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SER/ SRN - Seardel Investment Corporation Limited - Reviewed consolidated

Release Date: 17/05/2012 13:02
Code(s): SER SRN
Wrap Text

SER/ SRN - Seardel Investment Corporation Limited - Reviewed consolidated condensed results for the year ended 31 March 2012 SEARDEL INVESTMENT CORPORATION LIMITED ("Seardel" or "the Company") Registration number: 1968/011249/06 (Incorporated in the Republic of South Africa) JSE share code: SER ISIN: ZAE000029815 JSE share code: SRN ISIN: ZAE000030144 REVIEWED CONSOLIDATED CONDENSED RESULTS FOR THE YEAR ENDED 31 MARCH 2012 COMMENTARY The Group reports income attributable to ordinary shareholders of R136,9 million (2011: R8,6 million) and total comprehensive income of R163,5 million (2011: R42,2 million loss) for the year ended 31 March 2012. However, the current year`s results were overwhelmingly influenced by the settlement of the various litigation proceedings with former directors and officers of the Group as announced on SENS on 16 March 2012, with income of R191,8 million relating to a portion of that settlement having been recognised in the period. Excluding the effect of the settlement on the current year`s results, the Group is reporting an adjusted headline loss of R45.0 million against a R24.8 million loss in the prior year. The main reason for the deterioration was the poor performance of the Seardel Apparel division. The competition that this business unit faces from both imports out of lower wage paying countries and manufacturers within our own borders that do not pay the prescribed minimum wages meant that rising input costs could not be recovered in higher prices for products supplied. In order to fill its production capacity, margin needed to be sacrificed to retain volumes. The resultant losses were of such a magnitude that it unfortunately left no alternative but to rationalise the business unit. Although turnover was up 6% to R2,5 billion, tough trading conditions saw gross margins decline to 19,3% from 22,7% in the previous year. The decline in margins reflects the above mentioned difficulty experienced by the Seardel Apparel division. Margins, particularly within our textile businesses, were further affected by movements in raw material prices. We mentioned in the previous year`s report that the dramatic increases in cotton prices may have an effect on volumes and margins in this year. What transpired is that cotton prices have steadily declined over the course of this financial year which resulted in inventory holdings usually being held at prices above spot and thus resulted in lower margins being achieved. Textiles segment Although turnover was up 3,8% to R1 053,4 million, margin pressure saw operating profit before finance costs from continuing operations fall to R38,3 million in the current period down from R56,2 million in the prior period. The decrease is reflective of the generally difficult trading environment experienced, the effect of the steady decline in cotton prices and an inability to fully pass on the significant utility cost increases to customers. Clothing segment A combination of lower turnover, reduced margins and the costs associated with restructuring resulted in this segment reporting an operating loss before finance costs from continuing operations of R125,8 million compared to the R13,2 million loss recorded in the prior period. The proposed restructuring that was announced in January 2012 has now been completed with the 5 facilities located in the Western Cape being reduced to 2 facilities and the 2 facilities located in Ladysmith KwaZulu Natal being consolidated into 1 facility. The current year`s results include R22 million of direct restructuring costs as well R36 million of inventory impairments. Although we are still dealing with some operational challenges, the improvement initiatives identified in our interim report are beginning to find traction and we are confident that progress will continue to be made. The results of this segment also include the start-up costs of the new brand focused business unit, Brand ID. As most of the brands within this unit are either new or are being revamped, costs have been incurred ahead of any revenue benefits. The most significant development within this business unit was the successful launch of the 46664 fashion range into the local market and early indications are very positive. It remains our intention to expose this brand to the international markets and we hope to shortly be able to announce further developments in this regard. Property segment Revenue remained relatively flat at R66,6 million but of significance is that revenue from external tenants increased by 223% to R24,5 million. Operating profit before finance costs declined by 28,1% to R44,6 million from R62,0 million in the prior period. The decline is attributable to property revaluations as included in the prior period was a R21,6 million upwards revaluation, whilst the current period numbers include an R8,4 million downwards revaluation. We anticipate that whilst the investment properties are being developed and are at various stages of completion, the property revaluations will remain volatile. Good progress has been made on the property developments with 88 480 m2 having been fully developed and made available for letting to external tenants. Of this, 87 190 m2 (98,5%) has been let to date. A further 60 000 m2 across three buildings and two different sites is available for development and we will move ahead with these properties in stages as and when sufficient tenants have been signed up. Some R136,3 million has been spent on the developments to date, with the remaining portions anticipated to cost an additional R109.7 million. Toys, stationery and electronics segment The performance of all the businesses within this segment delivered excellent results. Revenue was up 25% to R565,7 million whilst operating profit, with some assistance from foreign exchange gains, was up 46,2% to R56,6 million. On behalf of the board Stuart Queen Gys Wege Chief Executive Officer Financial Director Cape Town 17 May 2012 CONSOLIDATED CONDENSED STATEMENT OF COMPREHENSIVE INCOME Audited and Reviewed restated
for the for the year year ended ended 31 March 31 March
Rand thousands 2012 2011 Revenue 2 506 794 2 358 986 Gross profit 483 846 536 361 Operating profit before impairments and restructuring and retrenchment costs 204 756 129 829 Net impairment of assets (1 250) (2 995) Restructuring and retrenchment costs (24 491) (5 176) Operating profit before finance costs 179 015 121 658 Finance income 4 594 7 925 Finance expenses (38 467) (35 651) Profit before taxation 145 142 93 932 Income tax 13 131 10 084 Profit for the year from continuing operations 158 273 104 016 Loss for the year from discontinued operations (21 442) (95 440) INCOME FOR THE YEAR 136 831 8 576 Other comprehensive income/(loss): Fair value adjustment on available-for-sale financial assets - 260 Revaluation of land and buildings 30 731 (51 479) Post employment medical benefit - actuarial (loss)/gain (4 170) 411 Other comprehensive income/(loss) for the year 26 561 (50 808) TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR 163 392 (42 232) Income attributable to: Equity holders of the parent 136 944 8 567 Non-controlling interests (113) 9 INCOME FOR THE YEAR 136 831 8 576 Total comprehensive income/(loss) attributable to: Equity holders of the parent 163 505 (42 241) Non-controlling interests (113) 9 TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR 163 392 (42 232) CONSOLIDATED STATEMENT OF FINANCIAL POSITION Reviewed Audited at at
31 March 31 March 2012 2011 Rand thousands Non-current assets 1 142 413 967 147 Property, plant and equipment 695 048 665 727 Intangible assets 10 563 8 812 Investment properties 357 801 224 001 Other investments 3 329 3 329 Long-term receivables 43 402 35 256 Deferred tax asset 32 270 30 022 Current assets 1 286 386 1 140 694 Non-current assets held for sale 12 906 16 338 Inventories 581 816 557 575 Trade and other receivables 688 644 554 995 Current tax asset 971 898 Cash and cash equivalents 2 049 10 888 Total assets 2 428 799 2 107 841 EQUITY AND LIABILITIES Total equity 1 411 645 1 254 592 Share capital and share premium 304 620 303 969 Treasury shares (14 610) (14 610) Reserves 1 121 635 964 623 Total equity attributable to equity holders 1 411 645 1 253 982 Non-controlling interest - 610 Non-current liabilities 85 226 77 759 Deferred tax liability 8 725 7 999 Post employment medical aid benefits 74 645 66 849 Interest-bearing liabilities 715 98 Operating lease accruals 1 141 2 813 Current liabilities 931 928 775 490 Current tax liabilities - 257 Post employment medical aid benefits 4 662 4 384 Interest-bearing liabilities 25 427 131 470 Provisions 13 538 2 337 Trade and other payables 437 830 418 912 Bank overdrafts 450 471 218 130 Total liabilities 1 017 154 853 249 Total equity and liabilities 2 428 799 2 107 841 Net asset value 1 411 645 1 253 982 Net asset value per share after treasury shares (cents) 201 178 Net asset value (excluding intangible assets) 1 401 082 1 245 170 Net asset value (excluding intangible assets) per share after treasury shares (cents) 199 177 STATISTICS PER SHARE Reviewed Audited at at 31 March 31 March
In cents, where applicable 2012 2011 Weighted average number of shares in issue (`000) 703 398 702 946 Number of shares in issue (`000) 703 711 702 946 Diluted weighted average number of shares in issue (`000) 727 060 737 493 Earnings per share 19,5 1,2 Adjusted (loss)/earnings per share (7,8) 1,2 Headline earnings/(loss) per share 20,9 (3,5) Adjusted headline loss per share (6,4) (3,5) Diluted earnings per share 18,8 1,2 Diluted headline earnings/(loss) per share 20,2 (3,4) Reconciliation between earnings, headline earnings/(loss) and adjusted headline loss Income attributable to shareholders 136 944 8 567 Net impairment of assets 1 250 (10 734) Gain on deemed disposal - (10) Surplus on disposal of property, plant and equipment (1 114) (2 077) Revaluation of investment property 8 372 (21 575) Loss on disposal of property, plant and equipment 1 534 1 115 Insurance claim for capital asset (247) Total tax effect of adjustments (3) (38) Headline earnings/(loss) 146 736 (24 752) Settlement (191 773) - Adjusted headline loss (45 037) (24 752) CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share Share Treasury Other Rand thousands capital premium shares reserves Balance 31 March 2010 159 207 144 762 (14 610) 318 019 Total comprehensive income for the year Fair value adjustment on available-for-sale financial assets 260 Revaluation of land and buildings (51 479) Post employment medical benefit - actuarial gain Share incentive scheme Reclassification of revaluation surplus (5 474) Deferred tax on release of revaluation surplus on land and buildings disposed of 2 738 Balance 31 March 2011 159 207 144 762 (14 610) 264 064 Total comprehensive income for the year Revaluation of land and buildings 30 731 Post employment medical benefit - actuarial loss Disposal of subsidiary Share incentive scheme Rate change (9 328) Reclassification of revaluation surplus (831) Deferred tax on release of revaluation surplus on land and buildings disposed 155 Share issue 192 459 Balance 31 March 2012 159 399 145 221 (14 610) 284 791 Non-
Retained controlling Total Rand thousands income Total interests equity Balance 31 March 2010 683 970 1 291 348 601 1 291 949 Total comprehensive income for the year 8 567 8 567 9 8 576 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 411 411 411 Share incentive scheme 2 137 2 137 2 137 Reclassification of revaluation surplus 5 474 - - Deferred tax on release of revaluation surplus on land and buildings disposed of 2 738 2 738 Balance 31 March 2011 700 559 1 253 982 610 1 254 592 Total comprehensive income for the year 136 944 136 944 (113) 136 831 Revaluation of land and buildings 30 731 30 731 Post employment medical benefit - actuarial loss (4 170) (4 170) (4 170) Disposal of subsidiary (525) (525) (497) (1 022) Share incentive scheme 3 205 3 205 3 205 Rate change (9 328) (9 328) Reclassification of revaluation surplus 831 - - Deferred tax on release of revaluation surplus on land and buildings disposed 155 155 Share issue 651 651 Balance 31 March 2012 836 844 1 411 645 - 1 411 645 CONSOLIDATED STATEMENT OF CASH FLOWS Audited and Reviewed restated
for the for the year year ended ended 31 March 31 March
Rand thousands 2012 2011 Net cash flow from (used in) operating activities 39 386 (57 281) Operating profit before finance costs from continuing operations 179 015 121 658 Operating loss before finance costs from discontinuing operations (19 148) (84 753) Income for the period before finance costs 159 867 36 905 Adjustments for: Depreciation and amortisation 44 301 40 735 Revaluation of investment property 8 372 (21 575) Foreign exchange gains (401) (1 261) Loss/(surplus) on disposal 420 (962) Net impairment of property, plant and equipment 1 250 17 216 Impairment of assets held for sale - (27 950) Investment income (78) (70) Post-employment medical benefit 2 282 2 079 Share incentive scheme 3 856 2 137 Change in non-current receivables (8 146) (496) Net change to working capital (124 930) (56 090) Net finance costs (36 167) (35 225) Taxation paid (11 240) (12 724) Net cash flow from (used in) investing activities (170 076) 22 786 Additions of property, plant and equipment (49 699) (63 884) Proceeds on disposal of property, plant and equipment 10 013 120 181 Additions to investment property (119 262) (22 778) Interest capitalised to investment property (5 956) (309) Net acquisition of intangible assets (5 250) (10 494) Investment income 78 70 Net cash flow from (used in) financing activities (105 376) (56 550) Change in borrowings (105 376) (56 550) Net change in cash and cash equivalents (236 066) (91 045) Cash and cash equivalents at the beginning of the year (207 242) (116 197) Cash in subsidiary disposed of (5 114) - Cash and cash equivalents at the end of the year (448 422) (207 242) CONSOLIDATED CONDENSED SEGMENTAL REPORT Toys, stationery and Rand thousands Textiles Clothing Property electronics Business segments R000`s R000`s R000`s R000`s 2012 Segment revenue Gross revenue 1 053 353 957 116 66 577 565 663 Revenue reclassified as discontinued operations 3 (49 900) - - Inter-segment revenue (these transactions are at arm`s length) (43 959) - (42 059) - Consolidated revenue 1 009 397 907 216 24 518 565 663 Segment results Combined operating profit/(loss) before finance costs 39 772 (146 495) 44 554 56 626 Disclosed as discontinued operations (excluding finance charges and taxation) (1 505) 20 653 - - Operating profit/(loss) before finance costs from continuing operations 38 267 (125 842) 44 554 56 626 Net finance costs Profit/(loss) before taxation from continuing operations 38 267 (125 842) 44 554 56 626 Segment assets 674 105 528 264 823 637 336 261 Segment liabilities 287 140 116 273 15 597 97 895 2011 Segment revenue External sales 1 014 983 1 150 248 65 597 452 600 Revenue reclassified as discontinued operations (restated) (136) (232 001) - - Inter-segment sales (these transactions are at arm`s length) (33 324) - (58 005) (976) Consolidated revenue 981 523 918 247 7 592 451 624 Segment results Combined operating profit/(loss) before finance costs 55 936 (97 753) 62 032 38 737 Disclosed as discontinued operations (excluding finance charges and taxation) (restated) 228 84 525 - - Operating (loss)/profit before finance costs from continuing operations 56 164 (13 228) 62 032 38 737 Net finance costs Profit/(loss) before taxation from continuing operations 56 164 (13 228) 62 032 38 737 Segment assets 666 464 558 194 595 401 248 721 Segment liabilities 283 273 119 614 2 891 63 090 Head Rand thousands office Total Business segments R000`s R000`s 2012 Segment revenue Gross revenue - 2 642 709 Revenue reclassified as discontinued operations - (49 897) Inter-segment revenue (these transactions are at arm`s length) - (86 018) Consolidated revenue - 2 506 794 Segment results Combined operating profit/(loss) before finance costs 165 410 159 867 Disclosed as discontinued operations (excluding finance charges and taxation) - 19 148 Operating profit/(loss) before finance costs from continuing operations 165 410 179 015 Net finance costs (33 873) (33 873) Profit/(loss) before taxation from continuing operations 131 537 145 142 Segment assets 66 532 2 428 799 Segment liabilities 500 249 1 017 154 2011 Segment revenue External sales - 2 683 428 Revenue reclassified as discontinued operations (restated) - (232 137) Inter-segment sales (these transactions are at arm`s length) - (92 305) Consolidated revenue - 2 358 986 Segment results Combined operating profit/(loss) before finance costs (22 047) 36 905 Disclosed as discontinued operations (excluding finance charges and taxation) (restated) - 84 753 Operating (loss)/profit before finance costs from continuing operations (22 047) 121 658 Net finance costs (27 726) (27 726) Profit/(loss) before taxation from continuing operations(49 773) 93 932 Segment assets 39 061 2 107 841 Segment liabilities 384 381 853 249 NOTES 1. Basis of preparation These consolidated condensed results are prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards (IFRS), the AC 500 standards as issued by the Accounting Practices Board or its successor, the disclosure requirements of IAS 34, the Listings Requirements of the JSE Limited and the Companies Act No. 71 of 2008. 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 year ended 31 March 2011. 3. Change in comparatives During the year the Group announced the closure of the Knitwear division. The results of this division have been disclosed as discontinued operations. The comparative results have been restated accordingly. 4. Independent review The consolidated statement of financial position at 31 March 2012 and the consolidated condensed statement of comprehensive income, statement of changes in equity, consolidated condensed segmental report and statistics per share for the year then ended have been reviewed by KPMG Inc. Their unmodified report is available for inspection at the Registered Office of the Company. 5. Related party transactions During the year the Group incurred the following related party expenditure: * Expenses recognised in relation to the provision of managerial services received from HCI amounted to R4 200 000. * Residential premises were leased to Mr A Ntuli (director) for R42 180. * Interest on bridging loan received from HCI Treasury (Pty) Ltd - R1 135 927 6. Capital expenditure and commitments Capital expenditure during the year under review amounted to R174,2 million (2011: 97,3 million). There are further commitments in respect of contracted capital expenditure as at 31 March 2012 of approximately R19,5 million (2011: R67,4 million). 7. Litigation settlement Included in operating profit for the current year is a portion of the litigation settlement with former directors and officers of the Group and officers of the Group amounting to R191,8 million. 8. Dividends The directors have resolved not to declare a dividend for the year ended 31 March 2012. 9. Preparation of results These results have been prepared under the supervision of the Financial Director, Gys Wege (CA) SA. CORPORATE INFORMATION 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 JSE share code: SRN ISIN: ZAE000029815 ISIN: ZAE000030144 Directors J A Copelyn* (Chairman), Adv N N Lazarus* (Deputy Chairman), M H Ahmed*, T G (Kevin) Govender, A M Ntuli, S A Queen (Chief Executive Officer), Y Shaik*, R Watson*, G D T Wege (Financial Director) (*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 Investec Bank Limited Date: 17/05/2012 13:02:01 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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