Wrap Text
Audited Summarised Consolidated Financial Results Announcement for the year ended 31 December 2014
South Ocean Holdings
(Registration number 2007/002381/06)
Incorporated in the Republic of South Africa
(South Ocean Holdings)
Share code: SOH ISIN: ZAE000092748
HIGHLIGHTS
Revenue increased by 1.4% to R1.715 billion
Earnings per share increased by 130.9% to 24.0 cents
Headline earnings per share increased by 14.3% to 24.0 cents
Tangible net asset value per share increased by 7.2% to 365.9 cents
AUDITED SUMMARISED CONSOLIDATED
FINANCIAL RESULTS ANNOUNCEMENT
for the year ended 31 December 2014
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT
31 December 31 December
2014 2013
(Audited) (Audited)
Notes R'000 R'000
Assets
Non-current assets 330 088 294 497
Property, plant and equipment 4 315 993 284 015
Intangible assets 4 9 994 10 482
Deferred tax 4 101 –
Current assets 674 503 653 160
Inventories 379 527 289 247
Trade and other receivables 255 625 331 927
Derivative financial instruments 1 143
Taxation receivable 2 960 3 166
Cash and cash equivalents 36 390 28 677
Total assets 1 004 591 947 657
Equity and liabilities
Equity
Share capital 5 441 645 441 645
Reserves 1 027 633
Retained earnings 139 486 101 968
Total equity 582 158 544 246
Liabilities
Non-current liabilities 120 464 77 436
Interest-bearing borrowings 6 80 267 42 033
Share-based payments 2 891 1 774
Deferred taxation 37 306 33 629
Current liabilities 301 969 325 975
Trade and other payables 127 445 133 762
Share-based payments 1 772 –
Interest-bearing borrowings 6 22 070 26 130
Taxation payable 4 634 –
Bank overdraft 146 048 166 083
Total liabilities 422 433 403 411
Total equity and liabilities 1 004 591 947 657
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended
31 December 31 December
2014 2013
(Audited) Change (Audited)
Note R'000 % R'000
Revenue 1 715 240 1.4 1 690 921
Cost of sales (1 453 059) (1 475 875)
Gross profit 262 181 21.9 215 046
Other operating income 3 255 6 446
Administration expenses (65 987) (66 638)
Distribution expenses (29 124) (26 567)
Operating expenses (90 679) (221 026)
Operating profit (loss) 79 646 185.9 (92 739)
Finance income 1 090 533
Finance costs (22 036) (18 885)
Profit (loss) before taxation 58 700 152.8 (111 091)
Taxation 7 (21 182) (10 357)
Profit (loss) for the year 37 518 130.9 (121 448)
Other comprehensive income (loss)
Exchange differences on translation of foreign operations 394 824
Total comprehensive income (loss) attributable to equity holders 37 912 131.4 (120 624)
of the Company
Cents per share Cents per share
Earnings (loss) per share – basic and diluted 24.0 130.9 (77.7)
Headline earnings per share – basic and diluted 24.0 14.3 21.0
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended
31 December 31 December
2014 2013
(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 633 (191)
Exchange differences on translation of foreign operations 394 824
Closing balance 1 027 633
Retained earnings
Opening balance 101 968 223 416
Total comprehensive profit (loss) for the year 37 518 (121 448)
Closing balance 139 486 101 968
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
For the year ended
31 December 31 December
2014 2013
(Audited) (Audited)
R'000 R'000
Cash generated from operating activities 43 021 16 025
Cash utilised in investing activities (49 841) (25 312)
Cash generated from (utilised in) financing activities 34 174 (6 730)
Net increase (decrease) in cash and cash equivalents 27 354 (16 017)
Cash and cash equivalents at the beginning of the year (137 406) (122 213)
Effects of exchange rate movement on cash balances 394 824
Cash and cash equivalents at the end of the year (109 658) (137 406)
SELECTED NOTES TO THE SUMMARISED CONSOLIDATED FINANCIAL INFORMATION
1. General information
South Ocean Holdings and its subsidiaries manufacture and distribute electrical cables, import and distribute light fittings, lamps,
electrical accessories and audio visual hardware and accessories, and hold investments in a light fitting assembly operation and
property investment company. South Ocean Holdings is a public company 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 18 March 2015.
2. Basis of preparation
The summary consolidated financial information of South Ocean Holdings has been prepared in accordance with the JSE Listings Requirements for
provisional reports and the requirements of the Companies Act of South Africa applicable to summary Financial Statements. This should be read
with the audited Financial Statements for the year ended 31 December 2014. The Listings Requirements require provisional reports to be prepared
in accordance with the framework concept and the measurement and recognition requirements of the 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 Financial Statements from which the summary Financial Statements were derived
are in terms of IFRS and are consistent with those accounting policies applied in the preparation of the previous consolidated Financial Statements.
3. Accounting policies
The accounting policies adopted are consistent with those applied in the Financial Statements for the year ended 31 December 2014, except where
indicated. There are no new standards or amendments that were issued since the last annual report that will result in a material impact in the
reported or future results of the Group.
4. Property, plant and equipment and intangible assets
During the year, the Group invested R49.9 million (2013: R26.1 million) in capital expenditure, related mainly to the manufacturing 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 2014
Opening net carrying amount 284 015 10 482
Additions 48 427 1 496
Disposals (78) –
Depreciation/amortisation (16 371) (1 984)
Closing net carrying amount 315 993 9 994
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/impairment (18 717) (2 094)
Closing net carrying amount 284 015 10 482
Impairment of goodwill
During the 2013 financial year, goodwill amounting to R148.1 million was impaired by recognising an expense in operating expenses. The impairments
arose as a result of the market conditions affecting the Radiant Group Proprietary Limited earnings. Goodwill attributable to the Radiant Group was
fully impaired in the prior year.
5. Share capital and share premium
Ordinary Share
Number shares premium Total
of shares R'000 R'000 R'000
At 31 December 2014
Opening and closing balance 156 378 794 1 274 440 371 441 645
At 31 December 2013
Opening and closing balance 156 378 794 1 274 440 371 441 645
6. Interest-bearing borrowings
31 December 31 December
2014 2013
(Audited) (Audited)
Secured loans R'000 R'000
Non-current 80 267 42 033
Current 22 070 26 130
102 337 68 163
The movement in borrowings is analysed as follows:
Opening balance 68 163 74 893
Additional loans raised 63 450 22 049
Finance costs 7 499 5 169
Repayments (36 775) (33 948)
Closing balance 102 337 68 163
7. Taxation
The effective tax rate is 28.0% (2013: 28.0%). The effective tax rate for 2014 is calculated after adjusting for non-tax deductible expenses amounting
to R14.2 million, while the effective tax rate for 2013 was calculated after adjusting for the non-tax deductible goodwill impairment of R148.1 million.
8. Reconciliation of headline earnings
31 December 31 December
2014 2013
R'000 R'000
Earnings (loss) attributable to equity holders of the Group 37 518 (121 448)
Goodwill impairment – 148 108
(Profit) loss on disposal of property, plant and equipment (4) 6 117
Headline earnings for the year 37 514 32 777
Headline earnings per share (cents) 24.0 21.0
31 December 31 December
2014 2013
R'000 R'000
9. Weighted average number of shares
Number of shares in issue 156 378 794 156 378 794
Weighted average number of shares in issue at the beginning and end of the year 156 378 794 156 378 794
10. Net asset value
Net asset value per share (cents) 372.3 348.0
Tangible net asset value per share (cents) 365.9 341.3
11. Derivative financial instruments
Movement on forward exchange contract 1 (143)
The notational principal amount of the outstanding forward exchange contract at 31 December 2014 was R5 188 105 (2013: R4 428 000).
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 statement of financial position. 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 agreed not
to recommend a final dividend.
13. Audit opinion
These summary Consolidated Financial Statements for the year ended 31 December 2014 have been audited by PricewaterhouseCoopers Inc., who
expressed an unmodified opinion thereon. The auditor also expressed an unmodified opinion on the 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 Financial Statements are
available for inspection at the Company's registered office, together with the Financial Statements identified in the respective auditors' 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:
Adjusted Segment Segment
Revenue EBITDA Assets Liabilities
Year ended R'000 R'000 R'000 R'000
31 December 2014
Electrical cable manufacturing 1 389 997 99 180 518 068 223 077
Lighting and electrical accessories 335 480 1 475 290 217 83 149
Property investments 17 891 14 472 185 213 68 770
1 743 368 115 127 993 498 374 996
31 December 2013
Electrical cable manufacturing 1 336 285 59 533 489 307 249 134
Lighting and electrical accessories 373 108 28 430 251 022 79 669
Property investments 15 995 5 446 202 448 35 072
1 725 388 93 409 942 777 363 875
Reconciliation of total segment report to the statement of financial position and statement of comprehensive income is provided
as follows:
31 December 31 December
2014 2013
(Audited) (Audited)
R'000 R'000
Revenue
Reportable segment revenue 1 743 368 1 725 388
Inter-segment revenue (property rentals) (17 891) (15 995)
Inter-segment revenue – other (10 237) (18 472)
Revenue per consolidated statement of comprehensive income 1 715 240 1 690 921
Profit (loss) before tax
Adjusted EBITDA 115 127 93 409
Corporate and other overheads (17 125) (17 229)
Depreciation (16 371) (18 717)
Impairment of intangible assets – lighting and electrical accessories – (148 108)
Amortisation of intangible assets – lighting and electrical accessories (1 985) (2 094)
Operating profit (loss) 79 646 (92 739)
Finance income 1 090 533
Finance costs (22 036) (18 885)
Profit (loss) before tax per consolidated statement of comprehensive income 58 700 (111 091)
Assets
Reportable segment assets 993 498 942 777
Corporate and other assets 4 032 1 714
Deferred taxation 4 101 –
Taxation receivable 2 960 3 166
Total assets per statement of financial position 1 004 591 947 657
Liabilities
Reportable segment liabilities 374 996 363 875
Corporate and other liabilities 5 497 5 907
Deferred taxation 37 306 33 629
Taxation payable 4 634 –
Total liabilities per statement of financial position 422 433 403 411
15. Director changes
Mr EG Dube resigned as Chairman on 31 March 2014 and was replaced by Mr KH Pon. Ms M Chong was appointed as Chairperson of the Audit
and Risk Management Committee from 1 April 2014. Ms M Chong also replaced Mr H Pon as Chairperson of the Remuneration Committee as from
1 April 2014. Ms L Stephens and Ms N Lalla were appointed as independent non-executive directors on 23 June 2014. Ms DL Pan, alternate non-
executive director to Mr EHT Pan, resigned on 29 August 2014 and Ms DJC Pan was appointed as alternate non-executive director to Mr EHT Pan
on 29 August 2014.
16. Competition Commission
On 13 November 2014, the Competition Commission referred a complaint to the Competition Tribunal in which it alleged that SOEW, 11 other
companies and the Association of Electric Cable Manufacturers of South Africa (AECMSA) had contravened the Competition Act by fixing the
prices of power cables, alternatively the trading conditions relating to the sale of power cables. The Commission asked the Tribunal to impose an
administrative penalty on AECMSA and each company (except Aberdare Cables which had been granted conditional immunity) not exceeding
10% of their respective turnovers. The Commission subsequently withdrew its referral against one of the respondents. This referral is related to the
Commission's earlier referral of a complaint to the Tribunal on 19 March 2014 in which the Commission alleged that SOEW and three other companies
had fixed prices and allocated markets in contravention of the Competition Act. In this complaint the Commission also asked the Tribunal to impose an
administrative penalty of 10% of the annual turnover of each of the companies except Aberdare Cables which had been granted conditional immunity.
These referrals arise from a complaint that the Commission first initiated on 16 March 2010 and which was referred to in the SENS announcement
dated 6 May 2010. SOEW has engaged the services of specialist competition lawyers and economists to advise the company in respect of the
Commission's referral. SOEW has cooperated with the Commission during its investigation of the complaint and continues to do so now that the
complaint has been referred to the Tribunal. In terms of IAS 37 no further disclosures are made as this would unfairly prejudice SOEW in its current
dealings with the Commission.
17. Subsequent events
Notwithstanding the above, the directors are not aware of any other significant events arising since the end of the financial year, which would materially
affect the operations of the Group or its operating segments, not dealt with in the financial results.
COMMENTARY
Introduction
The Board of South Ocean Holdings is pleased to announce its condensed consolidated results for the year ended 31 December 2014 ("the year").
South Ocean Holdings is an investment holding company, comprising four operating subsidiaries, namely: South Ocean Electric Wire Company Proprietary
Limited (SOEW), a manufacturer of low-voltage electrical cables, Radiant Group Proprietary Limited (Radiant), an importer and distributor of light fittings,
lamps, electrical accessories and audio visual hardware and accessories, Anchor Park Investments 48 Proprietary Limited (Anchor Park), a property holding
company, and Icembu Services Proprietary Limited (Icembu), a light fittings assembly company.
Financial overview
Earnings
Group revenue for the year ending 31 December 2014 increased by 1.4% (2013: 20.2%) to R1.715 billion (2013: R1.691 billion). The Group's gross profit
increased by 21.9% (2013: 5.2% decrease) to R262.2 million (2013: R215.0 million) and operating profit increased by 185.9% (2013: 1.8% decrease) to a
profit of R79.6 million (2013: R92.7 million loss) compared to the prior year.
Group profit before tax increased by 152.8% (2013: 5.4%, decrease) to a profit of R58.7 million (2013: R111.1 million, loss) compared to the prior year.
The basic earnings per share increased by 130.9% (2013: 2.8%, decrease) to a profit of 24.0 cents (2013: 77.7 cents, loss) compared to the prior period
with the headline earnings per share increasing by 14.3% (2013: 42.1%, decrease) to 24.0 cents (2013: 21.0 cents) compared to the prior year.
The electrical cable division saw volumes decreased due to the four-week industrial strike. However, profitability improved as efficiencies improved together
with better and tighter controls. The prior year was negatively impacted by electrical supply problems experienced, which had a severe impact on profitability.
The lighting and electrical accessories segment experienced an extremely challenging year, with problems experienced with the upgrading of the ERP
system and implementation issues with the new warehouse management system leading to supply chain difficulties, this in turn led to a decrease in
customer confidence and a decrease in revenue. The situation has improved significantly towards the end of the year. Margins were further affected by the
increase in competition and more aggressive pricing in the market.
Cash flow and working capital management
The cash generated during the year amounted to R43.0 million (2013: R16.0 million), improving by R27.0 million compared to the prior year. The trade
receivables book continues to be well managed in an increasingly challenging credit environment. The net working capital investment is currently at 29.6%
(2013: 28.8%) of revenue.
The Group invested R49.9 million (2013: R26.1 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 R36.8 million (2013: R33.9 million) to repay its long-term
interest-bearing borrowings.
The Group's net cash generated during the year of R27.4 million (2013: R16.0 million, utilised) decreased the net overdraft balance as at the beginning of
the year from R137.4 million to an overdraft balance of R109.7 million at year end.
Segment results
Electrical cable manufacturing – SOEW
Revenue increased by 4.0% (2013: 26.3%) to R1.389 billion (2013: R1.336 billion). The revenue increase is as a result of an increase in the moving average
Rand Copper Price (RCP) of 6.5% (2013: 8.7%) which was partially offset by a decline in production volumes due to the month-long industrial wage strike.
The earnings before interest, tax, depreciation and amortisation have increased by 66.6% to R 99.1 million (2013: R 59.5 million). The increase was also
impacted by lower EBITDA in 2013 due to electrical supply problems.
The market conditions were subdued during the year and selling prices were under pressure due to the competitive market.
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 RCP, and was funded from normal credit facilities.
Lighting and electrical accessories – Radiant
Radiant reported revenue of R335.5 million (2013: R373.1 million) which is a decrease of 10.1% (2013: 5.3%, increase) when compared to the prior year.
Implementation difficulties of the warehouse management system together with the ERP system upgrade had affected the supply chain capabilities, which
contributed to the decline in revenues. Market pressure and competition has continued to erode margins.
We are confident that the investment and strategic initiatives, made to both the warehouse management system and ERP upgrade, will see a turnaround
in revenues and profitability.
Property investment – Anchor Park
Anchor Park's revenue is derived from Group companies, as it leases its properties to fellow subsidiaries. Anchor Park has invested in a property for
expansion purposes at the cable plant at a cost of R 22.2 million, which was financed by long-term borrowings. The increase in interest expense is due to
the increase in interest-bearing debt.
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 2015 financial year, however, the results are expected to show an improvement compared to the
2014 financial year.
Management are in the process of refocusing on the lighting and electrical accessories segment to regain lost market share and improve customer service
delivery expectations. 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.
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
KH Pon PJM Ferreira
Chairman Chief executive officer
18 March 2015
Directors: KH Pon(#) (Chairman), EHT Panv(@) (Deputy Vice-Chairman), PJM Ferreira(*) (Chief Executive Officer), JP Bekker(*) (Chief Financial
Officer), M Chong(#), N Lalla(#), HL Liv(º), L Stephens(#), CY Wuv(º), WP Liv(º) (Alternate), CH Panv(º) (Alternate), DJC Pan (v)(@)(Alternate)
Company secretary: WT Green
(*)Executive (#)Independent Non-executive (v)Non-executive (º) Taiwanese (@)Brazilian
Registered office: 12 Botha Street, Alrode, 1451 (P.O. Box 123 738, Alrode, 1451)
Company Secretary: WT Green, 21 West Street, Houghton, 2198 (P.O. 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, 70 Marshall Street, Ground Floor, Johannesburg, 2001,
P.O. 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, Menlyn, 0102, Telephone: +27(12) 429 000, Telefax: +27(11) 797 5800,
Website: www.pwc.co.za
Date: 19/03/2015 03:00:00 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.
Sharenet Sites 
