| Wed 3 Nov 2010, 7:31 | | SKJ - Sekunjalo Investments Limited - Audited Group results for the year ended |
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SKJ
SKJ
SKJ - Sekunjalo Investments Limited - Audited Group results for the year ended
31 August 2010
Sekunjalo Investments Limited
(Incorporated in the Republic of South Africa)
Registration number 1996/006093/06
Share code: SKJ and ISIN: ZAE000017893
("Sekunjalo" or "the Group" or "the Company")
Audited Group results for the year ended 31 August 2010
Abridged Group Statement Of Financial Position
Audited Audited
31 August 2010 31 August 2009
R`000 R`000
Assets
Non-current assets 551 281 504 822
Property, plant and equipment 138 194 143 614
Goodwill 51 549 57 642
Intangibles 22 060 25 244
Investments in joint ventures 50 50
Investments in associates 138 179 144 776
Loans to associate 17 900 -
Other non-current assets 158 389 102 164
Deferred tax 24 960 31 332
Current assets 173 027 200 249
Inventory 15 703 21 634
Biological assets 34 046 38 320
Other financial assets 2 887 22 066
Current tax receivable 865 451
Trade and other receivables 67 451 66 723
Cash and cash equivalents 52 075 51 055
Assets of disposal groups classified 3 336 18 386
as held for sale
Total assets 727 644 723 457
Equity and liabilities
Capital and reserves
Share capital and share premium 403 177 402 977
Reserves 121 194 121 194
Accumulated losses (122 035) (129 932)
Equity attributable to parent 402 336 394 239
Non-controlling interest 867 (1 942)
Total equity 403 203 392 297
Non current liabilities 153 202 153 448
Other financial liabilities 52 978 57 019
Deferred tax 97 240 93 044
Other non-current liabilities 2 984 3 385
Current liabilities 165 562 165 971
Trade and other payables 61 778 59 371
Other financial liabilities 27 237 17 035
Other current liabilities 622 789
Provisions 26 139 23 571
Bank overdraft 41 398 43 587
Current tax payable 8 388 21 618
Liabilities of disposal groups 5 677 11 741
classified as held for sale
Total equity and liabilities 727 644 723 457
Abridged Group Statement Of Comprehensive Income
Audited Audited
31 August 2010 31 August 2009
R`000 R`000
Revenue 436 948 399 481
Cost of sales (315 923) (307 210)
Gross profit 121 025 92 271
Other operating income 16 043 31 574
Other operating expenses (150 620) (150 376)
Fair valuation adjustments 57 421 67 710
Impairments (9 111) (67 576)
Investment revenue 6 079 5 613
Income from associate (6 596) (5 224)
Finance cost (11 156) (18 215)
Profit/(loss) before tax 23 085 (44 223)
Tax (12 825) (13 881)
Profit/(loss) after tax from 10 260 (58 104)
continuing operations
Loss after tax from discontinuing (1 470) (668)
operations
Other comprehensive income - -
Total comprehensive income / (loss) 8 790 (58 772)
Attributable to:-
Non-controlling interest 614 169
Parent 8 176 (58 941)
8 790 (58 772)
Headline earnings 12 898 7 571
Number of shares in issue (`000) 489 339 489 073
Weighted number of shares in issue 489 339 489 073
(`000)
Diluted number of shares in issue 489 339 489 073
(`000)
Headline earnings per share (cents) 2.64 1.55
- continuing operations 2.94 1.68
- discontinuing operations (0.30) (0.13)
Basic earnings/(loss) per share 1.67 (12.05)
(cents)
- continuing operations 1.97 (11.91)
- discontinuing operations (0.30) (0.14)
Diluted earnings/(loss) per share 1.67 (12.05)
(cents)
Net asset value per share (cents) 82.22 80.57
Tangible net asset value per share 67.18 63.63
(cents)
Abridged Statement Of Changes In Equity
Non-
Attributable Controlling Total
to parent interest equity
R 000`s R 000`s R 000`s
Balance at 1 September 2008 455 949 (6 359) 449 590
Loss/(profit) for the year (58 941) 169 (58 772)
Issue of preference shares - 634 634
in subsidiary
Treasury shares (200) - (200)
Dividends paid - (679) (679)
Business combinations (2 569) 4 293 1 724
Balance at 31 August 2009 394 239 (1 942) 392 297
Net profit for the year 8 176 614 8 790
Issue of preference shares - 1 000 1 000
in subsidiary
Treasury shares 200 - 200
Dividends paid - (1 869) (1 869)
Business combinations - (280) 3 064 2 784
control not lost
Balance at 31 August 2010 402 335 867 403 202
Abridged Group Statement Of Cash Flows
Audited Audited
31 August 2010 31 August 2009
R`000 R`000
Cash flow from operating activities (4 657) 1 586
Cash flows from investing activities 6 408 (22 749)
Cash flows from financing activities (799) 23 914
Increase in cash and cash equivalents 952 2 751
Cash and cash equivalents for assets 2 256 -
held for sale
Cash and cash equivalents at beginning 7 468 4 717
of the year
Cash equivalents at the end of the year 10 676 7 468
Abridged Group Segmental Report 2010
Financial Technology Fishing Health
services solutions care
R`000 R`000 R`000 R`000
Revenue 8 698 116 215 226 362 11 431
External sales 738 111 247 226 362 11 431
Inter group sales - 4 968 - -
Discontinued operations 7 960 - - -
Segment result
Operating profit/(loss) (8 869) 7 609 13 175 (7 928)
Operating loss - (6 280) - - -
discontinued operation
Included in segment
results:
Impairments (6 621) - - -
Depreciation and (1) (507) (15 145) (3 732)
amortisation
Fair valuation of - - - -
investments
Carrying amount of 3 689 79 453 272 540 34 073
assets
Carrying amount of 6 094 30 150 150 991 14 956
liabilities
Loss from associate - - - -
Capital expenditure 106 839 9 377 1 717
Biotech- Invest- Media Group
nology ments
R`000 R`000 R`000 R`000
Revenue - 11 422 83 827 457 955
External sales - 3 343 83 827 436 948
Inter group sales - 8 079 - 13 047
Discontinued operations - - - 7 960
Segment result
Operating profit/(loss) (28) 35 619 (4 820) 34 758
Operating loss - - - - (6 280)
discontinued operation
Included in segment
results:
Impairments - (1 637) (853) (9 111)
Depreciation and - (271) (284) (19 940)
amortisation
Fair valuation of - 57 320 101 57 421
investments
Carrying amount of 156 079 165 026 16 784 727 644
assets
Carrying amount of 18 724 94 271 9 255 324 441
liabilities
Loss from associate (6 596) - - (6 596)
Capital expenditure - 7 92 12 138
Abridged Group Segmental Report 2009
Financial Technology Fishing Health
services solutions care
R`000 R`000 R`000 R`000
Revenue 8 928 127 940 192 389 12 271
External sales 2 498 98 078 192 389 12 271
Inter group sales - 11 379 - -
Discontinued operations 6 430 18 483 - -
Segment result
Operating profit/(loss) - (2 043) 16 916 (61 960) (24 354)
continued operations
Operating profit/(loss) - (2 119) 1 745 - -
discontinued operations
Included in segment
results:
Impairments (4 140) (1 029) (44 880) (17 500)
Depreciation and (50) (1 985) (16 296) (3 020)
amortisation
Fair valuation of - - - -
investments
Carrying amount of assets 24 378 86 094 285 662 37 005
Carrying amount of 8 156 40 144 155 394 17 405
liabilities
Loss from associate - - - -
Capital expenditure 69 794 15 519 2 865
Biotech- Invest- Media Group
nology ments
R`000 R`000 R`000 R`000
Revenue - 24 285 91 300 457 113
External sales - 2 945 91 300 399 481
Inter group sales - 21 340 - 32 719
Discontinued operations - - - 24 913
Segment result
Operating profit/(loss) - (53) 45 973 (243) (25 764)
continued operations
Operating profit/(loss) - - - - (374)
discontinued operations
Included in segment
results:
Impairments - - (27) (67 576)
Depreciation and - (387) (281) (22 019)
amortisation
Fair valuation of - 68 000 (290) 67 710
investments
Carrying amount of assets 144 776 128 081 17 461 723 457
Carrying amount of 19 382 78 353 12 326 331 160
liabilities
Loss from associate (5 224) - - -
Capital expenditure - 3 315 285 19 247
Calculation of headline earnings
Audited Audited
31 August 31 August
2010 2009
R`000 R`000
Earnings attributable to ordinary equity 8 176 (58 941)
holders of parent entity
Adjusted for:
IAS16 Gains on disposal of property, plant (3 200) (1 952)
and equipment
IFRS 3 Gains on disposal of subsidiaries - (300)
IAS36 Impairment of property, plant and 1 380 54 371
equipment
IFRS3 Impairment of goodwill 6 094 13 205
Effect of tax 448 1 188
Headline earnings 12 898 7 571
Additional financial information:
The Group is carrying its investment in associate, namely, Bioclones (Pty)
Ltd, at cost because of the complexities and subjectivity involved in
determining a fair value for the business.
Included in the statement of comprehensive income is R57,421m of fair
valuation adjustments to the Group`s investments. Refer to the segment
report for fair value adjustments within each division.
Basis of preparation
The abridged consolidated financial information has been prepared in
accordance with IAS 34 - Interim financial reporting and is based on the
audited financial statements of the Group for the year ended 31 August 2010,
which have been prepared in accordance with International Financial
Reporting Standards ("IFRS"), the AC500 series of interpretations, the
Listings Requirements of the JSE Limited, and the Companies Act of South
Africa, as amended. The abridged financial statements have been audited by
the Group`s independent auditor, PKF (Cpt) Inc., whose unmodified report is
available for inspection at the registered office of the Company.
The audited financial results for the year ended 31 August 2010 have been
prepared in accordance with the Group accounting policies, which comply with
IFRS and are consistent with those applied in the previous financial year,
except for the adoption of IFRS 8, Operating Segments, and IAS 1(revised).
These standards have only impacted on the disclosure and not on the
previously reported results.
Corporate activities
Acquisitions during the year:
- Subscription in Saab SA (Pty) Ltd - 25% voting rights and 5% economic
interest as per the SENS announcement on 03 June 2010.
Disposals during the year:
- There were no disposals resulting in a loss of control during the current
financial year.
- The Group however entered into a share incentive scheme with the
management and staff of Fios (Pty) Ltd in terms of which the management and
staff bought shares in Fios (Pty) Ltd. This resulted in a decrease in
shareholding from 100% to 70%.
-In addition Saratoga Software (Pty) Ltd issued additional shares in a
Management and Staff Share Incentive Scheme, in terms of which their
management and staff bought shares in them, which resulted in the Group`s
interest being reduced from 51% to 42%. The Group however still retains
control as a result of a shareholders` agreement.
Post Balance Sheet events:
There were no material post balance sheet events.
Group performance
As an investment holding company, the Company has increased its asset base
to R807 million from R774 million in the previous year. This was achieved by
the subscription of the 5% economic interest in Saab SA, a national defense
and civil safety company as well as increasing the value of our operating
businesses. This acquisition led the way for other opportunities and will
enable the Group to diversify its portfolio of investments to other sectors
in the economy by virtue of it being a partner of choice.
During the year under review, Sekunjalo continued to increase its focus on
improving business efficiencies and eliminating non-core assets and loss
making divisions. The global economic challenges had its expected impact on
the operating businesses and were largely averted by proactive steps taken
by the Group. The Group underwent a focused restructure over the last 18
months. This was primarily targeted at overhead structures and operating
efficiencies. It was also a pre-emptive action anticipating the global
economic crisis and the effect on the underlying business units.
The performance in the underlying investments in subsidiaries and associates
has seen a good improvement compared to the previous year. The pains of the
past 18 months of restructuring have been rewarded.
Despite tough market conditions, revenues increased by 9% for the Group. The
executive management has responded well to the current environment by
reducing risks to an acceptable level and maintaining or lowering cost
structures within each business unit. The Group`s gross profits increased by
31%, underscoring the success of the measures undertaken during the
restructuring process and cost efficiency drive.
Total borrowings from financial institutions have declined by 37% to R33
million from R53 million in the previous year, in line with the Group
strategy of better debt management. The Group is largely unleveraged and
there are significant opportunities for future acquisitions for growth.
Strategic Investments
With the acquisition of the British Telecom investment in the prior year and
the new subscription in Saab SA during the year under review, the unlisted
strategic private company investment value has grown by 61% to R153 million
from R95 million. This has increased the Group asset base by 8% which is in
line with Group strategy.
British Telecom ("BT")
BT is one of the world`s leading providers of communication solutions and
services operating in 170 countries. Its principal activities include:
- The provision of networked IT services globally;
- Local, national and international telecommunications services to customers
for use at home, at work and on the move;
- broadband and internet products and services; and
- converged fixed/mobile products and services.
BT consists principally of four lines of business: BT Global Services,
Openreach, BT Retail and BT Wholesale.
Sekunjalo`s partnership with BT has been very successful in its first year.
Both companies have grown to understand each other`s business methodologies
and have effortlessly integrated their philosophies. BT has performed
extremely well during the year despite the economic climate. It is expected
to exceed budget expectations and is well positioned to grow aggressively
over the next few years.
Saab SA
As an empowerment partner of choice, Sekunjalo has completed a landmark BEE
deal with Saab SA, the South African arm of Swedish multi-national Saab.
The deal sees Sekunjalo securing 25% of Saab SA`s voting rights and a 5%
economic interest. There is also an option, linked to Saab SA`s performance
over the next five years, for Sekunjalo to extend the economic interest to
25%.
Saab SA is a well established company in SA and this deal has consolidated
Saab`s position as the leading defence and civil security company in South
Africa. Saab has capabilities ranging from electronic warfare, sensor
technology, command and control systems, training systems, radio
communication, aviation and support solutions.
Saab`s products for civil security and defence use in Africa contribute
significantly to Saab`s overall bottom line.
Saab SA`s business areas active in the defence and civil security arena are:
- Saab Systems Grintek;
- Electronic Defense Systems;
- Support and Services;
- Security and Aviation Systems; and
- Aeronautics.
The Saab SA deal also has a big impact on Sekunjalo`s underlying value,
which as an investment holding company is arguably the most important
financial gauge.
Marine
Premier Fishing SA (Pty) Ltd ("Premier") is the largest black owned and
controlled fishing company in South Africa and the most transformed in terms
of its management and employees.
Revenue growth for the fishing division of 18% has been achieved despite the
impact of the world economic recession and the rand exchange pressure on
Premier`s performance. 60% of its business was generated from exports.
Divisional operating profit of R13,1 million compared to a prior year
operating loss of R61.9 million shows a good turnaround with a reduction in
the cost base of 18%. The huge improvement in gross profits is due to the
good fishing catches and sound operational efficiencies implemented.
Operational efficiencies, cost cutting measures as well as better negotiated
offshore selling prices for the South Coast Rock Lobster division were
implemented at the start of the season, to counter the effects of the
economic downturn. These measures have delivered good returns. West Coast
Rock Lobster division performed well due to the stability in the Far East
market. Good catches and excellent selling prices contributed to the
performance of the lobster operations but the strengthening of the rand
remains a challenge.
The unstable European markets in which the squid division operates has
impacted on the market price and has led to an average performance. The
pelagic division had good fishing catches and contributed 17% to the
division`s profitability.
With the changes in interest rates and our adequate debt management during
the year, the finance costs have declined considerably by 43% and this has
contributed to the Group results as a whole.
The Company is now well positioned for the years ahead with a reduced cost
base and is now set to grow organically as well as an aggressive acquisition
strategy.
Aquaculture
Premier Fishing is also making strong progress with its aquaculture
division. The Company was successful in being awarded a tender to acquire an
additional six hectares of land adjacent to the existing Gansbaai abalone
farm. The additional land could increase capacity of the current Gansbaai
farm to production levels of approximately 300 tons. The biggest spin-off of
this investment is that Premier Fishing will be able to offer new jobs to
between 80 to 100 members of the local community. Our existing operation
currently employs about 90 people.
Information Communication Technology
Sekunjalo TSG, a wholly owned subsidiary is an information and communication
technology niche market enterprise company. Sekunjalo TSG Group companies
provide innovative and effective ICT business solutions and services to
Government and corporate customers. Sekunjalo TSG`s businesses are leaders
in their respective niche markets, have high quality customers and are
achieving consistent organic growth.
Sekunjalo TSG Group companies have long standing international partnerships
with leading technology suppliers including amongst other BT, IBM, Cognos,
Intersystems, Siemens and JAC.
In the year under review, Sekunjalo TSG performed well under significantly
tougher trading conditions for all companies. External turnover for TSG
group increased by 13% generating profits at R7,6m against R16,9m from last
year. The difference is mainly due to the sale of the Synergy business in
the prior year as well as the cancellation of the Amethst contract with the
Gauteng Department of Health ("GDOH").
Health System Technologies("HST") is a leading provider of Hospital
Information and Laboratory Information Systems for the South African public
sector and continues to grow. Key customers include the Provincial
Government of the Western Cape and the National Health Laboratory Services.
The company has also developed its own Billing Accounts Receivable software
which is Unified Patient Fee System compliant and as such, a key element in
the future National Health Insurance scheme of South Africa.
HST has formed a joint venture with AME Africa ("Amethst") which was awarded
the GDOH Hospital Information Systems ("HIS") tender which entails
implementing systems in over 60 Gauteng hospitals.
However, the contract entered into between Amethst, as part of the Baoki
Consortium, and the GDOH, for the implementation of the HIS has been
cancelled by the Baoki Consortium. This action was taken as a result of a
non-delivery by the Gauteng Department of Health on their contractual
obligations. Discussion with the client is ongoing in an attempt to
resurrect the contract.
Saratoga Software (Pty) Ltd is a leading software development company
focused on building software solutions to innovators and corporate
customers. Saratoga Software has grown in scale and capability over the last
four years and has established a successful track record.
Digital Matter (Pty) Ltd is a young dynamic software business with products
and customers which complement the business of Saratoga. The business is
based in Johannesburg where it provides mobile focused software to blue-chip
clients.
Health
With the restructuring complete, Sekunjalo Health Care Ltd ("SHC") continues
to adapt proactively to an ever changing and challenging market to provide
affordable health care to the broadest possible population.
The strategy initiatives implemented in the current year have contributed to
the achievement of the overall cost containment of the SHC group. In the
period under review, we have concluded further distribution agreements for
products relevant to the infection control sector, as well as patenting our
own branded mineral supplements to increase our overall product offering.
Negotiations with international product providers continue and are likely to
bear fruit in the next financial period.
Our product offering in the wound healing sector will be expanded by the
introduction of new derivatives of the MEBO range manufactured by Julphar
Pharmaceuticals in the United Arab Emirates ("UAE").
In the current year further strategic positioning continues to set the
foundation for the turnaround of the Health Care group which is reflected in
the following results. The operating loss of R8 million for 2010 as opposed
to the 2009 loss of R24,3 million, indicates that the Group continued to
improve processes and performance despite an extremely difficult
international and local trading year.
Biotechnology
Genius Biotherapaeutics, formerly known as Bioclones (Pty) Ltd, is South
Africa and Africa`s largest medical biotechnology company with strategic
interests in Biogenerics and novel compounds.
Genius Biotherapaeutics has made significant strides in 2010 with its
Repotin division having grown sales and increased output significantly.
Ribotech, a Genius Biotherapeutics subsidiary and holder of the G-CSF
technology has rapidly embarked on the further refurbishment of its state of
the art manufacturing facility.
The company also holds global patents for personalised medicine and
vaccines. Both novel technologies are in advanced stages of development with
the next stages of development being clinical trials. Commercialisation with
key university and commercial partners is expected in the medium term
future.
An innovative and moral culture drives the teamwork within Genius
Biotherapeutics and the unfaltering commitment to alleviating patient
suffering and country disease burdens ensures the steady success and growth
of the company.
Media
The year under review remained challenging for Esp Afrika with the decrease
in sponsorship revenue due to the FIFA World Cup. A loss of over R1 million
was sustained in the period under review. Despite this, they have managed to
break even for their flagship event, the Cape Town International Jazz
Festival ("CTIJF"). The outlook for the next CTIJF remains positive as it is
anticipated that sponsorship funding will increase.
The CTIJF has contributed more than R780 million to the National GDP during
the period under review.
Esp Afrika has expanded their African footprint into Luanda, Gaborone,
Nigeria and Mozambique. Additional projects planned are music festivals in
Port Elizabeth and Gauteng.
Future Prospects
As an investment holding company our primary aim is to increase the value of
our investments.
We are in the midst of a global economic shift, which will culminate in the
world`s major investors taking a closer look at emerging markets and at
Africa specifically. Through its skills base, world class financial
systems, natural resources and infrastructure, South Africa is the obvious
launch pad for multinationals looking to expand into Africa.
Aside from encouraging prospects from our core operational investments in
Premier Fishing and the technology cluster, we have a strong base to launch
into Africa given our strategic ventures with British Telecoms and Saab SA.
We will also seek new partners that are keen to expand into South Africa and
Africa.
As a good corporate citizen, we will do so by creating jobs and building
communities. Projections show that we will create between 100 to 300 jobs,
mainly in our marine businesses in the forthcoming year, directly benefiting
those communities.
We believe that Sekunjalo is well set to increase its net asset value in the
year ahead through organic growth, acquisitions and strategic initiatives.
Dividends
No dividends have been declared for the current period. The board continues
to work towards payment of dividends in the foreseeable future and believes
that the Group strategy will deliver significant returns on investment.
Appreciation
We wish to thank the Sekunjalo Board of Directors for their leadership and
guidance during the past year and for their commitment in ensuring the
continued success of the Group.
In addition, our appreciation goes to all our executives and staff for their
unselfish commitment and effort in meeting the business challenges that have
resulted in their often going beyond the call of duty. It has been a
challenging year given the global economic environment and we would like to
thank all executives and staff who have taken on the new challenges with
great enthusiasm and passion.
Dr MI Surve K Abdulla
Executive chairman Chief executive officer
2 November 2010
Directors
*Dr M Iqbal Surve (Executive Chairman); *Khalid Abdulla; Rev. Dr Vukile
Mehana; Mihe Gaomab, The First; Salim Young; *Cherie Felicity Hendricks;
*Chantelle Ah Sing
*Executive Directors*
Company secretary: Cherie Felicity Hendricks
Registered Address: Quay 7, East Pier, Victoria and Alfred Waterfront, Cape
Town, 8001,
email: cherieh@sekunjalo.com
Transfer secretaries: Link Market Services South Africa (Pty) Ltd,
11 Diagonal Street, Johannesburg
Auditors: PKF (Cpt) Inc, Cape Town
Sponsor: PSG Capital, Stellenbosch
Date: 03/11/2010 07:31:01 Produced by the JSE SENS Department.
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