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SER/SRN - Seardel Investment Corporation - Reviewed consolidated condensed

Release Date: 20/05/2011 07:55
Code(s): SER SRN
Wrap Text

SER/SRN - Seardel Investment Corporation - Reviewed consolidated condensed results For the year ended 31 March 2011 SEARDEL INVESTMENT CORPORATION LIMITED ("Seardel" or "the Group") Registration number: 1968/011249/06 (Incorporated in the Republic of South Africa) The company`s shares are listed under the Consumer Goods - Personal and Household Goods Sector of the JSE Limited. JSE share code: SER ISIN: ZAE000029815 JSE share code: SRN ISIN: ZAE000030144 REVIEWED CONSOLIDATED CONDENSED RESULTS FOR THE YEAR ENDED 31 MARCH 2011 CONSOLIDATED STATEMENT OF FINANCIAL POSITION Group Reviewed Audited
at at 31 March 31 March Rand thousands 2011 2010 ASSETS Non-current assets 967 147 963 056 Property, plant and equipment 665 727 906 162 Intangible assets 8 812 3 933 Investment property 224 001 - Other investments 3 329 3 026 Long-term receivables 35 256 34 760 Deferred tax asset 30 022 15 175 Current assets 1 140 694 1 246 895 Non-current assets held for sale 16 338 81 725 Inventories 557 575 501 354 Trade and other receivables 554 995 583 089 Current tax asset 898 44 Cash and cash equivalents 10 888 80 683 Total assets 2 107 841 2 209 951 EQUITY AND LIABILITIES Total equity 1 254 592 1 291 949 Share capital and share premium 303 969 303 969 Treasury shares (14 610) (14 610) Reserves 964 623 1 001 989 Total equity attributable to owners of the parent 1 253 982 1 291 348 Non-controlling interest 610 601 Non-current liabilities 77 759 78 466 Deferred tax liability 7 999 6 919 Post-employment medical aid benefits 66 849 65 297 Interest-bearing liabilities 98 1 945 Operating lease accruals 2 813 4 305 Current liabilities 775 490 839 536 Current tax liabilities 257 3 074 Post-employment medical aid benefits 4 384 4 428 Interest-bearing liabilities 131 470 186 173 Provisions 2 337 17 770 Trade and other payables 418 912 431 211 Bank overdrafts 218 130 196 880 Total liabilities 853 249 918 002 Total equity and liabilities 2 107 841 2 209 951 Net asset value (excluding intangible assets) 1 245 170 1 287 415 Net asset value (excluding intangible assets) per share after treasury shares (cents) 177 183 STATISTICS PER SHARE Reviewed Audited
for the for the year year ended ended 31 March 31 March
In cents, where applicable 2011 2010 Weighted average number of shares in issue (`000) 702 946 702 946 Number of shares in issue (`000) 702 946 702 946 Diluted weighted average number of shares (`000) 737 494 737 346 Profit/(loss) 1,2 (29,0) Continuing operations 13,7 6,0 Discontinued operations (12,5) (35,0) Headline loss (3,5) (22,2) Continuing operations 10,9 6,0 Discontinued operations (14,4) (28,2) Diluted profit/(loss) 1,2 (27,6) Continuing operations 13,1 5,8 Discontinued operations (11,9) (33,4) Diluted headline loss (3,4) (21,2) Continuing operations 10,4 5,7 Discontinued operations (13,8) (26,9) Reconciliation between profit/(loss) and headline loss Income/(loss) attributable to equity holders of the parent 8 567 (203 593) Net impairment of assets (10 734) 29 599 Gain on deemed disposals (10) - Insurance claim for capital asset - (74) Surplus on disposal of property, plant and equipment (2 077) (4 045) Revaluation of investment properties (21 575) - Loss on disposal of property, plant and equipment 1 115 22 111 Total tax effect of adjustments (38) - Headline loss (24 752) (156 002) CONSOLIDATED CONDENSED INCOME STATEMENT Group Reviewed Audited for the for the year year
ended ended 31 March 31 March Rand thousands 2011 2010 Revenue 2 420 604 2 165 727 Gross profit 565 705 565 911 Operating profit before impairments and restructuring and retrenchment costs 122 310 71 510 Net impairment of assets (2 995) 646 Restructuring and retrenchment costs (5 316) (5 249) Operating profit before finance costs 113 999 66 907 Finance income 7 925 22 352 Finance expenses (35 651) (44 620) Profit before taxation 86 273 44 639 Income tax expense 10 084 (1 740) Profit for the year from continuing operations 96 357 42 899 Loss for the year from discontinued operations (87 781) (246 355) INCOME/(LOSS) FOR THE YEAR 8 576 (203 456) CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS Reviewed Audited for the for the
year year ended ended 31 March 31 March Rand thousands 2011 2010 Net cash flow from operating activities (28 835) 148 976 Operating profit before finance costs from continuing operations 113 999 66 907 Operating loss before finance costs from discontinuing operations (77 094) (211 030) Income/(loss) for the period before finance costs 36 905 (144 123) Adjustments for: Depreciation and amortisation 40 735 47 250 Revaluation of investment property (21 575) - Net unrealised foreign exchange (gains)/losses (1 261) 11 458 Loss/(surplus) on disposal (962) 18 066 Net impairment of assets 17 216 29 599 Post-employment medical benefit 2 079 (13 695) Share incentive scheme 2 137 - Waiver of liability - (18 897) Net changes to working capital (56 090) 283 697 Net finance costs (35 295) (53 611) Taxation paid (12 724) (10 768) Net cash flow from investing activities (5 660) 7 173 Additions of property, plant and equipment (63 884) (50 115) Proceeds on disposal 92 231 54 900 Additions to investment property (22 778) - Interest capitalised to investment property (309) - Net acquisition of intangible assets (10 494) - Investment income 70 116 Change in non-current receivables (496) 652 Proceeds on sale of investments - 1 620 Net cash flow from financing activities (56 550) (20 636) Change in borrowings (56 550) (20 636) Net change in cash and cash equivalents (91 045) 135 513 Cash and cash equivalents at the beginning of the year (116 197) (251 710) Cash and cash equivalents at the end of the year (207 242) (116 197) CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share Share Treasury Rand thousands capital premium shares Balance 31 March 2009 159 207 144 762 (14 610) Total loss for the year Fair value adjustment on available-for-sale financial assets Revaluation of land and buildings Post-employment medical benefit - actuarial gain Release reserve held for available for sale Balance 31 March 2010 159 207 144 762 (14 610) Total for the year income Fair value adjustment on available-for-sale financial assets Revaluation of land and buildings Post-employment medical benefit - actuarial gain Share incentive scheme Reclassification of revaluation surplus Deferred tax on release of revaluation surplus on land and buildings disposed Balance 31 March 2011 159 207 144 762 (14 610) Group Other Retained
Rand thousands reserves income Total Balance 31 March 2009 234 023 885 567 1 408 949 Total loss for the year (203 593) (203 593) Fair value adjustment on available-for-sale financial assets 2 755 2 755 Revaluation of land and buildings 81 972 81 972 Post-employment medical benefit - actuarial gain 1 265 1 265 Release reserve held for available for sale (731) 731 - Balance 31 March 2010 318 019 683 970 1 291 348 Total for the year income 8 567 8 567 Fair value adjustment on available-for-sale financial assets 260 260 Revaluation of land and buildings (51 479) (51 479) Post-employment medical benefit - actuarial gain 411 411 Share incentive scheme 2 137 2 137 Reclassification of revaluation surplus (5 474) 5 474 - Deferred tax on release of revaluation surplus on land and buildings disposed 2 738 2 738 Balance 31 March 2011 264 064 700 559 1 253 982 Minority Rand thousands interest Total Balance 31 March 2009 464 1 409 413 Total loss the year 137 (203 456) Fair value adjustment on available-for-sale financial assets 2 755 Revaluation of land and buildings 81 972 Post-employment medical benefit - actuarial gain 1 265 Release reserve held for available for sale - Balance 31 March 2010 601 1 291 949 Total for the year income 9 8 576 Fair value adjustment on available-for-sale financial assets 260 Revaluation of land and buildings (51 479) Post-employment medical benefit - actuarial gain 411 Share incentive scheme 2 137 Reclassification of revaluation surplus - Deferred tax on release of revaluation surplus on land and buildings disposed 2 738 Balance 31 March 2011 610 1 254 592 CONSOLIDATED CONDENSED STATEMENT OF COMPREHENSIVE INCOME Reviewed Audited for the for the year year ended ended
31 March 31 March Rand thousands 2011 2010 Income / (Loss) for the period 8 576 (203 456) Other comprehensive income: Fair value adjustment on available-for-sale financial assets 260 2 755 Revaluation of land and buildings (51 479) 81 972 Post employment medical benefit - actuarial gain 411 1 265 Other comprehensive (loss)/income for the period (50 808) 85 992 TOTAL COMPREHENSIVE LOSS FOR THE PERIOD (42 232) (117 464) Loss attributable to: Equity holders of the parent 8 567 (203 593) Non-controlling interests 9 137 8 576 (203 456) Total comprehensive loss attributable to: Equity holders of the parent (42 241) (117 601) Non-controlling interests 9 137 (42 232) (117 464) CONDENSED SEGMENTAL REPORT Rand thousands Textiles Clothing Property Business segments 2011 Segment revenue Gross revenue 1 014 983 1 150 248 65 597 Revenue reclassified as discontinued operations (136) (170 383) - Inter-segment revenue (these transactions are at arm`s length) (33 324) - (58 005) 981 523 979 865 7 592 Segment results Combined operating (loss)/profit before finance costs 55 936 (97 753) 62 032 Disclosed as discontinued operations (excluding finance charges and taxation) 228 76 866 - Operating (loss)/profit before finance costs from continuing operations 56 164 (20 887) 62 032 Net finance costs - - - Profit/(loss) before taxation from continuing operations 56 164 (20 887) 62 032 Segment assets 666 464 558 194 595 401 Segment liabilities 283 273 119 614 2 891 2010 Segment revenue Gross revenue 1 208 620 1 375 079 53 674 Revenue reclassified as discontinued operations (274 739) (513 215) - Inter-segment revenue (these transactions are at arm`s length) (52 712) - (53 333) 881 169 861 864 341 Segment results Combined operating (loss)/profit before finance costs (135 300) (83 817) 28 471 Disclosed as discontinued operations (excluding finance charges and taxation) 152 931 58 099 - Operating (loss)/profit before finance costs from continuing operations 17 631 (25 718) 28 471 Net finance costs - - - Profit/(loss) before taxation from continuing operations 17 631 (25 718) 28 471 Segment assets 666 959 598 536 585 991 Segment liabilities 273 246 147 990 471 Toys and Head electronics office Total
Business segments 2011 Segment revenue Gross revenue 452 600 - 2 683 428 Revenue reclassified as discontinued operations - - (170 519) Inter-segment revenue (these transactions are at arm`s length) (976) - (92 305) 451 624 - 2 420 604 Segment results Combined operating (loss)/profit before finance costs 38 737 (22 047) 36 905 Disclosed as discontinued operations (excluding finance charges and taxation) - - 77 094 Operating (loss)/profit before finance costs from continuing operations 38 737 (22 047) 113 999 Net finance costs - (27 726) (27 726) Profit/(loss) before taxation from continuing operations 38 737 (49 773) 86 273 Segment assets 248 721 39 061 2 107 841 Segment liabilities 63 090 384 381 853 249 2010 Segment revenue Gross revenue 423 616 - 3 060 989 Revenue reclassified as discontinued operations - (787 954) Inter-segment revenue (these transactions are at arm`s length) (1 263) - (107 308) 422 353 - 2 165 727 Segment results Combined operating (loss)/profit before finance costs 42 514 4 009 (144 123) Disclosed as discontinued operations (excluding finance charges and taxation) - - 211 030 Operating (loss)/profit before finance costs from continuing operations 42 514 4 009 66 907 Net finance costs - (22 268) (22 268) Profit/(loss) before taxation from continuing operations 42 514 (18 259) 44 639 Segment assets 329 433 29 032 2 209 951 Segment liabilities 58 755 437 540 918 002 NOTES 1. Basis of preparation These consolidated condensed results are prepared in accordance with the recognition and measurement requirements of IFRS, the AC 500 standards, the disclosure requirements of IAS 34 and the Listings Requirements of the JSE Limited. 2. Accounting policies The accounting policies adopted are in all respects consistent with those applied in the preparation of the Group`s annual financial statements for the period ended 31 March 2010. The Group has elected to early adopt the amendment to IAS 12 in connection with deferred tax on the recovery of underlying assets, specifically investment properties. As there were no investment properties in the prior period, no restatement is required. 3. Change in comparatives During the year the Group announced the closure of the Intimate Apparel division. The results of this division have been disclosed as discontinued operations. The comparative results have been restated accordingly. 4. Independent review These consolidated condensed results have been reviewed by our auditors KPMG Inc. 5. Related party transactions During the year the Group incurred the following related party expenditure: - Managerial services received from HCI - R4 200 000 - Professional services for recruitment of staff from Isilumko Staffing (Pty) Ltd - R115 611 - Interest on bridging loan received from HCI - R203 425 - Professional services rendered by Mr N Lazarus, deputy chairman of Seardel - R70 000 6. Capital expenditure and commitments Net capital expenditure during the year under review amounted to R97,3 million. There are further commitments in respect of contracted capital expenditure as at 31 March 2011 of R67,4 million. 7. Dividends The directors have resolved not to declare a dividend for the year ended 31 March 2011. COMMENTARY Seardel continues to make progress on its turnaround journey and for the 12 months ended 31 March 2011, we are pleased to be able to report an attributable profit of R8,5 million (2010: attributable loss of R203,4 million) comprising a R96 million profit from continuing operations (2010: R43 million) and an R88 million loss (2010: R246 million loss) from discontinuing operations. Given the current economic climate and strong Rand, we believe that on the whole the continuing operations performed solidly, reflected in them generating over R140 million of EBITDA in the 12 months. Although turnover from continuing operations was up 12% to R2,4 billion, the strong Rand, high cotton prices and our inability to pass any input price increases on to our customers, particularly within the clothing division weighed heavily on margins, with gross margins dropping 2,8% to 23,4%. One of the features of the second half of the financial year was the rapid and dramatic increase in cotton prices. The long term average price of cotton from 1998 through 2009 has been around US58 cents/lb; towards the end of March 2011 cotton was trading at around US200 cents/lb, and peaked at around US220 cents/lb thereafter. We have recently seen some easing down to US150 cents/lb levels, but even the current levels are still well over double the long-term average prices. The Group is obviously heavily exposed to the cotton price and on the whole has done well to manage its exposure to these dramatic swings. However, the cotton price increases did place some pressure on volumes, margins and working capital requirements which pressure is likely to continue into the new financial year. Textiles The performance of the textile division has been particularly pleasing with most business units showing marked improvements over the prior year. Turnover was up 11% to R982 million whilst operating profit was up 218% to R56 million. Operationally, each of these business units have taken significant strides forward and we believe that they are well positioned to take advantage of any uptick in economic conditions. Clothing The performance of the clothing division remains of great concern. This division is still being weighed down by all the external factors that have been discussed in previous reports, namely: - customs fraud; - the strong Rand; - competition from low wage paying countries both in the East and closer to home; and - competition from non-compliant local suppliers that do not pay the prescribed minimum wage. As we have stated previously, the central bargaining process is simply unworkable if some employers are free to undercut the legislated minimum wage whilst others are compelled to comply. This issue needs to be urgently addressed and it will require the co-operation of all stakeholders if a sustainable solution is to be arrived at. - import duty structures that require local garment manufacturers to pay import duties on most imported fabrics and trims. The list of fabrics and trims subject to these import duties is too wide. A more focused solution is required to enable garment manufacturers to source fabrics and trims at internationally competitive prices without destroying what is left of the local textile industry. These factors, together with some internal operational issues that are under our direct control resulted in this division delivering an operating loss of R21 million. Although this represents an improvement on the R26 million loss recorded in the prior year, it is clearly still most unsatisfactory. Numerous improvement programmes have been introduced to address the shortcomings that are under our control and we are optimistic that these will gain further traction in the new financial year. However, without meaningful changes to the external factors mentioned above, the apparel manufacturing operations are likely to remain under pressure, particularly those located in the higher wage areas. Included in the clothing segment is our new brand-focused business unit, Brand Identity, which has been established to manage the Group`s apparel brands. Of significance to this business unit was the recent announcement that it had acquired the local and international rights to procure, manufacture, distribute and sell apparel and accessories under the 46664 brand name. The range will be launched in the local market in August 2011 with international launches to follow. Toys, stationery and electronics The business units within this segment performed satisfactorily. Although the operating profit was down 9% from the previous year, it has to be seen against the backdrop of the economic climate as the products sold by these business units are largely discretionary in nature. Properties We have previously reported that the closure of the Frame Vertical Pipeline had left the Group with vacant properties that we have chosen to develop and let to external tenants. On completion of the developments, the Group will have approximately 150 000 m2 available to be let. Progress to date has been good with some 30 000 m2 having been developed, let and tenanted with a further 37 421 m2 currently under development. The remaining properties will be developed once sufficient lease agreements have been concluded. Government incentives Included in the current year`s results are benefits derived from government`s Production Incentive Scheme. Under the terms of the scheme, financial assistance is provided to enable businesses within the clothing and textile industry to upgrade its plant, processes and people. The scheme is welcomed and will enable the Group to invest in numerous upgrade programmes, the benefits of which will only be derived in future years. Discontinued operations The results of the discontinued operations include the costs of closing down the Intimate Apparel division as well as the remnant costs associated with selling the Frame Vertical Pipeline assets. These costs had largely come to an end by 31 March 2011. Appreciation As always, we would like to take this opportunity to thank all our employees for their concerted efforts during the past financial year. The improvements reflected in this report are as a direct result of the commitment shown by our management teams and all the staff that support them. CORPORATE INFORMATION Directors: J A Copelyn (Chairman), Adv N N Lazarus (Deputy Chairman), M H Ahmed, A E Dixon-Seager (Chief Operating Officer), T G (Kevin) Govender, A M Ntuli, S A Queen (Chief Executive Officer), Y Shaik, N Teladia, R Watson, G Wege (Chief Financial Officer) ( indicates Non-executive) Company secretary: HCI Managerial Services (Pty) Ltd Registered Office: 1 Moorsom Avenue, cnr Bofors Circle and Moorsom Avenue, Epping Industria II 7460 PO Box 524, Eppindust 7475, South Africa Transfer secretaries: Computershare Investor Services (Pty) Ltd 70 Marshall Street, Johannesburg 2001 PO Box 61051, Marshalltown 2107 Auditors: KPMG Inc. Sponsors: Java Capital Annual General Meeting Information in respect of the Annual General Meeting will be communicated to the shareholders in due course. On behalf of the board Stuart Queen Gys Wege Chief Executive Officer Chief Financial Officer Cape Town 20 May 2011 Date: 20/05/2011 07:55:12 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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