| Thu 21 May 2009, 7:20 | | SKJ - The Sekunjalo Investment Group - Unaudited Interim Results For The Period |
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SKJ
SKJ
SKJ - The Sekunjalo Investment Group - Unaudited Interim Results For The Period
Ended 28 February 2009
The Sekunjalo Investment Group
Sekunjalo Investments Limited (SIL)
Incorporated in the Republic of South Africa
Registration number 1996/006093/06
Share Code: SKJ & ISIN: ZAE000017893
("Sekunjalo" or "the company")
UNAUDITED INTERIM RESULTS FOR THE PERIOD ENDED 28 FEBRUARY 2009
Overview
Corporate profile
SIL is a black-controlled investment holding company domiciled in the Republic
of South Africa and listed on the JSE Limited ("JSE").
The Sekunjalo Group ("the Group") has investments in the following sectors:
- Fishing; Aquaculture; Information Technology; Telecommunications; Financial
Services; Health Care and Pharmaceuticals; Biotechnology and Enterprise
Development.
Recent highlights:
Sekunjalo has:
- been the highest ranked in ownership and status by the Financial Mail of all
companies listed on the JSE reflecting its true empowerment status as a leading
black economic empowerment company.
- been awarded founding status of the Community of Global Growth Companies of
the World Economic Forum. Sekunjalo is one of only a few African companies to be
designated a World Economic Forum New Champion.
- become the investor of choice and chosen black economic empowerment partner to
global telecommunications giant, British Telecom South African operations.
Sekunjalo now owns 30% of BT SA.
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 where applicable. The basis of preparation is consistent with the prior
year.
Commentary on results
The Sekunjalo Investments Limited results for the first six months of the
financial year are a promising improvement on previous years, due largely to the
implementation of a restructuring strategy which began almost a year ago and is
now starting to impact on the performance of the Group. The restructuring
strategy has focused on a process of disposal, in part or in full, of non-core
assets as well as on operational cost savings and the overall reduction of
corporate office overheads. Reporting revenue is down 20.1% from the same period
last year, from R229.6 million to R183.5 million. This is primarily as a result
of a number of part disposals of loss making businesses in the Financial
Services division which are now no longer controlled subsidiaries and hence
revenues are not consolidated. In addition, revenues have been impacted by a
slow down in sales in the fishing business which has been offset with increased
revenues in Informatics as the roll-out of new government projects starts to
influence the performance.
The operational performance is commendable given the economic environment over
the past 6 months with an overall improvement in operating profits of R14.2
million in the current year; R4.9 million of which relates to once off gains,
compared to an operating loss of R43.5 million last year. This has resulted in
headline earnings of 0.55 cents compared to a headline loss of 4.90 cents per
share as at 29 February 2008. The improvement has been underpinned by strong
performances across the Group`s investments. In particular, the Fishing business
which is normally expected to be a loss making business at this time of the year
has positively reacted to restructuring initiatives to produce an almost
operating breakeven.
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. The Board has implemented strategies to
further improve operating efficiencies, attain optimal synergies and the
consolidation of key business areas, which should enhance the performance of the
Group even further.
Review of investments
Fishing
Premier Fishing is perennially a loss making business for the first six months
of the financial year. However, it is very positive to see an almost operational
breakeven this year, compared to an operational loss of R7 million in 2008. The
improvement is due largely to the restructuring in the organisation and the
closure of under-performing business units. Premier holds rights in West and
South Coast Rock Lobster, Squid, Pelagic and Hake.
West Coast Rock Lobster catches have improved year on year with achieved selling
prices maintaining historic levels, a favourable rand/dollar exchange rate and
an adjusted sales mix resulting in the division performing well with
expectations of a strong performance for the full year. South Coast Rock Lobster
by contrast has had its challenges with a slow down on the export US sales and a
reduction in average prices as the product is predominantly sold as frozen tails
in the American market. The division diversified its sales strategy and is now
supplying new markets in Europe. It must be noted that the focused restructuring
of the business, which began almost a year ago, is starting to bear fruit with
both divisions benefiting from a reduction in catch costs. A beneficial factor
was the reduction in fuel prices.
The Pelagic division has posted a loss for the first 6 months but this is
primarily due to the once-off restructuring costs incurred when the under-
performing operation was closed down at the end of the last financial year. The
operational performance going forward is expected to benefit from the cost
savings of the closure which should lead to a good turnaround performance for
the full year.
The various divisions have seen very positive catch rates since the interim
period as well as additional improvements in cost efficiencies. The South Coast
division has also managed to increase export sales, product pricing and reduce
stocks thus improving the performance of this division.
Aquaculture
The Group has an investment in abalone at a Gansbaai farm into which it has
recently invested significantly to enable the business to expand its operations.
The abalone farm is an annual star performer, producing consistent levels of
profit. The farm has increased its capacity for abalone stocks and embarked on a
significant growth strategy with respect to its stockholdings. The business was
able to maintain pricing levels and production throughout the current period and
the expectation is that the current economic conditions should have a limited
impact on the business for the balance of the financial year.
There has been a renewed focus on aquaculture in general and hence the Group`s
strategy to invest in various other aquaculture businesses and actively pursue
new opportunities. The Group views aquaculture as a significant business of the
future and will use the abalone investments as the basis for future endeavours.
Information technology
Sekunjalo Technology Solutions Group (Sekunjalo TSG) has focused on the growth
of its current businesses and the start-up of two significant government health
care sector projects secured by Health System Technologies and Amethst.
Synergy Business Intelligence (BI) has consistently maintained a strong turnover
during the period despite the general downturn in the economy. It anticipates an
expansion of a successful BI pilot project in the Kwazulu-Natal provincial
government towards the end of 2009. Business Intelligence Solutions remain a top
priority of the Chief Information Officer and Synergy BI is well-positioned to
deliver on this requirement.
Fios, a leading provider of Cognos Corporate Performance Management Solutions,
offers both BI and financial solutions. Sales were initially down year on year
but have increased in early 2009 led by a project for the Department of Trade
and Industry.
Saratoga Software, a software development company building custom software
solutions for corporate customers, secured good medium-term contracts in the
insurance industry during early 2008 which continued throughout this period,
resulting in strong revenue streams that exceeded budget.
Health System Technologies (HST), a hospital information system (HIS) provider
has performed very well for the past six months as evidenced by the Government
contracts it won in previous years which are now being serviced. HST has formed
a joint venture with Amethst, to deliver HIS to the Gauteng region. This joint
venture began implementation during the current financial year and is expected
to have the greatest impact on the profitability of HST over the next few years.
Telecommunications
Sekunjalo became the black economic empowerment partner to global
telecommunications giant, British Telecom (BT) for their South African
operations. Sekunjalo is now a 30% stakeholder of BT South Africa. The relations
forged between the two organisations have remained strong and the Sekunjalo
Group is very positive about the performance of this investment for both the
current period and the foreseeable future.
Financial services
The Financial Services division underwent significant restructuring during the
period under review. The Group embarked on a cost reduction strategy and in
addition engaged with partners who could add greater value through part
disposals of Group companies to reduce the exposure of the Group during the
current economic environment. This has meant that in a number of businesses the
Group relinquished its controlling position and is treating the businesses as
empowerment investments rather than operational subsidiaries.
The net result has meant a significant drop in consolidated revenues as the
majority of the business previously accounted for as subsidiaries are no longer
included in the income statements and balance sheets for the Group. These
disposals have resulted in some once off recoveries and the remaining businesses
have improved the operational performances year on year and hence the turnaround
in the profitability of the Group.
Health care and pharmaceuticals
Sekunjalo Health Care (SHC) is pleased to advise that the restructuring and cost
containment measures implemented in the latter half of 2008 continue to show in
the improved financial turnaround. The total sales revenue for 2008 as at half
year and sales targets on own products have been achieved.
SHC has partnered with a large Middle Eastern company, Julphar Gulf
Pharmaceuticals, to expand its product basket. This will expand the basket of
goods from its current owned ethicals into the OTC market with the backing of
Julphar. This strategy of acquiring products relevant to the market is being
pursued vigorously and five new high quality and competitive products have been
acquired.
SHC remains confident that the turnaround of this business will be realised and
that the excessive losses of the past are history, with good prospects for
sustainable profitability in the years to come.
Biotechnology
Bioclones (Pty) Ltd, South Africa`s leading Biotechnology Company, focuses on
the research and development of biogenerics, novel biologics and vaccines and
the manufacture and sale of the leading Biopharmaceutical product,
Erythropoietin.
A significant investment in the flagship product Repotin(R) has led to output
levels which are enabling Bioclones to compete aggressively in the South African
state and private sectors. In addition, the significantly increased output
levels of Repotin(R) is now allowing the company to begin the implementation of
market entry into other SADC countries.
The development of the Cape Town based facility, Ribotech (Pty) Ltd, for
Granulocyte-Colony Stimulating Factor (G-CSF) manufacture is on track with the
first phase of engineering design having been completed.
Ribotech has received the necessary certification from the Department of
Agriculture to carry out work on Genetically Modified Organisms (GMO) thereby
allowing Ribotech to begin the development of the manufacturing process and
manufacture of G-CSF for clinical trials as soon as construction of the facility
is completed. The commercial launch of G-CSF remains on target for 2012.
Bioclones holds key global patents for Dendritic Cell Vaccines and Retro-Inverso
Peptides.
The Retro-Inverso Peptide R&D project will allow for new administration routes
for a significant number of vaccines.
Bioclones is in discussion with various Biotechnology players to widen its
product and R&D portfolio through technology transfers and R&D partnerships.
Bioclones remains committed to the listing of the company on a foreign exchange
and its efforts in this regard have been boosted by the possible reversal of the
economic crisis. The company is closely monitoring the economic environment and
will commence plans for a listing as soon as it feels the value of the company
will be fully recognised and the required investment will be raised.
Enterprise development
Events Social Marketing and Production Afrika (Pty) Ltd (ESP)
ESP has held its own thus far during the current period but due to the
seasonality of its largest festival, the Cape Town International Jazz Festival
occurring after the interim period, the business`s true profits are only
expected to show in the full year`s financials. The event was a success and a
sold out show for the 4th consecutive year.
ESP continues to explore new projects and festivals both locally and
internationally to diversify and expand its ability to generate new revenue
streams.
Tripos Travel (Cape Town) (Pty) Ltd (Tripos)
Tripos has delivered a breakeven performance with a drop-off in travel due to
the current economic conditions. However, the business usually performs better
in the second six months of the year and its relationship with the Cape Town
International Jazz Festival has provided additional growth which will be
reflected in the full year`s performance.
Dividends
No dividend has been declared for the current period. The directors continue to
work towards payment of dividends in the foreseeable future.
Prospects
Sekunjalo is now recognised as a significant empowerment partner of choice for
local and international companies. The Group`s high black ownership structure
and its World Economic Forum New Championship status, positions it well for
significant empowerment transactions in the years ahead. The Group`s balance
sheet is strong with low gearing and allows it to expand its businesses through
organic growth and by acquisition. The prospects for the Group are excellent.
Dr MI Surve Mr K Abdulla
Executive Chairman Chief Financial Officer
Cape Town
21 May 2009
Group income statement
Unaudited Unaudited Audited
28 February 29 February 31 August
2009 2008 2008
R`000 R`000 R`000
Revenue 183 533 229 660 638 271
Profit from operations before 14 185 (29 684) 33 613
material adjustments
Loan impairments 14 185 (13 789) (16 754)
Fair valuation adjustments - - (301)
Profit from operations after 14 185 (43 473) 16 558
material adjustments
Income from associate 4 944 (1 404) (3 374)
Finance cost (8 018) 747 (9 507)
Profit before tax 11 111 (44 130) 3 677
Tax (1 174) 5 263 1 956
Profit/(loss) after tax 9 937 (38 867) 5 633
Attributable to:
Outside shareholders 28 (4 306) (782)
Parent 9 909 (34 561) 6 415
9 937 (38 867) 5 633
Headline earnings 2 689 (20 171) 19 088
Number of shares in issue 489 339 184 487 860 984 489 339 184
Weighted number of shares in 489 339 184 411 428 631 484 983 877
issue
Diluted number of shares in 489 339 184 414 377 452 484 983 877
issue
Headline earnings/(loss) per 0.55 (4.90) 3.94
share (cents)
Earnings/(loss) per share 2.02 (8.40) 1.32
(cents)
Diluted earnings/(loss) per 0.55 (8.34) 1.32
share (cents)
Net Asset Value per share 93.77 61.11 91.88
(cents)
Diluted headline 0.55 (4.87) 1.32
earnings/(loss) per share
(cents)
Group balance sheet
Unaudited Unaudited Audited
28 February 29 February 31 August
2009 2008 2008
R`000 R`000 R`000
Assets
Non-current assets 620 680 418 809 575 910
Property, plant and equipment 192 688 203 171 195 535
Investment property 3 000 - -
Software development costs 5 563 13 006 13 816
Patents and trademarks 18 482 2 733 18 533
Pharma dossiers 19 550 21 250 20 400
Goodwill 94 459 92 286 97 148
Intangibles 2 355 2 943 2 166
Other investments 29 792 2 348 -
Investments in associates 154 994 18 528 150 000
Biological assets 33 057 18 357 33 582
Other financial assets 33 534 19 639 9 565
Deferred tax 33 206 24 548 35 165
Current assets 230 223 166 191 256 296
Inventory 59 982 41 978 30 816
Other financial assets 3 740 9 127 11 313
Tax 993 1 932 740
Trade and other receivables 148 804 74 465 122 958
Bank 16 704 38 689 90 469
Assets of disposal groups - 45 451 53 964
classified as held for sale
Total assets 850 903 630 451 886 170
Equity and liabilities
Capital and reserves
Share capital and share 403 177 402 203 403 177
premium
Reserves 121 691 12 255 121 194
Accumulated losses (58 513) (141 761) (68 422)
Equity attributable to parent 466 355 272 697 455 949
Outside shareholders interest (7 478) 25 436 (6 359)
Total Equity 458 877 298 133 449 590
Non current liabilities 168 871 128 553 141 967
Other financial liabilities 81 555 62 436 52 883
Deferred tax 84 884 63 538 87 190
Operating lease liability 37 507 293
Retirement benefit obligation 1 017 2 072 1 017
Loans from associates 1 378 - 584
Current liabilities 223 155 171 674 248 947
Trade and other payables 119 779 69 394 102 969
Other financial liabilities 20 461 15 038 25 041
Loans from associates 5 000 - 891
Provisions 3 800 18 498 18 427
Bank OD 57 062 54 572 85 752
Tax 17 053 14 172 15 867
Liabilities of disposal groups - 32 091 45 666
classified as held for sale
Total equity and liabilities 850 903 630 451 886 170
Group cash flow statement
Unaudited Unaudited Audited
28 February 29 February 31 August
2009 2008 2008
R`000 R`000 R`000
Cash flow from operating (42 876) (12 217) 32 043
activities
Cash flows from investing (76 448) (23 604) (40 921)
activities
Cash flows from financing 42 867 (3 101) 7 111
activities
Increase/(decrease) in cash (76 457) (38 922) (1 767)
and cash equivalents
Cash and cash equivalents at 36 099 23 038 37 866
beginning of the year
Cash equivalents at the end of (40 358) (15 884) 36 099
the year
Group statement of changes in equity
Attributable Outside
To parent shareholders Total Equity
R`000 interest R`000
R`000
Balance at 31 August 2007 561 329 29 741 591 070
Net profit/(loss) for the year 6 415 (782) 5 633
Issue of shares 16 384 - 16 384
Revaluation of forward (14) - (14)
exchange contract
Decrease in holdings due to 33 511 (33 511) -
allocation of shares
Transfer 17 (17) -
Dividends paid (1 195) - (1 195)
Business combinations (160 498) (1 790) (162 288)
Balance at 31 August 2008 455 949 (6 359) 449 590
Net profit/(loss) for the year 9 909 28 9 937
Dividends paid - (820) (820)
Business combinations 497 (327) 170
Balance at 28 February 2009 466 355 (7 478) 458 877
Notes - Determination of headline earnings
Unaudited Unaudited Audited
28 February 29 February 31 August
2009 2008 2008
R`000 R`000 R`000
Profit after taxation 9 909 (34 561) 6 415
attributable to own
shareholders
Adjusted for:
Impairments of property, plant - - 6 543
and equipment
Gains on disposal of property, (2 302) - 1 786
plant and equipment
Gains on disposal of (4 918) - (1 176)
subsidiaries
Impairment of goodwill - 601
Impairments of other financial - 13 789 5 520
instruments
Headline earnings 2 689 (20 171) 19 088
Group segmental report
Financial Informatics Fishing Healthcare Biotechnology
Services Unaudited Unaudited Unaudited Unaudited
Unaudited 28 Feb 2009 28 Feb 28 Feb 28 Feb 2009
28 Feb R`000 2009 2009 R`000
2009 R`000 R`000
R`000
Revenue 5 432 71 182 65 954 6 817 -
External sales 5 432 71 182 65 954 6 817 -
Intergroup sales - - - - -
Segment result
Operating 4 490 10 541 (86) (3 015) (23)
profit/(loss)
Carrying amount of 33 862 124 427 413 165 72 734 185 308
assets
Carrying amount of 56 438 103 557 205 687 148 455 85 833
liabilities
Profit/(Loss) from - 6 599 - - (1 655)
associate
Group segmental report
Corporate Other Eliminations Group
Unaudited Unaudited Unaudited Unaudited
28 Feb 2009 28 Feb 28 Feb 2009 28 Feb 2009
R`000 2009 R`000 R`000
R`000
Revenue 1 182 37 683 (4 717) 183 533
External sales - 32 966 1 182 183 533
Intergroup sales 1 182 4 717 (5 899) -
Segment result
Operating profit/(loss) (22 279) (104) 24 661 14 185
Carrying amount of assets 125 835 29 610 (134 038) 850 903
Carrying amount of 174 168 26 498 (408 610) 392 026
liabilities
Profit/(Loss) from - - - 4 944
associate
Group segmental report
Financial Informatics Fishing Healthcare Biotechnology
Services Unaudited Unaudited Unaudited Unaudited
Unaudited 29 Feb 2008 29 Feb 29 Feb 29 Feb 2008
29 Feb R`000 2008 2008 R`000
2008 R`000 R`000
R`000
Revenue 74 965 43 161 93 566 6 670 -
External sales 72 427 43 161 93 566 6 670 -
Intergroup sales 2 538 - - - -
Segment result
Operating (6 333) 5 091 (7 077) (19 741) -
profit/(loss)
Carrying amount of 88 078 94 044 340 817 45 216 349 351
assets
Carrying amount of 94 761 81 014 163 863 184 365 81 699
liabilities
Profit/(Loss) from - - - - (1 404)
associate
Group segmental report
Corporate Other Eliminations Group
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 1 831 13 722 (4 255) 229 660
External sales 114 13 722 - 229 660
Intergroup sales 1 717 - (4 255) -
Segment result
Operating profit/(loss) (30 204) (262) 15 053 (43 473)
Carrying amount of assets 1 217 915 17 154 (1 522 124) 630 451
Carrying amount of 198 709 18 222 (490 315) 332 318
liabilities
Profit/(Loss) from - - - (1 404)
associate
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.
3. Prior period segments have been restated as a result of the Group`s method
of identification of reporting segments.
Changes to the board of directors:
Resignations during the period included those of Ms Z Kota-Fredericks and Mr JP
van der Merwe as Non-executive Directors as well as that of Company Secretary Ms
N Katamzi. As previously announced, MY Kajee is now a Non-executive Director
effective 09 April 2009; and Ms CF Hendricks has been appointed as Company
Secretary and Executive Director, effective 01 January 2009 and 18 March 2009
respectively.
Directors: Dr MI Surve* (Executive Chairman), K Abdulla* (Chief Financial
Officer), MY Kajee, M Gaomab The First, Rev. VC Mehana*, S Young, CF Hendricks*
(*Executive) Company secretary: CF Hendricks
Registered address: Quay 7, East Pier, Victoria & Alfred Waterfront, Cape Town,
8001, South Africa. POSTAL ADDRESS: PO Box 181, Cape Town, 8000, South Africa
Telephone: +27 21 419 0124 Facsimile: +27 21 419 0731 email: info@sekunjalo.com
Transfer secretaries: Link Market Services (Pty) Ltd, 11 Diagonal Street,
Johannesburg, 2001 Postal Address PO Box 4844, Johannesburg, 2000
SPONSOR
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
www.sekunjalo.com
Date: 21/05/2009 07:20:03 Produced by the JSE SENS Department.
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