SANTOVA SANTOVA Investor Presentation 18 th May 2016 Innovative - - PowerPoint PPT Presentation
SANTOVA SANTOVA Investor Presentation 18 th May 2016 Innovative Solutions. Endless Possibilities AGENDA The year in perspective The logistics industry and the current economic climate Focus on a counter-cyclical strategy and business
Investor Presentation
18th May 2016
Innovative Solutions. Endless Possibilities
The year in perspective The logistics industry and the current economic climate Focus on a ‘counter-cyclical’ strategy and business model Internationalising and diversifying Santova Financial highlights Strategic pillars of ongoing development and management Focus and future strategy
To be a recognised brand in global trade solutions through strategic international offices and leading intellectual capital.
The year in perspective
The result is resilience and sustainable year-on-year growth Ability to mitigate these factors Strategy of diversification
‘Counter- cyclical business model’
effectiveness
Industry challenges
. Industry faced with flat global economic growth . Intense competition, new entrants in the domestic market . Diminishing margins, price ‘wars’ . Stagnating or reducing trade volumes . Ongoing over-capacity in ocean and airfreight . Consolidations through mergers and acquisitions Strong execution structure Clear growth strategy
Offshore Listed Companies Movement in share price over the last 5 years
05.06.2011 Santova share R.80
05.04.2016 Santova share R4.01
20.5 19.7 24.5 86.2 11.6
Transport & Logistics Industry Average price to earning ratio is more than 20 in the 1. Quarter 2016
Challenging 7 years for the industry
EFFECT OF GLOBAL ECONOMIES
South African Listed Companies Movement in share price over the last 5 years
05.06.2011 Santova share R.80 05.04.2016 Santova share R4.01
11.7 7.9 10.6 9.5 18.6 11.6
All share ex resources PE 19 Transport PE 24
Challenging 5 years for the industry – more so than their offshore counterparts
In response, companies have been forced to:
Enter new markets Identify more cost effective sources of supply Manage multiple supply chains Attain a sound understanding of the intricacies of offshore markets Adjust to changing sourcing locations and points of sale Entertain smaller and more frequent purchase orders (E-commerce)These market conditions are considered favourable for Santova:
Tailor-made solutions: divergent customer/supplier expectations
Nimble and flexible in dealing with customers’ requirements globally
Constitute an end-to-end “one-stop-shop” service
Offer clients global strategic locations (infrastructure) and local knowledge
Next generation ICT: efficiency, effectiveness and end-to-end SC visibility “Loyalty is fast becoming second to value add or ‘cost savings’”
Market change and complexity is driving
Global Presence
327 employees 20 offices worldwide
“Greater collaboration: multi-partner sharing of activities , including
warehousing, transportation (“asset utilisation”)” The opportunity: Santova is non-asset based and independent
Increase In Cash On Hand Increase In Reserves And Capital
Our strategy and business model has supported
Revenue
R279m
Net Profit Before Tax
R67m
Normalised HEPS
34.28 cents
24.3% 29.9% 33.2% 176% 68%
“A strong focus on balanced growth, irrespective of market conditions”
Operating Margin
25.4 %
5.39%
R386m R124m
2010 2011 2012 2013 2014 2015 2016
6 853 23 216 29 756 33 470 40 014 51 386 66736
NET PROFIT BEFORE TAX
R'000
2010 2011 2012 2013 2014 2015 2016 3.08 10.65 15.99 17.66 21.65 25.73 34.29
NORMALISED HEPS
Cents
2010 2011 2012 2013 2014 2015 2016
64 75 92 108 145 169 245
NET ASSET VALUE PER SHARE
Cents
2010 2011 2012 2013 2014 2015 2016 87 728 132 872 152 115 165 633 201 879 224 235 278 655
Revenue
R'000
7 years of year-on-year growth
SOUTH AFRICA *1 UNITED KINGDOM *2 HOLLAND AUSTRALIA GERMANY HONG KONG 30m 15m 19m 7m
384k
Actual Profit before tax by country
1%
10% 23% 28% 45%
Restated including Tradeway Group
R’000
DIVERSIFICATION actual
Geographical and currency
12month period ending 31st March 2016 R'000 *1 Includes Santova Financial Services *2 Includes Tradeway Group (3 months) Excludes Santova Logistics (Mauritius) *2 Includes Tradeway Group for 12 months (Turnover R46m, Net Profit before tax R19m) Excludes Santova Logistics (Mauritius) Onshore 45% Offshore 55%
SOUTH AFRICA *1 UNITED KINGDOM *2 HOLLAND AUSTRALIA GERMANY HONG KONG
30m 28m 19m 7m
384k
Restated Profit before tax by country
1%
8%
34%
23%
37% Onshore 37% Offshore 63%
AFRICA ASIA PACIFIC UNITED KINGDOM EUROPE
18 271 5 092 11 426 13 287
Logistic Services
Geographical segments Profit after tax R’000
38% 11% 28% 24%
South Africa *1 United Kingdom *2 Holland Australia Germany Hong Kong
2.6m 7.8m 8m 2.8m
NET GROWTH YEAR ON YEAR
PROFIT BEFORE TAX (R15M)
0% 72% 70% 10%
Including all SA divisions (16% Logistics only)
106%
TOP 20 CLIENT REVENUE
29 FEBRUARY 2016
COMPANY NAME INDUSTRY DESCRIPTION GROSS REVENUE 2016 %
SANTOVA LOGISTICS SA CHEMICALS 12 401 825 4.5% SANTOVA LOGISTICS SA APPAREL 11 784 606 4.2% SANTOVA AUSTRALIA PHARMACEUTICALS 3 311 323 1.2% TRADEWAY SHIPPING TEXTILE RECLAIMERS & PROCESSORS 3 260 183 1.2% WMS MINING 3 201 121 1.1% SANTOVA BV SALES PROMOTION 2 886 650 1.0% SANTOVA LOGISTICS SA PAPER 2 483 081 0.9% SANTOVA AUSTRALIA FOOD, BEVERAGE 2 448 805 0.9% SANTOVA LOGISTICS SA APPAREL 2 370 557 0.9% SANTOVA UK GARMENT 2 314 864 0.8% SANTOVA LOGISTICS SA ELECTRONIC SECURITY SOLUTIONS 2 188 067 0.8% SANTOVA LOGISTICS SA ELECTRICAL COMPONENTS SUPPLIERS 2 033 612 0.7% WMS MINTING 1 979 625 0.7% TRADEWAY SHIPPING TEXTILE RECYCLING 1 918 210 0.7% SANTOVA LOGISTICS SA FOOD, BEVERAGE 1 869 527 0.7% SANTOVA AUSTRALIA PHARMACEUTICALS 1 852 222 0.7% SANTOVA BV MUSHROOM TECHNOLOGY 1 705 404 0.6% MASTERFREIGHT WATCHES & JEWELLRY 1 666 035 0.6% SANTOVA LOGISTICS SA RETAIL FOOTWEAR 1 635 290 0.6% TRADEWAY SHIPPING TEXTILE RECYCLING 1 633 712 0.6% TOTAL TOP 20% 64 944 720 23.3% TOTAL GROUP 278 654 341
Business Model: Offshore vs. Onshore
SOUTH AFRICA *1 AUSTRALIA UNITED KINGDOM *2 HOLLAND GERMANY *4 HONG KONG 26% 47% 198% 103% 0% 38%
Return on capital employed
Estimate based on what the business requires to function
SOUTH AFRICA *1 AUSTRALIA UNITED KINGDOM *2 HOLLAND GERMANY *4 HONG KONG 451m 18m 92m 25m 11m 4m
Debtors book
as a % of Groups total debtors book
75% 15% 4% 2% 1% 3% SOUTH AFRICA *1 AUSTRALIA UNITED KINGDOM *2 HOLLAND GERMANY *4 HONG KONG 13 58 33 39 19 60
Number of shipments per staff Monthly
SOUTH AFRICA *1 AUSTRALIA UNITED KINGDOM *2 HOLLAND GERMANY *4 HONG KONG 690k 2.8m 1.6m 2.4m 755k 730k
Net revenue per staff Annual
GROUP PROFITABILITY
2016 2015 R'000 R'000
% Gross Billings 3,797,890 3,462,792 10% South Africa 2,717,174 2,838,582
Impact of economy on freight volumes in SA Foreign 987,880 624,210 58% Tradeway 92,836
Tradeway included for 3 months Revenue 278,655 224,235 24% South Africa 140,326 132,439 6% Foreign 124,451 91,796 36% Tradeway 13,878
Tradeway included for 3 months % Margin 7.3% 6.5% 0.9% South Africa 5.2% 4.7% 0.5% Results of focus on higher yielding airfreight project shipments and supplier consolidation and rate renegotiations Foreign 12.8% 14.7%
Impacted by a decline in freight rates in the UK % Operating margin 25.4% 24.1% 1.3% Boosted by margin gains and overhead efficiencies % Effective tax rate 25.2% 23.7% 1.5% Increased profitability and higher corporate tax rates in Netherlands 25%, Australia 30% and SA 28% 13% excl Tradeway, 3% in SA Logistics operations and 6% in foreign operations in local currency 215,022 182,742 18% Administration expenses
SOURCE OF PROFITABILITY
2016 R'000
%
Source of Growth in profit for the year Organic growth 11,553 75% Currency depreciation 2,085 14% Contribution from acquisitions 1,712 11% Tradeway for 3 months net of transaction and financing costs Total growth in profit for the year 15,350 100% Regional source of growth in profit for the year Group
Financial Services 934 6% Logistic Services 17,333 113% Netherlands 7,928 52% South Africa 4,648 30% Tradeway 2,935 19% Australia 2,760 18% UK 901 6% HK
Impact of the reduction in volumes from one major SA Listed client Start Up Phase Operations
Mauritius
Results of CAPEX into new offices, equipment and systems Ghana
Investment in registering and licencing a new division in Tema Germany
Investment in opening up new Hamburg sea freight branch Total growth in profit for the year 15,350 100%
VOLUNTARY INCOME STATEMENT RECLASSIFICATION
Reclassification of net interest and fee income and expense from client financing activities to revenue Client financing activities considered a principal revenue-producing activity Consistent with change in cash flow accounting policy in 2015 Consistent with how all Group revenues are recognised net of disbursements Interest expense line now reflects purely interest on working capital financing, not from the sale of receivables
2016 2016 2016 Post Pre Move
Financial Impact
R'000 R'000 R'000
Income Statement Revenue 278,655
288,776
(10,121) Other income 11,196
12,414
(1,218) Administrative expenses (215,022) (221,416) 6,394 Operating profit 70,786
75,731
(4,945) Interest received 205
9,725
(9,520) Finance costs (4,255)
(18,720)
14,465 Profit before taxation 66,736
66,736
Cash generated from operations 48,225
53,170
(4,945) Interest received 205
9,725
(9,520) Finance costs (3,628)
(18,093)
14,465 Net cash flows from operating activities 30,413
30,413
12,488
TOTAL ASSETS
2016 2,015 Move R'000 R'000 %
Property Plant and Equipment 25,086 7,933 216% R15.9 million acquired with Tradeway, including 2 unencumbered commercial properties the UK Intangible Assets Opening Balance 122,264 123,927 Goodwill of Tradeway acquisition 75,854
Exchange gain on translation 21,176
R14.4 mil on goodwill in WM Shipping R4.50 increase in closing ZAR/GBP rate Software 878 52 Trademarks and licences 1,211 162 Acquisition of Mauritian customs licence and registration of Santova trademark worldwide Other 1,498 158 222,881 122,264 82% Trade and other Receivables 636,876 547,900 16% 6% Organic growth and 10% from Tradeway Cash on hand 123,657 44,889 175% Total Assets 1,023,165 733,486 39% Total Group assets exceeding R1 billion for first time
TRADE RECEIVABLES
2016 2015 R'000 R'000 % Total Trade Receivables 609,136 507,198
20% Before provisions
South Africa 447,302 430,323
4%
73% 85% Offshore 161,833 76,875
111% R48.4 mil due to inclusion of Tradeway
27% 15% Debtor Days 56.7 52.2
4.5
South Africa 56.7 52.7
4.0 Primarily due to effects of economy in SA
Offshore 56.7 49.1
7.6 Take on of new longer term clients in UK
Debtors more than 30 days past due 26,192 13,601
93%
South Africa 3,155 9,561
0.7% 2.2% Offshore 23,037 4,040
470% Impact of inclusion of Tradeway
14.2% 5.3% Specific impairment provisions 3,174 2,952
8%
0.5% 0.6% South Africa 2,038 1,970
3%
0.5% 0.5% Offshore 1,135 982
16%
0.7% 1.3% Bad debts written off (Net of Recoveries) 2,004 1,185
69%
0.3% 0.3%
CASH FLOW AND CASH ON HAND
2016 2015 Move % R'000 R'000 %
Cash on Hand South Africa 14% 17,657 7,495 Group 14,765 3,586 312% R9.6 million paid to sellers of Tradeway in March 16 Financial Services 572 2,334
Logistics 2,321 1,575 47%
Offshore 86% 106,000 37,394 Held in: Netherlands 33,476 7,485 347%
Tradeway 19,997
UK 15,677 13,914 13%
Australia 15,466 4,933 214%
Hong Kong 13,087 10,556 24%
Germany 8,062 329 2350%
Other 234 177 32% 123,657 44,889 176% Cash Flow Cash generated from operations 48,225 46,138 5%
EQUITY AND LIABILITIES
2016 2015 Move R'000 R'000 %
Capital and Reserves Opening balance 230,289 198,510 General issue of shares for cash 51,282
49,913 39,220 Exchange gain on translation of foreign operations 42,796
R21 million on Goodwill and remainder on net assets Vendor issue of shares 17,602
Dividend
Other 327 1,138 386,415 230,289 68% Interest Bearing Debt Invoice discounting facility 262,153 280,838 Client financing facility of R350 million R60 million 5 year amortising medium term loan 56,883
R39 million 5 year amortising medium term loan 17,784 25,541 Taken out in Jan 2013 Instalment sale agreements 996 1,347 Overdrafts 765
307,726 10% Gearing Ratio (net of cash) 56% 114% -51% Gearing levels falling bellow 100% for first time Group banking facilities Total facilities available 473,195 416,867 14% Total unutilised facilities 135,610 110,488 23%
SANTOVA GROUP STRUCTURE
100% 100% 100% 100% 100% 100% 100% 100% 100% 75% 100% 100% 51% 100%
SANTOVA LIMITED
(SOUTH AFRICA)
(Listed on the JSE)
SANTOVA LOGISTICS (SOUTH AFRICA) SANTOVA EXPRESS (SOUTH AFRICA) SANTOVA FINANCIAL SERVICES (SOUTH AFRICA) SANTOVA INTERNATIONAL HOLDINGS (SOUTH AFRICA) SANTOVA LOGISTICS (NETHERLANDS) SANTOVA LOGISTICS (HONG KONG) SANTOVA LOGISTICS (AUSTRALIA) SANTOVA LOGISTICS (UNITED KINGDOM) SANTOVA PATENT LOGISTICS CO W.M. SHIPPING (UNITED KINGDOM) MASTERFREIGHT INTERNATIONALE SPEDITION (GERMANY) JET-FREIGHT SERVICES (MAURITIUS) TRADEWAY (SHIPPING) (UNITED KINGDOM) TRADEWAY NORTH WEST (UNITED KINGDOM)
FINANCIAL DASHBOARD
INVESTMENT CASE
2016 2015 % R' million R' million Change 1 Revenue Billings
R 3,798
R 3,463 10% Revenue
R 279
R 224 25% Revenue/Billings Margin
7.3%
6.5% 1% 2 Profitability Net Profit before Tax
R 66.7
R 51.4 30% Operating Margin
25.4%
24.1% 1% 3 Cash Cash generated from Operations
R 48.2
R 46.1 5% Cash and Cash Equivalents
R 123.7
R 44.9 176% 4 Tradability Volume of shares traded
40,991
51,135 Number of Shareholders
3,735
2,656 Percentage Traded
30%
37% 5 Dividends Paid
5.50
4.25 29%
CONCLUSION
FINANCIAL OUTLOOK FOR 2017
Continued strong contribution from offshore operations
Trading conditions in SA to remain challenging
fundamentals significantly
initiatives in this region Positive cash flow generation from in particular the offshore
Balance sheet to continue to remain sound with further reductions in gearing levels
Current and Future
3 Strategic pillars of development and management
Growth Innovation Efficiency-Effectiveness
3 strategic pillars
ORGANIC GROWTH
. Buyer-supplier
connectivity . Cross trades
Jet Freight (Mauritius)
. SADC (Southern African
Development Community)
. Customs Licence
Masterfreight
(Hamburg) . Route development (Own offices & West/East Africa)
W.M Shipping
(Ghana) . Vessel chartering (East/West Africa)
Up-selling cross selling
. SCM Insurance . Procurement
Critical mass
. Organic growth . Acquisitions
International Offices
. Intellectual capital . Resources . New markets . New trade routes
“Grass roots” initiatives (‘hands-on’ management) Low in cost structure, pose fewer cultural and adaptation-integration challenges – low risk Constitute exciting strategic opportunities for future earnings growth
STRATEGIC ACQUISITIONS
. Tradeway Group
(‘Base load’ for East/West Africa)
Age of change and complexity
“Conducive to alternative suggestions, tradition no longer dictating”
ICT Next generation communication and technology BUSINESS MODEL knowledge – intensive in design CULTURE PEOPLE Building and retaining the talent pool APPLICATION Entrepreneurial knowledge based matrix teams
Advanced technologies Product proliferation Economic stagnation Cost pressures Cultural integration
4 dimensions to our innovation Unlocking information, enabling strategic logistics and ‘smart’ decision making End-to-end supply chain solutions, across continents, across industries “multifaceted and multidimensional” Consultative engagement, comprehensive business solutions “Alternatives” External sourcing and internal development
New markets
ICT Information and communication technologies Centralisation vs decentralisation
Workflow process design Uninterrupted flow of intellectual capital across the
Efficiency and effectiveness
Four drivers – starts with asking the right questions?
Faster processing of files, access to information, reduction or elimination of errors Current performance levels are benchmarked against best practice to ensure improved efficiency, compliance, agility and visibility. Eliminating barriers to flow, breaking down departmental silos - ‘best practice’, Group think Take cognisance of control, standardised procedures, quicker decision making, customer service and the elimination of duplication. Never satisfied, always asking the question?
GROWTH
Organic Strategic acquisitions ‘Bolt-on’ acquisitions
INNOVATION
ICT Culture People Application Business model
EFFICIENCY – EFFECTIVENESS
Quality capital efficiency ratios Contain expenses Increase productivity High operating margins Increase profitability
Diversification: currencies, geographies, services and industries
Simultaneously
Consolidate and Grow