| Wed 15 Feb 2006, 8:00 | | Spectrum - Audited results for the year ended 31 D |
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SUM
SUM
Spectrum - Audited results for the year ended 31 December 2005
SPECTRUM SHIPPING LIMITED
(Registration number 1998/018118/06)
(Share code: SUM & ISIN number: ZAE000037446)
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005
INCOME STATEMENT Audited Audited
Year ended Year ended
31 December 31 December
2005 2004
R"000 R"000
Turnover 31 009 29 149
Gross billings 552 436 495 701
Cost of billings (521 427) (466 552)
Operating income 6 629 5 147
Amortisation of intangible assets - (266)
Depreciation (927) (709)
Net interest paid (3 532) (3 273)
Profit before taxation 2 170 899
Taxation (787) (269)
Net profit after taxation 1 383 630
Shares in issue (000"s) 849 000 850 000
Earnings per share (cents) 0.2 0.1
Headline earnings per share (cents) 0.2 0.1
Diluted earnings per share (cents) 0.2 0.1
Reconciliation between
earnings and headline earnings
Profit after taxation 1 383 630
Profit on sale of fixed assets (54) (31)
Impairment losses - 18
Taxation effects 16 4
Headline profit after taxation 1 345 621
CASH FLOW STATEMENT
Audited Audited
Year ended Year ended
31 December 31 December
2005 2004
R"000 R"000
Cash generated by operations
before working capital changes 6 387 5 108
Changes in working capital (23 100) (3 520)
Cash (utilised in)/generated from
operating activities (16 713) 1 588
Net interest paid (3 532) (3 273)
Cash flows from operating activities (20 245) (1 685)
Cash flows from investing activities (598) (1 217)
Cash flows from financing activities (1 151) (28)
Net decrease in cash and cash
equivalents (21 994) (2 930)
Cash and cash equivalents at the
beginning of the year (38 772) (35 842)
Cash and cash equivalents at the
end of the year (60 766) (38 772)
BALANCE SHEET Audited Audited
As at As at
31 December 31 December
2005 2004
R"000 R"000
ASSETS
Non-current assets 5 724 5 765
Property, plant and equipment 1 759 2 034
Intangible assets 265 265
Investments - 1
Deferred taxation 2 678 3 465
Loans receivable 1 022 -
Current assets 145 369 107 093
Trade and other receivables 125 219 94 620
Cash and cash equivalents 20 150 12 473
Total assets 151 093 112 858
EQUITY AND LIABILITIES
Capital and reserves 31 039 29 760
Share capital and premium 107 691 107 795
Accumulated loss (76 652) (78 035)
Current liabilities 120 054 83 098
Trade and other payables 36 468 28 970
Current portion of borrowing - 25
Bank overdraft 80 916 51 245
Provisions 2 670 2 858
Total equity and liabilities 151 093 112 858
STATEMENT OF CHANGES IN EQUITY
Accu-
Share Share mulated
capital premium loss Total
R"000 R"000 R"000 R"000
Balance at 01 January 2005 850 106 945 (78 035) 29 760
Net profit for the year 1 383 1 383
Treasury shares (1) (119) (120)
Employee share incentive scheme 16 16
Balance at 31 December 2005 849 106 842 (76 652) 31 039
COMMENTARY
INTRODUCTION
2005 was effectively characterised by the continued focus on the implementation
of strategic initiatives introduced in the latter part of 2003 and rolled-out in
2004. As reported previously, these initiatives were introduced to ensure that
as a comprehensive international supply chain logistics service provider the
company would improve earnings through intelligent `end to end" logistics
solutions. However, the rate at which the company has been able to fully
implement these initiatives has been slower than anticipated, resulting in a
delay in the financial benefits emanating from these newly introduced
operational activities.
Four new subsidiary companies were registered during the year in line with the
company"s strategic imperative to enlarge the range of services offered to
clients:
Spectrum Shipping NVOCC (Proprietary) Limited ("NVOCC") - a non-vessel owner
common carrier
Spectrum Warehousing Solutions (Proprietary) Limited ("SWS") - providing
warehousing solutions to clients
Supply Chain Insurance Brokers (Proprietary) Limited ("SCIB") - providing
marine and other insurance products to clients
Supply Chain Financial Services (Proprietary) Limited ("SCFS") - a financial
services provider.
Of the four, only Spectrum Shipping NVOCC has begun to make a contribution to
earnings in the financial year under review. Supply Chain Insurance Brokers
has applied to the Financial Services Board for a licence as a financial
services provider but due to inefficiencies on the part of the agents handling
the application, five months down the line a licence has yet to be issued. It
is anticipated that the licence will be authorised early in February 2006.
Supply Chain Financial Services (Proprietary) Limited will remain a dormant
company for the time being and a licence as a financial services provider has
accordingly not been applied for.
Performance
Whereas 2003 and 2004 incorporated the restructuring, strategic alignment,
reinvestment in intellectual capital and the introduction of sophisticated
management information systems, 2005 was meant to be the year in which
earnings constituted a significant turnaround. This, however, was not to be
the case. Whilst the group has achieved its status as an effective
international supply chain logistics service provider, earnings were
restricted by three major factors;
Firstly, a continued decline in export activity levels in regard to both
general goods and in particular perishables, the latter being adversely
affected by both the unexpected drought and persistent strengthening of the
Rand. This was characterised by diminished export volumes and/or numerous
`business failings" among exporters, all of which resulted in reduced
revenue to the company in the amount of R1 029 473. The effect of this was
in most part limited to both the Cape Town and Port Elizabeth offices where
these businesses are predominantly reliant on the export market.
Secondly, an increase in the cost structure of the group through the
continued investment in infrastructure and resources, the latter referring
specifically to management information systems which enabled highly advanced
`track and trace" systems for profiled clients on an international level.
Whilst this increase over the period was some R1 000 000 more than expected,
anticipated revenue of at least R2 000 000 as a direct result of this
investment was late in following due to trading with these clients only
starting four or five months later than expected.
Finally, NVOCC, SCIB and SWS have not as yet served the group as fully
functional operational units. In respect of the NVOCC, conversion to the
Spectrum House Bill and utilisation by strategic shipping partners worldwide
has been gradual rather than immediate. Where SCIB is concerned, the delay
experienced in obtaining a licence, as outlined above, has prevented the
company from becoming active. As a consequence, revenue anticipated from
these two strategic initiatives over the year under review has not
materialised, in spite of the investment outlay. SWS have achieved a
break-even situation and are expected to start contributing to revenue in
the current financial year.
Financial review
Gross billings for the year were 11% up on prior year despite a strengthening
rand. The higher levels of trading were a function of both the new client gains
experienced in 2005 and increased trading from existing clients.
Operating income has increased by 29% over the prior year and reflects the
benefits of the containment of fixed operating costs at levels similar to those
of 2004. Net interest paid is up on last year and reflects the higher levels of
trading in 2005. Profits have thus improved upon the prior year, but still fall
short of the return on equity targets that the company has set itself, due in
the main to delays experienced in the implementation of the new initiatives set
up at the end of the last financial year.
The tax rate at 36% for 2005 is greater than the statutory rate of 29% due to
the deferred tax rate adjustments which have been made on the opening deferred
tax balances. The company is still benefiting from the cash flow effects of
its assessed loss position.
Cash flow requirements have increased over the prior year due to both new
client gains in the latter part of the year and very brisk trading by existing
clients as part of the festive season trading cycle. The additional funding
requirements have been met both by current year profits and the increase in
existing facilities from the company"s bankers. Debtor days for the company
have however improved over the prior year and at December were at 55 days. The
company has also employed a qualified admitted attorney to meet the company"s
growing contractual demands in terms of multi modal transport requirements.
These include sea, road and related services contracts. The attorney role has
also resulted in the further strengthening of the in house credit function.
The doubtful debtors" book was sold during the current financial year in a
transaction valued at R7 million. The sale had a neutral effect on the current
year income statement after having provided for the proceeds and provisions on
the debtors" book. This transaction effectively improves the ageing of the
current debtor profile, frees the company of its previous time commitments in
respect of managing the doubtful debtors" book and improves the overall
profile of the asset base.
Achievements of 2005
Whilst the above factors hindered earnings by no less than R2 700 000, the
group"s growth-orientated strategy resulted in the achievement of significant
milestones; particularly in Gauteng and KwaZulu-Natal where, unlike Cape Town
and Port Elizabeth, the predominantly import client base was not adversely
affected by a strong currency.
Our operation in Gauteng, which in effect was only `launched" two and half
years ago, has displayed an impressive ability to grow exponentially. In spite
of the delay in operational activities of the NVOCC, SCIB and SWS, the total
revenue earned by the region for the period under review was
R6 087 046, as opposed to R2 628 178 for the same period last year - an
increase of 132%. Furthermore, approximately 46% of this 2005 revenue was
generated from new clients acquired during the period 2004 and 2005 with
128 good quality new clients being signed on in this region in 2005, compared
with 78 in 2004. Considering the fact that future growth of the group is
heavily dependent on the success of this regional office, such performance
bodes well for the group going forward.
Perhaps the greatest achievement of the group was the extent and rate at which
we have been able to evolve from a `customs clearing-house" into a
comprehensive service provider of integrated supply chain logistics solutions.
This is highlighted by the fact that:
Freight revenue relating to the movement of goods by sea and air increased
by 109%, increasing from R1 797 867 in 2004 to R3 763 741 in 2005;
Revenue relating to road transport increased by 129%, from R842 698 in 2004
to R1 927 141 in 2005.
Whilst still well below expectations for 2005, this cumulative revenue
generated from the activities mentioned above amounts to R5 690 882 - an
increase of 272% on the revenue of R1 530 316 generated two years ago during
the year ended 31 December 2003. With a fully operational NVOCC during 2006,
these revenue lines will no doubt deliver significant growth going forward.
Consistent with our expectations, the ability of the company to continue with
its strategy to consistently develop a quality client base is further
supported by the following:
354 new clients were acquired by the group overall during 2005, as opposed
to 382 in 2004 and 142 in 2003.
The cumulative revenue to the group from the new clients acquired in 2004
and 2005 amounted to R8 920 332, which is 29% of the group"s total net
revenue figure of R31 009 914 for 2005 - a trend which should continue as
the profile of new clients improves year on year as a result of the levels of
sophisticated delivery continuing to evolve even further and the quality of
clients taken on improves.
Of the total net revenue of R31 009 914 for 2005, approximately 53.04% has
emanated out of new clients acquired since the decision to strategically re-
align the business was introduced in 2003. Considering the business of
Spectrum is some 24 years old, this constitutes an impressive achievement of
the group.
Outlook for 2006
The group will continue to focus on the implementation and consolidation of
those operational activities which, once successfully implemented, will
generate the growth in earnings that is expected of the strategic initiatives
introduced in 2003 and 2004. These activities relate specifically to the
NVOCC, marine and short-term insurance as well as warehousing and distribution
solutions.
Complementary to this, relative to our historical client base, the larger
client profile acquired during the third and fourth quarters will
significantly enhance earnings in the year ahead. The predominant reason for
this is that, unlike 2005, this revenue will accrue over a full the twelve
month period in 2006.
Furthermore, with our in-house ability to provide integrated `end to end"
supply chain logistics solutions, the outsourcing of fundamental components in
the logistics chain is resulting in improved earnings whilst at the same time
reducing logistics costs to clients. In essence this `one-stop" international
service has resulted in a much better quality of clients opting for the
services of our organisation which should result in the group witnessing a
consistent improvement in the quality of the client base, and therefore
earnings, as more and more profiled clients opt for the services of Spectrum
worldwide.
For competitive reasons, the group is reluctant to expand further on its
strategic plans for the way forward at this stage.
Appreciation
What was initiated in 2003 was indeed a bold step by us all. Now some three
years down the road we can look back and acknowledge the relevance of such
initiatives by taking cognisance of the impact that this changed environment
could have had on Spectrum should we not have engaged in the transformation of
our business. The `character" of the group, and particularly its tenacity, has
indeed been tested and it has passed with flying colours. Furthermore, the
group has proved to be more resilient to both internal and external risk
factors, specifically in view of the first six month"s period when the
currency was on average 10% stronger than over the same period last year.
We would like to express our thanks and gratitude to our fellow directors,
executive committee members, staff, clients and partners for their commitment
and support during the past year, which has resulted in the group attaining
the improvements witnessed in 2005. We look forward to a highly successful
2006 which we trust will result in the aspirations of the group being
exceeded.
ACCOUNTING POLICIES
The financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS). The annual financial statements
published for the year ended 31 December 2004 were prepared in accordance with
South African Statements of Generally Accepted Accounting Practice, which
differ in some areas from IFRS. Therefore in preparing these financial
statements, certain reclassifications were applied to comply with IFRS. The
comparative figures in respect of 2004 have been restated to reflect these
adjustments.
DIVIDENDS FOR THE CURRENT FINANCIAL YEAR
In accordance with the board"s current desire to re-invest earnings, a
dividend for current financial year has not been declared.
Accumulated loss
The board draws attention to the accumulated loss, which was incurred prior to
the "reverse listing" in 2002 of the business of the company into Micrologix
Limited, which changed its name to Spectrum Shipping Limited. The profitable
results of the business of Spectrum Shipping have been fully disclosed and in
no way resulted in the accumulated loss as reflected in the balance sheet, at
inception of the "reverse listing".
DIRECTORS
Mr JP Nel and Mr T Tomaszewski resigned on 20 April and 20 October 2005
respectively. Mr S Donner was appointed as a director.
For and on behalf of the board
SDM Zungu GH Gerber
Chairman Chief Executive Officer
9 February 2006
SPECTRUM SHIPPING LIMITED
(Registration number 1998/018118/06)
(Share code: SUM ISIN number: ZAE000037446)
REGISTERED OFFICE AND POSTAL ADDRESS
5th Floor, MSC House, 54 Winder Street, Durban, 4001
PO Box 6148, Durban, 4000
COMPANY SECRETARY
JA Lupton ACIS, PO Box 1319, Hillcrest, 3650
TRANSFER SECRETARIES
Computershare Investor Services 2004 (Pty) Limited
PO Box 61051, Marshalltown, 2107
AUDITORS SPONSOR
Marwick & Company Inc. River Group
EXECUTIVE DIRECTORS
GH Gerber (CEO), DC Kelly (CFO), S Donner, R Singh
NON-EXECUTIVE DIRECTORS
SDM Zungu (Chairman), FE Lediga, M Tembe
Results are available for inspection at the registered office.
www.spectrum-shipping.co.za
Date: 15/02/2006 08:00:11 AM Produced by the JSE SENS Department
