CEO's
report
Dear shareholders,
Throughout the financial year 2024, the global logistics industry faced significant challenges. Like many logistics operators worldwide, Velogic navigated an unfavourable environment that slowed down our growth momentum. Despite market headwinds, the Group demonstrated strong resilience by maintaining revenue levels equivalent to the previous year, though overall profitability dropped by 3% compared to FY 23.
A challenging global environment
The macroeconomic landscape remained highly uncertain. The economic slowdown observed towards the end of the previous year, particularly in Europe, persisted into 2024, leading to a significant decline in consumption. The business environment throughout the year was marked by inflation, high interest rates, and geopolitical tensions stemming from the war in Ukraine and the Israel-Hamas conflict, which began in October 2023. These factors weakened the global economy and trade, which left few logistics operators unscathed, as evidenced by the financial performance of global logistics companies.
The economic slowdown led to a reduction in export volumes, primarily impacting Velogic’s garment exports from India, Mauritius, and, to a relatively lesser extent, Madagascar. Excess supply over demand kept freight rates low throughout most of the year until March 2024, when major shipping lines announced a rate increase affecting shipments. One of the main reasons for this increase is the ongoing Houthi attacks on commercial vessels in the Red Sea, causing several shipping companies to divert their ships around the Cape of Good Hope, leading to a capacity drop due to longer transit times.
Our served markets
Against this backdrop, Velogic demonstrated resilience by increasing its market share, diversifying its client base, and expanding its service offerings. In Mauritius, the economic environment remained positive. The momentum observed at the end of the previous financial year continued into 2024, driven by strong growth in tourism and investments in construction projects.
In its home market, the Group achieved commendable results, particularly in Haulage and Sugar Packing operations. The latter experienced a turnaround in its bottom line due to favourable exchange rates, higher prices, and a more remunerative product mix. Shipping operations performed well, servicing more vessels compared to the previous year. However, cross-border logistics, namely freight forwarding and express courier volumes, faced difficulties. Express courier was affected by a dip in e-commerce sales relative to the Covid period, while freight forwarding was mostly impacted by the decrease in export volumes due to a decline in demand for garments from our main markets.
Our operations in India also suffered from decreased garments exports and lower gross profits, despite consistent revenue compared to last year. Given the intense competition in this market, the company maintained thin margins to retain customers.
In Kenya, the sharp depreciation of the Shilling against major currencies, which hit its lowest point in February 2024, combined with an increase in interest rates, directly impacted import prices. As a result, import volumes significantly decreased, creating overcapacity in the market. This situation was exacerbated by a drop in tea production due to changes in climatic conditions.
Operations in Kenya were significantly impacted by a consistent spike in fuel prices reaching a 30% increase in October 2023 before decreasing at a much slower rate, thereby exerting pressure on operational costs. Margins were further eroded by a change in procedures that allowed traders to clear their goods in Mombasa, increasing long-haul trips and, consequently, operational costs. Due to the excess in haulage capacity and heightened market competition, this increase could not be passed on to clients, thus dampening profitability. In fact, our revenue rose by 26% due to a higher number of longer trips, while profit after tax was 40% less compared to FY 23, despite a full year of Rongai’s operations, acquired in December 2022.
In Madagascar, the Group achieved positive results despite a fall in garment exports, though the effect was less pronounced than in Mauritius and India. The company reported better results compared to last year, thanks to the successful diversification of its client base in the non garment industry. In Reunion, both revenue and profitability were up compared to the previous year. Higher freight and courier volumes, combined with improved gross margins, contributed to better profitability.
Our associated company in France reported a significant loss due to lower textile imports in a struggling economy. Consequently, Velogic decided in May 2024 to dispose of its 30% stake in this entity as part of its risk management strategy. This decision does not affect our global reach, as we maintain our presence and continue to service clients, whether they export to or import from France.
Compared to last year, the contribution of overseas activities to our overall financial performance was much lower, mainly due to the underperformance of the Kenyan and Indian entities. However, our good performance in Madagascar and Reunion somewhat mitigated the drop in profitability from our other overseas entities.
Future-focused
Velogic remains steadfast in achieving its strategic objectives and exceeding clients’ expectations by offering value-added services across the supply chain. Given our global reach and extensive expertise, we are well-positioned to strengthen our status as a partner of choice for various industries, especially as the strategic importance of logistics becomes increasingly evident. Over the past year, we have fostered long-term relationships with both external and internal stakeholders through proactive and transparent communication. Significant progress has been made to foster strong relationships and nurture a future-ready workforce, as detailed in the Social and Relationship Capital section on pages 44-45 and the Human Capital section on pages 48-49, respectively.
In FY 24, our digitalisation process was intensified, resulting in several important achievements. The primary one is the digitalisation of the entire procurement process, making it paperless and more efficient, with features like remote purchase validation and approval. Besides making our organisation more agile, efficient and resilient, digital tools are also being leveraged to enhance customer experience. Read more about our digitalisation journey in the Intellectual Capital section on pages 46-47.
Over the past months, we have explored expansion opportunities for both organic and inorganic growth through acquisitions. In a market where margins are under pressure, acquisitions and mergers can provide scale and synergies. With this in mind, we recently closed a deal for the acquisition of a freight forwarding company in Mauritius. This transaction will expand our market share and further consolidate our position in our home market. As we continue to explore untapped markets in East Africa, we opened an office in Tanzania towards the end of FY 24.
In line with our cost management and operational efficiency strategy, the Kenyan business is being reengineered to accommodate increasing long-haul trips. In India, the business is undergoing a rightsizing process to create a leaner and more efficient organisation.
Entrenching sustainability
During the year under review, the company received two sustainability awards: the PwC Sustainability Award 2023 and the 2024 Environmental Award (Logistics and Transportation category) from the Ministry of Environment, Solid Waste Management, and Climate Change. In September 2024, we were once again honoured to be awarded the PwC Sustainability Award for the second year in a row. For us, these recognitions are not just the celebration of our accomplishments, but a reminder of our responsibility to further advance sustainable industry practices. I extend my heartfelt thanks to all our team members and stakeholders for their contributions and encourage them to keep pushing forward.
In FY 24, we initiated a significant renewable energy project involving the installation of a photovoltaic plant on our main site, at Mer Rouge. Developed under the Carbon Neutral Industrial Sector (CNIS) Scheme of the Central Electricity Board, this PV plant, once fully operational, is expected to cover 100% of our electricity needs on our main site, amounting to approximately 85% of our consumption in Mauritius. This project is tangible proof of our firm commitment to reducing our carbon footprint. Our team has also been actively involved in projects focused on climate resilience, biodiversity, inclusive development, and the circular economy.
In addition, to reduce waiting time at the sugar factory weighbridge in Mauritius, we have implemented a new transport process whereby cane is transported in containers, allowing for the swapping and shunting of trailers within the factory area. This has not only increased productivity by markedly reducing waiting times, but has also halved the number of trucks required for the transport of similar tonnage, thereby significantly improving asset utilisation.
Read more in the Natural Capital section on page 50-51.
Looking ahead to 2025
Though we expect the economic and political turbulence to persist, I am cautiously optimistic about improvements in our profitability. We are poised to expand in mature markets while exploring emerging ones. The business climate in Mauritius is improving, even though the Mauritian Rupee’s weakness against hard currencies could affect imports. The sugar cane harvest however, could be a concern. Another cause for optimism is the uptick in consumption in most of our markets, especially in Kenya. The local currency has appreciated by approximately 25% since February 2024, when it hit its lowest rate. Recovery in the tea industry and the decrease in diesel prices should benefit our haulage activities. In Madagascar, we will pursue our diversification strategy, given the good results obtained in FY 24. In India, we are optimistic despite the market’s competitiveness and challenges.
Acknowledgement
I would like to close by thanking all our partners and clients for their renewed trust.
Special thanks to the Board of Directors and its chairman for their invaluable support and guidance throughout the year as we navigated a volatile and uncertain business environment.
I am deeply grateful to the Group’s executive team and all my colleagues across our served markets for their agility and unwavering commitment to growth. I look forward to working with all of them over the coming year as we pave the way towards a sustainable and inclusive future.
Dear shareholders,
Throughout the financial year 2024, the global logistics industry faced significant challenges. Like many logistics operators worldwide, Velogic navigated an unfavourable environment that slowed down our growth momentum. Despite market headwinds, the Group demonstrated strong resilience by maintaining revenue levels equivalent to the previous year, though overall profitability dropped by 3% compared to FY 23.
The macroeconomic landscape remained highly uncertain. The economic slowdown observed towards the end of the previous year, particularly in Europe, persisted into 2024, leading to a significant decline in consumption. The business environment throughout the year was marked by inflation, high interest rates, and geopolitical tensions stemming from the war in Ukraine and the Israel-Hamas conflict, which began in October 2023. These factors weakened the global economy and trade, which left few logistics operators unscathed, as evidenced by the financial performance of global logistics companies.
The economic slowdown led to a reduction in export volumes, primarily impacting Velogic’s garment exports from India, Mauritius, and, to a relatively lesser extent, Madagascar. Excess supply over demand kept freight rates low throughout most of the year until March 2024, when major shipping lines announced a rate increase affecting shipments. One of the main reasons for this increase is the ongoing Houthi attacks on commercial vessels in the Red Sea, causing several shipping companies to divert their ships around the Cape of Good Hope, leading to a capacity drop due to longer transit times.
Against this backdrop, Velogic demonstrated resilience by increasing its market share, diversifying its client base, and expanding its service offerings. In Mauritius, the economic environment remained positive. The momentum observed at the end of the previous financial year continued into 2024, driven by strong growth in tourism and investments in construction projects.
In its home market, the Group achieved commendable results, particularly in Haulage and Sugar Packing operations. The latter experienced a turnaround in its bottom line due to favourable exchange rates, higher prices, and a more remunerative product mix. Shipping operations performed well, servicing more vessels compared to the previous year. However, cross-border logistics, namely freight forwarding and express courier volumes, faced difficulties. Express courier was affected by a dip in e-commerce sales relative to the Covid period, while freight forwarding was mostly impacted by the decrease in export volumes due to a decline in demand for garments from our main markets.
Our operations in India also suffered from decreased garments exports and lower gross profits, despite consistent revenue compared to last year. Given the intense competition in this market, the company maintained thin margins to retain customers.
In Kenya, the sharp depreciation of the Shilling against major currencies, which hit its lowest point in February 2024, combined with an increase in interest rates, directly impacted import prices. As a result, import volumes significantly decreased, creating overcapacity in the market. This situation was exacerbated by a drop in tea production due to changes in climatic conditions.
Operations in Kenya were significantly impacted by a consistent spike in fuel prices reaching a 30% increase in October 2023 before decreasing at a much slower rate, thereby exerting pressure on operational costs. Margins were further eroded by a change in procedures that allowed traders to clear their goods in Mombasa, increasing long-haul trips and, consequently, operational costs. Due to the excess in haulage capacity and heightened market competition, this increase could not be passed on to clients, thus dampening profitability. In fact, our revenue rose by 26% due to a higher number of longer trips, while profit after tax was 40% less compared to FY 23, despite a full year of Rongai’s operations, acquired in December 2022.
In Madagascar, the Group achieved positive results despite a fall in garment exports, though the effect was less pronounced than in Mauritius and India. The company reported better results compared to last year, thanks to the successful diversification of its client base in the non garment industry. In Reunion, both revenue and profitability were up compared to the previous year. Higher freight and courier volumes, combined with improved gross margins, contributed to better profitability.
Our associated company in France reported a significant loss due to lower textile imports in a struggling economy. Consequently, Velogic decided in May 2024 to dispose of its 30% stake in this entity as part of its risk management strategy. This decision does not affect our global reach, as we maintain our presence and continue to service clients, whether they export to or import from France.
Compared to last year, the contribution of overseas activities to our overall financial performance was much lower, mainly due to the underperformance of the Kenyan and Indian entities. However, our good performance in Madagascar and Reunion somewhat mitigated the drop in profitability from our other overseas entities.
Velogic remains steadfast in achieving its strategic objectives and exceeding clients’ expectations by offering value-added services across the supply chain. Given our global reach and extensive expertise, we are well-positioned to strengthen our status as a partner of choice for various industries, especially as the strategic importance of logistics becomes increasingly evident. Over the past year, we have fostered long-term relationships with both external and internal stakeholders through proactive and transparent communication. Significant progress has been made to foster strong relationships and nurture a future-ready workforce, as detailed in the Social and Relationship Capital section on pages 44-45 and the Human Capital section on pages 48-49, respectively.
In FY 24, our digitalisation process was intensified, resulting in several important achievements. The primary one is the digitalisation of the entire procurement process, making it paperless and more efficient, with features like remote purchase validation and approval. Besides making our organisation more agile, efficient and resilient, digital tools are also being leveraged to enhance customer experience. Read more about our digitalisation journey in the Intellectual Capital section on pages 46-47.
Over the past months, we have explored expansion opportunities for both organic and inorganic growth through acquisitions. In a market where margins are under pressure, acquisitions and mergers can provide scale and synergies. With this in mind, we recently closed a deal for the acquisition of a freight forwarding company in Mauritius. This transaction will expand our market share and further consolidate our position in our home market. As we continue to explore untapped markets in East Africa, we opened an office in Tanzania towards the end of FY 24.
In line with our cost management and operational efficiency strategy, the Kenyan business is being reengineered to accommodate increasing long-haul trips. In India, the business is undergoing a rightsizing process to create a leaner and more efficient organisation.
During the year under review, the company received two sustainability awards: the PwC Sustainability Award 2023 and the 2024 Environmental Award (Logistics and Transportation category) from the Ministry of Environment, Solid Waste Management, and Climate Change. In September 2024, we were once again honoured to be awarded the PwC Sustainability Award for the second year in a row. For us, these recognitions are not just the celebration of our accomplishments, but a reminder of our responsibility to further advance sustainable industry practices. I extend my heartfelt thanks to all our team members and stakeholders for their contributions and encourage them to keep pushing forward.
In FY 24, we initiated a significant renewable energy project involving the installation of a photovoltaic plant on our main site, at Mer Rouge. Developed under the Carbon Neutral Industrial Sector (CNIS) Scheme of the Central Electricity Board, this PV plant, once fully operational, is expected to cover 100% of our electricity needs on our main site, amounting to approximately 85% of our consumption in Mauritius. This project is tangible proof of our firm commitment to reducing our carbon footprint. Our team has also been actively involved in projects focused on climate resilience, biodiversity, inclusive development, and the circular economy.
In addition, to reduce waiting time at the sugar factory weighbridge in Mauritius, we have implemented a new transport process whereby cane is transported in containers, allowing for the swapping and shunting of trailers within the factory area. This has not only increased productivity by markedly reducing waiting times, but has also halved the number of trucks required for the transport of similar tonnage, thereby significantly improving asset utilisation.
Read more in the Natural Capital section on page 50-51.
Though we expect the economic and political turbulence to persist, I am cautiously optimistic about improvements in our profitability. We are poised to expand in mature markets while exploring emerging ones. The business climate in Mauritius is improving, even though the Mauritian Rupee’s weakness against hard currencies could affect imports. The sugar cane harvest however, could be a concern. Another cause for optimism is the uptick in consumption in most of our markets, especially in Kenya. The local currency has appreciated by approximately 25% since February 2024, when it hit its lowest rate. Recovery in the tea industry and the decrease in diesel prices should benefit our haulage activities. In Madagascar, we will pursue our diversification strategy, given the good results obtained in FY 24. In India, we are optimistic despite the market’s competitiveness and challenges.
I would like to close by thanking all our partners and clients for their renewed trust.
Special thanks to the Board of Directors and its chairman for their invaluable support and guidance throughout the year as we navigated a volatile and uncertain business environment.
I am deeply grateful to the Group’s executive team and all my colleagues across our served markets for their agility and unwavering commitment to growth. I look forward to working with all of them over the coming year as we pave the way towards a sustainable and inclusive future.