New era set to pro­pel growth

Im­pe­rial Lo­gis­tics has ex­cit­ing plans for growth as a sep­a­rately listed com­pany with new strate­gies for ex­pan­sion

Financial Mail - - CORPORATE REPORT - Cor­po­rate Re­port compiled by Lynette Dicey Ad­ver­tis­ing ex­ec­u­tive: Won­der Fe­lane

Im­pe­rial Hold­ings — a busi­ness that over the past 70 years has evolved into a multi­na­tional group oc­cu­py­ing mar­ket-lead­ing po­si­tions in lo­gis­tics and the mo­tor sec­tors — an­nounced ear­lier this year that its mo­tor busi­ness, Mo­tus, was un­bundling.

Its listed en­tity, Im­pe­rial Hold­ings, was re­named Im­pe­rial Lo­gis­tics and em­barked on a new era as a sep­a­rately listed com­pany. This is the cul­mi­na­tion of more than four years of a mul­ti­faceted re­struc­tur­ing and strate­gic re­newal process.

Ac­cord­ing to Im­pe­rial Lo­gis­tics CEO des­ig­nate Mo­hammed Akoo­jee, the move will al­low each busi­ness to op­er­ate in a more fo­cused and ef­fi­cient man­ner and will al­low Im­pe­rial Lo­gis­tics to pur­sue in­de­pen­dent strate­gic ini­tia­tives with a spe­cific as­set fo­cus and flex­i­ble cap­i­tal al­lo­ca­tion to sup­port its strat­egy on a long-term sus­tain­able ba­sis.

Un­der the Im­pe­rial Hold­ings listing the com­pany traded at a dis­count to its global peer groups. From an in­vest­ment per­spec­tive it now pro­vides a more com­pelling in­vest­ment propo­si­tion, he says.

An in­te­grated out­sourced lo­gis­tics ser­vice provider, Im­pe­rial Lo­gis­tics, is ranked in the top 25 third party lo­gis­tics (3PL) providers glob­ally and is the lead­ing 3PL and 4PL provider in SA.

It has at­trac­tive growth plat­forms in Africa and Europe with a pres­ence in 38 coun­tries over five con­ti­nents and about 30,000 em­ploy­ees.

The busi­ness of­fers spe­cialised ca­pa­bil­i­ties and cus­tomised so­lu­tions in trans­porta­tion man­age­ment, ware­hous­ing and dis­tri­bu­tion man­age­ment, value-add lo­gis­tics so­lu­tions, sup­ply chain man­age­ment so­lu­tions and route-tomar­ket so­lu­tions to both lo­cal and multi­na­tional clients, mainly in SA, Sub-sa­ha­ran Africa, Europe and the UK.

In SA, Im­pe­rial Lo­gis­tics achieves more than dou­ble the rev­enue of its near­est com­peti­tor. The com­pany makes about 2.5-mil­lion con­sumer pack­aged goods (CPG) de­liv­er­ies an­nu­ally to more than 50,000 points through­out the coun­try.

It de­liv­ers about R60bn worth of prod­uct to re­tail out­lets, de­liv­ers 3-bil­lion litres of fuel and moves 1.6Mt of pack­ag­ing. It owns Sub­sa­hara’s largest cold stor­age ware­house with over 37,000 pal­let lo­ca­tions.

In Africa the com­pany is fo­cused on the re­silient and grow­ing health-care and CPG in­dus­tries, where it of­fers in­no­va­tive route-tomar­ket so­lu­tions, pro­vid­ing a unique plat­form for multi­na­tional fast mov­ing con­sumer goods (FMCG) and phar­ma­ceu­ti­cal brand own­ers to ac­cess high-growth con­sumer mar­kets on the con­ti­nent.

It pro­vides point-of-care and re­tailer-level de­liv­er­ies to more than 600 de­liv­ery points in Kenya, 700 in Ghana and more than 52,000 across Nige­ria. In ad­di­tion, it de­liv­ers more than 43-mil­lion pa­tient packs of medicine across Africa each month.

Its in­ter­na­tional divi­sion, mean­while, has a well-es­tab­lished con­tracts lo­gis­tics plat­form in Ger­many with spe­cialised ca­pa­bil­i­ties in au­to­mo­tive and chem­i­cals. Its in­land ship­ping divi­sion moves 60Mt of goods a year. In Europe the com­pany op­er­ates 20 au­to­mo­tive ware­houses which de­liver value-add lo­gis­tics for the an­nual pro­duc­tion of about 2.3-mil­lion cars, and op­er­ates one of the largest au­to­mo­tive spare parts ware­houses in the world. It is also a sig­nif­i­cant player in the chem­i­cal in­dus­try with about 60 tankers, 17 gas tankers and 23 spe­cialised ware­houses.

It is Western Europe’s largest provider of ex­press pal­letised dis­tri­bu­tion ser­vices — han­dling 10mil­lion pal­lets a year — and is the mar­ket leader in in­land wa­ter­ways, with 600 in­land ves­sels and barges.

The busi­ness’s op­er­at­ing model is di­vided into two ma­jor re­gions: Lo­gis­tics Africa which in­cludes SA and the African Re­gions, and In­ter­na­tional, con­sist­ing mainly of Europe and the UK. The com­pany is now man­aged on an in­te­grated

What it means: New busi­ness model to usher in growth in op­er­a­tions and broader mar­ket pen­e­tra­tion

ba­sis, with stan­dard­ised fi­nan­cial mea­sures and a sin­gle brand iden­tity.

Vi­sion and strat­egy

Akoo­jee’s vi­sion for Im­pe­rial Lo­gis­tics is for it to be­come an in­ter­na­tion­ally ac­claimed Tier One provider of out­sourced, in­te­grated, value-add lo­gis­tics, sup­ply chain man­age­ment and route-to-mar­ket so­lu­tions which are cus­tomised to en­sure the rel­e­vance and com­pet­i­tive­ness of its clients in the in­dus­tries and ge­ogra­phies in which it op­er­ates.

Sus­tain­able rev­enue, he says, will be in­creased through fo­cused or­ganic growth in each re­gion, com­ple­mented by strate­gic ac­qui­si­tions within de­fined pa­ram­e­ters. Tar­geted re­turns will be achieved through prof­itable part­ner­ships with clients in se­lected in­dus­tries, gen­er­at­ing tar­geted risk-ad­justed re­turns on in­vested cap­i­tal. 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 aims to de­liver truly client-cen­tric so­lu­tions, build cred­i­bil­ity among global clients, and prove its in­dus­try ex­per­tise in se­lected mar­kets.

As­set right­ness will max­imise agility by bal­anc­ing the busi­ness’s as­set in­ten­sity; en­sur­ing the right part­ners for greater flex­i­bil­ity, ca­pac­ity and ef­fi­cient scale; and align­ing as­set in­vest­ments with se­cured rev­enue. Flaw­less ex­e­cu­tion aims to de­liver su­pe­rior val­ueadded ser­vice ex­cel­lence; boost client con­fi­dence to cul­ti­vate longterm loy­alty; and foster col­lab­o­ra­tive in­ter­de­pen­dence with clients.

Lo­cal rel­e­vance will en­sure the busi­ness max­imises value for clients across dif­fer­ent mar­kets; that it un­der­stands the unique com­plex­i­ties and re­quire­ments; and lever­ages lo­cal own­er­ship and part­ner­ships.

Fi­nally, in­ter­na­tional freight man­age­ment will en­sure the busi­ness of­fers fully in­te­grated so­lu­tions from source to con­sump­tion; de­vel­ops the ca­pa­bil­ity to cap­ture ad­di­tional rev­enue; and will al­low the busi­ness to ex­pand into se­lect ge­ogra­phies and in­dus­tries.

“Once we have de­liv­ered on th­ese strate­gies and have met the busi­ness’s key fi­nan­cial ob­jec­tives over the next three to five years, we should see a value un­lock and a rerat­ing of Im­pe­rial Lo­gis­tics ver­sus our peer group,” says Akoo­jee. “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.”

Driving growth

Im­pe­rial Lo­gis­tics has am­bi­tious plans to drive sub­stan­tial growth in each of the re­gions in which it op­er­ates. In SA it in­tends to re­tain and ex­pand con­tracts with ex­ist­ing clients through cus­tomi­sa­tion, in­no­va­tion and ser­vice ex­cel­lence; win new con­tracts and use its scale, size and ser­vice of­fer­ing to take ad­van­tage of the out­sourc­ing trend in SA; en­hance its BBBEE cre­den­tials through a ma­jor black own­er­ship trans­ac­tion and ac­cel­er­ate em­ploy­ment eq­uity as well as en­ter­prise and sup­plier de­vel­op­ment to un­der­pin its mar­ket lead­er­ship and in or­der to com­pete more ef­fec­tively in the en­ergy and min­ing sec­tors.

Akoo­jee says the com­pany also in­tends to exit un­vi­able con­tracts and op­er­a­tions, while con­tin­u­ing to con­sol­i­date and ra­tio­nalise its as­sets and op­er­a­tions.

In Africa the com­pany plans to lever­age its in­no­va­tive abil­ity to pro­vide brand own­ers with ac­cess to frag­mented mar­kets through in­te­grated so­lu­tions, un­ri­valled scale and mul­ti­re­gional dis­tri­bu­tion.

Its man­aged so­lu­tions of­fer­ing will be ex­panded, in the process lev­er­ag­ing its SA op­er­a­tion’s ca­pac­ity to se­cure a sus­tain­able com­pet­i­tive ad­van­tage in an un­der­de­vel­oped 3PL mar­ket. In a bid to be­come the sin­gle strate­gic part­ner to multi­na­tional clients, the com­pany will be ap­ply­ing its pro­pri­etary mar­ket ag­gre­ga­tion model.

“Im­pe­rial Lo­gis­tics is al­ready well po­si­tioned in the phar­ma­ceu- tical in­dus­try in West and East Africa,” says Akoo­jee. “We will con­sider ex­pand­ing our phar­ma­ceu­ti­cal foot­print into Fran­co­phone Africa and North Africa while ex­pand­ing our CPG busi­ness in the Sadc re­gion into East and West Africa. Di­ver­si­fi­ca­tion and ex­pan­sion into de­fen­sive in­dus­tries in the con­sumer and phar­ma­ceu­ti­cal sec­tors is a ma­jor risk mit­i­ga­tion fac­tor for our African Re­gions busi­ness.”

Its in­ter­na­tional divi­sion, mean­while, will be lev­er­ag­ing its spe­cialised ca­pa­bil­i­ties in or­der to strengthen 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 fo­cus­ing on im­proved re­turns through busi­ness and con­tract ra­tio­nal­i­sa­tion, ca­pa­bil­ity align­ment and re­duced as­set in­ten­sity.

A num­ber of com­pany-wide ini­tia­tives have also been im­ple­mented to drive growth. Th­ese in­clude driving growth in pre­de­ter­mined pri­or­ity in­dus­tries by com­bin­ing the busi­ness’s ca­pa­bil­i­ties, client re­la­tion­ships and com­pet­i­tive ad­van­tages; de­vel­op­ing in­ter­na­tional freight man­age­ment ca­pa­bil­ity to ex­tend the com­pany’s in­te­grated so­lu­tions of­fer­ing and geo­graphic reach; im­ple­men­ta­tion of a com­mon frame­work for man­ag­ing hu­man cap­i­tal aligned to in­ter­na­tional best prac­tice; and adopt­ing a prag­matic ap­proach to digi­ti­sa­tion and in­no­va­tion to sup­port op­er­a­tional ex­cel­lence and client-led in­no­va­tion.

“The busi­ness’s dig­i­tal vi­sion is to cre­ate a cul­ture where digi­ti­sa­tion en­ables peo­ple, clients and part­ners to in­no­vate and con­tin­u­ously im­prove to achieve com­pet­i­tive­ness and dif­fer­en­ti­a­tion,” says Akoo­jee.

The el­e­ments of the Im­pe­rial Lo­gis­tics brand that will at­tract high per­form­ing em­ploy­ees, he says, are the facts that the com­pany is aim­ing to be per­for­mancedriven, and of­fer a de­ci­sive and in­clu­sive cul­ture.

Akoo­jee plans for the com­pany to move from a top 25 global player into a more sig­nif­i­cant Tier One player of­fer­ing in­te­grated so­lu­tions for its client base. This will be achieved, he says, through a com­bi­na­tion of or­ganic growth as well as merg­ers and ac­qui­si­tions op­por­tu­ni­ties. “Cur­rently our strength is in Africa and Europe.

My strat­egy is to lever­age and grow our foot­print in Africa, ex­pand our ca­pa­bil­i­ties in Europe and de­velop an in­ter­na­tional freight man­age­ment ca­pa­bil­ity.”

An as­set-right busi­ness model to sup­port en­hanced re­turns

An im­proved as­set com­po­si­tion and risk-ad­justed tar­geted re­turn on in­vested cap­i­tal will en­hance prospects for sus­tain­able rev­enue growth, cash flow, re­turns and prof­itabil­ity, says Akoo­jee.

“In ad­di­tion to pro­vid­ing en­hanced fi­nan­cial flex­i­bil­ity, Im­pe­rial Lo­gis­tics’ self-suf­fi­cient cap­i­tal struc­ture will pro­vide head­room for ac­qui­si­tions as well as di­rect ac­cess to eq­uity and debt cap­i­tal mar­kets. Our abil­ity to gen­er­ate cash pro­vides us with the liq­uid­ity to fund work­ing cap­i­tal, re­place­ment capex and in­vest­ment in growth while main­tain­ing a div­i­dend pay-out in line with guid­ance of 45% of head­line earn­ings per share,” he says.

The com­pany will be se­lec­tive re­gard­ing any merg­ers or ac­qui­si­tions, he says, fo­cus­ing on ex­ist­ing ge­ogra­phies and in­dus­tries either to pen­e­trate or pro­tect ex­ist­ing mar­kets; ex­pand ca­pa­bil­i­ties; or to fur­ther de­velop its in­ter­na­tional freight man­age­ment ca­pa­bil­i­ties.

His­tory of the busi­ness

Though Im­pe­rial Hold­ings was es­tab­lished as a sin­gle car deal­er­ship in down­town Jo­han­nes­burg in 1948, the lo­gis­tics side of the busi­ness was es­tab­lished only in 1975 when Im­pe­rial Truck Hire and Im­pe­rial Dis­tri­bu­tion were formed.

Dur­ing the 1990s the com­pany ac­quired var­i­ous truck­ing, trans­port and broking com­pa­nies. In the 2000s it ex­panded into dis­tri­bu­tion, as­set-light trans­porta­tion and sup­ply chain in­te­gra­tion.

In the past six years it has fo­cused on se­cur­ing spe­cialised ca­pa­bil­i­ties in se­lected in­dus­tries and re­gions to en­hance its ser­vice of­fer­ing, in­clud­ing en­ter­ing the health-care and con­sumer in­dus­try as a dis­trib­u­tor in Africa.

The com­pany op­ti­mised its port­fo­lio by con­sol­i­dat­ing its ca­pa­bil­i­ties and ex­ited strate­gi­cally mis­aligned and non-scal­able busi­nesses while in­te­grat­ing its op­er­a­tions in Africa and in­ter­na­tion­ally.

Th­ese strate­gies paid off with its in­creas­ingly di­ver­si­fied op­er­a­tions grow­ing rev­enue, re­duc­ing its as­set in­ten­sity and pro­vid­ing in­creased op­por­tu­ni­ties for or­ganic growth.

At its helm the com­pany has a strong and com­mit­ted lead­er­ship team. Mar­ius Swanepoel has been with Im­pe­rial for the past 28 years and, as CEO, he has built and con­sol­i­dated the Im­pe­rial Lo­gis­tics busi­ness. When he re­tires in 2019 he will be suc­ceeded by Akoo­jee, a char­tered ac­coun­tant by pro­fes­sion.

Akoo­jee joined the com­pany nine years ago af­ter ca­reer stints with Ned­bank Se­cu­ri­ties and In­vestec, the for­mer as an an­a­lyst and the lat­ter as a cor­po­rate fi­nancier. He joined Im­pe­rial Hold­ings in 2009 to head the merg­ers & ac­qui­si­tions divi­sion and be­came an ex­ec­u­tive di­rec­tor at the age of 34. Re­al­is­ing that he lacked op­er­a­tional ex­pe­ri­ence, he be­came CEO of the African Re­gions busi­ness in or­der to gain this ex­pe­ri­ence.

Af­ter 18 months in the role, he was re­called to Im­pe­rial Hold­ings as group CFO to im­ple­ment the un­bundling, and was sub­se­quently ap­pointed CEO des­ig­nate of Im­pe­rial Lo­gis­tics when Swanepoel an­nounced his im­mi­nent re­tire­ment. In a rapidly glob­al­is­ing world, the lo­gis­tics in­dus­try plays an in­creas­ingly im­por­tant role, act­ing as a bridge be­tween man­u­fac­tur­ers and con­sumers, and di­rect­ing the flow of goods and ser­vices.

The in­dus­try is ex­pected to ex­pe­ri­ence ro­bust growth in the years ahead driven pri­mar­ily by in­fras­truc­ture in­vest­ments and de­mo­graph­i­cally driven eco­nomic de­vel­op­ment in emerg­ing mar­kets; grow­ing ur­ban­i­sa­tion; in­creased con­sump­tion of FMCG; the emer­gence of new dis­tri­bu­tion chan­nels, in­clud­ing e-com­merce; and the re­design of com­plex sup­ply chains to re­duce time to mar­ket.

Lo­gis­tics costs glob­ally, says Akoo­jee, are pro­jected to grow at a com­pound an­nual growth rate of 6.7% be­tween 2017 and 2022, fu­elled by emerg­ing mar­kets such as In­dia, China and Africa.

“Th­ese costs are af­fected by the qual­ity of phys­i­cal in­fras­truc­ture, the so­phis­ti­ca­tion of com­mu­ni­ca­tion sys­tems, the adop­tion of tech­nol­ogy and the pres­ence of bu­reau­cratic hur­dles,” he says.

“As a re­sult, lo­gis­tics costs as a per­cent­age of gross do­mes­tic prod­uct tend to be lower in ad­vanced economies com­pared with emerg­ing mar­kets.”

Rapid ur­ban­i­sa­tion in Africa cou­pled with a young and grow­ing pop­u­la­tion and tech­nol­ogy-driven change will drive in­creas­ing and fast growth in con­sumer de­mand and busi­ness sup­ply chains, which in turn will of­fer growth po­ten­tial for large-scale in­dus­trial and ser­vice com­pa­nies, in­clud­ing lo­gis­tics com­pa­nies such as Im­pe­rial Lo­gis­tics.

Euro­pean mar­kets, says Akoo­jee, have a high po­ten­tial for out­sourced lo­gis­tics ser­vices due to their cur­rent low pen­e­tra­tion. Im­pe­rial Lo­gis­tics, he says, is well po­si­tioned to pur­sue an ac­tive merg­ers and ac­qui­si­tions strat­egy to tap into the growth story and build economies of scale.

The lo­gis­tics per­for­mance in­dex, compiled by the World Bank, ranked SA 20th out of 160 coun­tries in 2016.

SA is also one of only two coun­tries in the top 30 that are not clas­si­fied as high-in­come coun­tries. “SA’S lo­gis­tics in­dus­try plays a piv­otal role in the African re­gion due to its role as a re­gional trans­porta­tion hub and its su­pe­rior freight net­work, com­pared with neigh­bour­ing coun­tries,” says Akoo­jee.

Not only will the ad­vent of e-com­merce change the way con­sumers shop and re­ceive prod­ucts, it will also change and po­ten­tially dis­rupt the lo­gis­tics in­dus­try, says Akoo­jee.

“We be­lieve we’re well placed to be an en­abler for many brands in this space, both in Africa and Europe, and to be at the fore­front of the dis­rup­tion that will af­fect the in­dus­try. It’s an ex­cit­ing time for the lo­gis­tics in­dus­try. Ma­jor in­dus­try shifts cre­ate new op­por­tu­ni­ties.”

In­no­va­tion, he says, will be key to the busi­ness’s long-term sus­tain­abil­ity in or­der to re­duce the cost to mar­ket and to con­tin­u­ally adapt pro­cesses.

“I am con­fi­dent that Im­pe­rial Lo­gis­tics is well po­si­tioned to de­liver sus­tain­able rev­enue growth, en­hanced prof­itabil­ity and re­turns as we en­ter a new era as a sep­a­rately listed busi­ness,” he says.

Mo­hammed Akoo­jee: Un­bundling will re­sult in en­hanced prof­itabil­ity and re­turns

Long haul: Im­pe­rial Lo­gis­tics is ranked in the top 25 third party lo­gis­tics (3PL) providers glob­ally and is the lead­ing 3PL and 4PL provider in SA

On the move: In Europe, the com­pany op­er­ates 20 au­to­mo­tive ware­houses which de­liver value-add lo­gis­tics for the an­nual pro­duc­tion of 2.3-mil­lion cars

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