Wrap Text
2019 Annual General Meeting and Trading Update
Imperial Logistics Limited
Incorporated in the Republic of South Africa
Registration number: 1946/021048/06
Share code: IPL ISIN: ZAE000067211
(‘Imperial’ or ‘Company’ or ‘Group’)
2019 ANNUAL GENERAL MEETING AND TRADING UPDATE
The 2019 Imperial Logistics Integrated Annual Report and Annual Financial
Statements were made available to shareholders on 27 September 2019. These
reports expand on the significant progress made in the 2019 financial year
in achieving strategic clarity, confronting and resolving longstanding
impediments to delivery, and developing differentiated solutions in
carefully selected industries across our regional businesses.
As is customary at this time, we provide shareholders with an update on
the most noteworthy developments in the 2020 financial year thus far.
OPERATING CONTEXT AND PERFORMANCE FOR THE FIRST QUARTER OF F2019
Despite uncertain economic and socio-political conditions in many of our
markets of operation – particularly South Africa and Germany – Imperial’s
results from continuing operations for the first three months of the 2020
financial year are in line with expectations.
South Africa
In South Africa, persistently weak economic conditions, economic
uncertainty and low consumer spending continues to negatively impact
volumes. The division is also exposed to ongoing competitive and client
pressures, particularly in the consumer-facing, healthcare and
manufacturing client base, where we continue to face margin pressures.
Despite this, the division performed well during the three months -
supported by new contract gains, retention of CPG ambient contracts that
are now operating under more viable commercial terms, and a good
performance from Resolve (4PL Solutions), partially offset by lower
volumes in the healthcare business.
African Regions
Trading conditions in this region remain mixed, with variations in
performance across the division. Imres and Eco Health continue to record
good growth. Managed Solutions continues to be negatively impacted by the
ongoing poor economic conditions in Zimbabwe, resulting in significantly
lower cross-border volumes. Ongoing recessionary conditions in Namibia
resulted in a weaker performance from our CIC business but the business
in Mozambique continues to perform well. Resolve Africa saw a decline in
project work as anticipated and Surgipharm experienced slower than
expected growth.
International
Notwithstanding the challenging trading environment in Europe, with
recessionary conditions in Germany, this division delivered a strong
improvement in performance. Profitability in the shipping business
improved, supported by a strong performance from the South American
business. The automotive business benefitted from new contract gains and
2
improved pricing. The chemicals business was negatively impacted by lower
volumes which were exacerbated by the difficult German market. Palletways
performed in line with the prior comparative period.
UPDATE ON THE CLOSURE OF THE CONSUMER PACKAGED GOODS (CPG) BUSINESS IN
SOUTH AFRICA
The Ambient business within CPG ceased trading at the end of September
2019. We are pleased to report that due to the tireless work on the part
of the management team to retain as many employees and existing clients
under a more viable commercial model elsewhere within the group, we have
retained over 1700 employees (excluding staff in the Cold business) and
approximately 80% (revenue) of contracts from the Ambient business. These
contracts and staff have mainly been accommodated in the Dedicated
Contracts and Health Sciences businesses.
We are exiting the Cold business and an offer for the purchase of this
business is currently under consideration. We expect to finalise this
process by the end of November 2019.
We anticipate that the CPG closure costs previously communicated will
remain unchanged.
It is important to note that the closure of the CPG distribution business
does not represent Imperial’s exit from the consumer goods industry in
South Africa but the rationalisation of the multi-principal distribution
model that became unviable.
UPDATE ON SHIPPING BUSINESS
As previously communicated, we are reviewing our Logistics International
portfolio to align it to our strategic direction and core competitive
advantages. To this end, we are progressing the disposal of our shipping
business in Europe (including South America). The market will be kept
informed of material developments in this regard and we are targeting H2
F2020 for conclusion of this process. In F2019 the shipping business
generated revenue and operating profit of €386 million and €29 million
respectively.
PROSPECTS
Based on the first few months of trading, and particularly the challenging
market conditions in South Africa and Germany, our outlook for the
financial year to 30 June 2020 remains unchanged.
We expect Imperial’s continuing operations (excluding businesses held for
sale) to deliver:
– High single digit revenue growth compared to the prior year.
– Low double digit operating profit growth compared to the prior year.
– Low double digit growth in continuing HEPS compared to the prior
year.
– Strong free cash flow conversion.
The balance sheet of the business remains strong, with sufficient headroom
in terms of capacity and liquidity to facilitate our strategic growth
aspirations.
Imperial’s contract renewal rate across our divisions on existing contracts
is c.80%, with an encouraging pipeline of new opportunities, and supported
by a good new contract gain rate in all three divisions despite macro-
economic challenges. New business revenue of approximately R5.5 billion
was secured on a rolling 12-month basis to the end of September 2019. This
illustrates that our clients continue to view Imperial as a partner of
choice and our continued relevance in our key markets.
Despite our current macro-economic headwinds, we are confident that the
clear strategic path that has been set for the business and our swift
execution thereof - together with new contract gains, new acquisitions,
restructuring, and the significant cost-cutting undertaken in F2019 - will
reap tangible bottom line benefits for our business and its stakeholders.
The forecast information on which the prospects statement is based, has
not been reviewed or reported on by the Company’s auditors.
30 October 2019
Bedfordview
Sponsor:
Merrill Lynch South Africa (Pty) Limited
Date: 30/10/2019 08:55:00
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