Wrap Text
Group Summary Consolidated Interim Financial Results Announcement For the Six Months Ended 30 June 2018
South Ocean Holdings Limited
(Registration number 2007/002381/06)
Incorporated in the Republic of South Africa
(“South Ocean Holdings”, “the Group”)
Share code: SOH ISIN: ZAE000092748
GROUP SUMMARY CONSOLIDATED INTERIM FINANCIAL RESULTS ANNOUNCEMENT FOR THE SIX MONTHS ENDED
30 JUNE 2018
SALIENT FEATURES
Group revenue increased by 26.7% to R969.0 million
Headline loss per share improved by 9.5 cents to headline loss of 0.7 cents
Loss per share decreased by 12.9 cents to 6.6 cents
Tangible net asset value per share decreased by 24.6% to 236.7 cents
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 June 2018 30 June 2017 31 December 2017
(Unaudited) (Unaudited) (Audited)
Notes R’000 R’000 R’000
Assets
Non-current assets 203 866 313 976 297 500
Property, plant and equipment 4 194 083 273 538 293 035
Intangible assets 4 - 8 212 -
Deferred tax assets 9 783 32 226 4 465
Current assets 597 750 694 405 389 370
Inventories 175 726 340 932 162 879
Trade and other receivables 407 543 333 897 214 971
Cash and cash equivalents 14 481 19 576 11 520
Disposal group and assets held for sale 253 521 - 198 024
Total Assets 1 055 137 1 008 381 884 894
Equity and Liabilities
Equity 481 111 499 425 471 953
Share capital and share premium 5 461 342 441 645 441 645
Reserves 2 052 1 793 1 230
Retained earnings 17 717 55 987 29 078
Liabilities
Non-current liabilities 72 370 81 291 84 648
Interest-bearing borrowings 6 43 338 47 920 50 294
Deferred tax liabilities 28 028 32 879 33 862
Share-based payments 1 004 492 492
Current liabilities 448 906 427 665 250 813
Trade and other payables 248 951 238 789 195 448
Interest-bearing borrowings 6 197 016 188 820 55 365
Taxation payable 2 939 56 -
Disposal group and liabilities held for sale 52 750 - 77 480
Total liabilities 574 026 508 956 412 941
Total Equity and Liabilities 1 055 137 1 008 381 884 894
SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended Year ended
30 June 2018 30 June 2017 31 December 2017
Restated^
(Unaudited) (Unaudited) % (Audited)
Notes R’000 R’000 Change R’000
Continuing operations
Revenue 831 266 622 558 33.5 1 425 777
Cost of sales (772 574) (599 878) 28.8 (1 359 186)
Gross profit 58 692 22 680 158.8 66 591
Other operating income 2 4 764 6 795
Administration expenses (18 814) (15 616) (38 438)
Distribution expenses (6 494) (6 368) (2 532)
Operating expenses (18 857) (20 066) (13 117)
Operating profit/(loss) 14 529 (14 606) 199.5 19 299
Finance income 478 316 828
Finance costs (11 211) (10 828) (23 946)
Profit/(Loss) before taxation 3 796 (25 118) 115.1 (3 819)
Taxation 8 (2 601) 5 188 (2 404)
Profit/(Loss) for the period from
continuing operations 1 195 (19 930) 106.0 (6 223)
Loss for the period from discontinuing
operations 7 (12 556) (10 511) (51 127)
Loss for the period (11 361) (30 441) 62.7 (57 350)
Other comprehensive income
Items that may be reclassified to profit or
loss
Exchange differences on translating foreign
operations of continuing operations 516 (6) (135)
Exchange differences on translating foreign
operations of discontinuing operations 306 - (434)
Total items that may be reclassified to
profit or loss net of taxation 822 (6) (569)
Total comprehensive loss attributable to
equity holders of the Group (10 539) (30 447) (57 919)
^ Refer to note 16 on restatement
PER SHARE INFORMATION
Cents per Cents per Cents per
share share share
Earnings / (loss) per share - basic and diluted
– continuing operations 0.7 (12.8) (4.0)
Loss per share – basic and diluted –
discontinuing operations (7.3) (6.7) (32.7)
Loss per share – basic and diluted (6.6) (19.5) (66.2) (36.7)
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended Year ended
30 June 2018 30 June 2017 31 December 2017
(Unaudited) (Unaudited) (Audited)
Notes R’000 R’000 R’000
Share capital
Opening balance 5 1 274 1 274 1 274
Issue of ordinary shares during the six months
through the exercise of option under the non-
renounceable rights offer 469 - -
Closing balance 1 743 1 274 1 274
Share premium
Opening balance 5 440 371 440 371 440 371
Issue of ordinary shares during the six months -
exercise of option under the non-renounceable
rights offer 19 228 - -
Closing balance 459 599 440 371 440 371
Foreign currency translation reserve
Opening balance 1 230 1 799 1 799
Exchange differences on translation of foreign
operation 822 (6) (569)
Closing balance 2 052 1 793 1 230
Retained earnings
Opening balance 29 078 86 428 86 428
Total comprehensive loss for the period (11 361) (30 441) (57 350)
Closing balance 17 717 55 987 29 078
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months ended Year ended
30 June 2018 30 June 2017 31 December 2017
(Unaudited) (Unaudited) (Audited)
R’000 R’000 R’000
Cash flows from operating activities
Cash (utilised in) / generated from operations (123 100) 24 375 146 931
Finance income 534 413 996
Finance costs (12 683) (12 400) (26 988)
Net cash (utilised in) / from operating activities (135 249) 12 388 120 939
Cash flow from investing activities
Purchase of property, plant and equipment (5 207) (2 228) (6 770)
Proceeds from sale of property, plant and equipment 274 379 383
Purchase of intangible assets (807) (996) (1 040)
Net cash from investing activities (5 740) (2 845) (7 427)
Cash flows from financing activities
Shares issued 19 697 - -
Proceeds from interest bearing borrowings 148 866 676 10 699
Repayment of interest bearing borrowings (25 507) (12 973) (115 703)
Net cash from / (used in) financing activities 143 056 (12 297) (105 004)
Total cash and cash equivalents movements for the
period (2 069) (2 754) 8 508
Cash and cash equivalents at the beginning of the period 30 275 22 336 22 336
Effect of exchange rate movement on foreign entity balances 822 (6) (569)
Total cash and cash equivalents at end of the period 29 028 19 576 30 275
Cash and cash equivalents from continuing operations 14 481 8 556 11 520
Cash and cash equivalents from discontinuing
operations 14 547 11 020 18 755
SELECTED NOTES TO THE SUMMARISED CONSOLIDATED INTERIM FINANCIAL INFORMATION
1. General information
South Ocean Holdings (“SOH”) 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. SOH is a public company listed on the JSE Limited (“JSE”) and is incorporated and domiciled in the
Republic of South Africa.
The unaudited summarised consolidated interim financial information was prepared by Mr JP Bekker CA(SA) and was
approved for issue by the directors on 7 August 2018.
2. Basis of preparation
The summary consolidated interim Financial Statements of SOH have been prepared in accordance with the JSE
Listings Requirements for provisional reports, and the requirements of the Companies Act, 2008 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 2017. 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 summary Consolidated Financial Statements are in terms of
IFRS and are consistent with those accounting policies applied in the preparation of the previous summary Consolidated
Financial Statements.
The directors take full responsibility for the preparation of the financial information.
3. Accounting policies
The accounting policies adopted in the preparation of the summary Consolidated Financial Statements are in terms of
IFRS and are consistent with those applied in the audited Financial Statements for the year ended 31 December 2017,
except where indicated. IFRS 9 and IFRS 15 are the new standards or amendments that were issued since the last
Annual Report that are applicable to the Group and has not had a material impact on the reported results.
4. Property, plant and equipment and intangible assets
During the first six months, the Group invested R6.0 million (2017: R3.2 million) in capital expenditure mainly relating to
the acquisition of plant and machinery at South Ocean Electric Wire Company Proprietary Limited (“SOEW”) as well as
the replacement of vehicles at SOEW and infrastructure improvements at Anchor Park Investments 48 Proprietary
Limited (“Anchor Park”). An impairment charge of R8.4 million (2017: R10.3 million due to the value in use of the
subsidiary being lower than the enterprise value) was raised against the tangible assets at Radiant Group Proprietary
Limited (“Radiant”) and the properties held for sale in Anchor Park to record the assets at net realisable value
subsequent to it being reclassified to ‘held for sale’ (refer note 12). 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 2018
Opening net carrying amount 293 035 -
Additions 5 208 807
Disposals (668) (534)
Depreciation and amortisation (7 775) -
Non-Current assets reclassified to held for sale ^ (95 717) (273)
Closing net carrying amount 194 083 -
Six months ended 30 June 2017
Opening net carrying amount 289 699 7 783
Additions 2 226 997
Disposals (342) -
Impairment (10 326) -
Depreciation and amortisation (7 719) (568)
Closing net carrying amount 273 538 8 212
Year ended 31 December 2017 (Audited) (Audited)
Opening net carrying amount 289 699 7 783
Additions 6 770 1 040
Disposals (341) (1 339)
Impairments reversed 18 743 -
Depreciation and amortisation (15 450) -
Non-Current assets reclassified to held for sale (6 386) (7 484)
Closing net carrying amount 293 035 -
^ Amount reclassified to assets held for sale prior to R8.4 million write down to net realisable value less cost to sell
5. Share capital and share premium
Number of Ordinary Share
Shares shares premium Total
issued (R’000) (R’000) (R’000)
At 30 June 2018 (Unaudited)
Opening balance 156 378 794 1 274 440 371 441 645
Issue of ordinary shares during the six months
through the exercise of options issued under the
non-renounceable rights offer 46 898 000 469 19 228 19 697
Closing balance 203 276 794 1 743 459 599 461 342
At 30 June 2017 (Unaudited)
Opening and closing balance 156 378 794 1 274 440 371 441 645
At 31 December 2017 (Audited)
Opening and closing balance 156 378 794 1 274 440 371 441 645
SOH concluded a Rights Offer to Shareholders recorded in the register at the close of trade on Friday, 20 April 2018, to
subscribe for Rights Offer Shares on the basis of 29.99000 Rights Offer Shares for every 100 SOH shares held on such
date at a Rights Offer Price of 42 cents per Rights Offer Share. The Rights Offer Price represented a premium of
approximately 92.73% to the 30-day VWAP share price of SOH of 21.79236 cents per share as at Wednesday, 7 March
2018. The Rights Offer was underwritten by Macrovest 147 Proprietary Limited (“Marcrovest”). The Group successfully
raised R19 697 160 cash through the issue of 46 898 000 shares. The proceeds of this Rights Offer were applied to
reduce borrowings.
6. Interest-bearing borrowings
The current portion of the interest-bearing borrowings includes the bank overdraft balance of R209.4 million (2017:
R177.4 million).
The details of the total interest-bearing borrowings balance are as follows:
As at As at As at
30 June 2018 30 June 2017 31 December 2017
(Unaudited) (Unaudited) (Audited)
Secured loans R’000 R’000 R’000
Non-current liabilities 43 338 47 920 50 294
Current liabilities 197 016 188 820 55 365
Total secured loans 240 354 236 740 105 659
The movement in borrowings is analysed
as follows:
Opening balance 105 659 249 037 249 037
Additional loans utilised 135 533 19 363 10 699
Finance costs 11 336 10 677 21 705
Repayments (25 507) (42 337) (137 409)
Movement in non-current assets/(liabilities)
held for sale 13 333 - (38 373)
Closing balance 240 354 236 740 105 659
The Group’s bankers, First National Bank Limited (“FNB”) had renewed the bank overdraft facility of R254.0 million in
May 2018 for a period of four months. Due to the negative financial performance of the Group, FNB had indicated that
they will review the facilities every three months with the next review being at the end of August 2018 based on the June
2018 results.
7. Discontinuing operation and non-current assets held for sale
Radiant Group has not been profitable for the last few years. The Board has taken a decision to find a suitable buyer for
this Company together with the properties from which it operates. The Board has appointed a consultant to assist with
this process. The expected time of completion of the sale of this Company and the properties is by the end of 2018. The
assets and liabilities of the Company held for sale, as well as the properties, are set out below:
30 June 2018 30 June 2017 31 December 2017
(Unaudited) (Unaudited) (Audited)
R’000 R’000 R’000
Assets and liabilities
Assets of disposal group
Property 88 000 - -
Inventories 111 072 - 136 227
Trade and other receivables 39 902 - 43 042
Cash and cash equivalents 14 547 - 18 755
Total assets 253 521 - 198 024
Liabilities of disposal group
Interest bearing borrowings 25 040 - 38 374
Derivative financial instrument - - 4 348
Accounts payable 27 710 - 34 758
Total liabilities 52 750 - 77 480
30 June 2018 30 June 2017 31 December 2017
(Unaudited) (Unaudited) (Audited)
R’000 R’000 R’000
Financial performance of discontinuing
operation
Revenue 137 766 142 355 303 017
Cost of sales (88 150) (101 606) (229 666)
Gross profit 49 616 40 749 73 351
Other operating income 1 379 843 644
Operating expenses (52 461) (47 644) (100 198)
Impairment of current and non-current assets (21 607) (10 326) (8 295)
Operating loss (23 073) (16 378) (34 498)
Finance income 56 97 167
Finance expenses (1 473) (1 572) (3 042)
Loss before taxation (24 490) (17 853) (37 373)
Taxation 11 934 7 342 (13 754)
Loss for the period (12 556) (10 511) (51 127)
Cash flow information -
Net cash inflow from operating activities (10 849) 15 104 40 566
Net cash outflow from investing activities (544) (1 057) (1 139)
Net cash outflow from financial activities 8 280 9 473 (18 194)
Net increase in cash generated by
subsidiaries (3 113) 23 520 21 233
8. Taxation
Income tax expense is recognised 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 45.1% (2017: 29.2%). The high effective tax rate is
due to deferred tax not provided on loss making subsidiaries.
9. Reconciliation of headline loss
Six months ended Year ended
30 June 2018 30 June 2017 31 December 2017
(Unaudited) (Unaudited) (Audited)
R’000 R’000 R’000
Loss attributable to the equity holders of the Group for
the period (11 361) (30 441) (57 350)
Profit on disposal of property, plant and equipment - (38) (30)
Net impairment of property, plant and machinery - - 1 187
Net impairment loss of investment in assets held for
sale 10 217 14 491 -
Headline loss for the period (1 144) (15 988) (56 193)
Headline loss per share (0.7) (10.2) (40.1)
Headline earnings/(loss) per share (cents)– of
continuing operations - basic and diluted 0.7 (12.8) (2.1)
Headline (loss) /earnings per share (cents) of
discontinuing operations – basic and diluted (1.4) 2.6 (38.0)
10. Weighted average number of shares
Six months ended Year ended
30 June 2018 30 June 2017 31 December 2017
(Unaudited) (Unaudited) (Audited)
Number of shares in issue 203 276 794 156 378 794 156 378 794
Weighted average number of shares in issue for basic
and diluted earnings per share at the beginning of the
period 156 378 794 156 378 794 156 378 794
Issue of ordinary shares during the six months.
Shares issued at 30 April 2018 15 805 403 - -
Weighted average number of shares in issue for basic
and diluted earnings per share at the end of the period. 172 184 197 156 378 794 156 378 794
There are no dilutionary instruments in issue and therefore the diluted weighted average number of shares are similar to
that disclosed above.
11. Net asset value
As at As at
30 June 2018 30 June 2017 31 December 2017
(Unaudited) (Unaudited) (Audited)
Net asset value per share (cents) 236.7 319.4 301.8
Tangible net asset value per share (cents) 236.7 314.1 301.8
12. Impairment of assets in subsidiaries
To comply with IAS 36, the Group performed an impairment test of its assets in subsidiaries, as a result no impairment
was recognised in the current period (2017: R14.5 million) in the Statement of Comprehensive Income for assets owned
by Anchor Park.
An impairment of current and non-current assets of R21.6 million was recognised which relates to a reduction in the net
realisable value of the assets held for sale.
13. Going Concern
The summary consolidated 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 liabilities, contingent obligations and commitments will occur in the ordinary course of the business.
At 30 June 2018, the Group’s assets, fairly valued, exceeded its liabilities. Furthermore, management assessed the
Group’s liquidity forecasts for a period of twelve months. Various scenarios have been considered to test the Group’s
resilience against operational risks.
Management has concluded that the Group’s ability to continue to meet its financial obligations as they fall due is
dependent on the Group’s ability to continue to improve its performance, and/or the Group’s bankers, FNB, renewing the
Group’s working capital facilities (refer note 6) at the end of August 2018. Each of these matters present a material risk
to the Group remaining as a going concern.
14. Interim dividend declaration
The Company’s policy is to consider the declaration of a final dividend after its financial year-end and no interim dividend
is declared.
15. 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 cable 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:
Adjusted Segment Segment
Six months ended Revenue EBITDA assets liabilities
R’000 R’000 R’000 R’000
30 June 2018 (Unaudited)
Electrical cables manufacturing 832 195 28 480 662 844 431 368
Lighting and electrical
accessories (discontinuing
operations) 139 243 (4 690) 168 883 50 226
Property investments 11 956 (8 039) 200 910 50 909
983 394 15 751 1 032 637 532 503
30 June 2017 (Unaudited)
Electrical cables manufacturing 622 729 8 042 577 796 344 904
Lighting and electrical accessories 142 424 (10 196) 225 519 69 229
Property investments 11 425 9 467 170 108 53 696
776 578 7 313 973 423 467 829
Year ended
31 December 2017 (Audited)
Electrical cables manufacturing 1 427 627 29 267 487 432 243 748
Lighting and electrical accessories
(discontinuing operations) 304 977 (34 325) 198 024 77 480
Property investments 22 794 17 924 189 800 50 208
1 755 398 12 866 875 256 371 436
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 2018 30 June 2017 31 December 2017
(Unaudited) (Unaudited) (Audited)
(Restated)
R’000 R’000 R’000
Revenue
Reportable segment revenue 983 394 776 578 1 755 398
Inter-segment revenue (property rentals) (10 692) (10 692) (20 784)
Inter-segment revenue - other (3 670) (973) (5 820)
Discontinuing operations (137 766) (142 355) (303 017)
Revenue per consolidated statement of
comprehensive income 831 266 622 558 1 425 777
Loss before tax
Adjusted EBITDA 15 751 7 313 12 866
Corporate and other overheads (15 609) (9 883) (16 151)
Depreciation (7 775) (7 719) (15 450)
Impairment of intangible assets – lighting and electrical
accessories segment (378) - (5 573)
Reversal of impairment of plant and machinery –
electrical cable manufacturing segment - - 18 743
Amortisation of intangible assets – lighting and electrical
accessories segment (534) (568) (1 339)
Impairment of non-current assets – lighting and electrical
accessories segment - - (8 295)
Impairment of investment in subsidiaries - (20 127) -
Discontinuing operations 23 074 16 378 34 498
Operating profit / (loss) 14 529 (14 606) 19 299
Finance income 478 316 828
Finance cost (11 211) (10 828) (23 946)
Profit/(loss) before taxation 3 796 (25 118) (3 819)
Taxation (2 601) 5 188 (2 404)
Loss for the period from discontinuing operations (12 556) (10 511) (51 127)
Loss for the period (11 361) (30 441) (57 350)
Assets
Reportable segment assets 1 032 637 973 423 875 256
Corporate and other assets 12 717 2 732 5 173
Deferred taxation 9 783 32 226 4 465
Total assets per statement of financial position 1 055 137 1 008 381 884 894
Liabilities
Reportable segment liabilities 532 503 467 829 371 436
Corporate and other liabilities 10 555 8 192 7 643
Deferred taxation 28 028 32 879 33 862
Taxation payable 2 939 56 -
Total liabilities per statement of financial position 574 026 508 956 412 941
16. Restatement
Disposal Group held-for-sale disclosed as discontinued operations on 30 June 2018.
The Board of SOH took the decision to dispose of its 100% interest in Radiant, together with the properties from which the business
operates (together referred to as the “Disposal Group”).
The effect of this decision is that the Disposal Group is accounted for as assets and liabilities held-for-sale.
In line with the requirements of IFRS 5 par. 38, the consolidated Statement of Comprehensive Income for the
comparative period ended 30 June 2017 has been restated to account for Radiant and the properties from which it operates as
a Disposal Group held-for-sale. In terms of IFRS 5 par. 40, the consolidated Statement of Financial Position for 30 June
2017 was not restated to reflect the held-for-sale classification.
Impact on consolidated Statement of Comprehensive Income
Six months ended Increase/(Decrease)
30 June 2017 30 June 2017 30 June 2017
As previously Restated ^
reported
R’000 R’000 R’000
Revenue 764 913 622 558 (142 355)
Cost of sales (701 485) (599 878) 101 607
Gross profit 63 428 22 680 (40 748)
Other operating income 5 606 4 764 (842)
Administration expenses (23 191) (15 616) 7 575
Distribution expenses (15 858) (6 368) 9 490
Operating expenses (60 969) (20 066) 40 903
Operating loss (30 984) (14 606) 16 378
Finance income 413 316 (97)
Finance costs (12 400) (10 828) 1 572
Loss before taxation (42 971) (25 118) 17 853
Taxation 12 530 5 188 7 342
Profit/(loss) for the period from continuing
operations (30 441) (19 930) 10 511
Loss for the period from discontinuing operations
- (10 511) (10 511)
Loss for the period (30 441) (30 441) -
^ Restatement in terms of IFRS 5
There has been no impact on previously reported earnings per share and attributable earnings to equity holders of the
Company.
17. Related party information
There have been no transactions with related parties that are material to the interpretation of these results.
18. 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 SOH hereby announces its summary consolidated results for the six months ended 30 June 2018 (“the period”).
SOH is an investment holding company, comprising four operating subsidiaries namely: SOEW a manufacturer of low voltage
electrical cables; Radiant, an importer and distributor of light fittings, lamps, electrical accessories, audio visual hardware and
accessories; Anchor Park, a property holding company and Icembu Services
Proprietary Limited, a light fittings assembly company.
Financial overview
Earnings
Group revenue for the period ended 30 June 2018 increased by 26.7% (2017: 15.2 %, decreased) to R969.40 million (2017:
R764.9 million). The Group’s gross profit increased by 70.8% (2017: 26.7%, decreased) to R108.3 million (2017: R63.4 million)
and operating loss decreased by R22.4 million to a loss of R8.5 million (2017: R31.0 million) compared to the prior period.
Group loss before tax decreased by 51.8% (2017: 333.2%, decrease in profit before tax) to a loss of R20.7 million (2017: R43.0
million) compared to the prior period. Basic loss per share decreased by 66.2% (2017: 364.3%, decrease in earnings) to a loss of
6.6 cents (2017: 19.5 cents, loss) with headline loss per share decreasing by 93.1% (2017: 137.2%, decrease in headline
earnings) to earnings of 0.7 cents (2017:10.2 cents, loss) compared to the prior period. Headline earnings for the period
amounted to R1.1 million (2017: R16.0 million, loss).
Group’s earnings were negatively impacted by its low B-BBEE rating. Management is working hard to improve this situation,
which will enable the Group to do business in the Public Sector with a specific focus on State Owned Entities and Municipalities.
Cash flow and working capital management
Cash utilised in operations amounted to R126.8 million (2017: R12.4 million, generated) during the period. Working capital
increased by R21.6 million (2017: R27 million, increased) primarily due to increases in accounts receivable. The trade receivables
book continues to be well managed in an increasingly challenging credit environment. Working capital investment is currently at
47.2% (2017: 29.1%) of revenue.
The Group invested R6.0 million (2017: R3.2 million) in capital expenditure which was mainly financed by long-term borrowings
during this period and utilised R25.5 million (2017: R42.3 million) to repay its interest-bearing borrowings.
The Group’s net cash utilised during the period amounted to R1.6 million (2017: R2.8 million, cash utilised), decreasing the bank
balance to R29.0 million (2017: R19.6 million) as at end of the financial period.
Segment results
Electrical cables manufacturing - SOEW
SOEW reported revenue of R832.2 million (2017: R622.7 million), which is an increase of 33.6% (2017: 16.3%, decrease in
revenue) when compared to the same period in the prior year. The increase in SOEW’s revenue is attributed mainly to an
improvement in demand due to lower supply from competitors and a volatile Rand Copper Price (RCP) even though the market
demand and economic conditions have not improved. Production levels increased in line with the increased demand by 6.2% in
the first six months of the year. The Rand Copper Price (RCP) was volatile during the period, fluctuating between increases of
3.4% and decreases of 6.9%.
The increase in market demand for the first six months of the year has resulted in an increase in margins.
Lighting and electrical accessories – Radiant
Radiant reported revenue of R139.2 million (2017: R142.4 million), which is a decrease of 2.2% (2017: 13.0%, decrease in
revenue) when compared to the same period in the prior year. Revenue was under severe pressure in the first half of 2018 due to
low demand and tough trading conditions. This situation is expected to abate in the second half of the year.
Gross profit margins have improved during the period if compared to the same period in the prior period, due to better price
negotiations.
Radiant has managed to curtail expenditure reflecting no increase in expenses when compared to the same period in the prior
year.
Radiant is confident that the Company is well positioned for growth. It has seen an improvement in customer confidence and
loyalty from the implementation of its turn-around strategy.
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 macro-economic environment in which the Group operates is not expected to improve during the next six months. With
fundamental political and fiscal uncertainties remaining a key driver of economic reality, the group will be looking internally for
opportunities to improve the profitability of the operating entities.
SOEW is expected to maintain its focus on productivity and efficiency improvements on its current turnover levels. Besides
intervening on the cost of manufacturing electrical wire, the revised sales strategy through strengthening of the sales teams is
starting to show some improvement. The in-bound supply chain has however been disrupted during July and August this year with
one of its key suppliers announcing force majeure on its ability to supply raw materials after fatalities at its mining operation. The
impact of this event may cause disruptions in SOEW’s ability to service its customers for as long as the supply chain disruption
persists.
The Radiant transaction, as announced on SENS on 3 July 2018, is expected to be concluded by the end of the current financial
year. The Group will be applying the cash inflows to reduce its short-term borrowings with its bankers, First National Bank. This
transaction will initiate the needed correction to the Group’s capital structure.
The Board will continue its journey towards having better black ownership, also recognising the importance of racial
transformation required by the market in which the Group operates. The current BEE status of the Group is not reflective of its
view on transformation and this process will be receiving heightened attention from the Board.
The drivers for growth are local economic growth, increasing the customer base, improving the BEE shareholding and
improvement in efficiencies.
Management is confident that the above actions will return the Group to profitability.
Director changes
Ms MK Lehloenya resigned as Director and Chief Financial Officer on the 31 January 2018. Mr B Petersen was appointed as
Non-Executive Director on the 11 June 2018.
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 SOH’s
independent auditors.
8 August 2018
On behalf of the Board
KH Pon CA(SA) JP Bekker CA(SA)
Chairman Chief Executive Officer and acting
Chief Financial Officer
Directors: KH Pon# (Chairman), HL Li#º (Deputy Vice-Chairman), JP Bekker* (Chief Executive Officer and acting Chief
Financial Officer), N Lalla#, B Petersen?, CY Wu?º, DJC Pan ?@ (Alternate)
Company Secretary: WT Green
* Executive # Independent Non-executive ? Non-executive
º Taiwanese @ Brazilian
Corporate Information
Registered Office: 12 Botha Street, Alrode 1451, P.O. 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, P.O. Box 123738, Alrode, 1451
Sponsor: Arbor Capital Sponsors Proprietary Limited, (Registration No: 2006/033725/07), 20 Stirrup Lane, Woodmead Office
Park, Corner Woodmead Drive and Van Reenens Avenue, Woodmead, 2191 (Suite #439, Private Bag X29, Gallo Manor, 2052)
Share Transfer Secretary: Computershare Investor Services Proprietary Limited, Rosebank Towers, 15 Bierman Avenue,
Rosebank, Johannesburg, 2196, 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. 4 Lisbon Lane, Waterfall City, Jukskeiview, Johannesburg, 2090. Telephone: +27(12)
797 4000 Telefax +27(12) 797 5800, Website: www.pwc.co.za
Date: 08/08/2018 04:00:00 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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