| Mon 8 Mar 2010, 7:05 | | SOH - South Ocean Holdings - Audited Abridged Results and Dividend Announcement |
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SOH
SOH
SOH - South Ocean Holdings - Audited Abridged Results and Dividend Announcement
for the Year Ended 31 December 2009
SOUTH OCEAN HOLDINGS
(Registration number 2007/002381/06)
Incorporated in the Republic of South Africa
("South Ocean", "the Group")
Share code: SOH & ISIN: ZAE000092748
Audited abridged results and dividend announcement for the year ended 31
December 2009
HIGHLIGHTS
- Net cash position improves from R6,2 million overdraft to R58,8 million
- Debt equity ratio improves from 26,8% to 20,1%
- Net asset value per share improves by 4,8% to 441,1 cents
- Final dividend of 3 cents per share declared
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at
31 December 31 December
2009 2008
(Audited) (Audited)
Notes R`000 R`000
Assets
Non-current assets 586 929 598 035
Property, plant and equipment 3 240 499 248 187
Intangible assets 3 346 430 349 848
Current assets 337 250 389 341
Inventories 146 664 189 806
Trade and other receivables 124 003 175 201
Taxation receivable 1 948 179
Cash and cash equivalents 64 635 24 155
Total assets 924 179 987 376
Equity and liabilities
Capital and reserves attributable to
equity holders of the company
Share capital 4 1 274 1 274
Share premium 4 440 371 440 371
Retained earnings 248 127 216 470
Total equity 689 772 658 115
Liabilities
Non-current liabilities 129 336 168 237
Interest bearing borrowings 5 102 518 138 740
Deferred taxation 26 818 29 497
Current liabilities 105 071 161 024
Trade and other payables 58 995 86 088
Interest bearing borrowings 5 35 837 37 498
Taxation payable 4 380 7 049
Shareholders for dividends 4 4
Bank overdraft 5 855 30 385
Total liabilities 234 407 329 261
Total equity and liabilities 924 179 987 376
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended
31 December
2009
(Audited)
Note R`000
Revenue 957 972
Cost of sales (745 756)
Gross profit 212 216
Other operating income 12 098
Administration expenses (54 953)
Distribution expenses (21 410)
Operating expenses (87 792)
Operating profit 60 159
Finance income 2 843
Finance cost (18 531)
Profit before taxation 44 471
Taxation 6 (12 814)
Profit for the year 31 657
Other comprehensive income -
Total comprehensive income attributable to
equity holders of the company 31 657
Earnings per share - basic and diluted (cents) 20,2
Dividends per share (cents) 3,0
For the year ended
31 December
2008
Change (Audited)
% R`000
Revenue (15,7) 1 136 617
Cost of sales (826 061)
Gross profit (31,7) 310 556
Other operating income 1 609
Administration expenses (47 324)
Distribution expenses (17 976)
Operating expenses (114 128)
Operating profit (54,7) 132 737
Finance income 2 762
Finance cost (27 630)
Profit before taxation (58,8) 107 869
Taxation (46 768)
Profit for the year 61 101
Other comprehensive income -
Total comprehensive income attributable to
equity holders of the company (48,2) 61 101
Earnings per share - basic and diluted (cents) (48,3) 39,1
Dividends per share (cents) (57,1) 7,0
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended
31 December 31 December
2009 2008
(Audited) (Audited)
R`000 R`000
Share capital
Opening and closing balance 1 274 1 274
Share premium
Opening and closing balance 440 371 440 371
Retained earnings
Opening balance 216 470 197 591
Total comprehensive income for the year 31 657 61 101
Dividends paid - (42 222)
248 127 216 470
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
For the year ended
31 December 31 December
2009 2008
(Audited) (Audited)
R`000 R`000
Cash generated from operating activities 115 004 69 361
Cash utilised in investing activities (13 130) (77 983)
Cash utilised in financing activities (36 864) (42 940)
Net increase/(decrease) in cash and cash
equivalents 65 010 (51 562)
Cash and cash equivalents at the beginning of year (6 230) 45 332
Cash and cash equivalents at the end of year 58 780 (6 230)
SELECTED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL INFORMATION
1. General information
South Ocean Holdings Limited (`the Company`) and its subsidiaries (together
`the Group`) manufacture and distribute electrical wires, import and distribute
lighting and electrical accessories and rent its properties. The Company is a
public limited company which is listed on the Johannesburg Stock Exchange and
is incorporated and domiciled in South Africa.
The audited condensed consolidated financial information was approved for issue
by the directors on 5 March 2010.
2. Basis of preparation
The condensed consolidated financial information of South Ocean Holdings Limited
has been prepared in accordance with International Financial Reporting Standards
(IFRS), IAS 34 `Interim financial reporting`, IFRIC Interpretations and the
Companies Act, applicable to companies reporting under IFRS and the JSE Listings
Requirements and should be read with the audited annual financial statements for
the year ended 31 December 2009. The condensed consolidated financial statements
have been prepared under the historical cost convention, as modified by the
revaluation of financial assets and financial liabilities (including derivative
instruments) at fair value through profit or loss.
The accounting policies adopted are consistent with those applied in the
financial statements for the year ended 31 December 2008, except for the
adoption of IFRS 8 `Operating Segments`, IAS 1 (revised) - `Presentation of
Financial Statements` and amendments to IFRS 7 - `Financial Instruments -
Disclosure`.
3. Capital expenditure
During the year, the Group invested R27,9 million in capital expenditure,
related to the completion of the warehouse and showrooms, and investment in
plant and machinery. The details of changes in tangible and intangible assets
are as follows:
Tangible assets Intangible assets
(Audited) (Audited)
R`000 R`000
Year ended 31 December 2009
Opening net carrying amount 248 187 349 848
Additions 27 045 845
Disposals (20 839) -
Depreciation/amortisation (13 894) (4 263)
Closing net carrying amount 240 499 346 430
Year ended 31 December 2008
Opening net carrying amount 186 990 388 868
Additions 73 171 3 688
Disposals (52) -
Impairment - (39 000)
Depreciation/amortisation (11 922) (3 708)
Closing net carrying amount 248 187 349 848
4. Share capital and share premium
Number of shares Ordinary shares
R`000
At 31 December 2009
Opening and closing balance 156 378 794 1 274
At 31 December 2008
Opening and closing balance 156 378 794 1 274
Share premium Total
R`000 R`000
At 31 December 2009
Opening and closing balance 440 371 441 645
At 31 December 2008
Opening and closing balance 440 371 441 645
5. Interest bearing borrowings
31 December 31 December
2009 2008
(Audited) (Audited)
Secured loans R`000 R`000
Non-current 102 518 138 740
Current 35 837 37 498
138 355 176 238
The movement in borrowings is analysed as
follows:
Opening balance 176 238 177 528
Additional loans raised 22 565 38 786
Finance expense 16 788 23 187
Repayments (77 236) (63 263)
Closing balance 138 355 176 238
6. Income tax expense
The effective tax rate for 2009 is 28,8% (2008: 43,4%). The prior year income
includes an amount of R39,0 million relating to the impairment of goodwill,
which is not deductible for tax purposes.
7. Reconciliation of headline earnings
31 December 31 December
2009 2008
(Audited) (Audited)
R`000 R`000
Earnings attributable to equity holders
of the company 31 657 61 101
Impairment of intangible assets - 39 000
Impairment of available-for-sale financial assets - 1 582
Impairment of interest free loans receivable - 1 070
Loss/(profit) on disposal of property, plant
and equipment 6 079 (29)
Headline earnings 37 736 102 724
Headline earnings per share (cents) 24,1 65,7
8. Weighted average number of shares
31 December 31 December
2009 2008
(Audited) (Audited)
R`000 R`000
Number of shares in issue 156 378 794 156 378 794
Weighted average number of shares in issue at
beginning and end of the year 156 378 794 156 378 794
9. Net asset value
31 December 31 December
2009 2008
(Audited) (Audited)
R`000 R`000
Net asset value per share (cents) 441,1 420,8
10. Final dividend declaration
Notice is hereby given that the Board of Directors has declared a final
dividend of 3 cents per ordinary share amounting to R4 691 364 for the year
ended 31 December 2009 to shareholders recorded in the register at close of
business on 9 April 2010.
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 Wednesday 31 March 2010
Trading ex dividend commences Thursday 1 April 2010
Record date Friday 9 April 2010
Dividend payment date Monday 12 April 2010
Share certificates may not be dematerialised or rematerialised between Thursday
1 April 2010 and Friday 9 April 2010, both days inclusive.
11. Audit opinion
These results have been extracted from the Group`s audited annual financial
statements. The unqualified report of PricewaterhouseCoopers Inc. on the
financial statements is available for inspection at the registered office of
the company.
12. Segment reporting
The chief operating decision maker reviews the Group`s internal reporting in
order to assess performance and has determined the operating segments based on
these reports.
The business performance of the operating segments: electrical wires, lighting
and electrical accessories, and property investments, is assessed from the
market and product performance perspective.
The assessment of the performance of the operating segments is based on
operating profit before interest, tax, depreciation and amortisation (EBITDA)
and investment in working capital. This measurement basis excludes the effect
of non-recurring expenditure from the operating segments, such as restructuring
costs, profit on disposal of property, plant and equipment, impairments, etc.
Interest income and expenditure are included in the results of the operating
segments.
Total assets and liabilities exclude deferred and income tax liabilities,
inter-group balances and available-for-sale financial assets. The details of
the business segments are as follows:
Revenue Adjusted EBITDA
Year ended R`000 R`000
31 December 2009
Electrical wires 591 939 35 975
Lighting and electrical accessories 366 033 46 234
Property investments 17 213 9 015
975 185 91 224
31 December 2008
Electrical wires 747 994 99 634
Lighting and electrical accessories 388 623 77 860
Property investments 17 183 16 545
1 153 800 194 039
Segment assets Segment liabilities
Year ended R`000 R`000
31 December 2009
Electrical wires 227 059 34 976
Lighting and electrical accessories 530 874 78 261
Property investments 162 816 86 153
920 749 199 390
31 December 2008
Electrical wires 241 342 41 158
Lighting and electrical accessories 569 296 150 718
Property investments 176 500 98 684
987 138 290 560
Reconciliation of total segment report to the statement of financial position
and statement of comprehensive income is provided as follows:
31 December 31 December
2009 2008
(Audited) (Audited)
R`000 R`000
Revenue
Reportable segment revenue 975 185 1 153 800
Inter-group revenue (property rentals) (16 000) (16 000)
Property revenue reported in other operating
income (1 213) (1 183)
Revenue per consolidated statement of
comprehensive income 957 972 1 136 617
Profit before tax
Adjusted EBITDA 91 224 194 039
Corporate overheads (12 908) (4 020)
Depreciation (13 894) (11 922)
Amortisation of intangible assets (4 263) (3 708)
Impairment of intangible assets - (39 000)
Impairment of available-for-sale financial assets - (1 582)
Impairment of interest free loans - (1 070)
Operating profit 60 159 132 737
Finance income 2 843 2 762
Finance cost (18 531) (27 630)
Profit before tax 44 471 107 869
Assets
Reportable segment assets 920 749 987 138
Corporate assets 1 482 59
Taxation receivable 1 948 179
Total assets per statement of financial position 924 179 987 376
Liabilities
Reportable segment liabilities 199 390 290 560
Corporate liabilities 3 819 2 155
Deferred taxation 26 818 29 497
Taxation payable 4 380 7 049
Total liabilities per statement of financial
position 234 407 329 261
13. Director changes
Mr D Ko resigned from the board on 6 March 2009. Messers PJM Ferreira, G Stein
and H Schwartz did not avail themselves for re-election as directors of South
Ocean, at the annual general meeting held on 22 June 2009, in line with the
executive director reorganisation announced in the 2008 annual report. Mr JB
Magwaza, the Group chairman resigned from the board effective 31 July 2009 for
personal reasons and he was replaced by Mr EG Dube as chairman. Ms JL Law was
appointed as a director on 6 March 2009, redeployed as an alternate director on
7 August 2009 and resigned from the board on 28 February 2010.
14. Subsequent events
The directors are not aware of any significant events arising since the end of
the financial year, which would materially affect the operations of the Group
or its operating segments.
COMMENTARY
Introduction
South Ocean Holdings Limited ("SOH") is pleased to announce its results for its
third year as a listed company.
The Group consists of two trading companies South Ocean Electric Wire Company
(Proprietary) Limited ("SOEW"), manufacturer of low voltage electrical wire,
and Radiant Group (Proprietary) Limited ("Radiant"), importer and distributor
of light fittings, lamps and electrical accessories, and a property holding
company, Anchor Park Investments 48 (Proprietary) Limited ("Anchor Park").
The Group experienced a challenging trading year, with a decline in revenues
and margins, mainly due to sales price deflation and increased competition.
Trading improved in the second half of the year at SOEW with the copper price
recovery, despite the impact of the global financial crisis. Radiant was less
adversely affected by the economic climate. Some relief was felt as interest
rates and inflation indices improved, but consumer disposable income remains
tight as many struggle to service debts.
Financial overview
Earnings
The Group reports R31,7 million profit after tax for the 12 months ended 31
December 2009, which is 48,2% less than the R61,1 million reported for the same
period last year. The major contributor to the reduced profit for the Group is
the margin pressure experienced by both operating companies as manifested in
the reduction of R98,3 million in gross profit. The gross profit is reported at
R212,2 million (2008: R310,6 million) which is a 31,7% reduction compared to
the prior year.
Other operating income of R12,1 million (2008: R1,6 million) reported is mainly
as a result of forex gains during the year due to the strengthening of the
Rand.
The apparent saving of R15,2 million in the combined expenses for the Group of
R164,2 million (2008: R179,4 million) does not reflect a true picture as the
prior year operating expenses include impairments of goodwill (R39,0 million)
and available-for-sale financial assets (R1,6 million). The comparable combined
operating expenses amounted to R138,8 million for the prior year, which
translates to an 18,3% increase in current year expenses. Increased
depreciation, staff costs and a loss on disposal of a fixed property
contributed to the higher costs. Further details are discussed under the
operating divisions.
Finance costs at R18,5 million (2008: R27,6 million) reduced by 33,0% due to
the reduction in interest rates and reduced levels of debt.The effective tax
rate for 2009 is 28,8% compared to the prior year of 43,4%. The prior year
rate was affected by the impairment charges, which were not tax deductible.
Cash flow and cash position
Despite the adverse trading results for the year, the Group`s strategy of
retaining cash for growth helped improve its net cash position from an
overdraft of R6,2 million at December 2008 to a positive cash balance of R58,8
million at 31 December 2009. This was as a result of a focused and effective
working capital management strategy implemented by the Group. The Group
generated R115,0 million from operations which was complemented by a further
cash inflow of R14,8 million from the disposal of assets, including the Cape
Town property. The Group utilised an additional R22,6 million of its existing
facilities to finance the remainder of the capital expansions. The Group
reduced its debt positions by a further R37,9 million (2008: R1,3 million).
Operational overview
Electrical wires (SOEW)
SOEW reported a revenue of R591,9 million, which is a 20,9% reduction compared
to the prior year. It is however pleasing to note that the revenue improved in
the second half of the year due to an improvement in the Rand copper price.
Overall, volumes improved in 2009 compared to 2008, while the average Rand
copper price for 2009 was lower than that experienced in 2008. Aggressive
pricing in the market, as well as de-stocking by market participants during the
year, had a significant influence on the results for the year.
Market conditions remained difficult with margins aggressively depressed,
resulting in the gross profit for the year declining by 61,1% to R47,0 million
(2008: R120,9 million). Production output was limited as a result of shortages
of local copper supplies in the second half of the year.
The capital investment made in the prior years assisted in increasing
roduction, despite the difficult and challenging market conditions.
The focus on cost containment was rewarded as overall costs reduced when
compared to the prior year. In addition there was focus on the management of
working capital with trade receivables collections improving together with an
improvement in the quality of the debtors` book. The result has been a
significant improvement in the net cash position of the business to R24,8
million from a net overdraft of R8,1 million in the prior year.
Lighting and electrical accessories (Radiant)
Radiant imports and distributes light fittings, lamps and electrical
accessories and continues to be one of the leaders in this market. Light
fittings remain the largest contributor to sales, however difficult trading
conditions in a depressed economy resulted in a decline in results.
Revenue is down marginally by 5,8% to R366,0 million (2008: R388,6 million).
Gross profit of R160,6 million is recorded representing a 13,2% decline from
the R185,0 million achieved in the prior year.
The 18,2% increase in operating expenses is mainly attributable to general
inflationary increases as well as the employment of key specialist staff and
increased depreciation on capital expenditure, both in alignment with the
strategic restructuring completed in early 2009.
Net income before taxation decreased by 48,5% to R32,5 million (2008: R63,0
million). Finance charges decreased by 11,8% to R7,5 million (2008: R8,5
million) as a result of the reduction in interest rates and settlement of the
preference shares of R18,1 million.
Cash generated from operations amounted to R47,4 million (2008: R37,0 million).
This is mainly attributable to the improvement in working capital levels.
Significant reductions in inventory holdings and efficient debtor collections
resulted in cash levels increasing to R31,5 million (2008: R1,7 million).
Property investments (Anchor Park)
Anchor Park owns the properties that are leased by the operating subsidiaries.
During the year, the Milnerton (Cape Town) property, was disposed of at a loss
of R5,8 million. The completion of construction projects started in the prior
year was done at a cost of R12 million.
Prospects
The Group has adapted to the changed economic conditions and anticipates
competitive pricing and cautious demand from customers in the year ahead. There
are signs of the economy improving, but the conditions experienced are still
very difficult. Factors that continue to have an impact on the business include
the exchange rates, copper supply and copper price.
The operating segments will continue to build on the solid infrastructure and
market share they have developed over the past few years, whilst maintaining
the focus on superior quality products and customer service excellence.
The Group plans to utilise the cash to increase buffer stock due to supply
problems experienced and for capital expansion to improve operational capacity
in the operating segments.
The Group remains confident that it is well positioned to take advantage of the
opportunities when market stability returns as the global recession recedes.
On behalf of the board
EG Dube EHT Pan
Chairman Chief executive officer
5 March 2010
CORPORATE INFORMATION
Directors: EG Dube# (Chairman), EHT Pan*@ (Chief Executive Officer),
JP Bekker* (Chief Financial Officer), CY Wu?, HL Li?, KH Pon #
CH Pan? (Alternate) Company Secretary: WT Green * Executive # Independent
Non-executive + Non-executive ? Taiwanese @ Brazilian
Registered Office: 12 Botha Street, Alrode 1451 (PO Box 123738, Alrode, 1451)
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 Secretary: 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
Auditors: PricewaterhouseCoopers Inc. 2 Eglin Road, Sunninghill, 2157
Telephone: +27(11) 797 4000 Telefax: +27(11) 797 5800
Investor Relations: Craig Whittle Investor Relations www.cwir.co.za
Postnet suite #52, Private Bag X16, Constantia
Telephone: +27(76) 456 3270 Email: cdwhittle@mweb.co.za
8 March 2010
Date: 08/03/2010 07:05:04 Produced by the JSE SENS Department.
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