| Tue 18 Sep 2007, 16:58 | | SLO - SELCo - Reviewed Consolidated Results For Th |
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SLO
SLO
SLO - SELCo - Reviewed Consolidated Results For The Year Ended 30 June 2007
Southern Electricity Company Limited
(Registration Number 1997/006894/06)
JSE Share Code: SLO & ISIN: ZAE000041919
("SELCo" or "the Group")
REVIEWED CONSOLIDATED RESULTS FOR THE YEAR ENDED 30 JUNE 2007
CONSOLIDATED INCOME STATEMENT
30 June 30 June
2007 2006
R`000 R`000
Revenue 28 402 25 245
Cost of sales (14 538) (12 802)
Gross profit 13 864 12 443
Other income - 81
Operating expenses (13 397) (9 332)
Distribution costs (51) (489)
Marketing and selling expenses (638) (320)
Operating (loss) profit (222) 2 383
Investment revenue 1 067 1 913
Fair value adjustment 750 1 300
Finance costs (383) (495)
Profit before taxation 1 212 5 101
Taxation (388) (1 752)
Profit after taxation 824 3 349
Earnings per ordinary share (cents) 1.50 6.10
Headline earnings per ordinary share 0.79 3.76
(cents)
The calculation of headline earnings per ordinary share is based on a profit for
the Group of R434 000 (2006: R2 065 000) and on the weighted average ordinary
shares of 54 945 373 (2006: 54 945 373) for the year
Headline earnings profit has been
computed as follows:
2007 2006
R 000 R 000
Net profit after taxation 824 3 349
Revaluation gain on investment property (750) (1 300)
Loss on disposal of fixed assets 360 16
434 2 065
CONSOLIDATED CASH FLOW STATEMENT
30 June 30 June
2007 2006
R`000 R`000
CASH FLOWS FROM OPERATING ACTIVITIES (568) 3 047
Cash receipts from customers 27 602 23 563
Cash paid to suppliers and employees (26 835) (21 897)
Cash generated by operating activities 767 1 666
Interest received 1 067 1 913
Interest paid (383) (495)
Taxation paid (2 019) (37)
CASH FLOWS FROM INVESTING ACTIVITIES (1 588) (676)
Property, plant and equipment acquired (1 996) (676)
Repayment of loans from group companies 408
CASH FLOWS FROM FINANCING ACTIVITIES 3 003 (1 534)
Repayment of borrowings 353 (145)
Other loans - repayments 2 650 (1 389)
Total cash movement for the year 847 837
Cash and cash equivalents at the 1 234 397
beginning of the year
Total cash at the end of the year 2 081 1 234
CONSOLIDATED BALANCE SHEET
30 June 30 June
2007 2006
R`000 R`000
ASSETS
Non current assets 24 626 22 883
Investment property 12 500 11 750
Property, plant and equipment 7 730 6 868
Investment 4 396 4 265
Current assets 11 058 12 327
Inventories 581 848
Other loans receivable 5 650 8 300
Trade and other receivables 2 746 1 945
Cash and cash equivalents 2 081 1 234
Total assets 35 684 35 210
EQUITY AND LIABILITIES
Equity 23 247 22 311
Share capital 10 163 10 163
Non-distributable reserve 16 16
Available-for-sale investment reserve 1 141 1 029
Retained income 11 927 11 103
Liabilities
Non-current liabilities 8 274 7 859
Borrowings 3 560 3 272
Operating lease liability 574 512
Deferred tax 4 140 4 075
Current liabilities 4 163 5 040
Other loans payable 408 -
Borrowings 203 138
Taxation payable 961 2 638
Trade and other payables 2 507 2 167
Provisions 84 97
Total equity and liabilities 35 684 35 210
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
30 June 30 June
2007 2006
R`000 R`000
Balance at beginning of year 22 311 18 796
Net profit for the year 824 3 349
Unrealised gain on revaluation of 131 194
available-for-resale investment
Deferred taxation on revaluation of (19) (28)
investment
Balance at end of period 23 247 22 311
OVERVIEW
We are pleased to present, for the year ended 30 June 2007, our annual results,
which have improved when compared to the reviewed interim results for the six
months ended 31 December 2006.
SELCo`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. SELCo`s focus is to increase the quantity
of supply points which in turn will positively influence the debtor book and
risk profile. Furthermore, SELCo is currently in discussions with an alternative
energy supplier whereby environmentally friendly electricity is to be sourced in
addition to the conventional parastatal supply. This initiative will introduce a
second supplier which in time may mitigate supplier risks, but more importantly
will also limit the environmental effects that generation has had and is having
on our planet.
Review of the Business
We are pleased to note that earnings, after the disappointing first half year
results, have improved during the last six months. Earnings per share are
however down by 75% from 6,10 cents in 2006 (restated) to 1,50 cents in 2007,
and headline earnings per share are down from 3,76 cents per share in 2006 to
0,79 cents per share in 2007. The result of the once off non-recurring
expenditure relating to an increase in audit fees occasioned by the
International Financial Reporting Standards ("IFRS") conversion, together with
the effects of increased maintenance costs and expenditure due to the initial
postponement of maintenance expenditure at the request of the Electricity
Control Board, has negatively impacted on the margins for the year.
SELCo`s primary operation remains in the Namibian market where SELCo is not only
a provider of resources to the benefit of electricity users in Southern Namibia
but also a contributor to tax for utilisation by the Namibian government for the
benefit of all the people of Namibia. SELCo has both maintained its
profitability through testing times and its quality and efficient services
against an interim expected decrease in revenue due to the unresolved tariff
issue with the Keetmanshoop Local Council.
Country Overview
Namibia:
We continue to pursue the recovery of income lost as a consequence of the
dispute. SELCo is actively seeking to substantially increase its business
outside of the Namibian marketplace to mitigate the potential risks associated
with a single country revenue source. Shareholders will be informed of any
developments in this regard.
Mozambique:
SELCo`s investment in ENMo consists of a right to distribute electricity which
will yield royalty income in respect thereof within the municipal areas of
Vilanculos, Inhassoro, Machanga and Nova Mambone.
The central generation facility and interconnecting distribution infrastructure
was completed in December 2006, with December having subsequently been recorded
as a record sales month since ENMo`s inception. The growth of energy sales has
experienced a significant setback in March 2007 due to the impact of Cyclone
Favio. The cyclone completely destroyed the generation and distribution
infrastructure in the spate of a few hours. Although ENMo`s and SELCo`s parent
company stepped in and reconstructed the bulk of the services within 27 days,
the Mozambican population, businesses and lodges were not in a position to
rebuild as quickly due to the enormity of the infrastructure and building
destruction. Although ENMo has surplus capacity to supply electrical energy, the
historical users are still not able to do business and therefore utilise less
power, leading to a reduced demand which has resulted in a drop in sales for
ENMo.
ENMo has further experienced some difficulty in dealing with the Government of
Mozambique ("GoM"). Initially, the GoM awarded ENMo the rights to a new 600MW
Combined Cycle GasTurbine facility to be located within ENMo`s concession area
at Temane in 2006. This right was revoked in April of 2007 and the project was
awarded to a multinational utility company. As ENMo`s concession holds
generation exclusivity, the GoM has recently purported to cancel ENMo`s existing
concession agreement.
ENMo is currently engaged in discussions and correspondence with the GoM and the
World Bank on resolving the recent impasse.
Outlook
Management is positive as to the future business potential of the Group. As a
small private utility company, management and staff have been exposed to and
successfully resolved events and situations which are normally reserved for
parastatals and multinationals. SELCo, with its unique human capital and
institutional memory is therefore well poised to capitalise on the electricity
situation in Southern Africa. In addition, the competent staff and dedicated
management team are committed to producing consistent results for the future.
SELCo remains interested in pursuing business opportunities throughout Southern
Africa.
Directorate
Mr Montaque Senekal was appointed as an executive director of SELCo with effect
from 6 March 2007. Mr Senekal has more than forty years of 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.
Accounting Policies
The final results have been prepared in accordance with IFRS, the interpretation
adopted by the International Accounting Standards Board and the requirements of
the South African Companies Act. These results have also been prepared in
accordance with International Accounting Standards ("IAS")34 - Interim Financial
Reporting.
Mazars Moores Rowland, the Group`s independent auditor, have reviewed the
financial information contained in this report. The review by Mazars Moores
Rowland is unqualified and is available for inspection.
Segment reporting
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 is included in
the primary business segment).
Prior period errors
Subsequent to the submission of the 2006 annual financial statements to the
public, it came to the attention of management that software support and
royalties were not invoiced to the company for the 2006 financial year. The
appropriate adjustments were made to the figures reflected in the 2006 annual
financial statements as set out below. Furthermore, the operating lease
liability calculated on the straight-lining of leases in terms of IAS 17 Leases
was not raised in the 2006 annual financial statements. The after tax effect of
the prior year errors amounts to R472 000.
The correction of the errors results in adjustments as follows:
Income Statement 2006
Software support 211 000
Royalties 190 000
Taxation (50 000)
Balance Sheet 2006
Retained earnings (1 138 000)
Operating lease liability 512 000
Deferred tax 14 000
Current tax 211 000
Trade and other payables 400 000
Dividend
A dividend has not been declared for the year ended 30 June 2007.
Reminder of cautionary announcement
Shareholders are referred to the cautionary announcement dated 4 September 2007
wherein they were informed that the company was involved in discussions.
Shareholders are advised that these discussions are ongoing and are therefore
reminded to continue exercising caution when dealing in their SELCo shares until
a detailed announcement is published.
By order of the Board
18 September 2007
DIRECTORS:
B Hlongwa* (Chairman), C F Bosch (CEO), I Bosch, F K Sekandi#*,
M Senekal, A van Zyl
* Non Executive
# Uganda
COMPANY SECRETARY AND REGISTERED OFFICE:
Elsa Steyn, 99 Fascia Street, Silvertondale, 0184 (PO Box 73130, Lynnwood Ridge,
0040)
TRANSFER SECRETARIES:
Link Market Services South Africa (Pty) Limited, 5th Floor, 11 Diagonal Street,
Johannesburg, 2001, (PO Box 4844, Johannesburg, 2000)
SPONSOR:
Bridge Capital Advisors (Pty) Limited, 27 Fricker Road, Illovo Boulevard,
Illovo, 2196, (PO Box 651010, Benmore, 2010)
Date: 18/09/2007 16:58:14 Produced by the JSE SENS Department.
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