| Tue 13 May 2008, 17:38 | | SKJ - Sekunjalo Investments - Unaudited Interim Re |
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SKJ
SKJ
SKJ - Sekunjalo Investments - Unaudited Interim Results For The Period Ended
29 February 2008
SEKUNJALO INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1996/006093/06
Share code: SKJ ISIN: ZAE000017893
("SIL")
Unaudited interim results for the period ended 29 February 2008
OVERVIEW
CORPORATE PROFILE
SIL is a black-controlled investment holding company domiciled in the Republic
of South Africa with points of representation in London and Mauritius. SIL is
listed on the JSE Limited ("JSE").
The Sekunjalo Group ("the Group") is invested in two primary sectors, i.e.
Manufacturing and Resource-driven and Technology and Innovation-driven sectors.
Within the Manufacturing and Resource-driven sector the major investments are in
Industrials (primarily fishing) and within the Technology and Innovation-driven
sectors the main investments are in Healthcare and Pharmaceuticals, Information
Technology and Communication, Financial Services, Aquaculture, Biotechnology and
Enterprise Development.
RECENT HIGHLIGHTS
Sekunjalo has recently received a number of prestigious BEE awards:
- The Business Map Foundation Top BEE Partnership Award for 2007
- Financial Mail/Empowerdex 2006 Award for Top Ranked BEE Firm
- The Financial Mail Top Empowerment Companies Award for 2008 for the Top-ranked
listed Company in the General Industrials sector of the JSE.
ACCOUNTING POLICIES AND IFRS
The financial statements are prepared in accordance with International Financial
Reporting Standards ("IFRS") including IAS 34, using the historical cost
convention except for certain financial instruments that are stated at fair
value and adjustments, where applicable.
The basis of preparation is consistent with the prior year.
COMMENTARY ON RESULTS
The SIL results for the first six months of the financial year are in line with
expectations due largely to the seasonality of its fishing business. Compared to
the same period in 2007, reporting revenue is up 22,5% to R229,7 million from
R187,4 million, but has incurred an operating loss of R43,5 million compared to
an operating profit of R12,1 million last year. The headline loss per share is
reflected at 4,90 cents compared to a headline earnings of 2,91 cents per share
as at 28 February 2007.
In addition to the seasonal nature of fishing, the Group also changed its
classification of its Biotechnology interests from an Investment to an
Associate. This change arose as a result of a change in circumstances whereby
the Group now has significant influence over this Biotechnology investment. As a
consequence, last year`s interim results included a fair value adjustment of
R27,4 million which was included in operating income, whereas no fair value
adjustment is included in this year`s results. It should be noted that,
historically, the Group has consistently performed well in the second half of
the financial year due to the cyclical nature of its businesses. In line with
this trend the Group expects a stronger performance in the second half of the
financial year.
REVIEW OF INVESTMENTS
FISHING AND AQUACULTURE
Premier Fishing has incurred a loss for the first six months of R10,7 million.
This is due largely to the poor catches in the pelagic sector, high fuel prices,
depressed prices for fish meal globally and poor west coast rock lobster
catches. The pelagic total allowable catch(TAC)has been reduced to 90 000 tons
from 165 000 tons last year and poor catches continue on the West Coast, with
most catches occurring around Mossel Bay. Whilst the industry has experienced
poor catches of west coast rock lobster, it is anticipated that catches will
improve significantly in the next few months. South coast rock lobster catches
have been good and the favourable rand/dollar exchange rate will boost revenues
for the second half of the year.
Premier`s success in the allocation of long-term fishing rights has provided a
platform upon which Premier can roll out its high-growth business strategy,
which is to become one of the largest lobster fishing companies in the Southern
hemisphere. Premier`s success in reducing its long-term debt is allowing it to
reinvest capital in acquiring further lobster rights and partnering smaller
lobster rights holders. Premier Fishing is an exporter of choice and its lobster
brands are highly sought after in the USA, China, Japan and Europe.
The abalone farm continues to produce steady results and our strategy to expand
this business has been fast-tracked with the recent acquisition of the Marine
Growers Abalone Farm in the Eastern Cape. This acquisition complements our
current pipeline and will provide sustainable earnings as well as being a
substantial contributor to the sustainability of the abalone resource in the
country.
HEALTH CARE AND PHARMACEUTICALS
Sekunjalo Health Care (SHC) and its associated health care companies, comprising
Sekpharma(Pharmaceuticals), Rapimed(Rapid Diagnostics) and Health System
Technologies(HST), continue to supply both the private and public sectors.
In line with the strategy adopted at the end of last year, the Group has
embarked on significant cost-cutting measures with a view to managing the
Pharmaceuticals and Diagnostics businesses to break even by the 2008 financial
year-end, whilst pursuing alternative strategies for these businesses. HST, the
IT arm of SHC, continues to operate profitably and has won significant public
sector tenders which will enhance the profitability of this business. The most
recent tender awarded to HST is the National Health Laboratory System (NHLS)
tender which will involve rolling out systems to public sector laboratories
nationally.
In accordance with good accounting practice and being consistent with the year-
end treatment, the Group continues to impair loans owing by SHC and its
Associates to Sekunjalo Investments. The operating loss of R19,7 million
includes a loan impairment of R13,8 million.
INFORMATION TECHNOLOGY AND TELECOMMUNICATIONS
The Group`s ICT businesses are known as Sekunjalo TSG (Technical Solutions
Group). The Group comprises three companies that we have invested in, namely,
Synergy, Fios and Saratoga. These businesses have been consolidated and TSG is
now being managed as an autonomous division focusing on closer collaboration in
software development and implementation, marketing and sales and a reduction in
corporate overheads.
Sekunjalo TSG is a business solutions provider that is focused on:
- providing business intelligence solutions, and
- developing and supporting a variety of software products that are custom
designed to meet the objectives of businesses operating in specific sectors.
Sekunjalo TSG has performed well and is currently well positioned to deliver the
full-year targeted results. Plans to list Sekunjalo TSG are currently under
review and the Group will make an announcement in this regard shortly.
FINANCIAL SERVICES
The Group`s financial services interest is held through its wholly-owned
subsidiary, Sekunjalo Capital (Pty) Ltd.
Sekunjalo Financial Services has developed an integrated financial services
platform through extensive investment in software development. This platform is
able to deal with the complexity of distributing financial services products.
The strategy going forward is to market directly to established affinity groups.
The business has concluded an agreement with one of South Africa`s largest trade
unions. This has resulted in the business being significantly populated.
A turnaround in performance is dependent on bringing on board additional
affinity groups. Discussions are currently under way with two groups.
BIOTECHNOLOGY
Sekunjalo, through African Biotechnological and Medical Innovation Investments
(Pty) Ltd ("ABMI"), owns 49% in Bioclones (Pty) Ltd, the leading biotechnology
company on the African continent and in the developing world.
Bioclones manufactures Erythropoietin (EPO) at its manufacturing plant in
Pretoria. EPO is the leading biopharmaceutical product by sales revenues with a
market size in excess of US$12 billion. Bioclones has embarked on increasing the
capacity of the Pretoria plant to serve the private market in South Africa and
is looking to further increase capacity of EPO production through the use of
funds obtained from an intended international exchange listing in London or New
York. This will allow Bioclones to enter the global EPO market with its
trademarked product Repotin. The listing is planned for 2009 but is dependent on
market conditions and liquidity at the time.
Ribotech, a Bioclones subsidiary based in Cape Town, is in the early stages of
developing a facility for the manufacture of G-CSF, a partner product to
Repotin, used in the treatment of Neutropaenia. It is estimated that the
facility will be completed within 18 months and G-CSF released into global
markets shortly thereafter.
Bioclones is also assessing additional investments and licensing opportunities
to expand its product portfolio. The key mission of the company is to enhance
the infrastructure and skills of the African biotechnology sector and to ensure
the provision of affordable and life-saving drugs to those on the African
continent and throughout the world.
DIVIDENDS
No dividend has been declared for the current period. The directors continue to
work toward payment of dividends in the foreseeable future.
PROSPECTS
Sekunjalo is firmly established as a pre-eminent black economic empowerment
(BEE) group and is in its 9th year of listing on the JSE.
The directors expect a strong second half performance from the Fishing, IT and
Financial Services businesses. Furthermore, the Group will continue with its
strategy of migrating to an investment holding company and unlocking value
through separate listings of its IT and Biotechnology divisions.
Sekunjalo Investment Holdings (Pty) Ltd ("Holdings") is the largest shareholder
of SIL. Holdings, through Sekunjalo Telekom (Pty) Ltd, recently acquired 13% of
Nokia Siemens Networks ("NSN") RSA, by fulfilling the stringent empowerment and
other criteria. Holdings has tabled a memorandum of agreement to SIL whereby SIL
will accrue the full benefit of the NSN RSA investment, subject to conditions
precedent being fulfilled by 31 July 2008 - including the approval of NSN RSA
and NSN globally.
Dr MI Surve M Y Kajee
Executive chairman Chief executive officer
Cape Town
13 May 2008
GROUP INCOME STATEMENT
Unaudited Unaudited Audited
29 February 28 February 31 August
2008 2007 2007
R`000 R`000 R`000
Revenue 229 660 187 442 449 516
Profit from operations before (29 684) (14 902) (65 375)
material adjustments
Loan impairments (13 789) - -
Fair value adjustments - 27 000 250 904
Profit from operations after (43 473) 12 098 185 529
material adjustments
Income from associate (1 404) 241 (13)
Finance cost 747 (2 146) (11 413)
Profit before tax (44 130) 10 193 174 103
Tax 5 263 (1 117) (61 690)
Profit/(loss) after tax (38 867) 9 076 112 413
Attributable to:
Outside shareholders (4 306) (1 711) (2 204)
Parent (34 561) 10 788 114 619
(38 867) 9 076 112 413
Headline earnings (20 171) 10 788 116 353
Number of shares in issue 487 860 984 396 794 806 469 205 361
Weighted number of shares in 411 428 631 370 828 820 399 727 904
issue
Diluted number of shares in 414 377 452 425 352 624 416 478 528
issue
Headline earnings/(loss) per (4,90) 2,91 29,11
share (cents)
Earnings/(loss) per share (8,40) 2,91 28,67
(cents)
Diluted earnings/(loss) per (8,34) 2,54 27,52
share (cents)
Net asset value per share 61,11 101,62 125,97
(cents)
GROUP BALANCE SHEET
Unaudited Unaudited Audited
29 February 28 February 31 August
2008 2007 2007
R`000 R`000 R`000
ASSETS
Non-current assets 418 809 591 299 721 010
Property, plant and equipment 203 171 185 385 201 374
Investment properties - - -
Software development costs 13 006 - 12 362
Patents and trademarks 2 733 - 3 553
Contract costs due from - - -
customers
Pharma dossiers 21 250 22 950 22 100
Goodwill 92 286 89 261 85 885
Intangibles 2 943 14 891 2 166
Other investments 2 348 172 629 346 153
Investments in subsidiaries - - -
Investments in associates 18 528 10 120 -
Biological assets 18 357 17 331 17 882
Loans receivable 19 639 48 901 14 928
Deferred tax 24 548 29 831 14 607
Current assets 211 642 190 575 232 764
Inventory 41 978 36 954 35 279
Prepaid expenses 3 042 5 300 2 981
Forward exchange contract - 62 14
asset
Non-current assets held for 45 451 - 40 433
sale
Current loans 6 085 5 560 19 170
Contract costs due from - 3 885 -
customers
Current group loans - - -
Tax 1 932 486 1 166
Trade and other receivables 74 465 98 771 80 692
Bank 38 689 39 557 53 029
Total assets 630 451 781 874 953 774
EQUITY AND LIABILITIES
Capital and reserves
Share capital 29 28 29
Share premium 402 174 327 963 386 764
Non-distributable reserves 12 255 11 238 8 056
Other distributable reserves - 100 -
Accumulated losses (141 761) 62 372 166 481
Equity attributable to parent 272 697 401 701 561 330
Outside shareholders` interest 25 436 44 937 29 742
Total equity 298 133 446 638 591 072
Non-current liabilities 128 553 152 542 155 816
Interest-bearing borrowings 47 438 58 770 35 957
Deferred tax 63 538 70 214 106 911
Operating lease liability 507 578 348
Policyholders` liabilities - - -
Post-employment medical costs 2 072 2 212 2 072
Non-interest-bearing 14 998 20 768 10 528
borrowings
Current liabilities 203 765 182 694 206 886
Trade and other payables 69 394 67 495 68 445
Income received in advance 5 403 6 192 6 177
Policyholders` liabilities - 15 603 -
Current group loans - - -
Contract costs payable - 3 113 -
Liabilities held for sale 32 091 - 28 684
Provisions 18 498 13 725 30 926
Current portion of LTL 9 635 10 101 27 115
Bank overdraft 54 572 60 455 29 991
Tax 14 172 6 010 15 548
Total equity and liabilities 630 451 781 874 953 774
GROUP CASH FLOW STATEMENT
Unaudited Unaudited Audited
29 February 28 February 31 August
2008 2007 2007
R`000 R`000 R`000
Cash flow from operating (12 217) (1 938) (13 347)
activities
Cash flows from investing (23 604) (14 377) (33 794)
activities
Cash flows from financing (3 101) 6 285 81 044
activities
Increase/(decrease) in cash (38 922) (10 030) 33 903
and cash equivalents
Cash and cash equivalents at 23 038 (10 865) (10 865)
beginning of the year
Cash equivalents at the end of (15 884) (20 895) 23 038
the year
STATEMENT OF CHANGES IN EQUITY
Attribu- Outside Total equity
table to sharehol-
parent ders`
interest
R`000 R`000 R`000
Balance at 31 August 2006 365 191 49 655 414 846
Change in accounting policy - - -
Prior period error (1 142) (1 012) (2 154)
Restated balance 2006 364 049 48 643 412 692
Net profit/(loss) for the year 114 619 (2 204) 112 415
Dividends paid (382) - (382)
Movement in share capital 2 - 2
Movement in share premium 85 356 - 85 356
Movement in other distributable (100) - (100)
reserves
Movement in non-distributable (2 214) - (2 214)
reserves
Acquisitions of subsidiaries - (16 697) (16 697)
Balance at 31 August 2007 561 330 29 742 591 072
Change in accounting policy - - -
Prior period error - - -
Restated balance 2007 561 330 29 742 591 072
Net profit/(loss) for the year (34 561) (4 306) (38 867)
Dividends paid - - -
Movement in share capital - - -
Movement in share premium 15 410 - 15 410
Movement in other distributable - - -
reserves
Movement in non-distributable 4 176 - 4 176
reserves
CRRF - - -
Reclassification of investment (273 658) - (273 658)
fair value on becoming an
associate
Acquisitions of subsidiaries - - -
Balance at 29 February 2008 272 697 25 436 298 133
GROUP SEGMENTAL REPORT
Financial Informatics Fishing Healthcare
Services
Unaudited Unaudited Unaudited Unaudited
29 Feb 2008 29 Feb 2008 29 Feb 2008 29 Feb 2008
R`000 R`000 R`000 R`000
Revenue 74 965 34 912 93 566 14 919
External sales 72 427 34 912 93 566 14 919
Intergroup sales 2 538 - - -
Segment result
Operating profit/ (6 333) 5 007 (10 677) (19 657)
(loss)
Included in
segment results:
Fair valuations (601) - (95) (13 789)
and impairments
Depreciation and (289) (209) (969) (1 463)
amortisation
Carrying amount 88 078 83 621 340 817 55 639
of assets
Carrying amount 94 761 72 893 163 863 192 486
of liabilities
Loss from - - - -
associate
Capital 49 173 16 128 61
expenditure
GROUP SEGMENTAL REPORT (CONTINUED)
Biotech- Investments Other
nology
Unaudited Unaudited Unaudited
29 Feb 2008 29 Feb 2008 29 Feb 2008
R`000 R`000 R`000
Revenue - 114 15 439
External sales - 114 13 722
Intergroup sales - - 1 717
Segment result
Operating profit/(loss) - (34 092) 3 626
Included in segment results:
Fair valuations and - (24 577) -
impairments
Depreciation and amortisation - (187) (164)
Carrying amount of assets 349 351 1 185 504 49 565
Carrying amount of liabilities 81 699 165 677 51 254
Loss from associate (1 404) - -
Capital expenditure - 62 53
GROUP SEGMENTAL REPORT (CONTINUED)
Eliminations Group
Unaudited Unaudited
29 Feb 2008 29 Feb 2008
R`000 R`000
Revenue (4 255) 229 660
External sales - 229 660
Intergroup sales (4 255) -
Segment result
Operating profit/ (loss) 18 653 (43 473)
Included in segment results:
Fair valuations and 24 577 (14 485)
impairments
Depreciation and amortisation - (3 281)
Carrying amount of assets (1 518 123) 634 452
Carrying amount of liabilities (486 315) 336 318
Loss from associate - (1 404)
Capital expenditure - 16 526
GROUP SEGMENTAL REPORT
Financial Informatics Fishing Healthcare
Services
Unaudited Unaudited Unaudited Unaudited
28 Feb 2007 28 Feb 2007 28 Feb 2007 28 Feb 2007
R`000 R`000 R`000 R`000
Revenue 37 456 27 567 101 983 19 451
External sales 37 456 27 567 101 983 19 451
Intergroup sales - - - -
Segment result
Operating profit/ (2 102) 2 560 (3 102) (1 751)
(loss)
Included in
segment results:
Fair valuations - - - -
and impairments
Depreciation and (155) (293) (552) (1 758)
amortisation
Carrying amount of 108 293 81 068 322 052 122 332
assets
Carrying amount of 71 748 70 532 149 708 183 139
liabilities
Loss from - - - -
associate
Capital 60 170 2 452 621
expenditure
GROUP SEGMENTAL REPORT (CONTINUED)
Biotech- Investments Other
nology
Unaudited Unaudited Unaudited
28 Feb 2007 28 Feb 2007 28 Feb 2007
R`000 R`000 R`000
Revenue - 320 2 165
External sales - - 985
Intergroup sales - 320 1 180
Segment result
Operating profit/ (loss) 27 474 (7 064) (3 917)
Included in segment
results:
Fair valuations and 27 000 - -
impairments
Depreciation and - (197) -
amortisation
Carrying amount of assets 119 033 1 071 817 20 499
Carrying amount of 37 992 138 655 24 346
liabilities
Loss from associate - - -
Capital expenditure - - 59
GROUP SEGMENTAL REPORT (CONTINUED)
Eliminations Group
Unaudited Unaudited
28 Feb 2007 28 Feb 2007
R`000 R`000
Revenue (1 500) 187 442
External sales - 187 442
Intergroup sales (1 500) -
Segment result
Operating profit/ (loss) - 12 098
Included in segment results:
Fair valuations and impairments - 27 000
Depreciation and amortisation - (2 955)
Carrying amount of assets (1 063 220) 781 874
Carrying amount of liabilities (340 884) 335 236
Loss from associate - -
Capital expenditure - 3 362
Notes:
1. Operating profits/(losses) are stated after elimination of management fees.
2. These financial statements have been prepared in accordance with the
disclosure requirements of IAS 14.
DIRECTORS: *Dr MI Surve (Executive chairman), *M Y Kajee (Chief executive
officer), *K Abdulla (Chief financial officer),
*Rev. V C Mehana, N T Noland, M Goamab The First, Z A Kota-Fredericks, J P van
der Merwe, S Young
*Executive
Company Secretary: NC Katamzi
Registered Address: Sekunjalo House, Block F, The Terraces, Steenberg Office
Park, Tokai, 7945, Cape Town, South Africa
Postal Address: PO Box 31344, Tokai, 7966, Cape Town, South Africa
Tel: +2721 702 7700 Fax: +2721 702 7744 Email:info@sekunjalo.com
Transfer Secretaries: Link Market Services (Pty) Ltd,
11 Diagonal Street, Johannesburg, 2001
Sponsor: Rand Merchant Bank (A division of FirstRand Bank Limited)
Date: 13/05/2008 17:38:00 Produced by the JSE SENS Department.
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