2018 was a remarkable year for Aramex as we transformed our operations and reported one of our most profitable years to date. Our business is thriving in an increasingly competitive environment and remains resilient against market challenges.
Many of these challenges are shaped by the Fourth Industrial Revolution, a result of major and accelerated advancements in technologies that have changed the way that consumers, producers and service providers think, act and react. Today’s consumers hold increased influence because of heightened levels of awareness, sensitization and connectivity. Producers are required to constantly reinvent themselves to meet the more customized demands of their consumers. And the survival of service providers hinges on their ability to become faster, more efficient, and more reliable – all while remaining profitable.
We have adapted to these changes by creating a more efficient, agile, and asset-light business model through our digitization and internal restructuring efforts. We continue to build customer trust in our brand as we endeavor to achieve service excellence – all while finishing the year off with record profitability and creating more value for our shareholders.
The business strategy behind these results centers around our efforts to fully understand the shifts in our operating environment, identify key areas of improvement to reap rising opportunities, mitigate areas of weakness, and ultimately focus on initiatives that will help us achieve our three key strategic objectives:1) Protect the strength and viability of our core business, by defending and growing global market share, improving operational efficiency, and optimizing costs.
There is no secret to our successful year. Our financial results are a direct reflection of management’s ability to deliver on the goals set out in the company’s strategy and in the wider Aramex teams’ ability to implement those strategic objectives and meet targets.
Operationally, we have capped the increase in overheads, improved asset utility and identified ways to use our resources more efficiently. This has enhanced our operating margin and positively impacted our bottom line. Let the numbers speak for themselves: overheads as a percentage of gross profits dropped to 75.5% in 2018 from 78.4% in 2017, and our operating margin expanded to 12.6% from 11.7% in the previous year.
Over the last 12 months, we have invested heavily in our last mile capabilities and service levels on the ground, improving the overall operations of our Express business. We are making the journey from warehouse to end recipient more efficient and reliable, leading to shortened delivery times and improved customer satisfaction.
Throughout the year, we strengthened our network alliances with airlines and carriers and improved our agents’ networks. This helped Aramex’s International Express business to witness double-digit growth, up 13% for the year. We forged strategic partnerships with leading logistics providers, allowing us to improve our delivery time, enhance the level of service we offer our customers, and expand our delivery networks, which will ultimately help us win new business.
We made significant strides in our digital transformation strategy in 2018 through innovations that will dramatically enhance customer experience. As part of our drive to digitize the end-to-end shipment journey and enhance customer experience, we rolled out two innovative services: WhatsApp for Business and Aramex Fleet. With the former, we became one of the first companies in the industry to roll out this service to customers in the Middle East on the back of an AI-based Chatbot.
Aramex Fleet leverages the shared-economy model, enabling us to flex with peak demand with minimal cost burden and at the same time have a positive economic knock-on effect through economic empowerment in the countries in which the service is operational. While both services are in their nascent stages, their potential to scale is immense and in 2019, we plan to expand their reach and invest in other tech-empowered solutions.
At the heart of our growth story is our ability to leverage on the opportunities that arise from the continued boom and evolution of the e-commerce market. In 2018, we saw e-commerce continue to become the primary shopping destination for consumers, rather than the alternative, with e-commerce volumes for the year growing 35% compared to 2017.
Major e-Tailers saw a healthy growth in volumes, and more and more so-called ‘micro-brands’ entered the market and grew to scale. Servicing different types of online retailers is vital to staying competitive in this market, which is why we placed such a strong focus on expanding our customer base over the year. From a regional perspective, we secured several new clients from new origins such as Turkey, and our brand grew in prominence across our core markets in the Gulf, Levant, Asia and Africa.
Beyond e-commerce, we pursued a strong push into other industry verticals, offering logistics, fulfillment, freight forwarding and other supply chain management solutions across our B2B business lines. More specifically, we focused on opportunities from the Oil and Gas industry, and are making inroads into the Pharmaceutical, Fashion and Aerospace industries. To gain a foothold in a broader selection of sectors, we have invested in specialized assets, such as temperature-controlled vehicles, and expanded our infrastructure, such as our warehouse numbers.
At Aramex, what we do on a daily basis is not only about driving shareholders’ value, but about making a positive difference to the planet that we share with billions of people, particularly with the communities and individuals that we interact with every day. As a member of the United Nations Global Compact, we continue to make good on our promise to lead an organization that is committed to making a positive impact in line with the Ten Principles that meet the United Nations’ Sustainable Development Goals.
To contribute our part this year, we have invested in more all-electric, emissions-free vehicles in both Jordan and the UAE and have commissioned a solar power plant in Dubai. We have also been involved in numerous environmental projects around the world that will help ensure we minimize our carbon footprint.
In 2019, we plan to continue investing in clean technologies in the communities in which we operate. We are striving to ensure we cut our carbon emissions by 20% by 2020 – a goal we believe we will be able to achieve and that we will make an impact on global development.
As an Aramex veteran, I have never been more impressed with the caliber of talent at the company and the quality of work our people deliver. With over 15,600 employees working in over 600 offices across more than 65 countries, we are still very much a human-run organization – and I believe that despite the rise in automation, the adoption of AI and the employment of other robotic-like technologies, people remain the backbone of our industry. We want to empower our people to be thinkers, innovators and problem solvers, and this is why we have started to adopt a coaching framework and various training programs to help further develop their skillsets. I want to thank Aramex’s employees for their commitment and dedication, and for being the true creators of value for this company.
There is no denying that the tremendous changes in technology that we are witnessing have changed whom we compete with and how we differentiate ourselves. Traditional logistics providers are no longer the sole threat to our business model, which means it is no longer a game of volumes and pricing – it goes beyond that. It is about speed, reliability and quality.
This is why we are determined to carry on investing in upgrading our technology capabilities, and leveraging new innovations to create more personalized interaction channels with our customers that deliver the transparency, visibility and flexibility they demand.
As well as growing our market share in the e-commerce space, commercially we want to become top of mind for B2B clients across different industries. We have already been incredibly successful in doing so with the Oil and Gas industry, and in 2019, we want to penetrate the Pharmaceutical, Fashion and Aerospace industries. Our commercial ambitions will be supported by scaling our operations and introducing specialized supply chain management and freight forwarding solutions managed by a seasoned salesforce.
All of our ambitions will be supported by leaner and more agile operations, to ensure we continue to manage costs as we invest in upgrading our technology capabilities, ultimately to continue delivering long-term value for our shareholders.
Finally, I want to thank you for your continued trust and support. Together, we will continue to grow Aramex’s brand and stature in core markets and beyond.
Chief Executive Officer
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