SEKUNJALO INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1996/006093/06
Share code: SKJ ISIN: ZAE000017893
(“SIL”)
Unaudited interim results for the period ended 29 February 2008
OVERVIEW
CORPORATE PROFILE
SIL is a black-controlled investment holding company domiciled in
the Republic of South Africa with points of representation in
London and Mauritius. SIL is listed on the JSE Limited (“JSE”).
The Sekunjalo Group (“the Group”) is invested in two primary
sectors, i.e. Manufacturing and Resource-driven and Technology and
Innovation-driven sectors. Within the Manufacturing and Resourcedriven sector the major investments are in Industrials (primarily
fishing) and within the Technology and Innovation-driven sectors
the main investments are in Healthcare and Pharmaceuticals,
Information Technology and Communication, Financial Services,
Aquaculture, Biotechnology and Enterprise Development.
RECENT HIGHLIGHTS
Sekunjalo has recently received a number of prestigious BEE awards:
– The Business Map Foundation Top BEE Partnership Award for 2007
– Financial Mail/Empowerdex 2006 Award for Top Ranked BEE Firm
– The Financial Mail Top Empowerment Companies Award for 2008 for
the Top-ranked listed Company in the General Industrials sector of
the JSE.
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 and
adjustments, where applicable.
The basis of preparation is consistent with the prior year.
COMMENTARY ON RESULTS
The SIL results for the first six months of the financial year are
in line with expectations due largely to the seasonality of its
fishing business. Compared to the same period in 2007, reporting
revenue is up 22,5% to R229,7 million from R187,4 million, but has
incurred an operating loss of R43,5 million compared to an
operating profit of R12,1 million last year. The headline loss per
share is reflected at 4,90 cents compared to a headline earnings of
2,91 cents per share as at 28 February 2007.
In addition to the seasonal nature of fishing, the Group also
changed its classification of its Biotechnology interests from an
Investment to an Associate. This change arose as a result of a
change in circumstances whereby the Group now has significant
influence over this Biotechnology investment. As a consequence,
last year’s interim results included a fair value adjustment of
R27,4 million which was included in operating income, whereas no
fair value adjustment is included in this year’s results. 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.
REVIEW OF INVESTMENTS
FISHING AND AQUACULTURE
Premier Fishing has incurred a loss for the first six months of
R10,7 million. This is due largely to the poor catches in the
pelagic sector, high fuel prices, depressed prices for fish meal
globally and poor west coast rock lobster catches. The pelagic
total allowable catch(TAC)has been reduced to 90 000 tons from 165
000 tons last year and poor catches continue on the West Coast,
with most catches occurring around Mossel Bay. Whilst the industry
has experienced poor catches of west coast rock lobster, it is
anticipated that catches will improve significantly in the next few
months. South coast rock lobster catches have been good and the
favourable rand/dollar exchange rate will boost revenues for the
second half of the year.
Premier’s success in the allocation of long-term fishing rights has
provided a platform upon which Premier can roll out its high-growth
business strategy, which is to become one of the largest lobster
fishing companies in the Southern hemisphere. Premier’s success in
reducing its long-term debt is allowing it to reinvest capital in
acquiring further lobster rights and partnering smaller lobster
rights holders. Premier Fishing is an exporter of choice and its
lobster brands are highly sought after in the USA, China, Japan and
Europe.
The abalone farm continues to produce steady results and our
strategy to expand this business has been fast-tracked with the
recent acquisition of the Marine Growers Abalone Farm in the
Eastern Cape. This acquisition complements our current pipeline and
will provide sustainable earnings as well as being a substantial
contributor to the sustainability of the abalone resource in the
country.
HEALTH CARE AND PHARMACEUTICALS
Sekunjalo Health Care (SHC) and its associated health care
companies, comprising Sekpharma(Pharmaceuticals), Rapimed(Rapid
Diagnostics) and Health System Technologies(HST), continue to
supply both the private and public sectors.
In line with the strategy adopted at the end of last year, the
Group has embarked on significant cost-cutting measures with a view
to managing the Pharmaceuticals and Diagnostics businesses to break
even by the 2008 financial year-end, whilst pursuing alternative
strategies for these businesses. HST, the IT arm of SHC, continues
to operate profitably and has won significant public sector tenders
which will enhance the profitability of this business. The most
recent tender awarded to HST is the National Health Laboratory
System (NHLS) tender which will involve rolling out systems to
public sector laboratories nationally.
In accordance with good accounting practice and being consistent
with the year-end treatment, the Group continues to impair loans
owing by SHC and its Associates to Sekunjalo Investments. The
operating loss of R19,7 million includes a loan impairment of R13,8
million.
INFORMATION TECHNOLOGY AND TELECOMMUNICATIONS
The Group’s ICT businesses are known as Sekunjalo TSG (Technical
Solutions Group). The Group comprises three companies that we have
invested in, namely, Synergy, Fios and Saratoga. These businesses
have been consolidated and TSG is now being managed as an
autonomous division focusing on closer collaboration in software
development and implementation, marketing and sales and a reduction
in corporate overheads.
Sekunjalo TSG is a business solutions provider that is focused on:
- providing business intelligence solutions, and
- developing and supporting a variety of software products that are
custom designed to meet the objectives of businesses operating in
specific sectors.
Sekunjalo TSG has performed well and is currently well positioned
to deliver the full-year targeted results. Plans to list Sekunjalo
TSG are currently under review and the Group will make an
announcement in this regard shortly.
FINANCIAL SERVICES
The Group’s financial services interest is held through its whollyowned subsidiary, Sekunjalo Capital (Pty) Ltd.
Sekunjalo Financial Services has developed an integrated financial
services platform through extensive investment in software
development. This platform is able to deal with the complexity of
distributing financial services products.
The strategy going forward is to market directly to established
affinity groups. The business has concluded an agreement with one
of South Africa’s largest trade unions. This has resulted in the
business being significantly populated.
A turnaround in performance is dependent on bringing on board
additional affinity groups. Discussions are currently under way
with two groups.
BIOTECHNOLOGY
Sekunjalo, through African Biotechnological and Medical Innovation
Investments (Pty) Ltd (“ABMI”), owns 49% in Bioclones (Pty) Ltd,
the leading biotechnology company on the African continent and in
the developing world.
Bioclones manufactures Erythropoietin (EPO) at its manufacturing
plant in Pretoria. EPO is the leading biopharmaceutical product by
sales revenues with a market size in excess of US$12 billion.
Bioclones has embarked on increasing the capacity of the Pretoria
plant to serve the private market in South Africa and is looking to
further increase capacity of EPO production through the use of
funds obtained from an intended international exchange listing in
London or New York. This will allow Bioclones to enter the global
EPO market with its trademarked product Repotin®. The listing is
planned for 2009 but is dependent on market conditions and
liquidity at the time.
Ribotech, a Bioclones subsidiary based in Cape Town, is in the
early stages of developing a facility for the manufacture of G-CSF,
a partner product to Repotin®, used in the treatment of
Neutropaenia. It is estimated that the facility will be completed
within 18 months and G-CSF released into global markets shortly
thereafter.
Bioclones is also assessing additional investments and licensing
opportunities to expand its product portfolio. The key mission of
the company is to enhance the infrastructure and skills of the
African biotechnology sector and to ensure the provision of
affordable and life-saving drugs to those on the African continent
and throughout the world.
DIVIDENDS
No dividend has been declared for the current period. The directors
continue to work toward payment of dividends in the foreseeable
future.
PROSPECTS
Sekunjalo is firmly established as a pre-eminent black economic
empowerment (BEE) group and is in its 9th year of listing on the
JSE.
The directors expect a strong second half performance from the
Fishing, IT and Financial Services businesses. Furthermore, the
Group will continue with its strategy of migrating to an investment
holding company and unlocking value through separate listings of
its IT and Biotechnology divisions.
Sekunjalo Investment Holdings (Pty) Ltd (“Holdings”) is the largest
shareholder of SIL. Holdings, through Sekunjalo Telekom (Pty) Ltd,
recently acquired 13% of Nokia Siemens Networks (“NSN”) RSA, by
fulfilling the stringent empowerment and other criteria. Holdings
has tabled a memorandum of agreement to SIL whereby SIL will accrue
the full benefit of the NSN RSA investment, subject to conditions
precedent being fulfilled by 31 July 2008 - including the approval
of NSN RSA and NSN globally.
Dr MI Survé
Executive chairman
M Y Kajee
Chief executive officer
Cape Town
13 May 2008
GROUP INCOME STATEMENT
Unaudited
29 February
2008
R’000
229 660
Unaudited
28 February
2007
R’000
187 442
Audited
31 August
2007
R’000
449 516
(29 684)
(14 902)
(65 375)
Loan impairments
Fair value adjustments
Profit from operations after
material adjustments
Income from associate
Finance cost
Profit before tax
Tax
Profit/(loss) after tax
Attributable to:
Outside shareholders
(13 789)
-
27 000
250 904
(43 473)
(1 404)
747
(44 130)
5 263
(38 867)
12 098
241
(2 146)
10 193
(1 117)
9 076
185 529
(13)
(11 413)
174 103
(61 690)
112 413
(4 306)
(1 711)
(2 204)
Parent
(34 561)
(38 867)
10 788
9 076
114 619
112 413
Headline earnings
(20 171)
10 788
116 353
Number of shares in issue
Weighted number of shares in
issue
Diluted number of shares in
issue
487 860 984
396 794 806
469 205 361
411 428 631
370 828 820
399 727 904
414 377 452
425 352 624
416 478 528
Revenue
Profit from operations
before material adjustments
Headline earnings/(loss) per
share (cents)
Earnings/(loss) per share
(cents)
Diluted earnings/(loss) per
share (cents)
Net asset value per share
(cents)
(4,90)
2,91
29,11
(8,40)
2,91
28,67
(8,34)
2,54
27,52
61,11
101,62
125,97
Unaudited
29 February
2008
R’000
Unaudited
28 February
2007
R’000
Audited
31 August
2007
R’000
418 809
203 171
13 006
2 733
591 299
185 385
–
-
721 010
201 374
12 362
3 553
21 250
92 286
2 943
2 348
18 528
18 357
19 639
24 548
211 642
41 978
3 042
-
22 950
89 261
14 891
172 629
10 120
17 331
48 901
29 831
190 575
36 954
5 300
62
22 100
85 885
2 166
346 153
17 882
14 928
14 607
232 764
35 279
2 981
14
45 451
6 085
5 560
40 433
19 170
1 932
74 465
38 689
3 885
486
98 771
39 557
1 166
80 692
53 029
630 451
781 874
953 774
29
402 174
12 255
28
327 963
11 238
29
386 764
8 056
GROUP BALANCE SHEET
ASSETS
Non-current assets
Property, plant and equipment
Investment properties
Software development costs
Patents and trademarks
Contract costs due from
customers
Pharma dossiers
Goodwill
Intangibles
Other investments
Investments in subsidiaries
Investments in associates
Biological assets
Loans receivable
Deferred tax
Current assets
Inventory
Prepaid expenses
Forward exchange contract
asset
Non-current assets held for
sale
Current loans
Contract costs due from
customers
Current group loans
Tax
Trade and other receivables
Bank
Total assets
EQUITY AND LIABILITIES
Capital and reserves
Share capital
Share premium
Non-distributable reserves
Other distributable reserves
Accumulated losses
Equity attributable to parent
Outside shareholders’
interest
Total
equity
Non-current liabilities
Interest-bearing borrowings
Deferred tax
Operating lease liability
Policyholders’ liabilities
Post-employment medical costs
Non-interest-bearing
borrowings
Current
liabilities
Trade and other payables
Income received in advance
Policyholders’ liabilities
Current group loans
Contract costs payable
Liabilities held for sale
Provisions
Current portion of LTL
Bank overdraft
Tax
Total equity and liabilities
(141 761)
272 697
25 436
298 133
128 553
47 438
63 538
507
2 072
14 998
203 765
69 394
5 403
32 091
18 498
9 635
54 572
14 172
630 451
100
62 372
401 701
44 937
446 638
152 542
58 770
70 214
578
2 212
20 768
182 694
67 495
6 192
15 603
3 113
13 725
10 101
60 455
6 010
781 874
166 481
561 330
29 742
591 072
155 816
35 957
106 911
348
2 072
10 528
206 886
68 445
6 177
28 684
30 926
27 115
29 991
15 548
953 774
Unaudited
Unaudited
Audited
29 February
2008
28 February
2007
31 August
2007
R’000
R’000
R’000
(12 217)
(1 938)
(13 347)
(23 604)
(14 377)
(33 794)
(3 101)
6 285
81 044
(38 922)
(10 030)
33 903
23 038
(10 865)
(10 865)
(15 884)
(20 895)
23 038
GROUP CASH FLOW STATEMENT
Cash flow from operating
activities
Cash flows from investing
activities
Cash flows from financing
activities
Increase/(decrease) in cash
and cash equivalents
Cash and cash equivalents at
beginning of the year
Cash equivalents at the end
of the year
STATEMENT OF CHANGES IN EQUITY
Attributable to
parent
Balance at 31 August 2006
Change in accounting policy
Prior period error
R’000
365 191
(1 142)
Outside
shareholders’
interest
R’000
49 655
(1 012)
Total
equity
R’000
414 846
(2 154)
Restated balance 2006
Net profit/(loss) for the year
Dividends paid
Movement in share capital
Movement in share premium
Movement in other
distributable reserves
Movement in non-distributable
reserves
Acquisitions of subsidiaries
Balance at 31 August 2007
Change in accounting policy
Prior period error
Restated balance 2007
Net profit/(loss) for the year
Dividends paid
Movement in share capital
Movement in share premium
Movement in other
distributable reserves
Movement in non-distributable
reserves
CRRF
Reclassification of investment
fair value on becoming an
associate
Acquisitions of subsidiaries
Balance at 29 February 2008
364 049
114 619
(382)
2
85 356
48 643
(2 204)
-
412 692
112 415
(382)
2
85 356
(100)
-
(100)
(2 214)
561 330
561 330
(34 561)
15 410
(16 697)
29 742
29 742
(4 306)
-
(2 214)
(16 697)
591 072
591 072
(38 867)
15 410
-
-
-
4 176
-
-
4 176
-
(273 658)
272 697
25 436
(273 658)
298 133
Financial
Services
Informatics
Fishing
Healthcare
Unaudited
Unaudited
Unaudited
Unaudited
29 Feb 2008
29 Feb 2008
29 Feb 2008
29 Feb 2008
Revenue
External sales
Intergroup sales
R’000
74 965
72 427
2 538
R’000
34 912
34 912
-
R’000
93 566
93 566
-
R’000
14 919
14 919
-
Segment result
Operating
profit/ (loss)
(6 333)
5 007
(10 677)
(19 657)
(601)
-
(95)
(13 789)
(289)
(209)
(969)
(1 463)
GROUP SEGMENTAL REPORT
Included in
segment results:
Fair valuations
and impairments
Depreciation and
amortisation
Carrying amount
of assets
Carrying amount
of liabilities
88 078
83 621
340 817
55 639
94 761
72 893
163 863
192 486
Loss from
associate
-
-
-
-
Capital
expenditure
49
173
16 128
61
GROUP SEGMENTAL REPORT (CONTINUED)
Biotechnology
Unaudited
29 Feb 2008
R’000
Revenue
External sales
Intergroup sales
-
Investments
Unaudited
29 Feb 2008
R’000
114
114
-
Other
Unaudited
29 Feb 2008
R’000
15 439
13 722
1 717
Segment result
Operating profit/(loss)
–
(34 092)
3 626
Included in segment results:
Fair valuations and
impairments
Depreciation and amortisation -
(24 577)
(187)
(164)
Carrying amount of assets
Carrying amount of
liabilities
349 351
1 185 504
49 565
81 699
165 677
51 254
Loss from associate
(1 404)
-
-
Capital expenditure
-
62
53
GROUP SEGMENTAL REPORT (CONTINUED)
Eliminations
Unaudited
29 Feb 2008
R’000
Revenue
(4 255)
External sales
Intergroup sales
(4 255)
Group
Unaudited
29 Feb
2008
R’000
229 660
229 660
-
Segment result
Operating profit/ (loss)
18 653
(43 473)
Included in segment results:
Fair valuations and
impairments
24 577
(14 485)
Depreciation and amortisation -
(3 281)
Carrying amount of assets
Carrying amount of
liabilities
(1 518 123)
634 452
(486 315)
336 318
Loss from associate
-
(1 404)
Capital expenditure
-
16 526
GROUP SEGMENTAL REPORT
Financial
Services
Unaudited
28 Feb 2007
R’000
Revenue
37 456
External sales
37 456
Intergroup sales
-
Informatics
Unaudited
28 Feb 2007
R’000
27 567
27 567
-
Fishing
Unaudited
28 Feb 2007
R’000
101 983
101 983
-
Healthcare
Unaudited
28 Feb 2007
R’000
19 451
19 451
-
Segment result
Operating profit/
(loss)
(2 102)
2 560
(3 102)
(1 751)
-
-
-
-
(155)
(293)
(552)
(1 758)
108 293
81 068
322 052
122 332
71 748
70 532
149 708
183 139
Loss from
associate
-
-
-
-
Capital
expenditure
60
170
2 452
621
Included in
segment results:
Fair valuations
and impairments
Depreciation and
amortisation
Carrying amount
of assets
Carrying amount
of liabilities
GROUP SEGMENTAL REPORT (CONTINUED)
Biotechnology
Investments Other
Unaudited
Unaudited
Unaudited
28 Feb 2007 28 Feb 2007 28 Feb 2007
Revenue
External sales
R’000
-
R’000
320
-
R’000
2 165
985
Intergroup sales
-
320
1 180
Segment result
Operating profit/ (loss)
27 474
(7 064)
(3 917)
Included in segment results:
Fair valuations and
impairments
Depreciation and amortisation
27 000
-
(197)
-
Carrying amount of assets
Carrying amount of liabilities
119 033
37 992
1 071 817
138 655
20 499
24 346
Loss from associate
-
-
-
Capital expenditure
-
-
59
GROUP SEGMENTAL REPORT (CONTINUED)
Eliminations Group
Unaudited
Unaudited
28 Feb 2007
28 Feb 2007
Revenue
External sales
Intergroup sales
R’000
(1 500)
(1 500)
R’000
187 442
187 442
-
Segment result
Operating profit/ (loss)
-
12 098
Included in segment results:
Fair valuations and
impairments
Depreciation and amortisation
-
27 000
(2 955)
Carrying amount of assets
Carrying amount of liabilities
(1 063 220)
(340 884)
781 874
335 236
Loss from associate
-
-
Capital expenditure
3 362
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.
DIRECTORS: *Dr MI Survé (Executive chairman), *M Y Kajee (Chief
executive officer), *K Abdulla (Chief financial officer),
*Rev. V C Mehana, N T Noland, M Goamab The First, Z A KotaFredericks, J P van der Merwe, S Young
*Executive
Company Secretary: NC Katamzi
Registered Address: Sekunjalo House, Block F, The Terraces,
Steenberg Office Park, Tokai, 7945, Cape Town, South Africa
Postal Address: PO Box 31344, Tokai, 7966, Cape Town, South Africa
Tel: +2721 702 7700 Fax: +2721 702 7744 Email:info@sekunjalo.com
Transfer Secretaries: Link Market Services (Pty) Ltd,
11 Diagonal Street, Johannesburg, 2001
Sponsor: Rand Merchant Bank (A division of FirstRand Bank Limited)