Wrap Text
Interim results
SOUTH OCEAN HOLDINGS
(Registration number 2007/002381/06)
Incorporated in the Republic of South Africa
('South Ocean Holdings', 'the Group' or 'the Company')
Share code: SOH ISIN: ZAE000092748
Group condensed consolidated
interim financial results
announcement
for the six months ended 30 June 2012
HIGHLIGHTS
Revenue increased by 5,5% to R652,8 million
Headline earnings per share increased by 8,3% to 11,7 cents
Earnings per share increased by 8,3% to 11,7 cents
Net asset value per share increased by 2,3% to 512,5 cents
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at As at
30 June 2012 30 June 2011 31 December 2011
(Unaudited) (Unaudited) (Audited)
Notes R'000 R'000 R'000
Assets
Non-current assets 645 725 633 549 643 151
Property, plant and equipment 4 310 878 291 678 305 929
Intangible assets 4 334 847 341 871 337 222
Current assets 581 776 504 279 438 551
Inventories 287 885 227 577 244 966
Trade and other receivables 272 861 256 245 165 296
Taxation receivable 3 213 5 064 574
Cash and cash equivalents 17 817 15 393 27 715
Total assets 1 227 501 1 137 828 1 081 702
Equity and liabilities
Capital and reserves attributable to equity holders
of the Company
Share capital and share premium 5 441 645 441 645 441 645
Reserves (301) (720) (352)
Retained earnings 360 032 312 868 341 701
Total equity 801 376 753 793 782 994
Liabilities
Non-current liabilities 96 415 109 853 105 653
Interest-bearing borrowings 6 59 135 77 490 70 055
Deferred taxation 34 649 30 047 33 842
Share-based payments 2 631 2 316 1 756
Current liabilities 329 710 274 182 193 055
Trade and other payables 188 684 104 784 139 496
Interest-bearing borrowings 6 35 694 38 731 38 226
Taxation payable 1 481 1 292 1 401
Shareholders for dividends 4 4 4
Derivative financial instruments 169 36 30
Share-based payments 450 1 076
Bank overdraft 103 228 128 259 13 898
Total liabilities 426 125 384 035 298 708
Total equity and liabilities 1 227 501 1 137 828 1 081 702
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended Year ended
30 June 2012 30 June 2011 31 December 2011
(Unaudited) (Unaudited) Change (Audited)
Note R'000 R'000 % R'000
Revenue 652 854 618 627 5,5 1 261 019
Cost of sales (541 924) (512 366) (1 036 271)
Gross profit 110 930 106 261 4,4 224 748
Other operating income 868 870 2 871
Administration expenses (33 864) (34 430) (66 200)
Distribution expenses (12 246) (13 430) (24 378)
Operating expenses (33 538) (29 047) (61 335)
Operating profit 32 150 30 224 6,4 75 706
Finance income 139 520 310
Finance costs (6 272) (5 989) (10 976)
Profit before taxation 26 017 24 755 5,1 65 040
Taxation 7 (7 686) (7 799) (19 251)
Profit for the period 18 331 16 956 8,1 45 789
Other comprehensive income
Exchange differences on translating foreign operation 51 (14) 354
Total comprehensive income for the period 18 382 16 942 8,5 46 143
Cents Cents Cents
Earnings per share basic and diluted 11,7 10,8 8,3 29,3
Dividend per share
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended Year ended
30 June 2012 30 June 2011 31 December 2011
(Unaudited) (Unaudited) (Audited)
Note R'000 R'000 R'000
Share capital
Opening and closing balance 5 1 274 1 274 1 274
Share premium
Opening and closing balance 5 440 371 440 371 440 371
Foreign currency translation reserve
Opening balance (352) (706) (706)
Exchange differences on translation of foreign operation 51 (14) 354
Closing balance (301) (720) (352)
Retained earnings
Opening balance 341 701 295 912 295 912
Comprehensive income for the period 18 331 16 956 45 789
Closing balance 360 032 312 868 341 701
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months ended Year ended
30 June 2012 30 June 2011 31 December 2011
(Unaudited) (Unaudited) (Audited)
R'000 R'000 R'000
Cash (utilised in)/generated from operating activities (71 806) (117 047) 39 526
Cash utilised in investing activities (14 021) (39 759) (62 078)
Cash (utilised in)/generated from financing activities (13 452) 9 181 1 242
Net decrease in cash and cash equivalents (99 279) (147 625) (21 310)
Cash and cash equivalents at the beginning of period 13 817 34 773 34 773
Effects of exchange rate movement on cash balances 51 (14) 354
Cash and cash equivalents at the end of period (85 411) (112 866) 13 817
SELECTED NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
1. General information
South Ocean Holdings and its subsidiary companies manufacture and distribute electrical cables, import and distribute light fittings, lamps and electrical
accessories, and property investments. The Company is a public company listed on the Johannesburg Stock Exchange ('JSE') and is incorporated and
domiciled in the Republic of South Africa.
2. Basis of preparation
The condensed consolidated financial information has been prepared in accordance with International Financial Reporting Standards (IFRS), IFRIC Interpretations,
IAS 34 Interim Financial Reporting', the Companies Act, 2008, applicable to companies reporting under IFRS, as well as the JSE Listings Requirements. This
should be read with the audited annual financial statements for the year ended 31 December 2011. The condensed consolidated financial statements have been
prepared under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities (including derivative instruments) at fair
value through profit or loss. The unaudited condensed consolidated interim financial results were compiled by JP Bekker (CA) SA (Group Chief Financial Officer)
and approved for issue by the Board of Directors on 1 August 2012.
3. Accounting policies
The accounting policies adopted are consistent with those applied in the audited financial statements for the year ended 31 December 2011, except where
indicated. There were no new standards or amendments that were issued since the last annual report that are applicable to the Group or that will result in a
material impact in the reported results of the Group. These accounting policies comply with IFRS.
4. Property, plant and equipment and intangible assets
During the six months, the Group invested R14,1 million (2011: R40 million) in capital expenditure mainly relating to the manufacturing/assembly plant at Radiant
Group Proprietary Limited ('Radiant Group'). The details of changes in tangible and intangible assets are as follows:
Tangible assets Intangible assets
(Unaudited) (Unaudited)
R'000 R'000
Six months ended 30 June 2012
Opening net carrying amount 305 929 337 222
Additions 14 070
Disposals and write-offs (64)
Depreciation/Amortisation and other movements (9 057) (2 375)
Closing net carrying amount 310 878 334 847
Six months ended 30 June 2011
Opening net carrying amount 259 642 343 991
Additions 39 594 413
Disposals and write-offs (181)
Depreciation/Amortisation and other movements (7 377) (2 533)
Closing net carrying amount 291 678 341 871
Year ended 31 December 2011 (Audited) (Audited)
Opening net carrying amount 259 642 343 991
Additions 61 936 413
Disposals and write-offs (189)
Depreciation/Amortisation and other movements (15 460) (7 182)
Closing net carrying amount 305 929 337 222
5. Share capital and share premium Number of Ordinary shares Share premium Total
shares issued R'000 R'000 R'000
At 30 June 2012 (Unaudited)
Opening and closing balance 156 378 794 1 274 440 371 441 645
At 30 June 2011 (Unaudited)
Opening and closing balance 156 378 794 1 274 440 371 441 645
At 31 December 2011 (Audited)
Opening and closing balance 156 378 794 1 274 440 371 441 645
6. Interest-bearing borrowings
As at As at
Secured loans 30 June 2012 30 June 2011 31 December 2011
(Unaudited) (Unaudited) (Audited)
R'000 R'000 R'000
Non-current 59 135 77 490 70 055
Current 35 694 38 731 38 226
94 829 116 221 108 281
The movement in borrowings is analysed as follows:
Opening balance 108 281 107 039 107 039
Additional loans raised 5 818 35 594 47 297
Finance costs 3 976 4 191 8 433
Repayments (23 246) (30 603) (54 488)
Closing balance 94 829 116 221 108 281
7. Taxation
Income tax expense is recognised based on management's best estimate of the weighted average annual income tax rate expected for the full financial year. The
estimated average annual tax rate calculated before taking into account STC is 29,5% (2011: 31,5%).
8. Reconciliation of headline earnings
Six months ended Year ended
30 June 2012 30 June 2011 31 December 2011
(Unaudited) (Unaudited) (Audited)
R'000 R'000 R'000
Comprehensive income attributable to the equity holders of the Company
for the period 18 331 16 956 45 789
Loss/(profit) on disposal of property, plant and equipment 15 (67) (59)
Impairment of intangible assets 2 117
Headline earnings for the period 18 346 16 889 47 847
Headline earnings per share (cents) 11,7 10,8 30,6
9. Weighted average number of shares Six months ended Year ended
30 June 2012 30 June 2011 31 December 2011
(Unaudited) (Unaudited) (Audited)
Number of shares in issue 156 378 794 156 378 794 156 378 794
Weighted average number of shares in issue at the beginning and end of period 156 378 794 156 378 794 156 378 794
Weighted average number of shares in issue for diluted earnings per share 156 378 794 156 378 794 156 378 794
10. Net asset value
As at As at
30 June 2012 30 June 2011 31 December 2011
(Unaudited) (Unaudited) (Audited)
Net asset value per share (cents) 512,5 482,0 500,7
11. Interim dividend declaration
The Company policy is to consider the declaration of a final dividend after its financial year-end.
12. Segment reporting
The segment information has been prepared in accordance with IFRS Operating Segments, which defines the requirements for disclosure of financial
information of an entity's segments.
The standard requires segmentation on the Group's internal organisation and reporting of revenue and EBITDA based upon internal accounting presentation.
The segment revenue and EBITDA generated by each of the Group's reportable segments are summarised as follows:
Six months ended Adjusted Segment Segment
Revenue EBITDA assets liabilities
R'000 R'000 R'000 R'000
30 June 2012 (Unaudited)
Electrical cables manufacturing 494 438 31 611 451 653 215 207
Lighting and electrical accessories 158 416 10 793 566 786 107 858
Property investments 10 680 9 371 203 167 60 947
663 534 51 775 1 221 606 384 012
30 June 2011 (Unaudited)
Electrical cables manufacturing 447 911 22 941 387 652 189 371
Lighting and electrical accessories 170 716 19 316 553 015 85 300
Property investments 9 208 8 014 191 387 69 746
627 835 50 271 1 132 054 344 417
Year ended
31 December 2011 (Audited)
Electrical cables manufacturing 897 338 50 259 336 080 108 794
Lighting and electrical accessories 363 681 47 114 540 137 79 431
Property investments 19 457 17 099 200 531 70 311
1 280 476 114 472 1 076 748 258 536
Reconciliation of total segment report to Six months ended Year ended
statement of financial position and 30 June 2012 30 June 2011 31 December 2011
statement of comprehensive income (Unaudited) (Unaudited) (Audited)
is provided as follows: R'000 R'000 R'000
Revenue
Reportable segment revenue 663 534 627 835 1 280 476
Inter-Group revenue: property rentals (10 680) (8 706) (18 680)
Property revenue reported in other operating income (502) (777)
Revenue per consolidated statement of
comprehensive income 652 854 618 627 1 261 019
Profit before tax
Adjusted EBITDA 51 775 50 271 114 472
Corporate and other overheads (8 193) (10 137) (16 124)
Depreciation (9 057) (7 377) (15 460)
Impairment of intangible assets (2 117)
Amortisation of intangible assets (2 375) (2 533) (5 065)
Operating profit 32 150 30 224 75 706
Finance income 139 520 310
Finance cost (6 272) (5 989) (10 976)
Profit before income tax per statement of
comprehensive income 26 017 24 755 65 040
Assets
Reportable segment assets 1 221 606 1 132 054 1 076 748
Corporate and other assets 2 682 710 4 380
Taxation receivable 3 213 5 064 574
Total assets per statement of financial position 1 227 501 1 137 828 1 081 702
Liabilities
Reportable segment liabilities 384 012 344 417 258 536
Corporate and other liabilities 5 983 8 279 4 929
Deferred taxation 34 649 30 047 33 842
Taxation payable 1 481 1 292 1 401
Total liabilities per statement of financial position 426 125 384 035 298 708
13. Director changes
As reported in the annual report, Messrs WP Li and CC Wu were appointed as alternate directors during February 2012. There were no other director changes
during the period under review.
14. Subsequent events
The directors are not aware of any significant events arising since the end of the financial period, which would materially affect the operations of the Group or its
operating segments, not dealt with in the financial results.
COMMENTARY
Introduction
South Ocean Holdings is pleased to announce its condensed consolidated results for the six months ended 30 June 2012.
South Ocean Holdings is an investment holding company, comprising four operating subsidiaries namely: South Ocean Electric Wire Company
Proprietary Limited ('SOEW'), a manufacturer of low voltage electrical cables, Radiant Group, an importer and distributor of light fittings, lamps
and electrical accessories, a property holding company, Anchor Park Investments 48 Proprietary Limited ('Anchor Park'), and SOH Calibre
International Limited ('SOH Calibre'), a procurement agency on behalf of the Group, based in Hong Kong.
Notwithstanding the global financial market volatility affecting the local market, the Group's operating margin was in line with the prior period's
margin at 4,9% (2011: 4,9%).
Market uncertainty which resulted in the fluctuation of the currency and volatility of commodity prices during the period contributed to the
subdued results.
Financial overview
Earnings
Group revenue for the six-month period to 30 June 2012 increased by 5,5% (2011: 12,5%) to R652,8 million (2011: R618,6 million). The Group's
gross profit increased by 4,4% to R110.9 million (2011: R106,3 million) and operating profit also increased by 6,4% to R32,2 million (2011:
R30,2 million) compared to the prior period.
Group profit before tax improved by 5,1% to R26,0 million (2011: R24,8 million) compared to the prior period. Earnings and headline
earnings per share have, as a result, improved compared to the prior period. The basic earnings per share increased by 8,3% to 11,7 cents
(2011: 10,8 cents) with the headline earnings per share increasing by 8,3% to 11,7 cents (2011: 10,8 cents) compared to the prior period.
Headline earnings increased by 8,3% to R18,3 million (2011: R16,9 million).
Cash flow and working capital management
Investment in working capital contributed to cash utilised in operations of R71,8 million (2011: R117,0 million) during the period. Working capital
increased primarily due to an increase in accounts receivable, as a result of an increase in revenue. Certain significant customers paid late and
this contributed to the negative cash flow for the Group. Inventory levels increased due to higher copper prices, an increase in cable stock levels
compared to year-end, which is traditionally lower, as well as an increase in light fittings, lamps and electrical accessories inventory to improve
stock availability.
The Group invested R14,0 million (2011: R40,0 million) in capital expenditure which was mainly financed by long-term borrowings during this
period and utilised R23,2 million (2011: R30,6 million) to repay its long-term interest-bearing borrowings.
The Group's net cash utilised during the period of R99,3 million (2011: R147,6 million) resulted in the net overdraft improving from R112,9 million
reported at 30 June 2011 to R85,4 million at the end of the current period.
Segment results
Electrical cables SOEW
SOEW's revenue increased by 10,4% to R494,4 million (2011: R447,9 million). This was mainly attributable to the diversification of product range.
Current economic conditions necessitate that the focus at SOEW remains on streamlining production processes and improving operational
efficiencies in order to contain costs. Progress is being made by increasing the product range and expanding sales to include the tender market.
The new plant is now operational, resulting in additional working capital requirements for inventory and an increase in the debtors' book, which
is financed by utilising normal credit facilities.
Lighting and electrical accessories Radiant Group
Radiant Group reported revenue of R158,4 million (2011: R170,7 million), 7,2% lower compared to the same period in the prior year. The margins
have continued to be under pressure, due to the depressed market conditions and changes in customer spending patterns. Costs containment
was successful, resulting in cost increases well below inflation. This was achieved through a number of management interventions resulting in a
minimal increase of 1,7% compared to the same period last year.
Property investments Anchor Park
Anchor Park's revenue is derived from Group companies, as it leases its properties to fellow subsidiaries. The reduction in interest expense is due
to the decrease in loan balances. During this period capital investment was made at Radiant Group to relocate the factory assembly facility closer
to the bulk warehouse to improve control and save future transport costs.
Seasonality
The Group's earnings are affected by seasonality as earnings for the second half of the year are historically higher than the first half. Management
expects the historic seasonality trend to continue.
Prospects
The market for the next six months is likely to be even more challenging and it is anticipated that the results will be dependent on taking advantage
of Government's infrastructure spending programmes to increase revenue.
The Group has increased the manufacturing capacity of its electrical cable plant, enabling it to grow the business organically. Growth in the lighting
segment is expected to be driven by focusing on more economical, energy-saving lighting solutions for corporate and industrial clients looking
to reduce their electricity consumption as well as more economical light fittings and LED lamps, in line with current consumer spending trends.
Radiant Group has also added a new corporate gifts division to increase its product range and expand into new markets. The Group will continue
focusing on diversifying its product range and expanding its client base, including Government tenders.
The above information, including any projections, included in this announcement has not been reviewed or reported on by South Ocean Holdings'
independent external auditors.
On behalf of the Board
Ethan Dube Paul Ferreira
Chairman Chief Executive Officer
1 August 2012
Directors:
EG Dube# (Chairman), EHT Pan*@ (Deputy Vice Chairman), PJM Ferreira* (Chief Executive Officer), JP Bekker* (Chief Financial Officer),
M Chong#, HL LivQ, WP LivQ, CH PanvQ, KH Pon#, DL Tam#, CC Wuv, CY WuvQ
* Executive # Independent Non-Executive v Non-Executive Q Taiwanese @ Brazilian Alternate
Company Secretary: WT Green
Corporate Information
Registered Office: 12 Botha Street, Alrode 1451
PO Box 123738, Alrode, 1451
Telephone: +27(11) 864 1606 Telefax: +27(86) 628 9523
Company Secretary: WT Green, 21 West Street, Houghton, 2198
PO Box 123738, Alrode, 1451
Sponsor: Investec Bank Limited (Registration number 1969/004763/06)
Second Floor, 100 Grayston Drive, Sandown, Sandton, 2196
Share Transfer Secretary: Computershare Investor Services Proprietary Limited
Ground Floor, 70 Marshal Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Telephone: +27(11) 370 5000 Telefax: +27(11) 688 5200
Website: www.computershare.com
Auditors: PricewaterhouseCoopers Inc.
2 Eglin Road, Sunninghill, 2157
Telephone: +27(11) 797 4000 Telefax: +27(11) 797 5800
Investor Relations: Craig Whittle Investor Relations
Postnet Suite number 52, Private Bag X16, Constantia
Telephone: +27(76) 456 3270
Email: cdwhittle@mweb.co.za
Date: 02/08/2012 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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