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SNV
SNV
SNV - Santova Logistics - Group Interim Results for the six months ended
31 August 2008
Santova Logistics Ltd
Registration number 1998/018118/06
Share code SNV ISIN ZAE000090650
website www.santova.com
GROUP INTERIM RESULTS
for the six months ended 31 August 2008
CONDENSED GROUP INCOME STATEMENT
Restated
6 months to 6 months to 12 months to
31 August 31 August 29 February
2008 2007 2008
Unaudited Unaudited Audited
R`000 R`000 R`000
Turnover 61 189 54 688 108 243
Gross billings 972 845 924 416 1 956 021
Cost of billings 911 656 869 728 1 847 778
Other income 339 366 3 954
Administrative
expenses 47 854 44 569 88 502
Operating income 13 674 10 485 23 695
Depreciation and
amortisation 959 946 2 563
Interest received 1 870 2 339 4 454
Finance costs 9 336 8 496 17 550
Profit before
taxation 5 249 3 382 8 036
Income tax expense 1 327 1 132 1 965
Profit for the
period/year 3 922 2 250 6 071
Attributable to:
Equity holders of
the parent 3 920 2 234 6 026
Minority interest 2 16 45
Basic earnings per
share (cents) 0,29 0,18 0,45
Diluted earnings
per share (cents) 0,29 0,18 0,45
SUPPLEMENTARY
INFORMATION
Reconciliation
between earnings
and
headline earnings
Profit
attributable to
equity holders of
the parent 3 920 2 234 6 026
Loss/(profit) on
disposals of plant
and
equipment 75 (48) (14)
Taxation effects (21) 14 4
Headline earnings 3 974 2 200 6 016
Shares in issue (000`s) 1 375 357 1 341 788 1 366 788
Weighted average
number of shares (000`s) 1 329 990 1 228 833 1 335 522
Diluted number of
shares (000`s) 1 329 990 1 228 833 1 335 522
Shares for net
asset value
calculation (000`s) 1 329 990 1 335 068 1 329 990
Performance per
ordinary share
Basic headline
earnings per share (cents) 0,30 0,18 0,45
Diluted headline
earnings per share (cents) 0,30 0,18 0,45
Net asset value
per share (cents) 6,12 5,57 5,82
Tangible net asset
per share (cents) 3,89 3,37 3,64
CONDENSED GROUP CASH FLOW STATEMENT
Restated
6 months to 6 months to 12 months to
31 August 31 August 29 February
2008 2007 2008
Unaudited Unaudited Audited
R`000 R`000 R`000
Cash generated by operations
before working
capital changes 13 875 10 391 23 570
Changes in working capital (4 983) 26 302 8 174
Cash generated from operations 8 892 36 693 31 744
Interest received 1 870 2 339 4 454
Finance costs (9 336) (8 496) (17 550)
Income tax paid (1 364) (417) (1 824)
Cash generated from operating
activities 62 30 119 16 824
Net cash flows from investing
activities (1 839) (2 256) (3 511)
Cash inflows on acquisition of
subsidiaries - 1 001 1 001
Net cash flows from financing
activities 6 896 (34 581) (16 407)
Net increase/(decrease) in
cash and cash equivalents 5 119 (5 717) (2 093)
Effects of exchange rate
changes on cash and
cash equivalents 47 23 30
Cash and cash equivalents at
the beginning of the
period/year 5 910 7 973 7 973
Cash and cash equivalents at
the end of the period/year 11 076 2 279 5 910
CONDENSED GROUP BALANCE SHEET
Restated
31 August 31 August 29 February
2008 2007 2008
Unaudited Unaudited Audited
R`000 R`000 R`000
ASSETS
Non-current assets 44 199 43 862 43 502
Plant and equipment 9 398 10 119 9 498
Intangible assets 29 632 29 280 29 029
Deferred taxation 5 169 4 463 4 975
Current assets 302 129 271 008 286 789
Trade receivables 272 020 256 974 263 110
Other receivables 14 870 7 646 13 855
Amounts owing from related parties 4 163 4 087 3 871
Financial asset - 22 43
Cash and cash equivalents 11 076 2 279 5 910
Total assets 346 328 314 870 330 291
EQUITY AND LIABILITIES
Capital and reserves 81 398 74 303 77 438
Share capital and premium 156 401 157 104 156 401
Foreign currency translation reserve 79 19 41
Accumulated loss (75 123) (82 835) (79 043)
Attributable to equity holders of
the parent 81 357 74 288 77 399
Minority interest 41 15 39
Non-current liabilities 2 434 3 849 2 658
Interest-bearing borrowings 222 1 594 446
Long-term provision 2 212 2 255 2 212
Current liabilities 262 496 236 718 250 195
Trade and other payables 115 589 118 588 112 480
Current tax payable 1 096 1 002 940
Amounts owing to related parties 114 115 120
Current portion of interest-bearing
borrowings 594 - 772
Financial liability 83 - -
Short-term borrowings and overdraft 140 634 114 786 133 330
Short-term provisions 4 386 2 227 2 553
Total equity and liabilities 346 328 314 870 330 291
CONDENSED GROUP SEGMENTAL ANALYSIS
Southern Africa Far East United Kingdom Group
R`000 R`000 R`000 R`000
31 AUGUST 2008
GEOGRAPHICAL
SEGMENT
Turnover
(external) 56 395 1 012 3 782 61 189
Net profit
before interest
and tax 12 508 77 130 12 715
Net finance cost (7 263) (9) (194) (7 466)
Income tax
expense (1 313) (14) - (1 327)
Net
profit/(loss) 3 932 54 (64) 3 922
Total assets 340 410 3 024 2 894 346 328
Total
liabilities 259 887 2 023 3 019 264 929
Depreciation
and
amortisation 916 8 35 959
Capital
expenditure 1 382 12 7 1 401
31 AUGUST 2007
RESTATED
GEOGRAPHICAL
SEGMENT
Turnover
(external) 49 652 1 073 3 963 54 688
Net
profit/(loss)
before interest
and tax 9 295 436 (192) 9 539
Net finance cost (6 157) - - (6 157)
Income tax
expense (1 132) - - (1 132)
Net
profit/(loss) 2 006 436 (192) 2 250
Total assets 308 900 3 120 2 850 314 870
Total
liabilities 236 114 2 755 1 698 240 567
Depreciation
and
amortisation 911 6 29 946
Capital
expenditure 2 102 3 158 2 263
Freight forwarding
and clearing Insurance Group
R`000 R`000 R`000
31 AUGUST 2008
BUSINESS SEGMENT
Net profit 3 874 48 3 922
Total assets 344 573 1 755 346 328
Total liabilities 263 896 1 033 264 929
31 AUGUST 2007
RESTATED BUSINESS SEGMENT
Net profit 1 966 284 2 250
Total assets 314 037 833 314 870
Total liabilities 240 151 416 240 567
CONDENSED GROUP 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
Restated balances
at 28 February
2007 1 123 133 160 (11) (805)
Net profit for
the period as
restated - - - -
Net profit as
previously
reported - - - -
Re-assessment of
plant and
equipment under
IAS 16 - - - -
Related deferred
taxation - - - -
Employee share
scheme as
previously
reported - 49 - -
Re-assessment of
shares offered
under IFRS 2 - (49) - -
Reversal of
minority interest
allocated against
the parent - - - -
Foreign currency
translation
adjustment - - - -
Share capital
movements for
period as
restated 219 22 204 - -
Issue of share
capital as
previously
reported 219 41 104 - -
Re-assessment of
purchase price of
subsidiaries and
subscriptions
awaiting
allotment
realised - (18 900) - -
Restated balances
at 31 August 2007 1 342 155 364 (11) (805)
Net profit for
the period - - - -
Minority interest
adjustment - - - -
Issue of share
capital 25 2 975 (25) (2 975)
Adjustment to
subscriptions
awaiting
allotment - - - -
Re-assessment of
shares offered
under IFRS 2 - (54) - -
Foreign currency
translation
adjustment - - - -
Share capital
repurchased - - (9) (711)
Balances at
29 February 2008 1 367 158 285 (45) (4 491)
Net profit for
the period - - - -
Foreign currency
translation
adjustment - - - -
Issue of
subscriptions
awaiting
allotment 9 1 276 - -
Balances at
31 August 2008 1 376 159 561 (45) (4 491)
Foreign
Subscriptions currency
awaiting translation Accumulated
allotment reserve loss Total
R`000 R`000 R`000 R`000
Restated
balances at
28 February 2007 22 928 (3) (85 070) 71 322
Net profit for
the period as
restated - - 2 234 2 234
Net profit as
previously
reported - - 2 135 2 135
Re-assessment of
plant and
equipment under
IAS 16 - - 71 71
Related deferred
taxation - - (21) (21)
Employee share
scheme as
previously
reported - - - 49
Re-assessment of
shares offered
under IFRS 2 - - 49 -
Reversal of
minority
interest
allocated
against the
parent - - 1 1
Foreign currency
translation
adjustment - 22 - 22
Share capital
movements for
period as
restated (21 714) - - 709
Issue of share
capital as
previously
reported - - - 41 323
Re-assessment of
purchase price
of subsidiaries
and
subscriptions
awaiting
allotment
realised (21 714) - - (40 614)
Restated
balances at
31 August 2007 1 214 19 (82 835) 74 288
Net profit for
the period - - 3 792 3 792
Minority
interest
adjustment - - - -
Issue of share
capital - - - -
Adjustment to
subscriptions
awaiting
allotment 71 - - 71
Re-assessment of
shares offered
under IFRS 2 - - - (54)
Foreign currency
translation
adjustment - 22 - 22
Share capital
repurchased - - - (720)
Balances at
29 February 2008 1 285 41 (79 043) 77 399
Net profit for
the period - - 3 920 3 920
Foreign currency
translation
adjustment - 38 - 38
Issue of
subscriptions
awaiting
allotment (1 285) - - -
Balances at
31 August 2008 - 79 (75 123) 81 357
Minority Total
interest equity
R`000 R`000
Restated balances at 28 February 2007 - 71 322
Net profit for the period as restated 16 2 250
Net profit as previously reported 16 2 151
Re-assessment of plant and equipment under IAS 16 - 71
Related deferred taxation - (21)
Employee share scheme as previously reported - 49
Re-assessment of shares offered under IFRS 2 - -
Reversal of minority interest allocated against the
parent (1) -
Foreign currency translation adjustment - 22
Share capital movements for period as restated - 709
Issue of share capital as previously reported - 41 323
Re-assessment of purchase price of subsidiaries and
subscriptions awaiting allotment realised - (40 614)
Restated balances at 31 August 2007 15 74 303
Net profit for the period 29 3 821
Minority interest adjustment (5) (5)
Issue of share capital - -
Adjustment to subscriptions awaiting allotment - 71
Re-assessment of shares offered under IFRS 2 - (54)
Foreign currency translation adjustment - 22
Share capital repurchased - (720)
Balances at 29 February 2008 39 77 438
Net profit for the period 2 3 922
Foreign currency translation adjustment - 38
Issue of subscriptions awaiting allotment - -
Balances at 31 August 2008 41 81 398
COMMENTARY
GROUP PROFILE
Santova Logistics Limited and its subsidiary companies ("Santova"/"Group"),
operating out of South Africa, the United Kingdom, Hong Kong and China, provide
integrated "end-to-end" logistics solutions for importers/exporters and
consumers.
OPERATIONAL REVIEW
The six-month period ending 31 August 2008 witnessed a global economic
slowdown. This was compounded even further by soaring oil prices and the
sub-prime crisis, which had its origins in the United States. Whilst South
Africa`s economic fundamentals remained strong, these international
developments had heightened South Africa`s economic vulnerabilities and
resulted in a steady decline in The Trade Activity Index from 50 in February
2008 to 42 in June 2008.
Despite a weakening economy, the Group proved to be fundamentally very strong
and achieved improved results over those of the same period last year. Profit
for the period and basic headline earnings per share in 2008 were R3 922 379
(2007: R2 250 295) and 30 cents (2007: 18 cents), increases of 74,3% and 66,9%,
respectively.
This achievement reinforces our view that our business model, which has been
developed over the years, is a sustainable one capable of delivering earnings
in challenging times. Our leading edge technology, integrated portfolio of
services, and global network, together with our expertise in supply chain
logistics has allowed us to capitalise on these opportunities to meet the
demands of our organic growth strategy.
Southern Africa
The clearing and freight forwarding operations in the domestic market, Impson
Logistics (Pty) Limited ("Impson"), have performed exceptionally well with net
profit increasing from R1 966 173 in 2007 to R3 874 659 in 2008, an increase of
97,1%. This is largely as a result of the management team having settled down
and become fully integrated with well-aligned operational policies and
procedures resulting in greatly enhanced efficiencies and effectiveness. In
addition, new client acquisition and the retention of existing clients on
improved pricing structures also contributed to an impressive performance.
Despite reduced earnings, the insurance business of Leading Edge Insurance
Brokers (Pty) Limited ("Leading Edge") has continued to perform well in so far
as the acquisition of new clients is concerned. Earnings have been adversely
affected by two factors; the first concerns the cost of investing in staff to
ensure the future capabilities of the business, and the second, broker
commissions being renegotiated downwards by an underwriter on a significant
portion of the existing insurance book. Marine insurance revenue, however,
which accrues to the Group and not to Leading Edge, is significantly up (47,4%)
on the same period last year.
International
The Santova Hong Kong operation has experienced reduced volumes on both the
South African and United Kingdom routes. This, together with a significant
investment in a world class warehouse facility and a consolidation HUB facility
in Shenzhen China, has impacted on the earnings of the business. However, the
value of such a facility linking Shenzhen with the rest of the Guangdong
province for global clients will more than compensate the costs of such an
investment. Whilst the revenue derived from such a facility will only be
evident in the second six-month period, the Group is expecting improved
earnings from this operation for the period ending February 2009.
Whilst earnings of the United Kingdom operation have improved on last year, the
UK is experiencing an economic slowdown that has impacted on the rate of
earnings growth in this region. The Group has introduced strategic initiatives
that will see improved results going forward despite the difficult economic
climate.
In concluding, it must be recognised that Leading Edge, Santova Hong Kong and
Santova United Kingdom are relatively small business units that were
essentially "zero based" from an earnings perspective on establishment or
acquisition. It was always the decision of the Group to opt for low risk
profile businesses which could be developed by investing in quality human,
financial and physical resources that were necessary to achieve the Group`s
strategic objectives. Because these units are self-governing and have minimal
earnings, any spend or investment in the future capabilities of these
businesses results in a material effect on the earnings of these business
units.
FINANCIAL REVIEW
Overview of 2008 performance
The Group has achieved improved results for the first six months of 2008. In
comparison to the restated period last year, the following could be said to
constitute some of the salient features of this performance:
* Turnover increased by 11,9% to R61 189 216;
* Operating income increased by 30,4% to R13 673 945;
* Profit after tax increased by 74,3% to R3 922 379;
* Net asset value per share increased by 10,0% to 6,12 cents; and
* Tangible net asset value per share increased by 15,4 % to 3,89 cents.
The improved performance is a direct result of the successful integration of
capabilities and intellectual capital that is "enabling" systematic innovation
and more importantly the successful implementation thereof. Furthermore, the
business is slowly but surely attaining improved levels of critical mass that
allow it to benefit more and more from economies of scale. This is highlighted
by the improvement in the trading margin of the business which has improved by
16,6% from 19,2% last period to 22,3% this period.
In spite of a 33,5% increase in cash generated from operations, before working
capital changes, cash generated from operations is somewhat lower. This is due,
in the main, to the increased cash advanced to customers through accounts
receivable, some R9,9 million when compared to a decrease in cash advanced last
year of R15,2 million. This is in line with the increased trade volumes or
Gross Billings of R48,4 million when compared to the same period last year. The
ageing of the accounts receivables themselves are within normal trading terms
and provided for wherever their collection is in doubt. This increased demand
for cash has to a large extent been funded by operations with a relatively
small drawdown of R6,9 million on our Invoice Discounting facilities compared
to the repayment of R34,6 million in the previous period. The Group is trading
well within our long and short-term financing facilities afforded to us by our
bankers.
Financial reporting and accounting policy changes
The Group interim results reflect certain changes to the previously reported
financial information of the Group for the interim results presented for the
six months to 31 August 2007.
The reasons for this are discussed further in note 28 of the Annual Financial
Statements contained within the 2008 Annual Report. The effect of the
adjustments on the six months to 31 August 2007 are reflected in the Statement
of Changes in Equity and include an adjustment to residual values on certain
motor vehicles within the Group of R71 236 together with the related taxation
effect of R20 658 and an adjustment to correct the treatment of certain share
trust entries of R49 323.
This resulted in the basic earnings per share changing from 0,17 cents to 0,18
cents per share when comparing the 31 August 2007 previously reported results
to the restated results respectively, a 7,0% increase, and 0,16 cents to 0,18
cents per shares for basic headline earnings per share, an 11,9% increase.
Period under review
The period under review has been an exciting one, which saw the shareholders
approve a number of resolutions at the annual general meeting held on 23
September 2008. The most notable resolution being shareholder approval for the
Company to repurchase 219 666 667 shares, representing 15,97% of the total
issued share capital of Santova Logistics Limited. None of these changes have
been accounted for in these half-year results since they occurred post balance
sheet date, they will be accounted for subsequent to this period.
On 5 June 2008, 8 568 981 shares were issued to the vendors of Leading Edge
after meeting their profit warranties; this was the last batch of shares held
under "subscriptions awaiting allotment".
Subsequent events
There have been no material subsequent events since 31 August 2008 that have
not been referred to elsewhere in this report.
OUTLOOK FOR THE NEXT SIX MONTHS
There is no doubt that the deteriorating global economic outlook has increased
the risk to South Africa`s economy. This is evident in local current economic
conditions where spending has been substantially curtailed and consumer
confidence dramatically reduced. Whilst trade expectations tend to be "on
hold", the Group is confident it will continue to make progress in the third
and fourth quarter of the February 2009 financial year.
This growth will be achieved through continued new client acquisition and
enhanced multi-product/service delivery to existing clients. In a contracting
economy, the opportunities reside in the fact that businesses tend to review
their current structures (systems and work flow processes) and seek those that
are more efficient and effective. Santova`s Optimised Supply Chain Active
Resource suite of software packages ("OSCAR") will allow those businesses
seeking greater efficiencies to manage their supply chain on a real-time basis,
ensuring greater efficiencies, together with synchronisation and improved cash
flows as a consequence.
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 29 February 2008 annual financial
statements. The accounting policies adopted and methods of computation are
consistent with those applied in the financial statements for the year ended 29
February 2008 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 Interpretations Committee of the IASB that
are relevant to its operations and effective as at 1 March 2008.
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.
RETIREMENT OF DIRECTOR
TR Mezher retired as director from the boards of the Company and of its
subsidiary Impson on 23 September 2008, the Board would like to extend its
thanks to Tom for his contribution to the Santova Group and wish him a long and
happy retirement.
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
12 November 2008
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: 12/11/2008 13:09:01 Produced by the JSE SENS Department.
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