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Sekunjalo on the lookout

Nicola Mawson
By Nicola Mawson, Contributor.
Johannesburg, 06 Nov 2013

Sekunjalo is keeping an eye out for more acquisitions to add to its technology unit after buying World Wide Creative in its most recent financial year.

In the year to August, the technology unit - which accounts for a third of revenue - grew its top line 27%, to R192 million. This makes it the company's second-largest revenue-spinner after its fishing operations.

However, operating profit dropped from R38 million to R35 million, which it expected as projects came to an end.

Sekunjalo CEO Khalid Abdulla says the previous year's margins were boosted by contracts that have now been fully implemented. He notes the current margin is at a more normal level, as increased annuity income is filtering through.

Sekunjalo Technology Solutions Group is the company's largest contributor to operating profit, after its strategic investments, and accounted for more than half of overall operating profit, which was dampened by operating losses in its biotechnology, media and healthcare units.

Overall, revenue was 25% higher, at R569.2 million, a figure that broke through the half-a-billion-mark for the first time. The group attributes this to underlying operational organic growth.

Profit after tax gained from R18.2 million to R30.4 million, while headline earnings came in at R29 million, up from R18 million last year. Sekunjalo says this is mostly due to strategic investments and operational performance.

On the hunt

In its results commentary, the company says Sekunjalo Technology Solutions Group grew its top line as expected, and continues to perform "consistently". The unit houses Saratoga Software, Digital Matter, Health System Technologies, and World Wide Creative, which was acquired during the year.

Sekunjalo is looking for more companies to complement its existing operations, but will enter deals only when it feels the target can add value and enhance its current offerings, says Abdulla.

Abdulla adds Sekunjalo may spin out its technology unit through a separate listing on the JSE, although this will not happen until the unit consistently reports operating profit of R30 million to R40 million from revenue of R300 million to R400 million.

Spinning off the unit now is "not worth it", says Abdulla. "It is a part of the plan down the line." Sekunjalo had mooted listing the entity separately quite some time ago, but put it on hold three years ago.

Sekunjalo also has a "strategic" investment in British Telecom Communication Services SA, which exceeded expectations, it says. It expects the investment to grow "consistently" over the next few years.


The listed group's other strategic investments include stakes in Saab SA and Pioneer Food Group.

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