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Sail Group Limited - Unaudited interim results for the six months ended 30 June
2004
Sail Group Limited
(Registration No. 1941/014601/06)
(Incorporated in the Republic of South Africa)
Share code: SIR
ISIN code: ZAE000039962
(`Sail`)
Financial highlights
Unaudited 2003 % Change Unaudited 2004
Earnings before net 3 453 171% 9 361
finance costs
Headline earnings per 1.11 49% 1.65
share
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2004
INCOME STATEMENT
Unaudited Unaudited Audited
6 months 6 months 12 months
30 June 2004 30 June 2003 31 Dec 2003
R`000 R`000 R`000
Revenue 81,733 78,705 185,596
Other income 131 530 929
Operating expenses (72,503) (75,782) (174,550)
Earnings before net 9,361 3,453 11,975
finance costs
Net finance costs (4,948) (7,538) (13,377)
Earnings/(loss) after 4,413 (4,085) (1,402)
finance costs
Income/(loss) from
associates and joint
ventures
- normal operations 4,186 8,136 13,593
- amortisation of (581) (714) (390)
intangibles
- impairments of (3,500) (6,500) (15,083)
investments
Earnings/(loss) before
taxation,
amortisation and 4,518 (3,163) (3,282)
impairments
Amortisation of (13,659) (10,590) (20,995)
intangibles
Profit on disposal of 17,431 - -
subsidiary
Impairments of assets
and loss
on sale of investments (6,819) (8,582) (5,294)
Profit/(loss) before 1,471 (22,335) (29,571)
taxation
Taxation (1,092) 1,158 (1,682)
Profit/(loss) after 379 (21,177) (31,253)
taxation
Minority interest 4,108 (118) (241)
Profit/(loss) for the 4,487 (21,295) (31,494)
period
Earnings/(loss) per
share (cents)
Basic 1.62 (7.8) (11.35)
Headline 1.65 1.11 3.52
Weighted average number 277,603 273,854 273,854
of shares in issue
(`000)
RECONCILIATION OF
HEADLINE EARNINGS
Earnings/(loss) 4,487 (21,295) (31,494)
attributable to
ordinary shareholders
Goodwill amortised 7,204 9,250 18,991
Other adjustments* (7,112) 15,082 22,280
Headline earnings 4,579 3,037 9,777
* Other adjustments include: impairments of property, plant, equipment, and
investments, and profit on disposal of a subsidary
CASH FLOW STATEMENT
Unaudited Unaudited Audited
6 months 6 months 12 months
30 June 2004 30 June 2003 31 December 2003
R`000 R`000 R`000
Cash inflow from
operating
activities
(after tax and 13,373 17,490 23,562
interest)
Cash inflow from 4,050 1,905 26,539
investing
activities
Cash (outflow) (5,251) (33,428) (41,160)
from financing
activities
Net (decrease)/ 12,172 (14,033) 8,941
increase in cash
and cash
equivalents
Cash and cash 225 18,101 (8,716)
equivalents -
beginning of the
period
Cash and cash 12,397 4,068 225
equivalents - end
of the period
STATEMENT OF CHANGES IN EQUITY
Stated Distributable Non-
distributable
capital reserves reserves Total
R`000 R`000 R`000 R`000
Balance at 30 (101,340) 701 95,266
June 2003 195,905
Net loss for the - (10,199) - (10,199)
period
Transfer from - 861 (861) -
non-
distributable
reserves
Foreign currency - - 160 160
translation
reserve
Balance at 31 (110,678) - 85,227
December 2003 195,905
Net profit for - 4,487 - 4,487
the period
Issue of stated 2,250 - - 2,250
capital
Balance at 30 (106,191) - 91,964
June 2004 198,155
GROUP BALANCE SHEET
Unaudited Unaudited Audited
6 months 6 months 12 months
30 June 2004 30 June 2003 31 December 2003
R`000 R`000 R`000
ASSETS
Non-current assets
Property, plant 26,882 31,294 34,648
and equipment
Deferred tax 9,314 10,820 7,478
assets
Intangible assets 101,800 109,632 99,469
Investment in 42,511 46,025 40,743
associates
Investment in 5,461 6,838 6,264
joint ventures
Other investments 20,394 11,815 8,653
and loans
Current assets
Trade receivables 39,873 36,124 32,874
Inventory 1,681 711 625
Cash and cash 20,451 9,374 1,198
equivalents
Other receivables 1,300 7,668 8,868
TOTAL ASSETS 269,667 270,301 240,820
EQUITY AND
LIABILITIES
Capital and 91,964 95,266 85,227
reserves
Minority interest 6,712 (730) (860)
Non-current
liabilities
Interest-bearing 81,653 90,111 82,796
borrowings
Non-interest 202 242 1,553
bearing borrowings
Income received in 1,086 1,145 2,948
advance
Deferred taxation 229 245 36
Current
liabilities
Trade and other 47,030 32,934 41,285
liabilities
Short-term portion 8,329 13,688 11,098
of interest
bearing borrowings
Short-term portion 67 4,423 2,843
of non-interest
bearing borrowings
Income received in 24,341 27,671 12,921
advance
Bank overdraft 8,054 5,306 973
TOTAL EQUITY AND 269,667 270,301 240,820
LIABILITIES
Number of shares 277,603 273,854 273,854
issued (000)
Net asset value 33 35 31
per share (cents)
SEGMENT REPORT
Investment
Brands and
SAIL SAIL Sport & Other Adjustments Total
Commercial Entertainment
R`000 R`000 R`000 R`000 R`000
Revenue 38,568 41,193 1,972 - 81,733
Segment 952 7,747 662 - 9,361
results
Amortisation (2,048) (12,061) (131) - (14,240)
of
intangibles
Profit on 17,431 - - - 17,431
sale of
subsidiary
Net finance (3,440) (1,715) 207 - (4,948)
costs
Income from
associates
and
joint 686 - - - 686
ventures
Minority - 4,108 - - 4,108
interest
Taxation 1,019 (1,809) (302) - (1,092)
Impairment (5,970) - (849) - (6,819)
of assets
and
investment
Net profit 8,630 (3,730) (413) - 4,487
for the
period
Segment 243,386 28,004 8,467 (132,335) 147,522
assets
Investments 20,394 - - - 20,394
and loans
Investments
in
associates
and
joint 47,972 - - 47,972
ventures
Goodwill 210 43,767 117 - 44,094
Deferred 8,564 490 260 - 9,314
taxation
Taxation 358 - 13 - 371
Total assets 320,884 72,261 8,857 (132,335) 269,667
Segment (52,272) (18,511) (6,498) - (77,281)
liabilities
Long-term (74,181) (27,270) - 19,798 (81,653)
interest
bearing
borrowings
Long-term
non-interest
bearing
borrowings (37,609) (49,664) (25,466) 112,537 (202)
Current
portion of
interest
bearing (4,748) (3,581) - - (8,329)
borrowings
Current
portion of
non-interest
bearing (67) - - - (67)
borrowings
Deferred (229) - - - (229)
taxation
Taxation (1,373) (1,847) (10) - (3,230)
Total (170,479) (100,873) (31,974) 132,335 (170,991)
liabilities
Depreciation 1,357 370 6 - 1,733
Financial overview
Our results for the six months ended 30 June 2004 demonstrate the completion of
the restructuring during 2003.
Total revenue for the six months ended 30 June 2004 increased by 3.8%:
* SAIL Sport & Entertainment (`SSE`), which remains fully consolidated
following the sale of 50% plus 1 share to SACTWU, delivered growth of 29%
as our existing clients increased the level of spend with SSE and from
increased warehouse sales in our retail activities; and
* The 12.4% increase in revenue in Investment Brands and SAIL Commercial is
largely the result of Blue Bulls, which benefited from the Test Match which
was held one month earlier this year than the previous year.
Group operating margin improved to 11.5% from 4.4% in the comparable period last
year. This is as a result of the restructuring which impacted for the full
period:
* The integration of a number of support functions during 2003, in SSE, and
further economies of scale in our retail activities resulted in the
increase in operating profit for the division from R3.3m in 2003 to R7.7m
for the six months ended 30 June 2004.
* The operating performance of Investment Brands and SAIL Commercial showed a
decrease of R2.8m as a result of factors including new investments in high
profile players for our Metro Brands and the impact of continued Rand
strength on broadcast revenues.
Net finance costs reduced by R2.5m to R4.9m in line with the reduction of
interest bearing liabilities and better cash management introduced during 2003,
as well as lower interest rates which persisted for the period.
Goodwill amortisation continued in line with the economic benefits that are
derived from the underlying assets.
The disposal of the majority stake in SSE generated a profit of R17.4m. The
increase in minority interests to R4.1m reflects SACTWU`s share of SSE`s loss
from the effective date of the transaction of 1 January 2004. This loss
includes SACTWU`s share of goodwill amortisation of R6.2m.
Profit for the period increased to R4.5m from a loss of R21.3m in 2003. Headline
earnings increased by 49% to 1.65c per share from 1.11c per share for the
comparable period.
Salient features of the balance sheet were as follows:
* The net cash position improved by 12.1m to 12.4m since January 2004,
attributable to better management of working capital and the extension of
the term of some interest bearing liabilities.
* We continued to focus on reducing our liabilities and have repaid R5.3m of
borrowings since January 2004.
Offer to acquire entire share capital of SAIL
Further to our cautionary announcement dated 26 July 2004, we wish to advise our
shareholders that the Board of Directors of SAIL have received a firm offer from
a consortium comprising of VenFin Media Beleggings (Proprietary) Limited a
wholly owned subsidiary of VenFin Limited, Tree Tell 23 (Proprietary) Limited, a
wholly owned subsidiary of SACTWU Investments Group (Proprietary) Limited and
members of SAIL`s management team to acquire the 62.3% of the ordinary shares of
SAIL which they do not already own.
Additional details of the offer will follow in an imminent announcement to be
made on SENS.
Strategy and prospects
We expect that market conditions will remain tough and as such that SSE`s target
market will remain cost conscious. We have optimised efficiencies across the
majority of the business which is now profitable.
In this context, our strategic intent remains to maintain the efficiencies
introduced with the recent restructuring while retaining our clients and
extending their spend with SAIL.
Accounting Policies
The accounting policies of the Group are consistent in all material respects
with those applied in the previous year, except as otherwise indicated. The
annual financial statements have been prepared on the historical cost basis, as
modified for investment properties and certain financial assets and liabilities,
which are carried at fair value or amortised cost as appropriate and comply with
South African Statements of Generally Accepted Accounting Practice.
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
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses. The actual outcomes of these events and actions,
ultimately may differ from those estimates.
The Group adopted AC 133 Financial Instruments: Recognition and Measurement for
the first time in the 2003 financial year. The financial effects of adopting
this standard are reported in the current period`s consolidated financial
statements.
For and on behalf of the Board
Vinesh Dhanraj 30 August 2004
Company Secretary Johannesburg
Sponsor
Nedbank Capital
Date: 31/08/2004 05:54:08 PM
Produced by the JSE SENS Department
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