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Group summary consolidated interim financial results announcement for the six months ended 30 June 2016
South Ocean Holdings
(Registration number 2007/002381/06)
Incorporated in the Republic of South Africa
("South Ocean Holdings" and "the Group")
Share code: SOH ISIN: ZAE000092748
GROUP SUMMARY CONSOLIDATED INTERIM
FINANCIAL RESULTS ANNOUNCEMENT
for the six months ended
30 June 2016
SALIENT FEATURES
Revenue increased by 4,9% to R901,6 million
Headline earnings per share decreased by 9,1 cents to a loss of 4,3 cents
Earnings per share decreased by 9,3 cents to a loss of 4,2 cents
Tangible net asset value per share decreased by 4,5% to 354,6 cents
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at As at
30 June 2016 30 June 2015 31 December 2015
(Unaudited) (Unaudited) (Audited)
Notes R'000 R'000 R'000
Assets
Non-current assets 334 047 332 994 331 390
Property, plant and equipment 4 313 096 316 786 313 633
Intangible assets 4 8 483 9 516 8 780
Deferred tax 12 468 6 692 8 977
Current assets 792 417 779 532 578 274
Inventories 431 129 383 417 321 305
Trade and other receivables 332 587 358 306 229 596
Derivative financial instruments - - -
Taxation receivable 5 497 1 891 5 556
Cash and cash equivalents 23 204 35 918 21 817
Total assets 1 126 464 1 112 526 909 664
Equity and liabilities
Equity
Share capital and share premium 5 441 645 441 645 441 645
Reserves 2 323 1 309 2 513
Retained earnings 119 059 147 469 125 567
Total equity 563 027 590 423 569 725
Liabilities
Non-current liabilities 93 157 114 198 101 082
Interest-bearing borrowings 6 55 679 72 647 63 899
Deferred taxation 37 028 39 309 37 183
Share-based payments 450 2 242 -
Current liabilities 470 280 407 905 238 857
Trade and other payables 287 460 208 811 122 163
Interest-bearing borrowings 6 19 009 22 691 20 159
Taxation payable 251 216 -
Share-based payments - - -
Bank overdraft 163 560 176 187 96 535
Total liabilities 563 437 522 103 339 939
Total equity and liabilities 1 126 464 1 112 526 909 664
SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended Year ended
30 June 2016 30 June 2015 31 December 2015
(Unaudited) (Unaudited) Change (Audited)
Note R'000 R'000 % R'000
Revenue 901 560 859 497 4,9 1 657 358
Cost of sales (815 025) (754 590) (1 499 277)
Gross profit 86 535 104 907 (17,5) 158 081
Other operating income 1 880 2 364 11 647
Administration expenses (27 148) (26 413) (75 038)
Distribution expenses (17 398) (14 587) (25 822)
Operating expenses (44 454) (44 947) (68 430)
Operating (loss)/profit (585) 21 324 (102,7) 438
Finance income 395 598 1 037
Finance costs (9 730) (10 678) (20 397)
(Loss)/profit before taxation (9 920) 11 244 (188,2) (18 922)
Taxation 7 3 412 (3 261) 5 003
(Loss)/profit for the period (6 508) 7 983 (181,5) (13 919)
Other comprehensive income
Exchange differences on translating
foreign operation (190) 282 1 486
Total comprehensive income attributable
to equity holders of the Company (6 698) 8 265 (181,0) (12 433)
Cents Cents Cents
per share per share per share
(Loss)/earnings per share - basic and diluted (4,2) 5,1 (182,4) (8,9)
Headline (loss)/earnings per share - basic and
diluted (4,3) 4,8 (189,6) (9,1)
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended Year ended
30 June 2016 30 June 2015 31 December 2015
(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 2 513 1 027 1 027
Exchange differences on translation of foreign operations (190) 282 1 486
Closing balance 2 323 1 309 2 513
Retained earnings
Opening balance 125 567 139 486 139 486
Total comprehensive income for the period (6 508) 7 983 (13 919)
Closing balance 119 059 147 469 125 567
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months ended Year ended
30 June 2016 30 June 2015 31 December 2015
(Unaudited) (Unaudited) (Audited)
R'000 R'000 R'000
Cash (utilised)/generated in operating activities (47 806) (14 510) 67 539
Cash utilised in investing activities (8 274) (9 384) (15 806)
Cash utilised in financing activities (9 368) (6 999) (18 279)
Net (decrease)/increase in cash and cash equivalents (65 448) (30 893) 33 454
Cash and cash equivalents at the beginning of period (74 718) (109 658) (109 658)
Effects of exchange rate movement on cash balances (190) 282 1 486
Cash and cash equivalents at the end of period (140 356) (140 269) (74 718)
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 summary consolidated interim financial information was prepared by JP Bekker CA (SA) and was approved for issue by the directors
on 12 August 2016.
2. Basis of preparation
The summary 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 summary consolidated interim Financial Statements should be read with the audited financial statements for the year ended
31 December 2015. The JSE Listing 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 summary consolidated Financial Statements were derived are in terms of IFRS and are consistent
with those accounting policies applied in the preparation of the previous summary consolidated Financial Statements.
3. Accounting policies
The accounting policies adopted are consistent with those applied in the audited financial statements for the year ended 31 December 2015, 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
are 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 R8,6 million (2015: R10,2 million) in capital expenditure mainly relating to the acquisition of manufacturing
plant at SOEW as well as the replacement of vehicles at SOEW and infrastructure enhancements to the ERP system at 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 2016
Opening net carrying amount 313 633 8 780
Additions 7 541 1 068
Disposals and write-offs (147) -
Depreciation/amortisation (7 931) (1 365)
Closing net carrying amount 313 096 8 483
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
Year ended 31 December 2015 (Audited) (Audited)
Opening net carrying amount 315 993 9 994
Additions 15 002 1 697
Disposals and write-offs (587) -
Depreciation/amortisation (16 775) (2 911)
Closing net carrying amount 313 633 8 780
5. Share capital and share premium
Number of Ordinary shares Share premium Total
shares issued R'000 R'000 R'000
At 30 June 2016 (Unaudited)
Opening and closing balance 156 378 794 1 274 440 371 441 645
At 30 June 2015 (Unaudited)
Opening and closing balance 156 378 794 1 274 440 371 441 645
At 31 December 2015 (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 2016 30 June 2015 31 December 2015
(Unaudited) (Unaudited) (Audited)
Secured loans R'000 R'000 R'000
Non-current 55 679 72 647 63 899
Current 19 009 22 691 20 159
74 688 95 338 84 058
The movement in borrowings is analysed as follows:
Opening balance 84 058 102 337 102 337
Additional loans raised 1 579 5 137 5 888
Finance costs 3 681 4 147 8 145
Repayments (14 630) (16 283) (32 312)
Closing balance 74 688 95 338 84 058
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 34,4% (2015: 29,0%).
8. Reconciliation of headline earnings
Six months ended Year ended
30 June 2016 30 June 2015 31 December 2015
(Unaudited) (Unaudited) (Audited)
R'000 R'000 R'000
(Loss)/income attributable to the equity holders of the Company for
the period (6 508) 7 983 (13 919)
Loss/(profit) on disposal of property, plant and equipment (188) (441) (306)
Headline (loss)/earnings for the period (6 696) 7 542 (14 225)
Headline (loss)/earnings per share (cents) (4,3) 4,8 (9,1)
9. Weighted average number of shares
Six months ended Year ended
30 June 2016 30 June 2015 31 December 2015
(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 2016 30 June 2015 31 December 2015
(Unaudited) (Unaudited) (Audited)
Net asset value per share (cents) 360,0 377,6 364,3
Tangible net asset value per share (cents) 354,6 371,5 358,7
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 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 2016 (Unaudited)
Electrical cables manufacturing 743 945 13 278 604 435 339 507
Lighting and electrical accessories 163 596 (3 891) 309 671 121 005
Property investments 10 639 8 165 186 454 59 654
918 180 17 552 1 100 560 520 166
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
Year ended
31 December 2015 (Audited)
Electrical cables manufacturing 1 342 336 26 654 431 881 148 535
Lighting and electrical accessories 326 094 (7 906) 275 982 89 784
Property investments 19 280 15 664 185 749 61 490
1 687 710 34 412 893 612 299 809
A reconciliation of the total segment report to the statement of financial position and statement of comprehensive income is provided as follows:
Six months ended Year ended
30 June 2016 30 June 2015 31 December 2015
(Unaudited) (Unaudited) (Audited)
R'000 R'000 R'000
Revenue
Reportable segment revenue 918 180 874 763 1 687 710
Inter-segment revenue (property rentals) (10 376) (10 440) (19 280)
Inter-segment revenue - other (6 244) (4 826) (11 072)
Revenue per consolidated statement of
comprehensive income 901 560 859 497 1 657 358
Profit before tax
Adjusted EBITDA 17 552 41 220 34 412
Corporate and other overheads (8 841) (10 388) (14 288)
Depreciation (7 931) (8 293) (16 775)
Amortisation of intangible assets - lighting and electrical
accessories (1 365) (1 215) (2 911)
Operating (loss)/profit (585) 21 324 438
Finance income 395 598 1 037
Finance cost (9 730) (10 678) (20 397)
(Loss)/profit before income tax per consolidated statement
of comprehensive income (9 920) 11 244 (18 922)
Assets
Reportable segment assets 1 100 560 1 100 660 893 612
Corporate and other assets 7 939 3 283 1 519
Deferred taxation 12 468 6 692 8 977
Taxation receivable 5 497 1 891 5 556
Total assets per statement of financial position 1 126 464 1 112 526 909 664
Liabilities
Reportable segment liabilities 520 166 475 138 299 809
Corporate and other liabilities 5 992 7 440 2 947
Deferred taxation 37 028 39 309 37 183
Taxation payable 251 216 -
Total liabilities per statement of financial position 563 437 522 103 339 939
13. Director changes
Mr EHT Pan resigned as a director and Deputy-Vice Chairman on 18 February 2016 and was replaced by Mr HL Li as Deputy-Vice Chairman
effective 18 February 2016. Mr JH Yeh was appointed as an independent non-executive director effective 18 February 2016. Ms DJC Pan
replaced Mr CH Pan, who resigned as an alternate director effective 18 February 2016, as alternate director to Mr HL Li. Mr JP Bekker was
appointed Chief Executive Officer and Ms K Lehloenya was appointed Chief Financial Officer effective 4 August 2016. Ms L Stephens resigned
as non-executive director effective 10 August 2016.
14. 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.
15. 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 2016
("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 2016 increased by 4.9% (2015: 3,2 %, decreased) to R901,6 million (2015: R859,5 million). The
Group's gross profit decreased by 17,5% (2015: 6,0%, decreased) to R86,6 million (2015: R104,9 million) and operating profit decreased by
102,7% (2015: 17,8%, decreased) to a loss of R0,6 million (2015: R21,3 million, profit) compared to the prior period.
Group profit before tax decreased by 188,2% (2015: 30,4%, decreased) to a loss of R9,9 million (2015: R11,2 million, profit) compared
to the prior period. The basic earnings per share decreased by 182,4% (2015: 30,1%, decreased) to a loss of 4,2 cents (2015: 5,1 cents,
earnings) with the headline earnings per share decreasing by 189,6% (2015: 34,2%, decreased) to a loss of 4,3 cents (2015: 4,8 cents,
earning) compared to the prior period. Headline loss for the period amounted to R6,7 million (2015: R7,5 million, profit).
Cash flow and working capital management
Cash utilised in operations amounted to R47,8 million (2015: R14,5 million, utilised) during the period. Working capital increased by
R47,5 million (2015: R28,9 million, increased) primarily due to an increase in inventory and accounts receivable of both the electrical cables
manufacturing and lighting and electrical accessories segments. The trade receivables book continues to be well managed in an increasingly
challenging credit environment. Working capital investment is currently at 26,4% (2015: 31,0%) of revenue.
The Group invested R8,6 million (2015: R10,2 million) in capital expenditure which was mainly financed by long-term borrowings during this
period and utilised R14,6 million (2015: R16,3 million) to repay its long-term interest bearing borrowings.
The Group's net cash utilised during the period amounted to R65,4 million (2015: R30,9 million). The net overdraft increased from
R140,3 million reported at June 2015 to R140,4 million at the end of the current period.
Segment results
Electrical cables manufacturing - SOEW
SOEW's revenue increased by 4,9% (2014: 4,8%, decreased) to R743,9 million (2014: R709,2 million). The increase in SOEW's revenue is
attributed to an increase in production levels. The production levels increased compared to the previous period, mainly due no electricity
interruptions experienced during the current period. The Rand Copper Price (RCP) was volatile during the period, fluctuating between
increases of 5,4% and decreases of 7,1%. The net increase for the six months was 6,6% compared to an increase of 1,6% in the previous
period.
The market conditions were very weak 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, which was funded from normal
credit facilities.
Lighting and electrical accessories - Radiant
Radiant reported revenue of R163,6 million (2015: R155,1 million), which is an increase of 5,5% (2015: 6,2%, increased) when compared to
the same period in the prior year. The first half of 2016 continued to see growth in volumes of LED products, and overall increase in revenues.
However, the increase on volumes are from products yielding lower margins.
The margins are under pressure by competing with products of lower quality, there is subdued appetite for high end products as consumers
have lower disposable income and are extremely cost conscience.
The company has managed to curtail expenditure reflecting an increase of only 0,5% when compared to the same period in the prior year.
Property investments - Anchor Park
Anchor Park's revenue is derived from Group companies, as it leases its properties to fellow subsidiaries.
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 prospect for the South African economy's growth rate for the next year is lower with a decline in mining, agriculture and manufacturing
activities, an abnormal volatile exchange rate and limited infrastructure spending.
The Lighting and Electrical Division is expected to continue its revenue growth but the margins will still be under pressure.
The Electrical Cable Manufacturing Division's revenue is expected to be under pressure mainly due to a decrease in demand and continued
price pressures.
Taking the current weak market conditions into account it is imperative that the Group maintains its disciplined approach to reduce costs
as far as possible and improve working capital management, leveraging on operational efficiencies and increasing margins where possible.
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
KH Pon JP Bekker
Chairman Chief Executive Officer
12 August 2016
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)
HL Liv� (Deputy-Vice Chairman)
J P Bekker* (Chief Executive Officer)
K Lehloenya* (Chief Financial Officer)
M Chong(#)
N Lalla(#)
CY Wuv�
JH Yeh(#)
WP Liv� (Alternate)
DJC Panv@ (Alternate)
* Executive
(#) Independent Non-executive
v Non-executive
� Taiwanese
@ Brazilian
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
Date: 15/08/2016 02:00:00 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.
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