Roy Cokayne
Sea Kay Holdings is in serious financial difficulty.
The mass housing developer, which was warned recently by the JSE that its continued listing was under threat of suspension and termination because of the late publication of financial results, reported on Monday that its headline loss increased to R18.27 million in the six months to December from an R8.7m loss in the previous corresponding period.
This translated into a headline loss a share from continuing operations of 3.74c compared with a 1.79c loss in the previous corresponding period.
Sea Kay attributed the below expectation financial performance to “the lack of proper working capital”. Group revenue grew by 21 percent to R102.1m from R84.5m.
The operating loss increased by 397 percent to R131.28m from R26.39m.
Its auditors, Nexia SAB&T, have issued a qualified review opinion for the group’s results.
Among other things, they said Sea Kay’s liabilities exceeded its assets by R101.1m and significant pressures on liquidity had been experienced during the period under review. The ability of the group to honour its commitments and provide adequate working capital to sustain its operations were dependent on a combination of factors, including the successful outcome of negotiations, procuring additional funds for working capital and/or refinancing certain operations, as well as a return to profitability.
The uncertain outcome of these events indicated material uncertainties which cast doubt on the group’s ability to continue as a going concern and the group might therefore not be in a position to realise its assets and discharge its responsibilities in the normal course of business.
However, Sea Kay chief executive Pieter van der Schyf said the continued uncertainties identified by management and alluded to in the auditor’s audit opinion about the going concern, had been carefully considered and addressed through a restructuring process involving a fundraising exercise and the operational capability of the company to address the concern.
“The company will base its operational activities on the success achieved in the Western Cape to ensure stakeholder value is properly protected through efficient management of resources and successful completion of current projects with the view that the raising of funding through debt and equity can be achieved against the prospects of the increased value on the net asset value of the balance sheet through the property transaction already concluded,” he said.
Van der Schyf said Sea Kay’s management was confident about managing the company through the fundraising process to achieve sustainability and profitability in all the various subsidiaries.
He said management was looking to stabilise the company and create sustainability through an increased pipeline of work supported by adequate working capital.
Van der Schyf added that in line with the turnaround strategy, management also recognised the need to diversify operations to commercial and private sector developments to ensure the dependency of the company on government-related work was decreased.
“With this diversification, management is confident that government housing and infrastructure initiatives can better be assisted while the overall risk profile of the company will decrease accordingly,” he said.
Sea Kay reported last month that a wholly owned subsidiary had agreed to acquire a 360ha commercial and residential property development close to the King Shaka International Airport and Ballito in KwaZulu-Natal for R201m.
Van der Schyf said this transaction represented the first step towards achieving a sustainable pipeline outside of government work and would substantially increase the net asset value of the balance sheet.
Sea Kay shares closed unchanged at 4c on Monday.