Operational review / Diversified logistics

Contractual logistics

3 000+ revenue-earning vehicles

9 000+ employees

Revenue increased by 11%

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Unitrans’s highly successful business model incorporates the design, implementation and ongoing provision of supply chain solutions for its customers.

A diversified supply chain company serving the needs of select sub-Saharan African markets

Revenue by seCtOR

12% General freight

23% Food

33% Petroleum

6% Specialised warehousing

10% Agriculture

12% Mining and infrastructure

4% Chemicals Operating sites

Botswana

Lesotho

Madagascar

Malawi

Namibia

Mozambique

South AfricaSwaziland

Tanzania

Zambia

130

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The ‘One Unitrans’ strategy, which was concluded during the prior year in order to provide a clear framework for the company’s engagement with the market in identified sectors, continued to be driven by management and has created a more efficient and effective organisation with improved utilisation of assets and infrastructure.

The division remains focused on long-term contractual logistics services, diversified across the areas of fuel, chemicals, food, agriculture, cement, mining warehousing and general freight. While the economic environment remains challenging, the medium-term contractual nature of the business provides some protection through the economic cycle.

The division generally operates from its clients’ sites, which provides the ability to rapidly rationalise operations to optimise cost structures in instances where contracts are not renewed.

The division’s operations in various non-South African territories provide further diversification in terms of exposure to economic cycles. Currency volatility is closely managed by the group’s treasury team in order to minimise translation losses and to optimise the repatriation of cash into the group’s South African cash management system.

Meeting customer requirements, specifically in terms of the preferential procurement elements of their sector codes, created challenges during the year. However, good progress was made in this regard with the conclusion of a B-BBEE ownership transaction subsequent to year-end.

business environment

Operational review / Diversified logistics

Contractual logistics

services

General freight• Cross-border • Line haul

Agriculture• Infrastructure and

estate services• Land preparation• Transport

Mining and infrastructure• Cement• Explosives• Materials handling

Foods• Animal feed• FMCG• Poultry• Refrigeration• Sugar/Molasses

Petroleum• Alcohol• Fuel• Gas• Lubricants

Chemicals• Acids • Chemicals• Food grade oils• Industrial oils• Solvents

Specialised warehousing• Freight forwarding• Warehousing• X-docking

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Group strategy

“Our aim is to be the leading supply chain partner in our chosen markets, adding value to our clients through the provision of specialist services.”

theunis nel, CeO: Contractual logistics division

key facts

Geographical areas of operation (revenue)

74% South Africa

26% Rest of Africa

Fully operational control tower introduced that manages the operational execution of the fleet and provides customers with real-time information

Continuous decrease in accident-related costs

With a focus on continuous improvement, ISO standards are being rolled out to operations outside of South Africa. Certifications include: ISO 9001, 14001, OHSAS 18001 NOSA integration systems, RTMS, SQAS

R567 million capex employed for expansion and replacement of specialised vehicles

B-BBEE level 3, with business practices aligned to meet requirements

New operational structure provides a consolidated service offering from an existing footprint in Africa

Market leadership

High barriers to entry

Leveraging our African base

Industry diversification

Adding value through specialisation

Unitrans operates primarily in areas that require specialised equipment, technology, expertise and regulatory controls in order to provide a broad range of end-to-end logistics solutions.

Unitrans provides a diverse range of services across seven industry sectors and earns 26% of its revenue from territories outside of South Africa, which mitigates against concentration risk.

Unitrans consistently invests to remain at the forefront of technology in specialised logistics in order to improve operating efficiencies and thereby enhance margins.

The ‘One Unitrans’ strategy provides a framework of specialist skills and expertise in five specific sectors in order to provide a consolidated service offering in territories where it enjoys an existing footprint.

The ‘One Unitrans’ strategy provides for the economy of scale and efficiency benefits of a national business that are applied in order to secure market leadership in seven specific sectors.

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Revenue of the contractual logistics division increased by 11%, primarily as a result of the acquisition of Lucerne Transport Proprietary Limited (“Lucerne”) during the year, and a controlling stake in Xinergistix Proprietary Limited (“Xinergistix”). Operating profit of the division decreased by 10%.

While the division endeavours to position itself in the area of non-discretionary goods and services, which are less affected by economic cycles, the division was exposed to materially lower industry volumes in the fuel, poultry and cement sectors. The division defended its market share in terms of contract renewals, in line with the normalised operating margin levels of the current year, following non-recurring items in the prior year.

The division’s operations outside of South Africa showed strong growth and provided support to revenue and operating profit. Increased focus was placed on exploring further growth opportunities outside of South Africa.

Both Lucerne and Xinergistix traded ahead of expectation for the year.

Operational review / Diversified logistics

Contractual logistics

Commentary

Revenue of the contractual logistics division increased by 11%.

68 KAP Integrated Report 2017

During the year the division responded rapidly to changing market conditions and rationalised operations and management structures accordingly. Focus remains on renewing and securing medium-term contracts in its key areas of operation and protecting its market share. It is expected that the conclusion of a B-BBEE transaction to facilitate an improved ownership score will place the division in a competitive position to grow its market share. Opportunities in non-South African territories will receive increased management focus.

Outlook

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Diversified logistics / Contractual logistics

Case study

Technology enhances driver and road safety

Central controlUnitrans’s centralised control tower continuously monitors the movement of vehicles through satellite tracking technologies and GPRS information transfer. It mitigates on-road risk and drives productivity through tracking vehicles against defined planned routes and managing them through live exception-based reporting. The facility also contributes towards increased operational efficiencies and productivity.

The control tower adds value to Unitrans and its customers and can be fully integrated into customers’ supply chains. It assists in managing receiving and dispatch points, and improves supply chain management through visibility, information availability and reporting.

The control tower: • monitors vehicles for speeding, driving hours and route adherence

against each journey’s management plan;• responds to potential accidents through impact alerts and panic

alarms;• predicts times of arrival, allowing for off-load scheduling and

customer planning;• assists in mitigating the risk of theft and hijackings of goods in

transit; and• ensures load integrity.

Vehicle technologyNew-generation trucks include technology options that significantly increase the safety of vehicles for all road users.

Collision Avoidance technology and Automatic emergency braking (AEB), using forward-facing integrated radar, detects speed differences between the truck and other objects in its path. It assists in avoiding a collision by warning the driver of a possible collision or by automatically applying the brakes of the vehicle. These two systems help to avoid incidents and reduce the severity of an accident when unavoidable – by reducing the velocity of the vehicle in order to reduce the impact.

Roll stability systems (RSS) and Electronic Braking Systems (EBS) prevent vehicles from jackknifing and assist in reducing vehicle roll-overs. This is achieved by comparing tyre revolution speed across axles and applying the vehicle’s brakes differentially across the axles, which stabilises and straightens out a vehicle and maximises the possible braking force. This technology is employed on both prime movers and trailed units.

DriveCam is installed in all Unitrans on-road prime movers. The DriveCam system is triggered and immediately generates an in-cab-facing video when any of the specified parameters are exceeded, such as speeding or harsh breaking, and when potential impact is identified. These clips are 12 seconds long – initiating four seconds before the G-force trigger point is reached, and eight seconds afterwards. This video clip is then analysed, reported on and categorised. DriveCam is used to manage drivers and incidents, and to identify high-risk drivers and risky behaviour that could lead to an incident. It has also been used extensively to understand the causes that led to incidents and accidents. Further developments, which are showing positive results, include proactive fatigue and distraction detection.

Market leadership

High barriers to entry

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Case study

Skills and talent management

Carbon emissions

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