BRANDED PRODUCT
DISTRIBUTION
TEXTILES INDUSTRIALS CLOTHING PROPERTIES MEDIA
Seardel is a diverse investment group
and a le...
Rand thousands
30 Sep 2013
Unaudited
30 Sep 2012
Unaudited
31 Mar 2013
Audited
ASSETS
Non-current assets 1 435 388 1 239 5...
Rand thousands
30 Sep 2013
Unaudited
30 Sep 2012
Unaudited
%
change
Revenue 1 362 157 1 199 283 13,6
Gross profit 313 208 ...
Rand thousands
30 Sep 2013
Unaudited
30 Sep 2012
Unaudited
Net cash flow from operating activities (125 881) 50 950
Net ca...
Rand thousands
Stated
capital*/
share capital
and share
premium
Treasury
shares
Other
reserves
Retained
income
Total
equit...
Rand thousands Textiles
Indus-
trials Clothing
Branded
product
distri-
bution Properties
Head
office Total
2013
Segment re...
In cents, where applicable
30 Sep 2013
Unaudited
30 Sep 2012
Unaudited
Weighted average number of shares in issue (’000) 6...
NOTES TO THE Unaudited CONSOLIDATED CONDENSED RESULTS FOR THE
six months ended 30 September 2013
1	 Basis of preparation
	...
7 	 Business combinations
	The Group acquired 100% of the share capital of two separate legal entities during the period. ...
Seardel has delivered an improved set of results for the six months ended 30 September 2013.
•	 Revenue was up 14% to R1,3...
excluding any potential PI benefits which are likely to accrue. If one disregards the PI benefit recognised in the prior
p...
BRANDED PRODUCT
DISTRIBUTION
TEXTILES INDUSTRIALS CLOTHING PROPERTIES MEDIA
CORPORATE INFORMATION
Seardel Investment Corpo...
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Seardel Investment Corporation Ltd HY 2014 results

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Seardel Investment Corporation Ltd HY 2014 results

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Seardel Investment Corporation Ltd HY 2014 results

  1. 1. BRANDED PRODUCT DISTRIBUTION TEXTILES INDUSTRIALS CLOTHING PROPERTIES MEDIA Seardel is a diverse investment group and a leading manufacturer and distributor of branded, textile, industrial and apparel products. UNAUDITED CONSOLIDATED condensed INTERIM resultsfor the SIX MONTHS ended 30 SEPTEMBER 2013 Revenue R163 million to R1 362 million Net profit R26,3 million to R28 million Headline profit per share 4 cents to 4,1 cents Earnings per share 3,8 cents to 4,1 cents NAV per share 10 cents to 213 cents (“Seardel” or “the Group”)
  2. 2. Rand thousands 30 Sep 2013 Unaudited 30 Sep 2012 Unaudited 31 Mar 2013 Audited ASSETS Non-current assets 1 435 388 1 239 561 1 385 957 Property, plant and equipment 759 446 701 640 754 481 Plant and equipment 342 079 309 932 335 876 Owner-occupied property 417 367 391 708 418 605 Investment property 549 073 442 489 525 229 Intangible assets 16 184 11 688 13 030 Other investments 3 673 3 329 3 580 Long-term receivables 51 697 43 966 47 544 Goodwill 14 016 – – Deferred tax 41 299 36 449 42 093 Current assets 1 404 142 1 253 550 1 138 682 Non-current assets held for sale 1 785 3 298 2 295 Inventories 710 749 622 182 627 768 Trade and other receivables 681 503 624 883 504 788 Current tax asset 7 378 1 187 1 594 Cash and cash equivalents 2 727 2 000 2 237 Total assets 2 839 530 2 493 111 2 524 639 EQUITY AND LIABILITIES Total equity 1 488 813 1 392 874 1 460 586 Stated capital 320 366 309 989 312 156 Treasury shares (17 794) (17 794) (17 794) Reserves 1 186 241 1 100 679 1 166 224 Equity attributable to owners of the parent 1 488 813 1 392 874 1 460 586 Non-current liabilities 107 797 86 850 93 662 Deferred tax 8 016 8 252 8 400 Post-employment medical aid benefits 85 567 76 057 84 388 Interest-bearing liabilities 897 1 002 756 Deferred liability 13 089 – – Operating lease accruals 228 1 539 118 Current liabilities 1 242 920 1 013 387 970 391 Post-employment medical aid benefits 5 116 4 750 5 045 Interest-bearing liabilities 30 541 26 456 298 Provisions – 355 355 Trade and other payables 545 177 459 587 460 008 Bank overdrafts 662 086 522 239 504 685 Total liabilities 1 350 717 1 100 237 1 064 053 Total equity and liabilities 2 839 530 2 493 111 2 524 639 Net asset value (excluding intangible assets) 1 458 613 1 381 186 1 447 556 Net asset value per share after treasury shares (cents) 213 203 212 STATEMENT OF FINANCIAL POSITION
  3. 3. Rand thousands 30 Sep 2013 Unaudited 30 Sep 2012 Unaudited % change Revenue 1 362 157 1 199 283 13,6 Gross profit 313 208 255 007 22,8 Operating profit before restructuring costs 65 944 25 134 162,4 Net restructuring and retrenchment costs (10 399) (1 316) Operating profit before finance costs 55 545 23 818 133,2 Finance income 862 1 456 Finance expenses (28 848) (23 344) Profit before tax 27 559 1 930 1 327,9 Income tax 496 1 119 Profit for the period from continuing operations 28 055 3 049 820,1 Loss for the period from discontinued operations – (1 286) Total comprehensive income for the period 28 055 1 763 1 491,3 Total comprehensive income attributable to: Owners of the parent 28 055 1 763 Non-controlling interests – – 28 055 1 763 Condensed Statement of Comprehensive Income
  4. 4. Rand thousands 30 Sep 2013 Unaudited 30 Sep 2012 Unaudited Net cash flow from operating activities (125 881) 50 950 Net cash flow from investing activities (61 273) (103 007) Net cash flow from financing activities 30 243 (19 760) Net decrease in cash and cash equivalents (156 911) (71 817) Cash and cash equivalents at the beginning of the period (502 448) (448 422) Cash and cash equivalents at the end of the period (659 359) (520 239) Condensed Statement of Cash Flows
  5. 5. Rand thousands Stated capital*/ share capital and share premium Treasury shares Other reserves Retained income Total equity Balance at 1 April 2012 304 620 (14 610) 284 791 836 844 1 411 645 Total comprehensive profit for the period – – – 1 763 1 763 Shares issued 5 388 – – – 5 388 Share incentive scheme – – – (5 132) (5 132) Own shares acquired – (20 790) – – (20 790) Shares cancelled (19) 17 606 – (17 587) – Balance at 30 September 2012 309 989 (17 794) 284 791 815 888 1 392 874 Balance at 1 April 2013 312 156 (17 794) 298 669 867 555 1 460 586 Total comprehensive profit for the period – – – 28 055 28 055 Shares issued 8 210 – – – 8 210 Share incentive scheme – – – (8 038) (8 038) Balance at 30 September 2013 320 366 (17 794) 298 669 887 572 1 488 813 Composition of other reserves 30 Sep 2013 30 Sep 2012 Revaluation of investments 2 861 2 861 Capital redemption reserve fund 440 440 Surplus on disposal of subsidiary and associated companies 7 923 7 923 Surplus on revaluation of land and buildings 287 445 273 567 298 669 284 791 * Refer note 6. Statement of Changes in Equity
  6. 6. Rand thousands Textiles Indus- trials Clothing Branded product distri- bution Properties Head office Total 2013 Segment revenue Gross sales 398 170 217 125 320 588 419 408 56 166 – 1 411 457 Inter-segment sales (these transactions are at arm’s length) (25 656) – (87) – (23 557) – (49 300) 372 514 217 125 320 501 419 408 32 609 – 1 362 157 Less: Revenue attributable to discontinued operations – – – – – – – Revenue as per statement of comprehensive income 372 514 217 125 320 501 419 408 32 609 – 1 362 157 Segment results Operating profit/(loss) from operations 4 096 11 677 (45 745) 14 809 37 188 33 520 55 545 Less: Operating profit/(loss) from discontinued operations – – – – – – – Operating profit/(loss) from continuing operations 4 096 11 677 (45 745) 14 809 37 188 33 520 55 545 2012 Segment revenue Gross sales 331 523 168 877 361 298 342 261 46 114 – 1 250 073 Inter-segment sales (these transactions are at arm’s length) (23 043) – – – (24 030) – (47 073) 308 480 168 877 361 298 342 261 22 084 – 1 203 000 Less: Revenue attributable to discontinued operations – – (3 717) – – – (3 717) Revenue as per statement of comprehensive income 308 480 168 877 357 581 342 261 22 084 – 1 199 283 Segment results Operating profit/(loss) from operations (7 352) 10 676 (10 927) 2 891 33 229 (5 985) 22 532 Less: Operating profit/(loss) from discontinued operations 20 – (1 306) – – – (1 286) Operating profit/(loss) from continuing operations (7 372) 10 676 (9 621) 2 891 33 229 (5 985) 23 818 Condensed Segmental Report
  7. 7. In cents, where applicable 30 Sep 2013 Unaudited 30 Sep 2012 Unaudited Weighted average number of shares in issue (’000) 683 354 688 393 Number of shares in issue (’000) 685 925 681 594 Diluted weighted average number of shares in issue (’000) 730 820 731 154 Basic earnings/(loss) 4,1 0,3 Continuing operations 4,1 0,5 Discontinued operations – (0,2) Headline earnings/(loss) 4,1 0,1 Continuing operations 4,1 0,3 Discontinued operations – (0,2) Diluted earnings/(loss) 3,8 0,2 Continuing operations 3,8 0,4 Discontinued operations – (0,2) Diluted headline earnings/(loss) 3,8 0,1 Continuing operations 3,8 0,3 Discontinued operations – (0,2) Reconciliation between profit and headline earnings (’000) Income attributable to shareholders 28 055 1 763 Surplus on disposal of property, plant and equipment (173) (1 319) Loss on disposal of property, plant and equipment 131 7 Total tax effect of adjustments 16 15 Headline earnings 28 029 466 STATISTICS PER SHARE
  8. 8. NOTES TO THE Unaudited CONSOLIDATED CONDENSED RESULTS FOR THE six months ended 30 September 2013 1 Basis of preparation The Group interim results have been prepared in accordance with International Financial Reporting Standards (IFRS) and specifically International Accounting Standard IAS 34: Interim Financial Reporting as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the JSE Listings Requirements and the requirements of the Companies Act, 2008. The interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 March 2013, which have been prepared in accordance with IFRS. These results have been prepared under the supervision of the Financial Director, Gys Wege (CA)SA, and have not been audited or reviewed by the Group’s auditors, KPMG Inc. 2 Significant accounting policies The Group interim results have been prepared under the historical cost convention, except for the revaluation of certain properties and financial instruments. The accounting policies adopted are consistent with those followed in the preparation of the Group’s annual financial statements for the year ended 31 March 2013, except with reference to IFRS 10: Consolidated Financial Statements. The Group has applied IFRS 10 retrospectively in accordance with the transition provisions as stipulated. 3 Capital expenditure and commitments Rand thousands Unaudited Capital expenditure Contractual commitments 30 Sep 2013 30 Sep 2012 30 Sep 2013 30 Sep 2012 Investment property 23 844 28 469 – 95 845 Land and buildings 216 64 995 – – Plant and equipment 28 360* 17 002 600 19 110 Intangible assets 5 060 3 500 – – Total capital expenditure 57 480 113 966 600 114 955 * Included in this amount is R12 million of plant and equipment acquired by means of business combinations – refer note 7. The capital commitments are expected to be incurred during the remainder of the current financial year. 4 Issue of shares During the period 3 033 510 ordinary shares were issued in terms of the Group’s share incentive scheme. 5 Diluted weighted average number of shares The difference between the weighted average number of shares and the diluted weighted average number of shares are due to the impact of the unexercised options under the Group’s share incentive scheme. 6 Stated capital The shareholders of the company have approved the conversion of the ordinary shares and N ordinary shares having a par value, to ordinary shares and N ordinary shares having no par value at a general meeting of the company held on 8 August 2013. Share capital and share premium have therefore been restated to stated capital.
  9. 9. 7 Business combinations The Group acquired 100% of the share capital of two separate legal entities during the period. The total consideration was R18 060 650. The following table summarises the consideration paid for the entities, the assets acquired and the liabilities assumed, recognised at the acquisition date. Consideration R’000 Cash 4 842 Contingent consideration 13 089 Total consideration 18 061 Recognised amounts of identifiable assets acquired and liabilities assumed Property, plant and equipment 11 959 Investments 93 Inventories 8 018 Accounts receivable 12 560 Non-current loan (8 628) Deferred liabilities (3 687) Deferred tax liability (1 023) Accounts payable (8 748) Accruals (2 710) Bank overdrafts (3 789) Total identifiable net assets 4 045 Goodwill 14 016 Total consideration 18 061 The contingent consideration arrangement requires the Group to pay the former owners an amount dependent on future operational profits. The potential undiscounted amount of all future payments that the Group could be required to make under this arrangement is between RNil and R14 497 000. The fair value of the contingent consideration arrangement of R13 088 829 was estimated by applying a discount rate of 9,05%. 8 Subsequent events On 3 October 2013 the company issued 350 million N ordinary shares of no par value to Hosken Consolidated Investments Limited at R1,60 per share as payment for a 70% stake in HCI Invest 3 Holdco Proprietary Limited (“Sabido Holdco”), which holds a 63,9% interest in Sabido Investments Proprietary Limited, which in turn holds investments in, inter alia, e.tv, eNews Channel and Sasani Studios. This was pursuant to approval obtained from shareholders at the general meeting of the company on 8 August 2013, further details of which was published on SENS on 17 May 2013 and 10 July 2013. The consolidated results of Sabido Holdco will be accounted for as a business combination with effect from 1 October 2013. Further, Seardel concluded two agreements with SACTWU in terms of which: • Seardel will, subject to shareholder approval, acquire the remaining 30% equity interest in Sabido Holdco for a purchase consideration of R240 million, which will be settled by the issue of 150 million new N shares to Sactwu at R1,60 per N share, the details of which was publised on SENS on 10 October 2013; and • Seardel has entered into a Memorandum of Understanding in terms of which Sactwu, or its assignee, will, subject to shareholder and regulatory approval, acquire the Group’s South African clothing manufacturing business for an estimated consideration of R77,1 million. Details of the proposed transaction was published on SENS on 29 October 2013. The results of the clothing operation will be accounted for as a discontinued operation with effect from 1 October 2013.
  10. 10. Seardel has delivered an improved set of results for the six months ended 30 September 2013. • Revenue was up 14% to R1,36 billion with all the individual segments, apart from Clothing which was down 11%, delivering revenue growth in excess of 20%. • The gross margin was up 170 basis points to 23%. • Good cost controls saw fixed costs rise by just 2,6%, well below the prevailing inflation rate. • Operating profit before restructuring costs increased 162% from R25 million in the comparative period to R66 million. • Restructuring and retrenchment costs of R10 million were incurred in the Clothing segment and these costs, together with increased finance costs, resulted in profit before taxation coming in at R28 million, a R26 million improvement from the R2 million recorded in the comparative period. The results for both the period under review and the comparative period contain items that, whilst they are of similar magnitude and therefore don’t affect the overall comparability of the results, need to be considered nonetheless: 1. The comparative period results included R40 million of income relating to the government’s production incentive programme (“PI”). No PI income has been recognised in the current period due to the timing of the respective qualifying projects, but it is expected that income will be recognised in the second half of the financial year. 2. The current period’s results include R37,5 million of once-off income relating to the final piece of the litigation with former directors as disclosed in the SENS announcement of 10 May 2013. Recently Seardel has announced two separate transactions that are clearly transformative for the Group as a whole: 1. The first was the announcement, published on SENS on 17 May 2013, that Seardel had entered into an agreement to acquire Hosken Consolidated Investments Limited’s (“HCI”) 70% equity stake in HCI Invest 3 Holdco Proprietary Limited (“Sabido Holdco”), which holds a 63,9% interest in Sabido Investments Proprietary Limited (“Sabido”). Sabido is the investment vehicle that houses HCI’s media investments in e.tv, eSat. tv, Yfm and Sasani Studios. Although shareholder approval was obtained in August 2013, the last of the conditions precedent was fulfilled in early October 2013 and hence the effects of the acquisition will only be included in the Group’s results from 1 October 2013. This announcement has been followed up by a further announcement, published on SENS on 10 October 2013, that Seardel has concluded an agreement with the Southern African Clothing and Textile Workers Union (“Sactwu”) to acquire Sactwu’s 30% equity interest in Sabido Holdco. 2. The second significant event was the announcement, published on SENS on 29 October 2013, that Seardel had entered into a Memorandum of Understanding with Sactwu in terms of which Seardel would dispose of its South African-based clothing manufacturing operations to Sactwu, or its assignee. The clothing manufacturing operation has been a lossmaker for many years and whilst its disposal will be earnings enhancing for the Group, in another respect it is a very sad transaction for Seardel. The Group was founded on clothing manufacturing in 1967 and this represents the end of an era that spanned more that 40 years. As the transaction was concluded in October 2013 the results for the clothing manufacturing division are included as continuing operations for the interim results, but will be reflected as discontinuing operations for the financial year-end results ending 31 March 2014. Segments Textiles The comparative results of the Textile segment were affected by a number of extenuating circumstances, which saw it record an operating loss of R7 million, including R15 million of income relating to the PI. Having resolved the issues that gave rise to the loss, it is pleasing to report that this segment delivered an operating profit of R4 million Commentary
  11. 11. excluding any potential PI benefits which are likely to accrue. If one disregards the PI benefit recognised in the prior period, the segment has delivered a like-for-like improvement of R26 million year on year. Despite the improvement, we recognise that much work is still required to further improve these businesses. Operating margins of around 1% mean that the businesses can easily slip back into a loss-making situation if we do not stay on top of all operational aspects whilst we continue to look for alternative revenue streams in higher margin areas. Industrials Revenue in the Industrials segment was up 29% to R217 million as a result of improved performances from all the businesses within this segment. Operating profit was up 9% to R12 million although it should be noted that the comparative figures include R5 million of PI benefit whilst no PI benefit has been recognised in the current period. Excluding the PI benefit, operating profit more than doubled on a like-for-like basis. Clothing The Clothing segment performed poorly in the period under review with revenue declining by 11% to R321 million and an operating loss of R46 million being recorded. The performance of the division in the period was further hindered by a three-week strike endured in our Ladysmith facility, this despite being one of the few employers that pay the legislated minimum wage in the area. As mentioned above, Seardel has entered into a Memorandum of Understanding to dispose of its South African- based clothing manufacturing operations to SACTWU, or its assignee. The Group is also in advanced discussions to dispose of its Lesotho operation to a third party unrelated to SACTWU. Branded Product distribution Revenue in the Branded Product segment is up 23% to R419 million. Operating profit came in at R15 million, a R12 million improvement from the comparative period. We have previously reported that this segment is a key growth area for the Group going forward and this remains the case. Much investment has gone into marketing and infrastructure development ahead of expected revenue growth and although we are satisfied with the revenue growth achieved to date, further investment is required in a number of areas to unlock further improvements. Whilst the current operating margin of 4% looks thin, it should be noted that the first half of the financial year is traditionally slower than the second half. Furthermore, the operating margins are being adversely affected by the losses being incurred in our start-up Brand ID business which, although firmly on track, is still a little way away from breakeven. Properties Revenue grew 22% to R56 million with rentals from external tenants now comprising 58% of the total revenue. Operating profit was up 12% to R37 million. The main property developments, being the New Germany and Mobeni Industrial Parks in KwaZulu-Natal, have been completed. In total, the Group’s property portfolio comprises some 436 000 m2 of industrial space of which some 172 000 m2 is available for letting to tenants external to the Group. Of the space available to be let externally, at the close of the period under review, around 87% of it had been let. On behalf of the board Stuart Queen Gys Wege Chief Executive Officer Financial Director Cape Town 21 November 2013
  12. 12. BRANDED PRODUCT DISTRIBUTION TEXTILES INDUSTRIALS CLOTHING PROPERTIES MEDIA CORPORATE INFORMATION Seardel Investment Corporation Limited (“Seardel” or “the Group”) The company’s shares are listed under the Consumer Goods – Personal and Household Goods Sector of the JSE Limited. Registration number: 1968/011249/06 (Incorporated in the Republic of South Africa) JSE share code: SER ISIN: ZAE000029815 JSE share code: SRN ISIN: ZAE000030144 Registered office: 1 Moorsom Avenue, cnr Bofors Circle and Moorsom Avenue, Epping Industria II 7460 PO Box 524, Eppindust 7475, South Africa Directors: J A Copelyn* (Chairman), M H Ahmed*^ (Lead Independent Director), D Duncan, T G Govender*,  A M Ntuli, S A Queen (Chief Executive Officer), Y Shaik*^, R Watson*^, G D T Wege (Financial Director) (* Non-executive  ^ Independent) Company secretary: HCI Managerial Services Proprietary Limited Transfer secretaries: Computershare Investor Services Proprietary Limited, 70 Marshall Street, Johannesburg 2001 PO Box 61051, Marshalltown 2107 Auditors: KPMG Inc. Sponsors: Investec Bank Limited

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