Wrap Text
Audited abridged results announcement for the year ended 31 December 2012
South Ocean Holdings Limited
(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
Audited abridged
results announcement
for the year ended 31 December 2012
HIGHLIGHTS
Turnover increased by
11,5% to R1 406,3 million
Earnings per share decreased by
358,0% to a loss of 75,6 cents
Headline earnings increased by
18,6% to 36,3 cents
Tangible net asset value per share increased by
13,7% to 324,2 cents
Condensed consolidated statement of financial position
As at As at
31 December 2012 31 December 2011
(Audited) (Audited)
Notes R'000 R'000
Assets
Non-current assets 479 060 643 151
Property, plant and equipment 4 321 122 305 929
Intangible assets 4 157 938 337 222
Current assets 546 755 438 551
Inventories 283 166 244 966
Trade and other receivables 226 698 165 296
Taxation receivable 4 127 574
Cash and cash equivalents 32 764 27 715
Total assets 1 025 815 1 081 702
Equity and liabilities
Equity
Share capital and premium 5 441 645 441 645
Reserves (191) (352)
Retained earnings 223 416 341 701
Total equity 664 870 782 994
Liabilities
Non-current liabilities 81 785 105 653
Interest-bearing borrowings 6 46 059 70 055
Share-based payments 2 301 1 756
Deferred taxation 33 425 33 842
Current liabilities 279 160 193 055
Trade and other payables 94 413 139 496
Share-based payment 465
Derivative financial instrument 219 30
Interest-bearing borrowings 6 28 834 38 226
Taxation payable 252 1 401
Dividends payable 4
Bank overdraft 154 977 13 898
Total liabilities 360 945 298 708
Total equity and liabilities 1 025 815 1 081 702
Condensed consolidated statement of comprehensive income
For the year ended
31 December 2012 31 December 2011
(Audited) Change (Audited)
Note R'000 % R'000
Revenue 1 406 317 11,5 1 261 019
Cost of sales (1 179 536) (1 036 271)
Gross profit 226 781 0,9 224 748
Other operating income 8 050 2 871
Administration expenses (65 235) (66 200)
Distribution expenses (23 866) (24 378)
Operating expenses (236 816) (61 335)
Operating (loss)/profit (91 086) (220,3) 75 706
Finance income 512 310
Finance costs (14 788) (10 976)
(Loss)/profit before taxation (105 362) (262,0) 65 040
Taxation 7 (12 923) (19 251)
(Loss)/profit for the year (118 285) (358,3) 45 789
Other comprehensive (loss)/income
Exchange differences on translating foreign operations 161 354
Total comprehensive (loss)/income attributable to
equity holders of the Company (118 124) (356,0) 46 143
Cents Cents
Earnings per share basic and diluted (75,6) (358,0) 29,3
Condensed consolidated statement of changes in equity
For the year ended
31 December 2012 31 December 2011
(Audited) (Audited)
R'000 R'000
Share capital
Opening and closing balance 1 274 1 274
Share premium
Opening and closing balance 440 371 440 371
Foreign currency translation reserve
Opening balance (352) (706)
Exchange differences on translation of foreign operations 161 354
Closing balance (191) (352)
Retained earnings
Opening balance 341 701 295 912
Total comprehensive (loss)/income for the year (118 285) 45 789
Closing balance 223 416 341 701
Condensed consolidated statement of cash flow
For the year ended
31 December 2012 31 December 2011
(Audited) (Audited)
R'000 R'000
Cash (utilised in)/generated from operating activities (71 271) 39 526
Cash utilised in investing activities (31 528) (62 078)
Cash (utilised in)/generated from financing activities (33 392) 1 242
Net decrease in cash and cash equivalents (136 191) (21 310)
Cash and cash equivalents at the beginning of year 13 817 34 773
Effects of exchange rate movement on cash balances 161 354
Cash and cash equivalents at the end of year (122 213) 13 817
Selected notes to the condensed consolidated financial information
1. General information
South Ocean Holdings and its subsidiaries ("the Group") manufacture and distribute electrical cables, import and distribute light fittings, lamps
and electrical accessories and has property investments. South Ocean Holdings is listed on the Johannesburg Stock Exchange ("JSE") and is
incorporated and domiciled in the Republic of South Africa.
The audited condensed consolidated financial information was prepared by JP Bekker, CA(SA) and was approved for issue by the directors
on 27 February 2013.
2. Basis of preparation
The condensed consolidated financial information of South Ocean Holdings has been prepared in accordance with International Financial Reporting
Standards (IFRS) on interim financial reporting, IAS 34 Interim financial reporting' and the Companies Act and the JSE Listings Requirements
and should be read with the audited annual financial statements for the year ended 31 December 2012. 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.
3. Accounting policies
The accounting policies adopted are consistent with those applied in the financial statements for the year ended 31 December 2011, except
where indicated. There are no new standards or amendments that were issued since the last annual report that will result in a material impact in
the reported results of the Group.
4. Property, plant and equipment and intangible assets
During the year, the Group invested R32,7 million (2011: R62,3 million) in capital expenditure, related mainly to the investment in plant and
machinery at South Ocean Electric Wire Company Proprietary Limited and expanding the warehouse and assembly facility at Radiant. The details
of changes in tangible and intangible assets are as follows:
Tangible assets Intangible assets
(Audited) (Audited)
R'000 R'000
Year ended 31 December 2012
Opening net carrying amount 305 929 337 222
Additions 32 748
Disposals (1 207)
Foreign exchange movements 3
Impairment of goodwill (175 000)
Depreciation/amortisation (16 351) (4 284)
Closing net carrying amount 321 122 157 938
Year ended 31 December 2011
Opening net carrying amount 259 642 343 991
Additions 61 936 413
Disposals (189)
Depreciation/amortisation/impairment (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 31 December 2012
Opening and closing balance 156 378 794 1 274 440 371 441 645
At 31 December 2011
Opening and closing balance 156 378 794 1 274 440 371 441 645
6. Interest-bearing borrowings
Secured loans 31 December 2012 31 December 2011
(Audited) (Audited)
R'000 R'000
Non-current 46 059 70 055
Current 28 834 38 226
74 893 108 281
The movement in borrowings is analysed as follows:
Opening balance 108 281 107 039
Additional loans raised 5 817 47 297
Finance costs 7 091 7 688
Repayments (46 296) (53 743)
Closing balance 74 893 108 281
7. Taxation
The effective tax rate for 2012 is 12,3% (2011: 29,6%). The lower tax rate for 2012 is mainly due to an overprovision of taxes for the dormant
subsidiaries of Radiant Group Proprietary Limited in prior years and the recognition of unrealised tax losses at one of the subsidiaries. The
impairment charge of R175 million is not tax deductable.
8. Reconciliation of headline earnings
31 December 2012 31 December 2011
(Audited) (Audited)
R'000 R'000
(Loss)/earnings attributable to equity holders of the Company (118 285) 45 789
Profit on disposal of property, plant and equipment (13) (59)
Goodwill impairment 175 000
Impairment on intangible assets 2 117
Headline earnings 56 702 47 847
Headline earnings per share (cents) 36,3 30,6
9. Weighted average number of shares
31 December 2012 31 December 2011
(Audited) (Audited)
Number of shares in issue 156 378 794 156 378 794
Weighted average number of shares in issue at the beginning and end of year 156 378 794 156 378 794
10. Net asset value
31 December 2012 31 December 2011
(Audited) (Audited)
Net asset value per share (cents) 425,2 500,7
Tangible net asset value per share (cents) 324,2 285,1
11. Final dividend declaration
Funds have been utilised in the expansion plan to increase production capacity during the year, hence the directors have agreed not to
recommend a final dividend.
12. Audit opinion
These results have been extracted from the Group's audited financial statements. The unqualified report of PricewaterhouseCoopers Inc. on the
financial statements is available for inspection at the registered office of the Company.
13. Segment reporting
The chief operating decision-maker reviews the Group's internal reporting in order to assess performance and has determined the operating
segments based on these reports.
The business performance of the operating segments: electrical cables manufacturing, lighting and electrical accessories, and property
investments, is evaluated from the market and product performance perspective.
The segment information has been prepared in accordance with IFRS Operating Segments', which defines the requirements for the disclosure
of financial information of an entity's segments.
The standard requires segmentation on the Group's internal organisation and reporting of revenue and adjusted EBITDA based upon internal
accounting presentation.
The segment revenue and EBITDA generated by the Group's reportable segments are summarised as follows:
Adjusted Segment Segment
Revenue EBITDA assets liabilities
R'000 R'000 R'000 R'000
Year ended
31 December 2012
Electrical cables manufacturing 1 058 277 72 657 425 596 177 622
Lighting and electrical accessories 354 321 29 285 391 237 92 919
Property investments 21 360 18 749 202 725 51 284
1 433 958 120 691 1 019 558 384 012
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 1 076 748 358 536
13. Segment reporting continued
31 December 2012 31 December 2011
(Audited) (Audited)
R'000 R'000
Reconciliation of total segment report to the statement of financial position and
statement of comprehensive income is provided as follows:
Revenue
Reportable segment revenue 1 433 958 1 280 476
Inter-segment revenue (property rentals) (21 360) (18 680)
Inter-segment revenue other (6 281)
Property revenue reported in other operating income (777)
Revenue per consolidated statement of comprehensive income 1 406 317 1 261 019
Profit before tax
Adjusted EBITDA 120 691 114 472
Corporate and other overheads (16 142) (16 124)
Depreciation (16 351) (15 460)
Impairment of intangible assets lighting and electrical accessories segment (175 000) (2 117)
Amortisation of intangible assets lighting and electrical accessories segment (4 284) (5 065)
Operating (loss)/profit (91 086) 75 706
Finance income 512 310
Finance cost (14 788) (10 976)
(Loss)/profit before tax (105 362) 65 040
Assets
Reportable segment assets 1 019 558 1 076 748
Corporate and other assets 2 130 4 380
Taxation receivable 4 127 574
Total assets per statement of financial position 1 025 815 1 081 702
Liabilities
Reportable segment liabilities 321 825 258 536
Corporate and other liabilities 5 443 4 929
Deferred taxation 33 425 33 842
Taxation payable 252 1 401
Total liabilities per statement of financial position 360 945 298 708
14. Director changes
Mr WP Li and Mr CC Wu were appointed as alternate non-executive directors to Mr CY Wu and Mr EHT Pan during February and March 2012,
respectively. Mr WP Li resigned as an alternate director on 22 November 2012 and was replaced by Ms MH Lee, who was appointed as an
alternate director on 27 November 2012.
15. Subsequent events
The directors are not aware of any significant events arising since the end of the financial year, which would materially affect the operations of
the Group or its operating segments.
Commentary
Introduction
South Ocean Holdings is pleased to announce its condensed consolidated results for the year ended 31 December 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 Proprietary Limited ("Radiant"), 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 buying house, based in Hong Kong, which buys on behalf of the Group
companies.
The Group made capital investments at SOEW during the year to improve efficiencies and increase capacity towards the end of the year which will
only come on stream in the second quarter of 2013. The revenue at the electrical cable subsidiary increased compared to the prior year, resulting
in gross margins increasing mainly as a result of an increase in production, and a marginal increase in the Rand Copper Price ("RCP"). Radiant's
results were negatively affected by competitive market conditions, the changes in consumer buying trends and the national transport strike which
delayed both the receipt and despatch of inventory compared to the same period in the prior year.
SOH Calibre's objectives are to continue the procurement of quality imported products as well as increasing the level of communication between
suppliers and Radiant. SOH calibre also strives to grow the diversification of the product range.
Financial overview
Earnings
Group revenue for the year to 31 December 2012 increased by 11,5% (2011: 10,8%) to R1 406 million (2011: R1 261 million). The Group's
gross profit increased by 0,9% (2011: 5,5% decrease) to R226,8 million (2011: R224,7 million) and operating profit decreased by 220,3%
(2011: 14,5% increase) to a loss of R91,1 million (2011: R75,7 million profit) compared to the prior year.
Group profit before tax decreased by 262,0% (2011: 15,3%) to a loss of R105,3 million (2011: R65,0 million profit) compared to the prior year.
The basic earnings per share decreased by 358,0% (2011: 12,8% increase) to a loss of 75,6 cents (2011: 29,3 cents profit) compared to the prior
year with the headline earnings per share increasing by 18,6% (2011: 8,4% decrease) to 36,3 cents (2011: 30,6 cents) compared to the prior year.
Headline earnings increased by 18,5% (2011: 8,6% decrease) to R56,7 million (2011: R47,8 million) compared to the prior year.
The main reason for the decrease in earnings is an impairment charge amounting to R175,0 million against the goodwill which arose through the
acquisition of Radiant Group Proprietary Limited ("Radiant") in 2007. This charge was necessitated by a decrease in the earnings of Radiant Group
during the year and the further disruption to business because of the national transport sector strike in September 2012. Steps have already been
taken by management to improve the profitability of this segment which will materialise during the 2013 financial year. The earnings per share before
accounting for the impairment charge of R175,0 million would have been 36.3 cents representing an increase of 23,9% compared to prior year.
The continued efforts by management to control costs have again resulted in lower operational costs compared to the prior year.
Cash flow and working capital management
The cash utilisation of R71,3 million (2011: R39,5 million generation) was mainly as a result of an increased investment in working capital, which
was financed from short-term borrowings. Inventory levels increased due to inventory received late as a result of the national transport strike.
This was also a contributing factor which led to a decline in sales of Radiant for October and November 2012 when compared to the same period
last year. The increase in trade receivables is due to an increase in revenue during the last month of the year as a consequence of the strike.
Creditors reduced by R45,1 million (2011: R62,1 million increase).
The Group invested R32,7 million (2011: R62,3 million) in capital expenditure which was mainly financed by long-term borrowings during the year
and utilised R46,3 million (2011: R53,7 million) to repay its long-term interest-bearing borrowings.
The Group's net cash utilised during the period of R136,2 million (2011: R21,3 million) reduced the cash balance as at the beginning of the year
from R13,8 million to an overdraft balance of R122,2 million.
Segment results
Electrical cables manufacturers SOEW
Revenue increased by 17,9% (2011: 15,4%) to R1 058,3 million (2011: R897,3 million). This was mainly attributable to an increase in production
volumes and marginal increase in the average Rand Copper Price.
Operational expenses increased during the year mainly due to the increase in production.
Capital investment was made to improve efficiencies and to increase capacity at the Group's Alrode facility during the year under review. Additional
working capital was required to finance the increase in inventory and trade receivables relating to the increase in volumes, which was funded from
normal credit facilities.
Lighting and electrical accessories Radiant
Revenue decreased from R363,7 million in 2011 to R354,3 million. The national transport strike was one of the contributing factors that negatively
affected revenues resulting in a decrease of 2,6% (2011: 0,7% increase) when compared to the prior year. Operational costs decreased by 4,1%
compared to the prior year. Lower margins were due to supplier price increases and the volatile exchange rate, which was partially absorbed by the
Company. There has been a noticeable change in consumer spending trends and overall resilience in market conditions.
Cash on hand decreased from R9,8 million at the end of December 2011 to an overdraft position of R20,9 million as at the end of December 2012.
The funds were utilised to finance working capital.
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 cost is due to the
reduction in the loan balances. During the year a further R5,3 million (2011: R19,2 million) capital investment was made.
Seasonality
The Group's earnings are affected by seasonality as earnings for the second half of the year are historically higher than the first six months.
Management expects the traditional seasonality trend to continue in future.
Prospects
Based on the trading history and exogenous market factors going forward, the 2013 year's results are expected to show an improvement, and the
Group continues to strive for increased market share and expansion of its product range.
The Group remains committed to ensuring earnings enhancement, whilst improving the return on equity on a sustainable basis by diversifying its
revenue streams and promoting internal efficiencies. Management's focus on cost control and improving working capital management will continue.
The Group has for the first time entered the tender market and has submitted a number of tenders which will increase revenues if successful.
Any forward-looking information included in this announcement has not been reviewed and reported on by the Group's independent auditors.
On behalf of the board
EG Dube PJM Ferreira
Chairman Chief Executive Officer
27 February 2013
Corporate information
South Ocean Holdings Limited
(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
Directors:
EG Dube# (Chairman)
EHT Pan-@ (Deputy Vice-Chairman)
PJM Ferreira* (Chief Executive Officer)
JP Bekker* (Chief Financial Officer)
CY Wu-Q
M Chong#
DL Tam#
HL Li-Q
KH Pon#
CH Pan-Q (Alternate)
MH Lee- (Alternate)
CC Wu- (Alternate)
* Executive
# Independent Non-Executive
- Non-Executive
Q Taiwanese
@ Brazilian
Company Secretary:
WT Green
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 Marshall 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
Website: www.pwc.co.za
28 February 2013
Date: 28/02/2013 07:10:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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