| Wed 31 Mar 2010, 13:15 | | SKY - Sea Kay - Unaudited condensed interim group results for the six months |
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SKY
SKY
SKY - Sea Kay - Unaudited condensed interim group results for the six months
ended 31 December 2009, and withdrawal of the cautionary announcement
Seakay 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 CONDENSED INTERIM GROUP RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER
2009, AND WITHDRAWAL OF THE CAUTIONARY ANNOUNCEMENT
SALIENT FEATURES
- Revenue decreased by 6,36%
- Operating profit decreased by 162,55%
- Fully diluted headline earnings per share decreased by 250%
- R37,4 million cash generated from operations
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
31 December 2009 31 December 2008 30 June 2009
R`000 R`000 R`000
Revenue 404 907 432 411 841 389
Operating (50 825) 81 253 101 394
(loss)/profit
Investment revenue 1 929 247 8 922
Finance costs (17 634) (13 976) (52 578)
(Loss)/profit before (66 530) 67 524 57 738
taxation
Taxation 19 859 (19 536) (16 097)
Comprehensive (46 671) 47 988 41 641
(loss)/profit
Allocated as
follows:
Equity shareholders
of Sea Kay
Holdings Limited (57 417) 37 843 25 183
Minority interest 10 746 10 145 16 458
(46 671) 47 988 41 641
Reconciliation of
headline
(loss)/earnings
(Loss)/earnings (57 417) 37 843 25 183
attributable to
equity holders
Less: Profit on sale - - (521)
of property, plant
and equipment
Headline (57 417) 37 843 24 662
(loss)/earnings
Weighted average 488 336 482 934 488 336
number of shares in
issue (`000)
(Loss)/earnings per (11,76) 7,84 5,16
share (cents)
Headline (11,76) 7,84 5,05
(loss)/earnings per
share (cents)
CONDENSED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
31 December 2009 31 December 2008 30 June 2009
R`000 R`000 R`000
ASSETS
Non-current assets 320 657 322 111 328 418
Property, plant and 120 056 117 956 123 628
equipment
Goodwill 180 908 202 167 202 167
Intangible assets - - 244
Deferred tax 19 693 1 988 2 379
Current assets 446 191 516 764 610 631
Inventories 14 993 19 823 20 117
Capital accounts to - - 495
other vendors
Other financial - 3 077 -
assets
Trade and other 322 304 307 908 364 406
receivables
Loans and - - 1 915
receivables
Amounts due by 58 437 121 744 103 869
customers
Cash and bank 50 457 64 212 119 829
balances
Total assets 766 848 838 875 939 049
EQUITY AND
LIABILITIES
Total equity 267 759 340 595 326 499
Issued capital 170 077 170 077 170 076
Retained earnings 76 054 161 912 149 252
Minority interest 21 628 8 606 7 171
Non-current 126 220 181 785 81 581
liabilities
Non-current loans 25 172 22 092 29 067
payable
Non-current interest 74 754 104 422 -
bearing loans
Other financial 6 657 6 643 1 311
liabilities
Finance lease 18 283 33 564 16 752
Deferred taxation 1 354 15 064 34 451
Current liabilities 372 869 316 495 530 969
Capital accounts - - 3 126
from other vendors
Trade and other 152 984 165 893 176 952
payables
Other financial 121 592 86 449 252 057
liabilities
Current tax payable 33 752 40 224 11 585
Short-term portion 7 023 6 252 1 734
of loans payable
Finance lease 7 252 15 080 18 477
obligation
Excess billing over 47 325 - 62 917
work performed
Operating lease 263 - 265
liability
Lease smoothing - 155 -
reserve
Bank overdrafts 2 678 2 442 3 856
Total equity and 766 848 838 875 939 049
liabilities
CONDENSED STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
31 December 2009 31 December 2008 30 June 2009
R`000 R`000 R`000
Balance at 1 July 326 499 275 629 275 629
Shares issued - 16 978 16 977
Ordinary dividends - - (7 748)
Net(loss)/profit for (57 417) 37 843 25 183
the period
Minorities share in 10 746 10 145 16 458
current period loss
Adjustment of (12 069) - -
partial disposal of
subsidiary
Balance at end of 267 759 340 595 326 499
period
CONDENSED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
31 December 2009 31 December 2008 30 June 2009
R`000 R`000 R`000
Cash generated from 37 437 69 918 69 157
operations
Net finance costs (15 705) (13 728) (43 316)
Taxation (11 531) (2 268) (15 005)
(paid)/received
Net cash generated 10 201 53 922 10 836
by operating
activities
Purchase of (3 422) (26 903) (40 404)
property, plant and
equipment
Sale of property, - - 1 313
plant and equipment
Loans 2 409 (3 077) 184
repaid/(advanced) to
joint ventures
Loans and - - (1 915)
receivables
(advanced)
Cash utilised in (1 013) (29 980) (40 822)
investment
activities
Proceeds on shares - 10 000 16 977
issued
(Proceeds)/repayment (53 490) (35 284) 14 554
of other financial
liabilities
Advance on loans 1 395 - -
payable
Finance lease (9 695) - (1 721)
payments
Proceeds from excess (15 592) - 56 598
billing over work
done
(Repayment)of - - (3 561)
shareholder`s loan
Cash flows from (77 382) (25 284) 82 847
financing activities
(Decrease)/increase (68 194) (1 342) 52 861
in cash and cash
equivalents
Cash and cash 115 973 63 112 63 112
equivalents at
beginning of period
Cash and cash 47 779 61 770 115 973
equivalents at end
of period
SEGMENTAL ANALYSIS for the period ended December 2009
Statement of comprehensive income External (Loss)/profit
Sales before tax
R`000 R`000
Building, Material Supply and Property 145 911 (101 713)
Development
Civil Engineering 258 996 35 183
Total 404 907 (66 530)
Total Total Property plant Total current
assets liabilities and equipment liabilities
R`000 R`000 R`000 R`000
Building, Material 335 688 280 825 38 968 244 118
Supply and Property
Development
Civil Engineering 431 160 218 263 81 088 128 751
Total 766 848 499 088 120 056 372 869
CAPITAL EXPENDITURE AND DEPRECIATION for the period ended 31 December 2009
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
31 December 2009 31 December 2008 30 June 2009
R`000 R`000 R`000
Capital expenditure 3 422 26 903 40 404
for the period
Depreciation for the 7 237 5 741 13 155
period
Capital expenditure 10 000 40 300 45 000
committed or
authorised for the
period
FINANCIAL PREPARATION
The interim results for the six months ended 31 December 2009 have been
prepared in accordance with and contain the information required by IAS 34:
Interim Financial Reporting, International Financial Reporting Standards
("IFRS"), AC500 Standards as issued by the Accounting Practices Board or its
successor, the 4th Schedule of the South African Companies Act and the Listings
Requirements of the JSE Limited. The accounting policies applied, which are in
terms of IFRS, are consistent with those of the annual financial statements for
the year ended 30 June 2009, as described in those financial statements.
GROUP PROFILE
Sea Kay currently operates mainly in Gauteng and the Western Cape in the
construction of mass housing through Sea Kay Engineering Services (Pty) Limited
("Sea Kay Engineering"). Through its subsidiary companies, the group also
installs township services, constructs roads and freeways and undertakes civil
engineering projects through Lonerock Construction (Pty) Limited ("Lonerock").
Materials such as bricks, roof trusses and roof components are provided by
Seriso 474 (Pty) Limited ("Sedibeng Bricks") and Silver Falcon Trading 487
(Pty) Limited ("Silver Falcon"), primarily to support Sea Kay Engineering`s
construction activities.
TRADING CONDITIONS
Trading conditions were exceptionally difficult during the period due to:
- A slump in the economy, which put 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).
- Substantial job losses of prospective buyers in the above-mentioned market,
coupled with tougher credit requirements, which left this very important market
without prospects.
- Slow payment on Government contracts, which led to cash-flow constraints,
with the resultant effect on construction activities and the group`s ability to
be effective and efficient.
- No new subsidised housing programmes were awarded during the period under
review, causing strain to the subsidised housing pipeline.
On the positive side, Government`s commitment to spending in the low-cost
housing market remains high and a national priority, as can be construed from
the recent budget. Slower payment terms often impact this sector, and the
group`s established costing office`s main focus will be to facilitate and track
payments to ensure maximum efficiency in the collection of debtors. Dedicated
processes and staff have been put in place for this purpose, in an attempt to
speed up Government payments.
The civil engineering and low-cost housing sectors are expected to provide
continued growth, especially after the 2010 Soccer World Cup. The GAP and
bonded housing market is, however, likely to stay under pressure for the
foreseeable future. Across the country, there is a growing dissatisfaction with
non-service delivery, and Sea Kay Engineering and Lonerock are well-positioned
to take advantage of the expected high Government spending on infrastructure
development.
Results overview
The directors of Sea Kay present the unaudited condensed group financial
results for the six months ended 31 December 2009 ("the period").
Group revenue decreased from R432,4 million to R404,9 million and operating
profit of R81,3 million declined to an operating loss of R50,8 million, mainly
due to the losses incurred in the building, material supply and property
development division and impairment of trade receivables and loans of R27
million.
Revenue from the largest subsidiary, Sea Kay Engineering, decreased from R207
million to R131,9 million. This was due to the decline in the low cost housing
market in Gauteng and Western Cape and, in addition, Sea Kay Engineering
incurred a loss before tax of R37 million on various projects.
The losses on projects resulted from slow payments from clients, leading to
cash flow constraints and operational inefficiencies. In addition, Sea Kay
Engineering did not achieve its turnover budgets and accordingly operating
margins underwent severe strain.
The group has restructured its board and top management, and all current
operational processes are being reviewed and refined to avoid similar losses in
the future.
As a result of the above mentioned, the group`s operating margin of 18,8%
decreased to (12,6%).
A headline loss of R57,4 million (loss and headline of 11,76 cents per share)
was incurred for the period ended 31 December 2009. The results represent a
significant decline compared to those of the previous period, mainly due to the
losses incurred in Sea Kay Engineering.
Net cash generated by operations during the period was positive at R10,3
million.
At the end of the period, the group was cash positive with a balance of R47,8
million compared to R61,8 million at December 2008.
Trade receivables increased by R14,4 million from R307,9 million at December
2008 to R322,3 million as at December 2009. This was due to delayed payments
received from most government departments.
During the period, the group spent R3,2 million on property, but does not
expect to spend further large amounts in this regard during 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 to 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 are
expected soon. The Government budget outlined additional funding of 14% for
this sector. Management also expects a more aggressive drive from Government to
eradicate informal settlements, which should result in bigger allocations to
Sea Kay Engineering for the construction of BNG houses.
- Negotiations by Sea Kay Property Development (Pty) Limited ("Sea Kay
Property") with financial institutions and private companies to develop its own
integrated and sustainable human settlement projects programme have made slow
progress due to the factors mentioned under the "Trading Conditions" paragraph
above. However, one of these projects should commence shortly in the Western
Cape. This will ensure a growing future pipeline of work for Sea Kay
Engineering and will continue for a number of years. These 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 are also currently
being evaluated to further enhance the future pipeline for Sea Kay Engineering
and Lonerock.
Slow payment from major customers.
This has severely hampered the internal efficiencies, and effective growth of
operational activities. As outlined above, a new dedicated collection team
should significantly improve payment terms from customers
2. Lonerock
Lonerock achieved revenue at R259 million and profit before tax of R35,1
million. Lonerock is tendering on several civil engineering projects, which, if
successful, should increase its revenue significantly.
PROSPECTS
The group`s future prospects; after the 2010 Soccer World Cup, and the
completion of the Gautrain project; look healthier and buoyant. Management is
confident that Government`s spending to improve the country`s infrastructure
will take centre stage, and continue to increase. Housing and the eradication
of informal settlements remain at the forefront of Government`s infrastructure
investment programmes.
With this in mind, the group`s low-cost housing construction activities are
expected to expand in the second half of the year, as well as into 2011/2012.
As outlined above, the group has pro-actively focused on securing a healthier
pipeline of projects through Sea Kay Property. These initiatives are linked to
high level negotiations with a number of companies regarding mass housing
projects, some of them across SA borders.
The group will strive to achieve horizontal diversity, in tendering for
projects in other Government departments, such as Health and Education.
The group is confident of an upturn in trading conditions and has realistic
expectations for growth for the remainder of the year.
DIVIDENDS
No dividend will be paid in respect of the period under review.
WITHDRAWAL OF THE CAUTIONARY ANNOUNCEMENT
Further to the announcement, dated 3 March 2010, shareholders are advised that
the discussions referred to therein have been terminated, and the cautionary
announcement is accordingly withdrawn.
By order of the Board
P VAN DER SCHYF G OLIVIER
Acting Executive Chairman Group Financial Officer
31 March 2010
Registered office and postal address:
7 Patton Street, Duncanville, Vereeniging, 1939
PO Box 925, Meyerton, 1960
Website: www.seakay.co.za
Directors:
P van der Schyf (Acting Executive Chairman)
AO Osman (Group CEO)
G Olivier (Group Financial Officer)
AV Green*, BW Marais#
*non-executive: # independent non-executive
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: 31/03/2010 13:15:01 Produced by the JSE SENS Department.
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