| Tue 24 May 2011, 7:40 | | SNV - Santova Logistics Limited - Audited abridged group results for the year |
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SNV
SNV - Santova Logistics Limited - Audited abridged group results for the year
ended 28 February 2011
SANTOVA LOGISTICS LIMITED
REGISTRATION NUMBER: 1998/018118/06
SHARE CODE: SNV
ISIN: ZAE000090650
AUDITED ABRIDGED GROUP RESULTS
for the year ended 28 February 2011
STATEMENT OF FINANCIAL POSITION
2011 2010
R`000 R`000
ASSETS
Non-current assets 72 422 52 297
Plant and equipment 8 540 8 942
Intangible assets 59 990 39 527
Financial asset 458 579
Deferred taxation 3 434 3 249
Current assets 275 454 188 465
Trade receivables 248 820 176 576
Other receivables 11 789 6 911
Current tax receivable 784 622
Amounts owing from related parties 573 34
Cash and cash equivalents 13 488 4 322
Total assets 347 876 240 762
EQUITY AND LIABILITIES
Capital and reserves 103 415 80 277
Share capital and premium 151 204 145 579
Contingency reserve 181 132
Foreign currency translation reserve 1 068 1 148
Accumulated loss (50 718) (67 633)
Attributable to equity holders of the parent 101 735 79 226
Minority interest 1 680 1 051
Non-current liabilities 5 761 6 772
Interest-bearing borrowings 318 416
Long-term provision 2 013 2 136
Financial liabilities 3 429 4 206
Deferred taxation 1 14
Current liabilities 238 700 153 713
Trade and other payables 116 811 84 458
Current tax payable 593 796
Current portion of interest-bearing borrowings 151 321
Amounts owing to related parties 157 97
Current portion of financial liabilities 5 947 3 485
Short-term borrowings and overdraft 108 991 62 591
Short-term provisions 6 050 1 965
Total equity and liabilities 347 876 240 762
STATEMENT OF COMPREHENSIVE INCOME
2011 2010
R`000 R`000
Turnover 144 230 98 038
Gross billings 2 044 439 1 493 371
Cost of billings (1 900 209) (1 395 333)
Other income 6 365 1 924
Depreciation and amortisation (3 960) (2 669)
Administrative expenses (114 934) (84 875)
Operating income 31 701 12 418
Interest received 2 265 3 648
Finance costs (10 750) (9 213)
Profit before taxation 23 216 6 853
Income tax expense (5 891) (2 666)
Profit for the year 17 325 4 187
Attributable to:
Equity holders of the parent 16 964 3 748
Minority interest 361 439
Other comprehensive income
Exchange differences arising from translation of
foreign operations 188 619
Total comprehensive income 17 513 4 806
Attributable to:
Equity holders of the parent 16 884 4 367
Minority interest 629 439
Basic earnings per share (cents) 1,25 0,30
Diluted basic earnings per share (cents) 1,23 0,29
SUPPLEMENTARY INFORMATION
2011 2010
R`000 R`000
Reconciliation between earnings and headline earnings
Profit attributable to equity holders of the parent 16 964 3 748
Impairment of goodwill 1 152 -
Net loss on disposals of plant and equipment 215 67
Negative goodwill arising from purchase of subsidiary (3 868) -
Taxation effects (60) (19)
Headline earnings 14 403 3 796
Shares in issue (000`s) 1 376 127 1 256 049
Weighted average number of shares (000`s) 1 351 944 1 231 457
Diluted number of shares (000`s) 1 380 493 1 291 038
Shares for net asset value calculation (000`s) 1 403 828 1 216 328
Performance per ordinary share
Headline earnings per share (cents) 1,07 0,31
Diluted headline earnings per share (cents) 1,04 0,29
Net asset value per share (cents) 7,37 6,60
Tangible net asset value per share (cents) 3,09 3,35
STATEMENT OF CASH FLOWS
2011 2010
R`000 R`000
OPERATING ACTIVITIES
Cash generated from operations before working
capital changes 32 825 14605
Changes in working capital (28 370) 31 096
Cash generated from operations 4 455 45 701
Interest received 2 265 3 634
Finance costs (9 897) (8 430)
Taxation paid (7 671) (1 423)
Net cash flows from operating activities (10 848) 39 482
INVESTING ACTIVITIES
Plant and equipment acquired (1 588) (2 149)
Intangible assets acquired and developed (1 750) (1 524)
Proceeds on disposals of plant and equipment 738 1 125
Increase in amounts owing from related parties (223) -
Net cash flows on acquisition of subsidiaries (67) (8 428)
Cash inflow from disposal of investment - 2 975
Net cash flows from investing activities (2 890) (8 001)
FINANCING ACTIVITIES
Repurchase of share capital (1 117) (1 117)
Borrowings raised/(repaid) 23 945 (32 945)
Increase/(decrease) in amounts owing to related parties 60 (59)
Net cash flows from financing activities 22 888 (34 121)
Net increase/(decrease) in cash and cash equivalents 9 150 (2 640)
Effects of exchange rate changes on cash and cash
equivalents 16 380
Cash and cash equivalents at beginning of year 4 322 6 582
Cash and cash equivalents at end of year 13 488 4 322
SEGMENTAL ANALYSIS
South
Africa Australia Europe
GEOGRAPHICAL SEGMENTS R`000 R`000R`000
February 2011
Gross billings 1 910 424 92 142 34 729
Turnover (external) 123 679 10 861 6 736
Operating income 28 901 2 321 189
Interest received 2 206 15 1
Finance costs (10 341) (95) (314)
Income tax (expense)/credit (5 328) (818) -
Profit/(loss) for the year 15 438 1 423 (124)
Segment assets 261 057 11 902 6 112
Intangible assets 59 718 268 4
Deferred taxation 3 192 242 -
Total assets 323 967 12 412 6 116
Total liabilities 226 881 6 255 8 246
Depreciation and amortisation 3 145 717 81
Capital expenditure 3 208 378 80
February 2010
Gross billings 1 356 162 106 416 17 007
Turnover (external) 89 458 2 903 2 925
Operating income/(loss) 10 330 2 673 (1 226)
Interest received 3 593 33 -
Finance costs (8 718) (338) (157)
Income tax (expense)/credit (1 964) (673) 72
Profit/(loss) for the year 3 241 1 695 (1 311)
Segment assets 180 174 12 761 916
Intangible assets 38 731 790 6
Deferred taxation 2 981 268 -
Total assets 221 886 13 819 922
Total liabilities 146 062 9 238 2 992
Depreciation and amortisation 2 142 453 56
Capital expenditure 2 054 2 311 130
Hong
Kong Group
GEOGRAPHICAL SEGMENTS R`000 R`000
February 2011
Gross billings 7 144 2 044 439
Turnover (external) 2 954 144 230
Operating income 290 31 701
Interest received 43 2 265
Finance costs - (10 750)
Income tax (expense)/credit 255 (5 891)
Profit/(loss) for the year 588 17 325
Segment assets 5 381 284 452
Intangible assets - 59 990
Deferred taxation - 3 434
Total assets 5 381 347 876
Total liabilities 3 079 244 461
Depreciation and amortisation 17 3 960
Capital expenditure 53 3 719
February 2010
Gross billings 13 786 1 493 371
Turnover (external) 2 752 98 038
Operating income/(loss) 641 12 418
Interest received 22 3 648
Finance costs - (9 213)
Income tax (expense)/credit (101) (2 666)
Profit/(loss) for the year 562 4 187
Segment assets 4 135 197 986
Intangible assets - 39 527
Deferred taxation - 3 249
Total assets 4 135 240 762
Total liabilities 2 193 160 485
Depreciation and amortisation 18 2 669
Capital expenditure - 4 495
Freight
forwarding
and
clearing Insurance Group
BUSINESS SEGMENT R`000 R`000R`000
February 2011
Net profit/(loss) 18 090 (765) 17 325
Total assets 344 333 3 543 347 876
Total liabilities 242 493 1 968 244 461
February 2010
Net profit 3 939 248 4 187
Total assets 237 204 3 558 240 762
Total liabilities 158 490 1 995 160 485
STATEMENT OF CHANGES IN EQUITY
Attributable to equity holders of the parent
Treasury Treasury
Share Share share share
capital premium capital premium
R`000 R`000R`000R`000
Balances at 28 February 2009 1 297 151 840 (45) (4 506)
Total comprehensive income - - - -
Transfer of contingency reserve - - - -
Issue of share capital 61 4 835 - -
Repurchase of shares in terms of
share commitments (11) (1 106) - -
Repurchase of unallocated shares
in Share Purchase and
Option Scheme Trust (45) (4 506) 45 4 506
Repurchase of shares previously
allocated to beneficiaries
in Share Purchase and Option
Scheme Trust (46) (4 383) - -
Minority interest arising from
25,0% sale of subsidiary - - - -
Reversal of minority interest
allocated against parent - - - -
Balances at 28 February 2010 1 256 146 680 - -
Total comprehensive income - - - -
Transfer of contingency reserve - - - -
Share commitments arising on
acquisition of subsidiary - - - -
Issue of shares in terms of
share commitments 131 3 807 - -
Repurchase of shares in terms of
share commitments (11) (1 106) - -
Balances at 28 February 2011 1 376 149 381 - -
Attributable to equity holders of the parent
Share Accu-
commit- Other mulated
ments reserves FCTR* loss Total
R`000 R`000R`000R`000R`000
Balances at 28
February 2009 (3 474) - 529 (71 275) 74 366
Total comprehensive
income - - 619 3 748 4 367
Transfer of
contingency reserve - 132 - (132) -
Issue of share capital - - - - 4 896
Repurchase of shares
in terms of share
commitments 1 117 - - - -
Repurchase of
unallocated shares in
Share Purchase and
Option Scheme Trust - - - - -
Repurchase of shares
previously allocated
to beneficiaries
in Share Purchase and
Option Scheme Trust - - - - (4 429)
Minority interest
arising from 25,0%
sale of subsidiary - - - - -
Reversal of minority
interest allocated
against parent - - - 26 26
Balances at 28
February 2010 (2 357) 132 1 148 (67 633) 79 226
Total comprehensive
income - - (80) 16 964 16 884
Transfer of
contingency reserve - 49 - (49) -
Share commitments
arising on acquisition
of subsidiary 5 625 - - - 5 625
Issue of shares in
terms of share
commitments (3 938) - - - -
Repurchase of shares
in terms of share
commitments 1 117 - - - -
Balances at 28
February 2011 447 181 1 068 (50 718) 101 735
Minority Total
interest equity
R`000 R`000
Balances at 28 February 2009 - 74 366
Total comprehensive income 439 4 806
Transfer of contingency reserve - -
Issue of share capital - 4 896
Repurchase of shares in terms of share commitments - -
Repurchase of unallocated shares in Share Purchase and
Option Scheme Trust - -
Repurchase of shares previously allocated to beneficiaries
in Share Purchase and Option Scheme Trust - (4 429)
Minority interest arising from 25,0% sale of subsidiary 638 638
Reversal of minority interest allocated against parent (26) -
Balances at 28 February 2010 1 051 80 277
Total comprehensive income 629 17 513
Transfer of contingency reserve - -
Share commitments arising on acquisition of subsidiary - 5 625
Issue of shares in terms of share commitments - -
Repurchase of shares in terms of share commitments - -
Balances at 28 February 2011 1 680 103 415
* Foreign currency translation reserve
COMMENTARY
GROUP PROFILE
Santova Logistics Limited ("Santova Logistics" or "the Company") and its
subsidiary companies ("Santova" or "the Group"), operating out of South Africa,
Australia, Europe (the Netherlands and United Kingdom), and Hong Kong, provide
integrated `end-to-end` logistics solutions for importers/exporters and
consumers worldwide.
OPERATIONAL REVIEW
Santova achieved impressive results despite the fact that effects of a slower
economy were still prevalent during 2010. Lower international trade volumes and
the intense price competition among service providers across the spectrum
hampered any further improvement in the Group`s operating margins and cash
flows. Perhaps the most significant challenge was, and still is, the continued
strengthening of the Rand against the US Dollar. Not only has this had an
adverse effect on the competitiveness of South Africa`s exports and an already
struggling manufacturing and mining sector, it has significantly limited the
operating margin of the industry as a whole. The majority of Santova`s revenue
is still being generated by fees or commissions raised on the disbursement of
the weighted Rand value of goods traded by its clients. This, together with the
fact that a significant portion of our revenue in freight forwarding is also
raised in US Dollars, has resulted in profitability (operating margins) being
proportionately adversely affected with the strengthening of the Rand.
South Africa
The South African operations in the form of Impson Logistics (Pty) Limited and
Santova Logistics South Africa (Pty) Limited ("Santova Logistics SA"; formerly
Aviocean (Pty) Limited) have produced impressive results. Their strategy of
keeping abreast with what is considered `best practice` and their dedication to
ensuring that implementation of such is never compromised, has resulted in these
two operations continuing to provide the financial foundation and `hub` of all
development and support for the Group worldwide. Due to the fact that these two
South African based businesses still constitute the largest assets of the Group,
the responsibility of remaining at the forefront of our innovative ability
clearly resides in their hands.
In regard to our short-term insurance activities, the performance of Santova
Financial Services (Pty) Limited has not met expectations. Whilst turnover has
grown steadily over the years, cost structure has also grown, which has resulted
in diminishing margins over the period. A thorough review of the business has
taken place and strategic changes made which have resulted in much improved work
flow processes and structures. A decision was also taken to impair the goodwill
associated with the acquisition of Standard Insurance Consultants, which has
resulted in an impairment loss being effected through the statement of
comprehensive income. An on-going concern, however, is the skills shortage in
the insurance industry which is characterised by a high degree of difficulty in
sourcing experienced and competent talent. Nevertheless, the business remains
robust and confident about the year ahead. This confidence is supported by the
fact that new clients were being signed on at regular intervals in the last
quarter of the 2011 financial year.
Australia
Considering the global economic slowdown and its effect on this region, our
Australian operation proved its reliability and consistency by delivering a
pleasing set of results. The challenge for this office will now be to evolve to
its next level of capability. In this regard, initiatives are underway to
introduce software packages and intelligent management information systems
(OSCAR) which will result in this business focusing on integrating activities
into key supply chain processes rather than managing individual functions -
supply chain management as opposed to customs clearing and forwarding. This
capability will result in this business being better placed to secure larger,
more profitable, clientele whose complex supply chains require sophisticated
supply chain solutions.
Europe
Whilst the earnings achieved by Santova Logistics Limited (United Kingdom) are a
significant improvement on the previous year, the business has still felt the
effects of a prevailing `flat` economy. In April 2010, the British Retail
Consortium`s monthly survey revealed that sales around the country fell by
almost 2,0% in the month of March 2010, the largest decrease in 16 years.
Furthermore, whilst the inflation rate is still double the Bank of England`s
2,0% target rate and there is no guarantee that interest rates will remain low,
it seems certain that the year ahead will remain a challenge for the economy.
In spite of this, the Group made a bold step in October 2010 by investing
further in this region and opening an airfreight office at Heathrow Airport,
London. The motive behind such a decision was to try and improve the current
business model which focused predominantly on sea freight consolidation
services. The Heathrow office now offers the Group an opportunity to complete
its comprehensive service offering which eliminates the need to outsource such
services to third parties going forward. Since October 2010, this office has
delivered impressive earnings which no doubt will play an instrumental role in
building this operation in the year ahead.
With regards to the Netherlands, considering the fact that Santova Logistics
B.V. was a `grass roots` operation in March 2010, results for the first year of
trading are pleasing; particularly so if one acknowledges the gradual
strengthening of the Rand over this period and the resultant negative impact on
the statement of comprehensive income. To this end, one should also take
cognisance of the once-off expenses incurred in setting up this office from
inception. To strengthen our service offering in this region, the Group made the
strategic decision to set up an airfreight office at Schiphol Airport,
Amsterdam. This office was officially opened on 1 April 2011 to service the
needs and expectations of our global clients. Furthermore, the set of skills,
experience and additional staffing complement now in this office have put it in
a position to take transfer of the South African client base which is currently
with a third party (agent) in Amsterdam. The challenge once again, as it is in
all business units, is the ability for Santova Logistics B.V. to develop its own
client base within this region.
Asia
Santova Logistics Limited (Hong Kong) continued to play a pivotal role for our
offices around the globe. Our capability of facilitating, controlling and
managing `end-to-end` comprehensive supply chain logistics at source - Mainland
China - continues to be a valuable asset to the Group. Clients wanting to
venture into new territories or markets in China are offered a service through
this office which hedges the risks associated with the capital investment
required in most `grass roots` operations. The profitability or financial
benefit of such services more often than not resides with our global offices
located at point of final consumption.
2011 FINANCIAL PERFORMANCE REVIEW
Whilst organic growth was impressive, the acquisition of Santova Logistics SA
made a meaningful contribution to the Group`s increase in earnings per share
("EPS") and headline earnings per share ("HEPS") of 312,3% and 245,6%
respectively. Included in the EPS figure is negative goodwill raised on the
acquisition of Santova Logistics SA amounting to R3,868 million, which accounted
for 0,28 cents per share. Excluding the negative goodwill effect of the
acquisition, EPS would still have been 0,97 cents per share, which constitutes
an increase of 218,3% on the previous year. Notwithstanding the weakening US
Dollar and strengthening Rand, the Group managed to increase its operating
margin from 12,7% to 22,0%.
The Group`s effective tax rate decreased from 38,9% to 25,5%, largely due to the
negative goodwill, referred to above, on the consolidation of Santova Logistics
SA into the Group.
Net asset value has increased from 6,60 cents per share to 7,37 cents per share
as at 28 February 2011, an 11,6% increase; whilst the tangible net asset value
has moved from 3,35 cents per share to 3,09 cents per share as at 28 February
2011, a 7,7% decrease.
The statement of cash flows for the Group reflects borrowings raised of R23,945
million (2010: repaid R32,945 million). This is largely attributable to the
increased working capital requirements of the Group, in line with the increased
operational funding requirements from the 36,6% increase in gross billings,
which has been funded through our various invoice discounting facilities.
Adequate funding is available for this increase in business through the Group`s
cash resources and various funding facilities; supported by strong relationships
that exist with the Group`s bankers.
During the year, the following share movements took place in the issued share
capital of the Company:
- 131 250 000 Ordinary shares were allotted to AL van Zyl on 9 June 2010 for the
purchase of Santova Logistics SA; and
- 11 171 520 Ordinary shares were repurchased on 31 August 2010 from the Camilla
Coleman Trust in terms of the specific authority granted by shareholders at the
annual general meeting held on 23 September 2008.
THE YEAR AHEAD
Whilst our proficiency in a broad range of international services has been tried
and tested, the Group has made the strategic decision to focus on developing two
further segments of the business. The first includes contract logistics and
distribution which amongst others, constitutes receiving, assembly, quality
control, labelling, packaging, inspection and distribution. The second is `end-
to-end` supply chain management services which constitutes an independent
division within the International Group. This specialist area of expertise is
largely characterised by supply chain analysis, process definitions,
sophisticated software packages, data interchange, management information,
report writing and the integration of the individual functions of the supply
chain.
The decision to intensify the focus on these two segments of our business has
been fuelled by our growing number of international clients where the complexity
of their supply chains demands a level of sophistication in service delivery
beyond that of a typical customs and clearing agent.
SUBSEQUENT EVENTS
There have been no subsequent events of a material nature that have occurred
between the financial year endand the date of this report.
BASIS OF PREPARATION
The audited abridged Group results have been prepared in accordance with the
framework concepts and the measurement and recognition requirements of
International Financial Reporting Standards and the AC 500 standards as issued
by the Accounting Practices Board, and incorporates the information as required
by International Accounting Standard 34: Interim Financial Reporting and the
disclosure requirements of the JSE Limited Listings Requirements. The abridged
Group results are derived from and should be read in conjunction with the 28
February 2011 annual financial statements, which have been prepared in
accordance with the reporting requirements of Schedule 4 of the South African
Companies Act, No 61 of 1973, as amended. The accounting policies adopted and
methods of computation are consistent with those applied in the annual financial
statements for the year ended 28 February 2010 and are applied consistently
across the Group. The Group adopted all of the new and revised Standards and
Interpretations issued by the International Financial Reporting Interpretations
Committee of the International Accounting Standards Board that are relevant to
its operations and effective as at 1 March 2010.
AUDITED BY INDEPENDENT AUDITORS
The audited abridged Group results have been derived using annual financial
statements and are consistent in all material respects with the Group annual
financial statements. The Company`s independent auditors, Deloitte &Touche, have
issued unmodified opinions on the 28 February 2011 Company and Group annual
financial statements and on these abridged Group results. These reports are
available for inspection at the Company`s registered office during office hours.
OTHER MATTERS
The Santova Logistics Limited 2011 Annual Integrated Report will be issued on or
around 31 May 2011, both in electronic and printed form.
DIVIDENDS
During the Company`s development years the Board believes that it is appropriate
to re-invest earnings, therefore no dividend has been paid by the Company thus
far and none has been declared for the current financial year.
APPRECIATION
The Board would like to express its appreciation to all management and staff for
their efforts during the year.
For and on behalf of the Board,
GH Gerber SJ Chisholm
Chief Executive Officer Group Financial Director
16 May 2011
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), MF Impson, GM Knight,
AL van Zyl (Appointed 22 February 2011)
NON-EXECUTIVE DIRECTORS ESC Garner (Chairman)*, WA Lombard*, AD Dixon*
(Appointed 1 December 2010), S Donner
*Independent
TRANSFER SECRETARIES Computershare Investor Services (Pty) Limited,
70 Marshall Street, Marshalltown, 2107
COMPANY SECRETARY JA Lupton, FCIS
DESIGNATED ADVISORS River Group
AUDITORS Deloitte &Touche (Registered auditor - SD Munro)
DURBAN
24 MAY 2011
Date: 24/05/2011 07:40:27 Produced by the JSE SENS Department.
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