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SKJ - The Sekunjalo Investment Group - Unaudited Interim Results For The Period

Release Date: 21/05/2009 07:20
Code(s): SKJ
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SKJ - The Sekunjalo Investment Group - Unaudited Interim Results For The Period Ended 28 February 2009 The Sekunjalo Investment Group Sekunjalo Investments Limited (SIL) Incorporated in the Republic of South Africa Registration number 1996/006093/06 Share Code: SKJ & ISIN: ZAE000017893 ("Sekunjalo" or "the company") UNAUDITED INTERIM RESULTS FOR THE PERIOD ENDED 28 FEBRUARY 2009 Overview Corporate profile SIL is a black-controlled investment holding company domiciled in the Republic of South Africa and listed on the JSE Limited ("JSE"). The Sekunjalo Group ("the Group") has investments in the following sectors: - Fishing; Aquaculture; Information Technology; Telecommunications; Financial Services; Health Care and Pharmaceuticals; Biotechnology and Enterprise Development. Recent highlights: Sekunjalo has: - been the highest ranked in ownership and status by the Financial Mail of all companies listed on the JSE reflecting its true empowerment status as a leading black economic empowerment company. - been awarded founding status of the Community of Global Growth Companies of the World Economic Forum. Sekunjalo is one of only a few African companies to be designated a World Economic Forum New Champion. - become the investor of choice and chosen black economic empowerment partner to global telecommunications giant, British Telecom South African operations. Sekunjalo now owns 30% of BT SA. Accounting policies and IFRS The financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS") including IAS 34, using the historical cost convention except for certain financial instruments that are stated at fair value where applicable. The basis of preparation is consistent with the prior year. Commentary on results The Sekunjalo Investments Limited results for the first six months of the financial year are a promising improvement on previous years, due largely to the implementation of a restructuring strategy which began almost a year ago and is now starting to impact on the performance of the Group. The restructuring strategy has focused on a process of disposal, in part or in full, of non-core assets as well as on operational cost savings and the overall reduction of corporate office overheads. Reporting revenue is down 20.1% from the same period last year, from R229.6 million to R183.5 million. This is primarily as a result of a number of part disposals of loss making businesses in the Financial Services division which are now no longer controlled subsidiaries and hence revenues are not consolidated. In addition, revenues have been impacted by a slow down in sales in the fishing business which has been offset with increased revenues in Informatics as the roll-out of new government projects starts to influence the performance. The operational performance is commendable given the economic environment over the past 6 months with an overall improvement in operating profits of R14.2 million in the current year; R4.9 million of which relates to once off gains, compared to an operating loss of R43.5 million last year. This has resulted in headline earnings of 0.55 cents compared to a headline loss of 4.90 cents per share as at 29 February 2008. The improvement has been underpinned by strong performances across the Group`s investments. In particular, the Fishing business which is normally expected to be a loss making business at this time of the year has positively reacted to restructuring initiatives to produce an almost operating breakeven. It should be noted that historically, the Group has consistently performed well in the second half of the financial year due to the cyclical nature of its businesses. In line with this trend the Group expects a stronger performance in the second half of the financial year. The Board has implemented strategies to further improve operating efficiencies, attain optimal synergies and the consolidation of key business areas, which should enhance the performance of the Group even further. Review of investments Fishing Premier Fishing is perennially a loss making business for the first six months of the financial year. However, it is very positive to see an almost operational breakeven this year, compared to an operational loss of R7 million in 2008. The improvement is due largely to the restructuring in the organisation and the closure of under-performing business units. Premier holds rights in West and South Coast Rock Lobster, Squid, Pelagic and Hake. West Coast Rock Lobster catches have improved year on year with achieved selling prices maintaining historic levels, a favourable rand/dollar exchange rate and an adjusted sales mix resulting in the division performing well with expectations of a strong performance for the full year. South Coast Rock Lobster by contrast has had its challenges with a slow down on the export US sales and a reduction in average prices as the product is predominantly sold as frozen tails in the American market. The division diversified its sales strategy and is now supplying new markets in Europe. It must be noted that the focused restructuring of the business, which began almost a year ago, is starting to bear fruit with both divisions benefiting from a reduction in catch costs. A beneficial factor was the reduction in fuel prices. The Pelagic division has posted a loss for the first 6 months but this is primarily due to the once-off restructuring costs incurred when the under- performing operation was closed down at the end of the last financial year. The operational performance going forward is expected to benefit from the cost savings of the closure which should lead to a good turnaround performance for the full year. The various divisions have seen very positive catch rates since the interim period as well as additional improvements in cost efficiencies. The South Coast division has also managed to increase export sales, product pricing and reduce stocks thus improving the performance of this division. Aquaculture The Group has an investment in abalone at a Gansbaai farm into which it has recently invested significantly to enable the business to expand its operations. The abalone farm is an annual star performer, producing consistent levels of profit. The farm has increased its capacity for abalone stocks and embarked on a significant growth strategy with respect to its stockholdings. The business was able to maintain pricing levels and production throughout the current period and the expectation is that the current economic conditions should have a limited impact on the business for the balance of the financial year. There has been a renewed focus on aquaculture in general and hence the Group`s strategy to invest in various other aquaculture businesses and actively pursue new opportunities. The Group views aquaculture as a significant business of the future and will use the abalone investments as the basis for future endeavours. Information technology Sekunjalo Technology Solutions Group (Sekunjalo TSG) has focused on the growth of its current businesses and the start-up of two significant government health care sector projects secured by Health System Technologies and Amethst. Synergy Business Intelligence (BI) has consistently maintained a strong turnover during the period despite the general downturn in the economy. It anticipates an expansion of a successful BI pilot project in the Kwazulu-Natal provincial government towards the end of 2009. Business Intelligence Solutions remain a top priority of the Chief Information Officer and Synergy BI is well-positioned to deliver on this requirement. Fios, a leading provider of Cognos Corporate Performance Management Solutions, offers both BI and financial solutions. Sales were initially down year on year but have increased in early 2009 led by a project for the Department of Trade and Industry. Saratoga Software, a software development company building custom software solutions for corporate customers, secured good medium-term contracts in the insurance industry during early 2008 which continued throughout this period, resulting in strong revenue streams that exceeded budget. Health System Technologies (HST), a hospital information system (HIS) provider has performed very well for the past six months as evidenced by the Government contracts it won in previous years which are now being serviced. HST has formed a joint venture with Amethst, to deliver HIS to the Gauteng region. This joint venture began implementation during the current financial year and is expected to have the greatest impact on the profitability of HST over the next few years. Telecommunications Sekunjalo became the black economic empowerment partner to global telecommunications giant, British Telecom (BT) for their South African operations. Sekunjalo is now a 30% stakeholder of BT South Africa. The relations forged between the two organisations have remained strong and the Sekunjalo Group is very positive about the performance of this investment for both the current period and the foreseeable future. Financial services The Financial Services division underwent significant restructuring during the period under review. The Group embarked on a cost reduction strategy and in addition engaged with partners who could add greater value through part disposals of Group companies to reduce the exposure of the Group during the current economic environment. This has meant that in a number of businesses the Group relinquished its controlling position and is treating the businesses as empowerment investments rather than operational subsidiaries. The net result has meant a significant drop in consolidated revenues as the majority of the business previously accounted for as subsidiaries are no longer included in the income statements and balance sheets for the Group. These disposals have resulted in some once off recoveries and the remaining businesses have improved the operational performances year on year and hence the turnaround in the profitability of the Group. Health care and pharmaceuticals Sekunjalo Health Care (SHC) is pleased to advise that the restructuring and cost containment measures implemented in the latter half of 2008 continue to show in the improved financial turnaround. The total sales revenue for 2008 as at half year and sales targets on own products have been achieved. SHC has partnered with a large Middle Eastern company, Julphar Gulf Pharmaceuticals, to expand its product basket. This will expand the basket of goods from its current owned ethicals into the OTC market with the backing of Julphar. This strategy of acquiring products relevant to the market is being pursued vigorously and five new high quality and competitive products have been acquired. SHC remains confident that the turnaround of this business will be realised and that the excessive losses of the past are history, with good prospects for sustainable profitability in the years to come. Biotechnology Bioclones (Pty) Ltd, South Africa`s leading Biotechnology Company, focuses on the research and development of biogenerics, novel biologics and vaccines and the manufacture and sale of the leading Biopharmaceutical product, Erythropoietin. A significant investment in the flagship product Repotin(R) has led to output levels which are enabling Bioclones to compete aggressively in the South African state and private sectors. In addition, the significantly increased output levels of Repotin(R) is now allowing the company to begin the implementation of market entry into other SADC countries. The development of the Cape Town based facility, Ribotech (Pty) Ltd, for Granulocyte-Colony Stimulating Factor (G-CSF) manufacture is on track with the first phase of engineering design having been completed. Ribotech has received the necessary certification from the Department of Agriculture to carry out work on Genetically Modified Organisms (GMO) thereby allowing Ribotech to begin the development of the manufacturing process and manufacture of G-CSF for clinical trials as soon as construction of the facility is completed. The commercial launch of G-CSF remains on target for 2012. Bioclones holds key global patents for Dendritic Cell Vaccines and Retro-Inverso Peptides. The Retro-Inverso Peptide R&D project will allow for new administration routes for a significant number of vaccines. Bioclones is in discussion with various Biotechnology players to widen its product and R&D portfolio through technology transfers and R&D partnerships. Bioclones remains committed to the listing of the company on a foreign exchange and its efforts in this regard have been boosted by the possible reversal of the economic crisis. The company is closely monitoring the economic environment and will commence plans for a listing as soon as it feels the value of the company will be fully recognised and the required investment will be raised. Enterprise development Events Social Marketing and Production Afrika (Pty) Ltd (ESP) ESP has held its own thus far during the current period but due to the seasonality of its largest festival, the Cape Town International Jazz Festival occurring after the interim period, the business`s true profits are only expected to show in the full year`s financials. The event was a success and a sold out show for the 4th consecutive year. ESP continues to explore new projects and festivals both locally and internationally to diversify and expand its ability to generate new revenue streams. Tripos Travel (Cape Town) (Pty) Ltd (Tripos) Tripos has delivered a breakeven performance with a drop-off in travel due to the current economic conditions. However, the business usually performs better in the second six months of the year and its relationship with the Cape Town International Jazz Festival has provided additional growth which will be reflected in the full year`s performance. Dividends No dividend has been declared for the current period. The directors continue to work towards payment of dividends in the foreseeable future. Prospects Sekunjalo is now recognised as a significant empowerment partner of choice for local and international companies. The Group`s high black ownership structure and its World Economic Forum New Championship status, positions it well for significant empowerment transactions in the years ahead. The Group`s balance sheet is strong with low gearing and allows it to expand its businesses through organic growth and by acquisition. The prospects for the Group are excellent. Dr MI Surve Mr K Abdulla Executive Chairman Chief Financial Officer Cape Town 21 May 2009 Group income statement Unaudited Unaudited Audited
28 February 29 February 31 August 2009 2008 2008 R`000 R`000 R`000
Revenue 183 533 229 660 638 271 Profit from operations before 14 185 (29 684) 33 613 material adjustments Loan impairments 14 185 (13 789) (16 754) Fair valuation adjustments - - (301) Profit from operations after 14 185 (43 473) 16 558 material adjustments Income from associate 4 944 (1 404) (3 374) Finance cost (8 018) 747 (9 507) Profit before tax 11 111 (44 130) 3 677 Tax (1 174) 5 263 1 956 Profit/(loss) after tax 9 937 (38 867) 5 633 Attributable to: Outside shareholders 28 (4 306) (782) Parent 9 909 (34 561) 6 415 9 937 (38 867) 5 633
Headline earnings 2 689 (20 171) 19 088 Number of shares in issue 489 339 184 487 860 984 489 339 184 Weighted number of shares in 489 339 184 411 428 631 484 983 877 issue Diluted number of shares in 489 339 184 414 377 452 484 983 877 issue Headline earnings/(loss) per 0.55 (4.90) 3.94 share (cents) Earnings/(loss) per share 2.02 (8.40) 1.32 (cents) Diluted earnings/(loss) per 0.55 (8.34) 1.32 share (cents) Net Asset Value per share 93.77 61.11 91.88 (cents) Diluted headline 0.55 (4.87) 1.32 earnings/(loss) per share (cents) Group balance sheet Unaudited Unaudited Audited 28 February 29 February 31 August
2009 2008 2008 R`000 R`000 R`000 Assets Non-current assets 620 680 418 809 575 910 Property, plant and equipment 192 688 203 171 195 535 Investment property 3 000 - - Software development costs 5 563 13 006 13 816 Patents and trademarks 18 482 2 733 18 533 Pharma dossiers 19 550 21 250 20 400 Goodwill 94 459 92 286 97 148 Intangibles 2 355 2 943 2 166 Other investments 29 792 2 348 - Investments in associates 154 994 18 528 150 000 Biological assets 33 057 18 357 33 582 Other financial assets 33 534 19 639 9 565 Deferred tax 33 206 24 548 35 165 Current assets 230 223 166 191 256 296 Inventory 59 982 41 978 30 816 Other financial assets 3 740 9 127 11 313 Tax 993 1 932 740 Trade and other receivables 148 804 74 465 122 958 Bank 16 704 38 689 90 469 Assets of disposal groups - 45 451 53 964 classified as held for sale Total assets 850 903 630 451 886 170 Equity and liabilities Capital and reserves Share capital and share 403 177 402 203 403 177 premium Reserves 121 691 12 255 121 194 Accumulated losses (58 513) (141 761) (68 422) Equity attributable to parent 466 355 272 697 455 949 Outside shareholders interest (7 478) 25 436 (6 359) Total Equity 458 877 298 133 449 590 Non current liabilities 168 871 128 553 141 967 Other financial liabilities 81 555 62 436 52 883 Deferred tax 84 884 63 538 87 190 Operating lease liability 37 507 293 Retirement benefit obligation 1 017 2 072 1 017 Loans from associates 1 378 - 584 Current liabilities 223 155 171 674 248 947 Trade and other payables 119 779 69 394 102 969 Other financial liabilities 20 461 15 038 25 041 Loans from associates 5 000 - 891 Provisions 3 800 18 498 18 427 Bank OD 57 062 54 572 85 752 Tax 17 053 14 172 15 867 Liabilities of disposal groups - 32 091 45 666 classified as held for sale Total equity and liabilities 850 903 630 451 886 170 Group cash flow statement Unaudited Unaudited Audited 28 February 29 February 31 August 2009 2008 2008 R`000 R`000 R`000
Cash flow from operating (42 876) (12 217) 32 043 activities Cash flows from investing (76 448) (23 604) (40 921) activities Cash flows from financing 42 867 (3 101) 7 111 activities Increase/(decrease) in cash (76 457) (38 922) (1 767) and cash equivalents Cash and cash equivalents at 36 099 23 038 37 866 beginning of the year Cash equivalents at the end of (40 358) (15 884) 36 099 the year Group statement of changes in equity Attributable Outside To parent shareholders Total Equity
R`000 interest R`000 R`000
Balance at 31 August 2007 561 329 29 741 591 070 Net profit/(loss) for the year 6 415 (782) 5 633 Issue of shares 16 384 - 16 384 Revaluation of forward (14) - (14) exchange contract Decrease in holdings due to 33 511 (33 511) - allocation of shares Transfer 17 (17) - Dividends paid (1 195) - (1 195) Business combinations (160 498) (1 790) (162 288) Balance at 31 August 2008 455 949 (6 359) 449 590 Net profit/(loss) for the year 9 909 28 9 937 Dividends paid - (820) (820) Business combinations 497 (327) 170 Balance at 28 February 2009 466 355 (7 478) 458 877 Notes - Determination of headline earnings Unaudited Unaudited Audited 28 February 29 February 31 August 2009 2008 2008 R`000 R`000 R`000
Profit after taxation 9 909 (34 561) 6 415 attributable to own shareholders Adjusted for: Impairments of property, plant - - 6 543 and equipment Gains on disposal of property, (2 302) - 1 786 plant and equipment Gains on disposal of (4 918) - (1 176) subsidiaries Impairment of goodwill - 601 Impairments of other financial - 13 789 5 520 instruments Headline earnings 2 689 (20 171) 19 088 Group segmental report Financial Informatics Fishing Healthcare Biotechnology Services Unaudited Unaudited Unaudited Unaudited Unaudited 28 Feb 2009 28 Feb 28 Feb 28 Feb 2009
28 Feb R`000 2009 2009 R`000 2009 R`000 R`000 R`000 Revenue 5 432 71 182 65 954 6 817 - External sales 5 432 71 182 65 954 6 817 - Intergroup sales - - - - - Segment result Operating 4 490 10 541 (86) (3 015) (23) profit/(loss) Carrying amount of 33 862 124 427 413 165 72 734 185 308 assets Carrying amount of 56 438 103 557 205 687 148 455 85 833 liabilities Profit/(Loss) from - 6 599 - - (1 655) associate Group segmental report Corporate Other Eliminations Group Unaudited Unaudited Unaudited Unaudited 28 Feb 2009 28 Feb 28 Feb 2009 28 Feb 2009 R`000 2009 R`000 R`000
R`000 Revenue 1 182 37 683 (4 717) 183 533 External sales - 32 966 1 182 183 533 Intergroup sales 1 182 4 717 (5 899) - Segment result Operating profit/(loss) (22 279) (104) 24 661 14 185 Carrying amount of assets 125 835 29 610 (134 038) 850 903 Carrying amount of 174 168 26 498 (408 610) 392 026 liabilities Profit/(Loss) from - - - 4 944 associate Group segmental report Financial Informatics Fishing Healthcare Biotechnology Services Unaudited Unaudited Unaudited Unaudited Unaudited 29 Feb 2008 29 Feb 29 Feb 29 Feb 2008 29 Feb R`000 2008 2008 R`000
2008 R`000 R`000 R`000 Revenue 74 965 43 161 93 566 6 670 - External sales 72 427 43 161 93 566 6 670 - Intergroup sales 2 538 - - - - Segment result Operating (6 333) 5 091 (7 077) (19 741) - profit/(loss) Carrying amount of 88 078 94 044 340 817 45 216 349 351 assets Carrying amount of 94 761 81 014 163 863 184 365 81 699 liabilities Profit/(Loss) from - - - - (1 404) associate Group segmental report Corporate Other Eliminations Group
Unaudited Unaudited Unaudited Unaudited 29 Feb 2008 29 Feb 2008 29 Feb 2008 29 Feb 2008 R`000 R`000 R`000 R`000 Revenue 1 831 13 722 (4 255) 229 660 External sales 114 13 722 - 229 660 Intergroup sales 1 717 - (4 255) - Segment result Operating profit/(loss) (30 204) (262) 15 053 (43 473) Carrying amount of assets 1 217 915 17 154 (1 522 124) 630 451 Carrying amount of 198 709 18 222 (490 315) 332 318 liabilities Profit/(Loss) from - - - (1 404) associate Notes: 1. Operating profits/(losses) are stated after elimination of management fees. 2. These financial statements have been prepared in accordance with the disclosure requirements of IAS 14. 3. Prior period segments have been restated as a result of the Group`s method of identification of reporting segments. Changes to the board of directors: Resignations during the period included those of Ms Z Kota-Fredericks and Mr JP van der Merwe as Non-executive Directors as well as that of Company Secretary Ms N Katamzi. As previously announced, MY Kajee is now a Non-executive Director effective 09 April 2009; and Ms CF Hendricks has been appointed as Company Secretary and Executive Director, effective 01 January 2009 and 18 March 2009 respectively. Directors: Dr MI Surve* (Executive Chairman), K Abdulla* (Chief Financial Officer), MY Kajee, M Gaomab The First, Rev. VC Mehana*, S Young, CF Hendricks* (*Executive) Company secretary: CF Hendricks Registered address: Quay 7, East Pier, Victoria & Alfred Waterfront, Cape Town, 8001, South Africa. POSTAL ADDRESS: PO Box 181, Cape Town, 8000, South Africa Telephone: +27 21 419 0124 Facsimile: +27 21 419 0731 email: info@sekunjalo.com Transfer secretaries: Link Market Services (Pty) Ltd, 11 Diagonal Street, Johannesburg, 2001 Postal Address PO Box 4844, Johannesburg, 2000 SPONSOR RAND MERCHANT BANK (A division of FirstRand Bank Limited) www.sekunjalo.com Date: 21/05/2009 07:20:03 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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