Sekunjalo buys stake in software firm

By Nicola Mawson, Contributing journalist

Johannesburg, 22 Nov 2006

JSE-listed Sekunjalo Investments has boosted its ICT division with a 50% stake in Saratoga, a software and services firm.

The company, which is a black-controlled investment holding company, plans to list its ICT division on the Johannesburg-based bourse in the second half of next year. The group's ICT interests are held by Sekunjalo Informatics and Telecommunications Africa (SITCA), a wholly-owned subsidiary.

Sekunjalo's deputy CEO Norman Noland says the stake would be incorporated into its ICT stable alongside FIOS and Synergy Computing. This, the company said in a note to shareholders yesterday, would add weight to its "ability to sell comprehensive ICT business solutions as opposed to products".

"The operating businesses in our ICT division have a client base that covers the majority of SA's large corporates. We see significant upside in our ability to cross-sell products and solutions into the combined client base," he says.

Shortly after its acquisition announcement, the company's shares moved sharply upwards and were trading 1.18% higher 20 minutes later at 86c. Its 12-month high is R1.01 and its 12-month low is 48c.

Government deals

Saratoga has been awarded funding from the Department of Trade and Industry to develop mobile solutions for the local municipal market.

The project, the Shine Initiative, has been completed and is expected to aid service delivery. "The technology will help to improve service delivery and reduce crippling service backlogs, and local government will be provided with an open or free licence," says Noland.

Saratoga is active in the development of human resources, mobility and call centre technology. The company, a part of the Saratoga Group, has a number of SA's top companies on its client list and employs 80 staff in SA, the UK and the US.

Listing potential

The company aims to "unlock value at group level" through the separate listing of its ICT division either late next year or early in 2008.

"A SITCA IPO [initial public offering] is still firmly on track, boosted by ongoing solid performances at our existing ICT companies, and strategic acquisitions such as these announced today," said Noland yesterday.

The 50.1% stake will be paid for through a combination of cash on completion of the deal and cash against warranted profits to be achieved over the next three years.

Sekunjalo recently said its annual results, to end-August, are expected to show improved earnings.

Headline earnings per share are expected to be between 360% and 380% higher than the corresponding prior period, and earnings per share will be 30% to 50% higher.

Its results are due out on 28 November.