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SKJ
SKJ
Sekunjalo Investments Ltd - Audited results for the year ended
SEKUNJALO INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1996/006093/06
Share code: SKJ & ISIN: ZAE000017893
("Sekunjalo")
AUDITED RESULTS FOR THE YEAR ENDED 31 AUGUST 2006
South Africa"s most empowered company
OPERATING PROFIT of R92m UP 101% Highest Ever
HEADLINE EARNINGS at R66m UP 644% Highest Ever
HEADLINE EARNINGS PER SHARE 20.95Cents UP 500% Highest Ever
REVENUE at R425m UP 7% Highest Ever
NAV at R365m
GROUP BALANCE SHEET
IFRS Restated
Group Group
2006 2005
R"000 R"000
ASSETS
Non current assets 538,970 351,568
Property, plant & equipment 190,037 184,786
Goodwill 68,829 26,138
Other intangible assets 13,611 6,247
Pharmaceutical dossiers 23,800 25,500
Biological assets 16,331 9,725
Investments (incl. Associate co"s) 141,861 40,449
Loans receivable 60,312 38,454
Deferred taxation 24,189 20,269
Current Assets 193,335 225,020
Inventories 27,854 34,900
Trade & other receivables 125,106 102,135
Receiver of Revenue 466 155
Cash & cash equivalents 39,909 87,830
TOTAL ASSETS 732,305 576,588
Group IFRS Restated
Group
EQUITY & LIABILITIES 2006 2005
R"000 R"000
Capital & Reserves
Issued capital 301,435 236,427
Other Reserves 10,362 8,732
Retained income /(accumulated loss) 53,500 (13,837)
365,297 231,322
Minority shareholders interest 49,655 40,152
Total equity 414,952 271,474
Non Current Liabilities 125,975 125,963
Interest bearing borrowings 40,896 65,807
Non interest bearing borrowings 14,534 5,843
Policyholder liabilities - -
Post employment medical costs 1,970 1,789
Deferred taxation 68,575 52,524
Current Liabilities 191,378 179,151
Trade & other payables 121,795 118,012
Provisions 10,222 8,593
Bank overdraft 50,774 47,218
Receiver of revenue 8,587 5,328
TOTAL EQUITY & LIABILITIES 732,305 576,588
Total number of shares at year end 360,675,482 283,840,183
Net Asset Value (Cents) 101 81
GROUP INCOME STATEMENT
IFRS Restated
Group Group
2006 2005
R"000 R"000
Revenue 425,128 395,600
Profit from operations 92,293 45,823
Finance (cost)/income (3,466) (11,784)
Profit before tax 88,827 34,039
Taxation gain/(expense) (15,373) 7,092
Profit after tax 73,454 41,131
Income from associates 605 1,088
Net profit for the period 74,059 42,219
Attributable to:
Equity holders of the parent company 67,401 34,243
Minority shareholders 6,658 7,976
74,059 42,219
Reconciliation of basic earnings to
headline earnings
Attributable Income 67,401 34,243
Contingency (1,300) -
Loan written off 171 -
Loss on disposal of investment 26 -
Negative goodwill written off - (521)
Profit on disposal of property, plant (21) (5)
& equipment
Profit on sale of trademarks - (23,502)
Unexercised empowerment offer - (1,310)
Headline earnings 66,277 8,905
Weighted average number of shares in 316,379,170 255,120,169
issue
Earnings per share (cents) 21.30 13.42
Headline earnings per share (cents) 20.95 3.49
Diluted earnings per share (cents) 19.42 11.98
Diluted headline earnings per share 19.09 3.12
(cents)
NOTE:
1. The calculation of earnings per share is based on a profit of R67,401m
(2005 - R34,243m) and a weighted average number of 316,379,170 (2005 -
255,120,169) ordinary shares in issue throughout the year.
2. The calculation of headline earnings per share is based on a profit of
R66,277m (2005 - R8,905m) and a weighted average number of 316,379,170
(2005 - 255,120,169) ordinary shares in issue throughout the year.
3. The calculation of diluted earnings per share is based on a profit of
R67,401m (2005 - R34,243m) and a weighted average number of 347,098,813 (
2005 - 285,839,812) ordinary shares in issue throughout the year.
4. The calculation of diluted headline earnings per share is based on a profit
of R66,277m (2005 - R8,905m) and a weighted average number of 347,098,813
(2005 - 285,839,812) ordinary shares in issue throughout the year.
ABRIDGED CASH FLOW STATEMENT Restated
Group Group
2006 2005
R"000 R"000
CASH FLOWS FROM OPERATING ACTIVITIES (4,815) 29,561
CASH UTILISED BY INVESTING ACTIVITIES (77,276) (2,733)
CASH FLOWS FROM FINANCING ACTIVITIES 30,615 23,795
Net decrease in cash and cash equivalents (51,476) 50,623
Cash and cash equivalents at
beginning of period 40,612 (10,011)
Cash and cash equivalents at
end of period (10,864) 40,612
GROUP STATEMENT OF CHANGES IN
EQUITY
FOR THE PERIOD ENDED 31 AUGUST
2006
Share Share Other CRRF Accumulated
capital premium Reserves loss
R"000 R"000 R"000 R"000 R"000
Balance at 31 August 2004 1,557 203,396 1,750 8,000 (117,726)
Reclassifying Error (426)
IFRS Adjustments to - - - - 71,270
Opening Balances
Balance at 31 August 2004 1,557 203,396 1,750 8,000 (46,882)
Restated
Net profit from ordinary - - 487 - 37,473
activities (as previously
stated)
Reclassifying Error - (2,430)
IFRS Adjustments for the - - - - (799)
period
Issue of share capital 1 33,616 - - -
Treasury shares held - (483) - - -
within the group
Share issue expenses - (127) - - -
written off
Empowerment option expired (1,532) - - - -
Foreign currency - - 25 - -
translation reserve
Acquisition of - - - - -
subsidiaries
Dividend paid - - - - (1,200)
Revaluation of forward - - (1,530) - -
exchange contracts
Balance at 31 August 2005 26 236,402 732 8,000 (13,838)
Net profit from ordinary - - 24 - 67,401
activities
Issue of share capital 1 65,006 - - -
Movement in reserves - - (703) 2,309 -
Dividend paid - - - - (63)
Acquisition of - - - - -
subsidiaries
Balance at 31 August 2006 27 301,408 53 10,309 53,500
GROUP STATEMENT OF CHANGES IN EQUITY
(CONTINUED)
FOR THE PERIOD ENDED 31 AUGUST 2006
Attributable Minority Total
to parent shareholders
company
shareholders
R"000 R"000 R"000
Balance at 31 August 2004 96 977 6 877 103 854
Reclassifying Error (426) 17 (409)
IFRS Adjustments to Opening 71 270 17 657 88 927
Balances
Balance at 31 August 2004 167 821 24 551 192 372
Restated
Net profit from ordinary 37 960 9 073 47 033
activities (as previously
stated)
Reclassifying Error (2 430) - (2 430)
IFRS Adjustments for the period (799) 208 (591)
Issue of share capital 33 617 - 33 617
Treasury shares held within the (483) - (483)
group
Share issue expenses written off (127) - (127)
Empowerment option expired (1 532) - (1 532)
Foreign currency translation 25 - 25
reserve
Acquisition of subsidiaries - 6 320 6 320
Dividend paid (1 200) - (1 200)
Revaluation of forward exchange (1 530) - (1 530)
contracts
Balance at 31 August 2005 231 322 40 152 271 474
Net profit from ordinary 67 425 6 658 74 083
activities
Issue of share capital 65 007 - 65 007
Movement in reserves 1 606 - 1 606
Dividend paid (63) - (63)
Acquisition of subsidiaries - 2 845 2 845
Balance at 31 August 2006 365 297 49 655 414 952
OVERVIEW
COMMENTARY ON RESULTS
IFRS Restatement
The 2005 financial results have been restated to comply with IFRS. The profit
for the year after outside shareholders, was restated from R37m to R34m
Sekunjalo Investments Limited is rapidly gaining in maturity as a successful,
diversified, financially driven Group. The Directors continue with an
aggressive strategy to achieve growth in the value of investments. Financial
results are excellent. Group headline earnings increased to 20.95 cents per
share, an increase in operating profit driven by solid performances in most
Divisions, led by excellent performance in the Technology and Innovation
Driven Sectors are apparent.
GROUP COMPANY
Audited Fair Value (Rand) 365m 903m
Net Asset Value per share (cents) 101 251
For the year ended 31 August 2006, the audited fair value (NAV) of the Company
has increased to R903m against a value of R813 m (2005). At the Company level
our investments subsidiaries are reflected at audited fair value and in line
with IFRS. Upon consolidation the fair values are eliminated leading to the
differential between Company NAV per share 251cents and Group NAV per share
101cents
The Group"s investments in Technology and Innovation Driven Investments
reflected solid growth for the second year in a row. Profit delivery also
significantly exceeded initial expectations. The Groups" historic
manufacturing and resource driven investments have now entered a consolidation
phase of its life cycle and expectations are for renewed growth in revenue.
CORPORATE PROFILE
Sekunjalo Investments Limited is a black-controlled investment conglomerate
situated in the Republic of South Africa, with a global business presence in
UK, Mauritius and Namibia. Sekunjalo Investments are grouped in two areas. The
first area is Technology and Innovation Driven Investments. The second is
Manufacturing and Resource Driven Investments.
RECENT HIGHLIGHTS
A RECENT HIGHLIGHT FOR THE GROUP IS THE ANNOUNCEMENT OF BEING AWARDED 3 TOP
AWARDS BY THE FINANCIAL MAIL/EMPOWERDEX:
- SOUTH AFRICA"S MOST EMPOWERED COMPANY
- Top Performing Company in Terms of Enterprise Development
- Top Empowerment Company in the Diversified Industrials Sector
REVIEW OF INVESTMENTS
In the past year Sekunjalo has managed to maintain its track record of
consistently growing stakeholder wealth. The excellent results were in line
with projections and expectations. This increase clearly reflects the
company"s ability to identify, acquire and grow suitable investments in line
with its investment strategy. This strategy has been overlaid with a dynamic
investment model which targets growth sectors and companies and incorporates:
- Technology and Innovation Driven Investments
- Manufacturing and Resource Driven Investments
During the year under review, the Group :
* Continued to produce consistent & excellent performances with an increase
in earnings, and net asset value from R231m to R365m
* Established the infrastructure and platform for exponential growth in the
future across all Divisions
MANUFACTURING AND RESOURCE DRIVEN INVESTMENTS (INDUSTRIALS, FISHING, MOTOR AND
HEALTHCARE)
PREMIER FISHING
This business includes lobster (West Coast and South Coast), Pelagics, Squid,
Seagro and fishmeal and white fish.Premier Fishing faced particularly
difficult market and environmental conditions during 2006. Delays in the long-
term rights allocation process brought about a late start to the fishing
season, which in some instances led to the under-utilisation of quotas.
However by employing stringent cost controls and improved efficiencies,
Premier Fishing was able to achieve a reasonable level of profitability
comparable to industry performance.
Premier Fishing achieved another notable success during 2006 by acquiring
significant long-term fishing rights in a number of categories as well as
maintaining its leading position in the South Coast Rock Lobster sector. We
are confident that decisions taken to enhance efficiencies and to reduce costs
during the past year, will continue more aggressively in 2007 and that overall
profitability will show further improvement during the next year.
MOTOR HOLDINGS
Sekunjalo has entered the Retail Sector of the Motor Industry, as an
enterprise development area, where the medium to long-term outlook is
encouraging.
HEALTHCARE
Health Care investments include diagnostics, commodities and pharmaceuticals.
The Directors are pleased to confirm that in line with statements made to the
investment community when reporting the half-year results to February 2006,
the Healthcare Division"s performance improved significantly in the second
half of the financial year - and prospects for 2007 are encouraging especially
in pharmaceuticals.
TECHNOLOGY AND INNOVATION DRIVEN INVESTMENTS (ICT, AQUACULTURE, BIOTECHNOLOGY,
PHARMACEUTICALS, FINANCIAL SERVICES AND MEDIA)
INFORMATION TECHNOLOGY AND COMMUNICATION (ict)
Most of the Group"s ICT interests are held in Sekunjalo Informatics and
Telecommunications Africa (SITCA), a wholly-owned Sekunjalo subsidiary. HST is
held by Healthcare for historic reasons.
During the past twelve months, the Information Technology and Communication
Division (ICT) has performed exceptionally. During 2006, Sekunjalo acquired
50.1% of Saratoga, a software and services company, while also increasing our
stakes in previously acquired subsidiaries Synergy and FIOS, effected in terms
of the original purchase contracts.
Health System Technologies (HST) has successfully extended the provision of
Hospital Information Systems (HIS) in the public hospital sector as well as
the private hospital sector during the year.
FINANCIAL SERVICES
Over the past two years Sekunjalo Investments Limited has broadened its base
of investments in the financial services sector through its wholly-owned
subsidiary Sekunjalo Capital (Pty) Ltd. Our approach is that of a long-term
investor, with the intention of realising returns that meet or exceed the
costs of invested capital. This Division has performed well due to strong
contributions from local and international operations.
CAPITAL INTERNATIONAL
Sekunjalo Capital (Pty) Ltd, via its wholly owned subsidiary has identified
Africa as our ultimate focal area. The establishment of offices in Mauritius
will allow us to further expand the Group"s core businesses to carefully
targeted countries and niche markets in Sub-Saharan Africa. We remain
confident that this sector of our business will continue to deliver profitable
growth over the next few years.
AQUACULTURE
SEKUNJALO"S AQUACULTURE ABALONE FARM IS NEAR GANSBAAI ON THE CAPE SOUTH COAST.
PROFITABILITY HAS BEEN EXCELLENT. IT HAS EXCEEDED LAST YEAR"S IMPRESSIVE
PERFORMANCE. CONSIDERABLE INVENTORY GROWTH HAS PLACED THE FARM IN A POSITION
TO BENEFIT FROM ANY FUTURE WEAKENING OF THE RAND AGAINST THE US DOLLAR.
BIOTECHNOLOGY
During the year under review we were delighted to announce our investment in
Bioclones (Pty) Ltd which is housed in African Biotechnology and Medical
Innovation Investments (ABMI), a wholly-owned Sekunjalo subsidiary. Bioclones
is the leading local biotechnology company responsible for developing
biotechnology products for human pharmaceutical use. Bioclones through the
support of Sekunjalo is ready to expand EPO (Repotin) into a global market of
US$ 12 billion and GCSF of US$ 3 billion. The partnership with DST and Biopad
has allowed Bioclones to enter the global biotechnology stage.
Bioclones has made significant strides in the scientific biotechnology
community with three of its products being rated in the top ten by a prominent
international publication. Bioclones has 22 worldwide patents which attracts a
significant value, in addition to the intellectual property, in the worlds
largest biotechnology product- recombinant human erythropoietin (EPO),
(Repotin is the Bioclones EPO trade name) - based an global revenues and sales
worth US $12 billion. The immediate and future income stream over five years
will show significant and exponential growth.
MEDIA HOLDINGS
In the year under review, Sekunjalo announced its intention to enter the media
industry. In a post year end transaction, Sekunjalo Media Holdings acquired
controlling stakes in ESP Afrika (Pty) Ltd, an events management company and
South Atlantic Jazz Festival, the organisers of the prestigious Cape Town
International Jazz Festival (CTIJF).
FUTURE PROSPECTS
We believe in partnering with government and communities as the country
continues to play its role in the African Renaissance. We will attempt to play
a role in optimising these opportunities and to synchronise our strategy with
the development agenda of government.
We will build on significant partnerships with multi nationals. In
Pharmaceuticals JV"s have been developed with Indian Based Unichem and Orchid
Pharma and UAE based Julphur. In ICT - Health Care: in IT - Siemens: in BI -
Cognos and Microsoft: in Biotechnology with Swiss based Solidago AG. These
partnerships are expected to contribute handsomely to the profits of the
Group.
INVESTMENTS IN SUB-SAHARAN AFRICA (ANGOLA, NAMIBIA AND BOTSWANA)
Sekunjalo has commenced with the implementation of a strategy to expand its
successful South African operations into other African regions. Sekunjalo is
partnering with a German multinational and Falcon Resources Holdings to form a
consortium that will embark upon a five-year project with governments in the
SADC region to establish Public/Private Partnerships. In turn, these
partnerships will be used to build infrastructure in Sub-Saharan Africa in
accordance with NEPAD and SADC"s objectives.
DIVIDENDS
No dividends have been declared for the current period. The directors believe
the capital in the company is best deployed internally as part of the strategy
to consolidate and grow.
ACCOUNTING POLICIES AND IFRS
In line with the Listings Requirements of the JSE Ltd the Sekunjalo
Investments Group has adopted International Financial Reporting Standards
("IFRS") with effect from 1 September 2004. These are the first annual
financial statements in which the company has adopted IFRS. The date of
transition is 1 September 2004. Opening balances and comparative results have
been restated for, inter alia, an adjustment in terms of IAS16 in relation to
the accounting for property, plant and equipment, which requires that the
useful lives of assets and the estimated residual value of assets be evaluated
each year. The results have been audited by PKF (Newlands) Inc and their
unqualified opinion is available for inspection at the registered office of
the company. The annual report will be posted to the shareholders in December.
BASIS OF PRESENTATION
The financial information has been prepared in accordance with IFRS that are
currently effective together with expected amendments.
FIRST TIME ADOPTION OF IFRS
The key principle of IFRS 1 - First-time adoption of International Financial
Reporting Standards is fully retrospective. This statement however provides
exemptions from retrospective application in certain instances due to cost and
practical considerations.
ADJUSTMENTS AS A RESULT OF THE ADOPTION OF IFRS
The significant impact of changing from SA GAAP to IFRS is summarised below.
IAS 16 - REVALUATION OF RESIDUAL VALUES IN PROPERTY, PLANT AND EQUIPMENT
In calculating depreciation changes an entity reduces the depreciable amount
of an asset by its residual value. Previously under SA GAAP, the estimated
residual value was fixed on recognition of the asset and was not subject to
reassessment. IAS 16 revised requires that the residual value of the assets
should be reassessed at each balance sheet date. Annual increases in asset
values result in annual upward adjustments of residual values. The continuous
reassessment of residual values typically leads to a reduction in depreciation
charges and depreciation charges cease when the carrying value of an asset
equals the residual value.
REVALUATION OF PROPERTY, PLANT AND EQUIPMENT
A first time adopter may elect to use the fair value of individual property,
plant and equipment at transition date as the deemed cost. The group has
elected to measure individual items of property, plant and equipment at fair
value on 1 September 2004. In future those fair values are deemed to be cost
at that date.
Where significant components of an item of property, plant and equipment have
different useful lives or residual values those components are accounted for
as separate items of property, plant and equipment. Previously all parts of an
item of property, plant and equipment were depreciated at the same rate.
IAS 12/IAS 40 - DEFERRED TAX APPLICABLE TO FAIR VALUE ADJUSTMENTS ON PROPERTY,
PLANT AND EQUIPMENT
IAS 12 - Income Taxes defines the difference between the carrying amount of a
revalued depreciable asset and its tax base as a temporary difference and
therefore gives rise to a deferred tax liability or asset. The deferred tax
liability was increased as a result of the fair value adjustments made to
property, plant and equipment.
Reconciliation of significant balance IFRS adjustments.
IFRS ADJUSTMENTS SA GAAP EFFECTS OF ADJUSTMENTS IFRS
TRANSITION
TO IFRS
Balance sheet - 31 August 2004
Accumulated profit/(loss) (117,725) 71,270 (420) (46,875)
Property plant and equipment 59,458 125,679 - 185,137
Deferred tax liability 19,791 36,477 (217) 56,051
Balance sheet - 31 August 2005
Accumulated profit/(loss) (81,452) 70,742 (2,857) 13,837
Property plant and equipment 60,542 124,244 - 184,786
Deferred tax liability 16,688 36,052 (217) 52,523
Income statement for the year ended 31
August 2005
Profit for the year after outside 37,473 (825) (2,405) 34,243
shareholders
Our infrastructure for growth is in place and our core businesses are strong.
We are excited about the future and look forward to a year of growth in terms
of revenue and profits
Dr MI Surve Norman Noland
Chairman and Chief Executive Deputy CEO
28 November 2006
Cape Town
Directors:
Dr MI Surve (Chairman and CEO); NT Noland (Deputy CEO); MY Kajee (COO); MH
Ally (Financial Director); D Case (Non-Executive); M Goamab (Non-Executive);
ZA Kota (Non-Executive); Dr GP Mayende (Non Executive); MJ Ramatlhodi
(Executive); S Young (Non- Executive)
M G January (Company Secretary)
Registered Address: Transfer Secretaries:
Sekunjalo House Link Market Services S.A (Pty) Ltd
Block F, The Terraces 11 Diagonal Street
Steenberg Office Park Johannesburg 2001
Tokai 7945
Sponsor: Nedbank Capital
Date: 28/11/2006 07:16:59 AM Produced by the JSE SENS Department
