Roy Cokayne
Despite fragile economic conditions, listed integrated logistics solutions provider Santova yesterday reported 10 percent growth in diluted headline earnings a share to 7.61c in the six months to August from the previous corresponding period.
Glen Gerber, the chief executive of Santova, said this was a positive performance because trade volumes were heavily impacted by the weakening of the rand, weak trading conditions in local and international markets, and lower operating margins resulting from continued pressure from under pricing by competitors.
Gerber attributed the solid group earnings growth, despite constrained revenue growth, to a number of factors including stronger revenue growth and improved profitability in the group’s foreign subsidiaries, particularly in the UK.
Santova, which has offices across South Africa, Australia, the Netherlands, the UK and Hong Kong, rose gross billings by 5 percent to R1.2 billion, but turnover declined marginally to R80.3 million from R81.3m.
Operating profit improved by 5 percent to R18.7m.
Strong control of overhead costs resulted in an increase of only 1.2 percent in administrative expenses, which had the effect of improving the group’s operating margin to 23.3 percent from 21.9 percent in the previous corresponding period.
This, together with reduced finance costs and a slight improvement in the group’s effective tax rate, also contributed to the solid earnings growth.
Net cash flows from operating activities rocketed by 486 percent to R50.9m.
The company’s board announced a change to its dividend policy at a general meeting in July and it will commence paying dividends effective from its 2013 financial year.
Gerber said Santova’s offshore operations had achieved impressive year-on-year earnings growth of 117 percent, which had been predominantly driven by sound organic growth through new business development in both the UK and the euro zone, despite the fragile economic conditions in Europe and the slowdown in Asia that had reverberated globally.
“We believe these operations are well set to continue on their path to becoming more significant contributors to group profits going forward,” he said.
Gerber said the group’s South African operations had also performed well despite lower commodity volumes shipped and the substantially reduced trade volumes of certain clients that were previously meaningful contributors to group revenue.
He said the outlook in the next six months for the key components of trade activity pointed towards a fragile economy, but the group believed it was well placed to engage and work through any challenges that might confront it.
The group earlier this month announced an internal reorganisation involving the merger of Santova Logistics and Impson Logistics, its two South African logistics trading entities, into one operational entity to improve operational efficiencies and service delivery to clients.
The group also issued a cautionary announcement in August, advising shareholders that negotiations were taking place, which if successful could have a material effect on its share price. These negotiations are still taking place.
Shares closed 1.19 percent higher at 85c.