| Thu 1 Dec 2005, 17:00 | | Sekunjalo - Final Audited Results For The Year End |
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Sekunjalo - Final Audited Results For The Year Ended 31 August 2005
Sekunjalo Investments Limited
(Incorporated in the Republic of South Africa)
Registration number 1996/006093/06
Share Code: SKJ ISIN: ZAE000017893
("Sekunjalo")
SEKUNJALO FINAL AUDITED RESULTS FOR THE YEAR ENDED 31 AUGUST 2005
ABRIDGED GROUP INCOME STATEMENT
Year ended Year ended
31 August 2005 31 August 2004
Audited Audited
(Restated)
R 000"s R 000"s
REVENUE 399,830 310,760
Cost of sales 236,295 189,983
GROSS PROFIT 163,535 120,777
Operating income 53,976 27,584
GROSS INCOME 217,511 148,361
Administration, distribution and selling
expenses 164,163 127,454
Profit from operations 53,348 20,907
Finance cost 14,497 13,191
Profit before taxation 38,851 7,716
Income taxation gain/(expense) 6,607 (4,203)
Net profit after taxation 45,458 3,513
Income from associates 1,088 63
Outside shareholders" interest (9,073) (1,964)
Net profit for the year 37,473 1,612
Weighted average number of shares 255,120,169 154,554,122
Headline earnings per share (cents) 4.76 1.18
Basic Earnings per share (cents) 14.69 1.04
Reconciliation of basic earnings to
headline earnings
Basic earnings 37,473 1,612
Negative goodwill (521) -
Profit on sale of property, plant and
equipment (5) (439)
Profit on sale of brands (23,502) -
Unexercised empowerment offer (1,310) -
Amortisation of goodwill - 529
Loss on fair value adjustments of
investments - 124
Headline earnings 12,135 1,826
ABRIDGED GROUP BALANCE SHEET
Year ended Year ended
31 August 2005 31 August 2004
Audited Audited
(Restated)
Assets R 000"s R 000"s
Non current assets 224,529 145,766
Property plant and equipment 60,542 59,458
Biological assets 9,725 6,485
Software development costs 5,413 1,811
Goodwill 26,138 7,922
Intangible assets 834 3,811
Pharmaceutical dossiers 25,500 27,200
Investments 34,615 8,270
Loans receivable 41,475 16,558
Deferred tax 20,287 14,251
Current assets 218,106 175,316
Inventories 34,900 51,103
Trade and other receivables 94,390 92,009
Forward exchange contract asset 205 1,736
Taxation 155 155
Loans receivable 649 -
Cash and cash equivalents 87,807 30,313
Total assets 442,635 321,082
Equity and liabilities
Capital and reserves 163,220 96,977
Share capital 26 1,557
Share premium 236,402 203,396
Capital redemption reserve fund 7,975 7,975
Non distributable reserve 64 39
Hedging reserve 206 1,736
Accumulated profit/(loss) (81,453) (117,726)
Outside shareholders" interest 23,575 6,876
Non current liabilities 100,735 83,568
Interest bearing borrowings 65,807 61,272
Non-interest bearing borrowings 16,451 815
Deferred tax 16,688 19,791
Post employment medical costs 1,789 1,690
Current liabilities 155,105 133,661
Trade and other payables 70,530 59,958
Provisions 10,239 11,603
Current portion of long-term borrowings 21,985 17,066
Bank overdraft 47,218 40,324
Receiver of revenue 5,133 4,710
Total equity and liabilities 442,635 321,082
Number of shares at year end 283,840,183 232,143,545
Net Asset Value(cents) 57.50 41.77
ABRIDGED GROUP CASH FLOW STATEMENT
Year ended Year ended
31 August 2005 31 August 2004
Audited Audited
(Restated)
R 000"s R 000"s
Cash generated from operations
before working capital changes 22,121 17,100
Working capital changes 27,368 (18,119)
Net finance costs (8,557) (9,107)
Taxation paid (1,257) (102)
Cash flows from operating activities 39,675 (10,228)
Cash flows from investing activities 7,763 (4,706)
Cash flows from financing activities 3,161 (4,469)
Net increase/(decrease) in cash and cash
equivalents 50,599 (19,403)
Cash and cash equivalents at beginning
of year (10,011) 9,392
Cash and cash equivalents at end of year 40,588 (10,011)
GROUP STATEMENT OF CHANGES IN EQUITY
Year ended Year ended
31 August 2005 31 August 2004
Audited Audited
(Restated)
R 000"s R 000"s
Shareholders" interest as previously
stated 96,977 24,633
Prior year error - (1,560)
Shareholders" interest at beginning of
period restated 96,977 23,073
Issue of share capital 1 3
Premium on issue of share capital 33,616 79,997
Share issue costs (127) (2,884)
Revaluation of forward exchange
contracts (1,530) 1,736
Foreign currency translation reserve 25 -
Empowerment options expired (1,532) -
Treasury shares held within the group (483) -
Dividend paid (1,200) (6,560)
Restated net profit for the year 37,473 1,612
Previously stated net profit for the
year 37,473 3,901
Adjustment due to error - (2,289)
Shareholders" interest at end of year 163,220 96,977
ACCOUNTING POLICIES
The financial statements of the group comply with the South African Statements
of Generally Accepted Accounting Practice and are compiled on the going concern
basis. The financial statements are prepared on the historical cost basis unless
otherwise stated. The accounting policies applied are consistent with those
applied in the previous year.
These results have been audited by the group"s auditors, PKF (Newlands) Inc. and
their unqualified audit report is available for inspection at the company"s
registered office.
INTRODUCTION
Sekunjalo Investments is pleased to announce their final results for the
financial year ended 31 August 2005.
Sekunjalo Investments seeks to empower individuals and communities through
profitable investments and provide affordable products and services.
A cornerstone of our investment philosophy is the advancement of marginalized
groups through employment, skills transference, affirmative action and
development.
GROUP STRUCTURE AND CORPORATE PROFILE
Sekunjalo Investments Limited is a black-controlled Investment Holding Company
domiciled in the Republic of South Africa with global operations in London and
Mauritius.
Sekunjalo"s investments can be considered as Technology and Innovation Driven
investments which include the following sectors: Healthcare & Pharmaceuticals,
Aquaculture & Biotechnology, Information Technology and Telecommunications and
Financial Services. The Manufacturing and Employment Driven investments include
the following sectors: Industrials (Food and Fishing), Brands, Enterprise
Development and SMME support.
The company has been consistently rated by authorative rating agencies as one of
the Top Empowerment Companies in the country.
Sekunjalo"s business model has seen it attract senior executives from both the
private sector and government in the past financial year. The appointments with
combined operational experience of more than 50 years will ensure that
Sekunjalo"s growth strategy is implemented so that the group can unlock the
value of it"s investments.
GROUP FINANCIAL OVERVIEW
The results show an outstanding performance by the group considering the
challenges it faced in the past year; strengthened rand (affecting export
margins and increasing import competition), restructuring in the health care
business, once off loss in the Premfresh trading business (due to obsolete
stock). The outstanding performance was made possible due to earlier than
expected contributions from the financial services and information technology
businesses.
The prior years annual financial statements were restated with an aggregate
amount of R3,849m due to errors, some of which are highlighted below.
This year for the first time the fishing sector was not the major contributor to
the group"s earnings due to the losses in its trading joint venture. There has
been a prior year adjustment taking into account the errors made by the
management of this trading joint venture, which should have been reflected in
the previous year. To avoid a recurrence of such errors we have taken corrective
action by changing the management of the joint venture and taking full control
of those operations. The core fishing business remains a solid performer.
FINANCIAL HIGHLIGHTS
Group headline earnings R12.14m
Headline EPS 4.76c
Earnings for the group R37.47
Basic earnings per share of 14.69c
Net asset value for the company R826.3m
Net asset value per share for the company 291c
REVIEW OF INVESTMENTS
TECHNOLOGY AND INNOVATION DRIVEN INVESTMENTS
HEALTHCARE AND PHARMACEUTICALS
The overall performance of the Healthcare and Pharmaceutical investments has
been an improvement on the previous year and the Healthcare investments have now
been restructured for profitability.
Sekpharma is a key investment for Sekunjalo since the pharmaceutical sector has
been identified as an area for growth and requiring greater investment from the
group. By focusing on organic growth, Sekpharma"s revenue increased by 22%
compared to 2004, mainly due to the growth of its anti-infective and
dermatological portfolio of products in a fiercely competitive market.
The recent announcement of its partnerships with two large multinationals has
resulted in its product portfolio being expanded giving it the critical mass
that it had previously lacked.
Rapimed, the rapid diagnostics subsidiary, has had a challenging year due to
price competition in the diagnostics market. However the success in securing the
national Pregnancy latex strip tender until 2007 and its introduction along with
the growth in the private sector of its HIV test product portfolio and with the
relaunch of the Uricheck has positioned Rapimed for recovery.
Sekunjalo Medical Manufacturing and Sekunjalo Medical Trading
Sekunjalo has invested in the Promex Joint venture after a management buyout of
50% had helped recapitalise the business. The importation of cheap imports from
multinational factories in China and India has created a challenging environment
for this business.
AQUACULTURE AND BIOTECHNOLOGY
Sekunjalo Aquaculture recently acquired the Abalone farm from Premier Fishing.
The farm is currently producing in excess of 45 tons, all for the export market.
The introduction of new technology and the expansion of the farm into adjacent
land has meant that the farm is able to grow to 100 tons of abalone shortly.
African Biotechnology and Medical Innovation Investments, a wholly-owned
subsidiary of SIL, entered into an agreement to subscribe for shares in
Bioclones subject to a number of conditions precedent which have not been
fulfilled at the time of publication. Bioclones has more than 20 biotechnology
patents worldwide and is considered one of the top Biotech companies in
developing countries.
INFORMATION TECHNOLOGY AND TELECOMMUNICATIONS
The Information Technology and Telecommunications portfolio of Sekunjalo
consists of Synergy, Semtech, XN Africa, Health Systems Technologies and
Sharenet.
This portfolio has had an overall strong performance contributing to Group
profitability earlier than its expected date.
Synergy is one of the largest business intelligence companies with more than 350
blue-chip clients and has performed exceptionally well anticipating a cash
positive, steady organic growth in excess of 20% per annum over the next few
years with a 10% return on sales.
Semtech continues to be a marginal contributor and is focused more on R&D for
the food-processing sectors.
XN Corporation Africa has performed exceptionally well and exceeded budgeted
projections for the year. This year XN will achieve a startling revenue growth
of 185% with an even larger increase in net income, forecast.
Many of XN"s newly acquired customers are as a direct result of being a member
of the Sekunjalo Group.
Health Systems Technologies is the provider of Hospital Information Systems to
the Government and has performed satisfactorily, continuing to build its
business and brand awareness. The company expanded its investment with the
Government and diversified into further ERP business. Growth in ERP
implementations and support is expected to be a substantial part of the growth
strategy.
Sharenet the first financial website and vendor of JSE prices on the South
African Internet, continues to perform well and is expected to provide a core
component of the IP for the Financial Services and IT platforms.
FINANCIAL SERVICES
This sector includes the investments in South Africa (SekCapital), London and
Mauritius (SekCapital International).
SekCapital has performed exceptionally well this year and well ahead of the
expected time frame set for it. The past year has seen Sekunjalo Capital
experience substantial growth and success in terms of implementation of its
strategy and infrastructure. The group has significantly exceeded expected
results in what is really its first full year of operation. This subsidiary is
quickly emerging as an innovative and dynamic financial services group of
companies which will, during the next financial year, show rapid growth and
achievements in terms of its results core objectives.
In spite of an objective of achieving a break-even this year the group excelled
to be an outstanding contributor to earnings, generated primarily by the life,
medical aid and investment advisory companies. This young group now prides
itself in an excellent customer base of over 260 000 clients. This provides a
wonderful platform for cross selling of products and services in the years
ahead.
MANUFACTURING AND EMPLOYMENT DRIVEN INVESTMENTS
Sekunjalo is committed to a strong manufacturing base for the South African
economy resulting in employment and job creation. Sekunjalo is a large-scale
employer in the Western Cape and Gauteng regions.
INDUSTRIALS (FOOD AND FISHING)
Premier Fishing, one of the largest fishing companies in South Africa,
underperformed this year and for the first time was not the major contributor to
the group"s earnings.
The underperformance was largely due to the losses incurred in a joint venture,
Premfresh, where the audit revealed significant obsolete stock resulting from
problems in the supply chain and poor management of the trading operations.
If the Premfresh operation is excluded, then Premier"s core processing
operations performed satisfactorily. Premier Fishing is to concentrate on its
core competencies of catching, processing and value adding and to grow the
business by acquiring fishing companies or merging to add value to the business.
Premier Fishing is one of the largest lobster exporters in South Africa and this
remained the main contributor to earnings as the core business of Premier.
The Pelagic, Fishmeal, Squid, Hake and other white Fish operations were combined
marginal contributors to Premier"s profitability.
The company entered into a sale agreement in the past financial year with
Pioneer Foods, whereby it sold the brands Redro, Iona and Peck"s to them. The
factory in Saldanha Bay will continue to manufacture these renowned brands on
behalf of Pioneer Foods over the next three years, with an option to extend.
Premfresh, an international trading business primarily in prawns and other
shellfish imported from India and Mozambique, was restructured with a recovery
strategy put in place including that of new management and Premier taking
control of the operations.
Organic Agriculture, Seagro and Superkel, continues to make significant inroads
into the organic fertiliser market and are the brand of choice of organic
fertilizers.
BRANDS
Sekunjalo Brands is the company that is to house the Group"s brands and a
process is underway to acquire these brands from its subsidiaries.
As a result of the high value unlocked by the sale of Redro and Pecks brands,
shareholders have enquired about the value of the Group"s other brands. These
brands which have an estimated value of R170m are currently being evaluated with
a view to increasing the brand"s presence in the South Afircan market. Sekunjalo
is exploring the appointment of a brand management team to further enhance
Sekunjalo brands.
Sekunjalo brands has shown tremendous growth in the pharmaceutical, diagnostic
and surgical, food and fishing and organic agricultural sectors. Whilst the
majority (14) of the Group"s brands are proprietary brands, owned by Sekunjalo,
recent joint ventures has resulted in the group managing non-proprietary brands
(*8) on behalf of multinationals.
ENTERPRISE DEVELOPMENT AND SMME SUPPORT
Sekunjalo has recognised as a leading black investment holding company that it
has to invest in broad based black economic empowerment companies and SMMEs.
Sekunjalo will assist the development of enterprises using the group"s capital
base and extensive procurement spend. Through its operational companies,
Sekunjalo is able to significantly influence this development.
Sekunjalo Enterprise Development portfolio has three main areas: Private Equity,
SMME and BBBEE investments. The Private Equity investments include the Sharenet
Group, Cynthesis Business Consulting, African Investment and Risk Group,
Sekunjalo Property. The BBBEE and SMME investments include African Legend,
Ibhayi, Health and Fishing joint ventures
CORPORATE CITIZENSHIP REPORT
For Sekunjalo, Corporate citizenship goes beyond legislative compliance. It
recognises the rights and responsibilities of businesses within a broader
societal context and reinforces the mission of Sekunjalo to implement a social
contract between business, government and civil society.
In line with international trends Sekunjalo has for the first time quantified
the economic value add to the South African economy which is R1.6 billion.
PROSPECTS
The prospects for the group are excellent.
Sekunjalo now has a strengthened management team with core competencies in a
number of different sectors. The group"s strong asset base and low gearing has
now positioned it to add value to its current investment portfolio through
organic growth and acquisitions. Sekunjalo is a strong rand hedge and will
benefit from having a balanced portfolio of investments.
Sekunjalo"s Information Technology and Financial Services businesses are
expected to contribute strongly to group earnings in the years ahead. Sekunjalo
is currently exploring the possibility of listing the Information Technology and
Telecommunications Africa subsidiary in the next financial year. For SekCapital,
the entire infrastructure for delivery is now in place and this comprises life
(South Africa and Mauritius), medical aid, asset management, (both local and
abroad.), pension administration, all backed up by outstanding IT infrastructure
of the mature organization Sharenet and Imagination Management Services.
Sekpharma is aggressively adding to its portfolio of products which will
increase operating margins substantially.
The South African fishing industry is at the dawn of a new era and with the
allocation of Long-Term Fishing Rights from 8 to 15 years will bring stability
and consolidation in the industry leading to mergers, acquisitions and joint
ventures, which will lead to cost-effective and stream-lined businesses to meet
the challenges of escalating costs and a strong Rand.
Shareholders will be kept informed about the group"s acquisition of Bioclones
and the fulfilment of the conditions precedent.
A commercially prudent financial decision has been taken by the Board of
Directors to withdraw the action instituted against Deloitte & Touche. The
executive management can now focus their full attention on unlocking the group"s
value.
APPRECIATION
The excellent performance of the group would not have been possible without the
support of the Board of Directors. The added value, guidance, patience and
experience provided by them are highly appreciated. We thank all of our
employees for their contribution, without which the success of this company in
the past year would not have been possible.
By order of the Board
Dr WA Mgoqi Dr MI Surve
Chairman Chief Executive
Cape Town,
1 December 2005
Directors
Dr WA Mgoqi (Chairman), *Dr MI Surve (Chief Executive Officer),
*Dr G Mayende, *MH Ally, *M Nkosi, *K Patel, M.J. Ramatlhodi, D. Case, Z.
Kota
*Executive Directors
MG January (Company Secretary)
Registered Address: Transfer Secretaries:
Suite 5, 2nd Floor, North Wing Ultra Registrars (Pty) Ltd
Great Westerford, 240 Main Road 11 Diagonal Street,
Rondebosch, 7700 Johannesburg, 2001
Sponsor: Nedbank Capital
Corporate Finance Advisors: Sekunjalo Capital
Date: 01/12/2005 05:00:57 PM Produced by the JSE SENS Department
