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Unaudited consolidated condensed interim results for the six months ended 30 September 2013
SEARDEL INVESTMENT CORPORATION LIMITED
("Seardel" or "the Group")
The company's shares are listed under the Consumer Goods - Personal and Household
Goods Sector of the JSE Limited.
Registration number: 1968/011249/06 (Incorporated in the Republic of South Africa)
JSE share code: SER ISIN: ZAE000029815
JSE share code: SRN ISIN: ZAE000030144
UNAUDITED CONSOLIDATED CONDENSED INTERIM RESULTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2013
Revenue up R163 million to R1 362 million
Net profit up R26,3 million to R28 million
Headline profit per share up 4 cents to 4,1 cents
Earnings per share up 3,8 cents to 4,1 cents
NAV per share up 10 cents to 213 cents
STATEMENT OF FINANCIAL POSITION
Rand thousands 30 Sep 2013 30 Sep 2012 31 Mar 2013
Unaudited Unaudited Audited
ASSETS
Non-current assets 1 435 388 1 239 561 1 385 957
Property, plant and equipment 759 446 701 640 754 481
Plant and equipment 342 079 309 932 335 876
Owner-occupied property 417 367 391 708 418 605
Investment property 549 073 442 489 525 229
Intangible assets 16 184 11 688 13 030
Other investments 3 673 3 329 3 580
Long-term receivables 51 697 43 966 47 544
Goodwill 14 016 - -
Deferred tax 41 299 36 449 42 093
Current assets 1 404 142 1 253 550 1 138 682
Non-current assets held for sale 1 785 3 298 2 295
Inventories 710 749 622 182 627 768
Trade and other receivables 681 503 624 883 504 788
Current tax asset 7 378 1 187 1 594
Cash and cash equivalents 2 727 2 000 2 237
Total assets 2 839 530 2 493 111 2 524 639
EQUITY AND LIABILITIES
Total equity 1 488 813 1 392 874 1 460 586
Stated capital 320 366 309 989 312 156
Treasury shares (17 794) (17 794) (17 794)
Reserves 1 186 241 1 100 679 1 166 224
Equity attributable to owners of the parent 1 488 813 1 392 874 1 460 586
Non-current liabilities 107 797 86 850 93 662
Deferred tax 8 016 8 252 8 400
Post-employment medical aid benefits 85 567 76 057 84 388
Interest-bearing liabilities 897 1 002 756
Deferred liability 13 089 - -
Operating lease accruals 228 1 539 118
Current liabilities 1 242 920 1 013 387 970 391
Post-employment medical aid benefits 5 116 4 750 5 045
Interest-bearing liabilities 30 541 26 456 298
Provisions - 355 355
Trade and other payables 545 177 459 587 460 008
Bank overdrafts 662 086 522 239 504 685
Total liabilities 1 350 717 1 100 237 1 064 053
Total equity and liabilities 2 839 530 2 493 111 2 524 639
Net asset value (excluding intangible assets) 1 458 613 1 381 186 1 447 556
Net asset value per share after treasury
shares (cents) 213 203 212
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
Rand thousands 30 Sep 2013 30 Sep 2012 %
Unaudited Unaudited change
Revenue 1 362 157 1 199 283 13,6
Gross profit 313 208 255 007 22,8
Operating profit before restructuring costs 65 944 25 134 162,4
Net restructuring and retrenchment costs (10 399) (1 316)
Operating profit before finance costs 55 545 23 818 133,2
Finance income 862 1 456
Finance expenses (28 848) (23 344)
Profit before tax 27 559 1 930 1 327,9
Income tax 496 1 119
Profit for the period from continuing operations 28 055 3 049 820,1
Loss for the period from discontinued operations - (1 286)
Total comprehensive income for the period 28 055 1 763 1 491,3
Total comprehensive income attributable to:
Owners of the parent 28 055 1 763
Non-controlling interests - -
28 055 1 763
CONDENSED STATEMENT OF CASH FLOWS
Rand thousands 30 Sep 2013 30 Sep 2012
Unaudited Unaudited
Net cash flow from operating activities (125 881) 50 950
Net cash flow from investing activities (61 273) (103 007)
Net cash flow from financing activities 30 243 (19 760)
Net decrease in cash and cash equivalents (156 911) (71 817)
Cash and cash equivalents at the beginning of the period (502 448) (448 422)
Cash and cash equivalents at the end of the period (659 359) (520 239)
STATEMENT OF CHANGES IN EQUITY
Rand thousands Stated
capital*/
share
capital
and share Treasury Other Retained Total
premium shares reserves income equity
Balance at 1 April 2012 304 620 (14 610) 284 791 836 844 1 411 645
Total comprehensive profit
for the period - - - 1 763 1 763
Shares issued 5 388 - - - 5 388
Share incentive scheme - - - (5 132) (5 132)
Own shares acquired - (20 790) - - (20 790)
Shares cancelled (19) 17 606 - (17 587) -
Balance at 30 September 2012 309 989 (17 794) 284 791 815 888 1 392 874
Balance at 1 April 2013 312 156 (17 794) 298 669 867 555 1 460 586
Total comprehensive profit
for the period - - - 28 055 28 055
Shares issued 8 210 - - - 8 210
Share incentive scheme - - - (8 038) (8 038)
Balance at 30 September 2013 320 366 (17 794) 298 669 887 572 1 488 813
Composition of other reserves 30 Sep 2013 30 Sep 2012
Revaluation of investments 2 861 2 861
Capital redemption reserve fund 440 440
Surplus on disposal of subsidiary and associated companies 7 923 7 923
Surplus on revaluation of land and buildings 287 445 273 567
298 669 284 791
* Refer note 6.
CONDENSED SEGMENTAL REPORT
Rand thousands Branded
product
distri-
Textiles Industrials Clothing bution
2013
Segment revenue
Gross sales 398 170 217 125 320 588 419 408
Inter-segment sales (these
transactions are at arm's length) (25 656) - (87) -
372 514 217 125 320 501 419 408
Less: Revenue attributable to
discontinued operations - - - -
Revenue as per statement of
comprehensive income 372 514 217 125 320 501 419 408
Segment results
Operating profit/(loss) from
operations 4 096 11 677 (45 745) 14 809
Less: Operating profit/(loss) from
discontinued operations - - - -
Operating profit/(loss) from
continuing operations 4 096 11 677 (45 745) 14 809
2012
Segment revenue
Gross sales 331 523 168 877 361 298 342 261
Inter-segment sales (these
transactions are at arm's length) (23 043) - - -
308 480 168 877 361 298 342 261
Less: Revenue attributable to
discontinued operations - - (3 717) -
Revenue as per statement of
comprehensive income 308 480 168 877 357 581 342 261
Segment results
Operating profit/(loss) from
operations (7 352) 10 676 (10 927) 2 891
Less: Operating profit/(loss) from
discontinued operations 20 - (1 306) -
Operating profit/(loss) from
continuing operations (7 372) 10 676 (9 621) 2 891
Rand thousands
Head
Properties office Total
2013
Segment revenue
Gross sales 56 166 - 1 411 457
Inter-segment sales (these transactions are
at arm's length) (23 557) - (49 300)
32 609 - 1 362 157
Less: Revenue attributable to
discontinued operations - - -
Revenue as per statement of comprehensive income 32 609 - 1 362 157
Segment results
Operating profit/(loss) from operations 37 188 33 520 55 545
Less: Operating profit/(loss) from
discontinued operations - - -
Operating profit/(loss) from continuing operations 37 188 33 520 55 545
2012
Segment revenue
Gross sales 46 114 - 1 250 073
Inter-segment sales (these transactions are
at arm's length) (24 030) - (47 073)
22 084 - 1 203 000
Less: Revenue attributable to
discontinued operations - - (3 717)
Revenue as per statement of
comprehensive income 22 084 - 1 199 283
Segment results
Operating profit/(loss) from operations 33 229 (5 985) 22 532
Less: Operating profit/(loss) from
discontinued operations - - (1 286)
Operating profit/(loss) from continuing operations 33 229 (5 985) 23 818
STATISTICS PER SHARE
In cents, where applicable 30 Sep 2013 30 Sep 2012
Unaudited Unaudited
Weighted average number of shares in issue ('000) 683 354 688 393
Number of shares in issue ('000) 685 925 681 594
Diluted weighted average number of shares in issue ('000) 730 820 731 154
Basic earnings/(loss) 4,1 0,3
Continuing operations 4,1 0,5
Discontinued operations - (0,2)
Headline earnings/(loss) 4,1 0,1
Continuing operations 4,1 0,3
Discontinued operations - (0,2)
Diluted earnings/(loss) 3,8 0,2
Continuing operations 3,8 0,4
Discontinued operations - (0,2)
Diluted headline earnings/(loss) 3,8 0,1
Continuing operations 3,8 0,3
Discontinued operations - (0,2)
Reconciliation between profit and headline earnings ('000)
Income attributable to shareholders 28 055 1 763
Surplus on disposal of property, plant and equipment (173) (1 319)
Loss on disposal of property, plant and equipment 131 7
Total tax effect of adjustments 16 15
Headline earnings 28 029 466
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED RESULTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2013
1 BASIS OF PREPARATION
The Group interim results have been prepared in accordance with International
Financial Reporting Standards (IFRS) and specifically International Accounting
Standard IAS 34: Interim Financial Reporting as issued by the Accounting Practices
Committee and Financial Reporting Pronouncements as issued by the Financial
Reporting Standards Council, the JSE Listings Requirements and the requirements of
the Companies Act, 2008. The interim financial statements should be read in
conjunction with the annual financial statements for the year ended 31 March 2013,
which have been prepared in accordance with IFRS. These results have been prepared
under the supervision of the Financial Director, Gys Wege (CA)SA, and have not been
audited or reviewed by the Group's auditors, KPMG Inc.
2 SIGNIFICANT ACCOUNTING POLICIES
The Group interim results have been prepared under the historical cost convention,
except for the revaluation of certain properties and financial instruments. The
accounting policies adopted are consistent with those followed in the preparation
of the Group's annual financial statements for the year ended 31 March 2013, except
with reference to IFRS 10: Consolidated Financial Statements. The Group has applied
IFRS 10 retrospectively in accordance with the transition provisions as stipulated.
3 CAPITAL EXPENDITURE AND COMMITMENTS
Rand thousands
Unaudited Capital Capital Contractual Contractual
expenditure expenditure commitments commitments
30 Sep 2013 30 Sep 2012 30 Sep 2013 30 Sep 2012
Investment property 23 844 28 469 - 95 845
Land and buildings 216 64 995 - -
Plant and equipment 28 360* 17 002 600 19 110
Intangible assets 5 060 3 500 - -
Total capital expenditure 57 480 113 966 600 114 955
* Included in this amount is R12 million of plant and equipment acquired by means
of business combinations - refer note 7.
The capital commitments are expected to be incurred during the remainder of the
current financial year.
4 ISSUE OF SHARES
During the period 3 033 510 ordinary shares were issued in terms of the Group's
share incentive scheme.
5 DILUTED WEIGHTED AVERAGE NUMBER OF SHARES
The difference between the weighted average number of shares and the diluted
weighted average number of shares are due to the impact of the unexercised options
under the Group's share incentive scheme.
6 STATED CAPITAL
The shareholders of the company have approved the conversion of the ordinary shares
and N ordinary shares having a par value, to ordinary shares and N ordinary shares
having no par value at a general meeting of the company held on 8 August 2013.
Share capital and share premium have therefore been restated to stated capital.
7 BUSINESS COMBINATIONS
The Group acquired 100% of the share capital of two separate legal entities during
the period. The total consideration was R18 060 650.
The following table summarises the consideration paid for the entities, the assets
acquired and the liabilities assumed, recognised at the acquisition date.
Consideration R'000
Cash 4 842
Contingent consideration 13 089
Total consideration 18 061
Recognised amounts of identifiable assets acquired and liabilities assumed
Property, plant and equipment 11 959
Investments 93
Inventories 8 018
Accounts receivable 12 560
Non-current loan (8 628)
Deferred liabilities (3 687)
Deferred tax liability (1 023)
Accounts payable (8 748)
Accruals (2 710)
Bank overdrafts (3 789)
Total identifiable net assets 4 045
Goodwill 14 016
Total consideration 18 061
The contingent consideration arrangement requires the Group to pay the former
owners an amount dependent on future operational profits. The potential
undiscounted amount of all future payments that the Group could be required to
make under this arrangement is between RNil and R14 497 000.
The fair value of the contingent consideration arrangement of R13 088 829 was
estimated by applying a discount rate of 9,05%.
8 SUBSEQUENT EVENTS
On 3 October 2013 the company issued 350 million N ordinary shares of no par value
to Hosken Consolidated Investments Limited at R1,60 per share as payment for a 70%
stake in HCI Invest 3 Holdco Proprietary Limited ("Sabido Holdco"), which holds a
63,9% interest in Sabido Investments Proprietary Limited, which in turn holds
investments in, inter alia, e.tv, eNews Channel and Sasani Studios. This was
pursuant to approval obtained from shareholders at the general meeting of the
company on 8 August 2013, further details of which was published on SENS on
17 May 2013 and 10 July 2013. The consolidated results of Sabido Holdco will be
accounted for as a business combination with effect from 1 October 2013.
Further, Seardel concluded two agreements with SACTWU in terms of which:
- Seardel will, subject to shareholder approval, acquire the remaining 30% equity
interest in Sabido Holdco for a purchase consideration of R240 million, which
will be settled by the issue of 150 million new N shares to SACTWU at R1,60 per
N share, the details of which was publised on SENS on 10 October 2013; and
- Seardel has entered into a Memorandum of Understanding in terms of which SACTWU,
or its assignee, will, subject to shareholder and regulatory approval, acquire
the Group's South African clothing manufacturing business for an estimated
consideration of R77,1 million. Details of the proposed transaction was published
on SENS on 29 October 2013. The results of the clothing operation will be
accounted for as a discontinued operation with effect from 1 October 2013.
COMMENTARY
Seardel has delivered an improved set of results for the six months ended
30 September 2013.
- Revenue was up 14% to R1,36 billion with all the individual segments, apart from
Clothing which was down 11%, delivering revenue growth in excess of 20%.
- The gross margin was up 170 basis points to 23%.
- Good cost controls saw fixed costs rise by just 2,6%, well below the prevailing
inflation rate.
- Operating profit before restructuring costs increased 162% from R25 million in the
comparative period to R66 million.
- Restructuring and retrenchment costs of R10 million were incurred in the Clothing
segment and these costs, together with increased finance costs, resulted in profit
before taxation coming in at R28 million, a R26 million improvement from the
R2 million recorded in the comparative period.
The results for both the period under review and the comparative period contain items
that, whilst they are of similar magnitude and therefore don't affect the overall
comparability of the results, need to be considered nonetheless:
1. The comparative period results included R40 million of income relating to the
government's production incentive programme ("PI"). No PI income has been
recognised in the current period due to the timing of the respective qualifying
projects, but it is expected that income will be recognised in the second half of
the financial year.
2. The current period's results include R37,5 million of once-off income relating to
the final piece of the litigation with former directors as disclosed in the SENS
announcement of 10 May 2013.
Recently Seardel has announced two separate transactions that are clearly
transformative for the Group as a whole:
1. The first was the announcement, published on SENS on 17 May 2013, that Seardel had
entered into an agreement to acquire Hosken Consolidated Investments Limited's
("HCI") 70% equity stake in HCI Invest 3 Holdco Proprietary Limited
("Sabido Holdco"), which holds a 63,9% interest in Sabido Investments Proprietary
Limited ("Sabido"). Sabido is the investment vehicle that houses HCI's media
investments in e.tv, eSat.tv, Yfm and Sasani Studios. Although shareholder approval
was obtained in August 2013, the last of the conditions precedent was fulfilled in
early October 2013 and hence the effects of the acquisition will only be included
in the Group's results from 1 October 2013. This announcement has been followed up
by a further announcement, published on SENS on 10 October 2013, that Seardel has
concluded an agreement with the Southern African Clothing and Textile Workers Union
("SACTWU") to acquire SACTWU'S 30% equity interest in Sabido Holdco.
2. The second significant event was the announcement, published on SENS on
29 October 2013, that Seardel had entered into a Memorandum of Understanding with
SACTWU in terms of which Seardel would dispose of its South African-based clothing
manufacturing operations to SACTWU, or its assignee. The clothing manufacturing
operation has been a lossmaker for many years and whilst its disposal will be
earnings enhancing for the Group, in another respect it is a very sad transaction
for Seardel. The Group was founded on clothing manufacturing in 1967 and this
represents the end of an era that spanned more that 40 years. As the transaction
was concluded in October 2013 the results for the clothing manufacturing division
are included as continuing operations for the interim results, but will be reflected
as discontinuing operations for the financial year-end results ending 31 March 2014.
SEGMENTS
TEXTILES
The comparative period results of the Textile segment were affected by a number of
extenuating circumstances, which saw it record an operating loss of R7 million,
including R15 million of income relating to the PI. Having resolved the issues
that gave rise to the loss, it is pleasing to report that this segment delivered an
operating profit of R4 million excluding any potential PI benefits which are likely to
accrue. If one disregards the PI benefit recognised in the prior period, the segment
has delivered a like-for-like improvement of R26 million year on year.
Despite the improvement, we recognise that much work is still required to further
improve these businesses. Operating margins of around 1% mean that the businesses can
easily slip back into a loss-making situation if we do not stay on top of all
operational aspects whilst we continue to look for alternative revenue streams in
higher margin areas.
INDUSTRIALS
Revenue in the Industrials segment was up 29% to R217 million as a result of improved
performances from all the businesses within this segment. Operating profit was up 9% to
R12 million although it should be noted that the comparative figures include R5 million
of PI benefit whilst no PI benefit has been recognised in the current period. Excluding
the PI benefit, operating profit more than doubled on a like-for-like basis.
CLOTHING
The Clothing segment performed poorly in the period under review with revenue declining
by 11% to R321 million and an operating loss of R46 million being recorded. The
performance of the division in the period was further hindered by a three-week strike
endured in our Ladysmith facility, this despite being one of the few employers that
pay the legislated minimum wage in the area.
As mentioned above, Seardel has entered into a Memorandum of Understanding to dispose
of its South African-based clothing manufacturing operations to SACTWU, or its assignee.
The Group is also in advanced discussions to dispose of its Lesotho operation to a
third party unrelated to SACTWU.
BRANDED PRODUCT DISTRIBUTION
Revenue in the Branded Product segment is up 23% to R419 million. Operating profit
came in at R15 million, a R12 million improvement from the comparative period. We have
previously reported that this segment is a key growth area for the Group going forward
and this remains the case. Much investment has gone into marketing and infrastructure
development ahead of expected revenue growth and although we are satisfied with the
revenue growth achieved to date, further investment is required in a number of areas
to unlock further improvements. Whilst the current operating margin of 4% looks thin,
it should be noted that the first half of the financial year is traditionally slower
than the second half. Furthermore, the operating margins are being adversely affected
by the losses being incurred in our start-up Brand ID business which, although firmly
on track, is still a little way away from breakeven.
PROPERTIES
Revenue grew 22% to R56 million with rentals from external tenants now comprising 58%
of the total revenue. Operating profit was up 12% to R37 million.
The main property developments, being the New Germany and Mobeni Industrial Parks in
KwaZulu-Natal, have been completed. In total, the Group's property portfolio comprises
some 436 000 square metres of industrial space of which some 172 000 square metres is
available for letting to tenants external to the Group. Of the space available to be
let externally, at the close of the period under review, around 87% of it had been let.
On behalf of the board
Stuart Queen Gys Wege
Chief Executive Officer Financial Director
Cape Town
21 November 2013
Registered office: 1 Moorsom Avenue, cnr Bofors Circle and Moorsom Avenue,
Epping Industria II 7460; PO Box 524, Eppindust 7475, South Africa
Directors: J A Copelyn* (Chairman), M H Ahmed*^ (Lead Independent Director),
D Duncan, T G Govender*, A M Ntuli, S A Queen (Chief Executive Officer),
Y Shaik*^, R Watson*^, G D T Wege (Financial Director)
(* Non-executive ^ Independent)
Company secretary: HCI Managerial Services Proprietary Limited
Transfer secretaries: Computershare Investor Services Proprietary Limited,
70 Marshall Street, Johannesburg 2001; PO Box 61051, Marshalltown 2107
Auditors: KPMG Inc.
Sponsors: Investec Bank Limited
Date: 21/11/2013 11:20:00 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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