Wrap Text
Audited consolidated results for the year ended 31 December 2013
South Ocean Holdings Limited
(Registration number 2007/002381/06)
Incorporated in the Republic of South Africa
("South Ocean Holdings")
Share code: SOH ISIN: ZAE000092748
Audited summarised consolidated results announcement
for the year ended 31 December 2013
HIGHLIGHTS
Turnover increased by 20,2% to R1 690,9 million
Loss per share increased by 2,8% to 77,7 cents
Headline earnings decreased by 42,1% to 21,0 cents
Tangible net asset value per share increased by 5,3% to 341,3 cents
SUMMARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at
31 December 2013 31 December 2012
(Audited) (Audited)
Notes R'000 R'000
Assets
Non-current assets 294 497 479 060
Property, plant and equipment 4 284 015 321 122
Intangible assets 4 10 482 157 938
Current assets 653 160 546 755
Inventories 289 247 283 166
Trade and other receivables 331 927 226 698
Derivative financial instruments 11 143 –
Taxation receivable 3 166 4 127
Cash and cash equivalents 28 677 32 764
Total assets 947 657 1 025 815
Equity and liabilities
Equity
Share capital 5 441 645 441 645
Reserves 633 (191)
Retained earnings 101 968 223 416
Total equity 544 246 664 870
Liabilities
Non-current liabilities 77 436 81 785
Interest-bearing borrowings 6 42 033 46 059
Share-based payments 1 774 2 301
Deferred taxation 33 629 33 425
Current liabilities 325 975 279 160
Trade and other payables 133 762 94 413
Share-based payments – 465
Derivative financial instrument – 219
Interest-bearing borrowings 6 26 130 28 834
Taxation payable – 252
Bank overdraft 166 083 154 977
Total liabilities 403 411 360 945
Total equity and liabilities 947 657 1 025 815
SUMMARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended
31 December 2013 31 December 2012
(Audited) Change (Audited)
Note R'000 % R'000
Revenue 1 690 921 20,2 1 406 317
Cost of sales (1 475 875) (1 179 536)
Gross profit 215 046 (5,2) 226 781
Other operating income 6 446 8 050
Administration expenses (66 638) (65 235)
Distribution expenses (26 567) (23 866)
Operating expenses (221 026) (236 816)
Operating loss (92 739) 1,8 (91 086)
Finance income 533 512
Finance costs (18 885) (14 788)
Loss before taxation (111 091) 5,4 (105 362)
Taxation 7 (10 357) (12 923)
Loss for the year (121 448) 2,7 (118 285)
Other comprehensive income loss
Exchange differences on translation of foreign operations 824 161
Total comprehensive loss attributable to equity holders
of the Company (120 624) 2,1 (118 124)
Cents Cents
per share per share
Loss per share – basic and diluted (77,7) 2,8 (75,6)
SUMMARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended
31 December 2013 31 December 2012
(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 (191) (352)
Exchange differences on translation of foreign operations 824 161
Closing balance 633 (191)
Retained earnings
Opening balance 223 416 341 701
Total comprehensive loss for the year (121 448) (118 285)
Closing balance 101 968 223 416
SUMMARY CONSOLIDATED STATEMENT OF CASH FLOW
For the year ended
31 December 2013 31 December 2012
(Audited) (Audited)
R'000 R'000
Cash generated from/(utilised in) operating activities 16 025 (71 271)
Cash utilised in investing activities (25 312) (31 528)
Cash utilised in financing activities (6 730) (33 392)
Net decrease in cash and cash equivalents (16 017) (136 191)
Cash and cash equivalents at the beginning of year (122 213) 13 817
Effects of exchange rate movements on cash balances 824 161
Cash and cash equivalents at the end of year (137 406) (122 213)
SELECTED NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL INFORMATION
1. General information
South Ocean Holdings, a light fittings assembly operation and its subsidiaries ("the Group"), manufacture and distribute electrical cables, import and
distribute light fittings, lamps and electrical accessories, owns a light fittings operation 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
7 March 2014.
2. Basis of preparation
The summary consolidated financial statements are prepared in accordance with the requirements of the JSE Limited Listings Requirements for
provisional reports, and the requirements of the Companies Act applicable to summary financial statements. The Listings Requirements require
provisional reports to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International
Financial Reporting Standards ("IFRS") and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial
Pronouncements as issued, by the Financial Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34
"Interim Financial Reporting". The accounting policies applied in the preparation of the consolidated Annual Financial Statements from which the
summary financial statements were derived are in terms of International Financial Reporting Standards and are consistent with those accounting
policies applied in the preparation of the previous consolidated Annual Financial Statements.
3. Accounting policies
The accounting policies adopted are consistent with those applied in the Annual Financial Statements for the year ended 31 December 2012, except
where indicated. There are no new standards or amendments that were issued since the last annual report that had or is expected to have a material
impact on the reported or future results of the Group.
4. Property, plant and equipment and intangible assets
During the year, the Group invested R26,1 million (2012: R32,7 million) in capital expenditure, related mainly to the investment in plant and
machinery at South Ocean Electric Wire Company Proprietary Limited. 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 2013
Opening net carrying amount 321 122 157 938
Additions 23 333 2 746
Disposals (41 734) –
Foreign exchange movements 11 –
Impairment of goodwill – (148 108)
Depreciation/amortisation (18 717) (2 094)
Closing net carrying amount 284 015 10 482
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/impairment (16 351) (4 284)
Closing net carrying amount 321 122 157 938
Impairment of Goodwill
The impairment charge arose as a result of the current and future market conditions affecting Radiant Group Proprietary Limited's earnings. The
balance of the goodwill amounting to R148,1 million (2012: R175,0 million) was impaired during the year by recognising an expense in operating
expenses.
5. Share capital
Number of Ordinary shares Share premium Total
shares issued R'000 R'000 R'000
At 31 December 2013
Opening and closing balance 156 378 794 1 274 440 371 441 645
At 31 December 2012
Opening and closing balance 156 378 794 1 274 440 371 441 645
6. Interest-bearing borrowings
31 December 2013 31 December 2012
(Audited) (Audited)
Secured loans R'000 R'000
Non-current 42 033 46 059
Current 26 130 28 834
68 163 74 893
The movement in borrowings is analysed as follows:
Opening balance 74 893 108 281
Additional loans raised 22 049 5 817
Finance costs 5 169 7 091
Repayments (33 948) (46 296)
Closing balance 68 163 74 893
7. Taxation
The effective tax rate after adjusting for the non-tax deductable goodwill impairment of R148,1 million (2012: R175,0 million) is 28% (2012: 18,6%).
8. Reconciliation of headline earnings
31 December 2013 31 December 2012
R'000 R'000
Earnings/(loss) attributable to equity holders of the Company
Loss/(profit) on disposal of property, plant and equipment (121 448) (118 285)
Goodwill impairment 6 117 (13)
Headline earnings 148 108 175 000
Headline earnings for the year 32 777 56 702
Headline earnings per share (cents) 21,0 36,3
9. Weighted average number of shares
31 December 2013 31 December 2012
R'000 R'000
Number of shares in issue 156 378 794 156 378 794
Weighted average number of shares in issue at beginning and end of the year 156 378 794 156 378 794
10. Net asset value
31 December 2013 31 December 2012
R'000 R'000
Net asset value per share (cents) 348,0 425,2
Tangible net asset value per share (cents) 341,3 324,2
11. Derivative financial instruments
31 December 2013 31 December 2012
R'000 R'000
Movement on forward exchange contracts (143) 219
The notional principal amount of the outstanding forward exchange contracts at 31 December 2013 was R4 428 000 (2012: R6 851 000).
Trading derivatives are classified as a current asset or current liability. The fair value of the derivatives is determined with reference to observable
market data and rely as little as possible on entity specific estimates. The maximum exposure to credit risk at the reporting date is the fair value
of the derivative assets in the balance sheet. The fair values are within level 2 of the fair value hierarchy.
12. Final dividend declaration
Funds have been invested in the expansion plan to increase production capacity during the year, hence the directors have not recommended
a dividend.
13. Audit opinion
These summary consolidated financial statements for the year ended 31 December 2013 have been audited by PricewaterhouseCoopers Inc.,
who expressed an unmodified opinion thereon. The auditor also expressed an unmodified opinion on the Annual Financial Statements from which
these summary consolidated financial statements were derived.
A copy of the auditor's report on the summary consolidated financial statements and of the auditor's report on the Annual Financial Statements
are available for inspection at the Company's registered office, together with the financial statements identified in the respective auditor's report.
14. 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 8 – 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:
Year ended Adjusted Segment Segment
Revenue EBITDA assets liabilities
R'000 R'000 R'000 R'000
31 December 2013
Electrical cables manufacturing 1 336 285 59 533 489 307 249 134
Lighting and electrical accessories 373 108 28 430 251 022 79 699
Property investments 15 995 5 446 202 448 35 072
1 725 388 93 409 942 777 363 875
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 1 019 558 321 825
31 December 2013 31 December 2012
(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 1 725 388 1 433 958
Inter-segment revenue (property rentals) (15 995) (21 360)
Inter-segment revenue – other (18 472) (6 281)
Revenue per consolidated statement of comprehensive income 1 690 921 1 406 317
Loss before tax
Adjusted EBITDA 93 409 120 691
Corporate and other overheads (17 229) (16 142)
Depreciation (18 717) (16 351)
Impairment of intangible assets – lighting and electrical accessories (148 108) (175 000)
Amortisation of intangible assets – lighting and electrical accessories (2 094) (4 284)
Operating loss profit (92 739) (91 086)
Finance income 533 512
Finance cost (18 885) (14 788)
Loss before tax (111 091) (105 362)
Assets
Reportable segment assets 942 777 1 019 558
Corporate and other assets 1 714 2 130
Taxation receivable 3 166 4 127
Total assets per statement of financial position 947 657 1 025 815
Liabilities
Reportable segment liabilities 363 875 321 825
Corporate and other liabilities 5 907 5 443
Deferred taxation 33 629 33 425
Taxation payable – 252
Total liabilities per statement of financial position 403 411 360 945
15. Director changes
Mr C C Wu and Ms M H Lee resigned as alternate directors on 16 October 2013 and 7 March 2014, respectively, and were replaced by
Ms D L Pan and Mr W P Li as alternate directors on 16 October 2013 and 7 March 2014 respectively. Ms D L Tam resigned as director on
31 December 2013.
16. Going concern
The Annual Financial Statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes
that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and
commitments will occur in the ordinary course of business.
17. 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
The Board of South Ocean Holdings is pleased to announce its condensed consolidated results for the year ended 31 December 2013
("the year").
South Ocean Holdings is an investment holding company, comprising five 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, Anchor Park Investments 48 Proprietary Limited ("Anchor Park")
a property holding company, SOH Calibre International Limited ("SOH Calibre"), a procurement agency, based in Hong Kong, and Icembu
Services Proprietary Limited ("Icembu") a light fittings assembly company.
The Group has increased production volumes at the electrical cable manufacturing segment, during the year, but still experienced margin
pressures due to competitive market conditions and slow down in the building industry. The electrical supply problem from council due
to the cable failure experienced at the Alrode factory during February and March 2013, as referred to in the SENS announcement dated
26 April 2013, materially affected the segment's results.
Revenue of the lighting and electrical accessories segment increased during the year. The focus was on restructuring the segment during
the year which has resulted in an increase in revenue. However margins decreased in an attempt to gain market share. Margins were
further affected by the increase in competition and aggressive pricing in the market by our competitors.
Based on the results of discounted cash flow valuation, the Board of directors impaired the balance of the goodwill amounting to
R148,1 million during the year.
The Cape Town property was sold during the year and the operation was relocated to improve logistics to customers, implementing better
controls, and reduce staff and overheads. The Cape Town building was sold for R34,8 million resulting in a capital loss of R6,5 million,
which negatively affected the results.
Financial overview
Earnings
Group revenue for the year ending 31 December 2013 increased by 20,2% (2012: 11,5%) to R1 690,9 million (2012: R1 406,3 million).
The Group's gross profit decreased by 5,2% (2012: 0,9% increase) to R215,0 million (2012: R226,8 million) and the operating loss
increased by 1,8% (2012: 220,3%) to a loss of R92,7 million (2012: R91,1 million).
Group loss before tax increased by 5,4% (2012: 262,0%) to R111,1 million (2012: R105,4 million) compared to the prior period. The basic loss
per share increased by 2,8% (2012: 358,0%) to a loss of 77,7 cents (2012: 75,6 cents) with the headline earnings per share decreasing by
42,1% (2012: 18,6%: increase) to 21,0 cents (2012: 36,3 cents).
The main reason for the decrease in earnings is an impairment charge amounting to R148,1 million (2012: R175,0 million) against the
goodwill, which arose through the acquisition of Radiant Group Proprietary Limited in 2007. The balance of the goodwill was impaired during
the year, as approved by the Directors, based on current and future market conditions affecting the earnings of Radiant. Steps have been
implemented by management to improve the profitability of this segment which should materialise during the next few years.
The operating cost includes a loss of R6,5 million on the sale of the Cape Town property. Management is constantly evaluating all costs and
reducing where possible.
Cash flow and working capital management
The cash generated from operating activities during the year amounting to R16,0 million (2012: R71,3 million, utilised) improved compared
to the prior period. Inventory levels have increased at Radiant compared to prior period to accommodate suppliers closing during the
Chinese New year. The biggest increase in working capital amounting to R105,1 million was the increase in trade receivables as a result
of the increase in revenue during the last quarter of the year. The trade receivables book continues to be well managed in an increasingly
challenging credit environment. During the year the Group disposed of Cape Town property to the value of R34,8 million, for which funds
were only received after year end. This amount was included in other receivables. The funds will be used to reduce the debt levels of the
Group. The net working capital investment is currently at 28,8% of revenue.
The Group invested R26,1 million (2012: R32,7 million) in capital expenditure which was mainly for capital expenditure at the electrical cable
manufacturing segment which was financed by long-term borrowings. The Group utilised R33,9 million (2012: R46,3 million) to repay its
long-term interest-bearing borrowings.
The Group's net cash utilised during the year of R16,0 million (2012: R136,2 million) increased the net overdraft balance as at the beginning
of the year from R122,2 million to an overdraft balance of R137,4 million at year end.
Segment results
Electrical cables – SOEW
Revenue increased by 26,3% (2012: 17,9%) to R1 336,3 million (2012: R1 058,3 million). The revenue increase is as a result of an increase
in production volumes and an 8,7% increase in the moving average Rand Copper Price during the year. During the first quarter of the year
production volumes decreased due to the electricity supply problem experienced at the Alrode plant. The margins were also materially
affected by the lower production volumes during the first quarter of the year. Production volumes increased during the rest of the year.
The market conditions were subdued during the year and margins were under pressure due to the competitive market.
Operational expenses increased during the year as a result of increase in production volumes.
Capital investment was made to improve efficiencies and to increase capacity at the Group's Alrode facility during the year. Additional
working capital funding was required to finance the increase in inventory and trade receivables relating to the increase in volumes, and was
funded from normal credit facilities.
Lighting and electrical accessories – Radiant Group
Revenue increased by R18,8 million to R373,1 million from R354,3 million in 2012 representing an increase of 5,3% (2012: 2,6% decrease)
compared to prior period. This is despite subdued economic growth and testing trading conditions with intensified pressure on consumer
disposable income. There has been a clear shift in consumer spending which is reflective of waning consumer confidence. Cost containment
remained one of the primary focuses during the year and good progress was made as operating costs reduced by R1,9 million or 1,6%
(2012: 4,1%) even with inflationary increases.
The ERP solution was upgraded, during the year. In addition, a warehouse management system was implemented at year end which will
enhance stock control, despatching of deliveries and services to customers.
Radiant has acquired a new business, distributing audio visual and electronic accessories under the brand name "What 4 Electronics".
Radiant implemented a new organisational structure during the year to streamline processes and improve customer services which focuses
on our core business model. Radiant relocated its operations in Cape Town to improve customers centricity by moving to a location which
is more accessible to its customers.
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 the property in the Western Cape was disposed for R34,8 million resulting in a
capital loss of R6,5 million.
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
The market conditions will remain challenging during the 2014 financial year, however the results are expected to show a significant
improvement compared to the 2013 financial year.
Management are in the process of refocusing the lighting and electrical accessories segment and regaining lost market share. Cost control
and improving working capital will continue to be a focal point during the year, leveraging on operational efficiencies and capitalising on
existing marketing opportunities.
The Group has submitted a number of tenders to Parastatals (Government, Eskom) since the previous period, which has not yet been
awarded. Any successful tenders will increase revenues.
Appreciation
The directors would like to express their appreciation towards the management and staff as well as all our valued customers, suppliers,
advisors, business partners and shareholders for their continued support.
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
E G Dube P J M Ferreira
Chairman Chief Executive Officer
7 March 2014
CORPORATE INFORMATION
South Ocean Holdings Limited
(Registration number 2007/002381/06)
Incorporated in the Republic of South Africa
("South Ocean Holdings")
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)
C Y Wu**Q
M Chong#
H L Li**Q
K H Pon#
W P Li**QA
C H Pan**QA
D L Pan**QA
* Executive
# Independent Non-Executive
** Non-Executive
Q Taiwanese
@ Brazilian
A Alternate
Registered Office:
12 Botha Street, Alrode, 1451
PO Box 123738, Alrode, 1451
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.
32 Ida Street. Menlo Park, 0102
Telephone: +27(12) 429 0000
Telefax: +27(12) 429 0100
Website: www.pwc.co.za
www.southoceanholdings.com
Date: 07/03/2014 05:30:00 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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