| Tue 22 Feb 2005, 18:25 | | STATEMENT OF RESULTS FOR THE YEAR ENDED 31 DECEMBE |
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STATEMENT OF RESULTS FOR THE YEAR ENDED 31 DECEMBER 2004
INCOME STATEMENT
Audited Audited
Year ended Year ended
31 December 31 December
2004 2003
R`000 R`000
Turnover 29 149 28 731
Gross billings 495 701 574 568
Cost of billings (466 552) (545 837)
Operating income 5 147 6 187
Amortisation and impairment
of intangible assets (376) (1 114)
Depreciation (709) (448)
Net interest paid (3 273) (2 489)
Profit before taxation 789 2 136
Taxation (269) (660)
Net profit after taxation 520 1 476
Shares in issue (000`s) 850 000 850 000
Earnings per share (cents) 0.1 0.2
Headline earnings per share (cents) 0.1 0.2
Reconciliation between
earnings and headline earnings
Profit after taxation 520 1 476
Profit/loss on sale of fixed assets (31) 18
Amortisation of goodwill and
impairment losses 128 481
Taxation effects 4 (5)
Headline profit after taxation 621 1 970
CASH FLOW STATEMENT
Audited Audited
Year ended Year ended
31 December 31 December
2004 2003
R`000 R`000
Cash generated by operations
before working capital changes 5 108 6 350
Changes in working capital (3 520) (10 307)
Cash generated from/(utilised in)
operating activities 1 588 (3 957)
Net interest paid (3 273) (2 489)
Net cash flows from operating activities (1 685) (6 446)
Cash flows from investing activities (1 217) (1 199)
Cash flows from financing activities (28) (902)
Net increase/(decrease) in cash
and cash equivalents (2 930) (8 547)
Cash and cash equivalents at the
beginning of the year (35 842) (27 296)
Cash and cash equivalents at the
end of the year (38 772) (35 843)
BALANCE SHEET
Audited Audited
Year ended Year ended
31 December 31 December
2004 2003
R`000 R`000
ASSETS
Non-current assets 5 655 5 781
Property, plant and equipment 2 034 1 515
Intangible assets 155 532
Investments 1 -
Deferred taxation 3 465 3 734
Current assets 107 093 99 510
Trade and other receivables 94 620 91 779
Cash and cash equivalents 12 473 7 731
Total assets 112 748 105 291
EQUITY AND LIABILITIES
Capital and reserves 29 650 29 130
Share capital and premium 107 795 107 795
Accumulated loss (78 145) (78 665)
Non-current liabilities
Interest bearing borrowing - 25
Current liabilities 83 098 76 136
Trade and other payables 28 970 29 649
Current portion of borrowing 25 27
Bank overdraft 51 245 43 574
Provisions 2 858 2 886
Total equity and liabilities 112 748 105 291
STATEMENT OF CHANGES IN EQUITY
Accum-
Share Share ulated
capital premium loss Total
R`000 R`000 R`000 R`000
Balance at 1 January 2004 850 106 945 (78 665) 29 130
Net profit for the period 0 0 520 520
Balance at 31 December 2004 850 106 945 (78 145) 29 650
COMMENTARY
INTRODUCTION
The year under review proved to be both frustrating and exciting. Frustrating,
because earnings were not there, yet exciting because the benefits of the
strategically realigned business were starting to emerge. However, before
scrutinising 2004 it is perhaps appropriate to briefly review the period
leading up to 2004 to get a better understanding of the events thereof. After
all, 2004 was a follow on from what was initiated in 2003.
2003 was the year in which two long established businesses, CSS Logistics (Pty)
Limited, founded in 1921, and Spectrum Shipping (Pty) Limited, having its roots
in 1976, effectively consolidated into one business. This merger brought with
it differences in systems, structure, processes and culture, all of which had
to be integrated to constitute a single organisation with a common purpose with
shared values and philosophies.
Most important, however, was the need to initiate the strategic realignment of
the business as it resembled nothing more than a customs clearing intermediary
whose core services were no longer conducive to a sustained growth in earnings.
This involved transforming Spectrum into a comprehensive, international supply
chain logistics solution provider that would offer clearing, forwarding,
insurance, foreign exchange, warehousing and transport by sea, air, road and
rail.
To effectively meet these challenges, the company had to build on the future
capabilities of the business by investing in quality human, financial and
physical resources in order to achieve the company`s strategic objectives.
Management information systems were introduced which enabled the company to
create a networked centralised/decentralised structure which ensured regional
`connectivity` or synchronised service offering to all Spectrum clients.
2004 involved the continuation of the roll-out of the initiatives started in
2003, the predominant emphasis being the forward and backward integration in
the supply chains, for example, into the buying and selling of freight,
tracking, road haulage, finance, general and marine insurance. No less
important, however, was the establishment of strategic partners in the
worldwide supply chain which would enable an integrated `door to door`
logistics solution that would ensure the seamless flow of products for both
importers and exporters whether by sea, air, road or rail. To this end,
successful agreements including exclusivity have been signed with select niche
logistics service providers on strategic routes around the globe.
CHALLENGES OF 2004
The challenges of 2004 were in the main attributable to two major factors: the
first, the persistent strengthening of the rand, and the second, the conscious
decision to cease trading with select clients which collectively amounted to an
approximate loss in revenue in 2004 of R6,1 million.
The combination of the strengthening of the currency and the fact that the
strategic realignment of the company was not yet complete meant that, as a
clearing agent, most of Spectrum`s revenue was still being generated on the
weighted rand value of goods traded by its clients. This resulted in revenue
diminishing proportionately with the strengthening of the currency which, when
quantified, amounted to R2,4 million in 2004. Reviewing the combined two year
period 2003 through to 2004, this figure amounts to R7,7 million.
In addition to the diminishing weighted rand value of goods, export activity
levels in regards to both general goods and perishables also diminished
dramatically. This was further compounded by the unexpected drought which
resulted in both a variable and late perishables season.
Consistent with the philosophies of the company with regard to risk management,
a conscious decision was taken to cease trading with select clients where the
risk or business relationship was considered imprudent. The adverse effect of
a sound business decision unfortunately resulted in a loss of existing client
revenue of R3,7 million during 2004.
ACHIEVEMENTS OF 2004
Despite the challenges of 2004, exciting signs of the emergent `new business
proposition` were starting to come through more regularly. These include:
* 524 new clients acquired over a 24 month period, 142 in 2003 whilst 382
were acquired during 2004. This effectively means that the company has
almost doubled its total client base in the last 24 months.
* Revenue from these new clients amounted to R7,7 million in 2004.
* Revenue from `new business` activities, including forex, roadfreight,
marine insurance, tracking, and freight management totalled R3,4 million
which equates to 44% of all new revenue from the above mentioned new
clients.
In essence, whilst the company lost an approximate R6,1 million in potential
revenue in 2004, the aggressive campaign for new clients, together with the
revenue from `new business` activities generated R7,7 million which more than
covered the loss of potential revenue in 2004.
Another exciting achievement during 2004 was the dramatic reduction in the
fixed cost structure of the company. This was made possible with the
introduction of a sophisticated management information system which enabled
centralisation and leverage off regional interconnectivity. Company costs were
reduced by some R400 thousand per month from the month of August 2004, despite
the number of shipments or activity levels being substantially higher than that
in 2003, with the result that budgeted costs for 2005 are well down on costs
incurred in 2004.
As predicted in our interim results for 2004, the second six-month period was
very different from that of the first six months of 2004. Whilst the company
made a loss of R1,3 million in the first six months, it made a profit of R2,8
million in the second six-month period before provisions and company tax. The
turnaround was predominantly as a result of the newly introduced components of
the supply chain starting to deliver, whilst the restructuring of the company
resulted in significant savings in costs. In summary, as from the month of
August 2004 it can be said that the performance of the company started lifting
in spite of the persistent strengthening of the rand.
OUTLOOK FOR THE NEXT TWELVE-MONTH PERIOD
Whereas the last two years incorporated the restructuring, strategic
realignment, reinvestment in intellectual capital and the introduction of
sophisticated management information systems, the year ahead will be dedicated
to `deal making` or rather revenue generating activities. As reported, from the
month of August 2004 the company integrated a year and a half`s strategic
reorganisation which will inevitably ensure that the company is substantially
more resilient to both internal and external factors.
Whilst traditionally the first six-month trading period has always been slow,
the company has budgeted a significant increase in earnings in the second half
of 2005. Furthermore, whereas earnings historically have been seriously
affected by the strengthening rand, the newly aligned business should serve as
a hedge against a further strengthening in the currency.
APPRECIATION
A sincere `thank you` to all the company`s directors, management, staff,
clients and strategic partners for all their support during 2004. The year was
indeed a challenging one, particularly in view of continued strategic
initiatives launched in 2003, complicated even more by a persistent
strengthening in the rand and unexpected drought. The year ahead will be
exciting as the company reaps the benefits of its strategic initiatives and in
so doing becomes a force to be reckoned with in the industry.
ACCOUNTING POLICIES AND AUDIT OPINION
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. The financials are audited by Marwick and Company Inc. and their
unqualified report is available for inspection at the Company`s registered
office.
DIVIDENDS FOR THE CURRENT FINANCIAL YEAR
In accordance with the board`s current desire to reinvest earnings, a dividend
for the current financial year has not been declared.
For and on behalf of the board
SDM Zungu GH Gerber
Chairman Chief executive officer
22 February 2005
REGISTERED OFFICE POSTAL ADDRESS
5th Floor, MSC House PO Box 6148
54 Winder Street, Durban 4001 Durban 4000
TRANSFER SECRETARIES
Computershare Investor Services 2004 (Pty) Ltd
PO Box 61051, Marshalltown 2107
AUDITORS
Marwick and Company Inc.
EXECUTIVE DIRECTORS
GH Gerber (CEO), DC Kelly (CFO), R Singh
NON-EXECUTIVE DIRECTORS
SDM Zungu (Chairman), FE Lediga, JP Nel, M Tembe, T Tomaszewski
COMPANY SECRETARY
JA Lupton, ACIS
PO Box 1319, Hillcrest 3650
Results are available for inspection at the registered office.
COMPANY SPONSOR
River Group
www.spectrum-shipping.co.za
