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SOUTH OCEAN HOLDINGS LIMITED - Unaudited Interim Financial Results for the six months ended 30 June 2013

Release Date: 01/08/2013 07:05
Code(s): SOH     PDF:  
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Unaudited Interim Financial Results for the six months ended 30 June 2013

South Ocean Holdings Limited
(Registration number 2007/002381/06)
Incorporated in the Republic of South Africa
Share code: SOH    ISIN: ZAE000092748


Group condensed consolidated interim financial results announcement 
for the six months ended 30 June 2013

HIGHLIGHTS
Revenue increased by 17,8% to R769,2 million
Headline earnings per share decreased by 70,9% to 3,4 cents
Earnings per share decreased by 70,1% to 3,5 cents
Tangible net asset value per share increased by 10,0% to 328,2 cents

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                                                                     As at           As at               As at
                                                              30 June 2013    30 June 2012    31 December 2012
                                                                (Unaudited)     (Unaudited)           (Audited)
                                                      Notes          R'000           R'000               R'000
Assets
Non-current assets                                                 485 143         645 725             479 060
Property, plant and equipment                            4         327 639         310 878             321 122
Intangible assets                                        4         157 504         334 847             157 938
Current assets                                                     709 273         581 776             546 755
Inventories                                                        316 714         287 885             283 166
Trade and other receivables                                        358 939         272 861             226 698
Taxation receivable                                                  7 829           3 213               4 127
Cash and cash equivalents                                           25 791          17 817              32 764

Total assets                                                     1 194 416       1 227 501           1 025 815
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                                                               236            (301)               (191)
Retained earnings                                                  228 860         360 032             223 416
Total equity                                                       670 741         801 376             664 870
Liabilities
Non-current liabilities                                             75 533          96 415              81 785
Interest-bearing borrowings                              6          39 177          59 135              46 059
Deferred taxation                                                   34 116          34 649              33 425
Share-based payments                                                 2 240           2 631               2 301
Current liabilities                                                448 142         329 710             279 160
Trade and other payables                                           232 995         188 684              94 413
Interest-bearing borrowings                              6          27 141          35 694              28 834
Taxation payable                                                       273           1 481                 252
Shareholders for dividends                                                              4                   
Derivative financial instruments                                                      169                 219
Share-based payments                                                     8             450                 465
Bank overdraft                                                     187 725         103 228             154 977

Total liabilities                                                  523 675         426 125             360 945
Total equity and liabilities                                     1 194 416       1 227 501           1 025 815

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                                                                      Six months ended                               Year ended
                                                               30 June 2013        30 June 2012                31 December 2012
                                                                 (Unaudited)         (Unaudited)    Change             (Audited)
                                                        Note          R'000               R'000          %                 R'000
Revenue                                                             769 152             652 854       17,8             1 406 317
Cost of sales                                                      (674 422)           (541 924)                      (1 179 536)
Gross profit                                                         94 730             110 930      (14,6)              226 781
Other operating income                                                  357                 868                            8 050
Administration expenses                                             (31 748)            (33 864)                         (65 235)
Distribution expenses                                               (14 429)            (12 246)                         (23 866)
Operating expenses                                                  (32 988)            (33 538)                        (236 816)
Operating profit/(loss)                                              15 922              32 150      (50,5)              (91 086)
Finance income                                                          221                 139                              512
Finance costs                                                        (8 179)             (6 272)                         (14 788)
Profit/(loss) before taxation                                         7 964              26 017      (69,4)             (105 362)
Taxation                                                  7          (2 520)             (7 686)                         (12 923)
Profit/(loss) for the period                                          5 444              18 331      (70,3)             (118 285)
Other comprehensive income
Exchange differences on translating foreign operation                  427                   51                              161
Total comprehensive income/(loss) for the period                      5 871              18 382      (68,1)             (118 124)

                                                                     Cents                Cents                            Cents
                                                                  per share           per share                        per share
Earnings per share  basic and diluted                                  3,5                11,7      (70,1)                (75,6)
Dividend per share                                                                                                           

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
                                                                           Six months ended                   Year ended
                                                                    30 June 2013        30 June 2012    31 December 2012
                                                                      (Unaudited)         (Unaudited)           (Audited)
                                                            Notes          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                                                             (191)               (352)               (352)
Exchange differences on translation of foreign operations                    427                  51                 161
Closing balance                                                              236                (301)               (191)
Retained earnings
Opening balance                                                          223 416             341 701             341 701
Comprehensive income/(loss) for the period                                 5 444              18 331            (118 285)
Closing balance                                                          228 860             360 032             223 416

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                                                  Six months ended                    Year ended
                                                           30 June 2013        30 June 2012     31 December 2012
                                                             (Unaudited)         (Unaudited)            (Audited)
                                                                  R'000               R'000                R'000
Cash utilised in operating activities                           (15 283)            (71 806)             (71 271)
Cash utilised in investing activities                           (16 290)            (14 021)             (31 528)
Cash utilised in financing activities                            (8 575)            (13 452)             (33 392)
Net decrease in cash and cash equivalents                       (40 148)            (99 279)            (136 191)
Cash and cash equivalents at the beginning of the period       (122 213)             13 817               13 817
Effects of exchange rate movement on cash balances                  427                  51                  161
Cash and cash equivalents at the end of the period             (161 934)            (85 411)            (122 213)

SELECTED NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
1. General information
   South Ocean Holdings Limited ("South Ocean Holdings" or "the Group") and its subsidiary companies manufacture and distribute electrical cables,
   import and distribute light fittings, lamps, electrical accessories and corporate gifts and have 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, as well as the JSE Listings Requirements. This 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. The unaudited condensed consolidated interim financial results were compiled by J P Bekker (CA)SA
   (Group Chief Financial Officer) and approved for issue by the Board of Directors on 31 July 2013.

3. Accounting policies
   The accounting policies adopted are consistent with those applied in the audited financial statements for the year ended 31 December 2012, 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 R16,7 million (2012: R14,1 million) in capital expenditure mainly relating to the manufacturing plant at
     South Ocean Electric Wire Company Proprietary Limited. 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 2013
     Opening net carrying amount                                                                                   321 122                  157 938
     Additions                                                                                                      15 897                      822
     Disposals and write-offs                                                                                         (295)                       
     Foreign exchange movements                                                                                         (6)                       
     Depreciation/amortisation and other movements                                                                  (9 079)                  (1 256)
     Closing net carrying amount                                                                                   327 639                  157 504
     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
     Year ended 31 December 2012                                                                                  (Audited)                (Audited)
     Opening net carrying amount                                                                                   305 929                  337 222
     Additions                                                                                                      32 748                        
     Disposals and write-offs                                                                                       (1 207)                       
     Foreign exchange movements                                                                                          3                        
     Impairment of goodwill                                                                                                               (175 000)
     Depreciation/amortisation and other movements                                                                 (16 351)                  (4 284)
     Closing net carrying amount                                                                                   321 122                  157 938

5.   Share capital and share premium
                                                                Number of         Ordinary shares            Share premium                    Total
                                                             shares issued                  R'000                    R'000                    R'000
     At 30 June 2013 (Unaudited)
     Opening and closing balance                                156 378 794                   1 274                440 371                  441 645
     At 30 June 2012 (Unaudited)
     Opening and closing balance                                156 378 794                   1 274                440 371                  441 645
     At 31 December 2012 (Audited)
     Opening and closing balance                                156 378 794                   1 274                440 371                  441 645

6.   Interest-bearing borrowings
                                                                                            As at                   As at                  As at
                                                                                     30 June 2013            30 June 2012       31 December 2012
                                                                                       (Unaudited)             (Unaudited)              (Audited)
                                                                                            R'000                   R'000                  R'000
     Non-current                                                                           39 177                  59 135                 46 059
     Current                                                                               27 141                  35 694                 28 834
                                                                                           66 318                  94 829                 74 893
     The movement in borrowings is analysed as follows:
     Opening balance                                                                       74 893                 108 281                108 281
     Additional loans raised                                                                7 775                   5 818                  5 817
     Finance costs                                                                          2 522                   3 976                  7 091
     Repayments                                                                           (18 872)                (23 246)               (46 296)
     Closing balance                                                                       66 318                  94 829                 74 893

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 is 31,6% (2012: 29,5%).

8.   Reconciliation of headline earnings
                                                                                            Six months ended                          Year ended
                                                                                     30 June 2013            30 June 2012        31 December 2012
                                                                                       (Unaudited)             (Unaudited)               (Audited)
                                                                                            R'000                   R'000                   R'000
     Comprehensive income attributable to the equity holders
      of the Company for the period                                                        5 444                  18 331                (118 285)
     (Profit)/loss on disposal of property, plant and equipment  net of taxes               (126)                     15                    (13)
     Goodwill impairment                                                                                                                175 000
     Headline earnings for the period                                                       5 318                  18 346                  56 702
     Headline earnings per share (cents)                                                      3,4                    11,7                    36,3

9.   Weighted average number of shares
                                                                                            Six months ended                     Year ended
                                                                                     30 June 2013        30 June 2012      31 December 2012
                                                                                       (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 the 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                 As at
                                                                                     30 June 2013        30 June 2012      31 December 2012
                                                                                       (Unaudited)         (Unaudited)             (Audited)
     Net asset value per share (cents)                                                      428,9               512,5                 425,2
     Tangible net asset value per share (cents)                                             328,2               298,3                 324,2

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 2013 (Unaudited)
     Electrical cables manufacturing                                     602 293                 16 892          566 874            343 196
     Lighting and electrical accessories                                 174 884                 11 364          411 594             94 738
     Property investments                                                  8 735                  7 254          206 746             44 223
                                                                         785 912                 35 510        1 185 214            482 157
     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
     Year ended
     31 December 2012 (Audited)
     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            321 825


                                                                                               Six months ended                       Year ended
                                                                                          30 June 2013       30 June 2012       31 December 2012
                                                                                            (Unaudited)        (Unaudited)              (Audited)
                                                                                                 R'000              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                                                                 785 912            663 534              1 433 958
    Inter-segment revenue (property rentals)                                                    (8 735)           (10 680)               (21 360)
    Inter-segment revenue  other                                                               (8 025)                                  (6 281)
    Revenue per consolidated statement of comprehensive income                                 769 152            652 854              1 406 317
    Profit before tax
    Adjusted EBITDA                                                                              35 510            51 775                120 691
    Corporate and other overheads                                                                (9 253)           (8 193)               (16 142)
    Depreciation                                                                                 (9 079)            9 057)               (16 351)
    Impairment of intangible assets  lighting and electrical
     accessories segment                                                                                                              (175 000)
    Amortisation of intangible assets                                                            (1 256)           (2 375)                (4 284)
    Operating profit/(loss)                                                                      15 922            32 150                (91 086)
    Finance income                                                                                  221               139                    512
    Finance cost                                                                                 (8 179)           (6 272)               (14 788)
    Profit/(loss) before income tax per statement of
     comprehensive income                                                                         7 964            26 017               (105 362)
    Assets
    Reportable segment assets                                                                1 185 214          1 221 606              1 019 558
    Corporate and other assets                                                                   1 373              2 682                  2 130
    Taxation receivable                                                                          7 829              3 213                  4 127
    Total assets per statement of financial position                                         1 194 416          1 227 501              1 025 815
    Liabilities
    Reportable segment liabilities                                                             482 157            384 012                321 825
    Corporate and other liabilities                                                              7 129              5 983                  5 443
    Deferred taxation                                                                           34 116             34 649                 33 425
    Taxation payable                                                                               273              1 481                    252
    Total liabilities per statement of financial position                                      523 675            426 125                360 945

13. Director changes
    There were no 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 2013.

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
Group"), an importer and distributor of light fittings, lamps, electrical accessories and corporate gifts; a property holding company, Anchor
Park Investments 48 Proprietary Limited ("Anchor Park"); and SOH Calibre International Limited ("SOH Calibre"), a procurement agency
of the Group, based in Hong Kong.

Financial overview

Earnings
Group revenue for the six-month period to 30 June 2013 increased by 17,8% (2012: 5,5 %) to R769,2 million (2012: R652,8 million).
The Group's gross profit decreased by 14,6% (2012: 4,4% increase) to R94,7 million (2012: R110,9 million) and operating profit
decreased by 50,5% (2012: 6,4% increase) to R15,9 million (2012: R32,2 million) compared to the prior period.

Group profit before tax decreased by 69,4% (2012: 5,1% increase) to R8,0 million (2012: R26,0 million) compared to the prior period.
The basic earnings per share decreased by 70,1% (2012: 8,3% increase) to 3,5 cents (2012: 11,7 cents) with the headline earnings
per share deceasing by 70,9% (2012: 8,3% increase) to 3,4 cents (2012: 11,7 cents) compared to the prior period. Headline earnings for
the period were R5,3 million (2012: R18,3 million).

The Group's results were materially negatively affected by the electricity supply problem experienced by SOEW as pointed out in the SENS
announcement released on 25 April 2013.

Cash flow and working capital management
Cash utilised in operations amounted to R15,3 million (2012: R71,8 million) during the period. Working capital increased by R28,2 million
(2012: R101,3 million) primarily due to an increase in accounts receivable, as a result of an increase in revenue, and an increase in inventory.
Certain significant customers paid at the beginning of the month following this period, which contributed to the negative cash flow for the
period. 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 R16,7 million (2012: R14,0 million) in capital expenditure which was mainly financed by long-term borrowings during this
period and utilised R18,9 million (2012: R23,2 million) to repay its long-term interest-bearing borrowings.

The Group's net cash utilised during the period of R40,1 million (2012: R99,3 million) resulted in the net overdraft increase from R85,4 million
reported at June 2012 to R161,9 million at the end of the current period.

Segment results
Electrical cables  SOEW
SOEW's revenue increased by 21,8% (2012: 10,4% increase) to R602,3 million (2012: R494,4 million). This was mainly attributable to an
increase of 8,8% in the moving average Rand Copper Price ("RCP"), diversification of product range and an increase in production due to
increased capacity with new machinery installed.

SOEW's production was affected by the electrical supply problems experienced during the months of February to the beginning of April.
This has materially affected the results of SOEW resulting in lower production than budgeted, increased production costs, increased scrap
rates and decreased production efficiencies. The electrical supply problem has been resolved by the municipality replacing the electrical
cables supplying the transformer.

The margins during this period were materially affected as the cost of products escalated.

Production for the months from April to June 2013 was as budgeted. The focus for the rest of the year remains to streamline the production
process and improve operational efficiencies in order to contain costs and increase production.

Lighting and electrical accessories - Radient Group
Radiant Group reported revenue of R174,9 million (2012: R158,4 million), which is a 10,4% increase (2012: 7,2% decrease) when
compared to the same period in the prior year. The margins are still under pressure due to the subdued market conditions and
external competition with changes in customer spending patterns. Costs were again successfully reduced during the period in line with
management's strategy to improve profitability. This was achieved through a number of management interventions resulting in a cost
reduction of 5,8% (2012: 1,7% increase) compared to the same period last year.

Certain strategic changes are being implemented to reduce costs and refocus the business. These are expected to improve results.

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 interest-bearing debts.

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 seasonal trend to continue.

Prospects
The prospects for the South African economy remain mixed with muted growth rates expected for the year.

The highly competitive environment is also expected to continue for the rest of the year.

The Group has entered the tender market as previously indicated. Tenders to Eskom have been submitted by SOEW and Radiant Group
but the awarding of the tenders has been delayed. The positive outcome of any tender business will increase the revenue and results
of the Group.

The Cable segment will be able to take advantage of the improved capacity for the rest of the year and the strategic changes implemented
at the Lighting and Electrical segment will contribute to improving results.

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

E G Dube                                                               P J M Ferreira
Chairman                                                               Chief Executive Officer

31 July 2013

CORPORATE INFORMATION

South Ocean Holdings Limited
(Registration number 2007/002381/06)
Incorporated in the Republic of South Africa
Share code: SOH     ISIN: ZAE000092748

Directors:
E G Dube# (Chairman)
E H T Pan-@ (Deputy Vice-Chairman)
P J M Ferreira* (Chief Executive Officer)
J P Bekker* (Chief Financial Officer)
M Chong#
M H Lee-A
H L Li-Q
C H Pan-QA
K H Pon#
D L Tam#
C C Wu-A
C Y Wu-Q
* Executive
# Independent Non-Executive
- Non-Executive
Q Taiwanese
@ Brazilian
A Alternate

Registered Office:
12 Botha Street, Alrode, 1451
PO Box 123738, Alrode, 1451
Telephone: +27(11) 864 1606
Telefax: +27(86) 628 9523

Company Secretary:
W T 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, South Africa
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


    www.southoceanholdings.com









Date: 01/08/2013 07:05:00 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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