| Mon 28 Sep 2009, 12:06 | | SKY - Sea Kay Holdings - Condensed Reviewed Annual Financial Statements For |
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SKY
SKY
SKY - Sea Kay Holdings - Condensed Reviewed Annual Financial Statements For
The Year Ended 30 June 2009
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 2009
In accordance with the Listings Requirements of the JSE Limited, the directors
of Sea Kay hereby publish the group`s reviewed unaudited annual financial
statements for the year to 30 June 2009.
SALIENT FEATURES
- Revenue up 29%
- Operating profit down 24%
- Earnings per share down 63%
- Headline earnings per share down 63%
- Cash flows from operating activities more than doubled
CONDENSED REVIEWED CONSOLIDATED INCOME STATEMENT
Unaudited Audited
Year ended Year ended
30 June 30 June
2009 2008
R000 R000
Revenue 841,389 649,827
Operating profit 101,129 133,590
Investment revenue 8,923 6,946
Finance costs (48,425) (19,887)
Profit before taxation 61,627 120,649
Taxation (12,556) (32,113)
Profit after taxation 49,071 88,536
Allocated as follows:
Equity shareholders of Sea Kay
Holdings Limited 32,613 85,789
Minority Interest 16,458 2,747
49,071 88,536
Unaudited Audited
Year ended Year ended
30 June 2009 30 June 2008
Reconciliation of headline
Earnings
Profit after taxation 32,613 85,789
Less profit on sale of PP&E (520) (53)
Headline earnings 32,093 85,736
Weighted average number of 488,336 473,223
shares in issue (`000)
Earnings per share (cents) 6.68 18,13
Headline earnings per share 6.57 18,12
(cents)
CONDENSED REVIEWED CONSOLIDATED BALANCE SHEET
Unaudited Audited
Year Year
ended ended
30 June 30 June
2009 2008
R000 R000
ASSETS
Non-current assets 329,202 299,926
Property, plant and equipment 123,629 96,794
Goodwill 202,167 202,167
Intangible assets 243 339
Deferred tax 2,782 626
Term loan 381
Current assets 626,128 582,863
Inventories 20,081 21,719
Trade and other receivables 361,600 435,718
Loans to joint ventures 4,970 -
Other financial assets 1,915 -
Taxation receivable 13,864 -
Construction contracts and 103,869 62,314
Receivables
Cash and bank balances 119,829 63,112
Total assets 955,330 882,789
EQUITY AND LIABILITIES
Total equity 333,930 275,629
Issued capital 170,077 153,099
Retained earnings 156,682 124,069
Minority interest 7,171 (1,539)
Non-current liabilities 78,569 119,807
Capital accounts from joint ventures 8 -
Loans payable 29,067 27,936
Other financial liabilities 1,312 51,060
Finance lease 16,752 20,576
Deferred taxation 31,430 20,235
Current liabilities 542,831 487,353
Capital accounts from other 11,602 2,447
ventures
Trade and other payables 178,793 233,534
Other financial liabilities 239,857 187,754
Current tax payable 25,331 22,956
Short term portion loans payable 1,733 6,426
Finance lease obligation 18,477 16,034
Provisions - 18,071
Income received in advance 62,917 -
Bank overdrafts 3,856 -
Lease smoothing liability 265 131
Total equity and liabilities 955,330 882,789
Net asset value per share (cents) 68.31 57.72
Net tangible asset value per share 26.95 15.38
(cents)
Number of shares in issue at year
end (`000) 488,864 477,531
CONDENSED REVIEWED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited Audited
Year Year
ended ended
30 June 30 June
2009 2008
R000 R000
Balance at 1 July 275,629 144,816
Shares issued 16,977 46,563
Ordinary dividends (7,748) -
Minorities purchased (4,286)
Profit for the period 49,071 85,789
Minorities share in
current period profit 16,458 2,747
Balance at end of Period 333,929 275,629
CONDENSED REVIEWED CONSOLIDATED CASH FLOW STATEMENT
Unaudited Audited
Year Year
ended ended
30 June 2009 30 June 2008
R000 R000
Cash flows from operating 13,246 (53,783)
Activities
Cash used in operations 66,795 (38,300)
Net finance costs (39,162) (12,941)
Taxation paid (14,387) (2,542)
Cash flows from investment
activities (37,351) (48,000)
Property, plant and machinery (40,560) (27,015)
Acquired
Sale/purchases of intangible - (395)
assets
Proceeds from loan payable 3,812 -
Sale of property, plant and
equipment 1,312 69
Acquisition of businesses - (21,232)
Proceeds on loan (1,915) 573
Cash flows from financing
activities 76,966 172,227
Proceeds on shares issued 16,977 46,563
Long term liabilities raised 59,989 125,664
Ordinary dividends paid - -
Total movement for the year 52,861 70,444
Cash and cash equivalents at 63,112 (7,446)
beginning of period
Effect of exchange rate
movement on cash balances - 114
Cash and cash equivalents at 115,973 63,112
end of period
CONDENSED SEGMENTAL ANALYSIS
Building, Civil Total
Material Engineering
Supply and
Property
Development
R000 R000 R000
Revenue 379,757 461,632 841,389
Profit before tax 2,405 59,222 61,627
Total assets 474,708 480,622 955,330
Total liabilities 328,284 293,116 621,400
Property plant and 42,058 81,571 123,629
Equipment
Total current 282,544 260,287 542,831
Liabilities
BASIS OF PREPARATION AND ACCOUNTING POLICIES
These reviewed results have been prepared in accordance with the recognition
and measurement requirements of International Financial Reporting Standards
(IFRS), the Companies Act (Act 61 of 1973), as amended, and the presentation
and disclosure requirements of International Accounting Standards (IAS 34 :
Interim Financial Reporting). The accounting policies as set out in the
audited
financial statements for the year ended 30 June 2008 have been consistently
applied.
REVIEW OPINION
SAB&T Incorporated, the group`s independent auditor, have reviewed the
condensed financial results contained in this provisional report, and have
expressed an unmodified report on the provisional financial statements. Their
review report is available for inspection at the company`s registered office.
EVENTS AFTER REPORTING DATE
No material events occurred between the end of the accounting period and the
date of approval of these condensed financial statements.
INTRODUCTION
Sea Kay focuses on the development and construction of subsidised affordable
(GAP or credit linked) and bonded housing, which represents 45% of turnover.
In order to diversify the group`s earnings base, the Civil Engineering
Services
division has grown substantially over the last year to 55% of group turnover.
During the year, Government projects represented 90% of Building, Material
Supply and Property Development division`s turnover, with private sector
projects accounting for 10% of the turnover.
The global credit crunch and the resultant local impact thereof shrunk
Government`s tax base more than anticipated. This, together with elections
and the changes in Government earlier in the calendar year, exacerbated the
already slow delivery in the housing market. Certain provinces such as
Gauteng also experienced budgetary issues, which had a negative impact
on awards, payments and delivery of contracts.
Although revenue increased by 29% to R841,4 million (2008: R649,8 million),
operating profit decreased from R133,6 million to R101,1 million. Operating
profit was also impacted by a loss on one of the group`s projects, the Cosmo
City project in Gauteng, and certain cost escalations on another project.
The board and the executive team took swift action to address these losses
and embarked on restructuring and re-aligning the business to lower
operational and head office costs and increase operational efficiency.
As part of the restructuring process, the previous CEO, Corne Kruger,
left the group. The newly appointed CEO, Farid Hartnick, has a proven
track record of housing delivery and general construction, with 27 years`
experience and relevant academic qualifications.
The restructuring programme includes:
Senior management changes and reduced headcount to ensure increased
effectiveness and cost savings
Improving operational structures, accountability and financial controls
on sites
Increased interaction between financial and operational departments
Improving interaction with Government to ensure timeous payment for contracts
Financial overview
Revenue increased by 29% from R649,8 million to R841,3 million, mainly
due to the Lonerock acquisition during the 2008 financial year.
Operating profit was down by 24% from R133,6 million to R101,1 million,
resulting in the operating margin declining to 12% (2008: 20%). This was
mainly due to weaker results from the Building, Material Supply and
Property Development division.
Earnings per share and headline earnings per share decreased by 63%
to 6.68c per share (2008: 18.13c cents per share) and 6.57c per share
(2008: 18.12c per share), respectively.
The group doubled cash generated from operations to R115,9 million.
The improvement was as a result of the Lonerock contribution to the group,
as well as a continued focus on working capital.
The group`s debtor days decreased by 48% to 161 days as a result of
the group`s diversification of its revenue streams away from purely
Government contracts.
The effective tax rate of 20% was lower than the South African statutory
tax rate of 28% due to the effect of Construction Contract allowances.
Going forward it is expected that the sustainable effective tax rate
will stabilise at 28%.
OPERATIONAL OVERVIEW
BUILDING, MATERIAL SUPPLY AND PROPERTY DEVELOPMENT (45% OF TURNOVER)
Unaudited Audited
Year ended Year ended
30 June 30 June
2009 2008
Revenue - (R`000) 379,757 569 599
Reported Operating Margin 8% 21%
This division consists of Sea Kay Engineering Services. During the year,
this business experienced serious internal management issues, resulting
in a R31 million loss on the Cosmo City project, as outlined above.
This was aggravated by an unexpected increase in costs due to poor
management on the Pennyville project in Gauteng.
The results were also impacted by:
A financial dispute between Sea Kay and the implementing agent on the N2
Gateway project in the Cape, which significantly downscaled construction on
the project. A settlement of the dispute is expected by the end of calendar
year 2009
The Gauteng Department of Housing`s budget depletion, which resulted in
non-payments from November 2008 to May 2009, together with continued
slow payment processing and changes due to elections. These factors
further slowed BNG projects
The general credit crunch that impacted on the GAP and entry level bonded
housing market
The problems experienced on the Cosmo and Pennyville projects,
mentioned above
CIVIL ENGINEERING (55% OF TURNOVER)
Unaudited Audited
Year ended Year ended
30 June 30 June
2009 2008
Revenue - (R`000) 461,632 80,228
Reported Operating Margin 15% 14%
The Civil Engineering Services sector benefited from Government`s
infrastructure spend and contributed stronger than expected results. During
the year, this division was involved in several road projects, such as the
SANRAL bus route in Johannesburg and the Gauteng freeway improvement project.
Other contracts included the Paarl Eco Estate and Heineken Breweries.
Further synergies between Sea Kay Engineering and Lonerock will be explored
during the next financial year to maximise group resources, increase turnover
and curb expenses.
As a result of delays in the infrastructure/civil engineering sector
and increased competition on each project in the sector, the results for
this business could be impacted over the short term.
PROSPECTS
The recent decreases in interest rates, Government`s expected shift away
from the large World Cup-related projects to housing and the expected global
economic stabilisation, could result in an increase in low-cost housing
development for the coming year.
Due to affordability levels in the credit linked housing market (dwellings
in the R200k to R380k range or the so-called "GAP" market), sales in this
sector should start to recover slightly during 2010. This, together with
commitment from financial institutions to spend in this sector and the
Government`s increased focus on delivering sustainable integrated human
settlements, should result in a sustainable pipeline of work for the core
business of the group.
Although some progress has been made regarding the restructuring of the
debtors and cash management system to ensure timeous payments and constant
cash flow, concerns and challenges remain around Government`s payment terms.
Continued high level engagement with Government therefore remains a priority.
Although payment days are down from 238 days to 161 days, payments within 30
days after statement still remain a huge challenge. The need for regular
and prompt monthly payments has again been recognised by Government,
although the practical implementation thereof remains uncertain.
Sea Kay has recently been awarded a Construction Industry Development
Board (CIDB) rating of 9, which should be issued soon. This increased
rating will allow Sea Kay to bid on projects with a value in excess of
R100 million, opening up more markets to the group.
During the coming year, Sea Kay will focus strongly on its restructuring
plan to improve efficiencies and controls and to ensure it is effectively
structured for anticipated market levels. The ratio of the operational
expenses against revenue will be brought in line with other construction
companies in the same sector and should lead to improved results for the core
business. Sea Kay management is confident that there is potential for long
term growth in the group in all three spheres, namely infrastructure, housing
construction and property development due to the continued significant need
for housing and integrated housing projects.
DIVIDEND
The board has reviewed the current year`s results and has decided not to
declare a dividend. Cash generated by the group will 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, as the directors have every reason to believe that the group has
adequate
resources in place to continue operating.
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the annual general meeting of shareholders
of the company will be held on Thursday, 19 November 2009 at 10h00 at the
offices of Vunani Limited, Vunani House Block C, Athol Ridge Office
Park, 151 Katherine Street, Sandown, Sandton
Vereeniging
28 September 2009
Directors:
MH Lomas* (Chairman), G Olivier (CFO), P van der Schyf, AA
Deshmukh#, BW Marais*, CK Louw*
*independent non-executive, # non-executive
Registered office and postal address:
7 Patton Street, Duncanville, Vereeniging, 1939
PO Box 925, Meyerton, 1960
Website: www.seakay.co.za
Company secretary:
H Boshoff
Transfer secretaries:
Link Market Services South Africa (Proprietary) Limited
Auditors:
SAB&T Incorporated, Registered Auditors, Chartered Accountants (SA)
Sponsor:
Vunani Corporate Finance
Date: 28/09/2009 12:06:27 Produced by the JSE SENS Department.
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