| Thu 17 May 2012, 13:02 | | SER/ SRN - Seardel Investment Corporation Limited - Reviewed consolidated |
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SER SRN
SER
SER/ SRN - Seardel Investment Corporation Limited - Reviewed consolidated
condensed results for the year ended 31 March 2012
SEARDEL INVESTMENT CORPORATION LIMITED
("Seardel" or "the Company")
Registration number: 1968/011249/06
(Incorporated in the Republic of South Africa)
JSE share code: SER
ISIN: ZAE000029815
JSE share code: SRN
ISIN: ZAE000030144
REVIEWED CONSOLIDATED CONDENSED RESULTS FOR THE YEAR ENDED 31 MARCH 2012
COMMENTARY
The Group reports income attributable to ordinary shareholders of R136,9
million (2011: R8,6 million) and total comprehensive income of R163,5 million
(2011: R42,2 million loss) for the year ended 31 March 2012. However, the
current year`s results were overwhelmingly influenced by the settlement of the
various litigation proceedings with former directors and officers of the Group
as announced on SENS on 16 March 2012, with income of R191,8 million relating
to a portion of that settlement having been recognised in the period.
Excluding the effect of the settlement on the current year`s results, the
Group is reporting an adjusted headline loss of R45.0 million against a R24.8
million loss in the prior year.
The main reason for the deterioration was the poor performance of the Seardel
Apparel division. The competition that this business unit faces from both
imports out of lower wage paying countries and manufacturers within our own
borders that do not pay the prescribed minimum wages meant that rising input
costs could not be recovered in higher prices for products supplied. In order
to fill its production capacity, margin needed to be sacrificed to retain
volumes. The resultant losses were of such a magnitude that it unfortunately
left no alternative but to rationalise the business unit.
Although turnover was up 6% to R2,5 billion, tough trading conditions saw
gross margins decline to 19,3% from 22,7% in the previous year. The decline in
margins reflects the above mentioned difficulty experienced by the Seardel
Apparel division. Margins, particularly within our textile businesses, were
further affected by movements in raw material prices. We mentioned in the
previous year`s report that the dramatic increases in cotton prices may have
an effect on volumes and margins in this year. What transpired is that cotton
prices have steadily declined over the course of this financial year which
resulted in inventory holdings usually being held at prices above spot and
thus resulted in lower margins being achieved.
Textiles segment
Although turnover was up 3,8% to R1 053,4 million, margin pressure saw
operating profit before finance costs from continuing operations fall to R38,3
million in the current period down from R56,2 million in the prior period. The
decrease is reflective of the generally difficult trading environment
experienced, the effect of the steady decline in cotton prices and an
inability to fully pass on the significant utility cost increases to
customers.
Clothing segment
A combination of lower turnover, reduced margins and the costs associated with
restructuring resulted in this segment reporting an operating loss before
finance costs from continuing operations of R125,8 million compared to the
R13,2 million loss recorded in the prior period.
The proposed restructuring that was announced in January 2012 has now been
completed with the 5 facilities located in the Western Cape being reduced to 2
facilities and the 2 facilities located in Ladysmith KwaZulu Natal being
consolidated into 1 facility. The current year`s results include R22 million
of direct restructuring costs as well R36 million of inventory impairments.
Although we are still dealing with some operational challenges, the
improvement initiatives identified in our interim report are beginning to find
traction and we are confident that progress will continue to be made.
The results of this segment also include the start-up costs of the new brand
focused business unit, Brand ID. As most of the brands within this unit are
either new or are being revamped, costs have been incurred ahead of any
revenue benefits. The most significant development within this business unit
was the successful launch of the 46664 fashion range into the local market and
early indications are very positive. It remains our intention to expose this
brand to the international markets and we hope to shortly be able to announce
further developments in this regard.
Property segment
Revenue remained relatively flat at R66,6 million but of significance is that
revenue from external tenants increased by 223% to R24,5 million.
Operating profit before finance costs declined by 28,1% to R44,6 million from
R62,0 million in the prior period. The decline is attributable to property
revaluations as included in the prior period was a R21,6 million upwards
revaluation, whilst the current period numbers include an R8,4 million
downwards revaluation. We anticipate that whilst the investment properties are
being developed and are at various stages of completion, the property
revaluations will remain volatile.
Good progress has been made on the property developments with 88 480 m2 having
been fully developed and made available for letting to external tenants. Of
this, 87 190 m2 (98,5%) has been let to date. A further 60 000 m2 across three
buildings and two different sites is available for development and we will
move ahead with these properties in stages as and when sufficient tenants have
been signed up.
Some R136,3 million has been spent on the developments to date, with the
remaining portions anticipated to cost an additional R109.7 million.
Toys, stationery and electronics segment
The performance of all the businesses within this segment delivered excellent
results. Revenue was up 25% to R565,7 million whilst operating profit, with
some assistance from foreign exchange gains, was up 46,2% to R56,6 million.
On behalf of the board
Stuart Queen Gys Wege
Chief Executive Officer Financial Director
Cape Town
17 May 2012
CONSOLIDATED CONDENSED STATEMENT OF COMPREHENSIVE INCOME
Audited
and
Reviewed restated
for the for the
year year
ended ended
31 March 31 March
Rand thousands 2012 2011
Revenue 2 506 794 2 358 986
Gross profit 483 846 536 361
Operating profit before impairments and
restructuring and retrenchment costs 204 756 129 829
Net impairment of assets (1 250) (2 995)
Restructuring and retrenchment costs (24 491) (5 176)
Operating profit before finance costs 179 015 121 658
Finance income 4 594 7 925
Finance expenses (38 467) (35 651)
Profit before taxation 145 142 93 932
Income tax 13 131 10 084
Profit for the year from continuing operations 158 273 104 016
Loss for the year from discontinued operations (21 442) (95 440)
INCOME FOR THE YEAR 136 831 8 576
Other comprehensive income/(loss):
Fair value adjustment on available-for-sale
financial assets - 260
Revaluation of land and buildings 30 731 (51 479)
Post employment medical benefit - actuarial
(loss)/gain (4 170) 411
Other comprehensive income/(loss) for the year 26 561 (50 808)
TOTAL COMPREHENSIVE INCOME/(LOSS)
FOR THE YEAR 163 392 (42 232)
Income attributable to:
Equity holders of the parent 136 944 8 567
Non-controlling interests (113) 9
INCOME FOR THE YEAR 136 831 8 576
Total comprehensive income/(loss) attributable to:
Equity holders of the parent 163 505 (42 241)
Non-controlling interests (113) 9
TOTAL COMPREHENSIVE INCOME/(LOSS)
FOR THE YEAR 163 392 (42 232)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Reviewed Audited
at at
31 March 31 March
2012 2011
Rand thousands
Non-current assets 1 142 413 967 147
Property, plant and equipment 695 048 665 727
Intangible assets 10 563 8 812
Investment properties 357 801 224 001
Other investments 3 329 3 329
Long-term receivables 43 402 35 256
Deferred tax asset 32 270 30 022
Current assets 1 286 386 1 140 694
Non-current assets held for sale 12 906 16 338
Inventories 581 816 557 575
Trade and other receivables 688 644 554 995
Current tax asset 971 898
Cash and cash equivalents 2 049 10 888
Total assets 2 428 799 2 107 841
EQUITY AND LIABILITIES
Total equity 1 411 645 1 254 592
Share capital and share premium 304 620 303 969
Treasury shares (14 610) (14 610)
Reserves 1 121 635 964 623
Total equity attributable to equity holders 1 411 645 1 253 982
Non-controlling interest - 610
Non-current liabilities 85 226 77 759
Deferred tax liability 8 725 7 999
Post employment medical aid benefits 74 645 66 849
Interest-bearing liabilities 715 98
Operating lease accruals 1 141 2 813
Current liabilities 931 928 775 490
Current tax liabilities - 257
Post employment medical aid benefits 4 662 4 384
Interest-bearing liabilities 25 427 131 470
Provisions 13 538 2 337
Trade and other payables 437 830 418 912
Bank overdrafts 450 471 218 130
Total liabilities 1 017 154 853 249
Total equity and liabilities 2 428 799 2 107 841
Net asset value 1 411 645 1 253 982
Net asset value per share after treasury shares
(cents) 201 178
Net asset value (excluding intangible assets) 1 401 082 1 245 170
Net asset value (excluding intangible assets)
per share after treasury shares (cents) 199 177
STATISTICS PER SHARE
Reviewed Audited
at at
31 March 31 March
In cents, where applicable 2012 2011
Weighted average number of shares in issue (`000) 703 398 702 946
Number of shares in issue (`000) 703 711 702 946
Diluted weighted average number of shares
in issue (`000) 727 060 737 493
Earnings per share 19,5 1,2
Adjusted (loss)/earnings per share (7,8) 1,2
Headline earnings/(loss) per share 20,9 (3,5)
Adjusted headline loss per share (6,4) (3,5)
Diluted earnings per share 18,8 1,2
Diluted headline earnings/(loss) per share 20,2 (3,4)
Reconciliation between earnings, headline
earnings/(loss) and adjusted headline loss
Income attributable to shareholders 136 944 8 567
Net impairment of assets 1 250 (10 734)
Gain on deemed disposal - (10)
Surplus on disposal of property, plant and
equipment (1 114) (2 077)
Revaluation of investment property 8 372 (21 575)
Loss on disposal of property, plant and equipment 1 534 1 115
Insurance claim for capital asset (247)
Total tax effect of adjustments (3) (38)
Headline earnings/(loss) 146 736 (24 752)
Settlement (191 773) -
Adjusted headline loss (45 037) (24 752)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Treasury Other
Rand thousands capital premium shares reserves
Balance 31 March 2010 159 207 144 762 (14 610) 318 019
Total comprehensive income for
the year
Fair value adjustment on
available-for-sale financial
assets 260
Revaluation of land and buildings (51 479)
Post employment medical benefit
- actuarial gain
Share incentive scheme
Reclassification of revaluation
surplus (5 474)
Deferred tax on release of
revaluation surplus on land
and buildings disposed of 2 738
Balance 31 March 2011 159 207 144 762 (14 610) 264 064
Total comprehensive income for
the year
Revaluation of land and buildings 30 731
Post employment medical benefit
- actuarial loss
Disposal of subsidiary
Share incentive scheme
Rate change (9 328)
Reclassification of revaluation
surplus (831)
Deferred tax on release of
revaluation surplus on land
and buildings disposed 155
Share issue 192 459
Balance 31 March 2012 159 399 145 221 (14 610) 284 791
Non-
Retained controlling Total
Rand thousands income Total interests equity
Balance 31 March 2010 683 970 1 291 348 601 1 291 949
Total comprehensive
income for the year 8 567 8 567 9 8 576
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 411 411 411
Share incentive scheme 2 137 2 137 2 137
Reclassification of
revaluation surplus 5 474 - -
Deferred tax on release
of revaluation surplus on
land and buildings
disposed of 2 738 2 738
Balance 31 March 2011 700 559 1 253 982 610 1 254 592
Total comprehensive
income for the year 136 944 136 944 (113) 136 831
Revaluation of land and
buildings 30 731 30 731
Post employment medical
benefit - actuarial loss (4 170) (4 170) (4 170)
Disposal of subsidiary (525) (525) (497) (1 022)
Share incentive scheme 3 205 3 205 3 205
Rate change (9 328) (9 328)
Reclassification of
revaluation surplus 831 - -
Deferred tax on release
of revaluation surplus on
land and buildings disposed 155 155
Share issue 651 651
Balance 31 March 2012 836 844 1 411 645 - 1 411 645
CONSOLIDATED STATEMENT OF CASH FLOWS
Audited
and
Reviewed restated
for the for the
year year
ended ended
31 March 31 March
Rand thousands 2012 2011
Net cash flow from (used in) operating
activities 39 386 (57 281)
Operating profit before finance costs from
continuing operations 179 015 121 658
Operating loss before finance costs from
discontinuing operations (19 148) (84 753)
Income for the period before finance costs 159 867 36 905
Adjustments for:
Depreciation and amortisation 44 301 40 735
Revaluation of investment property 8 372 (21 575)
Foreign exchange gains (401) (1 261)
Loss/(surplus) on disposal 420 (962)
Net impairment of property, plant and equipment 1 250 17 216
Impairment of assets held for sale - (27 950)
Investment income (78) (70)
Post-employment medical benefit 2 282 2 079
Share incentive scheme 3 856 2 137
Change in non-current receivables (8 146) (496)
Net change to working capital (124 930) (56 090)
Net finance costs (36 167) (35 225)
Taxation paid (11 240) (12 724)
Net cash flow from (used in) investing activities (170 076) 22 786
Additions of property, plant and equipment (49 699) (63 884)
Proceeds on disposal of property, plant and equipment 10 013 120 181
Additions to investment property (119 262) (22 778)
Interest capitalised to investment property (5 956) (309)
Net acquisition of intangible assets (5 250) (10 494)
Investment income 78 70
Net cash flow from (used in) financing activities (105 376) (56 550)
Change in borrowings (105 376) (56 550)
Net change in cash and cash equivalents (236 066) (91 045)
Cash and cash equivalents at the beginning of the year (207 242) (116 197)
Cash in subsidiary disposed of (5 114) -
Cash and cash equivalents at the end of the year (448 422) (207 242)
CONSOLIDATED CONDENSED SEGMENTAL REPORT
Toys,
stationery
and
Rand thousands Textiles Clothing Property electronics
Business segments R000`s R000`s R000`s R000`s
2012
Segment revenue
Gross revenue 1 053 353 957 116 66 577 565 663
Revenue reclassified as
discontinued operations 3 (49 900) - -
Inter-segment revenue
(these transactions are
at arm`s length) (43 959) - (42 059) -
Consolidated revenue 1 009 397 907 216 24 518 565 663
Segment results
Combined operating
profit/(loss) before
finance costs 39 772 (146 495) 44 554 56 626
Disclosed as discontinued
operations (excluding
finance charges and
taxation) (1 505) 20 653 - -
Operating profit/(loss)
before finance costs from
continuing operations 38 267 (125 842) 44 554 56 626
Net finance costs
Profit/(loss) before
taxation from continuing
operations 38 267 (125 842) 44 554 56 626
Segment assets 674 105 528 264 823 637 336 261
Segment liabilities 287 140 116 273 15 597 97 895
2011
Segment revenue
External sales 1 014 983 1 150 248 65 597 452 600
Revenue reclassified as
discontinued operations
(restated) (136) (232 001) - -
Inter-segment sales
(these transactions are
at arm`s length) (33 324) - (58 005) (976)
Consolidated revenue 981 523 918 247 7 592 451 624
Segment results
Combined operating
profit/(loss) before
finance costs 55 936 (97 753) 62 032 38 737
Disclosed as discontinued
operations (excluding
finance charges and
taxation) (restated) 228 84 525 - -
Operating (loss)/profit
before finance costs from
continuing operations 56 164 (13 228) 62 032 38 737
Net finance costs
Profit/(loss) before
taxation from continuing
operations 56 164 (13 228) 62 032 38 737
Segment assets 666 464 558 194 595 401 248 721
Segment liabilities 283 273 119 614 2 891 63 090
Head
Rand thousands office Total
Business segments R000`s R000`s
2012
Segment revenue
Gross revenue - 2 642 709
Revenue reclassified as discontinued operations - (49 897)
Inter-segment revenue (these transactions are at arm`s
length) - (86 018)
Consolidated revenue - 2 506 794
Segment results
Combined operating profit/(loss) before finance costs 165 410 159 867
Disclosed as discontinued operations (excluding finance
charges and taxation) - 19 148
Operating profit/(loss) before finance costs from
continuing operations 165 410 179 015
Net finance costs (33 873) (33 873)
Profit/(loss) before taxation from continuing operations 131 537 145 142
Segment assets 66 532 2 428 799
Segment liabilities 500 249 1 017 154
2011
Segment revenue
External sales - 2 683 428
Revenue reclassified as discontinued operations
(restated) - (232 137)
Inter-segment sales (these transactions are at arm`s
length) - (92 305)
Consolidated revenue - 2 358 986
Segment results
Combined operating profit/(loss) before finance costs (22 047) 36 905
Disclosed as discontinued operations (excluding finance
charges and taxation) (restated) - 84 753
Operating (loss)/profit before finance costs from
continuing operations (22 047) 121 658
Net finance costs (27 726) (27 726)
Profit/(loss) before taxation from continuing operations(49 773) 93 932
Segment assets 39 061 2 107 841
Segment liabilities 384 381 853 249
NOTES
1. Basis of preparation
These consolidated condensed results are prepared in accordance with the
recognition and measurement requirements of International Financial Reporting
Standards (IFRS), the AC 500 standards as issued by the Accounting Practices
Board or its successor, the disclosure requirements of IAS 34, the Listings
Requirements of the JSE Limited and the Companies Act No. 71 of 2008.
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
year ended 31 March 2011.
3. Change in comparatives
During the year the Group announced the closure of the Knitwear division.
The results of this division have been disclosed as discontinued operations.
The comparative results have been restated accordingly.
4. Independent review
The consolidated statement of financial position at 31 March 2012 and the
consolidated condensed statement of comprehensive income, statement of changes
in equity, consolidated condensed segmental report and statistics per share
for the year then ended have been reviewed by KPMG Inc. Their unmodified
report is available for inspection at the Registered Office of the Company.
5. Related party transactions
During the year the Group incurred the following related party expenditure:
* Expenses recognised in relation to the provision of managerial services
received from HCI amounted to R4 200 000.
* Residential premises were leased to Mr A Ntuli (director) for R42 180.
* Interest on bridging loan received from HCI Treasury (Pty) Ltd - R1 135 927
6. Capital expenditure and commitments
Capital expenditure during the year under review amounted to R174,2 million
(2011: 97,3 million). There are further commitments in respect of contracted
capital expenditure as at 31 March 2012 of approximately R19,5 million (2011:
R67,4 million).
7. Litigation settlement
Included in operating profit for the current year is a portion of the
litigation settlement with former directors and officers of the Group and
officers of the Group amounting to R191,8 million.
8. Dividends
The directors have resolved not to declare a dividend for the year ended 31
March 2012.
9. Preparation of results
These results have been prepared under the supervision of the Financial
Director, Gys Wege (CA) SA.
CORPORATE INFORMATION
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 JSE share code: SRN
ISIN: ZAE000029815 ISIN: ZAE000030144
Directors
J A Copelyn* (Chairman), Adv N N Lazarus* (Deputy Chairman),
M H Ahmed*, T G (Kevin) Govender, A M Ntuli, S A Queen (Chief Executive
Officer), Y Shaik*, R Watson*, G D T Wege (Financial Director)
(*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
Investec Bank Limited
Date: 17/05/2012 13:02:01 Produced by the JSE SENS Department.
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