South Ocean Holdings wants to increase its broad-based BEE (BBBEE) score to win public contracts, the listed manufacturer and distributor of low-voltage electrical cables says.
South Ocean manufactures the electrical cables through its subsidiary South Ocean Electric Wire Company. It also owns Anchor Park, a property holding company.
The company’s products are sold to wholesalers and distributors who supply mainly the building and construction industry.
The group said its low BBBEE rating negatively affected its earnings potential.
“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,” the company said.
“The board will continue its journey towards improving BBBEE, recognising the importance of transformation required by the market in which the group operates. The current BBBEE status of the group is not reflective of its view on transformation and this process is receiving heightened attention from the board,” South Ocean said.
The group’s revenue was down 19.8% to R777.4m, while gross profit fell 52.4% to R51.6m, compared with R108.3m in the corresponding period in 2018.
Headline earnings per share improved 3.8c to 3.1c and earnings per share increased 9.6c to 3c.
South Ocean increased tangible net asset value per share 2.5% to 242.7c per share. The firm did not declare an interim dividend.
The group said subsidiary South Ocean Electric Wire Company’s revenue fell 7.2% to R772.5m. It attributed the fall to a decrease in demand due to the tough economic conditions.
“There is an oversupply of cable in the market that is expected to negatively impact results in the short term,” it said.
In January, South Ocean sold its loss-making subsidiary, Radiant Group, the importer and distributor of light fittings, lamps and electrical accessories in Southern Africa to JSE-listed ARB Holdings. This is part of South Ocean’s strategy to dispose of noncore assets to focus on the business of producing electrical cables.
South Ocean said the macroeconomic environment in which it operates “is not expected to improve during the next six months. With fundamental political and fiscal uncertainties remaining key drivers of economic reality, the group is exploring various opportunities to improve the profitability of the operating entities”.
South Ocean’s shares were unchanged at 75c on Friday.
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