| Fri 20 May 2011, 7:55 | | SER/SRN - Seardel Investment Corporation - Reviewed consolidated condensed |
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SER SRN
SER
SER/SRN - Seardel Investment Corporation - Reviewed consolidated condensed
results For the year ended 31 March 2011
SEARDEL INVESTMENT CORPORATION LIMITED
("Seardel" or "the Group")
Registration number: 1968/011249/06
(Incorporated in the Republic of South Africa)
The company`s shares are listed under the Consumer Goods - Personal and
Household Goods Sector of the JSE Limited.
JSE share code: SER
ISIN: ZAE000029815
JSE share code: SRN
ISIN: ZAE000030144
REVIEWED CONSOLIDATED CONDENSED RESULTS FOR THE YEAR ENDED 31 MARCH 2011
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Group
Reviewed Audited
at at
31 March 31 March
Rand thousands 2011 2010
ASSETS
Non-current assets 967 147 963 056
Property, plant and equipment 665 727 906 162
Intangible assets 8 812 3 933
Investment property 224 001 -
Other investments 3 329 3 026
Long-term receivables 35 256 34 760
Deferred tax asset 30 022 15 175
Current assets 1 140 694 1 246 895
Non-current assets held for sale 16 338 81 725
Inventories 557 575 501 354
Trade and other receivables 554 995 583 089
Current tax asset 898 44
Cash and cash equivalents 10 888 80 683
Total assets 2 107 841 2 209 951
EQUITY AND LIABILITIES
Total equity 1 254 592 1 291 949
Share capital and share premium 303 969 303 969
Treasury shares (14 610) (14 610)
Reserves 964 623 1 001 989
Total equity attributable to owners of the parent 1 253 982 1 291 348
Non-controlling interest 610 601
Non-current liabilities 77 759 78 466
Deferred tax liability 7 999 6 919
Post-employment medical aid benefits 66 849 65 297
Interest-bearing liabilities 98 1 945
Operating lease accruals 2 813 4 305
Current liabilities 775 490 839 536
Current tax liabilities 257 3 074
Post-employment medical aid benefits 4 384 4 428
Interest-bearing liabilities 131 470 186 173
Provisions 2 337 17 770
Trade and other payables 418 912 431 211
Bank overdrafts 218 130 196 880
Total liabilities 853 249 918 002
Total equity and liabilities 2 107 841 2 209 951
Net asset value (excluding intangible assets) 1 245 170 1 287 415
Net asset value (excluding intangible assets)
per share after treasury shares (cents) 177 183
STATISTICS PER SHARE
Reviewed Audited
for the for the
year year
ended ended
31 March 31 March
In cents, where applicable 2011 2010
Weighted average number of shares in issue (`000) 702 946 702 946
Number of shares in issue (`000) 702 946 702 946
Diluted weighted average number of shares (`000) 737 494 737 346
Profit/(loss) 1,2 (29,0)
Continuing operations 13,7 6,0
Discontinued operations (12,5) (35,0)
Headline loss (3,5) (22,2)
Continuing operations 10,9 6,0
Discontinued operations (14,4) (28,2)
Diluted profit/(loss) 1,2 (27,6)
Continuing operations 13,1 5,8
Discontinued operations (11,9) (33,4)
Diluted headline loss (3,4) (21,2)
Continuing operations 10,4 5,7
Discontinued operations (13,8) (26,9)
Reconciliation between profit/(loss) and headline loss
Income/(loss) attributable to equity holders of
the parent 8 567 (203 593)
Net impairment of assets (10 734) 29 599
Gain on deemed disposals (10) -
Insurance claim for capital asset - (74)
Surplus on disposal of property, plant and equipment (2 077) (4 045)
Revaluation of investment properties (21 575) -
Loss on disposal of property, plant and equipment 1 115 22 111
Total tax effect of adjustments (38) -
Headline loss (24 752) (156 002)
CONSOLIDATED CONDENSED INCOME STATEMENT
Group
Reviewed Audited
for the for the
year year
ended ended
31 March 31 March
Rand thousands 2011 2010
Revenue 2 420 604 2 165 727
Gross profit 565 705 565 911
Operating profit before impairments and
restructuring and retrenchment costs 122 310 71 510
Net impairment of assets (2 995) 646
Restructuring and retrenchment costs (5 316) (5 249)
Operating profit before finance costs 113 999 66 907
Finance income 7 925 22 352
Finance expenses (35 651) (44 620)
Profit before taxation 86 273 44 639
Income tax expense 10 084 (1 740)
Profit for the year from continuing operations 96 357 42 899
Loss for the year from discontinued operations (87 781) (246 355)
INCOME/(LOSS) FOR THE YEAR 8 576 (203 456)
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
Reviewed Audited
for the for the
year year
ended ended
31 March 31 March
Rand thousands 2011 2010
Net cash flow from operating activities (28 835) 148 976
Operating profit before finance costs from
continuing operations 113 999 66 907
Operating loss before finance costs from
discontinuing operations (77 094) (211 030)
Income/(loss) for the period before finance costs 36 905 (144 123)
Adjustments for:
Depreciation and amortisation 40 735 47 250
Revaluation of investment property (21 575) -
Net unrealised foreign exchange (gains)/losses (1 261) 11 458
Loss/(surplus) on disposal (962) 18 066
Net impairment of assets 17 216 29 599
Post-employment medical benefit 2 079 (13 695)
Share incentive scheme 2 137 -
Waiver of liability - (18 897)
Net changes to working capital (56 090) 283 697
Net finance costs (35 295) (53 611)
Taxation paid (12 724) (10 768)
Net cash flow from investing activities (5 660) 7 173
Additions of property, plant and equipment (63 884) (50 115)
Proceeds on disposal 92 231 54 900
Additions to investment property (22 778) -
Interest capitalised to investment property (309) -
Net acquisition of intangible assets (10 494) -
Investment income 70 116
Change in non-current receivables (496) 652
Proceeds on sale of investments - 1 620
Net cash flow from financing activities (56 550) (20 636)
Change in borrowings (56 550) (20 636)
Net change in cash and cash equivalents (91 045) 135 513
Cash and cash equivalents at the beginning of
the year (116 197) (251 710)
Cash and cash equivalents at the end of the year (207 242) (116 197)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Treasury
Rand thousands capital premium shares
Balance 31 March 2009 159 207 144 762 (14 610)
Total loss for the year
Fair value adjustment on available-for-sale
financial assets
Revaluation of land and buildings
Post-employment medical benefit - actuarial gain
Release reserve held for available for sale
Balance 31 March 2010 159 207 144 762 (14 610)
Total for the year income
Fair value adjustment on available-for-sale
financial assets
Revaluation of land and buildings
Post-employment medical benefit - actuarial gain
Share incentive scheme
Reclassification of revaluation surplus
Deferred tax on release of revaluation
surplus on land and buildings disposed
Balance 31 March 2011 159 207 144 762 (14 610)
Group
Other Retained
Rand thousands reserves income Total
Balance 31 March 2009 234 023 885 567 1 408 949
Total loss for the year (203 593) (203 593)
Fair value adjustment on
available-for-sale financial assets 2 755 2 755
Revaluation of land and buildings 81 972 81 972
Post-employment medical benefit -
actuarial gain 1 265 1 265
Release reserve held for available for sale (731) 731 -
Balance 31 March 2010 318 019 683 970 1 291 348
Total for the year income 8 567 8 567
Fair value adjustment on
available-for-sale financial assets 260 260
Revaluation of land and buildings (51 479) (51 479)
Post-employment medical benefit -
actuarial gain 411 411
Share incentive scheme 2 137 2 137
Reclassification of revaluation surplus (5 474) 5 474 -
Deferred tax on release of revaluation
surplus on land and buildings disposed 2 738 2 738
Balance 31 March 2011 264 064 700 559 1 253 982
Minority
Rand thousands interest Total
Balance 31 March 2009 464 1 409 413
Total loss the year 137 (203 456)
Fair value adjustment on available-for-sale financial assets 2 755
Revaluation of land and buildings 81 972
Post-employment medical benefit - actuarial gain 1 265
Release reserve held for available for sale -
Balance 31 March 2010 601 1 291 949
Total for the year income 9 8 576
Fair value adjustment on available-for-sale financial assets 260
Revaluation of land and buildings (51 479)
Post-employment medical benefit - actuarial gain 411
Share incentive scheme 2 137
Reclassification of revaluation surplus -
Deferred tax on release of revaluation surplus on land
and buildings disposed 2 738
Balance 31 March 2011 610 1 254 592
CONSOLIDATED CONDENSED STATEMENT OF COMPREHENSIVE INCOME
Reviewed Audited
for the for the
year year
ended ended
31 March 31 March
Rand thousands 2011 2010
Income / (Loss) for the period 8 576 (203 456)
Other comprehensive income:
Fair value adjustment on available-for-sale financial
assets 260 2 755
Revaluation of land and buildings (51 479) 81 972
Post employment medical benefit - actuarial gain 411 1 265
Other comprehensive (loss)/income for the period (50 808) 85 992
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD (42 232) (117 464)
Loss attributable to:
Equity holders of the parent 8 567 (203 593)
Non-controlling interests 9 137
8 576 (203 456)
Total comprehensive loss attributable to:
Equity holders of the parent (42 241) (117 601)
Non-controlling interests 9 137
(42 232) (117 464)
CONDENSED SEGMENTAL REPORT
Rand thousands
Textiles Clothing Property
Business segments
2011
Segment revenue
Gross revenue 1 014 983 1 150 248 65 597
Revenue reclassified as discontinued
operations (136) (170 383) -
Inter-segment revenue (these transactions
are at arm`s length) (33 324) - (58 005)
981 523 979 865 7 592
Segment results
Combined operating (loss)/profit before
finance costs 55 936 (97 753) 62 032
Disclosed as discontinued operations
(excluding finance charges and taxation) 228 76 866 -
Operating (loss)/profit before finance
costs from continuing operations 56 164 (20 887) 62 032
Net finance costs - - -
Profit/(loss) before taxation from
continuing operations 56 164 (20 887) 62 032
Segment assets 666 464 558 194 595 401
Segment liabilities 283 273 119 614 2 891
2010
Segment revenue
Gross revenue 1 208 620 1 375 079 53 674
Revenue reclassified as discontinued
operations (274 739) (513 215) -
Inter-segment revenue (these transactions
are at arm`s length) (52 712) - (53 333)
881 169 861 864 341
Segment results
Combined operating (loss)/profit before
finance costs (135 300) (83 817) 28 471
Disclosed as discontinued operations
(excluding finance charges and taxation) 152 931 58 099 -
Operating (loss)/profit before finance
costs from continuing operations 17 631 (25 718) 28 471
Net finance costs - - -
Profit/(loss) before taxation from
continuing operations 17 631 (25 718) 28 471
Segment assets 666 959 598 536 585 991
Segment liabilities 273 246 147 990 471
Toys and Head
electronics office Total
Business segments
2011
Segment revenue
Gross revenue 452 600 - 2 683 428
Revenue reclassified as discontinued
operations - - (170 519)
Inter-segment revenue (these
transactions are at arm`s length) (976) - (92 305)
451 624 - 2 420 604
Segment results
Combined operating (loss)/profit before
finance costs 38 737 (22 047) 36 905
Disclosed as discontinued operations
(excluding finance charges and
taxation) - - 77 094
Operating (loss)/profit before finance
costs from continuing operations 38 737 (22 047) 113 999
Net finance costs - (27 726) (27 726)
Profit/(loss) before taxation from
continuing operations 38 737 (49 773) 86 273
Segment assets 248 721 39 061 2 107 841
Segment liabilities 63 090 384 381 853 249
2010
Segment revenue
Gross revenue 423 616 - 3 060 989
Revenue reclassified as discontinued
operations - (787 954)
Inter-segment revenue (these transactions
are at arm`s length) (1 263) - (107 308)
422 353 - 2 165 727
Segment results
Combined operating (loss)/profit before
finance costs 42 514 4 009 (144 123)
Disclosed as discontinued operations
(excluding finance charges and
taxation) - - 211 030
Operating (loss)/profit before finance
costs from continuing operations 42 514 4 009 66 907
Net finance costs - (22 268) (22 268)
Profit/(loss) before taxation from
continuing operations 42 514 (18 259) 44 639
Segment assets 329 433 29 032 2 209 951
Segment liabilities 58 755 437 540 918 002
NOTES
1. Basis of preparation
These consolidated condensed results are prepared in accordance with the
recognition and measurement requirements of IFRS, the AC 500 standards, the
disclosure requirements of IAS 34 and the Listings Requirements of the JSE
Limited.
2. Accounting policies
The accounting policies adopted are in all respects consistent with those
applied in the preparation of the Group`s annual financial statements for the
period ended 31 March 2010. The Group has elected to early adopt the amendment
to IAS 12 in connection with deferred tax on the recovery of underlying assets,
specifically investment properties. As there were no investment properties in
the prior period, no restatement is required.
3. Change in comparatives
During the year the Group announced the closure of the Intimate Apparel
division. The results of this division have been disclosed as discontinued
operations. The comparative results have been restated accordingly.
4. Independent review
These consolidated condensed results have been reviewed by our auditors KPMG
Inc.
5. Related party transactions
During the year the Group incurred the following related party expenditure:
- Managerial services received from HCI - R4 200 000
- Professional services for recruitment of staff from Isilumko Staffing (Pty)
Ltd - R115 611
- Interest on bridging loan received from HCI - R203 425
- Professional services rendered by Mr N Lazarus, deputy chairman of Seardel -
R70 000
6. Capital expenditure and commitments
Net capital expenditure during the year under review amounted to R97,3 million.
There are further commitments in respect of contracted capital expenditure as at
31 March 2011 of R67,4 million.
7. Dividends
The directors have resolved not to declare a dividend for the year ended 31
March 2011.
COMMENTARY
Seardel continues to make progress on its turnaround journey and for the 12
months ended 31 March 2011, we are pleased to be able to report an attributable
profit of R8,5 million (2010: attributable loss of R203,4 million) comprising a
R96 million profit from continuing operations (2010: R43 million) and an R88
million loss (2010: R246 million loss) from discontinuing operations.
Given the current economic climate and strong Rand, we believe that on the whole
the continuing operations performed solidly, reflected in them generating over
R140 million of EBITDA in the 12 months.
Although turnover from continuing operations was up 12% to R2,4 billion, the
strong Rand, high cotton prices and our inability to pass any input price
increases on to our customers, particularly within the clothing division weighed
heavily on margins, with gross margins dropping 2,8% to 23,4%.
One of the features of the second half of the financial year was the rapid and
dramatic increase in cotton prices. The long term average price of cotton from
1998 through 2009 has been around US58 cents/lb; towards the end of March 2011
cotton was trading at around US200 cents/lb, and peaked at around US220 cents/lb
thereafter.
We have recently seen some easing down to US150 cents/lb levels, but even the
current levels are still well over double the long-term average prices. The
Group is obviously heavily exposed to the cotton price and on the whole has done
well to manage its exposure to these dramatic swings. However, the cotton price
increases did place some pressure on volumes, margins and working capital
requirements which pressure is likely to continue into the new financial year.
Textiles
The performance of the textile division has been particularly pleasing with most
business units showing marked improvements over the prior year. Turnover was up
11% to R982 million whilst operating profit was up 218% to R56 million.
Operationally, each of these business units have taken significant strides
forward and we believe that they are well positioned to take advantage of any
uptick in economic conditions.
Clothing
The performance of the clothing division remains of great concern. This division
is still being weighed down by all the external factors that have been discussed
in previous reports, namely:
- customs fraud;
- the strong Rand;
- competition from low wage paying countries both in the East and closer to
home; and
- competition from non-compliant local suppliers that do not pay the prescribed
minimum wage. As we have stated previously, the central bargaining process is
simply unworkable if some employers are free to undercut the legislated minimum
wage whilst others are compelled to comply. This issue needs to be urgently
addressed and it will require the co-operation of all stakeholders if a
sustainable solution is to be arrived at.
- import duty structures that require local garment manufacturers to pay import
duties on most imported fabrics and trims. The list of fabrics and trims subject
to these import duties is too wide. A more focused solution is required to
enable garment manufacturers to source fabrics and trims at internationally
competitive prices without destroying what is left of the local textile
industry.
These factors, together with some internal operational issues that are under our
direct control resulted in this division delivering an operating loss of R21
million.
Although this represents an improvement on the R26 million loss recorded in the
prior year, it is clearly still most unsatisfactory. Numerous improvement
programmes have been introduced to address the shortcomings that are under our
control and we are optimistic that these will gain further traction in the new
financial year. However, without meaningful changes to the external factors
mentioned above, the apparel manufacturing operations are likely to remain under
pressure, particularly those located in the higher wage areas.
Included in the clothing segment is our new brand-focused business unit, Brand
Identity, which has been established to manage the Group`s apparel brands.
Of significance to this business unit was the recent announcement that it had
acquired the local and international rights to procure, manufacture, distribute
and sell apparel and accessories under the 46664 brand name. The range will be
launched in the local market in August 2011 with international launches to
follow.
Toys, stationery and electronics
The business units within this segment performed satisfactorily. Although the
operating profit was down 9% from the previous year, it has to be seen against
the backdrop of the economic climate as the products sold by these business
units are largely discretionary in nature.
Properties
We have previously reported that the closure of the Frame Vertical Pipeline had
left the Group with vacant properties that we have chosen to develop and let to
external tenants. On completion of the developments, the Group will have
approximately 150 000 m2 available to be let. Progress to date has been good
with some 30 000 m2 having been developed, let and tenanted with a further 37
421 m2 currently under development. The remaining properties will be developed
once sufficient lease agreements have been concluded.
Government incentives
Included in the current year`s results are benefits derived from government`s
Production Incentive Scheme. Under the terms of the scheme, financial assistance
is provided to enable businesses within the clothing and textile industry to
upgrade its plant, processes and people. The scheme is welcomed and will enable
the Group to invest in numerous upgrade programmes, the benefits of which will
only be derived in future years.
Discontinued operations
The results of the discontinued operations include the costs of closing down the
Intimate Apparel division as well as the remnant costs associated with selling
the Frame Vertical Pipeline assets. These costs had largely come to an end by 31
March 2011.
Appreciation
As always, we would like to take this opportunity to thank all our employees for
their concerted efforts during the past financial year. The improvements
reflected in this report are as a direct result of the commitment shown by our
management teams and all the staff that support them.
CORPORATE INFORMATION
Directors:
J A Copelyn (Chairman), Adv N N Lazarus (Deputy Chairman), M H Ahmed,
A E Dixon-Seager (Chief Operating Officer), T G (Kevin) Govender, A M Ntuli,
S A Queen (Chief Executive Officer), Y Shaik, N Teladia, R Watson,
G Wege (Chief Financial Officer)
( indicates Non-executive)
Company secretary:
HCI Managerial Services (Pty) Ltd
Registered Office:
1 Moorsom Avenue, cnr Bofors Circle and Moorsom Avenue,
Epping Industria II 7460
PO Box 524, Eppindust 7475, South Africa
Transfer secretaries:
Computershare Investor Services (Pty) Ltd
70 Marshall Street, Johannesburg 2001
PO Box 61051, Marshalltown 2107
Auditors:
KPMG Inc.
Sponsors:
Java Capital
Annual General Meeting
Information in respect of the Annual General Meeting will be communicated to the
shareholders in due course.
On behalf of the board
Stuart Queen Gys Wege
Chief Executive Officer Chief Financial Officer
Cape Town
20 May 2011
Date: 20/05/2011 07:55:12 Produced by the JSE SENS Department.
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