| Thu 14 Aug 2008, 7:06 | | SOH - South Ocean Holdings - Interim results and interim dividend declaration |
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SOH
SOH
SOH - South Ocean Holdings - Interim results and interim dividend declaration
for the six months ended 30 June 2008
South Ocean Holdings
(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 and interim dividend declaration for the six months ended 30
June 2008
Highlights
Headline earnings per share up 23,5% to 46,2 cents
Basic earnings per share up 21,1% to 45,3 cents
Interim dividend up 16,7% to 7 cents per share
Revenue up 79,5% to R574,9 million
Operating profit up 92,9% to R115,5 million
Headline earnings up 71,9% to R72,3 million
CONDENSED CONSOLIDATED INCOME STATEMENT
Six months ended Year ended
30 June 30 June 31 December
2008 2007 2007
(Unaudited) (Unaudited) Change (Audited)
Notes R`000 R`000 % R`000
Revenue 574 876 320 303 79,5 852 594
Cost of sales (391 329) (240 006) (611 522)
Gross profit 183 547 80 297 128,6 241 072
Other income 894 4 4 200
Administrative (55 578) (10 452) (41 375)
expenses
Distribution (6 008) (370) (5 315)
expenses
Operating (7 393) (9 634) (13 204)
expenses
Operating profit 115 462 59 845 92,9 185 378
Finance income 1 800 2 526 4 317
Finance expense (14 359) (1 593) (10 028)
Profit before 102 903 60 778 69,3 179 667
income tax
Income tax 5 (32 008) (18 737) (53 875)
expense
Earnings 70 895 42 041 68,6 125 792
attributable to
ordinary
shareholders
Earnings per
share
Earnings per 45,3 37,4 21,1 97,0
share - basic
and diluted
(cents)
Dividend per 7,0 6,0 16,7 26,0
share (cents)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended Year ended
30 June 30 June 31 December
2008 2007 2007
(Unaudited) (Unaudited) (Audited)
Notes R`000 R`000 R`000
Share capital
Opening balance 1 274 710 710
Shares issued - 187 564
Closing balance 3 1 274 897 1 274
Share premium
Opening balance 440 371 34 236 34 236
Share premium on - 130 713 410 586
shares issued
Share issue expenses - (2 238) (4 451)
written off
Closing balance 3 440 371 162 711 440 371
Retained earnings
Opening balance 197 591 81 182 81 182
Profit for the 70 895 42 041 125 792
period
Dividend paid (31 276) - (9 383)
Closing balance 237 210 123 223 197 591
CONDENSED CONSOLIDATED BALANCE SHEET
As at As at
30 June 30 June 31 December
2008 2007 2007
(Unaudited) (Unaudited) (Audited)
Notes R`000 R`000 R`000
Assets
Non-current assets 613 919 63 463 576 979
Property, plant and 2 221 376 63 463 186 990
equipment
Intangible assets 2 391 593 - 388 868
Interest free loans 950 - 1 121
receivable
Current assets 419 365 304 773 359 981
Inventory 183 601 74 560 177 884
Trade and other 230 934 118 613 136 020
receivables
Interest free loans 326 - 326
receivable
Taxation receivable 1 696 - 350
Cash and cash 2 808 111 600 45 401
equivalents
Total assets 1 033 284 368 236 936 960
Equity
Capital and reserves
Share capital 3 1 274 897 1 274
Share premium 3 440 371 162 711 440 371
Retained earnings 237 210 123 223 197 591
Total equity 678 855 286 831 639 236
Liabilities
Non-current liabilities 168 902 16 269 174 140
Interest bearing 4 139 057 6 022 144 303
borrowings
Deferred income tax 29 845 10 247 29 837
liabilities
Current liabilities 185 527 65 136 123 584
Interest bearing 4 40 161 5 504 33 225
borrowings
Trade and other payables 94 273 50 524 76 856
Shareholders for 4 - 4
dividends
Taxation payable 10 963 9 108 13 430
Bank overdraft 40 126 - 69
Total equity and 1 033 284 368 236 936 960
liabilities
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Six months ended Year ended
30 June 30 June 31 December
2008 2007 2007
(Unaudited) (Unaudited) (Audited)
R`000 R`000 R`000
Cash flows from operating (40 592) 43 386 59 739
activities
Cash flows from investing (44 422) (2 402) (298 900)
activities
Cash flows from financing 2 364 129 930 343 807
activities
Net (decrease)/increase in cash (82 650) 170 914 104 646
and cash equivalents
Cash and cash equivalents at 45 332 (59 314) (59 314)
the beginning of period
Cash and cash equivalents at (37 318) 111 600 45 332
the end of period
SELECTED NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL RESULTS
1. Basis of preparation
The Group has prepared condensed consolidated interim financial statements for
the six months ended 30 June 2008 in accordance with IAS 34 "Interim Financial
Reporting" and in compliance with the listing requirements of the JSE Limited
and the South African Companies Act. The condensed consolidated interim
financial statements for the period should be read in conjunction with the 2007
financial statements. The accounting policies adopted are consistent with those
applied in the financial statements for the year ended 31 December 2007.
2. Capital expenditure
During the six months, the Group acquired new plant and machinery and is in the
process of building new showrooms and warehouses in Cape Town and Johannesburg.
The Group also invested in a new ERP computer system to increase Radiant`s
operating efficiency. The details of changes in tangible and intangible assets
are as follows:
Tangible Intangible
assets assets
R`000 R`000
Six months ended 30 June 2008
Opening net carrying amount 186 990 388 868
Additions 40 041 4 380
Depreciation, amortisation and other movements (5 655) (1 655)
Closing net carrying amount 221 376 391 593
Six months ended 30 June 2007
Opening net carrying amount 64 307 -
Additions 2 403 -
Depreciation, amortisation and other movements (3 247) -
Closing net carrying amount 63 463 -
3. Share capital
Number Ordinary Share
of shares shares premium Total
R`000 R`000 R`000
Opening balance 1 January 156 378 794 1 274 440 371 441 645
2008
Movement - - - -
Closing balance 30 June 156 378 794 1 274 440 371 441 645
2008
Opening balance 1 January 100 000 000 710 34 236 34 946
2007
Proceeds from shares 18 700 000 187 130 713 130 900
issued
Share issue expenses - - (2 238) (2 238)
written off
Balance at 30 June 2007 118 700 000 897 162 711 163 608
Proceeds from shares 37 678 794 377 279 873 280 250
issued
Share issue expense - - (2 213) (2 213)
Closing balance 31 156 378 794 1 274 440 371 441 645
December 2007
4. Interest bearing borrowings
Six months ended Year ended
30 June 30 June 31 December
(Unaudited) (Unaudited) (Audited)
Secured loans 2008 2007 2007
R`000 R`000 R`000
Non-current 139 057 6 022 144 303
Current 40 161 5 504 33 225
179 218 11 526 177 528
The movement in borrowings is
analysed as follows:
Opening balance 177 528 10 257 10 257
Acquisition of subsidiary - - 48 231
Additional loans raised 20 786 2 839 134 839
Finance expense 11 183 859 7 834
Repayments (30 279) (2 429) (23 633)
Closing balance 179 218 11 526 177 528
5. Income tax expense
Income tax expense is recognised 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 2008 is 31,1% (2007: 30,8%)
inclusive of STC.
6. Reconciliation of headline earnings
Six months ended Year ended
30 June 30 June 31 December
2008 2007 2007
(Unaudited) (Unaudited) (Audited)
R`000 R`000 R`000
Reconciliation of headline
earnings
Profit for the period 70 895 42 041 125 792
Amortisation of intangible 1 366 - 917
assets
Loss on disposal of property, - - (429)
plant and equipment
Headline earnings 72 261 42 041 126 280
Headline earnings per share 46,2 37,4 97,4
(cents)
7. Weighted average number of shares
Six months ended Year ended
30 June 30 June 31 December
2008 2007 2007
(Unaudited) (Unaudited) (Audited)
Number of shares in issue 156 378 794 118 700 000 156 378 794
Number of shares in issue at 156 378 794 100 000 000 100 000 000
beginning of the period
Weighted number of shares - - 14 129 548
issued during the period to
August 2007
Weighted number of shares - 12 466 667 15 583 333
issued during the period to
February 2007
Weighted average number of 156 378 794 112 466 667 129 712 881
shares in issue at end of
the period
Weighted average number of 156 378 794 112 466 667 129 712 881
shares in issue for diluted
earnings per share
8. Net asset value
As at As at
30 June 30 June 31 December
2008 2007 2007
(Unaudited) (Unaudited) (Audited)
Net asset value per share 434,1 241,6 408,8
(cents)
9. Interim dividend declaration
Notice is hereby given that the Board of Directors has approved for the six
months period ended 30 June 2008 an interim dividend of 7 cents per ordinary
share amounting to R10,9 million to shareholders recorded in the register at
close of business on 5 September 2008.
The interim results do not reflect this dividend payable and the related STC
charge, which will be recognised in shareholders` equity as an appropriation of
retained earnings when it is declared. The salient dates are as follows:
Last date for trading to qualify and Friday, 29 August 2008
participate in the interim dividend
Trading ex dividend commences Monday, 1 September 2008
Record date Friday, 5 September 2008
Dividend payment date Monday, 8 September 2008
Share certificates may not be dematerialised or rematerialised between Monday, 1
September 2008 and Friday, 5 September 2008, both days inclusive.
10. Segment reporting
The Group`s primary reporting format is business segments, and secondary format
is geographical segments. The details of the business segments are reported as
follows:
Operating Total
Six months ended Revenue profit assets
30 June 2008 R`000 R`000 R`000
Electrical wire manufacturing 393 161 76 233 305 078
Light fittings & accessories 181 715 41 672 573 905
Property investments - (142) 151 217
Other - (2 301) 1 388
574 876 115 462 1 031 588
30 June 2007
Electric wire manufacturing 320 303 59 845 368 236
Deprecia-
Total Capital tion and
Six months ended liabilities expenditure amortisation
30 June 2008 R`000 R`000 R`000
Electrical wire manufacturing 102 046 10 095 3 822
Light fittings & accessories 100 932 7 240 2 993
Property investments 108 290 27 086 495
Other 2 353 - -
313 621 44 421 7 310
30 June 2007
Electric wire manufacturing 62 050 2 403 3 247
11. Subsequent events
The directors are not aware of any significant events arising since the end of
the financial period not dealt with in the financial results, which would
materially affect the operations of the Group or the operating segments.
COMMENTARY
Introduction
South Ocean Holdings Limited (SOH) is an investment holding company, operating
through three subsidiaries, namely, South Ocean Electric Wire Company (SOEW),
Radiant Group (Radiant) and Anchor Park. SOH is pleased to report to
shareholders its interim financial results for the six months ended 30 June
2008.
The June 2008 results are not comparable to June 2007. The fundamental
difference between the two periods is due to the acquisition of Radiant in
August 2007.
Financial overview
Earnings
The Group continued to benefit from the increased demand for its products, the
rise in the copper price and improved operational efficiencies implemented
throughout the previous year and the period under review. Revenue for the six
month period to June 2008 increased by 79,5% to R574,9 million (2007: R320,3
million). Profit after tax for the same period increased by 68,6% to R70,9
million (2007: R42,0 million) and the basic earnings per share rose to 45,3
cents (2007: 37,4 cents) per share, reflecting a 21,1% increase. Headline
earnings increased by 71,9% to R72,3 million (2007: R42,0 million) and headline
earnings per share 23,5% to 46,2 cents.
The profit and revenue increases were as a result of production and efficiencies
at the cable manufacturing subsidiary, an 18,8% increase in the moving average
copper price over the same period compared to the prior year, and the inclusion
of Radiant. Management has continued its efforts to re-examine cost structures,
and implemented practical measures to extract ongoing efficiencies that are
ongoing across the Group.
Operating profit increased by 92,9% to R115,5 million (2007: R59,8 million).
This increase resulted from an improvement in operating margins to 20,1% (2007:
18,6%) due to efficiencies and the incorporation of the Radiant business into
the Group. Attributable earnings per share is 45,3 cents which is a 21,1 %
increase compared to the same period last year.
The higher financing costs were due to three factors. Firstly the financing
resulting from the restructuring of the properties within the Group, secondly,
the capital expansion the Group has embarked upon and finally the significant
investment in working capital as a result of increasing activity levels within
the business.
Cash flow
Cash flow from operations reflects a decrease from a cash inflow of R59,8
million for the period to December 2007 to a cash outflow of R40,6 million for
the period under review. An amount of R83,6 million (2007: R0,6 million) was
invested in working capital. The significant investment in working capital was
mainly because of the increased turnover following an increase in operating
capacity, activity levels and the acquisition of Radiant.
The Group paid a dividend of 20 cents per share amounting to R31,3 million
(2007: R10,6 million) declared in March 2008 out of December 2007 profits. Tax
of R35,8 million for the Group was paid during the period. The Group invested a
further R44,4 million in capital expansion of which R40 million is in respect of
property, plant and equipment and R4,4 million related to the new ERP computer
system at Radiant. The acquisitions were made to increase capacity at the copper
wire production plant, as well as building a new showroom and warehouses for
Radiant in Cape Town and extending the showroom in Johannesburg.
The Group raised additional loans of R20,8 million (2007: R2,8 million) to
finance plant and machinery of R5,8 million (2007: R1,9 million) and buildings
of R15 million. The Group repaid loans of R30,3 million (2007: R2,4 million).
The trade and other receivables balance increased to R230,9 million as a result
of the increased revenue driven by an increase in copper price and increased
volume sales. The significant increase in receivables as at 30 June 2008 in
relation to 31 December 2007 is due to December month having the lowest sales in
our calendar. The Group achieved record sales in June 2008. The debtors
collection period for June 2008 is in line with the corresponding period in
2007. Inventory increased from R74,6 million to R183,6 million as at 30 June
2008, mainly due to the incorporation of Radiant`s inventory and an increase in
SOEW inventory due to an increase in copper inventory levels and the copper
price.
The above payments resulted in the net cash outflow of R82,7 million and a
negative cash balance of R37,3 million at the end of the period under review
compared to a positive cash balance of R45,3 million at the end of December last
year. The negative cash balance at the end of June was as a result of high
provisional tax payments, increase in receivables and dividends paid during the
period.
Segment results
Electrical wire manufacturing
Revenue increased from R320,3 million in the same period last year to R393,2
million which represents a growth of 22,8%. This is because of a 18,8% increase
in the moving average copper price from R47 737 per ton in 2007 to R56 718 per
ton. The expected production volume increase of 15% for the first six months did
not fully materialise because of labour disruptions due to salary disputes.
Operating profits increased by 27,4% from R59,8 million to R76,2 million
compared to the same period last year. Costs remained relatively constant
despite inflationary pressures. The contribution of R55,6 million to the Group`s
attributable profit represents 78% of the total Group profit. Operating cash
flow generated from operations before working capital of R76,7 million was 22,3%
better than last year`s R62,5 million. An amount of R58,4 million (2007: -R0,6
million) was invested in working capital as a result of higher turnover in the
last two months. An amount of R10,1 million (R2,4 million) was spent on capital
expenditure and R15,3 million (2007: R10 million) related to the payment of
taxes.
Light fittings and accessories
Given that SOH acquired Radiant in the second half of 2007, Radiant`s
contribution was not reported in the 30 June 2007 interim results. Despite
deteriorating market conditions, revenue increased by R14,2 million or 8,5% from
R167,5 million to R181,7 million in same period last year.
Radiant invested R7,1 million in capital expenditure a significant portion of
which related to the new ERP software which was implemented to improve
management, customer service, efficiencies and controls within the business. A
significant portion of capital expenditure that was incurred in the property
investment company, relates mostly to the buildings occupied by Radiant as
warehouse and showrooms located both in Cape Town and Johannesburg.
The operating profit increased by 3,0% from R40,5 million to R41,7 million
during the reporting period.
Cash generated from operations amounted to R38,4 million. An amount of R19,4
million has been invested in working capital. Financing costs of R4,0 million
and tax of R16,2 million was paid during this period.
Property investment
The property investment company houses the properties occupied by the operating
companies. Given that it was established during the acquisition of Radiant there
were no comparative figures for the first six months period to June 2007.
During the period under review, R27,1 million was invested in the warehouses and
showrooms in Johannesburg and Cape Town.
Seasonality
The Group earnings are affected by seasonality. Earnings for the second half of
the year are historically higher than the first six months.
Prospects
Our commitment to delivering value to our shareholders continues to drive our
strategy. The Group will continue its unwavering focus on operational
efficiency. We will also continue to grow organically by expanding our existing
operations.
The earnings of the Group for the next six months will be impacted by the copper
price, the performance of the construction and building industry, infrastructure
development, the impact of the increase in our operational capacity as well as
interest and foreign exchange rates.
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 and
growth these markets present.
As trading conditions are expected to remain difficult the board anticipates
that the same growth rate will not be achieved in the next six months.
On behalf of the board
JB Magwaza EHT Pan
Chairman Chief Executive Officer
13 August 2008
CORPORATE INFORMATION
Registered office:
12 Botha Street, Alrode 1451
(PO Box 123738, Alrode 1451)
Telephone: +27 11 864 1606,
Telefax: +27 11 864 2925
Website: www.southoceanholdings.com
Company secretary:
WT Green
21 West Street, Houghton, 2198. (PO Box 123738, Alrode, 1451)
Sponsor:
Investec Bank Limited (Registration no: 1969/004763/06), Second floor, 100
Grayston Drive, Sandown, Sandton 2196
Share Transfer Secretaries:
Computershare Investor Services (Pty) Limited
70 Marshall Street, Ground floor, Johannesburg 2001
PO Box 61051, Marshalltown 2107, South Africa,
Telephone: +27 11 370 5000,
Telefax: +27 11 688 5200,
Website: www.computershare.com
Directors: JB Magwaza# (Chairman), EHT Pan* (Chief Executive Officer), JP
Bekker* (Chief Financial Officer), EG Dube#, PJM Ferreira*,
D Ko+, CH Pan+, KH Pon#, H Schwartz*, G Stein*, CY Wu+, E Li+ (Alternate).
* Executive # Independent non-executive + Non-executive
Taiwanese Brazilian
Date: 14/08/2008 07:06:03 Produced by the JSE SENS Department.
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