It has been all action at Santova in recent times, with full-year results, a new substantial shareholder announcing its presence on the share register, and a decent-sized acquisition all happening in the past three months.
So there is plenty to unpack at the international tech-based trade solutions specialist, which now spans its end-to-end supply chain solutions across 11 countries: South Africa, Australia, China, Germany, Hong Kong, Mauritius, the Netherlands, Singapore, the UK, the US and Vietnam.
Starting with the results, which were broadly in line with those of 2024, the decrease in headline earnings was slight compared with the prior year. After a poor first half, the business recovered extremely well in the second half, making up significant losses driven by improved shipping rates. Shipping rates have continued to improve over the past few weeks, with the extended pause in tariffs between the US and China resulting in a spike in demand and the spot price for containers and ships.
Santova should benefit from this in the first half of its 2026 financial year. Remember that 70% of billings by Santova are linked to goods shipped via sea freight, 28% via air freight, and the rest via road freight. Thus, changes up or down in global shipping rates are something to watch when thinking about Santova’s revenue and profitability.
With the tariff wars centred on the US, it was no surprise to see its American businesses struggle. The US division has been operationally challenging since its acquisition.
However, CEO Glen Gerber and his team are confident about the longer-term prospects of the US business. Losses are narrowing and it brings various benefits, including offering a global presence to clients.
The EU and UK divisions also struggled, but this is offset by solid growth in the Asia-Pacific business and the South African and broader African business.
As usual, no dividend was declared. Given the most recent acquisition and Santova’s history of acquisitions, management has reiterated that this dividend policy is unlikely to change. So yield investors must look elsewhere.
The balance sheet appears as clean as it has ever been, following a few years of no acquisitions, with term debt virtually cleared and all previous contingent considerations from past acquisitions either paid out or deemed nonpayable, due to the requisite performance hurdles not being met.
Shares in issue are also down as some were repurchased and cancelled during the year. Santova has a long history of share buybacks during periods of price weakness. Indeed, a glance at the 2020 annual report shows 161.4-million shares in issue then vs 128-million now.
Just before the results were announced, news emerged that Santova had acquired the Seabourne Group, a set of logistical businesses operating in the UK, France and the Netherlands that provide fulfilment services for e-commerce brands. While this marks a new service line it can offer to clients, it does not mark a departure from its traditional asset-light approach in its fourth-party logistics offerings. The group will not be acquiring physical warehouses as part of the deal but instead will access hard-to-source logistics lease spaces and specialist software that can be rolled out to the broader Santova group.
The latest deal will also push the revenue to close to 90% offshore, against 70% exposure in the most recent year. While Santova is now firmly a rand hedge stock, the strength of the rand in the past 12 months was a negative for the business. This is something investors will need to keep an eye on. The deal will also result in a doubling of the Santova workforce to just more than 500 people.
The deal metrics imply that the business should deliver £2.8m, or roughly R69m, in annual after-tax profits for the next two years — this all according to the forecast in the spreadsheets, of course. The deal price implies an after-tax multiple of about five, and with Santova shares now close to a multiple of eight, it will be value accretive to existing shareholders.
Keith McLachlan, CEO of Element Investment Managers, notes that Santova’s acquisition of Seabourne should lift profits (on a pro forma basis) by almost a third. He says it is about the power of deploying low-yielding cash into a relatively inexpensive acquisition that fits in well with the group.
Funding for the deal is provided via a R60m debenture facility from Nedbank and cash reserves on hand, so no new equity is being raised or issued to the vendors as part of the deal. The debt should be more than manageable. Santova has borrowed and repaid numerous term loans from Nedbank, its primary and long-standing banking and lending partner.
Overall, it appears to be a sensible deal, albeit more substantial than the traditional bolt-ons Santova has historically done. Management, after a few quiet years on the acquisition front, is scanning the market for similar businesses. In the recent investment presentation Gerber pointed out that the group was in a strong financial position, which bodes well for another acquisition should a solid opportunity present itself.
The FM believes this could include businesses similar to the current Seabourne deal in Poland, which can cover Eastern Europe. The goal is to encompass the UK and Western Europe with Seabourne, and allow for seamless interlinkages across the old Iron Curtain when required, if a business in Poland can be found.
There have been some intriguing movements on the share register, with Wimsey Capital notifying the JSE that it now speaks for 5.3% of Santova’s issued shares. Details are sparse on who is behind the company, but links to the Otto family and PSG (where Chris Otto was a co-founder) have been noted in market chatter. The intentions here are unknown.
US hedge fund Barca Capital acquired additional Santova shares towards the end of 2024 and now holds a 15% stake. Barca has been a long-term holder of Santova stock, but its eventual intentions remain unclear. Either way, there has been a significant shake-up of the share register in recent months.
With the AGM scheduled for the end of July, it will be interesting to see what voting results are announced. The AGM circular shows that Santova management is conducting an overhaul of its remuneration structure and policy, following the failure to pass the relevant remuneration and directors’ fee resolutions at last year’s AGM after shareholders voted against the motions.
With an intriguing AGM coming up, a dynamic shareholder register and a new acquisition to bed in over the next few months, it looks like interesting times for Santova for the rest of 2025. It will be worth watching.
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