Imperial to focus on global freight
• Focus will be on global freight management after sale of European shipping business is done
Transport group Imperial Logistics expects to conclude the sale of its European shipping business by the end of June 2020 and turn its focus on entering the international freight industry, says CEO Mohammed Akoojee.
Transport group Imperial Logistics expects to conclude the sale of its noncore European shipping business by the end of June 2020 and turn its focus to entering the international freight industry, says CEO Mohammed Akoojee.
The company, which has bemoaned weak economic growth in SA, disposed of the struggling consumer packaged goods business in 2019.
An acquisition of a freight business will add freight management capability to its portfolio, Akoojee said.
The CEO has previously said that buying a freight business would be key to Imperial’s competitiveness. Speaking after the unbundling of listed automotive holding company Motus in 2018, he said Imperial’s peers and all tier-one logistics groups had freight companies in their portfolios.
Imperial would build up the freight management capacity through acquisitions, he said.
Imperial Logistics is ranked among the top 25 global thirdparty logistics providers, according to Armstrong & Associates, the US-based supplychain consulting firm.
“[The acquisition of a freight business] is still a work in progress. We are looking at a few targets for acquisition. But we want to exit the shipping business first,” Akoojee said on Tuesday.
Imperial is also turning its focus to growing its rest-ofAfrica operations. Akoojee said Imperial’s strategy to penetrate the rest of Africa’s pharmaceuticals and consumer packaged goods markets is still on track.
In the six months to December,
R6.4bn or 25% of Imperial’s revenue was generated in the rest of Africa. These operations accounted for R511m or 31% of group operating profit.
Akoojee said Imperial, the largest distributor of pharmaceuticals in Nigeria, has already concluded four acquisitions in health care and consumer sectors in the rest of Africa for R584m.
But “there is still a lot that we need to do. We must extend our network in the rest of Africa,” Akojee said.
The company said its operations outside SA took strain from recessionary conditions in Namibia, resulting in reduced volumes in the consumer business, and economic problems in Zimbabwe, which led to lower cross-border volumes in the six months.
Imperial, which generated R17.8bn or 70% of revenue outside SA, said the SA market was characterised by persistently weak economic conditions and high unemployment. The resultant low-consumer spending continued to have a negative effect on volumes.
“The impact of load-shedding further added to the pressure on our businesses. This division was also exposed to an increasingly competitive environment, where we continue to face margin pressures on contract renewals,” the company said.
But Akoojee was optimistic about prospects for the SA business. Of the R5.8bn new business revenue in the six months to December, R2.1bn was from SA. He attributed this to growing outsourcing opportunities in the country as more local companies choose to outsource the logistics function.
“We have the right size and scale to take advantage of those opportunities. We have taken out a lot of costs [in the SA business],” Akoojee said.
Imperial said the rate of contract renewals across its various businesses was about 80%.
Imperial’s half-year revenue edged up 1% to R25.4bn, while operating profit was up 9% at R1.6bn.
Headline earnings per share increased 10% to 371c per share. Imperial increased its interim dividend 23.7% to 167c per share.
AS MORE LOCAL COMPANIES CHOOSE TO OUTSOURCE THE LOGISTICS FUNCTION, WE HAVE THE RIGHT SIZE AND SCALE TO TAKE ADVANTAGE