JSE-listed logistics company Santova grew its profit by 13.5% to R71.3-million for the financial year ended February 28, from R62.8-million in 2017, with the performance of the group having been “purely organic,” the company said on Wednesday.
This is the result of a strategic choice focused primarily on internal integration and scaling of operations, such as systems, new business development and ongoing support, and which constitute a critical foundation for future acquisitions.
Headline earnings a share increased by 12.4% to 44.84c and assets by 7.6% to R964.4-million. The group's financial position has not been significantly impacted on by currency in the current year, it said.
Santova also increased capital and reserves by 13.8% to R416.2-million, reduced the group's debt-to-equity ratio from 53% to 46.5% and increased net cash generated from operating activities by 20% to R67.8-million.
As a result, cash and cash equivalents on hand increased by 18.1% to R108.4-million.
“Our focus on the 'drivers' of organic growth was along three strategies – expanding the business model to include international courier express services, client sourcing and procurement management services and differentiating by optimising core operational capabilities through much improved data analytics to automation,” Santova said.
“We remained focused and disciplined in deploying our strategic growth initiatives,” it added.
Despite the effects of a strengthening rand on the consolidation of offshore earnings, most operations internationally have produced a solid set of results. Operations in South Africa have exceeded expectations by posting an exceptional result despite having started the year in recession, the company reported.
“Our focus on assisting clients in differentiating from their respective industries, together with much improved service levels, has contributed to the building of Santova's brand in the logistics industry in South Africa.”
Meanwhile, the group made a strategic change in the UK, where it has consolidated Shipping Limited and Santova Logistics Limited into one legal entity.
“This eliminates duplication of administrative structures and, simultaneously, the consolidation of the capabilities, know-how and the core competencies of the businesses. With the respective brands now focusing on their niche markets, they will also have access to one another's buy rates and networks worldwide, which will bode well for the businesses.”
The company’s operations in the Asia region have also surpassed its expectations with good progress being achieved. This was the result of a cyclical upturn in manufacturing and investment and stronger trade growth globally.
This has also been achieved through not only favourable buy rates, which were available through the group's network and associations in this region, but also as a result of higher freight rates in 2017.
FORCES OF CHANGE
The logistics sector is facing a new era of change which brings challenges and opportunities. Customer expectations are increasingly changing, driven by the new shopping patterns of consumers.
“Individuals and businesses expect delivery of goods faster and with greater reliability, flexibility and, in many cases, at minimal cost.”
The availability and intelligent application of technology is another driving force of change.
To meet these new customer expectations, Santova spent the past 12 months deploying intelligent technology, which is aimed at lowering costs, improving efficiency and allowing access to critical data, while simultaneously facilitating greater client centricity, the company said.
“We view these two forces of change as a window of opportunity. Our customers are being forced to adapt to new shopping patterns. As a result, we will continue to exploit digital technology to meet customer expectations while driving more efficient internal physical and digital standards and workflow processes that will convert and improve the profitability on low-margin shipments.”
Further, having spent the past two years on building and enhancing internal capacity, the proposition of select acquisitions is now high on the agenda of the group, Santova highlighted.
“Economic zones of interest that we are looking to enter include the US and South East Asia while entrenching ourselves further in the UK and Europe. Through acquisitions, we are able to gain the benefits of an entire company's prior sales and client relationships, which means we are immediately gaining markets and clients that we otherwise may not have had access to.”