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SNV - Santova Logistics Ltd - Group Interim Results for the six months ended 31
August 2009
SANTOVA LOGISTICS LTD
Registration number 1998/018118/06
Share code SNV
ISIN ZAE000090650
GROUP INTERIM RESULTS for the six months ended 31 August 2009
STATEMENT OF COMPREHENSIVE INCOME
6 months to 6 months to 12 months to
31 August 31 August 28 February
2009 2008 2009
Unaudited Unaudited Audited
R`000 R`000 R`000
Turnover 45 888 61 189 118 229
Gross billings 677 233 972 845 1 885 240
Cost of billings (631 345) (911 656) (1 767 011)
Other income 1 091 339 3 582
Administrative expenses (41 098) (47 854) (93 573)
Operating income 5 881 13 674 28 238
Depreciation and amortisation (1 109) (959) (1 963)
Interest received 2 146 1 870 3 397
Finance costs (5 247) (9 336) (18 585)
Profit before taxation 1 671 5 249 11 087
Income expense (1 027) (1 327) (3 227)
Profit for the period/year 644 3 922 7 860
Attributable to:
Equity holders of the parent 463 3 920 7 794
Minority interest 181 2 66
Other comprehensive income
Exchange differences from
translating foreign operations (418) 38 488
Total comprehensive income for
the period/year 226 3 960 8 348
Attributable to:
Equity holders of the parent 45 3 958 8 282
Minority interest 181 2 66
Basic earnings per share (cents) 0,04 0,29 0,63
Diluted earnings per share (cents) 0,04 0,29 0,62
SUPPLEMENTARY INFORMATION
Reconciliation between
earnings and headline earnings
Profit attributable to equity
holders of the parent 463 3 920 7 794
Loss on disposals of plant and
equipment 69 75 232
Profit on disposal of investment (18) - -
Finance cost of financial liability 466 - -
Variation of restraint of trade
agreement - - (4 323)
Cost of variation of restraint
of trade agreement - - 4 323
Taxation effects (150) (21) 343
Headline earnings 830 3 974 8 369
Shares in issue (000`s) 1 347 384 1 375 357 1 297 356
Weighted average number of
shares (000`s) 1 201 190 1 329 990 1 235 843
Diluted number of shares
(000`s) 1 240 911 1 329 990 1 257 873
Shares for net asset value
calculation (000`s) 1 262 056 1 329 990 1 200 856
Performance per ordinary share
Basic headline earnings per
share (cents) 0,07 0,30 0,68
Diluted headline earnings per
share (cents) 0,07 0,30 0,67
Net asset value per share (cents) 6,35 6,12 6,19
Tangible net asset per share (cents) 3,67 3,89 4,03
CONDENSED STATEMENT OF CASH FLOW
Cash generated by operations
before working capital changes 5 958 13 875 28 431
Changes in working capital (191) (4 983) 35 095
Cash generated from operating
activities 5 767 8 892 63 526
Interest received 2 146 1 870 3 397
Finance costs (4 782) (9 336) (18 585)
Taxation paid (461) (1 364) (3 380)
Net cash flows from operating
activities 2 670 62 44 958
Cash flows from other investing
activities (597) (1 839) (3 321)
Cash outflows on acquisition of
subsidiaries (5 765) - -
Cash inflow from sale of
investment 2 976 - -
Net cash flows from investing
activities (3 386) (1 839) (3 321)
Net cash flows from financing
activities 996 6 896 (41 453)
Net increase/(decrease) in
cash and cash equivalents 280 5 119 184
Effects of exchange rate
fluctuations on cash
and cash equivalents (151) 47 488
Cash and cash equivalents at
beginning of the period/year 6 582 5 910 5 910
Cash and cash equivalents at
end of the period/year 6 711 11 076 6 582
STATEMENT OF FINANCIAL POSITION
31 August 31 August 28 February
2009 2008 2009
Unaudited Unaudited Audited
R`000 R`000 R`000
ASSETS
Non-current assets 46 082 44 199 38 876
Plant and equipment 8 529 9 398 8 710
Intangible assets 33 783 29 632 25 948
Financial assets 164 - 164
Deferred taxation 3 606 5 169 4 054
Current assets 218 116 302 129 219 717
Trade receivables 199 068 272 020 203 158
Other receivables 7 190 14 870 4 959
Current tax receivable 687 - 605
Amounts owing from related parties 4 460 4 163 4 413
Cash and cash equivalents 6 711 11 076 6 582
Total assets 264 198 346 328 258 593
EQUITY AND LIABILITIES
Capital and reserves 80 126 81 398 74 366
Share capital and premium 150 008 156 401 145 112
Foreign currency translation reserve 111 79 529
Accumulated loss (70 786) (75 123) (71 275)
Attributable to equity holders of
the parent 79 333 81 357 74 366
Minority interest 793 41 -
Non-current liabilities 5 627 2 434 5 361
Interest bearing borrowings 320 222 79
Financial liabilities 3 055 - 3 030
Long-term provision 2 252 2 212 2 252
Current liabilities 178 445 262 496 178 866
Trade and other payables 75 294 115 589 78 294
Current tax payable 912 1 096 471
Amounts owing to related parties 102 114 156
Current portion of interest bearing
borrowings 466 594 379
Financial liabilities 1 538 83 1 092
Short-term borrowings and overdraft 97 903 140 634 95 488
Short-term provisions 2 230 4 386 2 986
Total equity and liabilities 264 198 346 328 258 593
CONDENSED SEGMENTAL ANALYSIS
South Australia & United
Africa Hong Kong Kingdom Group
GEOGRAPHICAL SEGMENT R`000 R`000 R`000 R`000
31 August 2009
Turnover (external) 39 160 5 000 1 728 45 888
Net profit/(loss) before
interest and tax 3 946 1 213 (387) 4 772
Interest received 2 125 21 - 2 146
Finance costs (4 802) (370) (75) (5 247)
Income tax expense (626) (401) - (1 027)
Net profit/(loss) 643 463 (462) 644
Segment assets 212 309 12 966 1 534 226 809
Intangible assets 25 735 7 393 655 33 783
Deferred taxation 3 469 137 - 3 606
Total assets 241 513 20 496 2 189 264 198
Total liabilities 167 878 13 168 3 026 184 072
Depreciation and
amortisation 979 103 27 1 109
Capital expenditure 1 324 92 - 1 416
31 August 2008
Turnover (external) 56 395 1 012 3 782 61 189
Net profit before interest
and tax 12 508 77 130 12 715
Interest received 1 850 20 - 1 870
Finance costs (9 113) (29) (194) (9 336)
Income tax expense (1 313) (14) - (1 327)
Net profit/(loss) 3 932 54 (64) 3 922
Segment assets 306 264 3 024 2 239 311 527
Intangible assets 28 977 - 655 29 632
Deferred taxation 5 169 - - 5 169
Total assets 340 410 3 024 2 894 346 328
Total liabilities 259 888 2 023 3 019 264 930
Depreciation and
amortisation 916 8 35 959
Capital expenditure 1 382 12 7 1 401
Freight, forwarding
and clearing Insurance Group
BUSINESS SEGMENT R`000 R`000 R`000
31 August 2009
Net profit 618 26 644
Total assets 262 014 2 184 264 198
Total liabilities 183 229 843 184 072
31 August 2008
Net profit 3 874 48 3 922
Total assets 344 573 1 755 346 328
Total liabilities 263 897 1 033 264 930
STATEMENT OF CHANGES IN EQUITY
Attributable to equity holders of the parent
Share Share Treasury Treasury
capital premium share capital share premium
R`000 R`000 R`000 R`000
Balances at 29
February 2008 1 367 158 285 (45) (4 491)
Total comprehensive
income - - - -
Issue of
subscriptions
awaiting allotment 8 1 277 - -
Balances at 31
August 2008 1 375 159 562 (45) (4 491)
Total comprehensive
income - - - -
Equity recognised
on share commitments - - - -
Shares returned in
terms of variation
of restraint
of trade agreement (47) (4 620) - -
Repurchase of
shares in terms of
share commitments (31) (3 102) - -
Share commitments
lapsed - - - -
Purchase of
remaining interest
in subsidiary - - - -
Shares returned in
terms of employee
share scheme - - - (15)
Minority interest
allocated against
equity of the parent - - - -
Balances at 28
February 2009 1 297 151 840 (45) (4 506)
Total comprehensive
income - - - -
Reversal of
minority interest
allocated against parent - - - -
Issue of share capital 61 4 835 - -
Repurchase of
shares in terms of
share commitments (11) (1 106) - -
Minority interest
acquired - - - -
Balances at 31
August 2009 1 347 155 569 (45) (4 506)
Attributable to equity holders of the parent
Foreign
currency
Share translation Accumulated
commitments reserve loss Total
R`000 R`000 R`000 R`000
Balances at 29
February 2008 1 285 41 (79 043) 77 399
Total
comprehensive income - 38 3 920 3 958
Issue of subscriptions
awaiting allotment (1 285) - - -
Balances at
31 August 2008 - 79 (75 123) 81 357
Total
comprehensive income - 450 3 874 4 324
Equity recognised
on share commitments (13 831) - - (13 831)
Shares returned in
terms of variation
of restraint
of trade agreement - - - (4 667)
Repurchase of
shares in terms of
share commitments 3 133 - - -
Share commitments
lapsed 7 224 - - 7 224
Purchase of
remaining interest
in subsidiary - - - -
Shares returned in
terms of employee
share scheme - - - (15)
Minority interest
allocated against
equity of the parent - - (26) (26)
Balances at 28
February 2009 (3 474) 529 (71 275) 74 366
Total
comprehensive income - (418) 463 45
Reversal of minority
interest allocated
against parent - - 26 26
Issue of share capital - - - 4 896
Repurchase of shares
in terms of
share commitments 1 117 - - -
Minority interest acquired - - - -
Balances at 31
August 2009 (2 357) 111 (70 786) 79 333
Minority Total
interest equity
R`000 R`000
Balances at 29 February 2008 39 77 438
Total comprehensive income 2 3 960
Issue of subscriptions awaiting allotment - -
Balances at 31 August 2008 41 81 398
Total comprehensive income 64 4 388
Equity recognised on share commitments - (13 831)
Shares returned in terms of variation of restraint
of trade agreement - (4 667)
Repurchase of shares in terms of share commitments - -
Share commitments lapsed - 7 224
Purchase of remaining interest in subsidiary (131) (131)
Shares returned in terms of employee share scheme - (15)
Minority interest allocated against equity of the
parent 26 -
Balances at 28 February 2009 - 74 366
Total comprehensive income 181 226
Reversal of minority interest allocated against parent (26) -
Issue of share capital - 4 896
Repurchase of shares in terms of share commitments - -
Minority interest acquired 638 638
Balances at 31 August 2009 793 80 126
COMMENTARY
GROUP PROFILE
Santova Logistics Limited ("Company") and its subsidiary companies
("Santova"/"Group"), who operate out of South Africa, the United Kingdom,
Australia, Hong Kong and China, provide integrated "end-to-end" logistics
solutions for importers and exporters.
OPERATIONAL REVIEW
Whilst Santova showed impressive progress for the 2009 financial year, despite
economic conditions deteriorating in the fourth quarter, conditions in the six
months ended 31 August 2009 proved no better than the fourth quarter of fiscal
2009. South Africa`s gross domestic product showed negative growth of 6,4% for
the first quarter and 3,0% for the second quarter, which was evident by the
significant reduction in the amount of cargo transported.
The year-on-year reduction in sea freight volumes - January 2008 versus January
2009 - in South African National Ports of 28% for Twenty-foot Equivalent Units
("TEUs") landed and 34% for TEUs shipped did not improve over this six-month
period and neither did airfreight nor any other modes of cargo movement. The
swiftness and severity of the downturn has had a profound effect on the results
of the Group. For the six months ended 31 August 2009, net earnings
attributable to shareholders amounted to R462 752, compared with R3 920 490 for
the same period in 2008, a decrease of 88,2%. Turnover for the six months
decreased to R45 888 316 from R61 189 216 for the same period in 2008, down
25,0%.
As noted in Santova`s February 2009 annual report, we predicted "economic hard
times" ahead and implemented a cost reduction exercise, which resulted in a
14,1% or R6 756 234 saving in administrative expenses. It is important to note,
however, that the full effect or benefit of this exercise is largely still to
be experienced.
It is important to emphasise that during the period our strategy has not only
been about cost reduction measures. The Group has also been successful in
acquiring quality new clients through greater efficiencies in the landed cost
of their products, a benefit for clients that constitutes an obvious
opportunity for our Group, and one, which we will continue to capitalise on.
South Africa
Whilst the insurance business has been affected to a lesser degree, the
clearing and forwarding operations in the domestic market have felt the effect
more so than the offshore operations. Activity levels within the local clearing
and forwarding business have been down by an approximate 25,0% for the
six-month period, which has been further complicated by a strong Rand.
International
The Hong Kong and Australian offices are performing to expectation and are not
experiencing the downturn as adversely as in South Africa. In fact, the
Australian office is on budget and is looking to evolve into its next level of
strategic development, which bodes well for the Group going forward.
In so far as the United Kingdom is concerned, the benefits from rationalisation
and further investment in "front end marketing activities" has not yet matured.
We are, however, still confident that the situation is being addressed and that
profitability will once again be restored to this region.
FINANCIAL REVIEW
Overview of 2009 performance
In an environment where a large number of businesses are facing closure,
Santova has generated a profit for the period of R644 149, resulting in
earnings per share of 0,04 cent and headline earnings per share of 0,07 cent.
There has been a 7,7% improvement in turnover generated from gross billings
from 6,3% for the same period last year to 6,8% this period, predominantly due
to diversification within the Group. Interest received increased by 14,8% due
to extended repayment terms authorised for a specific client, whilst finance
costs decreased by 43,8% due to reduced funding requirements and cost of
borrowings.
The high effective income tax rate of 61,5% for the current period is partly
due to the revised assessments of prior year taxation.
We have managed to maintain our balance sheet strength by ensuring strict
compliance with our provisioning policies, specifically our doubtful debt
provisioning policy. Net asset value per share increased by 3,7% to 6,35 cents,
with the 5,7% decrease in tangible net asset value per share to 3,67 cents
being predominantly due to the goodwill acquired in the acquisition referred to
below.
With the drop in activity over the period, net cash flows from operating
activities improved as expected, compared to 31 August 2008, with less funding
being required. The cash generated by operations was largely utilised to fund
the Australian acquisition, with a resultant minor increase in cash and cash
equivalents for the period. The Group is trading well within our long and
short-term financing facilities afforded to us by our respective bankers.
Acquisition of subsidiary
On 1 March 2009, the Group acquired the entire issued share capital of McGregor
Customs Pty Ltd ("McGregor"), an Australian registered company specialising in
customs brokerage, trade facilitation and international freight forwarding,
from Coolaroo Holdings Pty Ltd. The acquisition, acquired through Santova
Logistics Pty Ltd ("Santova Australia"), a wholly-owned subsidiary of the
Company, registered in Australia, was concluded for a purchase consideration of
AUD1 930 000 (R12 710 001). The purchase consideration consists of:
AUD720 000 (R4 896 001) from the issue on 31 August 2009 of 61 200 014
Santova Logistics Ltd ordinary shares at 8 cents per share (subject to profit
warranties);
a payment of AUD980 000 (R6 250 000) paid on 28 April 2009;
23 monthly payments of AUD6 666 commencing on 31 March 2009 with a final
payment of AUD6 682 on 28 February 2011 (R1 088 000); and
a payment of AUD70 000 (R476 000) to be paid on 28 February 2010.
The fair value of the purchase consideration at the acquisition date was AUD1
906 803 (R12 397 836), computed using a discount rate of 10,5%. The fair value
of the assets acquired amounted to AUD402 150 (R2 614 739), resulting in
goodwill of AUD1 504 653 (R9 783 097) at acquisition.
Subsequently, on 1 May 2009, Santova Australia sold 25,0% of the issued share
capital of McGregor to Patent International Co., Ltd, a company registered in
Hong Kong, for AUD482 500 (R2 975 433) in cash. The net asset value of the
minority interest sold amounted to AUD103 622 (R639 006).
The acquisition, together with our Hong Kong and China offices, gives the Group
a strategic presence in Australia and the Far East.
Period under review
On 31 August 2009, the Company repurchased a further 11 171 520 shares from the
Camilla Coleman Trust in terms of the repurchase agreement approved by
shareholders on 23 September 2008 - 39 720 960 shares remain outstanding at
period end. On the same date, 61 200 014 shares were issued to Coolaroo
Holdings Pty Ltd, in terms of the share sale contract referred to in
Acquisition of subsidiary above.
Subsequent events
There have been no material subsequent events since 31 August 2009 that have
not been referred to elsewhere in this report.
OUTLOOK FOR THE NEXT SIX MONTHS
In so far as the global and South African economies are concerned, there is
still a great deal of uncertainty. Whilst signs of recovery have been spoken
about, it is our view that it will take some time before we feel the recovery.
Our main reason for this view is that current growth appears to be stimulated
by government and public spending on infrastructure, particularly that relating
to the 2010 FIFA World Cup, rather than by consumer demand. Supportive of this
is the 7,0% fall in retail sales year-on-year in August 2009 and the 8,5%
reduction in car sales year-on-year in September 2009. The "slight" improvement
of recent months being driven predominantly by restocking of inventories, which
is consistent with the seasonal trend that traditionally precedes the festive
season.
In view of the impact that these difficult economic times have had on not only
Santova but also the industry as a whole, the strategy is to persevere with our
"heightened levels of innovation", which will continue to generate greater
efficiencies through streamlined workflow processes and systems. Whilst it is
difficult to predict the "tenure"of this economic downturn, we will continue to
be decisive in both our strategic thinking and decision making which will
ensure that we remain a fundamentally strong business capable of sustainable
earnings growth going forward.
BASIS OF PREPARATION
The unaudited condensed interim financial statements have been prepared using
accounting policies that comply with International Financial Reporting
Standards, as issued by the International Accounting Standards Board ("IASB"),
and should be read in conjunction with the 28 February 2009 annual financial
statements. The accounting policies adopted and methods of computation are
consistent with those applied in the financial statements for the year ended 28
February 2009 and are applied consistently throughout the Group. The Group has
adopted all of the new and revised Standards and Interpretations issued by the
International Financial Reporting Interpretation Committee of the IASB that are
relevant to its operations and effective as at 1 March 2009.
These Group interim results comply with International Accounting Standard 34 -
Interim Financial Reporting, Schedule 4 of the South African Companies Act,
1973, and the disclosure requirements of the JSE Listings Requirements.
DIVIDENDS
In line with the Company`s policy, no dividend has been declared for the
period.
ACKNOWLEDGEMENTS
The board would like to express its appreciation to all management and staff
for their efforts during the period.
For and on behalf of the board,
GH Gerber SJ Chisholm
Chief Executive Officer Group Financial Director
30 October 2009
Registration number 1998/018118/06
Share code SNV
ISIN ZAE000090650
website www.santova.com
REGISTERED OFFICE AND POSTAL ADDRESS
Santova House, 88 Mahatma Gandhi Road, Durban, 4001; PO Box 6148, Durban, 4000
EXECUTIVE DIRECTORS
GH Gerber (CEO), SJ Chisholm (GFD), S Donner, MF Impson, GM Knight
INDEPENDENT NON-EXECUTIVE DIRECTORS
ESC Garner (Chairman), WA Lombard, M Tembe
TRANSFER SECRETARIES
Computershare Investor Services (Pty) Limited
70 Marshall Street, Marshalltown, 2107
COMPANY SECRETARY
JA Lupton, ACIS
DESIGNATED ADVISOR
River Group
AUDITORS
Deloitte & Touche
Date: 30/10/2009 07:05:04 Supplied by www.sharenet.co.za
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