Sea Kay Holdings has narrowly escaped a liquidation claim lodged against it by the National Housing Finance Corporation (NHFC), but the company’s losses have mounted under a drastic housekeeping operation.
The JSE-listed developer of homes for the low to middle income housing market, released its latest financial results at the end of last week. This was after the group announced that it had reached a settlement agreement with the NHFC which had filed for liquidation in order to recover money owed by Sea Kay.
Sea Kay rose to prominence when it entered the JSE in 2007 with the promise of dominating the largely neglected low to middle income housing market. Under the stewardship of former CEO Corne Kruger, the operation grew quickly through both organic growth and corporate activity. Revenue reached R841m at the end of the 2009 financial year.
Harsh trading conditions and severe cash flow problems badly affected the group’s fortunes as reflected in the figures for the 12 months ended June this year. Sea Kay’s revenue declined to R647m.
Sea Kay’s performance was hit by significant impairments. The group posted an operating loss of R181m compared with an operating profit of R101.3m last year.
In its latest statement of results, Sea Kay said a decision was taken by the board to impair all remaining goodwill to the value of R90.4m.
The group also took a decision to further impair trade receivables to the value of about R29m. The latter decision was taken in light of uncertainties regarding the recoverability of the trade debts.
As a result of the settlement agreement, Sea Kay reclassified certain portions of its financial liabilities. This saw the group reclassify R97.7 m from current liabilities to non-current liabilities.
Explaining these drastic measures, the group said directors embarked on a process to address the uncertainties identified by management and alluded to in the auditors’ qualified opinion.
This process includes reviewing and restructuring of receivables and payables, to ensure that the group is in a position to operate adequately. The re-engineering process will also include a fundraising exercise.
The group said a potential funder had been identified. “The most significant factor to continue as a going concern is that the directors procure funding for the ongoing operations,” said the group.
“In this regard, the settlement with the NHFC that was made an Order of Court on December 6 2010 is an important milestone for the group,” said the group.
The settlement effectively removed the liquidation applications against both Sea Kay and Sea Kay Engineering Services and re-opened the group’s ability to access normal credit lines.
The settlement involves initial payment of R44m to be made during January 2011 to the NHFC plus a guarantee of R6m that will be issued to the NHFC. Sea Kay has also committed to repay R65m to the NHFC over 60 months.
Sea Kay also pointed out negotiations with its debtors, including provincial governments of the Western Cape and Gauteng, were at a mature stage. Sea Kay said an amount of about R29.5m was likely to be paid directly from the Western Cape into the coffers of NHFC during the course of January.
The balance due to NHFC should be realised from the Gauteng Department of Housing “where adequate funds are available to achieve this,” said the group.
The turnaround of Sea Kay is taking place under a relatively new leadership.
Kruger resigned last year but remaines a shareholder. Pieter van der Schyf was made acting CEO early this year.
At the beginning of this month the group brought in Landiwe Mahlangu as non executive chairman of the board.
- The New Age
The JSE-listed developer of homes for the low to middle income housing market, released its latest financial results at the end of last week. This was after the group announced that it had reached a settlement agreement with the NHFC which had filed for liquidation in order to recover money owed by Sea Kay.
Sea Kay rose to prominence when it entered the JSE in 2007 with the promise of dominating the largely neglected low to middle income housing market. Under the stewardship of former CEO Corne Kruger, the operation grew quickly through both organic growth and corporate activity. Revenue reached R841m at the end of the 2009 financial year.
Harsh trading conditions and severe cash flow problems badly affected the group’s fortunes as reflected in the figures for the 12 months ended June this year. Sea Kay’s revenue declined to R647m.
Sea Kay’s performance was hit by significant impairments. The group posted an operating loss of R181m compared with an operating profit of R101.3m last year.
In its latest statement of results, Sea Kay said a decision was taken by the board to impair all remaining goodwill to the value of R90.4m.
The group also took a decision to further impair trade receivables to the value of about R29m. The latter decision was taken in light of uncertainties regarding the recoverability of the trade debts.
As a result of the settlement agreement, Sea Kay reclassified certain portions of its financial liabilities. This saw the group reclassify R97.7 m from current liabilities to non-current liabilities.
Explaining these drastic measures, the group said directors embarked on a process to address the uncertainties identified by management and alluded to in the auditors’ qualified opinion.
This process includes reviewing and restructuring of receivables and payables, to ensure that the group is in a position to operate adequately. The re-engineering process will also include a fundraising exercise.
The group said a potential funder had been identified. “The most significant factor to continue as a going concern is that the directors procure funding for the ongoing operations,” said the group.
“In this regard, the settlement with the NHFC that was made an Order of Court on December 6 2010 is an important milestone for the group,” said the group.
The settlement effectively removed the liquidation applications against both Sea Kay and Sea Kay Engineering Services and re-opened the group’s ability to access normal credit lines.
The settlement involves initial payment of R44m to be made during January 2011 to the NHFC plus a guarantee of R6m that will be issued to the NHFC. Sea Kay has also committed to repay R65m to the NHFC over 60 months.
Sea Kay also pointed out negotiations with its debtors, including provincial governments of the Western Cape and Gauteng, were at a mature stage. Sea Kay said an amount of about R29.5m was likely to be paid directly from the Western Cape into the coffers of NHFC during the course of January.
The balance due to NHFC should be realised from the Gauteng Department of Housing “where adequate funds are available to achieve this,” said the group.
The turnaround of Sea Kay is taking place under a relatively new leadership.
Kruger resigned last year but remaines a shareholder. Pieter van der Schyf was made acting CEO early this year.
At the beginning of this month the group brought in Landiwe Mahlangu as non executive chairman of the board.
- The New Age
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