| Tue 1 Mar 2011, 7:30 | | SOH - South Ocean - Audited abridged results announcement for the year ended 31 |
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SOH
SOH
SOH - South Ocean - Audited abridged results announcement for the year ended 31
December 2010
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 ANNOUNCEMENT
for the year ended 31 December 2010
HIGHLIGHTS
Turnover increased by 18,8% to R1 138,1 million
Gross profit increased by 12,1% to R237,8 million
Earnings per share increased by 66,3% to 33,6 cents
Headline earnings increased by 38,6% to 33,4 cents
Net asset value per share increased by 6,8% to 471,2 cents
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at
31 December 31 December
2010 2009
(Audited) (Audited)
Notes R`000 R`000
Assets
Non-current assets 603 633 586 929
Property, plant and equipment 3 259 642 240 499
Intangible assets 3 343 991 346 430
Current assets 366 008 337 250
Inventories 188 579 146 664
Trade and other receivables 131 476 124 003
Taxation receivable 1 353 1 948
Cash and cash equivalents 44 600 64 635
Total assets 969 641 924 179
Equity and liabilities
Capital and reserves attributable to
equity holders of the company
Share capital and premium 4 441 645 441 645
Reserves (706) -
Retained earnings 295 912 248 127
Total equity 736 851 689 772
Liabilities
Non-current liabilities 102 449 129 336
Interest bearing borrowings 5 71 513 102 518
Share based payments 2 370 -
Deferred taxation 28 566 26 818
Current liabilities 130 341 105 071
Trade and other payables 77 446 58 995
Share based payments 5 010 -
Derivative financial instrument 680 -
Interest bearing borrowings 5 35 526 35 837
Taxation payable 1 848 4 380
Dividends payable 4 4
Bank overdraft 9 827 5 855
Total liabilities 232 790 234 407
Total equity and liabilities 969 641 924 179
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended
31 December 31 December
2010 2009
(Audited) Change (Audited)
Note R`000 % R`000
Revenue 1 138 130 18,8 957 972
Cost of sales (900 285) (745 756)
Gross profit 237 845 12,1 212 216
Other operating income 7 344 12 098
Administration (64 370) (54 953)
expenses
Distribution expenses (27 927) (21 410)
Operating expenses (64 395) (87 792)
Operating profit 88 497 47,1 60 159
Finance income 1 701 2 843
Finance cost (13 455) (18 531)
Profit before taxation 76 743 72,6 44 471
Taxation 6 (24 267) (12 814)
Profit for the year 52 476 65,8 31 657
Other comprehensive
income
Exchange differences (706) -
on translation of
foreign operation
Total comprehensive 51 770 63,5 31 657
income attributable to
equity holders of the
company
Earnings per share - 33,6 66,3 20,2
basic and diluted
(cents)
Dividends per share - - 3,0
(cents)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended
31 December 31 December
2010 2009
(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
Foreign currency translation reserve
Opening balance - -
Exchange differences on translation of (706) -
foreign operation
Closing balance (706) -
Retained earnings
Opening balance 248 127 216 470
Total comprehensive income for the year 52 476 31 657
Dividends paid (4 691) -
295 912 248 127
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
For the year ended
31 December 31 December
2010 2009
(Audited) (Audited)
R`000 R`000
Cash generated from operating 47 553 115 004
activities
Cash utilised in investing (34 847) (13 130)
activities
Cash utilised in financing (36 007) (36 864)
activities
Net (decrease)/increase in cash and (23 301) 65 010
cash equivalents
Cash and cash equivalents at the 58 780 (6 230)
beginning of year
Effects of exchange rate movement on (706) -
cash balances
Cash and cash equivalents at the end 34 773 58 780
of year
SELECTED NOTES TO 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 28 February 2011.
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 2010. 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 2009.
3. Capital expenditure
During the year, the group invested R35,3 million in capital expenditure,
related to the expansion programme at SOEW and further investment in plant and
machinery. The details of changes in tangible and intangible assets are as
follows:
Tangible Intangible
assets assets
(Audited) (Audited)
R`000 R`000
Year ended 31 December 2010
Opening net carrying amount 240 499 346 430
Additions 33 210 2 086
Disposals (204) -
Depreciation/amortisation (13 863) (4 525)
Closing net carrying amount 259 642 343 991
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
4. Share capital and share premium
Number of Ordinary Share
shares shares premium Total
R`000 R`000 R`000
At 31 December 2010
Opening and closing balance 156 378 794 1 274 440 371 441 645
At 31 December 2009
Opening and closing balance 156 378 794 1 274 440 371 441 645
5. Interest bearing borrowings
31 December 31 December
2010 2009
(Audited) (Audited)
Secured loans R`000 R`000
Non-current 71 513 102 518
Current 35 526 35 837
107 039 138 355
The movement in borrowings is analysed as
follows:
Opening balance 138 355 176 238
Additional loans raised - 22 565
Finance costs 9 640 16 788
Repayments (40 956) (77 236)
Closing balance 107 039 138 355
6. Taxation
The effective tax rate for 2010 is 31,6% (2009: 28,8%). The current year`s
effective tax rate is higher due to non-provision of a deferred tax asset
relating to a subsidiary`s tax losses.
7. Reconciliation of headline earnings
31 December 31 December
2010 2009
(Audited) (Audited)
R`000 R`000
Earnings attributable to equity holders of 52 476 31 657
the company
(Profit)/loss on disposal of property, plant (176) 6 079
and equipment
Headline earnings 52 300 37 736
Headline earnings per share (cents) 33,4 24,1
8. Weighted average number of shares
31 December 31 December
2010 2009
(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 156 378 794 156 378 794
beginning and end of the year
9. Net asset value
31 December 31 December
2010 2009
(Audited) (Audited)
R`000 R`000
Net asset value per share (cents) 471,2 441,1
10. Final dividend declaration
Due to the funding requirements for the expansion programme in 2011 financial
year, the directors have agreed not to recommend a final dividend.
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 and impairments.
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:
Adjusted Segment Segment
Revenue EBITDA assets liabilities
Year ended R`000 R`000 R`000 R`000
31 December 2010
Electrical wires 777 133 62 412 233 846 23 066
Lighting and electrical 360 998 44 845 549 920 100 087
accessories
Property investments 17 550 15 477 182 804 70 101
1 155 681 122 734 966 570 193 254
31 December 2009
Electrical wires 591 939 35 975 227 059 34 976
Lighting and electrical 366 033 46 234 530 874 78 261
accessories
Property investments 17 213 9 015 162 816 86 153
975 185 91 224 920 749 199 390
Reconciliation of total segment report to the statement of financial position
and statement of comprehensive income is provided as follows:
31 December 31 December
2010 2009
(Audited) (Audited)
R`000 R`000
Revenue
Reportable segment revenue 1 155 681 975 185
Inter-group revenue (property rentals) (16 041) (16 000)
Property revenue reported in other operating (1 510) (1 213)
income
Revenue per consolidated statement of 1 138 130 957 972
comprehensive income
Profit before tax
Adjusted EBITDA 122 734 91 224
Corporate overheads (15 849) (12 908)
Depreciation (13 863) (13 894)
Amortisation of intangible assets (4 525) (4 263)
Operating profit 88 497 60 159
Finance income 1 701 2 843
Finance cost (13 455) (18 531)
Profit before tax 76 743 44 471
Assets
Reportable segment assets 966 570 920 749
Corporate assets 1 718 1 482
Taxation receivable 1 353 1 948
Total assets per statement of financial 969 641 924 179
position
Liabilities
Reportable segment liabilities 193 254 199 390
Corporate liabilities 9 122 3 819
Deferred taxation 28 566 26 818
Taxation payable 1 848 4 380
Total liabilities per statement of financial 232 790 234 407
position
13. Director changes
Ms M Chong and Ms D Tam were appointed to the board as independent non-executive
directors on 1 April 2010 and 25 November 2010 respectively. Mr PJM Ferreira was
appointed an alternate director from 4 August 2010. Ms JL Law 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 the
year ended 31 December 2010.
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 favourable trading year compared to prior year, though
trading conditions remain challenging. Results improved compared to the prior
year mainly due to the improved performance at SOEW year-on-year. There has been
a marginal improvement in the trading volumes of electric wire during the year,
together with a 29,5% increase in the moving average Rand Copper Price (RCP),
which had a positive impact on the results for the group. Radiant was also
affected by the depressed economic climate. Some relief was felt as interest
rates and inflation improved, but past recessionary effects still continue to
dampen consumer spending.
Financial overview
Earnings
The group reports R52,5 million profit after tax for the 12 months ended 31
December 2010, which is 65,8% higher than the R31,7 million previously reported.
The group`s gross profit increased 12,1% to R237,8 million (2009: R212,2
million) and operating profit increased by 47,1% to R88,5 million (2009: R60,2
million).
Other operating income of R7,3 million (2009: R12,1 million) is R4,8 million
lower than the amount reported in 2009 mainly due to the foreign exchange gains
of R4,5 million compared to the R10,5 million reported in the prior year.
Group management continued to place emphasis on finding value within the
operations of the companies. This resulted in the cost savings as indicated by a
4,6% reduction in the group`s operating expenses and this was achieved despite
the increased activity at SOEW. The combined group operating expenses was R156,7
million compared to the prior year`s R164,2 million. Further details are
discussed within the operating division overviews.
The group has benefited from the reduction in interest rates. Finance costs
reduced by 27,4% to R13,5 million compared to the prior year of R18,5 million. A
reduced level of interest bearing borrowings was also instrumental in the lower
reported finance costs.
The effective tax rate for 2010 is 31,6% compared to the prior year of 28,8%.
The tax rate was affected by deferred tax asset relating to tax losses in one of
the subsidiaries not being provided for.
Cash flow and cash position
The cash generated by the group during the year was R47,6 million, which was
R67,4 million lower than the R115,0 million generated during the prior year. The
main contributor to this variance was the investments in inventory, and accounts
receivable, as a result of improved trading conditions and increased turnover at
the end of the year compared to the prior year. An amount of R19,5 million was
spent on capital expenditure relating to offices and factory building, of which
the financing loan will be received in the 2011 financial year. The group
further reduced its debt position by R31,3 million (2009: R37,9 million).
Operational overview
Electrical wires (SOEW)
Revenue increased by 31,3% to R777,1 million from R591,9 million in the prior
year. The increase in the moving average Rand Copper Price (RCP) of 29,5% and
volumes contributed to the improved revenue performance. The increased volumes
were mainly achieved through additional capacity added in the prior year.
Customers continue to trade cautiously due to the volatility in the RCP and
uncertain demand in the local market.
Due to the challenging market conditions and the competitive environment, focus
continues to be on cost containment and management of working capital. The
reduction in the net cash position is due to an increase in working capital
resulting from the increased RCP and increase in accounts receivable.
Operating expenses increased by 3,2% for the current year. The sustainable
reduction of expenses during the prior year, set a good foundation to take
advantage of trading improvements in the current year. The net result is an
improvement in the operating profit from a very difficult prior year.
Lighting and electrical accessories (Radiant)
Revenue has decreased by 1,4% to R361,0 million (2009: R366,0 million) compared
to the prior year. Gross profits remained fairly static. Notwithstanding the
decrease in revenue, a reduction of R6 million in foreign exchange gains and
inflationary increases in expenditure, net income before tax has increased by
R0,2 million.
Other operating income was negatively affected by the profit on foreign exchange
of R4,4 million (2009: R9,8 million) which has reduced compared to the prior
year. Operating expenditure reduced by R5,0 million when compared to the prior
year. Finance costs have reduced to R3,7 million (2009: R7,5 million) as a
result of decrease in interest rates, effective cash management and a reduction
of interest bearing borrowings.
Cash on hand of R13,9 million at year end has reduced by R20,3 million when
compared to prior year. The reduction in cash on hand is as a result of
repayment of interest bearing borrowings and an increase in inventories of R31,2
million.
Property investments (Anchor Park)
Anchor Park owns the properties that are leased by the operating subsidiaries.
The increase in the adjusted EBITDA at Anchor Park is due to the loss on sale of
buildings recorded in the prior year. Interests bearing borrowings and finance
costs have reduced as a result of lower interest rates. The increase in the
segment assets is as a result of the factory being built at Alrode to house a
new SOEW plant as well as the South Ocean Holdings head office. The group spent
R19,5 million on this project during the year.
Prospects
The group expects trading conditions to continue to improve. The operating units
will continue to extract value out of their operations to ensure the group
continues to increase value for the shareholders.
Although there are signs of improvement in the economy, trading conditions
remain challenging. Our businesses are affected by the volatility of the RCP,
copper supply and the foreign exchange fluctuations. Despite the trading
conditions, management endeavours to grow the businesses and be competitive
within its economic environment.
The operating segments are well positioned to take advantage of any improvement
in the economy. SOEW is currently constructing an additional manufacturing plant
at its current facility to diversify its product range. The plant will be
completed by the end of the first half of 2011 and will increase volumes from
the second half of the year.
The group is committed to deliver sustainable earnings and growth to its
shareholders.
On behalf of the board
EG Dube EHT Pan
Chairman Chief Executive Officer
28 February 2011
CORPORATE INFORMATION
Directors: EG Dube# (Chairman)
EHT Pan*@ (Chief Executive Officer)
JP Bekker* (Chief Financial Officer)
PJM Ferreira* (Chief Operating Officer) (Alternate)
CY Wuv
M Chong#
D Tam#
HL Liv
KH Pon#
CH Panv (Alternate)
Company Secretary:
WT Green
* Executive
# Independent Non-executive
v Non-executive
Taiwanese
@ Brazilian
Registered Office:
12 Botha Street, Alrode 1451
(P.O. Box 123738, Alrode, 1451)
Company Secretary:
WT Green
21 West Street, Houghton, 2198
(P.O. 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
Website: www.cwir.co.za
Postnet suite #52, Private Bag X16, Constantia
Telephone: +27(76) 456 3270
Email: cdwhittle@mweb.co.za
Date: 01/03/2011 07:30:00 Produced by the JSE SENS Department.
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