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Sail Group Limited - Audited Results For The Year Ended 31 December 2003
Release Date: 23/03/2004 16:00:01 Code(s): SIR
SAIL GROUP LIMITED - AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2003
SAIL Group Limited
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
(REGISTRATION NUMBER 1941/014601/06)
("SAIL"or "the company")
SHARE CODE: SIR
ISIN: ZAA000039962
SAIL GROUP LIMITED AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2003
We are pleased to announce our results for the year ended 31 December 2003.
These results reflect the benefits of the restructuring programme which we
undertook during the year.
Financial highlights 2003 % 2002
R"000 Change R"000
Earnings before finance costs 17 287 91% 9 044
Net cash generated by operations 39 039 223% 12 072
Repayment of borrowings 41 160 9 755
Net (decrease)/increase in cash 8 941 (9 999)
Headline (loss)/earnings per share (cents) 3.52 (4.91)
SAIL GROUP LIMITED
CONSOLIDATED INCOME STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2003
Group Company
31 31 31 31
December December December December
2003 2002 2003 2002
CONTINUED R 000"s R 000"s R 000"s R 000"s
OPERATIONS
Revenue 185,596 184,027 83,043 20,540
Other income 6,241 6,856 108 35
Staff costs (57,232) (49,562) (32,169) (7,588)
Other operating (117,318) (132,277) (42,032) (7,417)
expenses
Earnings before 17,287 9,044 8,950 5,570
finance costs
Finance costs (18,689) (25,560) (8,770) (10,307)
(Loss)/earnings (1,402) (16,516) 180 (4,737)
after finance
costs
Income/(loss)
from associates
and joint
ventures
- normal 13,593 13,903 - -
operations
- amortisation (390) (4,167) - -
of intangibles
- impairments (15,083) (6,090) - -
of investments
(Loss)/earnings (3,282) (12,870) 180 (4,737)
before
taxation,
amortisation
and impairments
Amortisation of (20,995) (19,034) (41,066) -
intangibles
Impairments and (5,294) (75,581) (8,241) (78,550)
loss on sale of
investments
Loss before (29,571) (107,485) (49,127) (83,287)
taxation
Taxation (1,682) (1,415) 1,554 1,899
Loss after (31,253) (108,900) (47,573) (81,388)
taxation
Minority (241) 5,451 - -
interest
Loss for the (31,494) (103,449) (47,573) (81,388)
year
DISCONTINUED
OPERATIONS
Revenue - (795) - -
Other income - (4) - -
Operating - (2,224) - -
expenses
Loss before - (3,023) - -
finance costs
Finance costs - (65) - -
Loss after - (3,088) - -
finance costs
Loss from
associates and
joint ventures
- normal - (5,942) - -
operations
- amortisation - (18) - -
of intangibles
Loss before - (9,048) - -
taxation,
amortisation
and impairments
Amortisation of - (215) - -
intangibles
Impairments and - (11,377) - -
loss on sale of
investments
Loss before - (20,640) - -
taxation
Taxation - 676 - -
Loss after - (19,964) - -
taxation
Minority - 1,027 - -
interest
Loss for the - (18,937) - -
year
Total net loss (31,494) (122,386) (47,573) (81,388)
for the year
Headline
earnings/(loss)
and diluted
headline
earnings/(loss) 3.52 (4.91)
per share
(cents)
Continued 3.52 (2.07)
Discontinued - (2.84)
Basic loss and (11.35) (44.67)
diluted basic
loss per share
(cents)
Continued (11.35) (37.76)
Discontinued - (6.91)
SAIL GROUP LIMITED
CONSOLIDATED BALANCE SHEETS
AT 31 DECEMBER 2003
Group Company
31 31 31 31
December December December December
2003 2002 2003 2002
R 000"s R 000"s R 000"s R 000"s
ASSETS
Non-current
assets
Deferred taxation 7,478 9,529 3,406 1,851
Investments and 8,653 34,248 8,061 27,096
loans
Goodwill 40,582 62,248 39,966 -
Leasehold right 30,469 30,800 - -
Trademarks 28,418 30,481 - -
Property, plant 34,648 36,108 4,814 2,612
and equipment
Investments in 40,743 45,359 1,003 4,663
associates
Investments in 6,264 9,695 4,161 4,166
joint ventures
Investments in - - 60,558 114,806
subsidiaries
197,255 258,468 121,969 155,194
Current assets
Short-term loans 3,497 7,992 - -
Inventories 625 893 491 10
Trade and other 32,874 50,901 23,516 8,788
receivables
Taxation 5,371 4,078 4,909 -
Cash and cash 1,198 280 - 36
equivalents
43,565 64,144 28,916 8,834
Total assets 240,820 322,612 150,885 164,028
EQUITY AND
LIABILITIES
Capital and
deficits
Stated capital 195,905 195,905 195,905 195,905
Accumulated loss (110,678) (80,045) (130,841)
(83,268)
Non-distributable - 861 - -
reserves
85,227 116,721 65,064 112,637
Minority interest (860) (854) - -
Non-current
liabilities
Interest bearing 82,796 103,363 36,334 21,555
borrowings
Non-interest 1,553 2,016 232 -
bearing
borrowings
Deferred taxation 36 154 - -
Income received 2,948 3,977 - -
in advance
87,333 109,510 36,566 21,555
Current
liabilities
Current portion 11,098 32,001 7,706 19,341
of interest
bearing
borrowings
Current portion 2,843 4,512 2,349 3,700
of non-interest
bearing
borrowings
Income received 12,921 10,932 4,823 -
in advance
Trade and other 41,162 39,659 34,132 2,814
payables
Taxation 123 1,135 - 48
Bank overdrafts 973 8,996 245 3,933
69,120 97,235 49,255 29,836
Total equity and 240,820 322,612 150,885 164,028
liabilities
Net asset value 30.81 42.62
per share (cents)
Shares in issue 273,853,642 273,853,642
SAIL GROUP LIMITED
STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2003
Stated Accumulated Non- Total
capital profit/(loss) distribu-
table
reserves
Group R 000"s R 000"s R 000"s R 000"s
Balance at 31 196,369 36,542 6,034 238,945
December 2001
Share issue expenses (266) - - (266)
written off
Net loss for the - (122,386) - (122,386)
year
Transferred from non- - 5,799 (5,799) -
distributable
reserves
Share buy back (198) - - (198)
Foreign currency - - 626 626
translation reserve
Balance at 31 195,905 (80,045) 861 116,721
December 2002
Net loss for the - (31,494) - (31,494)
year
Transferred from non- - 861 (861) -
distributable
reserves
Balance at 31 195,905 (110,678) - 85,227
December 2003
Company
Balance at 31 196,369 (1,880) - 194,489
December 2001
Share issue expenses (266) - - (266)
written off
Net loss for the - (81,388) - (81,388)
year
Share buy back (198) - - (198)
Balance at 31 195,905 (83,268) - 112,637
December 2002
Net loss for the - (47,573) - (47,573)
year
Balance at 31 195,905 (130,841) - 65,064
December 2003
SAIL GROUP LIMITED
CONSOLIDATED CASH FLOW STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2003
Group Company
31 31 31 31
December December December December
2003 2002 2003 2002
R 000"s R 000"s R 000"s R 000"s
Cash flow from
operating
activities
Cash received from 202,455 181,451 83,626 17,806
customers
Cash paid to
suppliers and (163,416) (169,379) (81,768) (28,256)
employees
Net cash generated 39,039 12,072 1,858
by/(utilised in) (10,450)
operations
Abnormal item - (1,510) - -
Dividend received 795 - 5,383 2,446
Interest received 5,312 6,424 7,003 12,752
Finance costs (18,689) (20,360) (8,770) (5,107)
Taxation paid (2,895) (5,918) (1,826) (611)
23,562 (9,292) 3,648 (970)
Cash flow from
investing
activities
Proceeds on sale of 450 359 47 72
property, plant and
equipment
Additions to (3,941) (5,044) (1,895) (2,389)
property, plant and
equipment
Decrease/(increase) 26,711 648 19,275 (15)
in investments and
receivable loans
Disposal of (817) 4,475 - -
subsidiaries and
divisions
Proceeds on sale of - 73 - -
investments
Investments in - (4) 3,665 -
joint ventures and
associates
Repayments 26 (2,842) - 230
of/(loans to) -
joint ventures
Investment in - (1,003) - (1,003)
associate
Repayments of 4,110 (3,359) - (3,660)
/(loans to) -
associates
Investment in - - 792 (6,748)
subsidiaries
Acquisition of - 1,731 13,110 -
subsidiaries
26,539 (4,966) 34,994
(13,513)
Cash flow from
financing
activities
Repayment of (41,160) (9,755) (2,257)
borrowings (34,990)
Increase in - 14,478 - 11,096
borrowings
Share issue cost - (266) - (266)
Share buy back - (198) - (198)
(41,160) 4,259 8,375
(34,990)
Reconciliation of
cash and
equivalents
Net 8,941 (9,999) 3,652 (6,108)
increase/(decrease)
in cash and cash
equivalents
Cash and cash (8,716) 1,283 (3,897) 2,211
equivalents at the
beginning of the
year
Cash and cash 225 (8,716) (245) (3,897)
equivalents at the
end of the year
SAIL GROUP LIMITED
SEGMENT REPORT
FOR THE YEAR ENDED 31 DECEMBER 2003
Investment SAIL
Brands and Sport &
SAIL Enter- Other Adjust- Total
Commercial tainment ments
2003 R 000"s R 000"s R 000"s R 000"s R 000"s
Revenue
External sales 84,735 97,959 16,796 (13,894) 185,596
Total revenue 84,735 97,959 16,796 (13,894) 185,596
Segment 5,560 11,493 (1,487) (4,520) 11,046
results
Other income 4,725 3,429 2,057 (3,970) 6,241
Finance costs (14,368) (12,407) (404) 8,490 (18,689)
Income from
associates and
joint ventures
- normal 13,235 - 358 - 13,593
operations
- (189) - (201) - (390)
amortisation
of intangibles
- impairments (15,083) - - (15,083)
of investments
Minority - - (241) - (241)
interest
Amortisation (2,418) (17,777) (800) - (20,995)
of intangibles
Impairments (1,404) (10,880) 6,990 - (5,294)
and loss on
sale of
investments
Taxation (863) 225 (1,044) - (1,682)
Net (10,805) (25,917) 5,228 - (31,494)
(loss)/profit
for the year
Other
information
Segment assets 92,915 111,065 15,023 (90,771) 128,232
Investment in 39,246 208 1,289 - 40,743
associates
Investment in 2,103 4,161 - - 6,264
joint ventures
Investments 5,905 8,061 4,880 (6,696) 12,150
and loans
Goodwill 224 40,210 148 - 40,582
Deferred 3,849 3,442 187 - 7,478
taxation
Taxation 313 4,909 149 - 5,371
Total assets 144,555 172,056 21,676 (97,467) 240,820
Segment (16,343) (39,199) (5,801) 3,339 (58,004)
liabilities
Long-term (84,846) (36,334) - 38,384 (82,796)
interest
bearing
borrowings
Current (3,328) (7,706) - (64) (11,098)
portion of
interest
bearing
borrowings
Long-term non- (19,739) (232) (37,390) 55,808 (1,553)
interest
bearing
borrowings
Current (494) (2,349) - - (2,843)
portion of non-
interest
bearing
borrowings
Deferred (36) - - - (36)
taxation
Taxation (123) - - - (123)
payable
Total (124,909) (85,820) (43,191) 97,467 (156,453)
liabilities
Capital (2,147) (1,983) (68) - (4,198)
expenditure
Depreciation (2,085) (1,571) (14) - (3,670)
HEADLINE EARNINGS/(LOSS) PER SHARE
The calculation of loss per share is based on a loss attributable to ordinary
shareholders of R31,494,000 (2002: loss of R122,386,000) and weighted average
shares in issue of 277,603,642 (2002: 273,940,291).
The calculation of headline earnings/(loss) per share is based on a headline
earnings attributable to ordinary shareholders of R9,777,000 (2002: headline
loss of R13,442,000) and weighted average shares in issue of 277,603,642 (2002:
273,940,291).
(Loss)/profit Minority Net
before shareholders
Reconciliation taxation Taxation interest (loss)/profit
of headline
earnings/(loss)
per share:
31 December
2003
Per the income (29,571) (1,682) (241) (31,494)
statement
Adjustments
Goodwill 18,991 - - 18,991
amortisation -
associates,
joint ventures
and
subsidiaries
Property, plant 1,351 - - 1,351
and equipment
impaired
Impairment of 15,083 - - 15,083
investment in
associates and
joint ventures
Impairment of 469 - - 469
property in
joint venture
Impairment of 1,106 - - 1,106
investment
Profit on sale (467) 68 - (399)
of investment
Loss on 4,660 - - 4,660
sale/write down
of investments
and loans
Loss on sale of 45 - - 45
asset
Profit on sale (46) - - (46)
of property,
plant and
equipment
Impairment of 11 - - 11
property, plant
and equipment
Headline 11,632 (1,614) (241) 9,777
earnings
31 December
2002
Per the income (128,125) (739) 6,478 (122,386)
statement
Adjustments
Goodwill 20,164 - (73) 20,091
amortisation -
associates,
joint ventures
and
subsidiaries
Goodwill 47,288 - (1,246) 46,042
impairment -
associates,
joint ventures
and
subsidiaries
Foreign 1,148 - - 1,148
exchange profit
on loan to
foreign entity
Property, plant 14,298 (464) (1,312) 12,522
and equipment
impaired
Investment (1,645) 190 223 (1,232)
properties
revalued
Profit on sale (90) - 26 (64)
of property,
plant and
equipment
Loss on sale of 80 - (1) 79
property, plant
and equipment
Loss on 30,999 - (641) 30,358
sale/write down
of investments
and loans
Headline loss (15,883) (1,013) 3,454 (13,442)
Operating Update
The strategic focus for 2003 was to generate profits and to increase our client
base. We have delivered on both fronts.
The change in strategy from the passive investment model to the active
operational model was a strategic part of the restructuring programme. Our
closer involvement in the business units meant better identification of problem
areas and more effective resolution of these issues. The restructuring has paid
off and SAIL is a much leaner and efficient company.
Our reputation as a leading service provider in the sport and entertainment
industry is growing. Additional opportunities arose with a number of new name
wins. Clients value our holistic services which are packaged using our
intellectual property, to create economically viable solutions.
Since we made our investments in Sports Brands more than five years ago, we have
instituted business structures and financial controls in order to ensure the
profitability and commercial sustainability of these entities going forward. We
are pleased that, as a whole our investments in Sports Brands have started to
contribute positive cash flows with a combined contribution of more than R8.7m
to the Group with the bulk from the Blue Bulls and Western Province.
Financial overview
We delivered a modest 1% increase in revenue to R185m for the year ended 31
December 2003. Our core operations SAIL Sports and Entertainment (SSE) and
Sports Brands performed well. In line with our strategy to focus on core
activities, we disposed of ProRange (Pty) Limited"s (ProRange) subsidiary retail
operations during 2002, resulting in an effective R28.6m reduction in revenue
(reflected as part of continued operations in 2002). The active operational
model and our reassessment of all investments led to our decision to exit
Australia.
On a comparable basis, SSE"s revenues increased by 21% for the period as a
result of increased penetration into existing accounts and new clients which
retained the services of SAIL. Blue Bulls" revenue increased by 45% which
reflects the solid management and business structures of the brand as well as
the team"s good performance on the field during 2003 which resulted in increased
demand for tickets. Demand for corporate facilities also contributed to the
increased revenue.
Secured revenue, that which is generated from contracts of at least one year in
duration represents 65% and 51% of SSE and Blue Bulls revenue respectively.
The turnaround in operating profit is evidence of the success of SAIL"s
restructuring programme during 2003 with operating margins increasing from 4.9%
to 9.3%. Staff expenses increased by 15% during 2003. Remuneration was reviewed
by an independent third party and packages and incentives were realigned.
Retrenchment costs of R3m resulting from the restructuring programme are
included in staff costs.
Other operating expenses decreased by 11%, mainly as a result of more efficient
administrative structures associated with the active operational model. The sale
of non-core activities also enhanced the operating expense structure of the
Group.
In line with the active operational model, the year was characterised by an
increased focus on efficient cash management and reduction of interest bearing
liabilities in order to reduce finance costs. The successful implementation of
these strategies and a more favourable interest rate environment resulted in
finance costs of R18.7m against R25.6m in 2002.
Goodwill amortisation continued in line with the economic benefits that are
derived from the underlying assets.
We advised shareholders in our 2002 Annual report and our 2003 Interim results
that we were in the process of re-evaluating the carrying value of SAIL"s
investments to ensure that they reflect the true market value:
1. The R15.1m impairment of investments in associates and joint ventures
relates to the revaluation of several of our Sports Brands.
2. The majority of the R5.3m impairment and loss on sale of investments
relates to the disposal of non-core operations in Australia and the ProRange
retail operations.
The net loss of R31.5m for the year ended 31 December 2003 is a significant
improvement on the R103.4m loss reported in 2002. Headline earnings improved
from a loss of R13.4m in 2002 to a profit of R9.8m for 2003.
We are pleased with the improvements reflected in our balance sheet:
1. The variance in investments and loans reflects a reclassification of a
short term asset which had been used by the Group as security and was therefore
not a readily available cash resource.
2. We ended the year with a net R0.2m positive cash balance compared to a net
overdraft of R8.7m at the end of 2002 as a result of stricter working capital
management procedures.
3. SAIL"s focus on collections paid off and trade debtors decreased by 35% for
the period which, given the high increase in revenue attests to the
effectiveness of more disciplined working capital processes.
4. Borrowings in the amount of R41.1m, were repaid during the period, with R
21.1m being repaid with cash generated from operations, while the balance of the
movement was settled by applying a deposit security against the loan amount. The
closing interest bearing liabilities include R39m of debentures held by a
partner in a Sports Rights investment.
Finally, the impact of the restructuring programme is reflected in the strong
net cash generated by operations of R39.0m which represents an increase of
R26.9m compared to 2002.
Transformation
During 2003 we actively addressed Black Economic Empowerment and transformation
within SAIL, not only satisfying legislation currently being drafted, but also
our responsibility as a solid corporate citizen. Transformation of our workforce
is of critical importance and we have well defined employment equity targets in
place. In 2003, we met the milestone targets for the year with PDI
representation of 53%.
In another strategic step towards full empowerment, we sold 50% plus one share
in SSE to SACTWU Investment Group (Pty) Limited (SACTWU) (the investment arm of
South African Clothing and Textile Workers Union); thereby leading our peers to
become a majority BEE owned entity. Competition Commission approval was obtained
on 2 March 2004. Shareholder approval was obtained on 12 March 2004. Put and
call arrangements exist to enable SACTWU to convert its shareholding into a 25%
stake in SAIL Group Limited within five years.
The introduction of SACTWU as our empowerment partner in SSE has generated much
interest. We anticipate that while it will cement relationships with current
clients, our status as a majority black owned entity is sure to open up a number
of opportunities in the market.
Strategy
We made significant progress in 2003, towards achieving a streamlined operation.
In 2004, we will focus on maintaining the benefits of this repositioning while
further reducing our gearing levels.
While the introduction of SACTWU as the majority shareholder in SSE strengthens
the long term value proposition of the division - for all stakeholders, the
profit contribution to SAIL will be diluted in the short term. We are confident
that with our continued ability to deliver holistic solutions and our new
empowerment credentials we will continue to attract new clients to our Group to
close this gap.
The active operational model has become embedded into all our activities. The
approach is now part of the culture and way of doing business in SAIL. To create
value for our shareholders in 2004, we will continue to drive greater
efficiencies throughout the Group.
Our business model is optimally structured following the restructuring
programme. During 2004, we will continue to focus on our core markets, Sports
Brands and SSE. However, we will use our uniquely combined skills in both
segments to create new events where we own the rights, enhancing the potential
revenue streams for SAIL.
Contingent Liabilities
Management of SSE 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 is disclosed in the circular
dated 26 February 2004. Limited surety of R 500 000 in favour of Rentworks (Pty)
Ltd for rental agreement in ProRange expired in December 2003, R 500 000 and
cession of loan to ProRange in favour of ABSA Bank Ltd for an overdraft facility
in Family Golf Centre (Pty) Ltd, R 8m in favour of BOE Bank Limited in respect
of suites at Outeniqua Park and Securicor Loftus.
Accounting Policies
The annual financial statements have been prepared on the historical cost basis,
as modified for investment properties and certain financial assets which are
carried at fair value, and comply with South African Statements of Generally
Accepted Accounting Practice and are consistent in all material respects with
those applied in the previous year, except as otherwise indicated.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Although these
estimates are based on management"s best knowledge of current events and
actions, actual results ultimately may differ from those estimates.
The Group adopted AC 133 Financial Instruments: Recognition and Measurement. The
financial effect of adopting this standard is reported in the current year"s
consolidated financial statements.
These annual financial statements have been audited by the company"s auditors
and a copy of the auditor"s report is available for inspection at the company"s
registered office.
Annual Report
The SAIL Group Limited annual financial statements for the year ended 31
December 2003 will be posted to shareholders on or about 31 March 2004.
BY ORDER OF THE BOARD
23 MARCH 2004
V DHANRAJ
COMPANY SECRETARY (ACTING)
Registered address: 28th Floor
no 1 Thibault Sqaure
Long Street
Cape Town
8001
Auditors: Deloitte & Touche
Transfer secretaries: Computershare Limited
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