| Fri 27 Feb 2004, 17:32 | | Results For The Year Ended 31 December 2003 |
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Spectrum Shipping - Annual Financial Results For The Year Ended 31 December 2003
Release Date: 27/02/2004 17:00:12 Code(s): SUM
SPECTRUM SHIPPING - ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2003
SPECTRUM SHIPPING
(Registration number: 1998/018118/06)
(Share Code: SUM ISIN number: ZAE000037446)
ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2003
INCOME STATEMENT
Audited Audited
2003 2002
R"000 R"000
Gross billings 574 568 628 908
Cost of billings (545 837) (599 583)
Turnover 28 731 29 325
Other income 721 833
Operating costs (24 827) (18 121)
Operating profit before interest and taxation 4 625 12 037
Net finance costs (2 489) (4 286)
Profit before taxation 2 136 7 751
Taxation (660) (715)
Net profit after taxation 1 476 7 036
Shares in issue (000"s) 850 000 850 000
Earnings per share (cents) 0,2 0,8
Headline earnings per share (cents) 0,2 0,7
Reconciliation between earnings and headline earnings
Profit after taxation 1 476 7 036
Impairment of intangible assets 417 -
Loss on sale of fixed assets 18 9
Amortisation of goodwill 64 282
Taxation effects (5) (1 296)
Headline profit after taxation 1 970 6 031
CASH FLOW STATEMENT
Audited Audited
2003 2002
R"000 R"000
Cash flows from operating activities (6 446) (17 610)
Cash generated by operating activities 6 350 12 373
Interest received 3 686 829
Interest paid (6 175) (5 114)
Changes in working capital (10 307) (25 698)
Cash flows from investing activities (1 199)
(343)
Property, plant and equipment acquired (937) (455)
Intangible assets acquired (329) -
Proceeds of disposals of property, plant and equipment 50 -
Loans receivable repaid 17 112
Cash flows from financing activities (902) 548
Capital redeemed - (333)
(Decrease)/increase in short-term loans (874) 874
(Decrease)/increase in non-current liabilities (28) 7
Decrease in cash and cash equivalents (8 547) (17 405)
Cash and cash equivalents at beginning of year (27 296) 9
Cash and cash equivalents before acquisitions (35 843) (17 396)
Cash and cash equivalents acquired during year - (9 900)
Cash and cash equivalents at end of year (35 843) (27 296)
BALANCE SHEET
Audited Audited
2003 2002
R"000 R"000
ASSETS
Non-current assets 5 781 6 804
Property, plant and equipment 1 515 1 093
Intangible assets 532 1 317
Deferred taxation 3 734 4 394
Current assets 99 510 99 035
Trade and other receivables 91 779 95 565
Non-interest bearing loans - 17
Cash and cash equivalents 7 731 3 453
Total assets 105 291 105 839
EQUITY AND LIABILITIES
Capital and reserves 29 130 27 654
Share capital and premium 107 795 107 795
Accumulated loss (78 665) (80 141)
Non-current liabilities
Interest bearing borrowing 25 53
Current liabilities 76 136 78 132
Loan payable - 874
Trade and other payables 29 649 44 087
Current portion of borrowing 27 23
Bank overdraft 43 574 30 749
Provisions 2 886 2 399
Total equity and liabilities 105 291 105 839
STATEMENT OF CHANGES IN EQUITY
Share Share Accumulated
capital premium loss Total
R"000 R"000 R"000 R"000
Balance at 1 January 2003 850 106 945 (80 141) 27 654
Net profit for the period - - 1 476 1 476
Balance at 31 December 2003 850 106 945 (78 665) 29 130
OPERATIONAL REVIEW
The 2003 financial year was a challenging one, due to a formidable
transformation process and dramatic strengthening of the rand. As noted in the
interim results in June 2003, infrastructure investment - particularly the
employment of additional skilled staff and costs associated with the strategic
realignment of the businesses of Spectrum Shipping Company (Pty) Ltd and CSS
Logistics (Pty) Ltd - significantly affected earnings. This had an effect of
raising the expense line by R6,7 million while the simultaneous strengthening
of the rand (30%) resulted in an approximate reduction in revenue of R4
million.
Due to the fact that Spectrum was predominantly a clearing agent, the effect
of a strengthening currency was more pronounced as most of its revenue was
generated from fees calculated on the weighted rand value of goods traded by
its clients. Going forward, this will be largely eliminated as the business
strategically transforms from a freight clearing intermediary to a
comprehensive international logistics solution provider where a diverse set of
earnings will emanate from a more comprehensive logistics model.
Where we have significantly achieved is in the acquisition of new clients,
particularly towards the latter part of 2003. As the strategic alignment of
the business has been "rolled out", not only have we acquired 142 quality new
clients but have experienced a sharp increase in the utilisation of our
services by our existing clients. Furthermore, while the company has over 82
years" experience in the export of perishables and is regarded as a prominent
player in this market, the company has recognised the need to continue
building this business as a highly specialised service. With the advent of the
deciduous season, the company has signed on a number of large clients, which
has entrenched its position in the market even further.
The acquisition of CSS Logistics (Pty) Ltd in 2002 constituted a "change
agent" for the company that highlighted two major issues. The first concerned
the differences in systems, structure, processes and culture between CSS
Logistics (Pty) Ltd and Spectrum Shipping Company (Pty) Ltd, which materially
effected company risk and service levels and the second, a realisation that
our traditional core services were no longer a competitive advantage.
With CSS Logistics (Pty) Ltd having been the clearing arm for Capespan
perishables for over 80 years and Spectrum Shipping Company (Pty) Ltd being an
"evolved" family business since 1982, they resembled two similar yet very
different businesses. In fact, all that constituted the historical successes,
traditional values and concerns of both companies has over the last six months
been managed through a participative, integrated change agenda to now
constitute a single organisation with a common purpose encompassing shared
values and philosophies. Furthermore, standardisation and consistency in
systems and procedures (particularly work flow processes) has been achieved
throughout our regional offices in Cape Town, Durban, Port Elizabeth and
Johannesburg.
The second issue facing the company concerned its ability to evolve into a
leader in the South African logistics market. To achieve this, the company was
faced with an urgent need to transform from being a predominantly freight
clearing intermediary for local importers and exporters to a comprehensive
international logistics solution provider. This, together with the very real
threat of "disintermediation," that is, the elimination of the "middle-man" on
the basis of no value being added, resulted in the company deciding to
fundamentally change its business value proposition to clients. This is now
being achieved through the provision of supply chain management and/or
logistics services to our clients or strategically enhancing our existing
services through key alliances with other service providers, thereby
optimising the supply chains of our clients.
To achieve such supply chain integration and, most importantly, raise
Spectrum"s current service levels, management has had to review the current
company profile and build on the future capabilities of the business by
investing in quality human, financial and physical resources. In particular,
highly skilled and motivated people have been recruited and positioned within
the various regions to facilitate the emergence of new strategies through
collective acceptance of these new ideas and exploited opportunities. These
people are not just skilled and knowledgeable, but through matrix lines of
communication, use and share this knowledge across the entire organisation on
a daily basis. With this capability the company has been able to deliver an
intelligent solution-based service to a niche market where supply chain
optimisation services have been in need. Most importantly, our culture and
"organisational behaviour" has taken a new direction.
Perhaps the greatest focus over the past six months has been on company risk
and, in particular, the management of the debtors" book. Here, additional
resources in the form of people, systems and procedures have been introduced
to eliminate potential write-offs resulting from bad debt. A risk committee
constituting the directors of the company has been appointed to review all
applications, including pricing, as well as other aspects relating to the risk
of the transaction. This function has also been centralised whereby
appropriate financial and legal resources are now applied to the credit
approval process, including the management of the debtors" book thereafter.
FINANCIAL REVIEW
The 2003 year has seen gross billings down on prior year due mainly to the
strengthening of the rand. Net margins were improved in the current year due
to improved new client margins. Operating costs were up on last year due to
increased employment and executive director costs, intangible asset impairment
costs, increased provisions in respect of leave pay and doubtful debts and
warehousing claims arising from the prior year.
The tax rate for the company is expected to remain at current levels. Cash
flow in the year has decreased due mainly to a decrease in trade payables,
increased fixed asset investment, the acquisition of Infomax and a loan
repayment. This was offset by positive cash flows from trading of R3,9
million. The trade payables decrease has arisen from a change in mix where the
volume of trade with a creditor with 60 day terms has decreased substantially.
This was export related business and is envisaged to increase again with new
and existing client gains in the forthcoming year.
Outlook for the year ahead
The gradual "metamorphosis" of Spectrum into a comprehensive logistics
solution provider will continue by looking at forward and backward integration
in the supply chains, for example, into banking, marine insurance, security,
road haulage and warehousing concerns. We will also continue to advance the
knowledge and skills of personnel through training in the fields of logistics
and supply chain management, and hiring in professional supply chain
optimisation experts and logistics engineers. Most importantly, however, we
will collaborate with all other strategic partners in the supply chain, which
will provide integrated "end to end" logistics solutions that would ensure the
seamless flow of products into the market place for our clients, ensuring
reductions in total logistics cost. This, in turn, would keep them competitive
in their markets.
Furthermore, this dramatically revised business model founded on innovation,
greater value add and "connectivity" among regions will result in higher
client conversion ratios as well as retention over the coming months. By
exploiting both our in-house intellectual capital and that of our strategic
partners, we are now in a position to cease outsourcing the profitable
services of our business, the benefits of which should be visible in the form
of an incremental growth in earnings over the year ahead. In addition to this
organic growth, we will look continuously for opportunistic acquisitions where
value add would more than compensate the purchase price of such acquisitions.
In respect of strategic partners, black empowerment was very much on our
agenda during the year under review. Spectrum"s standing as a black
empowerment company has its origins as early as 1982, when Rajin Singh founded
the company as Nunsofast (Pty) Ltd. It was in April 2002, after numerous
acquisitions and strong organic growth from 1982 to 2002, that Spectrum
Shipping was listed on the JSE Securities Exchange South Africa.
Last year, Impumelelo nominated Spectrum as one of South Africa"s Top 300
Empowerment Companies in the Shipping and Ports sector. This was based on a
set of strict criteria that takes into account the recommendations of Cyril
Ramaphosa"s Black Economic Empowerment Commission as well as the Department of
Trade and Industry"s BEE scorecard and strategy for Broad-Based Black Economic
Empowerment. Furthermore, of a national staff complement of 107 persons, 60%
constitute previously disadvantaged individuals, of which 48% are female.
It is our intention to finalise our black empowerment initiatives within the
early part of 2004. We believe that our envisaged strategic partners are
"active value add" participants and occupy strategic roles within the greater
economy. They are known to the directors and executive of the company and have
a sound track record in their own business.
APPRECIATION
We extend our sincere thanks to all the company directors, management, staff,
clients and strategic partners in embracing and supporting wholeheartedly the
strategic initiatives introduced during 2003. The year ahead will be an
exciting one as the company launches itself off a platform far more
representative of an innovative, intelligent logistics service provider. It is
indeed a year that the enabled, energised Spectrum Shipping Limited will make
great strides.
ACCOUNTING POLICIES
The accounts have been prepared in conformity with South African Statements of
Generally Accepted Accounting Practice and on a basis consistent with the
prior year.
DIVIDENDS
In accordance with the board"s current desire to re-invest earnings, a
dividend for the current financial year has not been declared.
For and on behalf of the board
GLEN GERBER KARL GRIBNITZ
Chief Executive Officer Chairman
REGISTERED OFFICE AND POSTAL ADDRESS
5th Floor, MSC House
54 Winder Street
Durban, 4001
PO Box 6148, Durban, 4000
SECRETARIES AUDITORS
JA Lupton ACIS, Compendium (Pretoria)
P O Box 1319 Incorporated
Hillcrest, 3650
Computershare Limited
70 Marshall Street, Marshalltown, 2107
EXECUTIVE DIRECTORS NON-EXECUTIVE DIRECTORS
G H Gerber (CEO), D C Kelly (CFO), R Singh K J Gribnitz, J P Nel,
T Tomaszewski
Results are available for inspection at the registered office.
AIR SEA ROAD RAIL
