| Wed 27 Jul 2011, 7:05 | | SOH - South Ocean Holdings - Group Condensed Consolidated Interim Financial |
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SOH
SOH
SOH - South Ocean Holdings - Group Condensed Consolidated Interim Financial
results announcement for the six months ended 30 June 2011
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
GROUP CONDENSED CONSOLIDATED INTERIM FINANCIAL RESULTS ANNOUNCEMENT
for the six months ended 30 June 2011
HIGHLIGHTS
Revenue increased by 12,5% to R618,6 million
Headline earnings per share decreased by 32,1% to 10,8 cents
Earnings per share decreased by 32,9% to 10,8 cents
Net asset value per share increased by 6,1% to 482,0 cents
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at
30 June 30 June 31 December
2011 2010 2010
(Unaudited) (Unaudited) (Audited)
Notes R`000 R`000 R`000
Assets
Non-current assets 633 549 585 545 603 633
Property, plant and 4 291 678 239 477 259 642
equipment
Intangible assets 4 341 871 346 068 343 991
Current assets 504 279 417 450 366 008
Inventories 227 577 161 124 188 579
Trade and other 256 245 232 563 131 476
receivables
Taxation receivable 5 064 1 049 1 353
Cash and cash equivalents 15 393 22 714 44 600
Total assets 1 137 828 1 002 995 969 641
Equity and liabilities
Capital and reserves
attributable to equity
holders of the company
Share capital and premium 5 441 645 441 645 441 645
Reserves (720) - (706)
Retained earnings 312 868 268 569 295 912
Total equity 753 793 710 214 736 851
Liabilities
Non-current liabilities 109 853 114 518 102 449
Interest bearing 6 77 490 87 793 71 513
borrowings
Deferred taxation 30 047 26 725 28 566
Share-based payments 2 316 - 2 370
Current liabilities 274 182 178 263 130 341
Trade and other payables 104 784 69 635 77 446
Interest bearing 6 38 731 33 968 35 526
borrowings
Taxation payable 1 292 4 404 1 848
Shareholders for dividends 4 4 4
Derivative financial 36 - 680
instruments
Share-based payments 1 076 - 5 010
Bank overdraft 128 259 70 252 9 827
Total liabilities 384 035 292 781 232 790
Total equity and 1 137 828 1 002 995 969 641
liabilities
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended Year ended
30 June 30 June 31 December
2011 2010 2010
(Unaudited) (Unaudited) Change (Audited)
Note R`000 R`000 % R`000
Revenue 618 627 549 725 12,5 1 138 130
Cost of sales (512 366) (431 114) (900 285)
Gross profit 106 261 118 611 (10,4) 237 845
Other operating 870 1 214 7 344
income
Administration (34 430) (31 230) (64 370)
expenses
Distribution (13 430) (12 091) (27 927)
expenses
Operating (29 047) (34 782) (64 395)
expenses
Operating profit 30 224 41 722 (27,6) 88 497
Finance income 520 1 274 1 701
Finance costs (5 989) (6 823) (13 455)
Profit before 24 755 36 173 (31,6) 76 743
taxation
Taxation 7 (7 799) (11 040) (24 267)
Profit for the 16 956 25 133 (32,5) 52 476
period
Other - - -
comprehensive
income
Exchange (14) - (706)
differences on
translating
foreign operation
Total 16 942 25 133 (32,6) 51 770
comprehensive
income for the
period
Cents Cents Cents
per share per share per share
Earnings per 10,8 16,1 (32,9) 33,6
share - basic and
diluted
Dividend per - 3,0 (100,0) -
share (cents)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended Year ended
30 June 30 June 31 December
2011 2010 2010
(Unaudited) (Unaudited) (Audited)
Notes R`000 R`000 R`000
Share capital
Opening and closing 5 1 274 1 274 1 274
balance
Share premium
Opening and closing 5 440 371 440 371 440 371
balance
Foreign currency
translation reserve
Opening balance (706) - -
Exchange differences on (14) - (706)
translation of foreign
operation
Closing balance (720) - (706)
Retained earnings
Opening balance 295 912 248 127 248 127
Comprehensive income for 16 956 25 133 52 476
the period
Dividend paid - (4 691) (4 691)
Closing balance 312 868 268 569 295 912
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months ended Year ended
30 June 30 June 31 December
2011 2010 2010
(Unaudited) (Unaudited) (Audited)
R`000 R`000 R`000
Cash (utilised in)/generated (117 047) (82 396) 47 553
from operating activities
Cash utilised in investing (39 759) (7 328) (34 847)
activities
Cash generated from/(utilising 9 181 (16 594) (36 007)
in) financing activities
Net decrease in cash and cash (147 625) (106 318) (23 301)
equivalents
Cash and cash equivalents at the 34 773 58 780 58 780
beginning of period
Effects of exchange rate movement on (14) - (706)
cash balances
Cash and cash equivalents at the (112 866) (47 538) 34 773
end of period
SELECTED NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
1. General information
South Ocean Holdings Limited (`the company`) and its subsidiaries (together
`the Group`) manufacture and distribute electrical cables, import and
distribute light fixtures, lamps and electrical accessories and lets its
properties. The company is a public company listed on the Johannesburg
Stock Exchange (JSE) and is incorporated and domiciled in the Republic of
South Africa.
The unaudited condensed consolidated interim financial results were
approved for issue by the directors on 26 July 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), IFRIC Interpretations, IAS 34 `Interim
Financial Reporting` 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.
3. Accounting policies
The accounting policies adopted are consistent with those applied in the
audited financial statements for the year ended 31 December 2010, except
where indicated. There were no new standards or amendments that were issued
since the last annual report that are applicable to the Group or that will
result in a material impact in the reported results of the Group.
4. Property, plant and equipment and intangible assets
During the six months, the Group invested a further R40,0 million in
capital expenditure mainly relating to the expansion program at SOEW. The
Group has committed capital expenditure of R6,0 million. The details of
changes in tangible and intangible assets are as follows:
Tangible Intangible
assets assets
(Unaudited) (Unaudited)
R`000 R`000
Six months ended 30 June 2011
Opening net carrying amount 259 642 343 991
Additions 39 594 413
Disposals and write-offs (181) -
Depreciation/amortisation and other movements (7 377) (2 533)
Closing net carrying amount 291 678 341 871
Six months ended 30 June 2010
Opening net carrying amount 240 499 346 430
Additions 5 749 1 867
Disposals and write-offs (68) -
Depreciation/amortisation and other movements (6 703) (2 229)
Closing net carrying amount 239 477 346 068
(Audited) (Audited)
Year ended 31 December 2010
Opening net carrying amount 240 499 346 430
Additions 33 210 2 086
Disposals and write-offs (204) -
Depreciation/amortisation and other movements (13 863) (4 525)
Closing net carrying amount 259 642 343 991
5. Share capital and share premium
Ordinary Share
Number of shares premium Total
shares issued (R`000) (R`000) (R`000)
At 30 June 2011
(Unaudited)
Opening and closing 156 378 794 1 274 440 371 441 645
balance
At 30 June 2010
(Unaudited)
Opening and closing 156 378 794 1 274 440 371 441 645
balance
At 31 December 2010
(Audited)
Opening and closing 156 378 794 1 274 440 371 441 645
balance
6. Interest bearing borrowings
As at As at
30 June 30 June 31 December
2011 2010 2010
(Unaudited) (Unaudited) (Audited)
R`000 R`000 R`000
Secured borrowings
Non-current 77 490 87 793 71 513
Current 38 731 33 968 35 526
116 221 121 761 107 039
The movement in borrowings is
analysed as follows:
Opening balance 107 039 138 355 138 355
Additional loans raised 35 594 - -
Finance costs 4 191 5 657 9 640
Repayments (30 603) (22 251) (40 956)
Closing balance 116 221 121 761 107 039
7. Taxation
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 calculated before taking into
account STC is 31,5% (2010: 29,2%).
8. Reconciliation of headline earnings
Six months ended Year ended
30 June 30 June 31 December
2011 2010 2010
(Unaudited) (Unaudited) (Audited)
R`000 R`000 R`000
Comprehensive income attributable 16 956 25 133 52 476
to the equity holders of the
company for the period
Profit on disposal of property, (67) (220) (176)
plant and equipment
Headline earnings for the period 16 889 24 913 52 300
Headline earnings per share 10,8 15,9 33,4
(cents)
9. Weighted average number of shares
Six months ended Year ended
30 June 30 June 31 December
2011 2010 2010
(Unaudited) (Unaudited) (Audited)
Number of shares in issue 156 378 794 156 378 794 156 378 794
Weighted average number of 156 378 794 156 378 794 156 378 794
shares in issue at the
beginning and end of the
period
Weighted average number of 156 378 794 156 378 794 156 378 794
shares in issue for diluted
earnings per share
10. Net asset value
As at As at
30 June 30 June 31 December
2011 2010 2010
(Unaudited) (Unaudited) (Audited)
Net asset value per share 482,0 454,2 471,2
(cents)
11. Interim dividend declaration
The company policy is to consider the declaration of a final dividend after
the year end.
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 cables
manufacturing, lighting and electrical accessories, and property
investments are evaluated 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, and impairments.
Total assets and liabilities exclude deferred and income tax liabilities,
intergroup balances and available-for-sale financial assets.
The details of the business segments are reported as follows:
Adjusted Segment Segment
Revenue EBITDA assets liabilities
Six months ended (R`000) (R`000) (R`000) (R`000)
(Unaudited)
30 June 2011
Electrical cables 447 911 22 941 387 652 189 371
manufacturing
Lighting and electrical 170 716 19 316 553 015 85 300
accessories
Property investments 9 208 8 014 191 387 69 746
627 835 50 271 1 132 054 344 417
30 June 2010 (Unaudited)
Electrical cables 375 632 29 148 317 575 116 451
manufacturing
Lighting and electrical 174 093 20 299 511 113 63 530
accessories
Property investments 8 884 8 048 167 445 76 564
558 609 57 495 996 133 256 545
Year ended (Audited)
31 December 2010
Electrical cables 777 133 62 412 233 846 23 066
manufacturing
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
Reconciliation of total segment report to the statement of financial
position and statement of comprehensive income is provided as follows:
Six months ended Year ended
30 June 30 June 31 December
2011 2010 2010
(Unaudited) (Unaudited) (Audited)
R`000 R`000 R`000
Revenue
Reportable segment revenue 627 835 558 609 1 155 681
Inter-group revenue (property (8 706) (8 041) (16 041)
rentals)
Property revenue reported in (502) (843) (1 510)
other operating income
Revenue per consolidated 618 627 549 725 1 138 130
statement of comprehensive income
Profit before tax
Adjusted EBITDA 50 271 57 495 122 734
Corporate and other overheads (10 137) (6 841) (15 849)
Depreciation (7 377) (6 703) (13 863)
Amortisation of intangible assets (2 533) (2 229) (4 525)
Operating profit 30 224 41 722 88 497
Finance income 520 1 274 1 701
Finance cost (5 989) (6 823) (13 455)
Profit before income tax 24 755 36 173 76 743
Assets
Reportable segment assets 1 132 054 996 133 966 570
Corporate and other assets 710 5 813 1 718
Taxation receivable 5 064 1 049 1 353
Total assets per statement of 1 137 828 1 002 995 969 641
financial position
Liabilities
Reportable segment liabilities 344 417 256 545 193 254
Corporate and other liabilities 8 279 5 107 9 122
Deferred taxation 30 047 26 725 28 566
Taxation payable 1 292 4 404 1 848
Total liabilities per statement 384 035 292 781 232 790
of financial position
13. Director changes
There were no changes to directors during the period under review.
14. Subsequent events
As reported on SENS on 2 June 2011, Mr PJM Ferreira was appointed as
Executive Director and Chief Executive Officer (CEO) of South Ocean
Holdings Limited with effect from 1 July 2011, taking over from Mr EHT Pan
who will retire at the end of September 2011. During the period 1 July 2011
to 30 September 2011, Mr Pan will remain as an Executive Director handing
over his responsibilities to Mr Ferreira. From 1 October 2011, Mr Pan will
remain on the Board as Non-Executive Deputy Vice Chairman.
The directors are not aware of any significant events arising since the end
of the financial period, which would materially affect the operations of
the Group or its operating segments, not dealt with in the financial
results.
COMMENTARY
Introduction
South Ocean Holdings Limited (South Ocean Holdings) is pleased to announce
its condensed consolidated results for the six months ended 30 June 2011.
South Ocean Holdings is an investment holding company, comprising two
operating subsidiaries namely, South Ocean Electric Wire Company
(Proprietary) Limited (SOEW), a manufacturer of low voltage electrical
cables; Radiant Group (Proprietary) Limited (Radiant), an importer and
distributor of light fixtures, lamps and electrical accessories and a
property holding company, Anchor Park Investments 48 (Proprietary) Limited
(Anchor Park).
Adverse economic conditions which continue to impact the construction and
related sectors affected the Group`s performance. The Group`s operating
margins for the period was 4,9% (2010: 7,6%), a decline of 35,5% compared
to the same period in the prior year.
SOEW revenue increased compared to the prior period, but gross margins
decreased mainly as a result of the current economic climate. The
fluctuation in the Rand Copper Price (RCP) during this period also impacted
performance. Radiant`s results were affected by the competitive market
conditions compared to the same period in the prior year.
Financial overview
Earnings
Group revenue for the six month period to 30 June 2011 increased by 12,5%
(2010: 21,8%) to R618,6 million (2010: R549,7 million). The Group`s gross
profit decreased 10,4% to R106,3 million (2010: R118,6 million) and
operating profit decreased 27,6% to R30,2 million (2010: R41,7 million)
compared to the prior period.
Group profit before tax is 31,6% lower at R24,8 million (2010: R36,2
million) compared to the prior period. Earnings and headline earnings per
share have as a result, decreased compared to the prior period. The basic
earnings per share decreased 32,9% to 10,8 cents (2010: 16,1 cents)
compared to the prior year with the headline earnings per share also
declining 32,1% to 10,8 cents (2010: 15,9 cents) compared to the prior
period. Headline earnings decreased 32,1% to R16,9 million (2010: R24,9
million) compared to the prior period.
The reduction in interest bearing borrowings coupled with lower interest
rates resulted in decreased finance costs compared to the prior period.
Cash flow and working capital management
A large investment in working capital contributed to cash utilisation in
operations of R117,0 million (2010: R82,1 million) being reported during
the period. Working capital primarily increased through accounts
receivable, as is traditional for this period, combined with the increase
in revenue compared to 31 December 2010. Certain customers have paid late
and this contributed to the negative cash flow for the Group. Inventory
levels increased due to higher copper prices, additional investment in
inventory for the new plant at the Group`s Alrode facility, as well as an
increase in light fixtures, lamps, and electrical accessories inventory to
improve stock availability.
The Group invested R40 million (2010: R7,6 million) in capital expenditure
which was mainly financed by long-term borrowings during this period and
utilised R30,6 million (2010: R22,3 million) to repay its long-term
interest bearing borrowings.
The Group`s net cash utilised during the period of R147,6 million (2010:
R106,3 million) resulted in an overdraft at the end of the period of R112,9
million (2010: R47,5 million).
Segment results
Electrical cables - SOEW
SOEW`s revenue increased by 19,3% to R447,9 million (2010: R375,6 million).
This was mainly attributable to the increase in the Rand Copper Price (RCP)
and a marginal increase in volumes. The current depressed economic climate
and the fluctuations in the copper prices, however, had a negative effect
on gross margins.
Operational expenses were well controlled and increased below the annual
inflation rate during the period.
Additional capital investment in the new manufacturing plant at the Group`s
Alrode facility was made during the period and will be fully operational in
the second half of the year. Additional working capital was required for
inventory for the new manufacturing operation, and will be increasing
further to finance the debtors book in the months ahead, utilising normal
credit facilities.
Lighting and electrical accessories - Radiant
Radiant reported revenue of R170,7 million (2010: R174,1 million), 2% lower
when compared to the same period in the prior year. Operational costs
reduced compared to the same period last year. The margins were lower due
to the current economic climate.
Cash on hand decreased from a positive cash balance of R13,9 million at the
end of December 2010 to a net overdraft of R17,5 million as at the end of
June 2011. The funds were utilised to increase inventory to improve
availability.
Property investment - Anchor Park
Anchor Park`s revenue is derived from Group companies, as it leases its
properties to fellow subsidiaries. The reduction in interest expense is due
to the repayment of loan balances and lower effective interest rates.
During the period a further R11,8 million capital investment was made for
the new SOEW factory building.
Seasonality
The Group`s earnings are affected by seasonality as earnings for the second
half of the year are historically higher than the first six months.
Management expects the traditional seasonality trend to continue with an
improvement in performance during the second half of the year.
Prospects
In line with its strategic plan, the Group has invested in a new
manufacturing plant to grow the business organically. Radiant`s growth is
expected to be driven by the provision of energy saving solutions to
corporate and industrial clients looking to reduce their electricity
consumption. This trend is expected to continue whereby more industries
move to support Government and Eskom`s initiatives to ease demand on the
national grid.
The Group will focus on increasing its market share, which will require a
combined effort by the production and marketing teams. Product quality and
client service remain a high priority within the Group.
The outlook for the second half of the year remains challenging. The Group
strategy is to maximise the opportunities in the current environment that
will enhance shareholders` value.
The above information has not been reviewed or reported on by South Ocean
Holdings` external auditors.
On behalf of the Board
Ethan Dube Paul Ferreira
Chairman Chief Executive Officer
26 July 2011
Directors:
EG Dube# (Chairman)
PJM Ferreira* (Chief Executive Officer)
EHT Pan*@
JP Bekker* (Chief Financial Officer)
CY Wuvo
KH Pon#
M Chong#
D Tam#
HL Livo
CH Pano (Alternate)
* Executive
# Independent Non-Executive
v Non-Executive
o Taiwanese
@ Brazilian
Company Secretary:
WT Green
Corporate Information
Registered Office:
12 Botha Street, Alrode, 1451
PO Box 123738, Alrode, 1451
Telephone: +27(11) 864 1606
Telefax: +27(86) 628 9523
Company Secretary:
Whitney Thomas 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
Ground Floor, 70 Marshal Street, 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
Postnet suite #52
Private Bag X16, Constantia
Telephone: +27(76) 456 3270
Email: cdwhittle@mweb.co.za
Date: 27/07/2011 07:05:15 Produced by the JSE SENS Department.
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