Wrap Text
SKY - Sea Kay - Reviewed Condensed Interim Group Results for the six months
ended 31 December 2010
Sea Kay Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2006/004967/06)
JSE code: SKY
ISIN: ZAE000102380
("Sea Kay" or "the group" or "the company")
REVIEWED CONDENSED INTERIM GROUP RESULTS FOR THE SIX MONTHS ENDED
31 DECEMBER 2010
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
REVIEWED UNAUDITED AUDITED
Six months Six months Year ended
ended ended
31 December 31 December 30 June 2010
2010 2009
R000 R000 R000
Revenue 84 462 404 907 647 375
Operating loss (26 389) (50 825) (181 361)
Investment revenue 326 1 929 7 928
Other income 4 992 - -
Finance costs (10 871) (17 634) (42 857)
Share of profit in associate 6 029 - -
Loss before taxation (25 913) (66 530) (216 290)
Taxation 16 177 19 859 10 404
Loss from continued and
discontinued operations (9 736) (46 671) (205 886)
Loss from continued operations (9 736) (42 053) (197 431)
Loss from discontinued operations - (4 618) (8 455)
Allocated as follows:
Equity shareholders of Sea Kay (9 736) (57 417) (239 173)
Minority interest - 10 746 33 287
(9 736) (46 671) (205 886)
Reconciliation of headline loss:
Loss attributable to equity
holders (9 736) (57 417) (239 173)
Less: Profit on sale of property,
plant and equipment - - (327)
Add: Impairment of goodwill - - 90 422
Add: Impairment of assets held
for sale 1 000 - -
Headline loss (8 736) (57 417) (149 078)
Weighted average number of shares
in issue (000) 488 864 488 336 488 864
Loss per share from continuing
and discontinued (1.99) (11.76) (48.92)
operations (cents)
Loss per share from continuing
operations (cents) (1.99) (10.81) (47.19)
Loss per share from discontinued
operations (cents) - (0.95) (1.73)
Headline loss per share from
continuing and (1.79) (11.76) (30.49)
discontinued operations (cents)
Headline loss per share from
continuing operations (cents) (1.79) (10.81) (28.76)
Headline loss per share from
discontinued operations (cents) - (0.95) (1.73)
CONDENSED STATEMENT OF FINANCIAL POSITION
REVIEWED UNAUDITED AUDITED
31 December 31 December 30 June
2010 2009 2010
R000 R000 R000
ASSETS
Non-current assets 185 075 320 657 201 972
Property, plant and equipment 24 743 120 056 111 460
Goodwill - 180 908 90 417
Intangible assets - - 95
Assets held for sale - 20 428 - -
Discontinued operations
Investment in associate 139 834 - -
Deferred tax 70 19 693 -
Current assets 122 774 446 191 392 245
Inventories 5 395 14 993 11 995
Capital accounts to other vendors - - 109
Other financial assets - - -
Trade and other receivables 58 720 322 304 249 489
Loans and receivables 899 - 1 913
Amounts due by customers 41 576 58 437 62 104
Cash and bank balances 16 184 50 457 66 635
Total assets 307 849 766 848 594 217
EQUITY AND LIABILITIES
Total equity 53 790 267 759 107 845
Issued capital 170 077 170 077 170 076
Retained earnings (116 287) 76 054 (106 376)
Minority interest - 21 628 44 145
Non-current liabilities 102 072 126 220 140 981
Loans payable 26 076 25 172 32 535
Interest-bearing loans 55 157 74 754 -
Other financial liabilities - 6 657 92 499
Liabilities held for sale -
discontinued operations 20 839
Finance lease - 18 283 2 835
Deferred taxation - 1 354 13 112
Current liabilities 151 987 372 869 345 391
Capital accounts from other vendors - - 3 274
Trade and other payables 59 683 152 984 157 101
Other financial liabilities 20 542 121 592 120 442
Current portion of interest- bearing
loan 63 807 7 023 170
Current tax payable 4 508 33 752 5 275
Current portion of finance lease
obligation 3 400 7 252 13 691
Excess billing over work performed - 47 325 33 689
Operating lease liability 47 263 310
Bank overdrafts - 2 678 11 439
Total equity and liabilities 307 849 766 848 594 217
Number of shares in issue at period
end (000) 488 864 488 864 488 864
Net asset value per share (cents) 11.00 54.77 22.06
Net tangible asset value per share
(cents) 11.00 17.77 3.55
CONDENSED STATEMENT OF CHANGES IN EQUITY
REVIEWED UNAUDITED AUDITED
Six months Six months Year ended
ended ended
31 December 31 December 30 June
2010 2009 2010
R000 R000 R000
Balance at beginning of period 107 845 326 499 326 499
Net loss for the period (9 736) (57 417) (239 173)
Minority share in current year profit - 10 746 33 287
Loss of control of subsidiary (44 319) - -
Adjustment of partial disposal of
subsidiary - (12 069) (12 768)
Balance at end of period 53 790 267 759 107 845
CONDENSED STATEMENT OF CASH FLOWS
REVIEWED UNAUDITED AUDITED
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2010 2009 2010
R000 R000 R000
Cash flows from operating activities 12 486 10 201 19 484
Cash flows from investment activities (35 279) (1 013) (2 042)
Cash flows from financing activities (16 219) (77 382) (78 219)
Total movement for the period (39 012) (68 194) (60 777)
Cash and cash equivalents at
beginning of period 55 196 115 973 115 973
Cash and cash equivalents at end of
period 16 184 47 779 55 196
CIVIL TOTAL
BUILDING, ENGINEERING
MATERIAL SUPPLY
AND DEVELOPMENT
R000 R000 R000
Period ended 31 December 2010
Revenue 84 462 - 84 462
Loss before tax (25 913) - (25 913)
Total assets 307 849 - 307 849
Total liabilities 254 059 - 254 059
Period ended 31 December 2009
Revenue 145 911 258 996 404 907
(Loss) / profit before tax (101 713) 35 183 (66 530)
Total assets 335 688 431 160 766 848
Total liabilities 280 826 218 263 499 089
Year ended 30 June 2010
Revenue 160 794 486 581 647 375
(Loss) / profit before tax (286 355) 70 065 (216 290)
Total assets 223 636 370 581 594 217
Total liabilities 293 741 192 631 486 372
NOTES
1. The results for the six months ended 31 December 2010 ("the period") are not
comparable to those of the prior periods presented. During the period Sea Kay`s
shareholding in Lonerock Construction (Pty) Limited ("Lonerock") decreased from
50.0001% to 49.9999%, and consequently the results of Lonerock were not
consolidated during the period as was the case in the prior periods, but rather
equity accounted. The loss of control of Lonerock resulted in a negligible loss
of R72k on the loss of control of the subsidiary. Lonerock, now an associate,
also constituted the entire civil engineering component of the segmental report
in prior periods.
2. Taxation for the period represents a reversal of a provision for taxation
which arose in a prior period.
3. Seriso 474 (Pty) Limited ("Sedibeng Bricks") and Silver Falcon (Pty) Limited
are treated as discontinued operations as it is the intention to dispose of
these subsidiaries in the near future.
The results, assets and liabilities of the disposal group are set out below.
REVIEWED UNAUDITED AUDITED
Six months ended Six months ended Year ended
31 December 2010 31 December 2009 30 June 2010
R000 R000 R000
Results of discontinued operations
Revenue - 17 992 18 799
Operating loss - (4 532) (5 259)
Investment revenue - 247 407
Other income - - 949
Finance cost - (857) (4 336)
Loss before tax - (5 142) (8 239)
Taxation - 524 (216)
Loss after tax - (4 618) (8 455)
Assets and liabilities
Assets of disposal groups
Property, plant and equipment 8 659 9 180 8 732
Goodwill - - 982
Deferred taxation - 1 517 -
Inventory 3 605 3 916 3 606
Trade and other receivables 8 143 16 264 8 205
Cash and cash equivalents 21 209 21
Total 20 428 31 086 21 546
Liabilities of disposal groups
Loans payable 8 179 10 741 8 192
Deferred taxation 572 1 354 578
Finance lease obligation 900 1 407 909
Other financial liabilities 728 786 732
Operating lease liability 264 217 264
Current tax payable - 683 -
Trade and other payables 7 720 9 687 7 743
Bank overdraft 2 476 2 678 2 500
Total 20 839 27 553 20 918
Cash flows of discontinued operations
REVIEWED UNAUDITED AUDITED
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2010 2009 2010
R000 R000 R000
Cash flows from operating activities - (452) 262
Cash flows from investment activities 25 - -
Cash flows from financing activities - 720 (273)
Total movement for the period 25 268 (11)
Cash and cash equivalents at beginning
of period (2 480) (2 737 (2 469
Cash and cash equivalents at end of
period (2 455) (2 469) (2 480)
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") and Sea Kay Engineering Services Western Cape (Pty)
Limited ("Sea Kay Western Cape"). Lonerock, (49.99% owned by Sea Kay) is
involved in large civil construction projects and road building.
TRADING CONDITIONS
The impact of the protracted macro-economic downturn has been specifically
severe on the construction sector. Banks and financial institutions remain
hesitant to fund projects and provide capital to businesses and individuals,
resulting in a slowdown in the delivery of houses in the GAP / credit link
market as well as property development projects.
OPERATIONAL OVERVIEW
Sea Kay`s performance for the period continued to be below expectations, mainly
as a result of the following factors:
- continued lack of affordable housing (GAP / credit link) projects due to the
economic downturn; and
- cash flow constraints, with the resultant negative impact on the efficiency of
construction activities leading to losses on certain projects.
Sea Kay completed and handed over 1 951 housing units during the period and its
order book (excluding Lonerock) comprises approximately R600 million,
representing more than 8 000 units, the bulk of which are to be completed within
the current calendar year.
LONEROCK
Lonerock, now an associate, achieved revenue of R203 million and after tax
profit of R12.1 million for the period, of which Sea Kay`s share is included in
the period results as share of profit from an associate. Lonerock is currently
engaged in various road projects (including the access road to Kusile power
station and various bus rapid transit roads), and has an order book of
approximately R400 million.
Sea Kay has an option to regain control of Lonerock, provided that it:
- settles the outstanding purchase consideration of approximately R13 million
plus interest by 31 August 2011;
- does not commit any breach of the terms and conditions of the relevant
agreements and no trigger events have occurred; and
- sources additional contracts for Lonerock to the extent of at least R200
million.
The option is valid for 30 days after the conditions have been fulfilled.
The assets and liabilities of Lonerock that have been derecognised due to the
deconsolidation are as follows:
R000
NON-CURRENT ASSETS 165 537
Property, plant and equipment 76 063
Goodwill 89 474
Current assets 224 516
Inventory 1 470
Trade and other receivables 145 101
Loans and receivables 109
Current tax receivable 19 471
Other financial assets 1 913
Cash and bank balances 56 452
Total assets 390 053
Non-current liabilities 17 675
Loans payable 3 274
Interest- bearing loans 1 806
Deferred taxation 12 595
Current liabilities 194 428
Trade and other payables 64 169
Other financial liabilities 79 971
Current portion of finance lease obligation 7 674
Excess billing over work performed 33 689
Bank overdraft 8 925
PROSPECTS
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, for which R(xxx) billion was allocated in
terms of the latest budget. 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 2012. The new allocations for low-cost housing by Government are
expected soon. Management also expects a more aggressive drive from Government
to eradicate informal settlements, which should result in larger allocations to
Sea Kay Engineering for the construction of low-cost houses.
It is anticipated that the property market will gradually recover towards the
end of 2011 due to low interest rates and inflation as well as increases in real
disposable income. Sea Kay is currently involved in negotiations with the
private sector regarding mass housing projects, as well as housing developments
in neighbouring countries. The group is confident of an upturn in trading
conditions and has realistic expectations for growth for the remainder of the
year.
Sea Kay is in the process of securing a pipeline of development and construction
work for the next few years, which is aimed directly to support sustainability.
The demand for integrated sustainable human settlements is still growing
countrywide. The so-called GAP market has an estimated backlog of between 500
000 and 800 000 units and remains a substantial challenge for Government, the
banking, and private sectors to adequately address. In this regard the
affordability levels for individuals have been the biggest challenge, but it is
expected that the sector will start growing again towards the end of 2011. Sea
Kay has a number of opportunities in this sector of the housing market and is
looking to expand its operations within it during 2011.
The group is also looking at opportunities to establish operations across
country borders and initial negotiations have been established with relevant
authorities and companies in Botswana and Angola. The need for proper integrated
housing projects in neighboring countries is also very high and those
Governments are eager to negotiate with the company to establish itself in their
countries.
Expansion will, to a large extent, depend on the successful recapitalisation of
the company.
GOING CONCERN - RESTRUCTURING AND FUNDING OF THE GROUP`S OPERATIONS
Sea Kay announced its intention to restructure various levels of the company
during the course of 2010 and some progress has been made in this regard. A lack
of working capital has prevented the company from accelerating this process but
it will remain a top priority and is expected to be achieved during the course
of 2011.
Sea Kay is in the process of applying to various financial institutions for
funding to alleviate pressure on the cash-flow and the working capital.
DIVIDENDS
No dividend will be paid in respect of the period under review.
FINANCIAL PREPARATION
The interim results for the six months ended 31 December 2010 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
Companies Act no 61 of 1973 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 2010, as
described in those financial statements.
NHFC LOAN
In terms of a settlement agreement with the National Housing Finance Corporation
Limited ("NHFC") (pursuant to the NHFC`s application for liquidation of Sea Kay
and Sea Kay Engineering (Pty) Limited during February 2010), loan repayments
totalling R51.2 million were made by Sea Kay between January 2011 and March
2011. This was made possible with the assistance of the Gauteng Department of
Local Government and Housing, which conducted a reconciliation and verification
of Sea Kay`s claims and effected accelerated payment. The capital balance on the
loan at 28 February 2011 was R65 million, which is to be repaid over five years,
with interest at prime.
CONTINGENT LIABILITIES
As included the 2010 annual report, the liquidators for BVI 1171 (Pty) Limited
(a special purpose vehicle company created for the development of a project on
Delft Symphony Precinct 3 & 5) have issued summons against Ibuyile Development
Consortium ("Ibuyile") (90% owned by Sea Kay), Sea Kay Engineering Services
(Pty) Limited and Sea Kay Property Development (Pty) Limited for R58 million
relating to expenses incurred in the normal course of business while the
development was managed. An amount of R11 million of the R58 million has already
been settled between the liquidators and the Provincial Government Western Cape
Housing Department ("PGWCHD"), reducing the contingency to R47 million. The
first phase of the development (351 houses) has been completed and was handed
over to the liquidators, who will sell and transfer those houses to
beneficiaries during 2011. The proceeds of those sales will in all probability
cover the balance of the contingency. Despite the sale of those houses and the
expected proceeds therefrom, Sea Kay (and Ibuyile) are in negotiations with the
liquidators and First National Bank, the only significant creditor in the
insolvent estate, to settle the ongoing litigation and to avoid any further
contingent liabilities. It is expected that a negotiated settlement will be
reached during the next few months, which should finally remove this contingency
and provide Ibuyile (and Sea Kay Western Cape) with additional construction work
valued at approximately R230 million.
A financial dispute arose between Ibuyile and its client, Thubelisha Homes (the
implementing agent on the N2 Gateway project in the Western Cape, which has
subsequently been wound down by Government). A mediation agreement has been
entered into with the Provincial Government in the Western Cape, and that
process was finalised early in December 2010, resulting in an amount of R8
million payable by Sea Kay. Ibuyile initiated a formal review process in the
Western Cape High Court against the mediator/arbitrator and other related
parties but certain issues relating to the dispute have been negotiated further
between Ibuyile and the PGWCHD and it is expected that these issues will be
resolved by mid 2011. Should the outcome of the negotiations be positive, the
review application will in all probability be settled between the parties.
REVIEW OPINION
SAB&T Inc has issued a qualified review opinion on the results for the period
ended 31 December 2010, which opinion is available for inspection at the
company`s registered office.
The review opinion contains the following paragraph:
"The ability of the group to honour its commitments and provide adequate working
capital to sustain its operations are dependent on a combination of factors
including the successful outcome of negotiations, procuring additional funds
and/or refinancing certain operations as well as a return to profitability."
DIRECTORATE AND SECRETARIAT
Landiwe Mahlangu was appointed chairperson, effective 14 December 2011. Stef
Greeff was appointed chief financial officer and financial director, and Mark
Hattingh as company sectary, both effective 1 February 2011. As a result of the
difficult circumstances encountered by the company during the period under
review, certain Corporate Governance protocols have not been implemented. In
this regard the board of directors assumed the responsibilities of the Audit
Committee during the period.
By order of the board.
P VAN DER SCHYF SJ GREEFF
Chief executive Officer Financial director
31 March 2011
Registered office and postal address
7 Patton Street, Duncanville, Vereeniging, 1939
PO Box 925, Meyerton, 1960
Website
www.seakay.co.za
Directors
LJ Mahlangu* (chairperson), P van der Schyf (CEO), SJ Greeff
(Financial director), AV Green*, BW Marais*
*non-executive
Company secretary
M Hattingh
Transfer secretaries
Link Market Services South Africa (Pty) Limited
Auditors
SAB&T Incorporated, Registered Auditors, Chartered Accountants (SA)
Sponsor
Vunani Corporate Finance
Date: 31/03/2011 17:19:01 Supplied by www.sharenet.co.za
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