| Thu 26 Feb 2009, 8:30 | | SKY - Sea Kay - Unaudited Interim Group Results For The Six Months Ended |
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SKY
SKY
SKY - Sea Kay - Unaudited Interim Group Results For The Six Months Ended
31 December 2008
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")
UNAUDITED INTERIM GROUP RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2008
Revenue increased by 83%
Operating profit increased by 102%
Fully diluted headline earnings per share increased by 29%
Cash generated from operations positive R53,9 million
CONDENSED INCOME STATEMENTS Unaudited Unaudited Audited
Six Six Year
Months Months Ended
Ended Ended
31 December 31 December 30 June
2008 2007 2008
R`000 R`000 R`000
Revenue 432,411 236,462 649,827
Operating profit 81,253 40,191 133,590
Investment revenue 247 7,015 6,946
Finance costs (13,976) (6,182) (19,887)
Profit before taxation 67,524 41,024 120,649
Taxation (19,536) (12,231) (32,113)
Profit after taxation 47,988 28,793 88,536
Allocated as follows:
Equity shareholders of Sea Kay
Holdings Limited 37,843 28,581 85,789
Minority Interest 10,145 212 2,747
47,988 28,793 88,536
Reconciliation of headline earnings
Earnings attributable to equity holders 37,843 28,793 85,789
Less: Profit on sale of property, plant
and equipment - - (53)
Headline earnings 37,843 28,793 85,736
Weighted average number of shares in
issue (`000) 482,934 471,723 473,223
Earnings per share (cents) 7,84 6,10 18,13
Headline earnings per share (cents) 7,84 6,10 18,12
CONDENSED BALANCE SHEETS
Unaudited Unaudited Audited
Six Six Year
Months Months Ended
Ended Ended
31 December 31 December 30 June
2008 2007 2008
R`000 R`000 R`000
ASSETS
Non-current assets 322,111 101,880 299,926
Property, plant and equipment 117,956 17,449 96,794
Goodwill 202,167 84,431 202,167
Intangible assets - - 339
Deferred tax 1,988 - 626
Current assets 516,764 316,501 582,863
Inventories 19,823 19,358 21,719
Other financial assets 3,077 - -
Construction contracts and receivables 121,744 47,948 62,314
Trade and other receivables 307,908 235,919 435,718
Cash and bank balances 64,212 13,276 63,112
Total assets 838,875 418,381 882,789
EQUITY AND LIABILITIES
Total equity 340,595 223,674 275,629
Issued capital 170,077 153,099 153,099
Retained earnings 161,912 66,861 124,069
Minority interest 8,606 3,714 (1,539)
Non-current liabilities 181,785 56,517 119,807
Non-current loans payable 22,092 - -
Non-current interest bearing loans 104,422 - 27,936
Other financial liabilities 6,643 50,090 51,060
Finance lease 33,564 3,621 20,576
Deferred taxation 15,064 2,806 20,235
Current liabilities 316,495 138,190 487,353
Capital accounts from other ventures - - 2,447
Trade and other payables 165,893 71,750 233,534
Other financial liabilities 86,449 - 187,754
Current tax payable 40,224 17,984 22,956
Loans payable 6,252 28,603 6,426
Finance lease 15,080 1,973 16,034
Lease smoothing reserve 155 - 131
Provisions - 15 18,071
Bank overdrafts 2,442 17,865 -
Total equity and liabilities 838,875 418,381 882,789
CONDENSED STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
Six Six Year
Months Months ended
Ended ended
31 December 31 December 30 June
2008 2007 2008
R`000 R`000 R`000
Balance at 1 July 275,629 144,816 144,816
Shares issued 16,978 46,563 46,563
Minorities purchased - 3,502 (4,286)
Profit for the period 37,843 28,581 85,789
Minorities share in current period
profit 10,145 212 2,747
Balance at end of period 340,595 223,674 275,629
CONDENSED CASH FLOW STATEMENTS
Unaudited Unaudited Audited
Six Six Year
Months Months Ended
Ended Ended
31 December 31 December 30 June
2008 2007 2008
R`000 R`000 R`000
Cash generated from/ (used) in
operations 69,918 (82,194) (38,300)
Net finance costs (13,728) 833 (12,941)
Taxation (paid)/ received (2,268) 5,884 (2,542)
Net cash generated by/ (from)
operating activities 53,922 (75,477) (53,783)
Purchase of Property, plant and
equipment (26,903) (7,091) (27,015)
Sale of Property, plant and equipment - - 69
Purchase of other intangible assets - - (395)
Acquisition of businesses - (13,778) (21,232)
Proceed/Repayment of loan (3,077) 573 573
Cash utilised in investment activities (29,980) (20,296) (48,000)
Proceeds on shares issued 10,000 46,563 46,563
Advances of shareholder`s loan - - 23,601
Repayment/ (proceeds) of other financial
liabilities (35,284) 52,068 102,063
Cash flows from financing activities (25,284) 98,631 172,227
(Decrease)/increase in cash and cash
Equivalents (1,342) 2,858 70,444
Cash and cash equivalents at beginning
of period 63,112 (7,447) (7,446)
Effects of exchange rate movements on
cash - - 114
Cash and cash equivalents at end of
period 61,770 (4,589) 63,112
Segmental Analysis External Profit
Income Statement Sales before Tax
R`000 R`000
Building, Material Supply
and Property Development 214,653 31,837
Civil Engineering 217,758 35,687
Total 432,411 67,524
Balance sheet Property Total
Total Total Plant & Current
Assets Liabilities Equipment Liabilities
R`000 R`000 R`000 R`000
Building, Material Supply
And Property Development 457,238 307,796 43,959 221,822
Civil Engineering 381,637 190,484 73,997 94,673
Total 838,875 498,280 117,956 316,495
Capital expenditure and depreciation for the period ended 31 December 2008
Unaudited Unaudited Audited
Six Six Year
Months Months Ended
Ended Ended
31 December 31 December 30 June
2008 2007 2008
R`000 R`000 R`000
Capital expenditure for the period 26,903 7,091 12,282
Depreciation for the period 5,741 391 1,050
Capital expenditure committed or
authorised for the period 40,300 9,855 19,500
FINANCIAL PREPARATION
The interim results for the six months ended 31 December 2008 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.
GROUP PROFILE
Sea Kay operates throughout South Africa, with expertise in the construction of
mass housing through Sea Kay Engineering Services (Pty) Ltd ("Sea Kay
Engineering"). The group also installs township services, constructs roads and
freeways and undertakes civil engineering projects through its subsidiary
Lonerock Construction (Pty) Ltd ("Lonerock"). Materials such as bricks, roof
trusses and roof components are provided by Sedibeng Bricks (Pty) Ltd ("Sedibeng
Bricks") and Silver Falcon (Pty) Ltd ("Silver Falcon"), primarily to support Sea
Kay Engineering.
The current revenue contribution of the Group activities is as follows:-
Low-cost housing: 38%
GAP & bonded housing: 9%
Civil Engineering Services: 50%
Property Development: 1%
Material Supply: 2%
The group has six trading entities, with Lonerock representing 50%, Sea Kay
Engineering 47%, Sedibeng Bricks 1%, Silver Falcon 1% and Property Development
1% of turnover. The major contributors to operating profit are Lonerock at 50%
and Sea Kay Engineering at 47%.
TRADING CONDITIONS
Trading conditions were difficult during the period due to the economic
conditions putting pressure on banks and financial institutions` ability to fund
projects and provide capital to businesses and individuals. This resulted in a
slowdown in the delivery of houses in the GAP or credit link market (houses in
the R200k to R380k range and property development projects.
On the positive side, Government spending in the low-cost housing market remains
high and a national priority. As this sector often has slower payment terms,
during the period, the group established a costing office under the leadership
of a Quantity Surveyor with vast experience in the construction environment. The
main focus of this office will be to facilitate and track payments to ensure
maximum efficiency in the collection of debtors. Dedicated staff to speed up
Government payments has been identified and linked to relevant officials at
Government offices for this purpose.
Traditionally, Government spending increases in the second six months of the
year due to delays in the awarding of subsidised housing programmes in the first
six months. The group is therefore confident that spending in this sector will
improve for the rest of the year.
The civil engineering and low-cost housing sectors are expected to provide
continued growth in the short term, while the GAP and bonded housing market is
likely to stay under pressure at least until the end of 2009. Sea Kay
Engineering and Lonerock are well positioned to take advantage of the high
Government spending on infrastructure development across the country.
Results overview
The directors of Sea Kay present the unaudited group financial results for the
six months ended 31 December 2008 ("the period").
Group revenue increased from R236,5 million to R432,4 million and operating
profit more than doubled from R40,2 million to R81,3 million, mainly due to the
contribution from the Lonerock acquisition which accounted for R41,3 million of
the group`s operating profit.
The comparative interim numbers do not include Lonerock`s results as the date of
acquisition was 1 May 2008.
Revenue from the largest business, Sea Kay Engineering, decreased from
R232,1 million to R204,0 million. This was due to the awarding of a major
contract in the Western Cape being concluded much later than anticipated,
resulting in the construction activities starting four months late.
However, the group`s operating margin pleasingly increased from 17% to 18.8% due
to increased subsidies on BNG (low cost) and RDP units, as well as increased
internal efficiencies.
Headline earnings and earnings of R37,8 million (HEPS and EPS of 7.84 cents per
share) were achieved for the period ended 31 December 2008. The results
represent a significant improvement compared to those of the previous period,
mainly due to the Lonerock acquisition. No dilution in earnings was experienced
during the period under review.
Cash generated from operations during the period was positive, R53,9 million
compared to a cash outflow of R75,5 million at December 2007. This was achieved
due to a focus on quicker debtors` collection, supplemented by positive inflows
from Lonerock`s customers.
At the end of the period, the group was cash positive with a balance of R61,8
million compared to an overdraft of R4.6 million at December 2007.
Trade receivables decreased by R127,8 million from R435,7 million at June 2008
to R307,9 million. This was achieved through hard work and continued support
from top management. Compared to December 2007, debtors increased as a result of
the acquisition of Lonerock.
The group spent R26,9 million on property, plant and equipment. Of this, R15,5
million was spent on the acquisition of new equipment to enhance production
capacity. The investment in equipment has resulted in a significant reduction in
equipment rental charges. The group does not expect to spend a large amount on
property, plant and equipment in the remaining six months of the financial year.
Operational Overview
1. Sea Kay Engineering`s performance for the period under review was below
expectations, mainly as a result of the following factors:
Dramatic slowdown in affordable housing (GAP and credit link) projects due
to the economic downturn.
- As a result of this slowdown, the group shifted its focus on the
housing side to BNG (low-cost) construction. Within the next six
months, the group expects higher volumes from this sector. The new
allocations for BNG by Government is expected within the next month
and as outlined in the Government budget, an additional amount of R45
billion over the next three years was allocated to the BNG programme.
This will bring the total spending on housing (including allocations
to local authorities and municipal infrastructure) to R44,8 billion
for the next financial year. Management also expects a further drive
from Government to eradicate informal settlements, which should result
in a bigger allocation of BNG houses to be constructed by Sea Kay
Engineering.
- Sea Kay Property Development (Pty) Ltd ("Sea Kay Property") has been
involved in negotiations with financial institutions to develop its
own integrated and sustainable human settlement projects. Four of
these are being negotiated and a fifth project should commence shortly
in the Western Cape. This will ensure a future pipeline of work for
Sea Kay Engineering and will continue for a number of subsequent
financial years. The activities will consist of construction
opportunities for Sea Kay Engineering in the low-cost, GAP and bonded
housing market. Furthermore, these projects will provide civil
engineering services, as well as commercial and community facilities
for Lonerock and Sea Kay Engineering. Strategic partnerships with
financial institutions outside of traditional banks and other
corporate clients are also currently being evaluated to further
enhance the future pipeline for Sea Kay Engineering and Lonerock.
Slow payment from major customers.
As outlined above, a new dedicated collection team should
significantly improve payment terms from customers.
2. Lonerock
Lonerock achieved higher than anticipated revenue at R217,7 million and
profit before tax of R35,6 million. The major contributing factors to this
were the finalisation of Lonerock`s CIDB9 rating, which has allowed it to
tender on larger and more profitable projects. Furthermore, Lonerock
restructured its tendering department to ensure a more accurate and
efficient tendering process. The major projects during the period under
review were the SANRAL freeway expansion project, the Heineken Breweries
project, the Paarl Eco Estate and the Mooifontein Eco Estate. Lonerock is
tendering on several large civil engineering projects, which, if
successful, should increase its revenue significantly.
Prospects
Management is confident that Government`s spending to improve the country`s
infrastructure will continue to increase. Housing and the eradication of
informal settlements remain at the forefront of Government`s infrastructure
investment programmes.
With Government`s intention to spend R44,8 billion on housing, the group`s low-
cost housing construction activities are expected to expand in the second half
of the financial year, as well as into 2009/2010. Certain National Department of
Housing priority projects received special mention in the budget speech, which
included the N2 Gateway project where the group is involved in the construction
process of over 5 000 houses. Another allocation to Sea Kay Engineering of at
least 2 000 houses is also expected on that project.
As outlined above, the group has pro-actively focused on securing a healthier
pipeline of projects through Sea Kay Property. These initiatives have been
developed hand-in-hand with high level negotiations with a number of companies
regarding mass housing projects.
The group therefore expects continued strong growth for the remainder of the
year, especially as Lonerock`s contribution escalates and Sea Kay Engineering
gains momentum.
DIVIDENDS
The board has reviewed the current results and market conditions and has deemed
it prudent not to declare a dividend in respect of the 2009 financial year.
However, the directors` intention is to declare a dividend in the 2010 or 2011
financial year.
26 February 2009
Registered office and postal address:
7 Patton Road, Duncanville, Vereeniging, 1930
PO Box 925, Meyerton, 1960
Website: www.seakay.co.za
Directors:
MH Lomas* (Chairman), C Kruger (Group CEO), G Olivier (Group Financial
Director), P van der Schyf, A Deshmukh*, BW Marais*, C Louw*
*independent non-executive, # non-executive
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: 26/02/2009 08:30:01 Produced by the JSE SENS Department.
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