| Tue 30 Sep 2008, 12:36 | | SKY - Sea Kay Holdings - Condensed Reviewed Annual Financial Statements For |
|
SKY
SKY
SKY - Sea Kay Holdings - Condensed Reviewed Annual Financial Statements For
The Year Ended 30 June 2008 And Notice Of General Meeting
SEA KAY HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2006/004967/06)
JSE code: SKY
ISIN: ZAE000102380
("Sea Kay" or "the group")
CONDENSED REVIEWED ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE
2008
HIGHLIGHTS
- Revenue up 160% to R650 million
- Operating profit up 179% to R134 million
- Attributable earnings up 109% to R85,830 million
- Headline earnings up 109% to R85,830 million
- Headline earnings per share up 44% to 18.14 cents
- Subsequent to year end the company has collected R270 million of it
outstanding debtors book.
Note: 2007 Comparative figures are effectively for a 6 month period.
The directors of Sea Kay are pleased to announce the group`s results for the
year ended 30 June 2008.
CONDENSED INCOME STATEMENTS
Unaudited Audited Year
Year ended ended
30 June 30 June
2008 2007
R000 R000
Revenue 649,827 250,301
Operating profit 133,590 47,941
Investment revenue 6,946 2,370
Finance costs (19,846) (4,882)
Profit before taxation 120,690 45,429
Taxation (32,113) (4,318)
Profit after taxation 88,577 41,111
Allocated as follows:
Equity shareholders of Sea Kay
Holdings Limited 85,830 41,111
Minority Interest 2,747 -
88,577 41,111
Unaudited Audited Year
Year ended ended
30 June 2008 30 June 2007
Reconciliation of headline
earnings
Profit after taxation 85,830 41,111
Headline earnings 85,830 41,111
Weighted average number of 473,223 326,653
shares
Earnings per share (cents) 18,14 12,59
Headline earnings per share 18,14 12,59
(cents)
CONDENSED BALANCE SHEETS
Un-audited Audited Year
Year ended
ended 30 June
30 June 2007
2008
R000 R000
ASSETS
Non-current assets 367,830 88,579
Property, plant and equipment 96,794 10,991
Goodwill 270,071 77,588
Intangible assets 339
Deferred tax 626
Current assets 582,863 146,592
Inventories 21,719 9,940
Trade and other receivables 435,718 121,698
Other financial assets - 573
Taxation receivable - 1,050
Construction contracts and 62,314 12,184
receivables
Cash and bank balances 63,112 1,147
Total assets 950,693 235,171
EQUITY AND LIABILITIES
Total equity 343,525 144,816
Issued capital 153,100 106,536
Retained earnings 124,110 38,280
Minority interest 66,315 -
Non-current liabilities 119,807 24,262
Loans from shareholders 27,936 5,004
Other financial liabilities 51,060 13,242
Finance lease 20,576 3,120
Deferred taxation 20,235 2,896
Current liabilities 487,361 66,093
Capital accounts from other 2,447
ventures 233,534 46,623
Trade and other payables
Other financial liabilities 187,754 3,185
Current tax payable 20,164 -
Loans payable 6,426 5,757
Finance lease obligation 16,034 1,909
Provisions 20,871
Bank overdrafts 8,594
Operating lease liability 131 25
Total equity and liabilities 950,693 235,171
Net asset value per share (cents) 72.6 44.3
Net tangible asset value per share 15.5 20.6
(cents)
Number of shares in issue at year 477,531 424,531
end
CONDENSED STATEMENT OF CHANGES IN EQUITY
Unaudited Audited
Year Year
ended ended
30 June 30 June
2008 2007
R000 R000
Balance at 1 July 144,816 -
Shares issued 46,563 106,536
Ordinary dividends - (2,831)
Minorities purchased 63,569 -
Profit for the period 85,831 41,111
Minorities share in 2,746
current period profit
Balance at end of 343,525 144,816
period
CONDENSED CASH FLOW STATEMENTS
Unaudited Audited Year
Year ended
ended 30 June 2007
30 June
2008
R000 R000
Cash flows from operating (42,480) (54,467)
activities
Cash utilised in operations (32,006) (48,054)
Net finance costs (10,653) (2,478)
Taxation received (paid) 179 (3,935)
Cash flows from investment (162,398) 17,670
activities
Property, plant and machinery (88,375) (12,282)
acquired
Proceed from intangible assets (395)
Sale of Property, plant and 69 67
equipment (76,716) 30,458
Acquisition of business 911
Proceeds from loans payable 1,535
Loans to/from group companies
Repayment of loan 573 (573)
Cash flows from financing 275,322 29,351
activities
Proceeds on shares issued 17 145
Long term liabilities raised / 275,305 32,037
(repaid)
Ordinary dividends paid - (2,831)
Total movement for the year 70,443 (7,446)
Cash and cash equivalents at (7,446) -
beginning of period
Effect of exchange rate
movement on cash balances 115
Cash and cash equivalents at 63,112 (7,446)
end of period
CONDENSED SEGMENTAL ANALYSIS
Building, Material Civil Total
Supply and Property Engineering
Development
R000 R000 R000
Revenue 569,599 80,228 649,827
Profit before tax 111,154 9,536 120,690
Total assets 616,117 334,575 950,692
Total liabilities 439,026 168,141 607,167
Property plant and 34,513 62,281 96,794
equipment
Total current 318,574 168,786 487,360
liabilities
ADOPTION OF NEW ACCOUNTING STANDARDS
During the current year the group adopted IFRS 7: Financial Instruments:
Disclosure, which is effective for annual reporting periods beginning on or
after 1 January 2007 and the consequential amendments to IAS 1: Presentation
of Financial Statements.
RECLASSIFICATION OF COMPARATIVE FIGURES
Certain comparative figures have been reclassified.
REVIEW OPINION
The annual financial statements have been reviewed by the company`s auditors,
SAB&T and their review opinion is available for inspection at the company`s
registered office.
ACQUISITIONS
Ibuyile Development Consortium, which was previously proportionately
consolidated, is now 90% owned by Sea Kay, following the group acquiring an
additional 45% of the issued share capital on 1 October 2008.
On 1 May 2008 the group acquired a 60% interest in Coveway (Pty) Limited.
The fair values of the assets and liabilities of the joint venture and
subsidiary acquired are set out below:
R`000
Total assets 305,621
Total liabilities 173,267
Minority interest recognised on consolidation 66,316
Goodwill recognised on consolidation 192,483
Purchase price of acquisitions 132,354
The goodwill recognised consists of:
Ibuyile Development Consortium 13,854
Coveway Trade and Invest(Pty) Limited 9,000
19,854
Ibuyile
With effect from 1 October 2008, Sea Kay acquired a 45% additional
shareholding in Ibuyile Development Consortium for a cash consideration of
R28 million.
Ibuyule is responsible for the turn-key development of the Delft symphony
section of the N2 Gateway housing project.
For the year ended 30 June 2008 Ibuyile contributed R96,9 million to revenue
and profit before tax of R4,4 million.
The quantum of goodwill arising on this acquisition is as a result of the key
role that Ibuyile plays in the N2 Gateway development. In this regard it is
important to note that Ibuyile is only one of three consortia on the panel of
the N2 Gateway project that are eligible to enter into construction and
development contracts with Government on that project.
Coveway Trade and Invest (Pty) Limited
Effective 1 May 2008, Sea Kay, acquired 60% shareholding in Coveway Trade and
Invest (Pty) Limited. Coveway Trade and Invest (Pty) Limited trading as
Lonerock is a niche construction and plant hire business, specialising in
bulk earthworks, road and infrastructure, and which business is carried on by
Lonerock and its subsidiary, Lonerock Plant (Pty) Limited.
Lonerock has a solid track record and its reputation in its field of activity
as well as its potential to grow with Sea Kay in order to deliver integrated
sustainable human settlements will enhance Sea Kay`s future prospects. Sea
Kay is currently engaged in construction activities, together with Lonerock,
on the Olievenhoutbosch project in Centurion on behalf of ABSA Devco where
Lonerock is providing civil engineering services whilst Sea Kay is
constructing 3 000 affordable housing units.
The transaction presented Sea Kay with the capability to provide a "one-stop"
service to Government and the major financial institutions in the production
of turn-key developments of integrated human settlements. By controlling both
the civil engineering services and the top-structure pricing, Sea Kay will
have a definite advantage over competitors who deliver only fragmented
development segments.
For the year ended 30 June 2008 Lonerock contributed R80,3 million to revenue
and profit before tax of R4,1 million.
The quantum of goodwill arising on this acquisition is high as a significant
portion of the value of the business resides in the quality of the workforce,
which is not recognisable as an intangible asset.
BASIS OF PREPARATION
The annual financial statements have been prepared in terms of International
Financial Reporting Standards ("IFRS"), IAS34: Interim Financial Reporting,
Schedule 4 of the South African Companies Act and in terms of the company`s
current accounting policies.
BORROWINGS
Borrowings increased significantly during the past financial year due to the
acquisition of Lonerock and Ibuyile, and an increase in revenue of 160%.
The increased borrowings were financed as follows:-
NHFC revolving credit facility;
Long-term finance with regards to acquisitions;
Increased credit facilities with suppliers.
OVERVIEW OF THE RESULTS
Revenue increased by 160% to R649,8 million (2007 : R250,3 million).
Headline earnings of R85,8 million were achieved for the year ended
30 June 2008, exceeding the revised consolidated profit forecast contained in
an announcement dated 5 November 2007 by 3%.
The operating profit increased from R47,9 million to R133,6 million. In
addition to the pleasing operating margin achieved, the group embarked on a
further drive to enhance the integrated process of delivery by establishing
three and acquiring one subsidiary into the value chain. It also demonstrates
the success of management`s strategy of vertical integration and further
similar investments that will add value and enhance shareholder returns will
be pursued in the new financial year.
Subsequent to the year end, the company has collected R270 million of the
outstanding debtors book.
GENERAL COMMENTARY
The group is focused on the development and construction of subsidised (RDP),
affordable (GAP or Credit linked) and bonded housing as well as the
construction of community facilities through sustainable integrated human
settlements on a turn-key basis.
The general construction sector within which Sea Kay operates has shown
elements of strong growth, however, due mainly to high interest rates,
properties are increasingly becoming too expensive, especially for first-time
home buyers. This resulted in a slow-down of sales in the GAP, credit linked
and entry level bonded housing market.
Pressure has accordingly been placed on existing stock in the GAP market
(i.e. dwellings in the R200k to R380k range) where a huge shortage already
exists and where insufficient construction is taking place. It is expected
that this will increase the demand for the integrated model of sustainable
human settlements along the policy guidelines of the National Department of
Housing.
Sea Kay is accordingly well-positioned in this growth-and-demand sector as an
expert affordable housing construction company.
Government and financial institution-led initiatives should inevitably result
in strong, sustainable demand for the services provided by Sea Kay as is
evident from Government`s announced housing budget of more than R6 billion;
and rising by an average of 14,4% per annum to 2010/11. It is Government`s
stated intent to house 10 to 12 million people in approximately 2.3 million
fully subsidised houses by 2014. In addition, financial institutions continue
to increase their spending in the housing development market and have
earmarked approximately R42 billion for this purpose, until the end of 2009,
and have earmarked an additional R65 billion until the end of 2012.
Government and private sector (especially the banking sector) spending on
housing and infrastructure is higher than in any prior period in the
country`s history.
Sea Kay recently established a property development company which has secured
three projects namely Thorntree View in Tshwane for 80 credit linked housing
units, 200 bonded units in Beverly Hills (Sedibeng) and 1333 credit linked
units in Delft Symphony. These contracts are at higher margins when compared
to the traditional home-building construction industry. It is anticipated
that Sea Kay Property Development will enjoy good growth in the medium- to
long- term.
Sea Kay has, as part of its planning for the new financial year, pro-actively
commenced restructuring the process for its debtors-and-cash management
system to ensure timeous payments and constant cash flow for continuous and
sustained growth.
The process has been aligned with the Gauteng Department of Housing where
payments are expedited due to the de-linking of beneficiary administration
from the payment process, the introduction of an extra milestone payment, and
the certification of payments that has been steam-lined to be effected within
30 days after statement. (This is a Government policy that has been
negotiated previously).
Eskom`s wide-spread electricity supply interruptions have not affected Sea
Kay`s operations. The provision of electricity to Sea Kay`s various projects
is generally handled by their clients (i.e. Government or Provisional
Authorities) and on all fully-subsidised projects the electrification of
units is a post-construction event.
OPERATIONAL OVERVIEW
Construction:
Sea Kay continues to improve production levels and prospects for the year
ahead remain positive. All the subsidiaries experienced significant growth as
the spending by Government and the financial sector continued to materialise.
The revenue for Sea Kay Engineering Services was slightly lower than expected
mainly due to the following reasons; firstly the illegal invasions on the N2
Gateway project in Cape Town, resulting in the inability to deliver as
planned. Secondly, unusual rain delays during February to April in Gauteng
caused unexpected delays. Thirdly the Lonerock acquisition was anticipated to
be effective from 1 February 2008, but only became effective from 1 May 2008.
Fourthly, the steep rise in interest rates resulted in a slowdown for the GAP
or credit-linked market.
Ibuyile Development Consortium:
Ibuyile Development Consortium is responsible for the turn-key development of
the Delft Symphony section of the greater N2 Gateway housing project in Cape
Town. Delays were experienced on this project as a result of the illegal
occupation of the completed and semi-completed houses during December 2007.
As a result of a court order obtained on 6 February 2008 through an urgent
application, the illegal occupants were removed on 19 February 2008. Steps
have been taken to manage the effect of the delays and management is
confident that the matter was dealt with effectively.
Sea Kay Engineering Services (Pty) Limited:
Sea Kay Engineering Services is a mass housing contractor and has commenced
various new projects, including RDP, credit link and bonded houses in Gauteng
and in the Western Cape.
PROSPECTS
Having regard to the following:
The State President reiterated in his State of the Nation address on 8
February 2008 that the backlog of 2.3 million houses remains a high priority
for the National Government and that 260 000 houses must be constructed per
annum to eradicate informal settlements.
It has been established that there is an additional need for GAP houses,
totalling more than 500 000.
National Housing Minister, Lindiwe Sisulu commented recently that "South
Africa needs to double the pace of housing provision if it is to meet its
target of eradicating informal settlements and slums by 2014".
Sea Kay management is confident that there is potential for significant
growth in the group in all three spheres, namely infrastructure and housing
construction, in-house material supply-chain and property development.
Management is confident that Sea Kay will deliver further turn-key
development projects on a larger scale. Challenges facing the group relate to
the application of risk management in the selection process of suitable
projects, improving margins and managing increased turnover.
The future outlook for the group remains exceptionally buoyant and Sea Kay
intends to continue expanding, both organically and acquisitively, should
appropriate opportunities arise. During the forthcoming financial year, Sea
Kay intends growing its supply chain in terms of the potential acquisition
and development of building materials, innovative products and complementary
construction-related services. Sea Kay`s current Construction Industry
Development Board (CIDB) rating is 8 and Sea Kay has applied for a 9 rating,
as all necessary criteria have been fulfilled. This increased rating will
allow Sea Kay to bid on projects with a value in excess of R100 million. The
confirmation of a 9GB-rating is eagerly awaited by the company.
SKILLS
Sea Kay is aware of the need for adequate skills in the construction sector
and especially for a company expanding at the rate that Sea Kay is.
The group continues to attract and train skills in order to support growth
aspirations.
HEALTH AND SAFTEY
Sea Kay has employed a private company specializing in this field, to manage,
monitor and sign off on all related aspects, and on all the sites where Sea
Kay have construction activities. Sea Kay`s staff are also continuously
trained and accredited by this company.
NEW SUBSIDIARIES ESTABLISHED
The following business ventures were embarked on, to further enhance the Sea
Kay vertically integrated supply-chain model:
Silver Falcon (Pty) Limited was established as a wholly-owned subsidiary in
order to give effect to a decision by Sea Kay to change its roofing
structures to roll-formed light weight zincalume steel structures; similar to
those used in Australia.
The manufacturing factory is situated in Alrode, Alberton and this option
provides Sea Kay with a cost-effective solution that saves on transport cost
and is superior in quality, strength and longevity to any other residential
housing truss-system on the market.
Sea Kay Property Development (Pty) Limited was established to secure
development revenue and a natural flow of construction work for Sea Kay
Engineering Services. Sea Kay`s Property Development is based in Cape Town,
and was profitable during its first year of existence. The company intends to
open offices in Gauteng in the near future.
Kong Crete (Pty) Limited was established during 2008 in order to ensure a
constant flow of quality concrete and to provide a handle on supply-and-
demand price increases. Wastage is virtually eliminated, and the concrete
delivery and quality to each stand is electronically linked, registered and
measured. Turnaround time is hence considerably reduced and concrete quality
variations limited.
Also effective from 1 May 2008, Sea Kay acquired 60% of Lonerock, a niche
civil engineering construction and plant hire business. Lonerock has
performed to expectations and Sea Kay plans to expand Lonerock`s footprint
into other provinces. By acquiring a civil engineering and infrastructure
company, Sea Kay will control both the civil engineering services and the top-
structure pricing, giving it an advantage over competitors and will enable
the group to effectively deliver turn-key property developments.
The directors are confident that in the absence of any unexpected events or
changes in the current operating environment, the Group will continue to grow
its revenue in the next financial year. The un-audited forward order book for
the Group is in excess of R 2 billion spanning over a 30 month period.
DIVIDENDS
The board has reviewed the current year`s results and has decided not to
declare a dividend. Cash generated by the group is to be invested in the
continued growth of Sea Kay`s activities.
STATEMENT OF GOING CONCERN
The condensed financial statements have been prepared on the going-concern
basis since the directors have every reason to believe that the group has
adequate resources in place to continue in operation for the foreseeable
future.
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the annual general meeting of shareholders of the
company will be held on Friday, 14 November 2008 at 10h00 at the offices of
Vunani Corporate Finance in Hyde Park, Johannesburg.
Vereeniging
30 September 2008
Directors:
MH Lomas* (Chairman), C Kruger (CEO), G Olivier (Group Financial Director), P
van der Schyf, A Deshmukh#, BW Marais*, C Louw*
*independent non-executive, # non-executive
Registered office and postal address:
7 Patton Road, Duncanville, Vereeniging, 1930
PO Box 925, Meyerton, 1960
Website: www.seakay.co.za
Company secretary:
H Steyn
Transfer secretaries:
Link Market Services South Africa (Proprietary) Limited
Auditors:
SAB&T Incorporated, Registered Auditors, Chartered Accountants (SA)
Sponsor:
Vunani Corporate Finance
Date: 30/09/2008 12:36:31 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
