South Ocean hopes for radiance after shakeup


South Ocean hopes for radiance after shakeup

Published Date: 2018-03-23 | Source: Stephen Gunnion | Author: Stephen Gunnion

South Ocean hopes for radiance after shakeup

The lights and wiring group plans to sell a stake to black shareholders as it restructures for a turnaround

South Ocean says it needs structure itself so it can respond more effectively to changing market dynamics. It's reinforcing its sales strategy and strengthening its sales teams to help grow its customer base. It also plans to tighten its control on costs and take action on managers who aren't performing. As part of the restructuring - and to raise capital - it plans to sell a stake in the company to black economic empowerment (BEE) investors. It says its banker is reducing the overdraft facility of its Radiant Lighting subsidiary to a maximum of R20 million. To raise some cash, it's planning a R20 million non-renounceable rights issue which will be underwritten by a potential BEE shareholder.

The electrical cable and lighting group says revenues have been negatively impacted by its current BEE status. In the year ended December, group revenue fell 2.7% to R1.73 billion. However, it managed to halve its operating loss to R15.2 million. It said this was partly as a result of an impairment reversal of R18.7 million to the plant and machinery of South Ocean Electric Wire Company. However, lighting division Radian provided an additional R12.7 million for slow-moving stock which affected the loss negatively. The group reported a loss of R41.2 million for the year and its headline loss per share increased by 119% to 35.9c.

South Ocean said its electric cable segment reported a drop in production volumes due to retrenchments that were implemented the previous year. Revenues from its lighting and electrical accessories segment fell due to adverse market conditions which impacted pricing and gross profits.

The group said its turnaround strategy has seen it make good progress in successfully managing its working capital. Cash management has also improved, with its interest expense decreasing b 50%. However, foreign exchange volatility and political uncertainty led to it incurring a R4.2 million unrealised foreign exchange loss at year-end.

It says it's confident the actions undertaken will help it return to profitability.

Its shares ended unchanged at 35c in thin trade.

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