| Thu 21 Feb 2002, 0:00 | | Seardel Investment Corporation Limited - Interim |
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Seardel Investment Corporation Limited
Group Interim Report to Shareholders for the six months ended 31 December
2001
Interim Results
Seardel Group Interim Report to Shareholders
for the six months ended December 2001
Financial Highlights
Rand thousands %Change
Revenue R1786,4 million + 67,8
Profit from operations R78,5 million + 157,6
Income before taxation R39,9 million +152,9
Retained income R35,1 million +159,0
Earnings per share 32,7 cents +159,0
Headline earnings per share 16,0 cents +27,0
Capital and reserves R990,1 million +3,9
The unaudited consolidated financial statements of the group for the six
months ended 31 December 2001 with comparative figures for the
corresponding period last year, together with the audited financial
statements for the financial year ended 30 June 2001 are set out below.
Income Statement
SIX MONTHS ENDED 31 DECEMBER Year Ended 30 June
2001 2000 % Change 2001
Rand thousands (unaudited) (unaudited) (audited)
Revenue R1 786 435 R1 064 589 +67.8% R2 550 245
Profit from operations 78 514 30 475 +157.6% 108 916
Amortisation of negative
Goodwill 17 935 - 17 935
Income before finance
charges 96 449 30 475 +216.5% 126 851
Net finance charges ( 56 560) ( 24 829) ( 70 269)
Attributable income of
associated companies - 10 129 10 270
Income before taxation 39 889 15 775 +152.9% 66 852
Taxation ( 4 807) ( 836) ( 11 359)
Income after taxation 35 082 14 939 +134.8% 55 493
(Income) attributable to
outside shareholders of
subsidiaries - ( 1 395) ( 46)
Retained income R35 082 R13 544 +159.0% R55 447
Statistics Per Share
Number of shares
in issue (000) 107 134 107 134 107 134
Earnings - historic 32.7 12.6 +159.0% 51.8
- headline 16.0 12.6 + 27.0% 37.1
Distribution annual
- (refer announcement) - - 4.5
Earnings yield 21.4% 14.1% 17.9%
Distribution yield - - 2.2%
Distribution
cover - headline - - 8.2
Balance Sheet
SIX MONTHS ENDED 31 DECEMBER Year Ended 30 June
2001 2000 2001
Rand thousands (unaudited) (unaudited) (audited)
ASSETS
Non-current assets 567 497 608 188 557 959
Fixed assets 861 240 970 552 867 923
Goodwill ( 394 576) ( 430 411) ( 412 515)
Investments 40 682 - 41 173
Long-term receivables 31 550 44 675 26 355
Deferred taxation 28 601 23 372 35 023
Current assets 1 466 382 1 648 631 1 514 372
Inventory 674 468 699 958 690 610
Accounts receivable 707 886 718 256 685 558
Cash and cash equivalents 84 028 230 417 138 204
TOTAL ASSETS R2 033 879 R2 256 819 R2 072 331
EQUITY AND LIABILITIES
Capital and reserves 595 687 541 931 560 611
Share capital 6 974 11 100 6 974
Reserves 588 599 510 316 553 523
Shareholders' interest 595 573 521 416 560 497
Outside shareholders'
interest 114 20 515 114
Non-current liabilities 665 919 772 734 664 114
Interest-bearing liabilities 538 218 628 527 532 847
Deferred liabilities 127 701 144 207 131 267
Current liabilities 772 273 942 154 847 606
Interest-bearing loans 113 686 286 864 191 734
Accounts payable 529 574 534 036 617 426
Bank overdrafts 128 809 120 948 33 421
Distribution to shareholders 204 306 5 025
TOTAL EQUITY AND LIABILITIES R2 033 879 R2 256 819 R2 072 331
Tangible net asset value value 990 149 951 827 973 012
Tangible net asset
value per share -- cents 924 888 908
Ratios
Profitability
Profit from operations
as percentage of revenue 4.4% 2.9% 4.3%
Income before taxation
as percentage of revenue 2.2% 1.5% 2.6%
Income after taxation
as percentage of revenue 2.0% 1.4% 2.2%
Return on total
tangible assets 7.0% 2.2% 5.2%
Return on shareholders'
interest 5.6% 3.1% 3.9%
Leverage
Ratio of debt to
capital and reserves 124% 138% 128%
Ratio of borrowings
to capital and reserves 70% 83% 64%
Liquidity
Current ratio 1.9 1.7 1.8
Net finance charges cover 1.7 1.2 1.8
Consolidated Abridged Cash Flow
SIX MONTHS ENDED 31 DECEMBER Year Ended 30 June
2001 2000 2001
Rand thousands (unaudited) (unaudited) (audited)
Internal cash flow 44 892 ( 33 838) 198 292
Interest and
taxation paid ( 81 914) ( 44 289) ( 100 082)
Transactions
with shareholders ( 4 821) ( 6 301) ( 2 277)
Cash utilised
from operating activities( 41 843) ( 84 428) 95 933
Investment and
financing activities ( 35 043) ( 581 269) ( 490 586)
Increase in net
borrowings (R76 886) (R665 697) (R394 653)
Changes in Equity Statement
FOR THE 6 months ended 31 DECEMBER 2001
Share Share Non- Retained Total
Capital Premium Distributable Earnings
Reserves
Rand thousands
Balance
31 December 2000 6 974 4 126 81 575 428 741 521 416
Net gains and
losses not
recognised in the
income statement 1 999 1 999
Revaluation of
land and buildings 488 488
Foreign currency
translation reserve 1 511 1 511
Net income
for the period 41 903 41 903
Distribution (4 126) (695) (4
821)
Balance
30 June 2001 6 974 - 83 574 469 949 560
497
Net gains and
losses not
recognised in the
income statement ( 6) ( 6)
Foreign currency
translation reserve ( 6) ( 6)
Net income for the period 35 082 35 082
Balance
31 December 2001 R6 974 R - R83 568 R505 031 R595
573
Composition of Non Distributable Reserves 2001 2000
Foreign currency translation reserve 1 505 -
Capital redemption reserve fund 440 440
Surplus on disposal of subsidiary and
associated companies 664 664
Surplus on revaluation of land and buildings 33 087 32 599
Revaluation of interest in associated companies 47 872 47 872
R83 568 R81 575
Comment on Results
Frame Group Limited and Prima Toy & Leisure Group Limited became wholly
owned subsidiaries on 11 December and 1 November 2000 respectively. The
results of these two entities have therefore been consolidated into the
group results. During the comparative period last year they were accounted
for as associated companies to dates of acquisition. There are therefore no
adjustments for minority interests for the period under review.
Revenue increased substantially by 67,8% to R1786,4 million from R1064,6
million last year. Profit from operations increased by 157,6% to R78,5
million from R30,5 million last year. In order to provide meaningful
comparative figures in respect of revenue and profit from operations, if
last year's figures had been restated on a pro forma consolidated basis,
revenue would have increased by 6,2% to R1,8 billion from R1,7 billion and
profit from operations by 16,7% to R78,5 million from R67,3 million.
Pre-tax income increased by 152,9% to R39,9 million from R15,8 million last
year, and income after tax increased by 134,8% to R35,1 million from R14,9
million last year.
Retained income increased by 159% to R35,1 million from last year's level of
R13,5 million. These earnings include an amount of R17,9 million, being the
amortisation of negative goodwill. Headline earnings per share amounted to
16 cents, an increase of 27% from last year's level of 12,6 cents.
The group is continuing with its rationalisation programme in order to
streamline its administration and manufacturing activities.
The number of shares in issue remains unchanged at 107,1 million.
Tangible net asset value is 924 cents (2000: 888 cents) per share.
Exports have continued to increase, amounting to 15,2% of clothing turnover
in the six months to December 2001, compared to 12,3% in the corresponding
period the previous year. We note with disappointment the inability of the
US Congress to pass AGOA II. This would resolve the "knit-to-shape" issue,
giving African countries additional opportunities to trade out of their
economic morass.
Commentary
Clothing retailers ended 2001 with buoyant trading conditions. Hopefully
this augers well for improved trading conditions in 2002 as retailers re-
stock. At the time of writing, it is difficult to predict the extent of
price increases caused directly and indirectly by the falling rand, but they
are likely to be substantial. With its strong financial base, Seardel will
be better placed in the forthcoming year to finance increased working
capital requirements caused by the devaluing rand than will smaller clothing
manufacturers.
The 5-year Duty Credit Certificate scheme is in place until March 2005 and
being well managed by the Board of Tariffs and Trade. The Department of
Customs continues to show more teeth in combating illegal imports and under-
invoicing. Unfortunately there is no sign of the Department of Trade and
Industry getting to grips with Country of Origin labelling. This would be of
major importance in combating illegal imports and helping the consumer
identify local product for the Proudly South African campaign.
Outlook to June 2002
The recent dramatic depreciation in the Rand against the currencies of South
Africa's major trading partners is well documented. The impact thereof will
only be felt during the next six months trading period and may result in
volumes decreasing because of higher prices. It is anticipated however that
export activity to the resurgent USA and EuroLand economies will, to a
certain extent, make up for lower local production levels.
Distribution Announcement
In keeping with past practice, a single distribution will be considered at
the end of the financial year.
Seardel Board
Shareholders in general meeting approved the granting of an option to a
consortium in respect of 26 783 571 N ordinary shares. Further to the
granting of the above option, Messrs Cyril Ramaphosa and Neil Lazarus were
appointed to the board. At a recent meeting of the board, and after due
consideration, it was unanimously decided that the board's composition
needed to be addressed as it was unwieldy and not in accordance with the
requirements of the King Report on Corporate Governance. After taking
cognisance of the above the following executive directors agreed to resign
from the board with effect from 21 February 2002 - G C de Bruin, B G
Richards, C Beekman, A Keller, M Davidson, R L Richter, S H Diamond, M R
Sternberg, E Stummer, K Winer and R J Whiteford. The executive directors who
have resigned from the board shall all retain their existing executive
management positions within the group and Seardel's operations will be
unaffected by their resignation. The restructured board now consists of four
non-executive and three executive directors, headed by Chairman Dr Aaron
Searll. All directors who have resigned are gratefully and sincerely thanked
for their valued contributions to the board over a period of many years.
Segmented Analysis
Office automation &
Segment Apparel Textiles* consumer electronics Toys
2001 2000 2001 2000 2001 2000 2001 2000
Revenue % 43 72 46 13 7 12 4 3
Operating income % 19 45 66 26 10 23 5 6
Total assets % 30 32 61 59 7 6 2 3
* Includes associated companies
Notes
1. Accounting policies
The unaudited consolidated financial statements of the group have been
prepared on the historical cost basis, except for land and buildings which
are periodically revalued, using the accounting policies detailed in the
annual report for the year ended 30 June 2001 and in terms of AC127.
2. Capital expenditure and commitments
Net capital expenditure during the period under review amounted to R34
million (2000: R23 million). Commitments in respect of contracted capital
expenditure as at 31 December 2001 amounted to approximately R47,2 million
(2000: R35,9 million). These commitments will be financed from internal cash
resources.
3. Contingent liabilities
There are contingent liabilities in respect of guarantees furnished by the
company and/or its subsidiaries for mortgage bonds, surety bonds, housing
loans, bank facilities, leases and normal business commitments of subsidiary
and associated companies.
4. Comparative Figures
The prior year figures account for the Frame and Prima groups as associated
companies to dates of acquisition, whereas in respect of the period under
review, now being wholly owned subsidiaries, their results have been fully
consolidated.
Signed for and on behalf of the board in Cape Town
DR A SEARLL D.B.A. A D JACOBSON C.A.(S.A.)
Chairman Financial Director
21 February 2002
Registration No. 1968/011249/06. Incorporated in the Republic of South
Africa.
The company's shares are listed in the industrial-clothing and textile
sector of the JSE Securities Exchange, South Africa.
Seardel: SER: ZAE000029815 SRN: ZAE000030144
Directors A Searll (Chairman), K A G Blumberg**, T Eboka**, A D Jacobson,
N N Lazarus**, M C Ramaphosa**, W Simeoni.
** indicates non-executive
Secretary and Registered office L A Clohessy, 2nd Floor, Seardel House,
Alphen Park, Constantia Main Road, Constantia 7806, Cape Town
Transfer secretaries Mercantile Registrars Limited, 10th Floor, 11 Diagonal
Street, Johannesburg 2001 (P O Box 1053 Johannesburg 2000)
