Santova Introduction To Santova Group Specialist Supply Chain - - PowerPoint PPT Presentation

SANTOVA

Analyst Presentation

15th May 2014

Santova

Specialist Supply Chain Solutions Opportunities And Future Strategy Strategic Initiatives Performance In The Context of The Logistics Industry Introduction To Santova Group Annual Financial Results Analysis 2014

Statement of Purpose

“ Businesses want more authority over operational costs.”

• The application of an effective supply chain management

strategy that targets silo optimization without sacrificing end-to- end visibility and control.

• Innovative global supply chain solutions that result in clients

achieving and sustaining competitive differentiation.

 Client – centric, recognise that our clients’ needs are unique.  In tune with constantly changing trends and dynamics in the market place.  Ensure flexibility, innovation and delivery on assurances.

GROUP STRUCTURE Santova Ltd

(South Africa)

Santova Logistics (South Africa) Santova NVOCC (South Africa) Santova Financial Services (South Africa) Supply Chain Management Advisory Services (International Division) Santova Logistics (Hong Kong) Santova Patent Logistics

Santova Logistics (United Kingdom) W.M. Shipping (United Kingdom) Santova Logistics (Netherlands) Santova Express (South Africa)

In addition to our Own Santova Offices, our International Network of exclusive partners Spans 5 Continents with

• ver 450 offices

Santova Logistics (Australia)

Specialist Supply Chain Solutions

Customs & Excise Clearing Freight Forwarding Quality Control Warehousing & Distribution Inventory Management Supply Chain Management Services IT Systems & Integration Insurance Procurement & Packaging Financial Services

INTEGRATED STRATEGIC LOGISTICS MANAGEMENT SOLUTIONS

TRADITIONAL CLEARING & FORWARDING BUSINESS MODEL

Intelligent Solution

“Solution Based”

Commodity

“Rate Based”

Warehousing & Delivery Customs & Excise Clearing Freight Forwarding

High Visibility Staff Dependent Low Visibility Low Risk Reduced Total Supply Chain Cost Components Impact High Risk Process and Technology Driven Management of independent functions Assembling, integrating and managing activities into key supply chain processes rather than managing individual functions. INTERNATIONAL SUPPLY CHAIN LOGISTICS BUSINESS Domestic Multiple Geographies

[Client Logo]

Private and Confidential

Supply Chain Management Landscape

Information Flow

EDI Transparency Measurement Statistics Reports Real-Time Visibility Process Automation Performance Management

Raw Materials Supplier Manufacturer Retailer Consumer

Goods Goods Goods Goods Reverse Logistics Reverse Logistics TYPICAL CHALLENGES TYPICAL OPPORTUNITIES

• Strategic Sourcing
• Quality Controls at

Source

• Price Tagging at

Source

• Supplier Performance

Management

• Integrated Available to

Promise (ATP)

• Consolidations
• Production Planning
• S&OP
• WMS Management
• Supply Chain Audit
• Cross docking
• Inventory Optimisation
• Distribution Network

Optimisation

• Optimal Channel Selection
• VAS at source
• Demand Planning
• Accurate

Forecasting

• Inferior Quality
• Stock Availability
• Cash Flows
• High Logistics Costs
• Short Shipments
• Late Deliveries
• Poor Communication
• Limited Visibility
• Excess Inventory
• Insufficient Inventory
• Slow Response
• Expensive Distribution
• Lack of Agility
• High barrier to new

market entry

• Demand Variability
• POS Data Accuracy

SCM TOOLKIT

• Channel Strategy Development
• Supplier Scorecards/Metrics
• Supply Chain Risk Mitigation
• Defining & Structuring Managed

Services or KPI’s

• Inventory Management/Optimisation
• Distribution Network Planning
• Cost to Serve Analysis
• Fleet Mix Modelling & Optimisation
• Business Process Definition and Re-

engineering

• Demand Driven Planning
• Business Case Development
• Project Management

Ensuring Supply Chain Strategy is aligned to Business Strategy

HISTORICAL PERFORMANCE

0.00 5.00 10.00 15.00 20.00 25.00 2.90 12.29 15.82 18.00 22.12 Cents 2010 - 2014

Diluted Basic Earnings Per Share

2010 2011 2012 2013 2014 0.00 2.00 4.00 6.00 8.00 10.00 6.02 5.07 7.48 9.68 7.35 7.90 Multiple 2009 - 2014

Price Earnings Ratio

2009 2010 2011 2012 2013 2014 10,000 20,000 30,000 40,000 50,000 6,853 23,216 30,063 33,809 40,014 Millions 2010 - 2014

Profit Before Tax

2010 2011 2012 2013 2014

SANTOVA PERFORMANCE OVER TIME

0.00 5.00 10.00 15.00 20.00 25.00 12.70 22.10 23.80 23.10 24.20 Percentage 2010 - 2014

Operating Profit Margin (%)

2010 2011 2012 2013 2014

0.00 20.00 40.00 60.00 80.00 100.00 120.00 140.00 160.00 61.90 66.00 73.70 92.12 108.20 145.00 Cents 2009 - 2014

Net Asset Value Per Share

2009 2010 2011 2012 2013 2014

Market Capitalisation R 241 698 600

vs. Underlying value of offshore subsidiaries United Kingdom Private Company Price Index 3Q 2013 Current pre-tax PE ratio (Enterprise Value/EBITDA) is 12.1 for ‘trade buyers’

• f private companies and 9.1 for ‘private equity buyers’.

5000 10000 15000 20000 17087 7722 2148 3052 777 Millions Global Offices

Profit After Tax Feb 2014

South Africa United Kingdom Hong Kong Europe Australia 5 25% 7% 10% 3%

• 100%
• 50%

0% 50% 100% 150% 200% 250% 5% 62% 204% 81%

• 52%

Percentage Global Offices

Year on Year Growth Profit After Tax Feb 2013 vs. Feb 2014

South Africa United Kingdom Hong Kong Europe Australia

200 400 69 297 358 218 130 Thousands Global Offices

Return Per Employee Profit After Tax Per Employee Feb 2014

South Africa United Kingdom Hong Kong Europe Australia

CONTRIBUTION BY GEOGRAPHY

South Africa 56% Offshore 44%

Gross Margin (%)

(Turnover/Gross Billings) South Africa United Kingdom Netherlands Hong Kong Australia 4,7% 16,1% 14,7% 18,8% 10,6%

South Africa 5% Offshore 56%

385,896 1,220,659 3,179,056 1,085,017 1,405,980 1,707,644 995,067 2,092,847 6,111,746 8,187,509 1,431,180 1,787,390 8,724,659 5,971,047 17,643,718 3,575,608 3,718,864 7,520,780 3,878,947 14,762,601 11,580,675 1,756,393 7,618,841 8,093,052

Units MAR 2012 - FEB 2014

SHARE TRADE VOLUMES

Trade Volumes Linear (Trade Volumes)

Management and staff 20,2% Total number of shareholders 1 433

• No. of shareholders holding 58% of the Company 23
• No. of shareholders holding 82% of the Company 136

Liquidity – until 2013 shares were tightly held Limited publicity – low profile Bottom of the growth curve – “Small cap vulnerability” Limited understanding of the Business Model

100 200 30 80 81 106 172 Cents Financial Year End

Closing Share Price At Year End

2010 2011 2012 2013 2014

Unique characteristics;

• A non-asset based business ‘favouring’ a variable cost structure;
• In a relatively short period of time established strategic offices globally;
• Transformed during a ‘flat’ 6 year economic cycle into sophisticated business model whilst at

the same time generating significant year-on-year growth in earnings, internationally.

• IT and supply chain capability is enabling Santova to compete on a ‘playing field’ that is

typically ‘reserved’ for multi-national ICONS;

• The unique business model makes it difficult if not impossible to compare Santova to any other

South African listed logistics business;

SANTOVA and THE INDUSTRY

FINANCIAL RESULTS ANALYSIS

February 2014

FINANCIAL HIGHLIGHTS

22.1% increase in total Billings to R3.221 billion Operating Margin increased from 23.1% to 24.2% 26.9% increase in Operating Income to R51.8 million 40.6% increase in HEPS from 17.62 to 24.77 cents per share 34.2% increase in NAV from 108.4 to 145.5 cents per share Final dividend of 3.25 cents declared – a 30% increase

INFLUENCING FACTORS

Internal/Technical

• No acquisitions or disposals

during the year

• IFRS 10 Deconsolidation of

Guardrisk Cell Captive

• Inclusion of WM Shipping for a

full 12 months

• Completion of 1st WM Shipping

warranty period

• Rejuvenated performances from

Hong Kong and Netherlands

• Continued strong contribution

from Financial Services

• Consolidation and centralisation
• f certain divisions

External/Market

• FOREX - the weakening of the

rand

• The Economy in SA and the effect
• n trade volumes – low GDP

growth

• Significant competition and

pressure on margins particularly in SA

FOREX EFFECT

13 14 15 16 17 18 19

• In SA majority on revenue

is invoiced in Rands but underlying calculation is based on the imported cost of goods and transport in US$

• Decline in trade volumes

as importers react to weaker rand

IMPACT

Opposing Effects on Revenue

ZAR/GBP

2013 2014 Move % USD Closing 8.84 10.79 1.95 22% Average 8.36 9.97 1.61 19% GBP 2013 2014 Closing 13.37 17.98 4.61 34% Average 13.26 15.74 2.48 19%

REVENUE ANALYSIS

86% 14% 65% 35%

TOTAL Fin Serv HO Logistics HK UK Neth Aus Rand BILLINGS 2013 8,658 1,680 2,395,175 28,015 98,077 85,634 123,241 2,637,920 2014 8,967 2,635 2,757,269 29,048 203,981 179,668 115,969 3,221,519 4% 57% 15% 4% 108% 110%

• 6%

22% SOUTH AFRICA OFFSHORE 2013 100%

• 2%

5.1% 13.7% 18.0% 15.5% 11.5% 6.7% 2014 100%

• 1%

4.7% 18.8% 16.1% 14.7% 10.6% 6.7%

• 1.0%
• 0.4%

5.0%

• 1.9%
• 0.8%
• 1.0%
• REVENUE/BILLINGS MARGIN

REVENUE 2013 8,658

• 33

121,260 3,846 17,632 13,283 14,194 176,651 2014 8,967

• 24

129,410 5,447 32,802 26,457 12,250 214,357 4% 0% 7% 42% 86% 99%

• 14%

21%

OPERATING MARGIN ANALYSIS

TOTAL Fin Serv HO Logistics HK UK Neth Aus Rand SOUTH AFRICA OFFSHORE

2013 924 1,675 4,773 320 377 685 542 9,296 2014 74 5,211 6,399 702 535 1,756 441 15,118

• 92%

211% 34% 119% 42% 156%

• 19%

63% 2013 6,396 19,670 80,635 3,399 10,951 11,340 11,568 142,067 2014 5,378 28,617 81,336 3,107 22,087 23,354 10,867 174,228

• 16%

45% 1%

• 9%

102% 106%

• 6%

23% 2013 2,667

• 18,511

43,903 882 6,918 2,535 2,904 40,810 2014 3,629

• 24,366

52,851 2,541 10,803 4,709 1,619 51,772 36% 32% 20% 188% 56% 86%

• 44%

27% 2013 31% 36% 23% 39% 19% 20% 23.1% 2014 40% 41% 47% 33% 18% 13% 24.2% 10% 5% 24%

• 6%
• 1%
• 7%

1.1% OTHER INCOME ADMIN EXPENSES OPERATING PROFIT OPERATING MARGIN

EARNINGS RECONCILIATION

2014 2013 % Cents Cents Reported - Basic earnings per share 22.42 18.06 24.1% Reported - Headline earnings per share 24.76 17.62 40.5% Approximate - Normalised Headline earnings per share 22.85 17.07 33.9% 2014 2013 Earnings Reconciliation R'000 R'000 Reported – Basic Earnings 30,587 24,688 Impairment of goodwill 3,131

• Loss on disposals of plant and equipment

85 122 Derecognition of Financial Liability

• (713)

Reported - Headline Earnings

33,803 24,097 Fair Value Gain on Remeasurement of Financial Liability (5,171) Recognition of Financial Liability due to Lease Termination 584 Forex Loss on Revaluation of Financial Liability 1,979 (753)

Approximate - Normalised Headline earnings

31,195 23,344

FINANCIAL POSITION - Key movements

Influencing Factors

• 22.1% Increase in Billings

Results

• 30% or R111.8 mil increase in Trade

Receivables from R369 mil to R481 mil

• Funded by:

– 11% Increase in Trade Payables – 51% increase in Short Term Borrowings

• 34% or R4.61 increase in closing

ZAR/GBP exchange rate

• R14 mil increase in Intangible assets

to R123.9 mil

• R22.5 mil increase in Foreign

Currency Translation Reserve

CORRELATION

Cash flow inverse relationship

Billing/Debtors/Borrowing/Cash Flow

2014 2013 2012 2011 2010 2009 2008

Cash Flow Borrowings Debtors Billings

CASH FLOW AND FUNDING

 Cash on hand increased 31% from R28.1 million to R36.8 million at year end of which 75% is held offshore – trend will continue/offshore

• perations are cash generators.

 Cash utilised in operating activities totalled R27 million versus net cash generated of R29.1 million in the prior year, this is consistent with:

• Working capital requirements as a result of 22.1% increase in billings

in 2014 versus 1.3% in 2013.

• The credit terms provided to clients versus those granted from SARS.

 In order to fund this growth the Group increased local facilities from R249 million to R300 million during the current year.  Group has in total R131 million unutilised financing facilities at year end.

CREDIT QUALITY

 Credit Collection remains a core competency of the Group  Centrally managed at Head Office and South African Book is 85%-90% insured via credit underwriters

2014 2013 2012 2011 2010 2009 Avg Trade receivables 434,600 326,314 250,922 196,709 170,937 203,846 Provision for impairments 2,266 993 1,447 2,447 2,858 2,970 0.5% 0.3% 0.6% 1.2% 1.7% 1.5% 1.0% Amounts Written Off 53 345 372 770 324 530 0.01% 0.11% 0.15% 0.39% 0.19% 0.26% 0.2% Past Due - More than 30 days 7,997 7,412 8,693 5,622 16,423 12,163 2% 2% 3% 3% 10% 6% 4%

SANTOVA LOGISTICS (SOUTH AFRICA)

TRADE AND OTHER RECEIVABLES

FINANCING REVENUE

2014 2014 Interest Effec 2013 2013 Interest Effec TOTAL Financing Inc/(Exp) % TOTAL Financing Inc/(Exp) % ASSETS Trade receivables 480,738 328,191 25,489 8.6% 368,931

262,694 17,159

7.3% LIABILITIES ST Borrowings (208,321) (208,321) (12,030) 7.0% (137,829) (136,146)

(8,282)

6.6% NET MARGIN 13,459 1.6% 8,877 0.7%

2014 2014 TOTAL Financing Revenue 214,357 21,232 Other income 15,118 Depn & Amort (3,476) Admin Exps (174,228) Operating profit 51,771 21,232 Interest received 4,559 4,257 Finance costs (16,316) (12,030) Profit before tax 40,014 13,459 2014 2013 2012 % Financing Financing 36% 15,560 15,121 15,560 15,121 166% 1,599 899 45% (8,282) (8,132) 52% 8,877 7,888

VALUE ADDED

VALUE ADDED STATEMENT

2014 2014 for the year ended 28 February 2014 Billings Basis Revenue Basis R'000 % R'000 % Billings to Clients 3,242,212 Revenue from Clients 236,026 Paid to Suppliers and Agents 868,145 49,762 Value Created 2,374,067 186,264 Value Distributed Employees 110,311 5% 110,311 59% Government/Regulators 2,197,474 93% 9,671 5% Financial Institutions 20,723 1% 20,723 11% IT Service Providers 7,092 0% 7,092 4% Shareholders 3,411 0% 3,411 2% Asset replacement 7,681 0% 7,681 4% Profits retained for future 27,375 1% 27,375 15% 2,374,067 100% 186,264 100%

Strategic Initiatives

Globalisation

Santova is capitalising on globalisation, “new ideas, new opportunities, network”, across geographies and cultures.

Client Centricity

We have unique customer-value focused relationship management structures in place, managing and controlling the relationships.

Diversification

We duplicate revenue streams, across businesses, geographies and currencies, “Critical mass, bulking, improved margins”.

Strategic Growth Strategy

Continuously balancing growth through organic growth and acquisitions - America’s, Europe, West and East Africa.

End-To-End Global Supply Chain Management Solutions

We have a presence across multiple geographies and cultures, assembling, integrating and managing activities into key supply chain processes rather than managing individual functions.

Information Technology

We have intelligent supply chain software packages and are advancing in mobile technologies – tablets and smartphones.

Multiple Businesses

The Group constitutes multiple business units and has numerous new business opportunities, “businesses within business”.

Internal Optimisation

Year in and year out we continue to evolve into a leaner cost structure and process optimisation without losing operational efficiency

Talent – Intellectual Capital

We invest in and develop the right talent. Multiple disciplines, an innovative aptitude and skills across all components in the supply chain.

Proximity To Source And Market

We focus on greater proximity to source, ensuring market intelligence, ‘intimacy’, agility and flexibility - Value added services at source.

MARKET OPPORTUNITIES

FUTURE STRATEGY

The world is moving from regional economies (‘clusters’) to a networked and digital economy (globalised).  New global business models  Innovative e-commerce  Interconnectivity between interdependent markets  Complex worldwide networks.

• 90% of respondents believe that ‘new business models require supply chain innovation’.
• 91% of respondents to GE’s Global Innovation Barometer 2013 agreed that innovation is a strategic priority for

their companies. “

• “51% felt that their supply chain and logistics functions don’t innovate regularly enough, often due to company

culture, lack of skills and fear of change.

• GE’s Innovation barometer labels this ‘Innovation Vertigo’ or ‘an uneasiness with the pace of change and

confusion over the best path forward’.

Barloworld’s Supplychainforesight 2013 Survey GE’ s Global Innovation Barometer 2013

It’s not simply about moving goods from one point to another, its now about a high degree of know- how and comprehensive logistics resources

Proximity And Specialised Services: international foot print a necessity

Decentralisation is becoming a common strategy for locating resources closer to demand and supply – kitting, global direct-ship, pack for store, built-to-order, merge in transit and cross docking solutions are growing.

Cash Flows: e-commerce driven efficiencies

Order-to-delivery and order-to-cash cycles are affecting the client’s cash flows

Supply Chain The Differentiator: demanding sophistication, top management attention

It is no longer companies that are competing with one another, it is the supply chains of which they are part of that are now competing.

End-to-End Control: sophisticated software packages and expertise

Most importers and exporters do not have sufficient control over the entire supply chain from door to door, nor the in-house expertise to manage the process. The application of the appropriate metrics is a challenge.

Internationalisation: competitive forces encouraging global mobility

Clients moving into new markets for the first time - worldwide sourcing and selling in multiple markets. Requiring

• perations and logistics solutions across geographies and an understanding of the intricacies of offshore markets.

Competitors: barriers to entry

Domestic based logistics companies face difficulties in adopting Information communication technology systems and applications due to the lack of human and financial resources

Thank You