Throughout the year under review, our key focus was on consolidating performance in light of the challenging operating environment. We committed to strengthening the fundamentals of our business, which remained our primary focus.
I am proud to present the Annual Report of Expolanka Holdings PLC for the financial year 2022/23. The past year has presented us with a set of formidable challenges, characterised by market volatility and uncertainty. However, we have remained steadfast in our commitment to our strategy and unwavering in our pursuit of creating value for our shareholders. Despite adversities, we have demonstrated resilience and delivered a commendable performance overall.
Central to our success has been the consistent implementation of a comprehensive, agile, and aligned strategy. This robust framework, coupled with our daring spirit, perseverance, and focus on executing strategic initiatives, has been the cornerstone of our accomplishments.
A challenging business environment
In the current economic landscape, we find ourselves amidst market uncertainties in global trade and logistics. The last quarter of 2022 reflected negative growth, while indicators for the first quarter of 2023 suggested stagnation in global trade Inflation related concerns have raised fears and resulted in a drop in demand. This has had a notable impact on the purchasing behaviour of consumers, as indicated by various consumer confidence indexes; signalling slowdown on a global scale.
Increase in freight rates, which had occurred during the pandemic, was driven by capacity constraints in both air and ocean transportation. However, as capacity gradually returned and the situation normalised, we witnessed a reduction in rates across both the air and ocean sectors. This normalisation of rates had an impact on our margins and profitability.
During the year, we remained focused on maintaining stability and optimising yields. We continued to implement effective procurement strategies to mitigate the impact of fluctuating rates, ensuring a balanced approach to both air and ocean transportation.
Furthermore, supply chain disruptions experienced during the pandemic and its aftermath have had lingering effects on inventory levels, particularly within the retail sector. Many retail brands have maintained stagnant inventory levels and have refrained from restocking due to subdued consumer demand. This has also contributed to a slowdown in global trade. On the supply side, carrier capacity continued to improve in the context of reduced demand coupled with resurgence of the travel sector. As a result, there was a normalisation of freight rates, leading to corrections in revenues and yields.
Looking ahead to 2023/24, The World Trade Organization expects trade growth to rebound to 3.2%. However, it is important to note that potential downside risks, such as geopolitical tensions across key global economies, uncertainties surrounding the Russia-Ukraine war, food supply shocks, and the unforeseen impacts from prolonged monetary tightening bring with them a degree of uncertainty.
Despite the current challenging macroeconomic factors, our commitment to core business fundamentals remains unwavering. As we move forward, we remain cognisant of the evolving market dynamics and will continue to adapt and adjust our strategies accordingly. We will remain focused on creating value for our shareholders and other stakeholders. We are confident that our steadfast approach will enable us to navigate short-term economic stressors, while better positioning the Group for future growth.
A stable financial performance
Expolanka Holdings PLC achieved a revenue of Rs. 546 Bn. and a Gross Profit of Rs. 105 Bn. Despite the Group recording an exchange loss of Rs. 2.3 Bn. during the fourth quarter from appreciation of the Sri Lankan rupee against the US Dollar, our strong financial performance translated to an impressive Earnings Per Share (EPS) of Rs. 15.88 per share and a Return on Equity (ROE) of 22.67%.
Driven by a clear vision, Expolanka has positioned itself among a select group of Sri Lankan entities with a global presence spanning 39 countries Over 92% of our group revenue and over 73% of our Profit After Tax is now generated from foreign markets.
The group’s core freight forwarding business encountered a year-on-year decline in both air and ocean freight volumes, brought on by a downturn across the sector. Our air freight operations handled a total of 105 million kilos of cargo, while our ocean freight operations managed the transportation of over 200,000 TEUs during the year.
Despite numerous challenges, the logistics sector remained focused on its core business fundamentals. EFL Global successfully onboarded a number of new customers and achieved an increase in wallet share with existing customers, demonstrating the continuity and consistency of its long-term strategy. Though demand-supply imbalances continue to impact the industry, our strategic investments and network expansion enabled the sector to expand service capabilities in both origin and destination markets. Investments in the contract and domestic logistics business also made positive contributions operationally and financially. The United States remained the main market during the year, while the European and Asian trade lanes performed satisfactorily.
Despite the challenging global macro environment and uncertain market conditions that have impacted visibility and predictability, the company remains committed to delivering strategic initiatives while adjusting to market challenges. With EFL Global's established position as a leading freight forwarder, we will continue to invest in capabilities, infrastructure and systems to create sustainable value for all stakeholders.
Story of strategic growth
Throughout the year under review, our key focus was on consolidating performance in light of the challenging operating environment. We committed to strengthening the fundamentals of our business, which remained our primary focus.
To drive future growth, EFL Global executed two significant acquisitions valued at Rs. 35 Bn., acquiring Trans American Customhouse Brokers LLC and its group companies (Trans American Group) and Locher Evers International Inc and its group companies (LEI Group). These acquisitions, completed during the latter part of the financial year, was a strategy to strengthen the North American Trade Lane, enhance our service capabilities, and expand EFL’s customer base. These were amongst the largest acquisitions undertaken by the Group, and shows our commitment and desire for growth. We intend to continue investing in infrastructure to facilitate further growth and enhance operational efficiencies.
We expanded our industry presence and enhanced capabilities across various sectors. Our investments in growing the domestic logistics footprint played a crucial role in stabilising our earnings while strengthening and deepening customer relationships. Moreover, we successfully established operations in six new countries, which further emphasises our ongoing investments in expanding our global network.
A key initiative of the sector has been the development of a diverse customer base, spanning various growth-centric and scalable industry verticals such as lifestyle, fashion, apparel, technology, consumer retail, auto spares, and pharmaceuticals.
Our strategies have placed increasing importance on customer-centricity; with a strong emphasis on awareness, relationship-building, customer experience and satisfaction. These factors have also been the driving force behind our investments. Strategic acquisitions, specifically in the field of domestic logistics, have had the clear focus of deepening relationships with our valued customers.
Our strategic partners enable us to effectively serve our customers and thereby play a vital role in the business. These partners include airlines, shipping lines, and other business partners from across the globe. Rather than viewing them solely as suppliers, we see them as true partners in our progress. We believe in growing together; prioritising loyalty and collaboration. By fostering these strong and enduring partnerships, we are able to carry out our operations successfully, derive a competitive advantage and deliver exceptional value to our customers.
Strength of our global team
As a people-centric organisation, we prioritise the welfare and well-being of our staff, who form the backbone of our business success. With a global workforce of over 3,400 employees, wellbeing, engagement, and development of our staff remains paramount. During the year under review we invested over Rs. 93 Mn. in training and development opportunities; pioneered new initiatives to enhance work satisfaction, work-life balance, and employee engagement; and reviewed and revised our employee value proposition in line with global market conditions. Leveraging the strength of digitalisation, we also instituted a number of new systems and processes that enhanced our operations and empowered our teams.
In response to the challenges that surfaced in Sri Lanka, we took proactive measures to prioritise the welfare of our employees. We extended inflationary allowances, increased work-flexibility, strove to minimise disruptions to their lives and our business operations; and reinforced the features that make Expolanka a great place to work. By prioritising the needs of our staff, we have been able to create an environment with shared values where our teams can thrive, pursue their personal development goals, and contribute to the success of the organisation.
Focusing on the future
As a global logistics company competing on the international stage, digital transformation and enablement are a critical component of our future-focused strategy. Our impetus on technology as a business enabler and a strategy for future-proofing the business, is evident in our investments and deployment of the latest services and infrastructure. During the year under review, we continued to make progress in our digital transformation journey; enhancing IT security, upgrading our enterprise systems and solutions, forging new partnerships with technology providers, and scaling up development, integration, and automation across our business units. In the year ahead, we will continue to prioritise technology adoption to drive sustainable long-term growth and maintain our competitive edge.
When navigating a changing business landscape and responding to short-term challenges, we recognise the need for continuous evolution and transformation. Our transition from a family-owned business to becoming a global leader in logistics has been a testament to our ability to adapt and embrace change. In the upcoming years, our recent and potential future acquisitions will receive prime focus as we prioritise the integration of these new additions into our business, maximising their potential, and enhancing their contribution to our overall performance.
Expanding our footprint in the global freight forwarding & logistics landscape remains a key strategic priority, and we will actively pursue suitable opportunities for both organic and inorganic growth. While consolidating our presence in the US market, we will also focus on expanding our footprint in Europe and Asia, capitalising on emerging markets and further strengthening our global reach.
Our strategic approach has consistently focused on delivering long-term value, which revolves around increasing volumes, expanding market share, enhancing our capabilities and improving efficiency through streamlined processes. Despite the various challenges presented by the global environment, we have successfully achieved our key targets for the year. This includes expanding our customer base, establishing new operations, completing two significant acquisitions, strengthening our cashflow and liquidity position, and fulfilling our goal of delivering shareholder returns.
Acknowledgements
I would like to express my gratitude to our esteemed Board of Directors for their visionary guidance and unwavering commitment to Expolanka’s success. I am exceedingly proud of the milestones we have accomplished and recognise this would not have been possible without the committed direction of our remarkable leadership. Let me also take this opportunity to thank our dynamic global team spanning multiple countries and continents for their sincere dedication and commitment. Their contribution has been instrumental in driving our growth.
I also extend my gratitude to our shareholders for their continued support and trust in our organisation. Their belief in our vision and strategies has been a driving force behind our accomplishments. I would also like to appreciate our customers and business partners, whose partnerships have been instrumental to our success. We remain committed to pursuing shared goals, delivering value, and building enduring relationships.
As we look to the future, we are confident that our unwavering commitment to our stakeholders, coupled with our agile and strategic approach, will enable us to navigate challenges and seize opportunities in the ever-evolving global landscape.
Together, we will strive to create sustainable value, drive innovation and shape the future of Expolanka Holdings PLC.
HANIF YUSOOF
Executive Director and Group CEO
30 June 2023