| Wed 8 Aug 2007, 7:05 | | SOH - South Ocean - Interim Results For The Six Mo |
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SOH
SOH
SOH - South Ocean - Interim Results For The Six Months Ended 30 June 2007 and
dividend declaration
South Ocean Holdings Limited
(Registration number 2007/002381/06)
Incorporated in the Republic of South Africa
("South Ocean", "the group" or "the company")
Share code: SOH & ISIN: ZAE000092748
Interim results for the six months ended 30 June 2007
1 Highlights
Revenue up 53.4% to R320.3 million
Operating profit up 73.9% to R59.8 million
Headline earnings up 86.7% to R42 million
Headline earnings per share up 61.9% to 37.4c
Basic earnings per share up 61.9% to 37.4c
Condensed Consolidated balance sheet
As at As at
NOTE
30 June 2007 30 June 2006 31 December
2006
(R) (Unaudited) (Unaudited ) (Audited)
Assets
Non-current assets 63 463 250 55 960 034 64 307 736
Property, plant and equipment 63 463 250 55 960 034 64 307 736
11
Current assets 304 772 688 140 960 525 171 316 873
Inventory 74 560 066 42 939 528 65 657 329
Trade and other receivables 118 613 035 97 390 068 105 025 766
Cash and cash equivalents 111 599 587 630 929 633 778
Total assets 368 235 938 196 920 559 235 624 609
Equity and liabilities
Capital and reserves
- Share capital 896 964 699 914 709 964
12 162 710 674 33 988 332 34 236 064
- Share premium 123 223 191 53 849 714 81 181 642
- Retained earnings
Total equity 286 830 829 88 537 960 116 127 670
Liabilities
Non-current liabilities 16 268 672 10 755 607 14 693 653
Interest bearing borrowings 6 021 891 3 748 240 5 207 367
13 10 246 781 7 007 367 9 486 286
Deferred income tax liabilities
Current liabilities 65 136 437 97 626 992 104 803 286
Current portion of interest 5 504 320 11 674 625 5 050 022
bearing borrowings 13 50 523 909 26 781 776 28 027 177
Trade and other payables - - 10 649 453
Shareholders for dividends 9 108 208 6 734 664 1 128 788
Current income tax liabilities - 52 435 927 59 947 846
Bank Overdraft
Total equity and liabilities 368 235 938 196 920 559 235 624 609
Condensed Consolidated income statement
Six Ten
months ended months
NOTE ended
30 June 30 June Chan 31
2007 2006 ge December
2006
(R) (Unaudited) (Unaudit % (Audited)
ed )
Revenue 320 302 793 208 736 53.4 458 310
888 210
Cost of Sales (240 005 (164 337 (347 277
656) 562) 657)
Gross Profit 80 297 137 44 399 80.9 111 032
326 553
Other Operating Income 4 333 - -
80 301 470 44 399 80.9 111 032
326 553
Administration expenses (10 452 (4 853 (13 020
210) 890) 122)
Distribution Expenses (370 127) (438 (724 657)
038)
Other Operating Expenses (9 633 981) (4 687 (12 425
679) 018)
Operating profit 59 845 152 34 419 73.9 84 862
719 756
Finance income 2 525 964 35 391 101 261
Finance expense (1 592 862) (1 900 (4 381
772) 640)
Profit before income tax 60 778 254 32 554 86.7 80 582
338 377
Income tax expense (18 736 (10 033 (25 422
14 705) 637) 396)
Profit after tax for the 42 041 549 22 520 86.7 55 159
period 701 981
Headline earnings 42 041 549 22 520 55 189
15 701 630
Earnings per share
Earnings per share - basic 37.4 23.1 61.9 55.8
(cents)
Earnings per share - diluted 37.4 23.1 61.9 55.8
(cents)
Condensed Consolidated statement of changes in shareholders` equity
Six months Ten
ended months ended
30 June 2007 30 June 2006 31 December
2006
(R) (Unaudited) (Unaudited) (Audited)
Share Capital
Opening Balance 709 964 677 133 699 914
Shares issued 187 000 22 781 10 050
Closing Balance 896 964 699 914 709 964
Share Premium
Opening balance 34 236 064 33 426 805 33 988 332
Share premium raised 130 713 000 561 527 247 732
Share issue expenses (2 238 390) - -
written off
Closing Balance 162 710 674 33 988 332 34 236 064
Distributable Reserves
Opening Balance 81 181 642 35 178 537 36 671 114
Profit for the period 42 041 549 22 520 701 55 159 981
Dividend paid - (3 849 524) (10 649 453)
Closing balance 123 223 191 53 849 714 81 181 642
Condensed Consolidated cash flow statement
Six months Ten
ended months
ended
30 June 30 June 2006 31 December
2007 2006
(R) (Unaudite (Unaudited ) (Audited)
d)
Cash flows from operating
activities
Profit before taxation 60 778 32 554 338 80 582 377
254
Adjust for:
Finance income (2 525 (35 391) (101 261)
964)
Finance cost 1 592 862 1 900 772 4 381 640
59 845 34 419 719 84 862 756
152
Adjustment for items not
affecting cash flow
Loss/ (profit) on disposal of - - 29 648
property, plant and equipment
(Reversal)/Provision for (578 444) 1 059 000 3 360 000
doubtful debts
Depreciation, amortisation and 3 247 401 3 484 540 4 421 652
other
Operating profit before working 62 514 38 963 259 92 674 056
capital changes 109
Working capital changes 585 170 (59 755 210) (78 864
264)
Increase in inventory (8 902 (11 163 010) (35 164
737) 214)
Increase in trade and other (13 008 (59 737 332) (52 392
receivables 825) 718)
Increase in trade and other 22 496 11 145 132 8 692 668
payables 732
Cash generated from / 63 099 (20 791 951) 13 809 792
(utilized) operations 279
Finance expenses paid (1 592 (1 900 772) (4 381 640)
862)
Finance income received 2 525 964 35 391 101 261
Income tax paid (9 996 (5 846 191) (24 705
790) 040)
Dividends paid to shareholders (10 649 - (3 849 524)
453)
Net cash generated from / 43 386 (28 503 523) (19 025
(used in) operating activities 138 151)
Cash flows from investing
activities
Purchases of property, plant (2 402 (4 632 305) (12 590
and equipment ("PPE") 915) 532)
Proceeds from disposal of - 506 622 546 728
property plant and equipment
Net cash used in investing (2 402 (4 125 683) (12 043
activities 915) 804)
Cash flows from financing
activities
Net Proceeds from issue of 128 661 584 307 257 782
ordinary shares 610
Increase / (decrease) in 1 268 822 (3 874 037) (8 406 262)
interest bearing liabilities
Net cash generated from/(used 129 930 (3 289 730) (8 148 480)
in) financing activities 432
Net increase/(decrease)in cash 170 913 (35 918 936) (39 217
and cash equivalents 655 435)
Cash and cash equivalents at (59 314 (15 886 062) (20 096
the beginning of period 068) 633)
Cash and cash equivalents at 111 599 (51 804 998) (59 314
the end of period 587 068)
Selected notes to condensed consolidated interim financial information
Introduction
South Ocean Holdings Limited (SOH), an investment holding company, operating
through its subsidiary, South Ocean Electric Wire Company (Pty) Limited (SOEW),
is pleased to report to shareholders its maiden financial results since becoming
a listed company in February 2007.
SOEW manufactures a comprehensive range of low voltage general-purpose
electrical power cables at its factory in Alrode, near Johannesburg and
distributes its products through electrical wholesalers and cable distributors.
SOH acquired 100% of the issued share capital of SOEW in January 2007 and the
results for the first six months represent the investment by SOH. The prior
period`s results for SOEW have been included for the purposes of analysis,
information and to explain the performance of SOEW for the period under review,
which represents SOH`s sole operation.
2 Financial Overview
Revenue for the six-month period to June 2007 increased by 53.4% to R320.3
million (2006: R208.7 million). Profit after tax (earnings) and headline
earnings increased by 86.7% to R42 million (2006: R22.5 million) respectively.
Headline earnings per share increased by 61.9% to 37.4 cents (2006: 23.1 cents
per share).
The profit and revenue increases were as a result of a 36% year-on-year average
increase in the copper price, increased production and stock profits,
management`s continued efforts to contain costs and improving efficiencies
across the Group.
Operating profit increased by 73.9% to R59.8 million (2006: R34.4 million).
This increase was despite a once-off cost of R4 million incurred for
professional services relating to the listing and the acquisition of the Radiant
Group (Pty) Limited. The finance income amounting to R2.5 million was earned on
the proceeds received from the share issue at listing. The finance expenses
pertain mainly to the financing of machinery.
The effective tax rate for the current period is 30.8% (2006: 30.8%).
Inventory holding levels and stock volumes increased as a result of higher
copper prices while the balance on the trade and other receivables account
increased to R118 million as a result of the increased revenue. The Company
invested in plant and machinery during the current period to increase its
production capacity.
The net cash balance of R111.6 million at the end of the review period is due to
the proceeds received from the share issue at listing and positive net cash
generated from operations. The Group also paid a dividend of R10.6 million
during this period which was declared in December 2006.
3 Significant acquisitions
In January 2007 SOH acquired all the shares of SOEW in order to prepare for the
listing on the main board. The results for the current period are consolidated
whilst the comparative are only those of SOEW, SOH`s sole operation. This will
be the first year the company reports consolidated results and they will be
consolidated from 1 January 2007. The increase in share premium is mainly as a
result of the listing. SOH issued 100 million shares to vendors of SOEW at R7.00
per share for the acquisition of shares of SOEW by SOH and a further 18.7
million shares were issued by SOH to selected institutions as part of
subscription offer at R7.00 per share on listing.
IFRS 3 requires that a new entity formed to issue equity instruments to effect
business combination, cannot be identified as the acquirier and therefore the
operating company will be identified as the acquirer. As a result, the
principle of reserve acquisition will have to be applied to transaction. This
principle has been applied in the preparation of these Group condensed
consolidated financial statements. The carrying value of assets and liabilities
of SOEW, the operating company, at the pre-transaction have been used as those
of the Group. The comparatives of the Group are therefore the comparatives of
SOEW as it is the acquirer in terms of IFRS 3.
SOH has successfully negotiated the acquisition of 100% of the issued share
capital of the Radiant Group (Pty) Limited.
As announced on SENS on 7 August 2007, all conditions precedent to the
transaction has been fulfilled.
4 Operational Review
During the period under review the Group`s operated at close to maximum
capacity. The Group has therefore embarked on expansion plans to ensure that the
capacity is increased to meet the strong demand for the Group`s products.
Phase one of the expansion strategy, valued at R10 million including the
acquisition and installation of new machinery and working capital was
successfully completed in the first half of 2007 and added 10% to SOEW`s overall
capacity. The effects of the increased capacity should be evident in the next
six-month period.
Phase two of the expansion strategy started in mid-June, and is due for
completion by December 2007. Once complete, this will add a further 15% to
SOEW`s capacity and assist in meeting the strong growth in demand for the
Group`s products. Construction has commenced and commitments to the value of R6
million have been entered into.
The industry continues to benefit from the rising copper price compared to the
previous period and a buoyant construction and building industry. The group has
been able to maintain and exceed its revenue growth plan as a result.
5 Group costs
The increase in the administration expenses is due to an increase in directors`
remuneration which comprises a performance bonus based on both profit
performance and of the appointment of more executive directors. The operating
expenses of R9.6 million includes professional and legal fees incurred related
to the listing in February 2007 and the costs related to the acquisition of 100%
of the issued ordinary share capital of the Radiant Group (Pty) Limited. The
balance of the operational costs is in line with the Group`s performance
targets.
6 Seasonality
During the period under review, SOEW has operated at nearly maximum capacity.
The earnings over the next six months will be driven by the copper price, a
buoyant construction and building industry coupled with the increased capacity.
The earnings of SOH are not seasonal.
7 Interim dividend declaration
An interim dividend of 6 cents per ordinary share amounting to R9.4 million was
approved by the Board of Directors on 7 August 2007 for the six months ended 30
June 2007.
The interim financial report does not reflect this dividend payable and related
STC charge, which will be recognised in shareholder`s equity as an appropriation
of retained earnings in the period in which they are declared.
The salient dates are as follows: -
Last date for trading to qualify and participate
in the interim dividend Friday, 24 August 2007
Trading ex dividend commences Monday, 27 August 2007
Record date Friday, 31 August 2007
Dividend payment date Monday, 3 September 2007
Share certificates may not be dematerialised or rematerialised between Monday,
27 August 2007 and Friday, 31 August 2007, both days inclusive.
8 Prospects
Our commitment to shareholders drives our strategy to deliver on all the
promises we made when listing. The Group will continue with its unwavering
focus of operational efficiency as we grow both organically and through
acquisitions. The government`s commitment to infrastructure and housing
development combined with the strong performance of private sector construction
and manufacturing means the Group is well positioned to take advantage of the
opportunities in the markets. The Group remains committed to the constant
rationalisation of machinery and processes, optimising efficiencies and
minimising running costs.
As a result the Group expects the solid returns obtained in the past to continue
in the medium to long-term.
9 Basis of preparation
The group has prepared condensed consolidated interim financial statements for
the six months ended 30 June 2007 in accordance with IAS 34 "Interim Financial
Reporting" and in compliance with the listing requirements of the JSE Limited
and the South Africa Companies Act. The condensed consolidated interim financial
statements for the period have been prepared on the basis of a reverse
acquisition in terms of the requirements of IFRS 3.
10 Accounting policies
The accounting policies adopted are consistent with those applied in the
previous period.
11 Capital expenditure
During the six-month period until June 2007, the group acquired new plant and
machinery to increase its operating capacity. The details of the changes in
capital are as follows:
(R`) Tangible
assets
Six months ended 30 June 2007
Opening net carrying amount 64 307 736
Additions 2 402 915
Depreciation, amortisation and other movements (3 247 401)
Closing net carrying amount 63 463 250
Six months ended 30 June 2006
Opening net carrying amount 54 812 269
Additions 4 632 305
Depreciation, amortisation and other movements (3 484 540)
Closing net carrying amount 55 960 034
12 Share capital
Number of Ordinary Share Total
shares shares premium (R`)
(R`) (R`)
Opening balance 1 100 000 000 709 964 34 236 34 946
January 2007 064 028
Proceeds from shares 18 700 000 187 000 130 713 130 900
issued 000 000
Share issue expenses - - (2 238 (2 238
written off 390) 390)
Closing balance 30 June 118 700 000 896 964 162 710 163 607
2007 674 638
Opening balance 1 95 374 253 677 133 33 426 34 103
January 2006 805 938
Proceeds from shares 3 208 563 22 781 561 527 584 308
issued
Closing balance 30 June 98 582 816 699 914 33 988 34 688
2006 332 246
13 Interest bearing long term borrowings
(R) As at As at
Secured Loans 30 June 2007 30 June 2006 31 December
2006
Non Current 6 021 891 3 748 240 5 207 367
Current portion 5 504 320 11 674 625 5 050 022
11 526 211 15 422 865 10 257 389
The movement in borrowings is analysed as follows:
Opening balance 10 257 389 19 296 902 18 663 651
Additional borrowings raised 2 838 504 1 991 776 5 303 662
Financed expenses incurred 859 229 811 545 1 213 798
Repayments (2 428 911) (6 677 358) (14 923 722)
Closing balance 11 526 211 15 422 865 10 257 389
14 Income tax
Expenditure on income tax is based on management`s best estimate of the weighted
average annual income tax rate expected for the full financial year. The
estimated average annual tax rate used for 2007 is 30.8% (2006: 30.8%).
15. Reconciliation of headline earnings
Six Ten
months ended months ended
30 June 30 June 31 December
2007 2006 2006
(R) (Unaudited) (Unaudit (Audited)
ed )
Reconciliation of headline
earnings
Profit for the period 42 041 549 22 520 55 159 981
701
Loss on sale of property, plant - - 29 649
and equipment
Headline earnings 42 041 549 22 520 55 189 630
701
16. Weighted average number of shares
Six Ten
months ended months ended
30 June 30 June 31 December
2007 2006 2006
(Unaudited) (Unaudit (Audited)
ed )
Number of shares in issue 118 700 000 98 584 100 000 000
434
Number of shares in issue at 100 000 000 95 375 98 584 434
beginning of the period 818
Issued February 2007 12 466 667
Issued February 2006
Issued October 2006 2 139 283 113
077
Weighted average number of
shares in issue at end of the 112 466 667 97 514 98 867 547
period 895
Weighted average number of 112 466 667 97 514 98 867 547
shares in issue for diluted 895
earnings per share
17. Net asset value
As at As at
30 June 30 June 31 December
2007 2006 2006
(Unaudited) (Unaudit (Audited)
ed )
Net asset value per 241.6 89.8 116.1
share(cents)
18. Segment reporting
SOH operates only as one segment.
19. Subsequent Events
On 25 June 2007 SOH released on SENS that it had entered into an agreement,
subject to the fulfilment of certain conditions precedent, that the company
would acquire 100% of the issued ordinary share capital of the Radiant Group
(Pty) Limited for a total purchase consideration of R485 million. All conditions
precedent were fulfilled on 7 August 2007 and the effective date of the
acquisition is 1 March 2007.
On behalf of the board
JB Magwaza
Chairman
EHT Pan
Chief executive
07 August 2007
Registered office
12 Botha Street
Alrode 1451
(P.O. Box 123 738, Alrode, 1451)
Company secretary
Whitney Thomas Green
21 West Street
Houghton, 2198
(P.O. Box 123 738, Alrode, 1451)
Directors: J B Magwaza (Chairman), E H T Pan* (Chief Executive), J P Bekker*,
P J M Ferreira*, R. P Walley* D Ko#, E G Dube#, C Y Wu^, C H Pan^,
Company Secretary : WT Green
* Executives # Independent Non Executives ^ Non Executives
Date: 08/08/2007 07:05:03 Produced by the JSE SENS Department.
