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SANTOVA LIMITED - Santova Limited Group Interim Results for the six months ended 31 August 2013

Release Date: 30/10/2013 14:00
Code(s): SNV     PDF:  
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Santova Limited Group Interim Results for the six months ended 31 August 2013

SANTOVA LIMITED
Registration number 1998/018118/06                 
Share code SNV              
ISIN ZAE000159711

GROUP INTERIM RESULTS
for the six months ended 31 August 2013

30,5%
INCREASE IN NORMALISED
HEADLINE EARNINGS PER SHARE

44,5%
INCREASE IN TANGIBLE
NET ASSET VALUE PER SHARE

CONDENSED STATEMENT OF COMPREHENSIVE INCOME
                                                       Unaudited      Unaudited         Audited
                                                     6 months to    6 months to    12 months to
                                                       31 August      31 August     28 February
                                                            2013           2012            2013
                                                           R'000          R'000           R'000
Gross billings                                         1 463 985      1 199 379       2 640 037
Turnover                                                 102 884         80 322         178 790
Other income                                               8 950          3 751           8 535
Depreciation and amortisation                            (1 554)        (1 551)         (3 070)
Administrative expenses                                 (86 896)       (63 802)       (143 221)
Operating profit                                          23 384         18 720          41 034
Interest received                                          1 554            683           2 014
Finance costs                                            (7 207)        (4 191)         (9 239)
Profit before taxation                                    17 731         15 212          33 809
Income tax expense                                       (3 786)        (3 914)         (8 712)
Profit for the period/year                                13 945         11 298          25 097
Attributable to:
Equity holders of the parent                              13 879         11 124          24 688
Minority interest                                             66            174             409
Other comprehensive income
Exchange differences arising
  from translation of foreign operations                  13 011          1 684           (945)
Total comprehensive income                                26 956         12 982          24 152
Attributable to:
Equity holders of the parent                              26 834         12 635          23 473
Minority interest                                            122            347             679
Basic earnings per share                   (cents)         10,17           8,12           18,06
Diluted basic earnings per share           (cents)         10,07           8,12           18,00
Dividends per share                        (cents)                                       2,50

SUPPLEMENTARY INFORMATION
                                                       Unaudited      Unaudited         Audited
                                                     6 months to    6 months to    12 months to
                                                       31 August      31 August     28 February
                                                            2013           2012            2013
                                                           R'000          R'000           R'000
Reconciliation between earnings
  and headline earnings
Profit attributable to equity holders of the parent       13 879         11 124          24 688
Net loss on disposals of plant and equipment                  70             20             171
Fair value remeasurement of goodwill                       3 131                             
Derecognition of financial liability                                     (713)           (713)
Taxation effects                                            (19)            (6)            (49)
Minority interest                                                                         (1)
Headline earnings                                         17 061         10 425          24 096
Fair value gain on remeasurement
  of financial liability                                 (5 171)                             
Recognition of financial liability due to
  lease termination agreement                              1 665                             
Normalised headline earnings                              13 555         10 425          24 096
Shares in issue                            (000's)       136 459        136 459         136 459
Weighted average number of shares          (000's)       136 459        136 987         136 725
Diluted number of shares                   (000's)       137 760        136 987         137 165
Shares for net asset value calculation     (000's)       136 459        136 459         136 459
Performance per ordinary share
Headline earnings per share                (cents)         12,50           7,61           17,62
Diluted headline earnings per share        (cents)         12,38           7,61           17,57
Normalised headline earnings per share     (cents)          9,93           7,61           17,62
Net asset value per share                  (cents)        125,85         100,16          108,43
Tangible net asset value per share         (cents)         40,33          55,44           27,91

CONDENSED STATEMENT OF FINANCIAL POSITION
                                                 Unaudited  Unaudited       Audited
                                                 31 August  31 August   28 February
                                                      2013       2012          2013
                                                     R'000      R'000         R'000
ASSETS
Non-current assets                                 130 062     72 508       122 247
Plant and equipment                                  9 921      8 080         8 308
Intangible assets                                  116 694     61 028       109 883
Financial asset                                        529        625           522
Deferred taxation                                    2 918      2 775         3 534
Current assets                                     490 179    361 016       436 369
Trade receivables                                  406 738    332 050       368 931
Other receivables                                   39 509      4 804        36 764
Current tax receivable                               1 852        510         1 129
Amounts owing from related parties                               797             
Cash and cash equivalents                           42 080     22 855        29 545

Total assets                                       620 241    433 524       558 616
EQUITY AND LIABILITIES
Capital and reserves                               171 734    136 678       147 963
Non-current liabilities                             35 486      4 922        49 516
Interest-bearing borrowings                         31 783      1 648        37 402
Long-term provision                                  1 966      1 976         1 966
Financial liabilities                                1 737      1 280        10 148
Deferred taxation                                                 18             
Current liabilities                                413 021    291 924       361 137
Trade and other payables                           219 397    184 429       199 664
Current tax payable                                  6 325      1 421         3 650
Current portion of interest-bearing borrowings       7 638        354         3 430
Amounts owing to related parties                       195        240           167
Financial liabilities                               14 591                   5 293
Short-term borrowings and overdraft                154 305     99 460       137 829
Short-term provisions                               10 570      6 020        11 104

Total equity and liabilities                       620 241    433 524       558 616

CONDENSED STATEMENT OF CHANGES IN EQUITY
                                                 Unaudited   Unaudited       Audited
                                                 31 August   31 August   28 February
                                                      2013        2012          2013
                                                     R'000       R'000         R'000
Capital and reserves
Balance at beginning of period/year                147 963     123 699       123 699
Total comprehensive income                          26 956      12 982        24 152
Issue of shares in terms of share commitments                     (3)             
Equity reserves arising from grant of
   equity-settled share options                        225                      115
Recognition of costs directly related to share
   issues capitalised to equity                                                (3)
Dividends paid                                     (3 410)                        
Balance at end of period/year                      171 734     136 678       147 963
Comprising:
Stated capital                                     145 533     145 192       145 307
Foreign currency translation reserve                14 741       4 511         1 785
Accumulated profit/(loss)                            8 312    (15 719)       (2 155)
Attributable to equity holders of the parent       168 586     133 984       144 937
Minority interest                                    3 148       2 694         3 026
Capital and reserves                               171 734     136 678       147 963

CONDENSED STATEMENT OF CASH FLOW
                                                Unaudited     Unaudited       Audited
                                              6 months to   6 months to  12 months to
                                                31 August     31 August   28 February
                                                     2013          2012          2013
                                                    R'000         R'000         R'000
Cash generated from operations                      7 660        56 202        30 655
Interest received                                   1 554           683         2 014
Finance costs                                     (6 975)       (4 156)       (9 087)
Taxation paid                                     (1 219)       (1 783)       (8 827)
Net cash flows from operating activities            1 020        50 946        14 755
Cash outflows from the acquisition
 of subsidiaries                                               (2 502)      (35 738)
Cash utilised in other investing activities       (3 393)       (1 114)       (2 332)
Net cash flows from investing activities          (3 393)       (3 616)      (38 070)
Net cash flows from financing activities           12 689      (35 226)        41 217
Net increase in cash and cash equivalents          10 316        12 104        17 902
Effects of exchange rate changes on
  cash and cash equivalents                         3 224           799         1 012
Cash and cash equivalents at beginning
  of period/year                                   28 540         9 626         9 626
Cash and cash equivalents at end
 of period/year                                    42 080        22 529        28 540

CONDENSED SEGMENTAL ANALYSIS
                                                  Foreign
                               South Africa    Operations     Group
GEOGRAPHICAL SEGMENT                  R'000         R'000     R'000
31 August 2013
Turnover                             65 692        37 192   102 884
Operating income                     15 757         7 627    23 384
Profit for the period                 8 503         5 442    13 945
Total assets                        525 847        94 394   620 241
Total liabilities                   390 588        57 919   448 507
Depreciation and amortisation         1 134           420     1 554
Capital expenditure                   3 397            74     3 471
31 August 2012
Turnover                             63 917        16 405    80 322
Operating income                     15 776         2 944    18 720
Profit for the period                 9 157         2 141    11 298
Total assets                        399 070        34 454   433 524
Total liabilities                   274 980        21 866   296 846
Depreciation and amortisation         1 345           206     1 551
Capital expenditure                     854           223     1 077

                                  Logistics
                                   Services     Insurance     Group
BUSINESS SEGMENT                      R'000         R'000     R'000
31 August 2013
Profit for the period                12 543         1 402    13 945
Total assets                        614 679         5 562   620 241
Total liabilities                   447 234         1 273   448 507
31 August 2012
Profit for the period                 9 880         1 418    11 298
Total assets                        430 368         3 156   433 524
Total liabilities                   295 561         1 285   296 846

OPERATIONAL REVIEW
The Group has continued its trend of generating consistent sound earnings growth, despite a challenging
economic environment and a significant drop off in trade volumes that occurred in the first quarter of the
current financial year.

The period under review witnessed no new acquisitions and was one primarily focused internally on:

- bedding down and integrating W.M. Shipping into the Group;
- developing and enhancing further our offshore capabilities, particularly in the Netherlands;
- launching Santova Express, a new international courier service; and
- 'refining' and formalising the Group's marketing strategies and initiatives.

In terms of the Group's stated strategies, the offshore operations continue to grow and become significant
earnings contributors to the Group. The current financial year will see the inclusion of a full year's trading
results from W.M. Shipping following last year's successful acquisition in the United Kingdom. In addition to
this is a rejuvenated performance from the Netherlands following the take-on of a specialised logistics team
late last year and the recent restructuring of the operational structures. All in all, this sees the contribution
from foreign operations to the Group's results increasing from 19% to 39% during this period.

In South Africa the Group continues to experience intense competition within the logistics sector which has
resulted in margins and profits coming under pressure. To counteract this, the Group has focused intensely
during the period on refining and formalising its marketing procedures, and has invested in new resources
and skills within the Supply Chain Management division. This highly specialised division works side by side
with the core logistics divisions to provide sophisticated supply chain analysis and solutions to our
customers, ensuring high levels of customer retention and growth opportunities going forward.

The in-house development and implementation of Santova Express during the current period is an exciting
step in further expanding the Group's product offering and creating future revenue streams. Santova Express
is the Group's new international courier service that provides international express delivery on demand,
carrying out door-to-door delivery of freight, parcels and documents of a time-sensitive nature. Santova
Express utilises the Group's existing in-house IT capabilities and extensive international representation to
provide our clients with a reliable, cost effective courier solution.

The financial services division produced excellent results during the period under review and has become a
mature business and a meaningful contributor to the Group, showing growth of 75% on normalised earnings
from the prior period. The division is in the process of expanding its license categories and its product
offering to clients, which will ensure its continued growth path going forward.

GROUP FINANCIAL REVIEW
For the six months to 31 August 2013 the Santova Group achieved headline earnings per share of
12,50 cents and basic earnings per share of 10,17 cents, an increase of 64,3% and 25,2% respectively over
the prior period.

Both headline and basic earnings per share have been significantly impacted by the once-off inclusion in
profit, in terms of IFRS, of a fair value gain of R5,2 million on the subsequent re-measurement of a portion
of the contingent purchase consideration payable in respect of the acquisition of W.M. Shipping Limited and
the resultant fair value loss of R3,1 million on the subsequent re-measurement of goodwill related to the
acquisition. In terms of the Headline Earnings Circular 2/2013, the once-off fair value gain is specifically
included in headline earnings per share and the fair value loss is specifically excluded, which causes headline
earnings growth to be artificially inflated.

In addition, as detailed in the subsequent events note in the 2013 Annual Integrated Report, the Group is
required, in terms of IFRS, to recognise the remaining obligations following the termination of the lease for
the premises previously occupied by Santova Logistics South Africa (Pty) Limited as a financial liability. The
total net impact of raising this financial liability in the current period is a pre-tax expense of R3 million, of which
R2,3 million can be viewed as the once-off exceptional amount on a comparative basis with the related
expense in the prior period.

Therefore, a more appropriate basis for the measurement of the actual performance by Santova in this period
from on-going operations is the computation of 'normalised' headline earnings per share, which eliminates
the effect of these once-off items. The result is 'normalised' headline earnings per share of 9,93 cents, an
increase of 30,5% over the headline earnings per share reported in the prior comparative period.
This increase in normalised headline earnings is primarily as a result of:

- the first time inclusion of six months' trading results from the acquisition of W.M. Shipping in the interim
  reporting period, resulting in a contribution of R4,9 million to profit before tax; and
  
- strong performances from both the Netherlands and Hong Kong regions resulting in additional
  contributions of R2,9 million and R1 million to net profit before tax respectively compared to the prior
  period.

The effect of these strong earnings and the weakening of the rand, which resulted in significant foreign
exchange profits from the translation of the Group's foreign assets, led to a 16,1% increase in net asset value
per share from 108,43 cents in February 2013 to 125,85 cents.

OUTLOOK FOR THE NEXT SIX MONTHS

Following a relatively slow start to the year, trade volumes appear to have recovered their lost territory which
is a positive indicator for the second six months. This, coupled with the initiatives implemented and
investments made by the Group in the first six months, places the Group in a very good position to continue
to achieve its target of consistent earnings growth.

BASIS OF PREPARATION

The condensed consolidated financial information for the six months ended 31 August 2013 has been
prepared and presented in accordance with the framework concepts and the measurement and recognition
requirements of International Financial Reporting Standards ("IFRS"), the SAICA Financial Reporting Guides as
issued by the Accounting Practices Committee, and Financial Reporting Pronouncements as issued by the
Financial Reporting Standards Council, the listings requirements of the JSE Limited, the information as required
by IAS 34: Interim Financial Reporting, and the requirements of the South African Companies Act 71 of 2008.

These condensed consolidated interim results have not been audited by the Group's auditors.

For and on behalf of the Board,

GH Gerber                                DC Edley
Chief Executive Officer                  Group Financial Director                              30 October 2013

INTERNATIONAL LOGISTICS SOLUTIONS
Santova Limited is a public company listed on the main board of
the Johannesburg Stock Exchange, with offices throughout
South Africa and in Hong Kong,
Australia, the Netherlands and the United Kingdom,
as well as strategic partners throughout the world.

Santova provides INTEGRATED END-TO-END LOGISTICS
SOLUTIONS that ensure the seamless flow of products into the
market place for importers, exporters and consumers worldwide,
by assuming RESPONSIBILITY FOR THE ENTIRE SUPPLY CHAIN,
from supplier to consumer.

Santova offers a UNIQUE CLIENT-CENTRIC APPROACH, which
provides SUPPLY CHAIN OPTIMISATION SOLUTIONS, through
industry-leading strategic logistics management practices and
VIRTUAL SUPPLY CHAIN MANAGEMENT, through the use of
the Group's in-house developed intelligent management
information system, OSCAR®.

Registration number 1998/018118/06                 
Share code SNV              
ISIN ZAE000159711

REGISTERED OFFICE 
Santova House, 88 Mahatma Gandhi Road, Durban, 4001

POSTAL ADDRESS 
PO Box 6148, Durban, 4000

EXECUTIVE DIRECTORS 
GH Gerber (CEO), DC Edley (GFD), AL van Zyl

INDEPENDENT NON-EXECUTIVE DIRECTORS 
ESC Garner (Chairman), AD Dixon, WA Lombard

TRANSFER SECRETARIES
Computershare Investor Services (Pty) Limited, 70 Marshall Street, Marshalltown, 2107

COMPANY SECRETARY 
JA Lupton, FCIS

JSE SPONSOR 
River Group         

AUDITORS 
Deloitte & Touche       

www.santova.com
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