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Sail Group Limited - Unaudited Interim Results For The Six Months Ended 30 June
Release Date: 09/09/2003 07:50:00 Code(s): SIR
SAIL GROUP LIMITED - UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE
2003
SAIL GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1941/014601/06)
("SAIL" or "the Company")
Share code: SIR
ISIN: ZAE000039962
SAIL GROUP LIMITED UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE
2003
30 June 31 December 30 June
2003 2002 2002
Basic earnings per
share (cents) (7.78) (44.67) 1.75
Headline earnings
per share (cents) 1.11 (4.91) 3.36
Net asset value per
share (cents) 35 42 91
Number of shares
issued (000) 273 854 273 854 273 898
INCOME STATEMENT
for the six months ended 30 June 2003
Unaudited Unaudited Audited
6 months 6 months 12 months
30 June 2003 30 June 2002 31 December 2002
R "000 R "000 R "000
Revenue 78,705 88,957 183,232
Other income 530 3,919 873
Operating expenses (73,827) (79,748) (177,216)
EBITDA 5,408 13,128 6,889
Depreciation (1,955) (3,204) (6,847)
Intangibles amortised (11,304) (3,418) (19,249)
Exceptional items (15,082) (2,410) (86,958)
Operating (loss) profit
before interest
and taxation (22,933) 4,096 (106,165)
Net interest (paid)
/earned (7,538) (7,612) (19,646)
Income from associates
and joint ventures 8,136 8,872 (2,314)
(Loss)/profit before
taxation (22,335) 5,356 (128,125)
Taxation 1,158 (917) (739)
Net (loss) profit
after taxation (21,177) 4,439 (128,864)
Minority interest (118) 342 6,478
Attributable (loss)
profit for the period (21,295) 4,781 (122,386)
-
(Loss)/Earnings per
share (cents)
Basic (7.78) 1.75 (44.67)
Headline 1.11 3.36 (4.91)
Weighted average number
of shares in issue("000) 273,854 273,945 273,940
RECONCILIATION OF HEADLINE EARNINGS
for the six months ended 30 June 2003
(Loss)/Earnings
attributable to ordinary
shareholders (21,295) 4,781 (122,386)
Goodwill amortised 9,250 3,415 20,091
Other adjustments 15,082 1,059 88,853
Headline earnings
(loss) 3,037 9,255 (13,442)
STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2003
Stated Distributable Non-distributable Total
Capital reserves reserves
R "000 R "000 R "000 R "000
Balance at
30 June 2002 195,968 41,323 6,132 243,423
Issue of stated
capital
Net loss for
the period - (127,167) - (127,167)
Share buyback (63) - (63)
Foreign currency
translation reserve 528 528
Transfer from non-
Distributable
Reserves - 5,799 (5,799)
Balance at
31 December 2002 195,905 (80,045) 861 116,721
Net loss for the
Period - (21,295) - (21,295)
Foreign currency
translation reserve (160) (160)
Transfer to non-
distributable reserves- -
Balance at
30 June 2003 195,905 (101,340) 701 95,266
CASH FLOW STATEMENT
for the six months ended 30 June 2003
Unaudited Unaudited Audited
6 months 6 months 12 months
30 June 2003 30 June 2002 31 December 2002
R "000 R "000 R "000
Cash inflow/(outflow)from
operating activities 17,490 2,424 (9,292)
Cash inflow (outflow)
from investing
activities 8,231 (1,165) (4,966)
Cash (outflow) inflow
from financing activities(33,428) (1,970) (629)
Net decrease in cash
and cash equivalents (7,707) (711) (14,887)
Cash and cash equivalents
- beginning of the period 18,101 32,988 32,988
Cash and cash equivalents
- end of the period 10,394 32,277 18,101
GROUP BALANCE SHEET
for the six months ended 30 June 2003
Unaudited Unaudited Audited
6 months 6 months 12 months
30 June 2003 30 June 2002 31 December 2002
R "000 R "000 R "000
ASSETS
Non-Current assets
Property, plant
and equipment 31,294 55,364 36,108
Deferred tax assets 10,820 11,830 9,529
Intangible assets 109,632 178,400 123,529
Investment in associates 46,025 67,377 45,359
Investment in joint
Ventures 6,838 11,592 9,695
Other investments
and loans 5,489 12,231 7,431
Current assets
Trade receivables 36,124 54,240 50,901
Inventory 711 14,721 893
Cash and cash
Equivalents 15,700 39,912 27,097
Other receivables
and prepayments 7,668 2,949 12,070
TOTAL ASSETS 270,301 448,616 322,612
EQUITY AND LIABILITIES
Capital and reserves 95,266 243,423 116,721
Minority interest (730) 4,611 (854)
Non-current liabilities
Interest-bearing
Borrowings 90,111 109,551 103,363
Non-interest bearing
Borrowings 242 4,386 2,016
Income received in
Advance 1,145 4,168 3,977
Deferred taxation 245 154
Current liabilities
Trade and other
Liabilities 32,934 44,503 40,794
Short-term portion
of interest bearing
borrowings 13,688 18,946 32,001
Short-term portion of
non-interest bearing
borrowings 4,423 2,042 4,512
Income received in
Advance 27,671 9,351 10,932
Bank overdraft 5,306 7,635 8,996
TOTAL EQUITY AND
LIABILITIES 270,301 448,616 322,612
Number of shares
issued (000) 273,854 273,898 273,854
Net asset value per
share (cents) 35 91 42
SEGMENT REPORT
for the six months ended 30 June 2003
Sport Rights Corporate
And Brand Marketing
Commerciali- Division
sation
Division Other Adjustment Total
R"000 R"000 R"000 R"000 R"000
Revenue 34,399 31,661 12,645 78,705
Segment results 3,807 3,309 (3,545) 3,571
Amortisation of
Intangibles (1,798) (8,888) (618) (11,304)
Finance costs (5,159) (4,915) 2,536 (7,538)
Profit/ (loss)
on sale of
fixed assets 64 (182) (118)
Income from
associates and
joint ventures 7,767 900 (531) 8,136
Minority
Interest (118) (118)
Taxation 641 841 (324) 1,158
Impairment of
investment/
exceptional
items (7,860) (21) (7,201) (15,082)
Dividend
received/
(paid) 102 (102)
Attributable
(loss) profit
for the period (2,602) (8,608) (10,085) (21,295)
Segment assets 102,541 39,521 4,726 (463) 146,325
Investments
and loans (6,705) 80,220 (24,921) (43,105) 5,489
Investments in
associates and
joint ventures 45,185 6,069 1,609 52,863
Goodwill 238 49,099 194 49,531
Deferred
Taxation 4,974 4,160 1,686 10,820
Taxation 173 4,792 308 5,273
Total assets 143,804 175,253 (26,483) (43,568) 270,301
Segment
Liabilities 26,369 34,610 6,741 (1,405) 66,315
Long-term
interest
bearing
borrowings 88,521 40,265 3,488 (42,163) 90,111
Long-term non
-interest
bearing
borrowings 242 242
Current
portion of
interest
bearing
borrowings 2,428 9,281 1,979 13,688
Current
portion of
non-interest
bearing
borrowings 723 3,700 4,423
Deferred
Taxation 245 245
Taxation 25 716 741
Total
Liabilities 118,553 87,856 12,924 (43,568) 175,765
Depreciation (941) (672) (342) (1,955)
The restructuring of the business has been a challenging yet rewarding process
for SAIL"s management and staff.
As stated in SAIL"s 2002 Annual Report, the group"s focus would be to activate
existing, and unleash new revenue opportunities. The new focus has opened up a
wide range of opportunities that are being vigorously pursued. This has resulted
in an increase in revenue of R14 million from SAIL"s core businesses.
An enhanced consolidated cash management system has resulted in better working
capital management, the consolidation of debt, saving on financing costs and
reduced borrowings for the Group.
As part of the finalisation of the restructuring process, the carrying value and
sustainability of SAIL"s investments were again reviewed. It was deemed prudent
to impair investments further and in certain instances fast track the
amortisation of goodwill to match future revenue streams. This resulted in the
company making an attributable loss of R21,295 million for the interim period.
In support of its new strategy, SAIL"s operating business units were collapsed
into the group and a new divisional structure has been put into place. The lines
of business are now Sports Rights, Investment Management, Corporate Client
Service, Events, Production and PR and the Shared Services groups. The focus of
the business is to add value, leverage and enhance every element of sport and
entertainment.
OPERATING PERFORMANCE
As mentioned in our annual results (31 December 2002), the Group engaged in a
restructuring process moving to an active, operational approach from a passive,
investment approach. The actions associated with this restructuring included re-
valuation of assets and investments, consideration as to discontinue certain
operations as well as considering financing and investment options. The impact
thereof on the trading results for the past six months can be summarised as
follows:
* The good performance of the Blue Bulls and the Corporate Client Services
Group of SAIL contributed additional revenue, before taxation, of
R14 million compared to the same period last year. The Corporate Client
Services Group concluded new business contracts with large corporate
companies and extended existing management contracts.
* In line with the restructuring process, the decision was taken in the
latter part of last year, to sell 7 operating units of the Golf retail
division. This resulted in a loss of gross revenue of R 21 million,
compared to the same period last year.
* The exceptional items are as a direct result of the revaluation of the
carrying value of certain investments.
* The decrease in other income is mainly attributable to the forex profit
accounted for during the previous year (R 3,7 million). The last foreign
exchange contracts matured last year and currently there is no material
foreign debt in need of hedging.
* The restructuring of the group also had an impact on the non-cashflow items
on the income statement i.e. amortisation of intangibles and depreciation.
Decisions taken in the latter part of 2002 resulted in the accelerated
write-off of goodwill and intangibles. Some of these have also had an
impact on the first six months results.
* Taxation of R 1,1 million largely comprised a deferred tax credit as a
result of the assessed loss situation for the year to date and the
consolidation of group company business.
Attributable shareholders income decreased from a profit of R 4,7 million to a
loss of R 21,3 million as a result of the above mentioned factors. Headline
earnings on comparison only shows a decrease of 67%.
CONTINGENT LIABILITIES
Management of Sail Sport & Entertainment (now merged into SAIL) has the right to
require SAIL to repurchase 28 823 529 SAIL shares at R2 per share for a period
of 30 days after 31 March 2006. Details regarding the specific repurchase of the
shares can be seen in the circular dated 21 December 2001.
FINANCIAL POSITION AND CASH FLOW
As mentioned in our Annual report, a vital ingredient of our new approach is an
intense focus on the financial aspect of our business. Greater financial
management and accountability for the divisions characterize our new strategy.
The Finance Division has therefore been strengthened and re-focused. As stated
in our Annual Report, we would concentrate on the golden triangle of revenue,
cash flow and profits, although cash earnings will not match accounting earnings
for the next three years.
The net asset value for the group decreased by 62% compared to the previous
year"s June results. This is mainly as a result of the impact of the
restructuring and the re-valuation of the carrying value of investments. With
the prospects of expanding the core business units, the deferred tax asset will
be utilised through generation of future profits.
The increase in income received in advance of R 15,2 million, is as a result of
increases in season ticket sales, suite rentals and management fees
The decrease in the working capital of 84% is mainly attributable to the Golf
retail divisions that were sold during the course of last year.
Net cash outflow from financing activities (increased from 0,6 million to R 33,4
million) is in accordance with the whole restructuring plan of reducing interest
bearing debt and optimising the cash flow situation. The overall level of
consolidated group borrowings decreased by 24% to R 108 million at the end of
June 2003.
ACCOUNTING POLICIES
The financial statements are prepared on a historical cost basis in accordance
with South African Statements of Generally Accepted Accounting Practice, and
incorporate the accounting policies of the group, which are consistent in all
material respect with those, adopted in the previous financial year.
DIVIDEND POLICY
The current policy is not to pay dividends, and all retained earnings are used
to fund growth. The directors will periodically review this policy.
LOOKING FORWARD
In terms of empowerment, SAIL believes that it is imperative to transform itself
into a more fully representative organization at both employee and shareholder
level. SAIL believes it is necessary to increase its current BEE shareholding
from 18.1 %, and is endeavouring to do so in the current year. On an employee
level, 48% of SAIL"s staff represents historically disadvantaged individuals.
The new management have been in office for six months now, in this period it has
managed to stabilise the business and systems, and have managed to identify the
non-performing and non-core investments. Management"s focus for the remainder of
the year will be on reducing its debt exposure.
SAIL is uniquely positioned in the sporting industry. The company can provide
total solutions that add value at multiple points. The restructuring has
resulted in a new energy and vibrancy that has infused the business. Management
believes this will convert to greater client satisfaction, professional
fulfilment for SAIL staff, and better returns to shareholders.
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