| Tue 28 Feb 2012, 7:05 | | SOH - South Ocean Holdings - Audited abridged results announcement for the |
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SOH
SOH
SOH - South Ocean Holdings - Audited abridged results announcement for the
year ended 31 December 2011
South Ocean Holdings
(Registration number 2007/002381/06)
Incorporated in the Republic of South Africa
("South Ocean Holdings", "the Group" or "the company")
Share code: SOH ISIN: ZAE000092748
AUDITED ABRIDGED RESULTS ANNOUNCEMENT
for the year ended 31 December 2011
HIGHLIGHTS
Turnover increased by 10,8% to R1 261 million
Earnings per share decreased by 12,8% to 29,3 cents
Headline earnings per share decreased by 8,4% to 30,6 cents
Net asset value per share increased by 6,3% to 500 cents
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at
31 December 31 December
2011 2010
(Audited) (Audited)
Notes R`000 R`000
ASSETS
Non-current assets 643 151 603 633
Property, plant and equipment 4 305 929 259 642
Intangible assets 4 337 222 343 991
Current assets 438 551 366 008
Inventories 244 966 188 579
Trade and other receivables 165 296 131 476
Taxation receivable 574 1 353
Cash and cash equivalents 27 715 44 600
Total assets 1 081 702 969 641
EQUITY AND LIABILITIES
Equity
Share capital and premium 5 441 645 441 645
Reserves (352) (706)
Retained earnings 341 700 295 912
Total equity 782 993 736 851
Liabilities
Non-current liabilities 105 653 102 449
Interest-bearing borrowings 6 70 055 71 513
Share-based payments 1 756 2 370
Deferred taxation 33 842 28 566
Current liabilities 193 056 130 341
Trade and other payables 139 497 77 446
Share-based payments - 5 010
Derivative financial instrument 30 680
Interest-bearing borrowings 6 38 226 35 526
Taxation payable 1 401 1 848
Dividends payable 4 4
Bank overdraft 13 898 9 827
Total liabilities 298 709 232 790
Total equity and liabilities 1 081 702 969 641
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended
31 December 31 December
2011 2010
(Audited) Change (Audited)
Note R`000 % R`000
Revenue 1 261 019 10,8 1 138 130
Cost of sales (1 036 271) (900 285)
Gross profit 224 748 (5,5) 237 845
Other operating income 2 871 7 344
Administration expenses (66 200) (64 370)
Distribution expenses (24 378) (27 927)
Operating expenses (61 335) (64 395)
Operating profit 75 706 (14,5) 88 497
Finance income 310 1 701
Finance cost (10 977) (13 455)
Profit before taxation 65 039 (15,3) 76 743
Taxation 7 (19 251) (24 267)
Profit for the year 45 788 (12,7) 52 476
Other comprehensive income
Exchange differences on 354 (706)
translation of foreign
operations
Total comprehensive income 46 142 (10,9) 51 770
attributable to equity
holders of the company
Earnings per share - basic 29,3 (12,8) 33,6
and diluted (cents)
Dividends per share (cents) - -
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended
31 December 31 December
2011 2010
(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 (706) -
Exchange differences on translation of 354 (706)
foreign operation
Closing balance (352) (706)
Retained earnings
Opening balance 295 912 248 127
Total comprehensive income for the year 45 788 52 476
Dividends paid - (4 691)
Closing balance 341 700 295 912
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
For the year ended
31 December 31 December
2011 2010
(Audited) (Audited)
R`000 R`000
Cash generated from operating activities 39 526 47 553
Cash utilised in investing activities (62 078) (34 847)
Cash generated/(utilised) in financing 1 242 (36 007)
activities
Net decrease in cash and cash equivalents (21 310) (23 301)
Cash and cash equivalents at the beginning 34 773 58 780
of year
Effects of exchange rate movement on cash 354 (706)
balances
Cash and cash equivalents at the end of 13 817 34 773
year
SELECTED NOTES THE TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
1. General information
South Ocean Holdings and its subsidiaries, together ("the group"),
manufacture and distribute electrical cables, import and distribute light
fittings, lamps and electrical accessories and has property investments.
South Ocean Holdings is listed on the Johannesburg Stock Exchange ("JSE") and
is incorporated and domiciled in the Republic of South Africa.
The audited condensed consolidated financial information was prepared by JP
Bekker, CA(SA), and was approved for issue by the directors on 27 February
2012.
2. Basis of preparation
The condensed consolidated financial information of South Ocean Holdings has
been prepared in accordance with International Financial Reporting Standards
(IFRS), IFRIC Interpretations, IAS 34 `Interim financial reporting` and the
Companies Act, 2008, 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 2011. 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
financial statements for the year ended 31 December 2010, except where
indicated. There are no new standards or amendments that were issued since
the last annual report that will result in a material impact in the reported
results of the group.
4. Property, plant and equipment and intangible assets
During the year, the group invested R61,9 million in capital expenditure,
related to the expansion programme at South Ocean Electric Wire Company (Pty)
Limited ("SOEW") and further 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 2011
Opening net carrying amount 259 642 343 991
Additions 61 936 413
Disposals (189) -
Depreciation/amortisation/impairment (15 460) (7 182)
Closing net carrying amount 305 929 337 222
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
5. Share capital and share premium
Number of Ordinary Share Total
shares shares premium
R`000 R`000 R`000
At 31 December 2011
Opening and closing 156 378 794 1 274 440 371 441 645
balance
At 31 December 2010
Opening and closing 156 378 794 1 274 440 371 441 645
balance
6. Interest-bearing borrowings
31 December 31 December
2011 2010
(Audited) (Audited)
Secured loans R`000 R`000
Non-current 70 055 71 513
Current 38 226 35 526
108 281 107 039
The movement in borrowings is analysed as
follows:
Opening balance 107 039 138 355
Additional loans raised 47 297 -
Finance costs 7 688 9 640
Repayments (53 743) (40 956)
Closing balance 108 281 107 039
7. Taxation
The effective tax rate for 2011 is 29,6% (2010: 31,6%).
8. Reconciliation of headline earnings
31 December 31 December
2011 2010
(Audited) (Audited)
R`000 R`000
Earnings attributable to equity holders of 45 788 52 476
the company
Profit on disposal of property, plant and (59) (176)
equipment
Impairment 2 117 -
Headline earnings 47 846 52 300
Headline earnings per share (cents) 30,6 33,4
9. Weighted average number of shares
31 December 31 December
2011 2010
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
the beginning and end of the year
10. Net asset value
31 December 31 December
2011 2010
R`000 R`000
Net asset value per share (cents) 500,7 471,2
11. Final dividend declaration
Funds have been utilised in the expansion programme to increase production
capacity during the year, hence the directors have agreed not to recommend a
final dividend.
12. Audit opinion
These results have been extracted from the group`s audited financial
statements. The unqualified report of PricewaterhouseCoopers Inc. on the
financial statements is available for inspection at the registered office of
the company.
13. 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,
is 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,
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 2011
Electrical cables 897 338 50 259 336 080 108 794
manufacturing
Lighting and electrical 363 681 47 114 540 137 79 431
accessories
Property investments 19 457 17 099 200 531 70 311
1 280 476 114 472 1 076 748 258 536
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:
31 December 31 December
2011 2010
(Audited) (Audited)
R`000 R`000
Revenue
Reportable segment revenue 1 280 476 1 155 681
Inter-group revenue - property rentals (18 680) (16 041)
Property revenue reported in other (777) (1 510)
operating income
Revenue per consolidated statement of 1 261 019 1 138 130
comprehensive income
Profit before tax
Adjusted EBITDA 114 472 122 734
Corporate overheads (16 124) (15 849)
Depreciation (15 460) (13 863)
Impairment of intangible assets (2 117) -
Amortisation of intangible assets (5 065) (4 525)
Operating profit 75 706 88 497
Finance income 310 1 701
Finance cost (10 977) (13 455)
Profit before tax 65 039 76 743
Assets
Reportable segment assets 1 076 748 966 570
Corporate and other assets 4 380 1 718
Taxation receivable 574 1 353
Total assets per statement of financial 1 081 702 969 641
position
Liabilities
Reportable segment liabilities 258 536 193 254
Corporate and other liabilities 4 930 9 122
Deferred taxation 33 842 28 566
Taxation payable 1 401 1 848
Total liabilities per statement of 298 709 232 790
financial position
14. Director changes
Mr PJM Ferreira was appointed as an Executive Director and Chief Executive
Officer (CEO) of South Ocean Holdings with effect from 1 July 2011 taking
over from Mr EHT Pan who retired at the end of September 2011. Mr Pan remains
on the Board as Non-Executive Deputy-Vice Chairman with effect from 1 October
2011.
15. 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 is pleased to announce its condensed consolidated
results for the year ended 31 December 2011.
South Ocean Holdings is an investment holding company, comprising four
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
fittings, lamps and electrical accessories and a property holding company,
Anchor Park Investments 48 Proprietary Limited ("Anchor Park"), and SOH
Calibre International Limited, a buying house based in Hong Kong on behalf of
the group companies.
The subdued economic conditions are still affecting the group`s performance
and had a negative impact on the results. However, the group focused on
organic expansion and made capital investments during the year to increase
capacity. The revenue at the electrical cable subsidiary increased compared
to the prior period, but the gross margins decreased mainly as a result of
the current economic climate and fluctuation in the Rand Copper Price (RCP)
which also impacted performance during this period. Radiant`s results were
affected by the competitive market conditions compared to the same period in
the prior year.
SOH Calibre International was established in 2011 and is based in Hong Kong.
The objectives for SOH Calibre is to improve quality on all imported products
as well as increasing the level of communication between suppliers and
Radiant. SOH Calibre also strives to bring new fashionable trends to the
South African lighting market.
Financial overview
Earnings
Group revenue for the year to 31 December 2011 increased by 10,8% (2010:
18,8%) to R1 261 million (2010: R1 138.1 million). The group`s gross profit
decreased by 5,5% (2010: 12,1% increase) to R224,7 million (2010: R237,8
million) and operating profit decreased by 14,5% (2010: 47,1% increase) to
R75,7 million (2010: R88,5 million) compared to the prior year.
Group profit before tax decreased by 15,3% (2010: 72,6% increase) to R65,0
million (2010: R76,7 million) compared to the prior year. Earnings and
headline earnings per share have, as a result, decreased compared to the
prior year. The basic earnings per share decreased by 12,8% (2010: 66,3%
increased) to 29,3 cents (2010: 33,6 cents) compared to the prior year with
the headline earnings per share also declining by 8,4% (2010: 38,6%
increased) to 30,6 cents (2010: 33,4 cents) compared to the prior year.
Headline earnings decreased by 8,6% (2010: 66,3% increased) to R47,8 million
(2010: R52,3 million) compared to the prior year.
Operational costs were contained during the period and decreased which was as
a result of management`s commitment to control costs.
Cash flow and working capital management
The cash generated from operations of R39,5 million (2010: R47,6 million) was
lower than the prior period, as a result of additional investments in
working capital. Inventory levels increased due to higher copper prices and
the additional investment in inventory and trade receivables for the new
plant at the group`s Alrode facility.
The group invested R62,3 million (2010: R35,2 million) in capital expenditure
which was mainly financed by long-term borrowings during this period and
utilised R53,7 million (2010: R41,0 million) to repay its long-term interest-
bearing borrowings.
The group`s net cash utilised during the period of R21,3 million (2010: R23,3
million) reduced the cash balance as at the beginning of the year from R34,8
million to R13,8 million.
Segment results
Electrical cables - SOEW
Revenue increased by 15,4% (2010: 31,3%) to R897,3 million (2010: R777,1
million). This was mainly attributable to the increase in the RCP and a
marginal increase in volumes. Volumes were negatively affected by the
industry strike during July 2011.
Operational expenses increased during the year mainly due to the increase in
production capacity and increased spending on training, social responsibility
and enterprise development.
The current economic climate and the fluctuations in the copper price,
however, had a negative effect on gross margins.
The capital investment was made to increase capacity in the new manufacturing
plant at the group`s Alrode facility during the period under review. The
plant commenced production during the second half of the year. Additional
working capital was required to finance the increase in inventory and trade
receivables relating to the expansion, which was funded from normal credit
facilities.
Lighting and electrical accessories - Radiant
Revenue increased from R361,0 million in 2010 to R363,7 million which is an
increase of 0,7% (2010: 1,4%) when compared to the prior year. Operational
costs, including the intangible assets impairment of R2,1 million, reduced
compared to the prior year. The margins were lower due to an increase in
prices from suppliers, which was partially absorbed by the company, and
overall market conditions.
Cash on hand decreased from R13,9 million at the end of December 2010 to R9,8
million as at the end of December 2011. The funds were utilised to finance
working capital.
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 cost is due to
the reduction in the loan balances. During the period a further R19,2 million
capital investment was made to complete the new factory building for SOEW.
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 in future.
Prospects
Government and Eskom`s commitment to increase spending on infrastructure will
create opportunities within the group. The expansion completed last year to
increase production capacity will contribute to an increase in volumes and
revenue.
The market recovery is slower than anticipated, but the group is well-
positioned to take full advantage of any improvements in the economy.
The group remains committed to ensuring earnings enhancement through both
organic and acquisitive growth, whilst improving the return on equity on a
sustainable basis.
Any forecast or forward looking information included in this announcement has
not been reviewed and reported on by the group`s independent auditors.
On behalf of the Board
EG Dube PJM Ferreira
Chairman Chief Executive Officer
27 February 2012
CORPORATE INFORMATION
Directors:
EG Dube# (Chairman)
EHT Panv@ (Deputy Vice-Chairman)
PJM Ferreira* (Chief Executive Officer
JP Bekker* (Chief Financial Officer)
CY Wuv
M Chong#
DL Tam#
HL Liv
KH Pon#,
CH Panv (Alternate)
* Executive
# Independent Non-executive
v Non-executive
Taiwanese
@ Brazilian
Company Secretary:
WT Green
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: 1969/004763/06)
Second Floor, 100 Grayston Drive, Sandown, Sandton, 2196
Share Transfer Secretary:
Computershare Investor Services (Pty) Ltd
Ground Floor, 70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
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
Website: www.pwc.co.za
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: 28/02/2012 07:05:02 Produced by the JSE SENS Department.
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