Imperial’s new entity assumes the crown
Imperial Logistics is a leading player in logistics industry
Imperial Holdings Limited is being renamed Imperial Logistics Limited (Imperial Logistics) now that the unbundling of its motor business, Motus, has been concluded.
Imperial Logistics is now entering an exciting new era as a separately listed company, which is the culmination of more than four years of a multifaceted restructuring and strategic renewal process.
The unbundling of Motus became unconditional on November 14 and both companies began to trade as separate securities on the JSE on November 22, paving the way for two standalone, blue-chip businesses.
The move, says Mohammed Akoojee, CEO-designate of Imperial Logistics, will allow each business to operate in a more focused and efficient manner and allow Imperial Logistics to pursue independent strategic initiatives with a specific asset focus and a flexible capital allocation to support its strategy on a sustainable basis.
He maintains the company previously traded at a discount to its global peer group. Imperial Logistics’ independence provides a more compelling investment proposition. Under Imperial Holdings investors were forced to invest in both the logistics and motor businesses. They now have more choice in terms of which business to invest in.
Imperial Logistics, an integrated outsourced logistics service provider, is ranked in the top 25 Third Party Logistics (3PL) providers globally and is the leading 3PL and Fourth Party Logistics (4PL) provider in SA.
It has a presence in 38 countries with around 30,000 employees, offering specialised capabilities and customised solutions in transportation management, warehousing and distribution management, value-add logistics solutions, supply chain management solutions and route-to-market solutions to local and multinational clients in SA, Sub-Saharan Africa, Europe and the UK.
Locally Imperial Logistics is a leading player in the logistics industry, achieving more than double the revenue of its nearest competitor. Its African Regions business is focused on the growing health-care and consumer packaged goods industries where it offers unique route-to-market solutions.
Its Africa business provides a unique platform for multinational FMCG and pharmaceutical brand owners to access highgrowth consumer markets on the continent and leverages South African expertise in under-developed and fragmented 3PL markets.
Its international business has an established contracts logistics platform in Germany with specialised capabilities in automotive and chemicals and is Europe’s largest provider of express palletised distribution services and leader in inland waterways.
The operating model is divided into two major regions: Logistics Africa which includes SA and the African Regions, and International — mainly Europe — managed on an integrated basis, with standardised financial measures and a single brand identity.
Akoojee’s vision for Imperial Logistics is for it to become an internationally acclaimed Tier One provider of outsourced, integrated, value-add logistics, supplychain management and route-to-market solutions which are customised to ensure the competitiveness of its clients in the industries and geographies in which it participates.
Sustainable revenue, he says, will be grown through focused organic growth in each region, complemented by strategic acquisitions within defined parameters. Competitiveness will be improved by investing in its people, processes, digitisation and innovation, as well as leveraging operational excellence across the divisions.
The company has formulated five corporate strategies to turn its vision into reality: client-centricity, asset rightness, flawless execution, local relevance and a focus on international freight management.
Akoojee anticipates that delivery on these strategies and meeting the business’s key financial objectives over the next three to five years should result in a value unlock and a rerating of Imperial Logistics versus its peer group. “If both entities deliver there is little doubt that shareholders will look back and say we were right to unbundle and that this strategy has created value,” says Akoojee.
The company has plans to drive substantial organic growth throughout the business in each of the regions in which it operates.
In SA it intends to retain and expand contracts with existing clients, using its scale, size and service offering to take advantage of the outsourcing trend in SA, win new contracts and enhance its broad-based black-empowerment credentials to compete more effectively in the energy and mining sectors.
In Africa it will leverage its ability to provide brand owners access to fragmented markets through integrated solutions, scale and multiregional distribution while expanding its managed-solutions offering.
The company is well positioned in the pharmaceutical industry in West and East Africa and will be looking to expand this as well as its Consumer Packaged Goods footprint beyond the borders of Sadc.
Diversification and expansion to defensive industries in the consumer and pharmaceutical sectors, says Akoojee, are a riskmitigation factor for its African Regions business.
Its international division will be strengthening client relationships in specific market sectors, underpinned by a differentiated approach to digitisation and innovation.
The company will be looking for opportunities to expand its specialist capabilities into developing markets mainly in Europe and Asia, while at the same time focusing on improved returns through business and contract rationalisation, capability alignment and reduced asset intensity.
In addition to delivering organic growth in all three regions (SA, African Regions and International) Imperial Logistics will be considering a number of mergers and acquisitions. Any acquisitions, he reports, will be focused on existing geographies and industries, either to penetrate or protect existing markets; expand the company’s capabilities; or to further develop its international freight-management capabilities.
An improved asset composition and risk adjusted targeted return on invested capital, he adds, will enhance prospects for sustainable revenue growth, cash flow, returns and profitability. “In addition to providing enhanced financial flexibility, our self-sufficient capital structure will allow for acquisitions as well as direct access to equity and debt capital markets.
“Our ability to generate cash gives us the liquidity to fund working capital, replacement capex and invest in growth while continuing to pay a healthy dividend to shareholders in line with 45% of HEPS,” Akoojee says.
This was the right time for Imperial Logistics to separate from Motus and for the holding company to fall away, he says. In the past six years the company has focused on securing specialised capabilities in selected industries and regions to enhance its service offering, including entering the healthcare and consumer industry as a distributor in Africa.
It has also optimised its portfolio by consolidating its capabilities and exited strategically misaligned and non-scalable businesses while at the same time integrating its operations in Africa and internationally. These strategies have paid off with its increasingly diversified operations.
The logistics industry globally is expected to see robust growth driven primarily by infrastructure investments and demographically driven economic development in emerging markets; growing urbanisation; increased consumption of fast-moving consumer goods; the emergence of new distribution channels, including e-commerce; and the redesign of complex supply chains to reduce time to market.
Imperial Logistics is well positioned to capitalise on this growth. The Logistics Performance Index, compiled by the World Bank, ranked SA 20th out of 160 countries in 2016. SA’s logistics industry, says Akoojee, plays a pivotal role in Africa due to its role as a regional transportation hub.
He expects e-commerce to disrupt the logistics industry but says Imperial Logistics can act as an enabler for companies operating in the e-commerce space.
Akoojee is confident Imperial Logistics is capable of delivering delivering sustainable revenue growth, enhanced profitability and returns — and consistent dividends.
“As we look forward to a new chapter with Imperial Logistics being a separately listed entity, key priorities are to continue to position the company as a market leader in its respective industries and to ensure that we deliver on our strategic, financial and operational objectives and targets over the next three to five years,” he concludes.
Shareholders will look back and say we were right to unbundle