| Mon 17 Mar 2008, 7:04 | | SOH - South Ocean Holdings Limited - Audited results and final dividend |
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SOH
SOH
SOH - South Ocean Holdings Limited - Audited results and final dividend
declaration for the year ended 31 December 2007
South Ocean Holdings Limited
(Registration number 2007/002381/06)
Incorporated in the Republic of South Africa
("South Ocean", "the group")
Share code: SOH ISIN: ZAE000092748
Audited results and final dividend declaration for the year ended 31 December
2007
Highlights
Revenue up 65.5% to R852.6 million
Operating profit up 96.4% to R185.4 million
Headline earnings up 108.8% to R126.3 million
Headline earnings per share up 58.4% to 97.4c
Basic earnings per share up 57.5% to 97.0c
Final dividend of 20 cents per share
Condensed Consolidated balance sheets as at
NOTES 31 December 31 December
2007 2006
(R`000) (Audited) (Audited)
Assets
Non-current assets 576 979 64 308
Property, plant and 11 186 990 64 308
equipment
Intangible assets 388 868 -
Interest free loans 1 121 -
Current assets 359 981 171 317
Inventory 177 884 65 657
Trade and other 136 346 105 026
receivables 350 -
Taxation receivable 45 401 634
Cash and cash
equivalents
Total assets 936 960 235 625
Equity and liabilities
Capital and reserves
Share capital 12 1 274 710
Share premium 12 440 371 34 236
Retained earnings 197 591 81 182
Total equity 639 236 116 128
Liabilities
Non-current liabilities 174 140 14 693
Interest 13 144 303 5 207
bearing borrowings 29 837 9 486
Deferred income tax
liabilities
Current liabilities 123 584 104 804
Trade and 76 856 28 028
other payables 4 10 649
Shareholders 13 33 225 5 050
for dividends 13 430 1 129
Interest 69 59 948
bearing borrowings
Income tax
liabilities
Bank
overdraft
Total liabilities 297 724 119 497
Total equity and liabilities 936 960 235 625
Condensed consolidated income statements
Ten months
NOTE Twelve months ended ended
31 31 Chan 31
December December ge December
2007 2006 2006
(R`000) (Audited) (Unaudite % (Audited)
d )
Revenue 852 594 515 310 65.5 458 310
Cost of Sales (611 522) (391 511) (347 278)
Gross Profit 241 072 123 799 94.7 111 032
Other Income 4 200 17 -
Administration expenses (41 375) (14 496) (13 020)
Distribution expenses (5 315) (803) (725)
Operating expenses (13 204) (14 128) (12 425)
Operating profit 185 378 94 389 96.4 84 862
Finance income 4 317 118 101
Finance expense (10 028) (4 897) (4 381)
Profit before income tax 179 667 89 610 100. 80 582
5
Income tax expense (53 875) (29 108) (25 422)
14
Earnings attributable to 125 792 60 502 107. 55 160
ordinary shareholders 9
Earnings per share - basic 97.0 61.6 57.5 67.0
and diluted (cents)
Dividends per share 26.0 10.5 145. 10.6
(interim) 5
(cents)
Condensed consolidated statements of changes in shareholders` equity
Twelve Ten
months ended months
ended
31 31 December 2006 31
December December
2007 2006
(R`000) (Audited) (Audited)
(Unaudited)
Share Capital
Opening Balance 710 677 700
Shares issued 564 33 10
Closing Balance 1 274 710 710
Share Premium
Opening balance 34 236 33 427 33 988
Share premium on shares 410 586 809 248
issued
Share issue expenses written (4 451) - -
off
Closing Balance 440 371 34 236 34 236
Retained earnings
Opening Balance 81 182 35 179 36 671
Profit for the year/period 125 792 60 502 55 160
Dividend paid (9 383) (14 499) (10 649)
Closing balance 197 591 81 182 81 182
Condensed consolidated cash flow statements
Twelve months ended Ten months
ended
31 December 31 December 31 December
2007 2006 2006
(R`000) (Audited) (Unaudited) (Audited)
Cash generated from 59 738 (20 104) (19 024)
/(utilised in) operating
activities
Cash utilised in investing (298 899) (15 126) (12 045)
activities
Cash generated from/(used 343 807 (8 198) (8 148)
in) financing activities
Net increase/(decrease)in 104 646 (43 428) (39 217)
cash and cash equivalents
Cash and cash equivalents at
the beginning of year/ (59 314) (15 886) (20 097)
period
Cash and cash equivalents at 45 332 (59 314) (59 314)
the end of year/period
Selected notes to condensed consolidated financial information
1 Introduction
South Ocean Holdings Limited (SOH), is pleased to report to shareholders its
maiden financial results.
The operating subsidiaries are South Ocean Electric Wire Company (Proprietary)
Limited (SOEW), Radiant Group (Proprietary) Limited, (Radiant) and the property
subsidiary Anchor Park Investments 48 (Proprietary) Limited (Anchor Park).
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.
Radiant is an importer and distributor of lighting products which include
decorative light fittings, lamps and bulbs and electrical accessories. It
operates from premises in Johannesburg and Cape Town and distributes its
products through wholesalers and distributors.
Anchor Park houses all the group`s properties which are utilised by the
operating companies.
SOH acquired 100% of the issued share capital of SOEW in January 2007 and 100%
of the issued share capital of Radiant in August 2007 as approved at the
shareholders meeting in August 2007.
The consolidated results for the year ended include the twelve months` results
of SOEW and the five months` results of Radiant and Anchor Park.
The prior period`s results of the group disclosed are the results of SOEW for
the ten months and twelve months ended 31 December 2006, which have been
included for information purposes to assist in evaluating the performance of SOH
for the year under review.
2. Basis of preparation
The audited financial statements for the year ended 31 December 2007, have been
prepared in accordance with the accounting policies which fully comply with
International Financial Reporting Standards and IAS 34 Interim Financial
reporting and are consistent with those applied in the previous year, except for
the adoption of IRFS 7 Financial Instruments : Disclosures. This standard has
not changed the recognition of financial instruments.
3. Audit opinion
These results have been extracted from the group`s audited financial statements.
The unqualified report of PricewaterhouseCoopers Inc. on the financial
statements is available at the registered office of the company.
4. Financial overview
Revenue for the twelve months to 31 December 2007 compared to the comparative
period in the prior year increased by 65.5% to R852.6 million (2006: R515.3
million). Profit after tax increased by 107.9% to R125.8 million (2006: R60.5
million) and headline earnings increased by 108.8% to R126.3 million (2006:
R60.5 million). Headline earnings per share increased by 58.4% from 61.5 cents
to 97.4 cents per share while earnings per share increased by 57.5% from 61.6
cents to 97.0 cents per share.
The profit and revenue increases were as a result of the acquisition of Radiant
whose results for the last five months of the financial year were consolidated
into the group`s results. The moving average copper price increase of 19% year-
on-year, increased production and stock profits, management`s continued efforts
to contain costs and improving efficiencies across the group also contributed to
the improved results.
If the acquisition had occurred on 1 January 2007, group revenue would have been
R1 049,3 million and earnings attributable to ordinary shareholders would have
been R150,5 million.
Operating profit increased by 96.4% from R94.4 million to R185.4 million. The
finance income of R4.3 million was earned on the proceeds received from the
shares issued on listing. The group earned a foreign exchange profit of R3.4
million during the financial year. The finance expenses pertain mainly to the
financing of machinery and building expansions. Financing cost increased mainly
due to a loan of R120 million utilised to finance the acquisition of the
properties on the acquisition of the Radiant transaction.
Inventory holding levels increased by R112.2 million as a result of higher
copper prices and inventory acquired on the Radiant acquisition. Trade and other
receivables only increased by 29.8% to R136 million due to improved credit
control and collection policies. The company invested in plant and machinery
and buildings during the current period to increase production capacity at SOEW.
The net cash balance of R45.4 million at the end of the year is due to the
positive net cash generated from operations. The group paid a dividend of R9.4
million during the year.
5. 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
figures whilst the comparatives relate only to those of SOEW, SOH`s sole
operation at the time of the listing.
The increase in share premium is due to the listing and the acquisition of
Radiant. SOH issued 100 million shares to vendors of SOEW at R7.00 per share for
the acquisition of shares of SOEW and a further 18.7 million shares were issued
by SOH to selected institutions as part of the subscription offer at R7.00 per
share on listing. SOH issued a further 24.7 million shares to the vendors of
Radiant at R7.30 and 12.9 million shares to selected institutions at R7.70 to
discharge the purchase consideration of Radiant.
IFRS 3 requires that a new entity formed to issue equity instruments to effect a
business combination, cannot be identified as the acquirier and therefore the
operating company has been identified as the acquirer. As a result, the
principle of reverse acquisition has been applied to the transaction. This
principle has been applied in the preparation of the group financial statements.
The carrying value of assets and liabilities of SOEW, the operating company, at
the pre-transaction date 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.
6. Operational review
During the year under review the group`s subsidiary SOEW operated at close to
maximum capacity. SOEW has therefore embarked on expansion plans to ensure that
the capacity is increased to meet the strong demand for the group`s products.
Phase 1 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. Phase 2 valued at R15 million including the expansion of the factory
space, acquisition and installation of new machinery and working capital is in
the final phase of completion and will be fully operational in March 2008 adding
15% to the overall capacity. The total effect of the increased capacity should
be evident in the 2008 results.
Radiant is in the process of upgrading their computer system which is a crucial
element for effective customer service and sales, and is expected to be fully
operational by the middle of 2008.
The industry benefited during the 2007 financial year 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.
7. Group costs
A significant portion of the increase in the operating expenses is due to the
inclusion of the operating expenses of Radiant for the five months, amounting to
R31 million. The interest increase of R4.8 million related to the external
financing of the group`s buildings sold to the subsidiary Anchor Park.
Production salaries at SOEW increased by R6 million due to the increase in the
workforce related to the expansion, a long service hourly rate increase awarded
to the staff, and overtime worked to cater for the demand. Directors`
remuneration increased during the year due to performance bonuses based on
profit performance and the appointment of additional executive directors. The
balance of the operational costs is in line with the group`s performance
targets.
8. Seasonality
The group is affected by seasonality.
9 Final dividend declaration
Notice is hereby given that the Board of Directors has declared a final dividend
of 20 cents per ordinary share amounting to R31 275 759 for the year ended 31
December 2007 to shareholders recorded in the register at close of business on
11 April 2008.
The financial statements does not reflect this dividend payable and the related
STC charge, which will be recognised in shareholder`s equity as an appropriation
of retained earnings in the year in which they are declared.
The salient dates are as follows: -
Last date for trading to qualify and participate in the final dividend
Friday 4 April 2008
Trading ex dividend commences Monday 7 April 2008
Record date Friday 11 April 2008
Dividend payment date Monday 4 April 2008
Share certificates may not be dematerialised or rematerialised between Monday 7
April 2008 and Friday 11 April 2008, both days inclusive.
10. Prospects
We have had an extraordinarily successful year as a group. In particular, our
cable manufacturing division has achieved the targets that we set ourselves at
listing almost two years ahead of schedule. We have brought on stream the first
phase of our capacity expansion and are already maximizing the returns from this
investment. Phase 2 will be fully operational by end of March 2008.
Our businesses are both exposed to the vagaries of the South African economy.
The fundamentals however remain strong and we expect a stable performance even
in a weaker economy thanks to Radiant`s leading market position and our strong
brands.
We continue our search for value adding acquisitions to further diversify our
portfolio and will maintain a well managed organic growth path to add capacity
to both divisions.
During the year under review, SOEW has operated at near maximum capacity. The
earnings over the next year will be driven by the copper price, the construction
and building industry coupled with the increased capacity.
Radiant sales are affected by the construction and building industry, interest
and foreign exchange rates.
The last year has produced outstanding results which are testimony to the hard
work of all the employees of the group. Provided there is no significant
effects from the existing power crises and no major economic slowdown in the
year ahead, we are confident that the group will achieve double digit earnings
growth in 2008.
11. Capital expenditure
Radiant is also in the process of building larger offices, a warehouse and a
showroom in Cape Town at a cost of approximately R30 million which is expected
to be completed by the middle of 2008. The showroom in Johannesburg is the
process of being upgraded and a new warehouse will be built in 2008 at a cost of
approximately R25 million.
During the twelve months to 31 December 2007, the group acquired new plant and
machinery and expanded their buildings to increase its operating capacity. The
details of the changes in property, plant and equipment are as follows:
31 December 31 December
2007 2006
(R`000)
Opening net carrying amount 64 308 56 715
Additions 32 996 12 591
Acquisition of subsidiary 98 301 -
Disposals (116) (576)
Depreciation (8 499) (4 422)
Closing net carrying amount 186 990 64 308
12. Share capital and share premium
Number of Ordinary Share Total
shares shares premium (R`000)
(R`000) (R`000)
Balance at 1 January 100 000 710 34 236 34 946
2007
Proceeds from shares 31 687 317 230 583 230 900
issued
Shares issued to 24 692 247 180 003 180 250
vendors for
subsidiary acquired
Share issue expenses - - (4 451) (4 451)
written off
Balance at 31 156 379 1 274 440 371 441 645
December 2007
Balance at 1 March 98 584 700 33 988 34 688
2006
Proceeds from shares 1 416 10 248 258
issued
Balance at 31 100 000 710 34 236 34 946
December 2006
13. Interest bearing long term borrowings
Secured Loans (R`000) 31 December 31 December
2007 2006
Non-current 144 303 5 207
Current 33 225 5 050
177 528 10 257
The movement in borrowings is analysed as follows:
Opening balance 10 257 18 664
Acquisition of subsidiary 48 231 -
Additional borrowings 134 839 5 303
raised
Finance expenses 7 834 1 214
Repayments (23 633) (14 924)
Closing balance 177 528 10 257
Additional borrowings of R120 million were raised by a mortgage bond on the
group properties and was utilised for the acquisition of the properties as part
of the Radiant acquisition.
14. Income tax expense
The effective tax rate for 2007 is 30.0% (2006 - 12 months: 32.5%), (2006 - 10
months: 31.5%).
15 nciliation of headline earnings
Twelve Ten months
months ended ended
31 December 31 December 31 December
2007 2006 2006
(R`000) (Audited) (Unaudited) (Audited)
Reconciliation of headline
earnings
Earnings attributable to 125 792 60 502 55 160
ordinary shareholders
Amortisation of intangible 917 - -
assets
(Surplus)/deficit on
disposal of property, plant (429) (17) 30
and equipment
Headline earnings 126 280 60 485 55 190
Headline earnings per share 97.4 61.5 67.0
16 ghted average number of shares
Twelve Ten months
months ended ended
31 December 31 December 31 December
(,000) 2007 2006 2006
(Audited) (Unaudited) (Audited)
Number of shares in issue 156 379 100 000 100 000
Weighted average number of
shares in issue at beginning 100 000 95 376 82 154
of the year/period 14 130 - -
Issued August 2007 15 583 - -
Issued February 2007 - 2 674 -
Issued February 2006 - 236 236
Issued October 2006
Weighted average number of 129 713 98 286 82 390
shares in issue for at the
end of the year/period
17. Net asset value
31 December 31 December
2007 2006
(Audited) (Audited)
Net asset value per share 408.8 116.1
(cents)
18. Segment reporting
The group`s primary reporting format is business segments, and its secondary
format is geographical segments.
Revenue Operating Total Total Capital Depreciation
2007 profit Assets Liabilities Expenditure amortisation
(R`000)
Electrical
Wire 673 390 97 293 246 46 767 2 675 6 933
631
Light
Fittings &
accessories 178 785 36 536 567 84 583 21 975 1 932
918
Property
investment 419 (6 044) 122 121 859 10 303 551
383
Other - (1 993) 28 1 248 - -
852 594 125 792 936 254 457 34 953 9 416
960
2006
(R`000) - (10
months)
Electrical
wire 458 310 55 160 235 119 497 12 591 4 422
625
19. Subsequent events
With the exception of the charge in the company tax rate, the directors are not
aware of any other matter or circumstance arising since the end of the financial
period, not otherwise dealt with in the financial statements, which would affect
the operations of the company and the group or the results of those operations
significantly.
On behalf of the board
JB Magwaza EHT Pan
Chairman Chief executive officer
15 March 2008
Registered office Company secretary
12 Botha Street W T Green
Alrode 1451 21 West Street
(P.O. Box 123 738, Alrode, Houghton, 2198
1451) (P.O. Box 123 738, Alrode, 1451)
Directors: J B Magwaza# (Chairman), E H T Pan* (Chief Executive
Officer), J P Bekker*(Chief Financial Officer),
P J M Ferreira*, D Ko#, E G Dube#, C Y Wuv, C H Panv, H Schwartz*, G
Stein*, K H Pon#.
Company Secretary : W T Green
* Executive
# Independent Non Executive v Non Executive
Taiwanese
Date: 17/03/2008 07:04:52 Produced by the JSE SENS Department.
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