| Thu 19 Apr 2007, 16:48 | | SLO - SELCo - Reviewed Interim Results For The Six |
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SLO
SLO
SLO - SELCo - Reviewed Interim Results For The Six Months Ended
31 December 2006
Southern Electricity Company Limited
(Registration Number 1997/006894/06)
JSE Share Code: SLO & ISIN: ZAE000041919
("SELCo" or "the Group" or "the Company")
REVIEWED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2006
CONSOLIDATED INCOME STATEMENT
6 months 6 months 12 months
ended ended ended
31 December 31 December 30 June
2006 2005 2006
Reviewed Unaudited Audited
*Restated
(R`000) (R`000) (R`000)
Gross revenue 14 029 11 838 25 245
Cost of sales (8 573) (6 944) (14 719)
Gross profit 5 456 4 894 10 526
Other income - 653 81
Operating costs (5 413) (4 190) (7 703)
Operating profit 43 1 357 2 904
Investment revenue 471 397 1 913
Fair value adjustment - - 1 300
Finance costs (164) (240) (495)
Profit before taxation 350 1 514 5 622
Taxation (184) (581) (1 802)
Profit after taxation 165 933 3 820
Earnings per ordinary share 0.30 1.70 6.95
(cents)
Headline earnings per 0.30 1.70 4.62
ordinary share (cents)
CONSOLIDATED CASH FLOW STATEMENT
CASH FLOWS FROM OPERATING (191) 209 3,047
ACTIVITIES
Cash receipts from customers 13 237 10 798 23 562
Cash paid to suppliers and (12 895) (10 364) (21 635)
employees
Cash generated by operating 342 434 1 927
activities
Interest received 471 397 1 913
Interest paid (164) (240) (495)
Taxation paid (840) (382) (298)
CASH FLOWS FROM INVESTING (292) 134 (676)
ACTIVITIES
Property, plant and equipment (292) (18) (676)
acquired
Sale of financial asset - 152 -
CASH FLOWS FROM FINANCING 520 (641) (1 534)
ACTIVITIES
Repayment of loans 520 (773) (1 534)
Other - 132 -
Increase/(Decrease) in cash 37 (298) 837
and cash equivalents
Cash and cash equivalents at 1 234 397 397
beginning of the period
Cash and cash equivalents at 1 271 99 1 234
end of the period
CONSOLIDATED BALANCE SHEET
31 December 31 December 30 June
2006 2005 2006
Reviewed Unaudited Audited
*Restated
(R`000) (R`000) (R`000)
ASSETS
Non-current assets 22 794 21 563 22 883
Investment property 11 750 10 450 11 750
Property, plant and 6 779 7 042 6 868
equipment
Investment 4 265 4 071 4 265
Current assets 12 741 12 442 12 311
Inventories 539 561 848
Other loans receivable 7 708 8 461 8 283
Trade and other receivables 3 223 3 319 1 946
Cash and cash equivalents 1 271 101 1 234
Total assets 35 535 34 005 35 194
EQUITY AND LIABILITIES
Equity 23 613 20 936 23 448
Share capital 10 162 10 162 10 162
Non-distributable reserve 16 16 16
Available-for-sale 1 029 864 1 029
investment reserve
Retained income 12 406 9 345 12 241
Liabilities
Non-current liabilities 7 156 7 671 7 333
Other financial liabilities 3 192 3 670 3 272
Deferred tax 3 964 4 001 4 061
Current liabilities 4 766 5 938 4 413
Other loans payable - 4 256 -
Trade and other payables 2 899 1 680 1 986
Bank overdraft - 2 -
Taxation payable 1 867 - 2 427
Total equity and 35 535 34 005 35 194
liabilities
STATEMENT OF CHANGES IN EQUITY
Balance at beginning of period 23 448 19 463 19 463
Net profit for the period 165 933 3 820
Unrealised gain on revaluation - - 193
of available-for-sale
investment
Deferred taxation on - - (28)
revaluation of investment
Balance at end of period 23 613 20 396 23 448
COMMENTARY
NATURE OF BUSINESSSELCo`s core business is the supply and distribution of
electrical energy directly to users thereof, whether such users are
governmental, parastatal, industrial, commercial or individuals. The
principle is to supply numerous customers and not to be restricted to a few
bulk agreements.
FINANCIAL REVIEWThe gross profit and operating profit are lower than the
corresponding previous six month period, as a result of non-recurring, once-
off expenditure relating to a significant increase in audit fees occasioned
by the IFRS conversion, together with the knock-on effects of a postponement
of maintenance expenditure at the request of the Electricity Control Board
of Namibia which resulted in increased repair costs.
Additional expenditure of R350 000 was incurred by SELCo to prepare itself
to become IFRS compliant and an amount of R850 000 on additional maintenance
and support. Against this backdrop, it is therefore encouraging to note that
SELCo`s core business is solid if one compares the previous period`s profit
before taxation of R1,5 million to the current period`s R350 000 (R1 550 000
profit before tax if non-recurring expenditure is excluded).
OUTLOOK
SELCo`s business in Namibia demonstrates a profitable and sustainable
business model in the electricity distribution industry. Management is
investigating opportunities to apply the business model in other aspects of
the electricity industry in Southern Africa, with the objective of
materially increasing the size of the Company`s business. In due course and
when appropriate the Company will publish more information in this regard.
BUSINESS REVIEW
NamibiaAs SELCo`s revenue is currently predominantly reliant on its Namibian
interests, the Board has deemed it appropriate to provide further details
pertaining to such interests, as follows: The expansion of SELCo`s business
interests in Namibia, as originally envisaged in 2002, has as yet not been
implemented for political reasons. Subsequent to the replacement of its
original CEO, the Southern Regional Electricity Distributor (SORED) steering
committee now appears to be seeking a more workable and practical solution
to the Regional Electricity Distributor (RED) saga as opposed to its
original stance of demanding a single government distributor at all costs.
Although the Company is not yet guaranteed of an increase in market share,
SELCo`s consistent views and quality of service in the region has positioned
it to become a potential influential role player in the Namibian market
place as originally intended in 2002. Furthermore, due to the lack of
funding available at local authority level, the RED process has been
somewhat delayed. SELCo anticipates that the Government could either elect
to provide the pertinent local authorities with funding for the premature
termination of SELCo`s long-term management agreements so as to form a
government-based service provision company (Southern RED), or that SELCo
could be requested to set up the new envisaged Southern RED on a Build
Operate and Transfer (BOT) basis. Either possibility has associated benefits
and SELCo is conducting ongoing discussions with the relevant authorities in
this regard.
With regard to other energy related business opportunities, SELCo is
aggressively pursuing environmentally friendly electricity generation
possibilities and has already commenced with the licensing application
procedure as drafted by the ECB for these purposes in Namibia. It is
envisaged that the first pilot site will be situated at Luderitz and
generation is due to commence by the third quarter of 2008.
Consequently, the directors are satisfied that the Company will be able to
continue its operations as a going concern, irrespective of the outcome of
the allocation of distribution licences by the ECB and/or the finalisation
of the formation of a new distribution entity such as SORED.
MozambiqueThe project located in the northern Province of Inhambane is
progressing steadily with the fulfilment of all statutory approvals and
requirements. The construction of the main distribution line linking Temane
with Vilanculos and Inhassoro is complete and was commissioned in November
of 2006, with a record sales month in December. Although Cyclone Favio hit
the concession area after the date of the reporting period, this will have
no effect on the investment of SELCo in ENMo and accordingly no adjustment
to fair value is necessary.
REPORTABLE IRREGULARITY
The reportable irregularity that was disclosed in the 2006 Annual Report has
been resolved to the satisfaction of the Independent Regulatory Board of
Auditors (IRBA).
POST BALANCE SHEET EVENTS
Mr Montaque Senekal was appointed as an executive director of SELCo with
effect from 6 March 2007. Mr Senekal has more than forty years experience in
the electricity field, the last eight of which have been with the Group. Mr
Senekal also oversees the Group`s Occupational Health and Safety matters.
Mr Pierre Jacobs resigned as a director of the Company with effect from 6
March 2007 to pursue other business interests. The Board wishes to thank Mr
Jacobs for his valuable contribution.
SEGMENTAL ANALYSIS
The primary reporting format of the Group is by business segment. As the
Group operates as a vertically integrated electricity distributor, there is
only one business segment as defined by IAS 14. (The rental income derived
from the investment property is insignificant by comparison and therefore
included into the primary business segment.)
ACCOUNTING POLICIES
The interim results have been prepared in accordance with International
Financial Reporting Standards (IFRS), the interpretations adopted by the
International Accounting Standards Board and the requirements of the South
African Companies Act.
Moores Rowland, the Group`s independent auditor, has reviewed the interim
financial statements contained in this interim report and has expressed an
unmodified conclusion on the interim financial statements. Their review
report is available for inspection at the Company`s registered office.
DIVIDEND
No dividend for the six month period ended 31 December 2006 is declared.
On behalf of the Board19 April 2007
DIRECTORS: B Hlongwa* (Chairman), CF Bosch (CEO), I Bosch, F Sekandi*#,
M Senekal, A van Zyl
* Non Executive # Uganda.
REGISTERED OFFICE:
156 Kleine Street, New Muckleneuk, Pretoria.
PO Box 73130, Lynnwood Ridge, 0040.
TRANSFER SECRETARIES:
Link Market Services South Africa (Pty) Ltd,
PO Box 4844, Johannesburg, 2000.
COMPANY SECRETARY:
EA Steyn.
SPONSOR:
Bridge Capital Advisors (Pty) Ltd.
AUDITORS:
Moores Rowland
Date: 19/04/2007 16:48:12 Produced by the JSE SENS Department.
