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SOUTHERN ELECTRICITY COMPANY LTD - Audited Consolidated Results for the year ended 30 June 2012

Release Date: 28/09/2012 09:00
Code(s): SLO     PDF:  
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Audited Consolidated Results for the year ended 30 June 2012

Southern Electricity Company Limited
(Incorporated In the Republic of South Africa)
(Registration number 1997/006894/06)
Share code: SLO ISIN: ZAE000041919
(“SELCo” or “the group” or “the company”)
AUDITED CONSOLIDATED RESULTS FOR THE YEAR ENDED 30 JUNE 2012

STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2012
                                                                 GROUP                         COMPANY
                                                          2012             2011         2012             2011
                                                           R                 R            R                R
ASSETS
Non-current assets                                      17 184 968       25 449 035   1 444 526      1 444 526
Investment property -Property, plant and equipment       6 750 000       13 000 000           -              -
Intangible assets
Investment in subsidiaries                               5 718 358       6 600 433            -              -
                                                         4 716 610       5 848 602            -              -
                                                                 -               -    1 444 526      1 444 526

Current assets                                          16 748 326       15 598 555   2 487 532      2 067 035
Inventories                                              3 664 914        2 681 857           -              -
Loans to group companies                                     8 794            2 703   1 415 134      1 318 324
Current tax receivable                                     299 848        1 870 612     299 848         51 351
Trade and other receivables                              9 793 863        8 225 128     738 271        275 856
Cash and cash equivalents                                2 980 907        2 818 255      34 279        421 504
Total assets                                            33 933 294       41 047 590   3 932 058      3 511 561
EQUITY AND LIABILITIES
Equity                                                  17 242 325       24 335 946     761 502         542 016
Share capital                                           10 162 796       10 162 796      10 162      10 162 796
                                                                                            796
Reserves                                                    16 115           16 115      16 115          16 115
Retained earnings/ (accumulated loss)                    7 063 414       14 156 035  (9 417 409)     (9 636 895)
                                                                                          
Liabilities
Non-current liabilities                                  7 717 753        8 939 923             -              -
Other financial liabilities                              2 469 426        2 655 086             -              -
Finance lease obligation                                   559 549          354 139             -              -
Deferred tax                                             4 688 778        5 930 698             -              -
Current liabilities                                      8 973 216        7 771 721     3 170 556      2 969 545
Loans from group companies                                       -                -       210 052              -
Other financial liabilities                              3 116 627        3 176 808     2 952 991      2 965 761
Current tax payable                                          7 426                -             -              -
Finance lease obligation                                   294 789          176 921             -              -
Trade and other payables                                 5 149 118        4 319 011         7 513          3 784
Provisions                                                 405 256           98 981             -             -
Total liabilities                                       16 690 969       16 711 644     3 170 556      2 969 545
Total equity and liabilities                            33 933 294       41 047 590     3 932 058      3 511 561

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2012
                                                              GROUP                      COMPANY
                                                         2012          2011       2012           2011
                                                          R              R          R              R
Revenue                                                61 778 880   54 109 722   1 800 000      1 800 000
Cost of sales                                         (37 465 401) (31 434 525)          -             -
Gross profit                                           24 313 479   22 675 197   1 800 000      1 800 000
Other income                                               31 353        9 027      15 282              -
Operating expenses                                    (25 286 394) (21 747 771)  (1 680952)    (3 056 083)
Operating (loss) profit                                  (941 562)     936 453     134 330     (1 256 083)
Investment revenue                                         26 913       32 325      85 202         55 502
Fair value adjustments                                 (6 250 000)           -          -               -
Finance costs                                            (848 084)    (286 135)        (46)             -
(Loss) profit before taxation                          (8 012 733)     682 643     219 486     (1 200 581)
Taxation                                                  919 112     (732 452)          -          2 366
(Loss) profit for the year                             (7 093 621)     (49 809)    219 486     (1 198 215)
Other comprehensive income                                      -            -           -              -
Total comprehensive (loss) income for the year         (7 093 621)     (49 809)    219 486     (1 198 215)
Earnings per share
Per share information
Basic loss per share (c)                                  (12.91)       (0.09)           -               -
Diluted loss per share (c)                                (12.91)       (0.09)           -               -
Headline loss per share (c)                                (2.95)       (0.09)
Diluted headline loss per share (c)                        (2.95)       (0.09)
RECONCILIATION OF HEADLINE EARNINGS
                                                          Audited year         Audited year to 30
                                                           to 30 June                June 2011
                                                              2012
Loss for the year attributable to ordinary shareholders    (7 093 621)                  (49 809)
Headline earnings adjustment net of taxation
- Profit on disposal of property, plant and                  96 203                           -
Equipment
- Investment property - Fair value adjustment               6 250 000                         -
- Tax effect thereon                                        (875 000)                         -


Headline loss                                               (1 622 418)                 (49 809)
Ordinary number of shares in issue                           54 948 173               54 948 173
Weighted average number of shares                            54 948 173               54 948 173
Diluted number of shares                                     54 948 173               54 948 173
Earnings per share (cents)                                      (12.91)                   (0.09)
Diluted earnings per share (cents)                              (12.91)                   (0.09)
Headline earnings per share (cents)                              (2.95)                   (0.09)
Diluted headline earnings per share (cents)                      (2.95)                   (0.09)


STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2012
                                                   Share        Share        Total Share
                                                  capital      Premium         Capital

                                                    R             R              R
 GROUP
 Balance as at 01 July 2009                     2,747,408     7,415,388      10 162 796
 Changes in equity                                  -             -               -
 Total comprehensive income for the year            -             -               -
 Total changes                                      -             -               -
 Opening balance as previously reported         2,747,408     7,415,388      10 162 796
 Adjustments Prior period errors
                                                    -             -
 Balance as at 01 July 2010 as restated         2,747,408     7,415,388      10 162 796
 Changes in equity
 Total comprehensive income for the year            -             -               -
 Total changes                                      -             -               -
 Balance as at 01 July 2011 as restated         2,747,408     7,415,388      10 162 796
 Changes in equity
 Total comprehensive income for the year            -             -               -
 Total changes                                      -             -               -
 Balance as at 30 June 2012                     2,747,408     7,415,388      10 162 796

 COMPANY
 Balance as at 01 July 2009                     2,747,408     7,415,388      10 162 796
 Changes in equity
 Total comprehensive income for the year            -             -               -
 Balance as at 01 July 2010 as restated         2,747,408     7,415,388      10 162 796
 Changes in equity
 Total comprehensive income for the year            -             -               -
 Total comprehensive income for the year            -             -               -
 Balance as at 01 July 2011 as restated         2,747,408     7,415,388      10 162 796
 Changes in equity
 Total comprehensive income for the year            -             -               -
 Total comprehensive income for the year            -             -               -
 Balance as at 30 June 2012                     2,747,408     7,415,388      10 162 796



 STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUE)
                                                    Non -     Accumulated       Total
                                               distributable      Loss          Equity
                                                  Reserve
 GROUP
 Balance as at 01 July 2009                        16 115       12 111 720       22 290
                                                                                  631
 Changes in equity
 Total comprehensive income for year                  -          2 095 127     2 095 127
 Total Changes                                        -          2 095 127     2 095 127
 Opening balance as previously reported            16 115       15 106 155    25 285 066
                                                                                  
 Adjustments
 Prior Period errors                                  -           (899 308)     (899 308)
 Balance as at 01 July 2010 as restated            16 115        14 157 038    24 385 758
 Changes in equity                                                 (49 809)       (49 809)
 Total comprehensive income for year
 Total changes                                        -            (49 809)       (49 809)
 Balance as at 01 July 2011                        16 115       14 157 038     24 335 949
 Changes in equity                                    -         (7 093 621)    (7 093 621)
                                                                                        
 Total comprehensive income for year
 Total changes                                        -         (7 093 621)    (7 093 621)
                                                                                        
 Balance as at 30 June 2012                        16 115        7 063 414     17 242 325
 COMPANY
 Balance as at 01 July 2009                        16 115        (8 572337)     1 606 574
 Changes in equity                                    -            133 658        133 658
 Total comprehensive income for the year
 Total changes                                        -            133 658        133 658
 Balance at 01 July 2010                           16 115       (8 438 679      1 740 232
 Changes in equity                                    -         (1 198 215)    (1 198 215)
                                                                                     
 Total comprehensive income for the year
 Total changes                                        -         (1 198 215)    (1 198 215)
                                                                                     
 Balance as at 1 July 2011                         16 115       (9 636 894)       542 017
 Changes in equity                                    -            219 486        219 486
 Total comprehensive income for   the year
 Total changes                                        -            219 486        219 486
 Balance as at 30 June 2012                        16 115       (9 417 409)       761 502

CASH FLOW STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012
                                         GROUP                       COMPANY
                               2012          2011           2012           2011
                                    R             R              R             R
 CASH FLOWS FROM OPERATING
 ACTIVITIES
 Cash generated from (used         263 424       190 843       (324 356)   (1 535 683)
 in) operations
 Interest income                    26 913        32 325         85 202        55 502
 Finance costs                    (848 084)     (286 135)           (46)             -
                                      
 Tax received (paid)             1 258 605      (442 000)       (248 497)             -
 Net cash from operating
 activities                        700 858      (504 967)       (487 697)   (1 480 181)
 
 CASH FLOWS FROM INVESTING
 ACTIVITIES
 Purchase of property, plant
 and equipment                     (908 552)
                                          -              -             -             -
 Sale of property, plant and        299 000              -             -             -                                                                       -
 equipment

 CASH FLOW STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (CONTINUE)
                                         GROUP                       COMPANY
                                   2012         2011          2012             2011
                                    R            R              R                R
 Net cash from investing         (609 552)          -                -              -                                
 activities
 CASH FLOWS FROM FINANCING
 ACTIVITIES
 Proceeds from other             
 financial liabilities                   -      784 812               -     2 004 427
 Repayment of other               (245 841)    (500 162)        (12 770)     (500 162)
 financial liabilities
 Nett movement on finance
 leases                            323 278     (293 238)              -             -                                 
 Loans advanced to group 
 companies                         (6 091)       (2 703)        (96 810)     (527 303)

                                    
 Proceeds from loans from               -             -          210 052             -
 group companies
 Net cash from financing
 activities                         71 346       (11 291)        100 472       976 962
 Total cash movement for the
 year                              162 656      (516 258)       (387 225)     (503 219)
 Cash at the beginning of
 the year                         2 818 255     3 334 512        421 504       924 723
 Total cash at the end of
 the year                         2 980 907                       34 279       421 504
 

Overview
At the end of our 2012 financial year, we wish to present a report on the performance of
SELCo as well as the progress that was made during the year. Even though the wave of the
global decline has continued, SELCo with its local partners in Namibia have intensified
efforts to expand its business operations in Southern and Central Namibia, retaining good
cash flow and minimal bad debts in the process.
    *  Revenue increased by 14.17% to R61.778m
    * Expenditure increased by 16.27% to R25.28m, catering for the marketing and relations
       drive embarked upon to actively increase SELCo’s footprint in Southern and Central
       Namibia.
    *  Although SELCo registered a loss of R7.098m, this was due to i) a fair value
       adjustment on an investment property of R6.25m, AND ii) the effect of SELCo’s tariffs
       which were not increased for a period of 4 months whilst the bulk supply tariff had
       been amended upwards. Royalties paid back to the local Council’s from tariffs
       amounted to R4.748m.
It was unfortunate that a number of exceptional items for the period detracted from an
otherwise solid performance by SELCo. This sensitivity to exceptional items relates to
SELCo’s small customer base and not to the business model. SELCo’s Board is committed to the
expansion of SELCo’s business through organic growth and corporate activity where same is
sustainable and to the benefit of the Company.
In short, the Directors are acutely aware that SELCo has to grow materially in the next
financial year to justify the overheads and effectively deal with the exceptional items,
which unfortunately remain a fact of business.

Empowerment Grouping
As stated in the previous financial year, SELCo Namibia’s operations are being conducted with
No South African expatriates being present in Namibia, confirming the successful and
sustainable business model where customer loyalty can be secured through delivering
professional services in a respectful and personalised manner.
SELCo is gaining political stature in Namibia. To further strengthen its image, become a
strong local brand and actively market the business model, SELCo has concluded an agreement
with GDCE - a local Namibian based BEE Consultancy Company. Through the initiatives of the
latter, SELCo was invited to submit a bid for the electricity distribution services in the
Omaheke Region in the eastern part of the country. SELCo is one of two companies shortlisted.
The Agreement that was reached with the Nama Traditional Authority during the 2011 year, was
finalised, ratified and signed by the shareholders during the 2012 year. Public Relations
Program
Numerous meetings and information sessions have been held with the communities, Regional
Councils and municipalities in the Southern and Central part of Namibia, together with
relevant Government Departments to raise awareness of SELCo within the formal Government
sector. SELCo also sponsored various sport activities such as the Fish River Marathon at
which the staff manned one of the water points. This program will continue throughout the
next financial year. In addition, SELCo provides food to 1,000 children on a daily basis,
Monday through Friday via the public school structures in all three towns.

Effective Network Management
SELCo has continued through its effective management processes to minimise its overall
network losses to 9.36%. The net effect thereof is that SELCo’s new tariff increases for the
next financial year 2012/2013 are lower than that of the energy provider Nam-Power. SELCo is
therefore cushioning its customers against tariff increases.
In addition to the ongoing kWh loss management program, SELCo continues to roll out remote
metering systems to its entire customer base to enable time of use metering and billing. The
deployment of this technology has reduced SELCo’s potential liabilities from the current
disparity between the electricity buying tariffs methods and the electricity selling tariffs
methods. With Time of Use tariffs [TOU], electricity users have a choice and can therefore
actively manage electricity costs.
Review of the Business
    ?  Profitability of SELCo Namibia has been negatively affected due to the late
       promulgation of the 2011/2012 tariffs. The logistical challenges have been resolved
       between the Municipalities and the Regulator, with the tariff increases for 2012/2013
       being implemented timeously
    ?  The fair value adjustment of an investment property downwards to reflect the economic
       climate has had a negative impact on SELCo’s earnings.
    ?  Historical Non trading, trade and other receivables, have been written off to ensure
       the integrity of SELCo’s debtor book. At 30 June 2012 only R51, 506 (2011: R286, 522)
       were more than 3 months in arrears.
    ?  As per the 2011 report, SELCo is still in the process of actively rolling out remote
       metering to its entire customer base as planned. The further reduction in losses is
       testament to the success of the programme, currently standing at a spectacular 5.98%.

Outlook
SELCo’s core business is performing well. The efforts of our competent staff and dedicated
management team are now focused on growing the SELCo customer base which is essential to
deliver a return to shareholders.

Any reference to future financial performance included in this announcement has not been
reviewed or reported on by SELCO’s external auditors.

Appreciation
Our sincere appreciation is extended to our fellow board members, management and staff for
their efforts and their continued commitment to the company.

Accounting Policies                                                             
Presentation of annual financial statements
These results are presented in terms of IAS34 and the JSE Limited Listings Requirements. The
annual financial statements have been prepared in accordance with the     International
Financial Reporting Standards, the AC500 standards and the Companies Act, 71 of 2008. The
annual financial statements have been prepared on the historical cost basis, except for the
measurement of investment properties and certain financial instruments at fair value, and
incorporate the principal accounting policies set out below. They are presented in South
African Rands. These accounting policies are consistent with the previous period. The
consolidated financial statements have been audited by the Group's independent auditors,
Middel and Partners and their report on the June 2012 Annual Financial Statements is
available for inspection at the company's registered office.

Dividends
No dividends were declared or paid to shareholders during the year under review. As the
underlying principles of SELCo's business are strong, it is the intention of the directors to
commence with dividend payments from the next financial year, provided always that solvency
and liquidity are not being compromised.

Notice of Annual General Meeting.                                               
Notice is hereby given that the Annual General Meeting of shareholders will be held at 11:00 on
Thursday 22 November 2012 at the company's registered office located at 99 Fascia Road,
Silvertondale, Pretoria to transact the business as stated in the notice of Annual General
Meeting contained in the Annual Report which will be posted to shareholders shortly.

By order of the board
28 September 2012

DIRECTORS: B Hlongwa* (Chairman), P M Bester (CEO), I Bosch, E E Cloete*, W B Mahlangu*, S
Goliath* (* Non Executive)

COMPANY SECRETARY AND REGISTERED OFFICE:RMMS Consulting, 99 Fascia Street, Silvertondale,
0184 (PO Box 73130,Lynnwood Ridge,0040)

TRANSFER SECRETARIES: Link Market Services South Africa (Pty) Limited, 13th Floor Rennie
House, 19 Ameshoff Street, Braamfontein, 2001 (PO Box 4844, Johannesburg, 2000)

SPONSOR: Grindrod Bank Limited, Building three, First Floor, Commerce Square, 39 Rivonia
Road, Sandton, 2146 (PO Box 78011, Sandton, 2146)
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