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SKJ - Sekunjalo - Audited Group results for the year ended 31 August 2011
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 2011
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
Audited Audited
Group to Group to
31 August 2011 31 August 2010
R`000 R`000
Assets
Non-current assets 591 352 551 275
Property, plant and equipment 143 443 138 193
Goodwill 34 191 51 548
Intangibles 20 696 22 060
Investments in joint ventures - 50
Investment in associate 130 192 138 179
Loan to associate 39 111 17 900
Operating lease asset 1 689 1 218
Other financial assets 197 226 157 171
Deferred tax 24 804 24 956
Current assets 187 409 173 027
Inventory 17 985 15 703
Biological assets 34 903 34 046
Other financial assets 6 060 2 887
Current tax receivable 1 112 865
Trade and other receivables 96 725 67 451
Cash and cash equivalents 30 624 52 075
Assets of disposal group - 3 336
classified
as held for sale
Total assets 778 761 727 638
Equity and liabilities
Capital and reserves
Share capital and share premium 403 177 403 177
Reserves 121 194 121 194
Accumulated losses (99 501) (122 036)
Equity attributable to parent 424 870 402 335
Non-controlling interests 10 195 867
Total equity 435 065 403 202
Non-current liabilities 177 862 153 199
Other financial liabilities 72 839 53 454
Deferred tax 102 124 97 239
Other non-current liabilities 2 899 2 506
Current liabilities 165 834 165 561
Trade and other payables 94 017 61 778
Other financial liabilities 11 621 27 237
Other current liabilities 85 623
Provisions 19 139 26 138
Bank overdraft 38 211 41 398
Current tax payable 2 761 8 387
Liabilities of disposal groups - 5 676
classified as held for sale
Total equity and liabilities 778 761 727 638
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
Group to Group to
31 August 2011 31 August 2010
R`000 R`000
Continuing operations
Revenue 440 390 403 169
Cost of sales (307 886) (290 025)
Gross profit 132 504 113 144
Other income 12 848 16 028
Other expenses (139 891) (144 673)
Loss on sale of businesses (8 225) -
Impairments (946) (9 111)
Fair valuation adjustments 41 732 57 421
Investment revenue 20 966 5 897
Loss from associate (8 521) (6 596)
Finance cost (13 967) (11 025)
Profit before tax from 36 500 21 085
continuing operations
Tax (7 295) (12 510)
Profit for the year after tax 29 205 8 575
from
continuing operations
(Loss)/profit after tax from (1 165) 215
discontinuing operations
Other comprehensive income - -
Total comprehensive income 28 040 8 790
Attributable to:-
Non-controlling interests 1 736 614
Equity holders of the parent 26 304 8 176
28 040 8 790
Number of shares in issue 489 339 489 339
Weighted number of shares in 489 339 489 339
issue
Diluted number of shares in 489 339 489 339
issue
Headline and diluted headline 6.99 2.64
earnings/loss per share (cents)
- continuing operations 7.22 2.59
- discontinuing operations (0.23) 0.05
Earnings and diluted 5.38 1.67
earnings/loss per share (cents)
- continuing operations 5.61 1.63
- discontinuing operations (0.23) 0.04
Net asset value per share 86.83 82.22
(cents)
Tangible net asset value per 75.61 67.18
share (cents)
CONDENSED STATEMENT OF CHANGES IN EQUITY
Attri-butable Non-con- Total
trolling
To Parent Interests Equity
R 000`s R 000`s R 000`s
Balance at 1 September 394 239 (1 942) 392 297
2009
Profit for the year 8 176 614 8 790
Issue of preference - 1 000 1 000
shares in subsidiary
Treasury shares 200 - 200
repurchased
Dividends - (1 869) (1 869)
Changes in ownership (280) - (280)
interest
Business combinations - 3 064 3 064
Balance at 31 August 402 335 867 403 202
2010
Profit for the year 26 304 1 736 28 040
Issue of ordinary shares - 3 599 3 599
in subsidiary
Dividends - (2 506) (2 506)
Business combinations (3 769) 6 499 2 730
Balance at 31 August 424 870 10 195 435 065
2011
CONDENSED GROUP STATEMENT OF CASH FLOWS
Audited Audited
Group to Group to
31 August 2011 31 August 2010
R`000 R`000
Cash flow from operating 21 821 (4 656)
activities
Cash flows from investing (22 295) 6 408
activities
Cash flows from financing (17 790) (799)
activities
(Decrease) / increase in cash and (18 264) 953
cash equivalents
Cash and cash equivalents at 10 677 7 468
beginning
of the year
Cash and cash equivalents for - 2 256
assets
held for sale
Cash equivalents at the end of the (7 587) 10 677
year
CONDENSED GROUP SEGMENTAL REPORT 2011
Financial Technology Fishing Health
Services Solutions Care
R`000 R`000 R`000 R`000
Revenue 4 722 141 995 223 139 12 344
External sales 361 124 446 221 025 12 344
Inter group sales - 2 142 2 114 -
Discontinued 4 361 15 407 - -
operations
Dividends received - - - -
Segment result
Operating (2 654) (13 227) 12 282 (8 739)
profit/(loss)
Operating (368) 45 - -
profit/(loss) -
discontinued operation
Included in segment
results:
Impairments - - - -
Depreciation and (6) (2 359) (16 (2 072)
amortisation 886)
Fair valuation of - - - -
investments
Carrying amount of 209 88 838 251 672 28 747
assets
Carrying amount of 236 48 211 126 771 17 272
liabilities
Capital expenditure - 503 21 105
Invest- Media Group
Biotech- ments
nology
R`000 R`000 R`000 R`000
Revenue - 20 021 82 268 484 489
External sales - 2 053 80 161 440 390
Inter group sales - 17 968 2 107 24 331
Discontinued - - - 19 768
operations
Dividends received - 13 436 - 13 436
Segment result
Operating loss/profit/ (25) 23 853 78 38 022
Operating - - - (323)
profit/(loss) -
discontinued operation
Included in segment
results:
Impairments - (946) - (946)
Depreciation and - (169) (317) (21 809)
amortisation
Fair valuation of - 41 719 13 41 732
investments
Carrying amount of 169 301 222 199 17 795 778 761
assets
Carrying amount of 18 718 121 558 10 930 343 696
liabilities
Loss from associate 8 521 - - 8 521
Capital expenditure - - - 21 608
CONDENSED GROUP SEGMENTAL REPORT 2010
Financial Technolgy Fishing Health Care
Services Solutions
R`000 R`000 R`000 R`000
Revenue 8 698 116 216 226 362 11 431
External sales 738 77 468 226 362 11 431
Inter group sales - 4 968 - -
Discontinued 7 960 33 780 - -
operations
Segment result
Operating (8 869) 5 660 13 175 (7 928)
profit/(loss) -
continued
operations
Operating (6 280) 1 949 - -
profit/(loss) -
discontinued
operations
Included in segment (6 622) (507) (15 145) (3 732)
results:
Impairments (6 621) - - -
Depreciation and (1) (507) (15 145) (3 732)
amortisation
Carrying amount of 3 689 79 453 272 540 34 073
assets
Carrying amount of 6 094 30 150 150 991 14 956
liabilities
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 83 827 457 956
External sales - 3 343 83 827 403 169
Inter group sales - 8 079 - 13 047
Discontinued - - - 41 740
operations
Segment result
Operating (28) 35 619 (4 820) 32 809
profit/(loss) -
continued
operations
Operating - - - (4 331)
profit/(loss) -
discontinued
operations
Included in segment - 55 412 (1 036) 28 370
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
Note - All amounts are stated after elimination of management fees and
intergroup transactions.
Audited Audited
Group to Group to
Calculation of headline 31 August 2011 31 August 2010
earnings
R`000 R`000
Notes
Earnings attributable to 26 304 8 176
ordinary equity holders of
parent entity - IAS 33
Adjusted for:
Impairments of intangible i - 1 380
assets - IAS 38
Gains on disposal of property, ii (386) (2 752)
plant and equipment - IAS 36
Loss on disposal of businesses iii 8 225 -
- IFRS 3
Impairment of goodwill - IFRS 3 38 6 094
Headline earnings 34 181 12 898
Notes:
(i) The Group impaired intangible assets after impairment tests
indicated that the recoverable amount of cash generating unit was less
than its carrying value.
(ii) This profit arose from the disposal of property, plant and
equipment.
(iii) This loss arose from the disposal of Fios (Pty) Ltd and First Light
Administration Services (Pty) Ltd during the year.
Additional financial information:
Included in the income statement are fair value adjustments to the Group`s
investments of R41,7m. Refer to the segmental report for fair valuations
within each division.
The Group is carrying its investment in associate, namely, Bioclones (Pty)
Ltd, at cost less accumulated share of post acquisition losses because of
the complexities and subjectivity involved in determining a fair value for
the business.
Basis of preparation
The condensed 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
2011, which have been prepared in accordance with International Financial
Reporting Standards ("IFRS"), the AC 500 series of interpretations, the
Listings Requirements of the JSE Limited, and the current Companies Act of
South Africa. The condensed financial statements have been audited by the
Group`s independent auditor, PKF (Cpt) Inc., whose report is available for
inspection at the registered office of the Company.
The audited financial results for the year ended 31 August 2011 have been
prepared in accordance with the Group accounting policies and are
consistent with those applied in the previous financial year. The annual
financial statements were prepared by Takudzwa Hove, Financial Manager
B.Com (Hons), CA (SA).
Corporate activities
Disposals during the year:
- The Group concluded its disposal of its 51% share in First Light
Administration Service (Pty) Ltd with the effective date being 1 March
2011. The assets and liabilities of this subsidiary were disclosed in the
comparative financials as non-current assets and non-current liabilities
held for sale.
- The Group disposed of its 70% share in Fios (Pty) Ltd on 1 March 2011.
The assets and liabilities of this subsidiary were not disclosed in the
comparative financials as non-current assets and non-current liabilities
held for sale as intention to sell had not been made at that date.
The financial implications of these corporate actions are detailed below:
Net assets 11 375
Less: Non-controlling interests 6 500
Disposed by Group 17 875
Loss on disposal (8 225)
Selling price 9 650
Settled in non-cash items (672)
Settled in cash 8 978
Bank disposed (5 355)
Net cash flow 3 623
Events post reporting date:
The directors are not aware of any events post reporting date that
materially affects the Group.
Highlights
Headline earnings per share increased by 165% to 6.99c.
Net profit before tax from continuing operations increased by 73% to
R36,5m (2010:R21m)
Investment revenue has increased by 256%.
Cash generated from operations increased by 98%.
Investments show steady growth and excellent returns.
Group performance
The financial position of the Group has strengthened with the net asset
values ("NAV") increasing by approximately 6% (2010:2%). The NAV per share
increased from 82.22c to 86.83c in the current year under review. Tangible
net asset value increased from 67.18c to 75.61c. The Company NAV per share
is 139.52c (2010: 130.65c per share). This further demonstrates that the
Sekunjalo Group continues to meet its strategic objective with regard to
its investment asset base.
Group revenue grew consistently by 9%(2010:9%). This was achieved despite
the adverse effects of the strong Rand to Dollar denominated sales and
tough market conditions. Profit from continuing operations attributable to
the Group equity holders increased by 222% to R26m (2010:R8,1m).
The headline earnings increased to R34,2 million from R12,9m in 2010. This
demonstrates that Sekunjalo is in line with our strategy to maximise its
returns and is on target in growing its investment portfolio value. This
growth was achieved by strengthening its subsidiaries organically and by
adding strategic value to its non-controlled investments.
Sekunjalo focused on improving operational efficiencies and eliminating
non-essential costs. This resulted in the Group increasing its overall
gross profit percentage from 28% to 30% in 2011 for continuing operations.
This was achieved despite revenues being adversely affected by the strong
Rand. Other expenses decreased by 3.3% despite rising inflationary
pressures.
Bank borrowings decreased by 21% (2010:38%) and other institutional
borrowings decreased by 33%. Additional funding acquired during the year
was utilised to fund growth in operations and further benefits are
expected to be reaped in the future. The low gearing of the Group has
positioned us to favourably consider any opportunities that will arise.
The fishing division has performed satisfactorily, despite the effects of
the stronger Rand during the year under review and tough weather and
catching conditions within certain sectors that it operates in.
The Information and Communications Technology division ("ICT") showed
tremendous improvement with revenues from continuing operations increasing
by 61%(2010:1.8%).
Fios (Pty) Ltd, a subsidiary of Technology Solutions Group, was sold
during the year.
The Group also finalised the disposal of First Light Administration
Services (Pty) Ltd in its financial services division. This resulted in
the Group containing its losses from this division and limited it to R3m
for the current year.
Cash generated from operations increased from R16m to R31.8m in 2011, a
98% positive turnaround coming from our underlying investments.
Strategic investments
The Group`s strategic investments consist of British Telecom Communication
Services South Africa ("BTSA") and Saab South Africa (Pty) Ltd ("Saab SA")
that were acquired last year. The unlisted private company investment
value has grown by 27% from R153,1 million to R194,6 million.
The Group received a maiden dividend of R13m from BTSA during the year
under review.
BTSA 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.
BTSA consists principally of four lines of business: BT Global Services,
Openreach, BT Retail and BT Wholesale.
Sekunjalo`s partnership with BTSA has been very successful to date. The
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 current economic climate. It
has exceeded budgeted expectations and looks extremely well positioned to
grow aggressively over the next few years.
Saab SA
Saab SA, the South African operations of Swedish multi-national Saab AB,
has settled well into the Group. With its specialized capabilities in
civil security and defence, the Group expects this investment will produce
the expected growth in the medium term.
Marine
Premier Fishing SA (Pty) Ltd ("Premier Fishing"), is the largest black
owned and controlled fishing company in South Africa and the most
transformed in terms of its management and employees.
The major product lines for Premier Fishing are South Coast rock lobster,
West Coast rock lobster, squid, abalone and pelagic.
Premier Fishing has performed satisfactorily, despite the effects of the
stronger Rand on sales and the tough weather conditions which affected
landings across all sectors. Although operating profits of R12m are 6.8%
lower than compared with the prior year due to the factors above, the
company has refocused its strategy on attaining more sustainable
businesses that are not dependent on non-controllable factors and has
managed to control its operating costs.
The South Coast rock lobster division revenue dropped due to the stronger
Rand and the catch sizes declined due to poor weather conditions in the
second half of the year. However, the total volume of lobster landed in
2011 has increased by 8.5% and continues to meet sustainable demands
globally.
The West Coast rock lobster division performed satisfactorily compared to
the previous year. Although the sales value declined due to the stronger
Rand during the year, market pricing is considerably higher due to the
demand in the Far East remaining strong.
The pelagic sector as an industry did not fare well in the 2011 season due
to poor weather conditions which reduced the fishing days. This division
landed their entire pilchard quota and landings were 16% less than the
prior year under the anchovy quota.
The squid division has improved substantially with the increase in market
demand. Pricing in the European market has increased by 25%. The volume of
squid landed has also increased by 11%.
The abalone farm continues to produce good results and our decision to
expand this business is one of the key strategies of the Group. This
division performed better than last year as a result of the increased
sales prices received internationally. Volumes sold during the year are
also 20% higher than the prior year.
The Company is assessing regulatory requirements for the expansion of the
farm after it acquired additional land adjacent to the farm in Gansbaai.
This additional land could increase the capacity of the current Gansbaai
farm to a capacity of approximately 300 tons from our existing 120 tons.
Our branded names, Atlantic Fishing and Seagro continue to have favourable
support in the market and are considered to be well-established brands in
the domestic and international sectors.
Information Communication Technology
The growth of Sekunjalo Technology Solutions Group Limited ("SekTSG") is
continuing which is clearly reflected in its revenue and profitability
increases of 61% and 133% respectively. With the disposal of the
underlying FIOS operations, this division continues to fare strongly and
is well positioned to attain further acquisitions to increase its focused
product offerings.
SekTSG subsidiary companies include Saratoga Software (Pty) Ltd
("Saratoga") which is a software development house primarily focused on
the insurance industry and Digital Matter (Pty) Ltd ("Digital Matter"), a
75% Saratoga owned subsidiary providing mobile data solutions. Wisdom
Global Technology Solutions (Pty) Ltd ("Wisdom Global"), which was set up
during the year, focuses on computerised asset maintenance management
software solutions and services.
SekTSG acquired 51% stake in the startup company, Wisdom Global as part of
its strategy to present innovative solutions to its customers. With
Digital Matter, this will enable the Group to further satisfy the growing
demand for efficient IT solutions.
Saratoga and its subsidiary, Digital Matter have posted good results with
profits exceeding budget. Although margins have been controlled, the
increased cost of resources to meet customer demands has been justified by
the excellent profits.
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 and Accounts
Receivable software which is suitable as part of the IT solutions needed
for the implementation of the future National Health Insurance scheme in
South Africa.
HST has had a very good financial year. The contract with the Provincial
Government of the Western Cape has been renewed and secured for another
three years with the regional pharmacy roll out in seven hospitals going
live by the end of the financial year. Phase two of the laboratory
information system contract was awarded in April 2011 and this
implementation is progressing well.
The impact of these contracts has enabled the revenue of HST to increase
by 80% to R82m (2010:R45m)and operating profits have increased by 144%.
HST has partnered with AME International through Amethst (Pty) Ltd
("Amethst"), which has won the Gauteng Department of Health`s HIS tender
which entails implementing systems in over 60 Gauteng hospitals and
clinics.
However, as previously reported, the contract entered into between Amethst
as part of the Baoki Consortium, and the Gauteng Department of Health for
the implementation of the HIS has been cancelled by the Baoki Consortium.
This action has been taken as a result of a non-delivery by the Gauteng
Department of Health on their contractual obligations. While legal advice
is being sought regarding the recovery of outstanding debts, the Baoki
Consortium continues to engage with The Gauteng Department of Health in an
attempt to get a revised project contract in place.
Health Care
The revenue generation of Sekunjalo Health Care division has not performed
in line with targets, due to tough market conditions and delayed product
launches.
However, the patents and registration of nine new consumer products will
soon be introduced into production and will be available for sale in 2012.
Our South African Bureau of Standards registered advanced range of natural
disinfectant and sanitizer products are ready to be launched into the
market which will result in us becoming the market leader in these niche
health care products.
The restructuring of the Health Care division has enabled management to
grow the company into new niche health care areas and expand its product
offerings. The company has incurred non-recurring costs and will reap
the benefits of this investment in future years.
Biotechnology
Genius Biotherapeutics, 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 Biotherapeutics also holds global patents for personalised medicine
and vaccines. Genius Biotherapeutics` one technology is in advanced stages
with the next stage of development being clinical trials.
Commercialisation with key university and commercial partners is expected
in the medium term.
Management has assembled an experienced team of scientists with
appropriate biopharmaceutical skills to provide a robust supply of the
Repotin product into the market.
The refurbishment of the Ribotech facility in Cape Town is now complete
and research and development work has commenced on the G-CSF technology.
Genius Biotherapeutics made a media announcement about its global patents
on Dendritic Cell Vaccine ("DCV"). This followed on closely to the
previous week`s announcement on the Nobel Peace prize award in medicine
made to the three scientists for their research done on DCV. This
opportunity may have far reaching consequences for the future of the
company and biotechnology in the country.
Media
The Sekunjalo media division has managed to contain losses with the
division breaking even operationally. The biggest contributor to the
turnaround was espAfrika (Pty) Ltd ("espAfrika") which owns the rights of
and manages the Cape Town International Jazz Festival. The company
extended its events to include the Luanda International Jazz Festival and
Nelson Mandela International Music Festival in Port Elizabeth.
The Cape Town International Jazz Festival continues to bear fruit and
recent studies showed that it contributed R499 million to the gross
domestic product of the Western Cape economy.
Future prospects
With the growth of our core operational investments in our technology and
fishing sectors during the current year, the group has built a strong
platform for the next few years.
Due to the financial success during the year under review, we believe that
Sekunjalo is well positioned for further success through 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 returns on the
investments.
Appreciation
We wish to thank the Sekunjalo board of directors for its leadership and
guidance during the past year and for its 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 I would
like to thank all executives and staff who have taken on the new
challenges with great enthusiasm and passion.
MI Surve K Abdulla
Executive chairman Chief executive officer
3 November 2011
Directors
*Dr M Iqbal Surve (Executive Chairman); *Khalid Abdulla; Prof Vukile
Mehana, Johannes 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,
Rennie House, 13th Floor, 19 Ameshoff Street, Braamfontein, 2001
Auditors: PKF (Cpt) Inc, Cape Town
Sponsor: PSG Capital (Pty) Ltd, Stellenbosch
Date: 03/11/2011 08:45:01 Supplied by www.sharenet.co.za
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