Wrap Text
Group summarised consolidated interim financial
results announcement for the six months ended 30 June 2015
South Ocean Holdings Limited
(Registration number 2007/002381/06)
Incorporated in the Republic of South Africa
("South Ocean Holdings", "the Group" or "the Company")
Share code: SOH ISIN: ZAE000092748
Group summarised consolidated
interim financial results announcement
for the six months ended 30 June 2015
SALIENT FEATURES
Revenue decreased by 3,2% to R859,5 million
Headline earnings per share decreased by 34,2% to 4,8 cents
Earnings per share decreased by 30,1% to 5,1 cents
Tangible net asset value per share increased by 6,6% to 371,5 cents
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at As at
30 June 2015 30 June 2014 31 December 2014
(Unaudited) (Unaudited) (Audited)
Notes R'000 R'000 R'000
Assets
Non-current assets 332 994 315 928 330 088
Property, plant and equipment 4 316 786 302 658 315 993
Intangible assets 4 9 516 10 789 9 994
Deferred tax 6 692 2 481 4 101
Current assets 779 532 738 135 674 503
Inventories 383 417 318 531 379 527
Trade and other receivables 358 306 388 911 255 625
Derivative financial instruments – – 1
Taxation receivable 1 891 5 282 2 960
Cash and cash equivalents 35 918 25 411 36 390
Total assets 1 112 526 1 054 063 1 004 591
Equity and liabilities
Equity
Share capital and share premium 5 441 645 441 645 441 645
Reserves 1 309 611 1 027
Retained earnings 147 469 113 314 139 486
Total equity 590 423 555 570 582 158
Liabilities
Non-current liabilities 114 198 88 142 120 464
Interest-bearing borrowings 6 72 647 50 287 80 267
Deferred taxation 39 309 35 982 37 306
Share-based payments 2 242 1 873 2 891
Current liabilities 407 905 410 351 301 969
Trade and other payables 208 811 203 473 127 445
Interest-bearing borrowings 6 22 691 21 149 22 070
Taxation payable 216 2 716 4 634
Share-based payments – 150 1 772
Bank overdraft 176 187 182 863 146 048
Total liabilities 522 103 498 493 422 433
Total equity and liabilities 1 112 526 1 054 063 1 004 591
SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended Year ended
30 June 2015 30 June 2014 31 December 2014
(Unaudited) (Unaudited) Change (Audited)
Note R'000 R'000 % R'000
Revenue 859 497 888 203 (3,2) 1 715 240
Cost of sales (754 590) (776 610) (1 453 059)
Gross profit 104 907 111 593 (6,0) 262 181
Other operating income 2 364 2 277 3 255
Administration expenses (26 413) (32 716) (65 987)
Distribution expenses (14 587) (15 162) (29 124)
Operating expenses (44 947) (40 061) (90 679)
Operating profit 21 324 25 931 (17,8) 79 646
Finance income 598 421 1 090
Finance costs (10 678) (10 207) (22 036)
Profit before taxation 11 244 16 145 (30,4) 58 700
Taxation 7 (3 261) (4 799) (21 182)
Profit for the period 7 983 11 346 (29,6) 37 518
Other comprehensive income
Exchange differences on translating
foreign operation 282 (22) 394
Total comprehensive income attributable
to equity holders of the Company 8 265 11 324 (27,0) 37 912
Cents Cents Cents
per share per share per share
Earnings per share – basic and diluted 5,1 7,3 (30,1) 24,0
Headline earnings per share – basic and diluted 4,8 7,3 (34,2) 24,0
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended Year ended
30 June 2015 30 June 2014 31 December 2014
(Unaudited) (Unaudited) (Audited)
Note 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 1 027 633 633
Exchange differences on translation of foreign operations 282 (22) 394
Closing balance 1 309 611 1 027
Retained earnings
Opening balance 139 486 101 968 101 968
Total comprehensive income for the period 7 983 11 346 37 518
Closing balance 147 469 113 314 139 486
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months ended Year ended
30 June 2015 30 June 2014 31 December 2014
(Unaudited) (Unaudited) (Audited)
R'000 R'000 R'000
Cash (utilised) generated in operating activities (14 510) 6 542 43 021
Cash utilised in investing activities (9 384) (29 839) (49 841)
Cash (utilised) generated in financing activities (6 999) 3 273 34 174
Net (decrease) increase in cash and cash equivalents (30 893) (20 024) 27 354
Cash and cash equivalents at the beginning of period (109 658) (137 406) (137 406)
Effects of exchange rate movement on cash balances 282 (22) 394
Cash and cash equivalents at the end of period (140 269) (157 452) (109 658)
SELECTED NOTES TO THE SUMMARISED CONSOLIDATED INTERIM FINANCIAL INFORMATION
1. General information
South Ocean Holdings and its subsidiary companies manufacture and distribute electrical cables, import and distribute light fittings, lamps, electrical
accessories, audio visual hardware and accessories and have property investments. South Ocean Holdings is a public company listed on the JSE
and is incorporated and domiciled in the Republic of South Africa.
The unaudited summarised consolidated interim financial information was prepared by JP Bekker CA (SA) and was approved for issue by the directors
on 5 August 2015.
2. Basis of preparation
The summarised consolidated interim financial statements of South Ocean Holdings are prepared in accordance with the requirements of the
JSE Listings Requirements for provisional reports, and the requirements of the Companies Act of South Africa applicable to summary financial
statements. The summarised consolidated interim financial statements should be read with the audited financial statements for the year ended
31 December 2014. The JSE 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 financial statements from which the summarised financial statements were derived are in terms of IFRS.
3. Accounting policies
The accounting policies adopted are consistent with those applied in the audited financial statements for the year ended 31 December 2014, 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
is expected to have a material impact on the reported results or future results of the Group.
4. Property, plant and equipment and intangible assets
During the six months, the Group invested R10,2 million (2014: R29,8 million) in capital expenditure mainly relating to the acquisition of manufacturing
plant at SOEW as well as the replacement of vehicles for SOEW and Radiant. 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 2015
Opening net carrying amount 315 993 9 994
Additions 9 419 737
Disposals and write-offs (333) –
Depreciation/amortisation (8 293) (1 215)
Closing net carrying amount 316 786 9 516
Six months ended 30 June 2014
Opening net carrying amount 284 015 10 482
Additions 28 652 1 186
Disposals and write-offs (1) –
Depreciation/amortisation (10 008) (879)
Closing net carrying amount 302 658 10 789
Year ended 31 December 2014 (Audited) (Audited)
Opening net carrying amount 284 015 10 482
Additions 48 427 1 496
Disposals and write-offs (78) –
Depreciation/amortisation (16 371) (1 984)
Closing net carrying amount 315 993 9 994
5. Share capital and share premium
Number of Ordinary shares Share premium Total
shares issued R'000 R'000 R'000
At 30 June 2015 (Unaudited)
Opening and closing balance 156 378 794 1 274 440 371 441 645
At 30 June 2014 (Unaudited)
Opening and closing balance 156 378 794 1 274 440 371 441 645
At 31 December 2014 (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 2015 30 June 2014 31 December 2014
(Unaudited) (Unaudited) (Audited)
Secured loans R'000 R'000 R'000
Non-current 72 647 50 287 80 267
Current 22 691 21 149 22 070
95 338 71 436 102 337
The movement in borrowings is analysed as follows:
Opening balance 102 337 68 162 68 163
Additional loans raised 5 137 17 478 63 450
Finance costs 4 147 2 935 7 499
Repayments (16 283) (17 139) (36 775)
Closing balance 95 338 71 436 102 337
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 effective tax rate calculated is 29,0% (2014: 29,7%).
8. Reconciliation of headline earnings
Six months ended Year ended
30 June 2015 30 June 2014 31 December 2014
(Unaudited) (Unaudited) (Audited)
R'000 R'000 R'000
Income attributable to the equity holders of the Company
for the period 7 983 11 346 37 518
(Profit) loss on disposal of property, plant and equipment (441) 1 (4)
Headline earnings for the period 7 542 11 347 37 514
Headline earnings per share (cents) 4,8 7,3 24,0
9. Weighted average number of shares
Six months ended Year ended
30 June 2015 30 June 2014 31 December 2014
(Unaudited) (Unaudited) R'000
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 2015 30 June 2014 31 December 2014
(Unaudited) (Unaudited) (Audited)
Net asset value per share (cents) 377,6 355,3 372,3
Tangible net asset value per share (cents) 371,5 348,4 365,9
11. Interim dividend declaration
The Company's policy is to consider the declaration of a final dividend after its financial year-end.
12. Segment reporting
The chief operating decision makers review the Group's internal reporting in order to assess performance and have 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, are 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 (excluding inter company
management fees expenses) based upon internal accounting presentation.
The segment revenue and EBITDA generated by 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 2015 (Unaudited)
Electrical cables manufacturing 709 240 36 448 655 449 343 879
Lighting and electrical accessories 155 083 (2 950) 256 234 65 134
Property investments 10 440 7 722 188 977 66 125
874 763 41 220 1 100 660 475 138
30 June 2014 (Unaudited)
Electrical cables manufacturing 744 756 42 432 578 097 318 586
Lighting and electrical accessories 146 087 (2 247) 278 187 100 068
Property investments 7 828 5 738 182 413 39 594
898 671 45 923 1 038 697 458 248
Year ended
31 December 2014 (Audited)
Electrical cables 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
Six months ended Year ended
A reconciliation of the total segment report to the statement of 30 June 2015 30 June 2014 31 December 2014
financial position and statement of comprehensive income (Unaudited) (Unaudited) (Audited)
is provided as follows: R'000 R'000 R'000
Revenue
Reportable segment revenue 874 763 898 671 1 743 368
Inter-segment revenue (property rentals) (10 440) (7 828) (17 891)
Inter-segment revenue – other (4 826) (2 640) (10 237)
Revenue per consolidated statement of
comprehensive income 859 497 888 203 1 715 240
Profit before tax
Adjusted EBITDA 41 220 45 923 115 127
Corporate and other overheads (10 388) (9 105) (17 125)
Depreciation (8 293) (10 008) (16 371)
Amortisation of intangible assets – lighting and electrical
accessories (1 215) (879) (1 985)
Operating profit 21 324 25 931 79 646
Finance income 598 421 1 090
Finance cost (10 678) (10 207) (22 036)
Profit before income tax per consolidated statement
of comprehensive income 11 244 16 145 58 700
Assets
Reportable segment assets 1 100 660 1 038 697 993 498
Corporate and other assets 3 283 7 603 4 032
Deferred taxation 6 692 2 481 4 101
Taxation receivable 1 891 5 282 2 960
Total assets per statement of financial position 1 112 526 1 054 063 1 004 591
Liabilities
Reportable segment liabilities 475 138 458 248 374 996
Corporate and other liabilities 7 440 1 547 5 497
Deferred taxation 39 309 35 982 37 306
Taxation payable 216 2 716 4 634
Total liabilities per statement of financial position 522 103 498 493 422 433
13. Restatement of comparative figures
Certain co current mparative figures have been reclassified to ensure consistent allocation between the current year and the prior year.
The effect of the reclassification is as follows:
Six months ended Year ended
30 June 2015 30 June 2014 31 December 2014
(Unaudited) (Unaudited) (Audited)
R'000 R'000 R'000
SUMMARISED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
Non-current assets
Deferred taxation – 2 481 –
Non-current liabilities
Deferred taxation – (2 481) –
14. Director changes
There have been no changes in the directors of the company since the financial year-end.
15. Competition Commission
On 13 November 2014, the Competition Commission referred a complaint to the Competition Tribunal ("the 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 not exceeding 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.
16. Subsequent events
Notwithstanding the above, the directors are not aware of any other 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
The Board of South Ocean Holdings hereby announces its summarised consolidated results for the six months ended 30 June 2015
("the period").
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, 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 period ended 30 June 2015 decreased by 3,2% (2014: 15,5 %, increased) to R859,5 million (2014: R888,2 million).
The Group's gross profit decreased by 6,0% (2014: 17,8%, increased) to R104,9 million (2014: R111,6 million) and operating profit
decreased by 17,8% (2014: 62,9%, increased) to R21,3 million (2014: R25,9 million, increased) compared to the prior period.
Group profit before tax decreased by 30,4% (2014: 102,8%, increased) to R11,2 million (2014: R16,1 million) compared to the prior period.
The basic earnings per share decreased by 30,1% (2014: 108,6%, increased) to 5,1 cents (2014: 7,3 cents) with the headline earnings per
share decreasing by 34,2% (2014: 114,7%, increased) to 4,8 cents (2014: 7,3 cents) compared to the prior period. Headline earnings for
the period amounted to R7,5 million (2014: R11,3 million).
Cash flow and working capital management
Cash utilised in operations amounted to R14,5 million (2014: R6,5 million, generated) during the period. Working capital increased by
R28,9 million (2014: R61,3 million) primarily due to an increase in inventory, as stock levels in the prior period were low due to an increase
in sales ahead of the industrial strike at the cable plant, which was partially offset by a decrease in accounts receivable due to debtors
collections improving.
The Group invested R10,2 million (2014: R29,8 million) in capital expenditure which was mainly financed by long term borrowings during this
period and utilised R16,3 million (2014: R17,1 million) to repay its long-term interest-bearing borrowings.
The Group's net cash utilised during the period amounted to R30,9 million (2014: R20,0 million). The net overdraft decreased from
R157,5 million reported at June 2014 to R140,3 million at the end of the current period.
Segment results
Electrical cables manufacturing – SOEW
SOEW's revenue decreased by 4,8% (2014: 23,6% increased) to R709,2 million (2014: R744,7 million). The decrease in SOEW revenue
is mainly attributed to power supply problems that were experienced during the April and May period. The local Council's transformers
supplying electricity to the factory were faulty, which led to a limited supply of electricity during the day and no supply during the night,
resulting in a decrease in production levels. The Rand Copper Price (RCP) was volatile during the period, fluctuating between increases of
8,2% and decreases of 8,8%. The net increase for the six months was 1,6%.
The market conditions were subdued during the first six months of the year and margins were under pressure due to the competitive market.
Additional working capital funding was required to finance the increase in inventory and trade payables and which was funded from normal
credit facilities.
Lighting and electrical accessories – Radiant
Radiant reported revenue of R155,1 million (2014: R146,0 million), which is an increase of 6,2% (2014: 16,5%, decrease) when compared
to the same period in the prior year. The general business sentiment remains subdued with the impending interest rate hikes and current
power cuts. Both local and international confidence in the economy remains low with consumers being quite cautious. However, there has
been an improvement in revenue and decreased expenditures, when compared to the same period in the prior year. The new warehouse
management system and ERP system upgrade problems experienced last year has been bedded down and has led to improved efficiencies
and client services.
The margins continue to be under pressure due to competing with certain inferior quality products in the market. Intensified competition and
a change in consumer spending patterns are also factors that are eroding margins.
Property investments – Anchor Park
Anchor Park's revenue is derived from Group companies, as it leases its properties to fellow subsidiaries. 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 historic seasonal trend to continue in future.
Prospects
The South African economic conditions are not expected to improve significantly in the near future, household disposable income is
expected to decrease and inflation is on the increase. These economic conditions, together with competitive markets and a weakening
Rand, are expected to adversely affect our trading subsidiaries results.
The focus by management is to strategically improve efficiencies and reduce overhead costs, and therefore improve profitability.
Revenue and margins will continue to be affected by tough market conditions and stringent competition.
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, shareholders and stakeholders for their continued support.
The above information, including any projections, included in this announcement have not been reviewed or reported on by South Ocean
Holdings' independent external auditors.
On behalf of the Board
Henry Pon Paul Ferreira
Chairman Chief Executive Officer
5 August 2015
CORPORATE INFORMATION
South Ocean Holdings Limited
(Registration number 2007/002381/06)
Incorporated in the Republic of South Africa
("South Ocean Holdings", "the Group" or "the Company")
Share code: SOH ISIN: ZAE000092748
Directors:
K H Pon# (Chairman)
E H T Pan>@ (Deputy-Vice Chairman)
P J M Ferreira* (Chief Executive Officer)
J P Bekker*(Chief Financial Officer)
M Chong#
N Lalla#
H L Li>Q
W P Li>QA
C H Pan>QA
DJC Pan>@A
L Stephens#
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
Website: www.southoceanholdings.com
Company Secretary:
WT Green, 21 West Street, Houghton, 2198
PO Box 123738, Alrode, 1451
Sponsor:
Investec Bank Limited
(Registration no: 1969/004763/06)
Second floor, 100 Grayston Drive, Sandown, Sandton, 2196
Share Transfer Secretary:
Computershare Investor Services Proprietary Limited
Ground Floor, 70 Marshal 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
WWW.SOUTHOCEANHOLDINGS.CO.ZA
Date: 06/08/2015 03:15:00 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,
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