SFS Group Public Company Ltd (SFS) announced its 1H 2007 results reporting exceptional profits on the back of improved business activity in all three main areas of interest, namely shipping, commercial and financial services, which led the Board to declare an interim dividend.
SFS has already upped its forecasted profit target for 2007 to EUR 27.3 mln from EUR 17.1 mln initial target, giving it one of the best valuations on the Cyprus Stock Exchange.
The main reasons for the increased profitability are the disposals of investment properties, the disposal of an associated company as well as the negative goodwill which arose from the Public Offer for Takeover of White Knight Holdings Public Company Limited (WKH).
The total revenue of the Group for 1H 2007, including the profit from disposal of investment properties, increased by 59% compared to the total revenue of the first half for the year 2006. Revenues from the financial services segment increased by 105%, i.e. from EUR3.3 million for the first half of 2006, to EUR 6.9 million for the first half of 2007.
Revenues from the property segment (including the profit from sale of investment properties) reached EUR 11.4 million during the first half of 2007 compared to EUR 3.5 million for the same period in 2006 recording an increase of 227% due to the profitable sale of significant investment properties. The third segment which contributed to the increase of total revenue was the shipping activities which recorded an increase of 32% during the first half of 2007, reaching EUR 17.3 million compared to EUR 13.1 million for the first half of 2006. Finally, revenue from other activities increased by 447% due to negative goodwill of EUR4.8 million which arose from the increased stake in WKH. Due
to the above, total contribution from operations recorded a significant increase of 106% and reached EUR 32.8 million for the first half of 2007 compared to EUR 15.9 million for the corresponding period in 2006.
Selling and distribution costs remained at the same levels whereas administrative expenses recorded an expected increase of 36% (from EUR 5.0 million in 2006 to EUR 6.8 million in 2007), that resulted mainly from the shipping and financial services segments of the Group. The increase in depreciation and amortisation of assets is due to the purchase of four ship vessels mainly towards the second half of 2006, therefore not reflected in the results of the first half of 2006. Financial expenses increased by 24% from EUR 3.9 million in 2006 to EUR 4.9 million in 2007, mainly due to the new loans for funding the acquisition of the four ship vessels and exchange differences from foreign currency loans. It is worth noting that the reduction in bank debt shown at the balance sheet date did not affect financial expenses during the first half of 2007 since the reduction took place in June 2007.
Profit from operations of the Group during the first half of 2007 increased to EUR 16.6 million compared to EUR 3.0 million in 2006. The results from the principal activities of the Group are considered very satisfactory since they recorded an absolute increase of EUR 13.6 million. Due to the 62% increase of the General Price Index (GPI) of the Cyprus Stock Exchange (CSE) during the first half of year 2006, the profit from associates had reached EUR 2.4 million. Profit from associates in 2007 however was contained at EUR 1.3 million mainly because the GPI of the CSE increased by a
comparatively lower rate of 21%.
Profit attributable to the shareholders of the Company reached EUR 15.9 million for the first half of 2007 compared to EUR 3.2 million for the same period in 2006, which corresponds to an annualized Return on Equity (RoE) of 39.3% (1H 2006: 12.8% and 24.6% for the whole year in 2006).
The cash inflows of the Group have improved significantly during the first half of 2007 recording an increase in net cash inflow from operating activities of EUR 5.1 million
compared to EUR 2.5 million during the same period of 2006 and EUR 8.0 million for the whole year of 2006.
The financial position of the Group during the second quarter of 2007 improved considerably compared to previous periods. The contributing factors to this improvement have been the repayment of bank debt totalling EUR 17.1 million coupled with a significant increase in net working capital (from EUR 5.1 million at 31st December
2006 to EUR 37.9 million at 30th June 2007). According to the announcement, the repayment of substantial bank debt by the Group depicts its financial strength and stability as well as its future potential. Total assets reached EUR 309.8 million at 30th June 2007 (31st December 2006: EUR 294.5 million). The reduction in bank debt is within the quantitative strategic targets set by the Group for the three year period 2007-2009 and announced on 27th February 2007.
Total equity attributable to equity holders of the Company as well as the total equity of the Group has increased to EUR 98.2 million and EUR 125.7 million respectively at 30th June 2007 compared to EUR 64.2 million and EUR 112.5 million at 31st December 2006.
In another development, the Board of Directors of the Group announced its decision to proceed with an interim dividend payment of CYP0.02/share or EUR 0.0342/share (ex-dividend: 10th September 2007) for a dividend yield of 1.7%.
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