Contractual Logistics (South Africa)

A diversified supply chain solution company serving the South African market

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Unitrans Supply Chain Solutions Proprietary Limited ('USCS') is a black-empowered, diversified transportation and logistics company providing integrated supply chain solutions to its clients in South Africa.

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Unitrans Supply Chain Solutions Proprietary Limited ('USCS') is a black-empowered, diversified transportation and logistics company providing integrated supply chain solutions to its clients in South Africa.

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1 999
VEHICLES
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5 273
EMPLOYEES
222 million
KILOMETRES PER ANNUM

“The USCS business model utilises technology,
intellectual property and control tower operational excellence
to leverage value to its customers.”

– Terry Bantock

“The USCS business model utilises technology, intellectual property and control tower operational excellence to leverage value to its customers.”

– Terry Bantock

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Business environment

The division operates in the contract logistics sector of the economy, playing an integral role in the supply chains of several well-known organisations in South Africa. The diversified nature of the division enables it to operate efficiently in a number of sectors, offering a wide range of value-adding services to its customers.

The black-empowerment credentials position the division to participate and compete favourably in most business sectors. The division has a proud track record of forming long-lasting strategic alliances with customers.

Commentary

A B-BBEE transaction was concluded in September 2018, whereby 45% of USCS was disposed of to B-BBEE entities. The management team was reorganised in December 2018 and the business underwent a significant restructure and culture change. USCS is now well-positioned to leverage its scale in a challenging economic trading environment.

The division’s operations in the petroleum, mining and general freight sectors remained stable, while its activities in the chemical and cement sectors were negatively impacted by lower customer volumes. The food sector’s performance was poor, primarily as a result of margin pressure in the poultry sector and a significant contractual dispute, which was resolved on a forward-looking basis at the start of the new financial year.

The persistent weakness in the economy had a direct negative impact on volumes and profitability of both the division and many of its customers. The division has worked closely with customers to develop efficient and sustainable supply chain solutions. In exchange for the renewal of long-term contracts, the division reduced its rates in certain sectors and offered customers more flexible contractual solutions in order to compete in a challenging economic environment. This negatively impacted financial performance in FY19, but has presented future awareness of opportunities for organic growth, cost management, consolidation and operational effectiveness.

The division’s turnover increased by 4% to R5 144 million from R4 969 million, primarily as a result of new business won and changes in the fuel price that are contractually passed on to customers. Operating profit of R161 million, excluding the R196 million impact of the B-BBEE transaction, was 49% down from the previous year. Over and above the R196 million B-BBEE cost, additional one-off costs of R102.5 million were also incurred.

During the year, the division renewed contracts with an annualised revenue of R913 million, secured new contracts with an annualised revenue of R426 million, and was unsuccessful in contract renewals with an annualised revenue of R86 million.

Outlook

Market conditions are expected to remain challenging. The division’s focus is on executing its strategy to gain market share by leveraging the strengths of the brand, B-BBEE credentials, scale, technology and efficiencies. Growth will be further supported by ensuring contractual compliance combined with an aggressive organic marketing strategy. The division is well-positioned to benefit from an improvement in the economy.

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