Financial Mail Page 110 -30-11-2018 01:20:02 PM

imperiallogisticsspecial report

What it means:

New business model to usher in

growth in operations and

broader market penetration

OVERVIEW

New era set to

propel growth

Imperial Logistics has exciting plans for future growth as a

separately listed company with new strategies for expansion

ý Imperial Holdings — a businessthat over the past 70 years hasevolved into a multinational groupoccupying market-leading posi-tions in logistics and the motorsectors — announced earlier thisyear that its motor business, Motus,was unbundling.

Its listed entity, Imperial Hold-ings, was renamed Imperial Logis-tics and embarked on a new era asa separately listed company. This isthe culmination of more than fouryears of a multi-faceted restructur-ing and strategic renewal process.

According to Imperial LogisticsCEO designate Mohammed Akoo-jee, the move will allow each busi-ness to operate in a more focused

and efficient manner and will allowImperial Logistics to pursue inde-pendent strategic initiatives with aspecific asset focus and a flexiblecapital allocation to support itsstrategy on a long-term sustainablebasis.

Under the Imperial Holdingslisting the company traded at a dis-count to its global peer groups.From an investment perspective itnow provides a more compellinginvestment proposition, he says.

An integrated outsourced logis-

tics service provider, ImperialLogistics is ranked in the top 25Third Party Logistics (3PL)providers globally and is the lead-ing 3PL and 4PL logistics providerin SA. It has attractive growth plat-forms in Africa and Europe with apresence in 38 countries over fivecontinents and around 30,000e mp lo y e e s .

The business offers specialisedcapabilities and customised solu-tions in transportation manage-ment, warehousing and distribu-tion management, value-add logis-tics solutions, supply chain man-agement solutions and route-to-market solutions to both local andmultinational clients, mainly in SA,Sub-Saharan Africa, Europe andthe UK.

In SA, Imperial Logisticsachieves more than double therevenue of its nearest competitor.The company makes in the regionof 2.5-million consumer packagedgoods (CPG) deliveries annually tomore than 50,000 points through-out the country.

It delivers about R60bn worthof product to retail outlets, delivers

3-billion litres of fuel and moves1.6-million tons of packaging. Itowns Sub-Sahara’s largest coldstorage warehouse with over37,000 pallet locations.

In Africa the company isfocused on the resilient and grow-ing healthcare and CPG industries,where it offers innovative route-to-market solutions, providing aunique platform for multinationalfast moving consumer goods(FMCG) and pharmaceutical brandowners to access high-growthconsumer markets on the conti-ne nt .

It provides point-of-care andretailer level deliveries to morethan 600 delivery points in Kenya,700 in Ghana and more than52,000 across Nigeria. In addition,it delivers more than 43-millionpatient packs of medicine acrossAfrica each month.

Its international division, mean-while, has a well-established con-tracts logistics platform in Ger-many with specialised capabilitiesin automotive and chemicals. Itsinland shipping division moves 60-million tons of goods a year. InEurope the company operates 20automotive warehouses whichdeliver value-add logistics for theannual production of about 2.3-million cars, and operates one ofthe largest automotive spare partswarehouses in the world. It is alsoa significant player in the chemicalindustry with around 60 tankers,17 gas tankers and 23 specialisedw a r e ho u s e s .

It is Western Europe’s largestprovider of express palletised dis-tribution services — handling 10-million pallets a year — and is t hemarket leader in inland waterways,with 600 inland vessels andb a r ge s .

The business’ operating modelis divided into two major regions:Logistics Africa which includes SAand the African Regions, and Inter-national, consisting mainly ofEurope and the UK. The companyis now managed on an integrated

Mohammed Akoojee: Unbundling will result in enhanced profitability and returns

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tical industry in West and EastAf r ic a ,” says Akoojee. “We willconsider expanding our pharma-ceutical footprint into FrancophoneAfrica and North Africa whileexpanding our CPG business in theSADC region into East and WestAfrica. Diversification and expan-sion into defensive industries in theconsumer and pharmaceuticalsectors is a major risk mitigationfactor for our African Regions busi-ne s s .”

Its international division, mean-while, will be leveraging its spe-cialised capabilities in order tostrengthen client relationships inspecific market sectors, under-pinned by a differentiated approachto digitisation and innovation. Thecompany will be looking foropportunities to expand its special-ist capabilities into developingmarkets, mainly in Europe andAsia, while focusing on improvedreturns through business and con-tract rationalisation, capabilityalignment and reduced asset inten-s it y .

A number of company-wideinitiatives have also been imple-mented to drive growth. Theseinclude driving growth in pre-determined priority industries bycombining the business’s capabil-ities, client relationships and com-

petitive advantages; developinginternational freight managementcapability to extend the company’sintegrated solutions offering andgeographic reach; implementationof a common framework for man-aging human capital aligned tointernational best practice; andadopting a pragmatic approach todigitisation and innovation to sup-port operational excellence andclient-led innovation.

“The business’s digital vision isto create a culture where digital-isation enables people, clients andpartners to innovate and continu-ously improve to achieve compet-itiveness and differentiation,” s ay sAko o j e e .

The elements of the ImperialLogistics brand that will attracthigh performing employees, hesays, are the facts that the com-pany is aiming to be performance-driven, and offer a decisive andinclusive culture.

Akoojee plans for the companyto move from a top 25 global play-er into a more significant Tier Oneplayer offering integrated solutionsfor its client base. This will beachieved, he says, through a com-bination of organic growth as wellas mergers and acquisitionsopportunities. “Currently ourstrength is in Africa and Europe.

basis, with standardised financialmeasures and a single brand iden-t it y .

Vision and strategy

Ako o j e e’s vision for ImperialLogistics is for it to become aninternationally acclaimed Tier Oneprovider of outsourced, integrated,value-add logistics, supply chainmanagement and route-to-marketsolutions which are customised toensure the relevance and compet-itiveness of its clients in the indus-tries and geographies in which ito p e r at e s .

Sustainable revenue, he says,will be grown through focusedorganic growth in each region,complemented by strategic acqui-sitions within defined parameters.Targeted returns will be achievedthrough profitable partnershipswith clients in selected industries,generating targeted risk-adjustedreturns on invested capital. Com-petitiveness will be improved byinvesting in its people, processes,digitisation and innovation, as wellas leveraging operational excel-lence across the divisions.

The company has formulatedfive corporate strategies to turn itsvision into reality. Client-centricityaims to deliver truly client-centricsolutions, build credibility amongglobal clients, and prove its indus-try expertise in selected markets.

Asset rightness will maximiseagility by balancing the business’sasset intensity; ensuring the rightpartners for greater flexibility,capacity and efficient scale; andaligning asset investments withsecured revenue. Flawless execu-tion aims to deliver superior value-added service excellence; boostclient confidence to cultivate long-term loyalty; and foster collabora-tive interdependence with clients.

Local relevance will ensure thebusiness maximises value forclients across different markets;that it understands the uniquecomplexities and requirements;and leverages local ownership andp a r t ne r s h ip s .

Finally, international freightmanagement will ensure the busi-ness offers fully integrated solu-tions from source to consumption;

develops the capability to captureadditional revenue; and will allowthe business to expand into selectgeographies and industries.

“Once we have delivered onthese strategies and have met thebu s i ne s s ’ key financial objectivesover the next three to five years,we should see a value unlock anda rerating of Imperial Logistics ver-sus our peer group,” says Akoojee.“If both entities deliver, there is lit-tle doubt that shareholders willlook back and say we were rightto unbundle, and that this strategyhas created value.”

Driving growth

Imperial Logistics has ambitiousplans to drive substantial growth ineach of the regions in which itoperates. In SA it intends to retainand expand contracts with existingclients through customisation,innovation and service excellence;win new contracts and use itsscale, size and service offering totake advantage of the outsourcingtrend in SA; enhance its BBBE Ecredentials through a major blackownership transaction and accel-erate employment equity as wellas enterprise and supplier devel-opment to underpin its marketleadership and in order to competemore effectively in the energy andmining sectors.

Akoojee says the company alsointends to exit unviable contractsand operations, while continuing toconsolidate and rationalise itsassets and operations.

In Africa the company plans toleverage its innovative ability toprovide brand owners with accessto fragmented markets throughintegrated solutions, unrivalledscale and multi-regional distribu-t io n .

Its managed solutions offeringwill be expanded, in the processleveraging its SA operation’scapacities to secure a sustainablecompetitive advantage in anunderdeveloped 3PL market. In abid to become the single strategicpartner to multinational clients, thecompany will be applying its pro-prietary market aggregation model.

“Imperial Logistics is alreadywell positioned in the pharmaceu-

Long haul: Imperial Logistics is ranked in the top 25 Third Party Logistics (3PL) providers

globally and is the leading 3PL and 4PL logistics provider in SA

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financialmail.co.za . January 24 - January 30, 2017111

special report imperial logistics

My strategy is to leverage andgrow our footprint in Africa,expand our capabilities in Europeand develop an international freightmanagement capability.”

An asset-right business model to

support enhanced returns

An improved asset compositionand risk-adjusted targeted returnon invested capital will enhanceprospects for sustainable revenuegrowth, cash flow, returns andprofitability, says Akoojee.

“In addition to providingenhanced financial flexibility,Imperial Logistics’ s e l f- s u f f ic ie ntcapital structure will provide head-room for acquisitions as well asdirect access to equity and debtcapital markets. Our ability to gen-erate cash provides us with the liq-uidity to fund working capital,replacement capex and investmentin growth while maintaining a div-idend pay-out in line with guidanceof 45% of headline earnings pers h a r e ,” he says.

The company will be selectiveregarding any mergers or acquisi-tions, he says, focusing on existinggeographies and industries eitherto penetrate or protect existingmarkets; expand capabilities; or tofurther develop its internationalfreight management capabilities.

History of the business

While Imperial Holdings wasestablished as a single car dealer-ship in downtown Johannesburg in1948, the logistics side of the busi-ness was only established in 1975when Imperial Truck Hire andImperial Distribution were formed.

During the 1990s the companyacquired various trucking, trans-port and broking companies. In the2000s it expanded into distribu-tion, asset-light transportation andsupply chain integration.

In the past six years it hasfocused on securing specialisedcapabilities in selected industriesand regions to enhance its serviceoffering, including entering thehealthcare and consumer industryas a distributor in Africa.

The company optimised itsportfolio by consolidating its capa-bilities and exited strategically mis-

aligned and non-scalable business-es while integrating its operationsin Africa and internationally.

These strategies paid off with itsincreasingly diversified operationsgrowing revenue, reducing its assetintensity and providing increasedopportunities for organic growth.

At its helm the company has astrong and committed leadershipteam. CEO Marius Swanepoel hasbeen with Imperial for the past 28years, and as CEO, he has built andconsolidated the Imperial Logisticsbusiness. He will be succeeded byAkoojee, a chartered accountant byprofession, in 2019 whenSwanepoel retires.

Akoojee joined the companynine years ago after career stintswith Nedbank Securities andInvestec, the former as an analystand the latter as a corporatefinancier. He joined Imperial Hold-ings in 2009 to head the mergers& acquisitions division and becamean executive director at the age of34. Realising that he lacked oper-ational experience, he became CEOof the African Regions business inorder to gain this experience.

After 18 months in the role, hewas recalled back to ImperialHoldings as group CFO to imple-ment the unbundling, and wassubsequently appointed CEO des-ignate of Imperial Logistics whenSwanepoel announced his immi-nent retirement.

In a rapidly globalising world, thelogistics industry plays an increas-ingly important role, acting as abridge between manufacturers andconsumers, and directing the flowof goods and services.

The industry is expected toexperience robust growth in theyears ahead driven primarily byinfrastructure investments anddemographically driven economicdevelopment in emerging markets;growing urbanisation; increasedconsumption of FMCG; the emer-gence of new distribution channels,including e-commerce; and the re-design of complex supply chains toreduce time to market.

Logistics costs globally, saysAkoojee, are projected to grow at acompound annual growth rate(CAGR) of 6.7% between 2017 and2022, fuelled by emerging marketssuch as India, China and Africa.

“These costs are affected by thequality of physical infrastructure,the sophistication of communica-tion systems, the adoption of tech-nology and the presence ofbureaucratic hurdles,” he says.

“As a result, logistics costs as apercentage of gross domesticproduct (GDP) tend to be lower inadvanced economies comparedwith emerging markets.”

Rapid urbanisation in Africacoupled with a young and growingpopulation and technology-drivenchange will drive increasing and

fast growth in consumer demandand business supply chains, whichin turn will offer growth potentialfor large scale industrial and ser-vice companies, including logisticscompanies such as Imperial Logis-t ic s .

European markets, says Akoo-jee, have a high potential for out-sourced logistics services due totheir current low penetration.Imperial Logistics, he says, is wellpositioned to pursue an activemergers and acquisitions strategyto tap into the growth story andbuild economies of scale.

The Logistics PerformanceIndex, compiled by the WorldBank, ranked SA 20th out of 160countries in 2016. SA is also onlyone of two countries in the top 30that are not classified as high-income countries. “S A’s logisticsindustry plays a pivotal role in theAfrican region due to its role as aregional transportation hub and itssuperior freight network, com-pared to neighbouring countries,”says Akoojee.

Not only will the advent of e-commerce change the way con-sumers shop and receive products,it will also change and potentiallydisrupt the logistics industry, saysAko o j e e .

“We believe we’re well placedto be an enabler for many brandsin this space, both in Africa andEurope, and to be at the forefrontof the disruption that will impactthe industry. It’s an exciting timefor the logistics industry. Majorindustry shifts create new oppor-t u n it ie s .”

Innovation, he says, will be keyto the business’s long-term sus-tainability in order to reduce thecost to market and to continuallyadapt processes.

“I am confident that ImperialLogistics is well positioned todeliver sustainable revenuegrowth, enhanced profitability andreturns as we enter a new era as aseparately listed business,” hesays. x

Special Report compiled byLynette Dicey

Advertising executive:Wonder Felane

On the move: In Europe, the company operates 20 automotive warehouses which d e l i ve r

value-add logistics for the annual production of 2.3-million cars