Wrap Text
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
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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.