Wrap Text
GROUP INTERIM RESULTS for the six months ended 31 August 2014
SANTOVA LIMITED
Registration number 1998/018118/06
Share code SNV
ISIN ZAE000159711
GROUP INTERIM RESULTS
for the six months ended 31 August 2014
HIGHLIGHTS
INCREASE IN
GROSS BILLINGS
12,8%
INCREASE IN
REVENUE
13,9%
INCREASE IN
PROFIT FOR THE PERIOD
25,3%
INCREASE IN
BILLINGS MARGIN TO
7,1%
INCREASE IN
OPERATING MARGIN TO
23,6%
INCREASE IN
INTEREST COVER TO
5,5 times
INCREASE IN BASIC
EARNINGS PER SHARE
24,4%
INCREASE IN HEADLINE
EARNINGS PER SHARE
23,8%
INCREASE IN NET
ASSET VALUE PER SHARE
22,6%
INCREASE IN TANGIBLE NET
ASSET VALUE PER SHARE
66,4%
2014 2013 %
August August movement
Gross billings (R'000) 1 650 849 1 463 155 12,8
Revenue (R'000) 116 486 102 304 13,9
Profit for the period (R'000) 17 475 13 945 25,3
Billings margin (%) 7,1 7,0 1,4
Operating margin (%) 23,6 22,8 3,5
Interest cover (times) 5,5 4,1 34,1
Basic earnings per share (cents) 12,65 10,17 24,4
Headline earnings per share (cents) 15,47 12,50 23,8
Net asset value per share (cents) 154,31 125,85 22,6
Tangible net asset value per share (cents) 67,09 40,33 66,4
COMMENTARY
OVERVIEW
The Group has achieved a 25,3% increase in profit for the period to R17,5 million (2013: R13,9 million), which
in turn has translated into a 23,8% increase in headline earnings per share for the period to 15,47 cents
(2013: 12,50 cents).
This growth was achieved despite a noticeable downturn in trading volumes, seen particularly in the third
quarter of 2014, as consumers and importers reacted to the current weak economic climate and outlook in
South Africa. The growth was achieved through a number of key factors, in particular:
- The continued weakening of the rand which has a positive effect on the underlying 'US dollar-based'
calculation of revenue in South Africa and on the translation of profits from the Group's offshore investments;
- Strong growth in revenue from project shipments primarily into Africa; and
- The continued growth in the contribution of profit from the Group's offshore investments, particularly from
the Netherlands operation which has matured over the past financial periods into a meaningful contributor
to the Group's earnings.
OPERATIONAL PERFORMANCE
South African operations
Santova Logistics (South Africa), which continues to be the core contributor to Group revenue contributing
58% (2013: 60%), achieved a 9,7% increase in revenue and a 33,1% increase in profit for the period. The growth
in revenue was driven primarily by a 454% growth in project revenue for the period as a result of a significant
increase in the number of projects awarded to the Group. These projects related mainly to the shipment of
agricultural products, wood and concrete into Africa and are a strategic initiative of the Group which it expects
to develop further in the coming periods.
Revenue from ongoing operations increased by 1,24% as a result of the downturn in shipping volumes related
to the state of the South African economy. This was evidenced in the decrease of internal file volumes which
was in turn supported by official port statistics showing import volumes being down approximately 7% to 8%
for the year to date. However, the decrease in volumes was counteracted by the further weakening of the
rand which resulted in a 10,6% increase in the average rand dollar exchange rate over the period, positively
impacting the underlying calculation of the shipping revenues.
Foreign operations
The expansion of the Group's international footprint continues to be another of its key strategic initiatives, the
result being the increase in revenue contribution from the offshore subsidiaries from 36% to 38% in the current
period.
The primary driver of this increased contribution was the Netherlands operation which saw revenue increase
43,2% and profit for the period increase 78,9%. There was also another strong contribution from Hong Kong
and signs of a turnaround in Australia which saw a growth in profit following a long period of weakness in the
local economy. Trading conditions in the United Kingdom, however, remain challenging and this resulted in a
decrease in the profit contribution from both subsidiaries within the region.
Other comprehensive income
Other comprehensive income decreased significantly from a profit in the prior period of R13,0 million to a loss
of R1,4 million in the current period, primarily due to two factors:
- A strengthening of the closing South African rand to British pound exchange rate in the current period by
R0,36 versus a weakening in the prior period of R2,59; and
- The fact that the British pound denominated investment in W.M. Shipping (UK) is the Group's largest
offshore exposure.
FINANCIAL POSITION
The Group's balance sheet structure remains consistent with prior periods, with the exception of two material
line item movements, being a 34,1% decrease in trade and other payables versus the closing balance at
February 2014 and a corresponding 23,9% increase in short-term borrowings and overdraft. These changes are
directly associated and attributable to a restructuring and change of payment date of the Group's deferment
facilities with the South Africa Revenue Services ("SARS") which took place in August 2014. This restructuring
resulted in a double payment to SARS in August, hence the corresponding reduction in the creditor balances
and an increase in the borrowings required to fund the payments. The restructuring was a decision taken by the
Group and it will have significant long term benefits in respect of cash flow and funding costs.
The Group's core asset, being its debtors book, increased 11,8% or R47,9 million versus the prior period to
R454,6 million at the end of August 2014. This increase is entirely consistent with the 12,8% increase in gross
billings in the current period and the management of the debtors book remains one of the Group's core
competencies. The result being that, together with the credit underwriting of the book that insures the Group
against default by clients, the credit ratios and ageing on the book remain sound.
Overall, debtor days have decreased from 50,6 days in August 2013 to 50,1 at August 2014 and total bad debt
write offs during the six months to August 2014 decreased to R0,7 million (2013: R2,1 million). Total provisions
for impairment of receivables have increased by R3,1 million from February 2014 to R9 million as at August
2014 (February 2014: R5,9 million) due to the abovementioned increase in the debtors book coupled with the
current economic uncertainty, but they remain at a very acceptable level of 2% of the total book (February 2014:
1,2%). In addition, the net interest margin generated on this debtors book as a result of the Group providing
finance facilities to its clients for recoverable logistics disbursements has increased 45% to R8,4 million during
the current period (2013: R5,8 million), due to the overall growth in the book.
CASH FLOW AND FUNDING
Net cash generated from operating activities remains positive for the period at R9,5 million and although it
is lower than the R13,5 million generated in the prior period, the reduction is simply due to the amount and
timing of taxation payments across the Group's various subsidiaries.
In addition the Group remains well funded with excess facilities available for future growth having recently
renegotiated its banking facilities with its primary bankers in South Africa, which resulted in an increase in
overall South African facilities from R300 million to R350 million.
OUTLOOK
As a result of the weakening in trade volumes which the Group has experienced in the third quarter of 2014
due to the current poor economic climate in South Africa, some uncertainty has been created on the outlook
for the second half of the current financial year. However the impact of this will be mitigated by the internal
efficiencies the Group continues to drive in South Africa to maintain margins and remain cost effective, plus
the diversified earnings from the Group's offshore subsidiaries and the fact that the second half of the financial
year is cyclically the Group's peak trading period.
In addition, the Group remains committed to expanding its footprint internationally through acquisitions and
as a result the Board believes that it can continue to deliver sustainable earnings growth and create long term
value for shareholders.
For and on behalf of the Board
GH Gerber DC Edley
Chief Executive Officer Group Financial Director
31 October 2014
CONDENSED STATEMENT OF PROFIT
OR LOSS AND OTHER COMPREHENSIVE INCOME
Unaudited Unaudited* Audited
Six months to Six months to 12 months to
31 August 31 August 28 February
2014 2013 2014
R'000 R'000 R'000
Gross billings 1 650 849 1 463 155 3 221 519
Revenue 116 486 102 304 214 357
Other income 10 927 9 309 15 118
Depreciation and amortisation (1 675) (1 554) (3 476)
Administrative expenses (98 243) (86 772) (174 228)
Operating profit 27 495 23 287 51 771
Interest received 3 997 1 514 4 559
Finance costs (9 019) (7 207) (16 316)
Profit before taxation 22 473 17 594 40 014
Income tax expense (4 998) (3 649) (9 228)
Profit for the period/year 17 475 13 945 30 786
Attributable to:
Equity holders of the parent 17 264 13 879 30 587
Non-controlling interests in subsidiaries 211 66 199
Other comprehensive income
Exchange differences arising from translation
of foreign operations (1 426) 13 011 22 743
Total comprehensive income 16 049 26 956 53 529
Attributable to:
Equity holders of the parent 15 739 26 834 53 122
Non-controlling interests in subsidiaries 310 122 407
Basic earnings per share (cents) 12,65 10,17 22,42
Diluted basic earnings per share (cents) 12,48 10,07 22,12
Dividends per share (cents) n/a n/a 3,25
* Restated due to adoption of IFRS 10 detailed in note 3.
CONDENSED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited* Audited
31 August 31 August 28 February
2014 2013 2014
R'000 R'000 R'000
ASSETS
Non-current assets 136 364 131 393 141 418
Plant and equipment 8 400 9 921 8 940
Intangible assets 119 013 116 694 123 927
Financial assets 2 372 1 874 3 175
Deferred taxation 6 579 2 904 5 376
Current assets 534 944 488 376 555 123
Trade receivables 454 620 406 738 480 738
Other receivables 43 435 39 499 36 627
Current tax receivable 962 1 852 915
Cash and cash equivalents 35 927 40 287 36 843
Total assets 671 308 619 769 696 541
EQUITY AND LIABILITIES
Capital and reserves 210 565 171 734 198 510
Non-current liabilities 25 790 35 486 30 080
Interest-bearing borrowings 24 013 31 783 27 967
Long-term provision 1 777 1 966 1 777
Financial liabilities – 1 737 336
Current liabilities 434 953 412 549 467 951
Trade and other payables 145 524 219 133 220 750
Current tax payable 5 015 6 117 4 180
Current portion of interest-bearing borrowings 8 314 7 638 7 947
Amounts owing to related parties 208 195 204
Financial liabilities 2 874 14 591 9 709
Short-term borrowings and overdraft 258 032 154 305 208 321
Short-term provisions 14 986 10 570 16 840
Total equity and liabilities 671 308 619 769 696 541
* Restated due to adoption of IFRS 10 detailed in note 3.
CONDENSED STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
31 August 31 August 28 February
2014 2013 2014
R'000 R'000 R'000
Capital and reserves
Balance at beginning of period/year 198 510 147 963 147 963
Total comprehensive income 16 049 26 956 53 529
Employee share option scheme 441 226 429
Dividends paid (4 435) (3 411) (3 411)
Balance at end of period/year 210 565 171 734 198 510
Comprising:
Stated capital 146 198 145 533 145 757
Foreign currency translation reserve 22 795 14 741 24 320
Accumulated profit 37 829 8 312 25 000
Attributable to equity holders of the parent 206 822 168 586 195 077
Non-controlling interests in subsidiaries 3 743 3 148 3 433
Capital and reserves 210 565 171 734 198 510
CONDENSED STATEMENT OF CASH FLOWS
Unaudited Unaudited* Audited*
Six months to Six months to 12 months to
31 August 31 August 28 February
2014 2013 2014
R'000 R'000 R'000
Cash generated from operations 19 845 20 246 45 170
Interest received 3 997 1 514 4 559
Finance costs (8 921) (6 975) (15 959)
Taxation paid (5 412) (1 274) (10 102)
Net cash flows from operating activities 9 509 13 511 23 668
Cash outflows from the acquisition of subsidiaries – – (6 277)
Cash utilised in other investing activities (1 056) (3 393) (3 912)
Net cash flows from investing activities (1 056) (3 393) (10 189)
Net cash flows from financing activities (8 934) (1 595) (8 971)
Net (decrease)/increase in cash and cash equivalents (481) 8 523 4 508
Effects of exchange rate changes on cash and cash equivalents (435) 3 224 5 257
Cash and cash equivalents at beginning of period/year 36 843 28 540 27 078
Cash and cash equivalents at end of period/year 35 927 40 287 36 843
Cash and cash equivalents is made up as follows:
Cash and cash equivalents 38 159 40 287 36 843
Less: Bank overdrafts (2 232) – –
Cash and cash equivalents at end of period/year 35 927 40 287 36 843
* Restated due to change in accounting policy detailed in note 2 and adoption of IFRS 10 detailed in note 3.
CONDENSED SEGMENTAL ANALYSIS
Foreign
South Africa operations Group
R'000 R'000 R'000
GEOGRAPHICAL SEGMENT
31 August 2014
Revenue 72 052 44 434 116 486
Operating profit 16 617 10 878 27 495
Profit for the period 9 002 8 473 17 475
Total assets 563 089 108 219 671 308
Total liabilities 399 668 61 075 460 743
Depreciation and amortisation 1 357 318 1 675
Capital expenditure 955 327 1 282
31 August 2013
Revenue 65 112 37 192 102 304
Operating profit 15 660 7 627 23 287
Profit for the period 8 503 5 442 13 945
Total assets 525 375 94 394 619 769
Total liabilities 390 116 57 919 448 035
Depreciation and amortisation 1 134 420 1 554
Capital expenditure 3 397 74 3 471
Logistics Financial
Services Services Group
R'000 R'000 R'000
BUSINESS SEGMENT
31 August 2014
Profit for the period 16 197 1 278 17 475
Total assets 663 775 7 533 671 308
Total liabilities 459 452 1 291 460 743
31 August 2013
Profit for the period 12 543 1 402 13 945
Total assets 614 679 5 090 619 769
Total liabilities 447 233 802 448 035
SUPPLEMENTARY
FINANCIAL INFORMATION AND NOTES
1. BASIS OF PREPARATION
The condensed consolidated interim financial statements for the six months ended 31 August 2014
have 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 No 71 of 2008.
The accounting policies applied in preparation of these interim financial statements are in terms of IFRS
and are consistent with those applied in the previous annual financial statements, except for the voluntary
change in accounting policy as noted below.
This report was prepared under the supervision of the Group Financial Director, DC Edley, CA(SA) and has
not been audited by the Group's external auditors.
2. VOLUNTARY CHANGE IN ACCOUNTING POLICY
The following voluntary change in accounting policy, in terms of IAS 8: Accounting Policies, Changes in
Accounting Estimates and Errors ("IAS 8"), has been applied during the period under review resulting in
the restatement and reclassification of certain comparatives for the six months ended 31 August 2014.
IAS 7: Statement of cash flows – Reclassification of the proceeds from the sale of short-term
receivables from financing activities to operating activities
The proceeds received from the sale of short-term receivables have previously been disclosed as
a financing activity in the Group's statement of cash flows. During the period under review, the Board
resolved to account for such proceeds in its statement of cash flows as an operating cash flow. The Group
generates interest revenue through the provision of short-term finance facilities to clients for logistics-
related recoverable disbursements, effectively acting as a financial institution. The Group's management
regard this as a principal revenue-producing activity. The Group funds these short-term receivables
through the ongoing sale of such receivables to its principal banker via an invoice discounting facility, on
which it incurs an interest expense.
The Group believes that this change will result in more relevant and reliable information being presented
in respect of its cash flows by matching all the related capital inflows and outflows and interest income and
expense associated with this principal revenue-producing activity and disclosing these as operating cash
flows. As required by IAS 8, this change in accounting policy has been retrospectively applied, resulting in
the restatement of the Group's statement of cash flows as disclosed below, after the adjustments required
for the deconsolidation of the Guardrisk Cell Captive dealt with in the previous annual financial statements.
The change in policy has not resulted in any changes or restatement to the Group's statement of financial
position or statement of profit or loss and other comprehensive income.
Unaudited Audited
Six months to 12 months to
31 August 28 February
2013 2014
R'000 R'000
Statement of cash flows
As previously reported
Net cash flows from operating activities (773) (48 508)
Net cash flows from financing activities 12 689 63 205
As currently reported
Net cash flows from operating activities 13 511 23 668
Net cash flows from financing activities (1 595) (8 971)
Impact of the change
Net cash flows from operating activities 14 284 72 176
Net cash flows from financing activities (14 284) (72 176)
3. IFRS 10: CONSOLIDATED FINANCIAL STATEMENTS (EFFECTIVE FOR PERIODS BEGINNING ON OR
AFTER 1 JANUARY 2013)
The Group adopted IFRS 10: Consolidated Financial Statements for the first time during the previous
reporting period. As a result, the investment by Santova Logistics (Pty) Limited in a cell captive operated
by the Guardrisk Insurance Company no longer qualifies for consolidation.
The Board do not consider the impact of this restatement on the Group's interim results to be material as
there is no effect on either profit for the period or total capital and reserves in the current or prior reporting
periods.
Due to the Board's assessment of the immateriality of the restatement and the fact that the transitional
provisions of IFRS 10 do not require the presentation of reporting periods, other than the annual period
immediately preceding the date of initial application of this IFRS, a third statement of financial position has
not been included in terms of IAS 1: 40A.
The impact of this restatement on the 2013 interim financial results can be summarised as follows:
As
previously
reported Adjustment Restated
R'000 R'000 R'000
Profit for the period 13 945 – 13 945
Total assets 620 241 (472) 619 769
Total liabilities 448 507 (472) 448 035
Capital and reserves 171 734 – 171 734
Unaudited Unaudited Audited
Six months to Six months to 12 months to
31 August 31 August 28 February
2014 2013 2014
R'000 R'000 R'000
4. FAIR VALUE ADJUSTMENTS
ON FINANCIAL INSTRUMENTS
The Group recognised the following financial liability in
the statement of financial position measured at fair value
using significant unobservable inputs (level 3 inputs):
Current portion of contingent purchase considerations
on acquisitions 1 151 12 452 7 046
This amount represents the present value of the
remaining contingent purchase obligations arising
from the acquisition of W.M. Shipping Limited (United
Kingdom) ("W.M. Shipping"). The fair value of the liability
is calculated as the net present value of the remaining
warranty payments as set out in the agreement of sale,
discounted at the weighted average cost of capital for
the acquired entity calculated at 4,1%. The financial
liability is revalued annually or when key indicators
suggest revaluation is necessary and the reconciliation
below illustrates the impact of the revaluation on profit
and loss:
Financial liability at beginning of year 7 046 15 388 15 388
Fair value gain (5 896) (5 171) (5 171)
Interest on present value calculation 24 232 357
Warranty payments – – (6 277)
Foreign exchange (loss)/profit on translation (23) 2 002 2 749
Financial liability at end of year 1 151 12 451 7 046
The second and final warranty period related to the acquisition of W.M. Shipping ended on 31 August
2014. Over the two warranty periods of 24 months, the Group consolidated total pre-tax profits of
GBP1,362 million from W.M. Shipping versus the warranted profit before tax of GBP1,5 million. As a result
the Seller did not meet certain specific warranty conditions and a fair value gain of R5,896 million, as
detailed above, was realised and released to profit and loss in the current period after revaluation of
the financial liability. Due to the above indications, management performed an impairment test on the
cash generating unit ("CGU") which indicated that the recoverable value currently exceeded the carrying
amount of the CGU. However, sensitivity testing of key variables used in the impairment test indicated a
potential impairment of R3,892 million which management decided to recognise in the current period to
ensure consistency with the fair value gain and impairment reported in the prior period in respect of this
CGU.
There were no other material adjustments to fair values of financial instruments during the period under
review.
Unaudited Unaudited Audited
Six months to Six months to 12 months to
31 August 31 August 28 February
2014 2013 2014
R'000 R'000 R'000
5. EARNINGS PER SHARE AND SHARE PERFORMANCE
5.1 Reconciliation between earnings and headline
earnings
Profit attributable to equity holders of the parent 17 264 13 879 30 587
Net (profit)/loss on disposals of plant and equipment (49) 70 94
Impairment of goodwill 3 892 3 131 3 131
Taxation effects 10 (19) (18)
Non-controlling interests in subsidiaries – – 9
Headline earnings 21 117 17 061 33 803
Shares in issue 136 459 136 459 136 459
Weighted average number of shares 136 459 136 459 136 459
Diluted number of shares 138 288 137 760 138 285
Shares for net asset value calculation 136 459 136 459 136 459
5.2 Performance per ordinary share
Headline earnings per share 15,47 12,50 24,77
Diluted headline earnings per share 15,26 12,38 24,45
Net asset value per share 154,31 125,85 145,47
Tangible net asset per share 67,09 40,33 54,66
6. EVENTS AFTER THE REPORTING PERIOD
There are no events which have taken place after the reporting period for which non-disclosure would
affect the ability of the users to make proper evaluations and decisions.
CORPORATE INFORMATION
Registration number 1998/018118/06
Share code SNV
ISIN ZAE000159711
Independent non-executive directors ESC Garner (Chairman)
AD Dixon
WA Lombard
EM Ngubo
Executive directors GH Gerber (Chief Executive Officer)
DC Edley (Group Financial Director)
AL van Zyl
Company Secretary JA Lupton, FCIS
JSE sponsor River Group
Auditors Deloitte & Touche
Transfer secretaries Computershare Investor Services (Pty) Ltd
Investor relations Contact persons GH Gerber (Chief Executive Officer)
DC Edley (Group Financial Director)
E mail address investor@santova.com
Contact number +27 31 374 7000
Physical address Santova House, 88 Mahatma Gandhi Road, Durban, 4001
Postal address PO Box 6148, Durban, 4000
Contact number +27 31 374 7000
www.santova.com
3 Novemeber 2014
Sponsor
River Group
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