In extraordinary and challenging trading conditions, exacerbated by the COVID-19 pandemic, Imperial increased revenue from continuing operations, generated strong free cash flow, maintained a strong balance sheet, stringently managed costs and recorded significant progress against its strategy.
Excluding businesses held for sale, revenue grew by 16% from R22 471 million to R26 005 million, supported by new business gains and acquisitions, despite the decline in trading volumes resulting from the impact of COVID-19 on operations.
Continuing EBITDA, excluding businesses held for sale,
decreased marginally by 1% from R2 581 million to
R2 562 million.
Continuing operating profit, excluding businesses held for sale, declined 16% from R1 481 million to R1 249 million. This was largely due to the impact of COVID-19 lockdown restrictions; subsequent impact on trading volumes in certain sectors across the business; associated once-off costs; and investment in people, structure, processes and systems to support strategic growth and future efficiency in line with our 'One Imperial' and 'Gateway to Africa' strategy.
Continuing HEPS declined by 43% to 180 cents per share versus a decline of 39% in core EPS of 235 cents per share – which adjusts headline earnings for items that are once-off and not of a trading nature. We have re-introduced core EPS as management believes it is a more accurate reflection of Imperial's trading performance. Please see full reconciliation of headline earnings to core headlines earnings.
A strong recovery in volumes and profitability was recorded in the first half of 2021 compared to H2 F2020.
Continuing operating margin declined from 6,4% in the comparable period to 4,6% in H1 F2021. This is mainly due to the negative impact of COVID-19 on volumes, margin pressure in the Healthcare business in Nigeria and in the Healthcare medical supplies and kitting business (Imres), and the impact of a competitive market on contract renewals and rates.
Annualised costs of c.R200 million were removed from Logistics Africa, the full benefit of which will be realised from F2022, and will assist in maintaining our competitive market positioning.
Imperial's contract renewal rate across its operations on existing contracts is strong at c.80%, with a strong pipeline of new opportunities.
New business revenue of approximately R6,2 billion per annum was secured on a rolling 12-month basis to the end of December 2020. A material Procter and Gamble (P&G) contract awarded to Imperial's joint venture (JV) with the Chanrai Summit Group for P&G's end-to-end distribution and logistics of consumer goods in Nigeria became effective on 1 January 2021.
Acquisitions of R120 million were concluded during the period.
The disposal of the loss-making business, Pharmed, was successfully concluded during the period.
Net working capital of R1 006 million improved by 53% compared to R2 123 million at December 2019 and is in line with guidance of 4% to 5% of revenue.
Net capital expenditure (capex) of R269 million from continuing operations decreased from R623 million and was significantly lower than depreciation (excluding right-of-use assets). The results from implementing more effective and efficient fleet management technology and disciplines across Logistics Africa contributed to this decline.
Net debt (excluding lease obligations) of R5,5 billion decreased by 25% compared to December 2019 due to effective working capital and capex management, strong cash flow generation and the receipt of proceeds from the disposal of the European shipping business. A summary of the movements is provided in the group financial performance section.
Free cash flow (post maintenance capex, repayment of
lease obligations and excluding discontinued operations
and CPG) increased to an inflow of R671 million from a
free cash outflow of R54 million for the six months ended
31 December 2019.
Our cash and liquidity position remains strong with R13,7 billion of available facilities and cash, of which c.R11,9 billion is committed banking facilities.
ROIC of 4,1% (H1 F2020: 8,2%) versus WACC of 7,5% (H1 F2020: 8,0%). The depressed ROIC was due to lower returns in H2 F2020 over a rolling 12-month basis, impacted by COVID-19.
Discontinued operations: the European shipping business was sold on 31 July 2020 and is classified as a discontinued operation in these results. The South American shipping operation remains part of continuing operations and is classified as 'held for sale'.
Imperial has been reorganised based on the solutions we offer to our clients (our capabilities) and less so on regions. As from 1 July 2020, Imperial has operated within two overarching solutions – market access and logistics, and is categorised into three businesses: Market Access, Logistics Africa and Logistics International. The logistics businesses encompass contract logistics and freight (road, air and ocean, and lead logistics provider (LLP)). Therefore, primary segmentation for the period and the narrative thereof in this report is compiled accordingly, and in line with IFRS reporting.