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SELCo - Abridged audited financial statements for the year ended 30 June 2005
Southern Electricity Company Limited
Incorporated in the Republic of South Africa
(Registration Number 1997/006894/06)
JSE Share Code: SLO & ISIN number: ZAE000041919
Abridged audited financial statements for the year ended 30 June 2005
BALANCE SHEET
COMPANY GROUP
2005 2004 2005 2004
R R R R
ASSETS
Non-current assets 12 149 522 12 112 324 17 565 229 18 354 465
Property, plant and - - 1 919 314 2 457 741
equipment
Investments in 4 505 726 4 505 726 3 061 000 3 061 000
subsidiaries
Investment property - - 9 300 000 9 300 000
Loans receivable 3 284 915 3 631 319 3 284 915 3 535 724
Amount owing by Group 4 358 881 3 975 279 - -
companies
Current assets 1 316 505 1 316 505 12 654 268 10 608 798
Inventories - - 540 799 501 736
Trade and other 1 316 505 1 316 505 11 663 254 9 963 275
receivables
Bank balances - - 450 215 143 787
Total assets 13 466 027 13 428 829 30 219 497 28 963 263
EQUITY AND
LIABILITIES
Capital and reserves 7 486 935 7 469 807 16 682 706 15 723 236
Issued capital 10 162 796 10 162 796 10 162 796 10 162 796
Non-distributable 16 115 16 115 7 839 969 7 839 969
reserve
Distributable reserve (2 691 976) (2 709 104) (1 320 059) (2 279 529)
Non-current 3 319 600 3 387 737 3 320 700 4 776 391
liabilities
Borrowings 3 319 600 3 387 737 3 320 700 4 776 391
Current liabilities 2 659 492 2 571 255 6 392 781 8 463 636
Loans payable 1 722 000 2 437 000 7 798 041 -
Trade and other 7 175 7 829 7 602 302 6 298 149
payables
Bank overdraft 102 877 41 999 102 877 5 451
Deferred tax 759 303 - 759 303 759 408
Current portion of 68 137 84 457 1 555 870 1 400 628
borrowings
Total equity and 13 466 027 13 428 829 30 219 497 28 963 263
liabilities
INCOME STATEMENT
COMPANY GROUP
2005 2004 2005 2004
R R R R
Gross revenue - - 23 497 201 27 087 705
Cost of sales - - (11 969 412) (13 032 254)
Gross profit - - 11 527 789 14 055 451
Other income 820 381 1 002 522 (192 805) 3 491 573
Operating costs (787 138) (764 329) (10 436 697) (13 651 120)
Operating (33 243) 238 193 1 283 897 3 895 904
profit/(loss)
Interest received - - 435 378 524
Finance costs - (178 703) (380 449) (680 908)
Profit/(loss) before (33 243) 59 490 1 338 826 3 215 521
taxation
Taxation - - (379 356) (1 330 328)
Profit/(loss) after (33 243) 59 490 959 470 1 885 193
taxation
Earnings per share 1,75 cent 5,88 cent
Headline earnings per 2,24 cent 6,30 cent
share
Basic attributable earnings per share are calculated by dividing the net profit
attributable to shareholders by the weighted average number of ordinary shares
in issue during the year.
The calculation of earnings per ordinary share is based on a profit for the
Group of R 959 470 (2004: R1 885 047) on the weighted average ordinary shares of
54 945 373 (2004: 32 060 305) for the year.
The calculation of headline earnings per ordinary share is based on a profit for
the group of R 1 231 268 (2004: R2 021 066) on the weighted average ordinary
shares of 54 945 373 (2004: 32 060 305) for the year.
Headline earnings have been computed as GROUP
follows
2005 2004
R R
Profit/(loss) for the year 959 470 1 885 193
Bad debts recovered - (352 565)
Listing expenses 153 540 309 242
Legal expenses 88 258 179 196
Headline earnings / (loss) 1 231 268 2 021 066
CASH FLOW STATEMENT
COMPANY GROUP
2005 2004 2005 2004
R R R R
Cash flows from (677 519) (1 256 911) 658 603 2 836 838
operating activities
Cash generated by (677 519) (1 078 208) 603 674 3 517 221
operating activities
Interest received - - 435 378 524
Interest paid (178 703) (380 449) (680 907)
Cash flows from (255 922) (6 010 786) (255 922) (6 619 580)
investing activities
Expenditure to
maintain operating
capacity
Property, plant and - - (160 469) (24 154)
equipment acquired
Proceeds on disposal - - - 1 299
of property, plant
and equipment
Proceeds from loans - - - (3 535 725)
Loans repaid by - 1 595 812 - -
subsidiaries
Expenditure for
expansion
Property, plant and - (3 975 279) - -
equipment
Loan to related party - (3 631 319) - -
Subsidiaries acquired (95 453) - (95 453) -
Investment in - - - (3 061 000)
subsidiary
Cash flows from 712 094 7 225 698 (193 681) 3 623 854
financing activities
Capital raised - 1 316 504 - 1 316 504
Loans raised - 5 909 194 2 898 187 2 307 350
Loans repaid (433 983) - (3 091 868) -
Increase/ (decrease) (60 878) (41 999) 209 000 (158 888)
in cash and cash
equivalents
Cash and cash (41 999) - 138 336 297 224
equivalents at
beginning of the year
Cash and cash (102 877) (41 999) 347 336 138 336
equivalents at end of
the year
STATEMENT OF CHANGES IN EQUITY
Non
distribu- Accumu-
Share Share table lated
capital premium Reserve Loss Total
GROUP R R R R R
Balance at 01 1 480 850 7 365 441 253 899 (4 164 722) 4 935 468
July 2003
Net profit for - - - 1 885 390 1 885 390
the year
Revaluation of - - 7 586 070 - 7 586 070
Investment
Property
Issue of share 1 319 244 92 347 - - 1 411 591
capital
Repurchase of (52 826) (42 261) - - (95 087)
shares
Balance at 01 2 747 269 7 415 527 7 839 969 (2 279 532) 15 723 236
July 2004
Net profit for - - - 959 470 959 470
the year
Balance at 30 2 747 269 7 415 517 7 839 969 (1 320 062) 16 682 706
June 2005
Non
distribu- Accumu-
Share Share table lated
capital premium Reserve Loss Total
COMPANY R R R R R
Balance at 01 1 480 850 7 365 441 16 115 (2 768 594) 6 093 812
July 2003
Net profit for 59 490 59 490
the year
Issue of share 1 319 244 92 347 - - 1 411 591
capital
Cancellation of (52 826) (42 261) - - (95 087)
shares
Balance at 01 2 747 269 7 415 527 - (2 709 104) 7 469 807
July 2004
Net profit for 33 243 33 243
the year
Balance at 30 2 747 269 7 415 527 - (2 675 861) 7 486 935
June 2005
COMMENTARY
OVERVIEW
Overall, profit is down this year as compared to last year due to numerous
marketing and expansion activities embarked upon by SELCo during the past year.
These expansion activities should positively impact on SELCo"s profits for the
2006 / 2007 financial year.
The Company"s cash flows have been very strong in 2005, which has enabled SELCo
to fund its distribution interests in Mozambique from internal resources.
Recently project funding for the Mozambican concession business was secured with
the Development Bank of South Africa (DBSA).
This year marks the first year in which SELCo has formally written off bad debts
since its commencement of business activities in Namibia.
In recent times, the necessity of introducing Independent Power Producers in the
electricity supply chain has been a much discussed topic in Government policy
circles. Such producers are reliant on bulk off-takers, of which there are few.
SELCo has now positioned itself as a retailer with direct access to end-users,
the benefits of which should be quite apparent, and which will result in
improvements to the Company"s bottom line.
Overall, we are quite pleased with SELCo"s performance and position in the
marketplace and feel confident that the business is viable and sustainable in
the long term.
REVIEW OF THE BUSINESS
SELCo operates within the electricity utility industry, which historically has
been dominated by governments and parastatals. The industry is heavily
regulated due to the potential impact that the electricity business can have on
the economy of a country. The recent interruptions in the supply of electricity
in Johannesburg certainly did have an impact on businesses in the Greater
Johannesburg area, as was demonstrated by the public outcry over these
interruptions. The interruptions and poor quality of service of electricity
clearly demonstrated the harm that the South African economy could potentially
suffer.
SELCo commenced its distribution business in 2000 in Southern Namibia and has
since stabilized the then fragile industry and transformed it into a sustainable
and viable business. This year is the third year that SELCo is reporting a
profit from its Namibian operations, which comprise a mere 5,000 points of
supply in a very sparsely populated countryside. What makes this achievement
even more remarkable is the fact that SELCo"s bulk revenue originates from
domestic and governmental users, which have historically displayed a poor
tendency to pay promptly for service. Since the start of SELCo"s operations in
Southern Namibia, SELCo has written off only R200,000 in respect of electricity
users who have not settled their accounts. This figure is against a revenue of
around R90,000,000.00.
The electricity industry in Southern Africa is now opening up to the
participation of the private sector, with Governments looking to introduce
private players to inject capital and know-how. In this regard, SELCo has
secured an interest in the distribution portion of the first long term
electricity concession to be awarded in the Southern African sub region to an
indigenous African based company, namely the 20 year concession for the
distribution, generation and transmission of electricity in the Northern
Inhambane Province of Mozambique. Equally significant is the fact that SELCO
has pre-qualified for the purchase of a majority stake in the Lesotho
Electricity Corporation (LEC).
There is a lot of activity in the industry and SELCo is confident that it is
well positioned to become a serious player in the Southern African electricity
marketplace.
PROSPECTS
NAMIBIA
Despite recent ill-advised attempts by councilors to obstruct SELCo"s business
operations in Namibia, our business has been solid, generating strong cash
flows.
The Government of Namibia has embarked upon a policy of consolidating and
amalgamating electricity suppliers into four regional electricity distributors
(much as is the process in South Africa). The Electricity Control Board (ECB)
has presented a position paper to all the stakeholders in Southern Namibia.
This position paper highlights Government"s policy guidelines and requirements,
and articulates how the process and the various potential outcomes are
envisaged. These potential outcomes are to be achieved through negotiation by
all parties involved. The indications are that no party would be obliged to
accept any proposal that would be detrimental to its existence or that would
infringe on its existing contractual rights.
Finally, we are pleased to report back that SELCo"s litigation against the
Namibian Ministry of Health (as disclosed in the 2004 Annual Report) has been
settled with costs by the Ministry.
MOZAMBIQUE
SELCo has secured the distribution business pertaining to a 20 year concession
for the generation, distribution and supply of electricity in the Northern
Inhambane Province. This concession is held by SELCo"s sister company, Energia
de Mocambique (ENMo). SELCo has been providing funds for its portion of the
project since May 2004. As noted earlier, ENMo recently secured project finance
from the DBSA to expedite deliverables in the concession area. This accelerated
investment should lead to an increase in business within the concession area
which, with one of the most beautiful coastlines in the world, will now have a
hospitality industry with access to reliable and affordable electricity.
The actual project figures to date have confirmed the assumptions made and the
original financial model used during concession negotiations.
LESOTHO
SELCo has been short-listed to submit a bid for the purchase of 70% of the
issued share capital of the Lesotho Electricity Company (LEC). Although the LEC
is relatively small and has not been profitable for quite some time, SELCo,
mainly due to its business model, is ideally positioned to turn the business
around in the event that it is successful with the bidding process.
ACCOUNTING POLICIESThe audited results for the year ended 30 June 2005 have been
prepared in accordance with the Statements of Generally Accepted Accounting
Practice of South Africa and Schedule 4 of the South African Companies Act,
1973, as amended and should be read in conjunction with the 2004 annual
financial statements. The accounting policies adopted remain consistent with
those applied in the financial statements for the year ended 30 June 2004 and
the interim financial statement for the six months ended 31 December 2004.
The Company"s auditors J S Lambrechts Inc have audited the financial information
for the year ended 30 June 2005 and their unqualified audit report is available
for inspection at the registered office of the Company.
DIVIDENDNo dividend for the year ended 30 June 2005 is declared.
ANNUAL GENERAL MEETING
The Annual General Meeting of the Company will be held at 156 Kleine Street, New
Muckleneuk, Pretoria at 10:00 on Friday, 2 December 2005.
DIRECTORSB Hlongwa (Chairman)*, CF Bosch (CEO), I Bosch, PH Jacobs,
F Sekandi*#, A van Zyl
* Non Executive
# Uganda
REGISTERED OFFICE156 Kleine StreetNew MuckleneukPretoriaPO Box 73130Lynnwood
Ridge0040
TRANSFER SECRETARIESUltra Registrars (Pty) LtdPO Box 4844, Johannesburg, 2000
COMPANY SECRETARYE.A. Steyn
SPONSORBridge Capital Services (Pty) Ltd
AUDITORSJ.S. Lambrechts Inc
Date: 30/09/2005 04:47:27 PM Produced by the JSE SENS Department
