Sekunjalo: At a loss

It was Sekunjalo's smallest division, informatics, that managed to trade in the black for the period under review. The informatic division showed operating profits of R5m from turnover of R35m.

Most disappointing was mainstay investment Premier Fishing, which notched up a R10m loss from turnover of R93m.

The interim loss follows a promising profit showing by Premier Fishing in the year to end-August 2007 and a commitment by management to bolster profitability by slashing costs.

Sekunjalo CEO Mo Kajee said Premier Fishing's performance was due largely to poor catches in the pelagic sector, high fuel prices, depressed prices for fishmeal globally and poor west coast rock lobster catches.

"Despite the poor catches of west coast rock lobster, however, it is anticipated that catches will improve significantly in the next few months. In fact, south coast rock lobster catches have been good."

Sekunjalo's financial services arm showed an operating loss of R6m from turnover of R75m, while the long ailing healthcare arm posted an ominous loss of R20m from turnover of just R15m.

The performance by healthcare asks serious questions around the viability of this division, which some shareholders believe should be closed or sold off.

But it seems like Sekunjalo is determined to soldier on with health care. Directors said a strategy had been embarked upon to enable the division to "engender significant cost-cutting measures with a view to managing the pharmaceuticals and diagnostics businesses to break even by the 2008 financial year".

The results, while disappointing, are a better reflection of Sekunjalo's financial position as the fair value adjustments in the group's much-vaunted Bioclones biotechnology subsidiary have been stripped out.

While it's difficult to see the translation of a 22.5% hike in turnover to R230m into an operating loss of R43.5m as anything but disappointing, Kajee remains positive for the full year.

He noted that historically Sekunjalo had 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 much stronger performance in the second half of the financial year."

Kajee said Sekunjalo would continue with its strategy of migrating to an investment holding company and unlocking value through separate listings of its IT and Biotechnology divisions.

But, the separate listing of Bioclones - which was accorded a value of R340m in Sekunjalo?s last annual report - has now been pushed out to 2009. And it?s hard to imagine the profitable Informatics division listing in the current market volatility.

* The writer holds shares in Sekunjalo.

- Fin24.com