Wrap Text
Audited Group results for the year ended 31 August 2012
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 2012
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
Audited Audited
Group to Group to
31 August 2012 31 August 2011
R'000 R'000
Assets
Non-current assets 673 555 591 352
Property, plant and equipment 135 500 143 443
Goodwill 34 191 34 191
Intangibles 15 642 20 696
Investment in associate 120 956 130 192
Other loans receivable 25 322 39 111
Operating lease asset 2 274 1 689
Other financial assets 314 451 197 226
Deferred tax 25 219 24 804
Current assets 181 748 187 409
Inventory 17 851 17 985
Biological assets 38 537 34 903
Other financial assets 1 464 6 060
Current tax receivable 209 1 112
Trade and other receivables 77 434 96 725
Cash and cash equivalents 46 253 30 624
Total assets 855 303 778 761
Equity and liabilities
Capital and reserves
Share capital and share premium 403 177 403 177
Reserves 121 194 121 194
Accumulated losses (81 548) (99 501)
Equity attributable to parent 442 823 424 870
Non-controlling interests 9 041 10 195
Total equity 451 864 435 065
Non-current liabilities 253 872 177 862
Other financial liabilities 129 949 72 839
Deferred tax 123 189 102 124
Other non-current liabilities 734 2 899
Current liabilities 149 567 165 834
Trade and other payables 85 806 94 017
Other financial liabilities 37 784 11 621
Finance lease obligation 51 85
Provisions 16 766 19 139
Current tax payable 2 593 2 761
Bank overdraft 6 567 38 211
Total equity and liabilities 855 303 778 761
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
Group to Group to
31 August 2012 31 August 2011
R'000 R'000
Continuing operations
Revenue 455 860 440 390
Cost of sales (305 131) (307 886)
Gross profit 150 729 132 504
Other income 3 700 12 848
Other expenses (123 882) (139 891)
Loss on sale of subsidiaries - (8 225)
Impairments (1 370) (946)
Fair valuation adjustments 30 081 41 732
Investment revenue 17 334 20 966
Loss from associates (9 211) (8 521)
Finance costs (19 251) (13 967)
Profit before tax from continuing operations 48 130 36 500
Tax (29 931) (7 295)
Profit after tax from continuing
operations 18 199 29 205
Loss after tax from discontinuing
operations - (1 165)
Other comprehensive income - -
Total comprehensive income 18 199 28 040
Attributable to:-
Non-controlling interests 246 1 736
Equity holders of the parent 17 953 26 304
18 199 28 040
Number of shares in issue (000's) 489 339 489 339
Weighted number of shares in issue (000's) 489 339 489 339
Diluted number of shares in issue (000's) 489 339 489 339
Earnings and diluted per share (cents) 3.67 5.38
- continuing operations 3.67 5.61
- discontinuing operations - (0.23)
Net asset value per share (cents) 90.49 86.83
Tangible net asset value per share (cents) 80.31 75.61
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
Attributable to Non-controlling Total Equity
Parent Interests
R 000's R 000's R 000's
Balance at 01 September 2010 402 335 867 403 202
Profit for the year 26 304 1 736 28 040
Issue of ordinary shares in subsidiary - 3 599 3 599
Dividends declared by subsidiary for
non-controlling interests - (2 506) (2 506)
Loss of control through disposal of subsidiaries (3 769) 6 499 2 730
Balance at 31 August 2011 424 870 10 195 435 065
Profit for the year 17 953 246 18 199
Dividends declared by subsidiary for
non-controlling interests - (1 400) (1 400)
Balance at 31 August 2012 442 823 9 041 451 864
CONDENSED GROUP STATEMENT OF CASH FLOWS
Audited Audited
Group to Group to
31 August 2012 31 August 2011
R'000 R'000
Cash flow from operating activities 53 302 21 821
Cash flows from investing activities (96 437) (22 295)
Cash flows from financing activities 90 408 (17 790)
Increase / (decrease) in cash and cash equivalents 47 273 (18 264)
Cash and cash equivalents at beginning of the year (7 587) 10 677
Cash equivalents at the end of the year 39 686 (7 587)
CONDENSED GROUP SEGMENTAL REPORT 2012
Technology Fishing Health
Solutions Care
R'000 R'000 R'000
Revenue 152 436 208 018 16 994
External sales 152 214 207 639 16 994
Inter-group sales 222 379 -
Segment Result
Operating profit/(loss) 38 459 16 028 (7 828)
Included in segment results: (4 790) (17 465) (2 018)
Impairments (275) - -
Depreciation and amortisation (4 515) (17 465) (2 018)
Fair valuation of investments - - -
Carrying amount of assets 82 994 255 946 16 677
Carrying amount of liabilities 42 696 97 898 8 341
Loss from associate - - -
Capital expenditure 750 10 831 19
Bio-
technology Investments Media Group
R'000 R'000 R'000 R'000
Revenue - 21 950 77 820 477 218
External sales - 1 997 77 014 455 858
Inter-group sales - 19 953 806 21 360
Segment Result
Operating profit/(loss) (42) 19 746 (7 097) 59 266
Included in segment results: - 28 914 (271) 4 370
Impairments - (1 095) - (1 370)
Depreciation and amortisation - (58) (285) (24 341)
Fair valuation of investments - 30 067 14 30 081
Carrying amount of assets 174 779 330 146 17 838 878 380
Carrying amount of liabilities 24 951 242 468 16 528 432 882
Loss from associate (9 211) - - (9 211)
Capital expenditure - 244 432 12 276
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 operations 4 361 15 407 - -
Segment Result
Operating profit/(loss) (2 654) 13 227 12 282 (8 739)
Operating profit/(loss) - discontinued
operation (368) 45 - -
Included in segment results:
Impairments - - - -
Depreciation and amortisation (6) (2 359)(16 886) (2 072)
Fair value of investments - - - -
Carrying amount of assets 209 90 469 251 672 27 116
Carrying amount of liabilities 236 49 843 126 771 15 641
Loss from associate - - - -
Capital expenditure - 503 23 187 519
Bio- Investment
technology Media Group
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 operations - - - 19 768
Segment Result
Operating profit/(loss) (25) 23 853 78 38 022
Operating loss
discontinued operations - - - (323)
Included in segment results:
Impairments - (946) - (946)
Depreciation and amortisation - (169) (317)(21 809)
Fair valuation of investments - 41 719 13 41 732
Carrying amount of assets 169 301 222 199 17 795 778 761
Carrying amount of liabilities 18 718 121 557 10 930 343 696
Loss from associate (8 521) - - (8 521)
Capital expenditure - 39 543 24 791
Note: All amounts are stated after elimination of inter-group transactions and balances.
Audited Audited
Group to Group to
31 August 31 August
Calculation of Headline Earnings 2012 2011
R'000 R'000
Notes
Earning attributable to ordinary equity holders
of parent entity - IAS 33 17 953 26 304
Adjusted for:
Impairments of intangible assets - IAS 38 275 -
Loss / (gain) on disposal of property, plant and
equipment - IAS 16 122 (386)
Loss on disposal of subsidiaries - IFRS 3 (i) - 8 225
Impairment of goodwill - IFRS 3 / IAS 38 - 38
Headline earnings 18 350 34 181
Headline and diluted headline earnings
per share (cents) 3.75 6.99
- continuing operations 3.75 7.22
- discontinuing operations - (0.23)
Notes:
(i)This loss arose from the disposal of Fios (Pty) Ltd and First Light Administration
Services (Pty) Ltd during the prior year.
Highlights
Investments in subsidiaries show excellent returns;
Gross margin increased from 30% to 33%;
Profit from operations increased by 56%;
Cash flows from operating activities increased by 141% from R22m to R53m;
Total assets increased by 9.8%; and
NAV per share increased by 4% to 90.49c.
Group performance
Profit before tax rose by 32% to R48m from R36.5m due to improved results from the underlying
operations. Both profit attributable to Group equity holders and the headline earnings are down
to R18m compared to R26m and R34m respectively in 2011. The main reason for the decline in
earnings is attributable to the increase in the capital gains tax inclusion rate. The inclusion
rate increased from 50% to 66% resulting in the effective capital gains tax rate increasing
from 14% to 18.67%. This resulted in a re-estimation of the deferred tax liabilities on the
previously recognised cumulative fair value gains.
The impact of this was the recognition of a once-off deferred tax charge of R14m through the
statement of comprehensive income. The deferred tax charge reflects the potential tax which
may be paid by the Group when it realises its investments in the future. If this once-off
deferred tax adjustment was not taken into account, the earnings attributable to the parent
equity holders would have been 13% higher than the prior year.
The Group's objective of increasing its investment asset base has been consistently
demonstrated over the past few years and has increased further this year by 9.8% to
R855m (2011: R779m). The financial position of the Group has strengthened with the
net asset value (NAV) increasing by approximately 4%. The NAV per share increased
from 86.83c to 90.49c. Tangible net asset value per share increased from 75.61c to 80.31c.
Group revenue growth of approximately 4% was achieved despite the adverse pressure of market
pricing internationally and tough environmental conditions which delayed catching and selling
in the fishing sector. However, despite the marginal revenue growth, improved efficiencies
and cost control resulted in the improved gross profit margins and operating profit of R29m.
This is in line with our strategy to maximise returns from our subsidiaries and to
strengthen our investment value.
The success of Sekunjalo's focus on improving operational efficiencies and eliminating
non-essential costs is demonstrated by the improved gross profit margin, which increased
from 30% to 33%. The decline in operating expenses of 11% was achieved despite inflationary
pressures such as increases in diesel, electricity and wages.
Bank borrowings decreased by 28% from R17m to R12m. Additional funding was sourced during the
year to fund the growth in assets, new investments and operations. Further benefits from these
activities are expected to be reaped in the future.
Cash flows from operating activities increased from R22m to R53m, a 141% increase. In line
with expectations, the Sekunjalo Technology Solutions Group division, ("SekTSG") was the
biggest contributing factor to the high cash generation.
The Information and Communications Technology division (ICT) earnings growth has been
exceptional with profits soaring up by 191% from R13m to R38m.
The marine division has performed satisfactorily, despite the pressures of market pricing and
tough weather and catching conditions within certain sectors that it operates in. Earnings
growth was good compared to the prior year, with profits increasing by 30% from R12m to R16m.
Additional financial information:
Included in the statement of other comprehensive income are fair value adjustments to
the Group's investments of R30m (2011: R41m). Refer to the segmental report for fair
valuations relating to each segment.
The Group is carrying its investment in associate, namely, Genius Biotherapeutics, at cost
less accumulated share of post-acquisition losses because of the complexity and
subjectivity involved in determining a fair value for the investment.
Strategic investments
The Groups strategic investments consist of British Telecom Communication Services South Africa
(BTSA),Saab South Africa (Pty) Ltd (Saab SA) and Pioneer Food Group Ltd (Pioneer Foods).
The unlisted private company investments value (i.e. BTSA and Saab SA) have grown by 17%
(2011: 27%) from R195m to R228m (2011: R153m to 195m). The listed public company investment,
namely Pioneer Foods was valued at R84.6m at year end.
BTSA is one of the world's leading providers of communication solutions and services
operating in 170 countries. BTSA consists principally of four lines of business: BT Global
Services, Openreach, BT Retail and BT Wholesale.
Sekunjalo's partnership with BTSA is well established. BTSA has performed exceptionally well
during the year despite the current economic climate. It has exceeded budgeted expectations
and is extremely well positioned to grow consistently over the next few years. The Group
received a second dividend of R10m (2011: R13m)from BTSA during the year under review.
Saab SA, the South African operation of Swedish multi-national Saab AB, has specialised
capabilities in civil security and defence. The Group expects that this investment will
continue to grow in the medium term.
During the year under review the Group acquired a minority stake of 0.75% in Pioneer Foods.
This relationship with Pioneer Foods is in line with the Group's strategy of becoming a
"Partner of Choice". The Group received a dividend of R0.7m during the period under review.
Information Communication Technology
The expected growth of the SekTSG division was realised with its revenue and profitability
increasing by 22% and 191% respectively. Through organic growth, the division continues
to perform strongly and consistently. It is well positioned to attain further niche
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 and asset tracking solutions.
Saratoga and Digital Matter have experienced a good year with profits increasing to
R4.3m from R2.7m and R1.3m from R0.7m respectively.
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 steadily. Key customers include the Western Cape Government ("WCG") and the
National Health Laboratory Service (NHLS). The billing and accounts receivable software
was developed by the company and is also a critical part of the IT solutions needed
for the implementation of a future National Health Insurance scheme in South Africa.
HST has had an impressive financial year with profitability increasing by 81% from R16m to
R29m (2011: 129% from R7m to R16m). The implementation of the NHLS contract has progressed
well with 116 laboratories installed and rolled out during the year.
The impact of this successful implementation of the contracts has resulted in an increase of
revenue in HST by 27% to R105m (2011: 80% to R82m).
As previously reported, HST has partnered with AME International through Amethst (Pty) Ltd
(Amethst). As part of the Baoki Consortium Amethst was awarded the Gauteng Department of
Healths Hospital Information System (HIS) contract during the 2009 financial year.
The tender entails implementing systems in over 60 Gauteng hospitals and clinics.
However, as previously reported, the contract has been cancelled by the Baoki Consortium.
This action was taken as a result of non-delivery by the Gauteng Department of Health on
its contractual obligations. Arbitration proceedings have commenced and a date for the
hearing has been set for later in the calendar year.
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 fairly well considering the tough weather conditions which
affected landings across most sectors and the effect of the reduced total allowable catch
(TAC) across the industry that is determined by the Marine Coastal management.
Nonetheless, operating profits were up 30% to R16m (2011: down 6.8% to R12m) as the company
has refocused its strategy on attaining more sustainable businesses that mitigate the
effects of a lower TAC and has managed to control its operating costs effectively.
The south coast rock lobster division revenue was affected by unsold inventory held at
year-end due to poor weather conditions which delayed shipping to overseas customers and
reduced the number of good fishing days experienced in the second half of the year.
The balance of 2012 fishing season quota was landed after year end and will be sold within the
first quarter of the 2013 financial year.
The west coast rock lobster division performed well considering the highly pressurised market
pricing in the Far East.
The pelagic sector within the fishing industry fared extremely well in the 2012 season
due to improved fishing days with high volumes landed. This division landed its entire
pilchard quota and anchovy quota during the year under review.
The squid division in line with the industry has faced a tough year in terms of landed volumes.
The division managed to break even operationally during the year.
Marine Growers (our abalone farm), delivered good results and the decision to expand this
business is one of the key strategies of the Group. This division's performance improved
again and was driven by the consistent demand for the South African abalone in the Far East
market.
Marine Growers has embarked on an environmental impact assessment to continue its strategy
to expand the farm after it acquired the land adjacent to the farm in Gansbaai. This
additional land could increase the capacity of the current facility to a capacity of
approximately 300 tons.
Health Care
The revenue of the Sekunjalo Health Care division has increased by 37%, due to better
strategic marketing and product initiatives put into place to increase the sales volumes.
The 2011 restructuring of the Health Care division has enabled management to grow the
market share of the company into niche health care areas and expand its product
offerings to include mineral supplements, galenical creams, natural disinfectant and
sanitiser products.
Biotechnology
Genius Biotherapeutics, formerly known as Bioclones (Pty) Ltd, is South Africa and Africas
largest medical biotechnology company with strategic interests in biogenerics and novel
compounds. One of Genius Biotherapeutics technological developments is in advanced stages
with the next stage of development proceeding well towards clinical trials.
Management has enabled the team of scientists to upgrade the facility and update all
regulatory processes to meet the Medicines Control Council's requirements and to continue
with alternative development methods to improve the efficiency of the facility in
Centurion.
The Ribotech facility in Cape Town has been successfully upgraded. The research and
development work of the facility has continued working towards replicating the protocol
for the granulocyte colony-stimulating factor technology.
Media
The Sekunjalo media division has achieved a loss mainly due to an impairment of R6m
relating to a sponsorship debtor. Its subsidiary, espAfrika (Pty) Ltd (espAfrika) owns
the rights of and manages the Cape Town International Jazz Festival. The Cape Town
International Jazz Festival continues to bear fruit and contributes greatly to the
gross domestic product of the Western Cape as well as the national economy.
Contingencies
Premier Fishing received summons from the Competition Commission pursuant to the
Commission's investigation into the pelagic fishing industry which has been ongoing since July
2008. Premier Fishings attorneys have undertaken an extensive investigation into the business
conduct at Premier Fishings pelagic division. Premier Fishing continues to cooperate fully with
the Competition Commission. The outcome of the investigation is uncertain therefore the
financial effect cannot be determined.
A copyright infringement claim has been lodged against a Group company HST. The total income
earned by the company from the alleged copyright infringement does not exceed R 1.8m to date.
As such damages, if proven, are not likely to be higher than R2m which includes estimated legal
fees. The Group is confident of a positive outcome when the case is resolved.
Basis of preparation
The condensed consolidated financial information has been prepared in accordance with
International Financial Reporting Standards ("IFRS"), IAS 34 - Interim Financial Reporting,
the AC 500 series of interpretations, the Listings Requirements of the JSE Limited, and the
Companies Act, 2008 (No 71 of 2008) of South Africa and is based on the audited financial
statements of the Group for the year ended 31 August 2012. The condensed financial statements
have been audited by the Groups independent auditor, PKF (Cpt) Inc., whose unmodified report
is available for inspection at the registered office of the Company.
The audited financial results for the year ended 31 August 2012 have been prepared in
accordance with the Group's 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) and supervised by Chantelle Ah Sing the
Chief Financial Officer of the Group.
Events after the reporting date
The directors are not aware of any events after the reporting date that materially affect
the Group.
Future prospects
Our strategy to focus on our core operational investments in our information technology
and fishing sectors have borne fruit with the sectors showing significant growth during
the current year and have built the Group a strong platform for further growth over the
next few years.
As we continually build on our financial successes, we believe that Sekunjalo is well
positioned to further enhance its earnings and is well set to bolster its net asset
value through organic growth, acquisitions and strategic initiatives.
Any reference to future financial performance included in this announcement has not been
reviewed or reported on by the Group's auditors.
Dividends
No dividends have been declared for the current period. The Board continues to work
towards the payment of dividends in the foreseeable future and believes that the Group
strategy will deliver significant returns on 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, staff and strategic partners for
their unselfish commitment and effort in meeting the business challenges that have resulted
in them often going beyond the call of duty. It has been a challenging year given the global
economic environment and we 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
6 November 2012
Directors
*Dr M Iqbal Surve (Executive Chairman); *Khalid Abdulla; Prof Vukile Mehana, Johannes
Mihe Gaomab; 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: 06/11/2012 03:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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