Technology services group Sebata Holdings, which supplies local government services such as meter reading and software, saw its headline earnings drop more than fifteenfold in its last financial year due to tough trading conditions.
Revenue fell by a quarter to R25.4m, headline loss per share was down 1,459% to 443.68c for the year ended March, and it declared no dividend.
The company, formerly MicroMega Holdings, posted a R705.8m loss from a R50.9m loss a year ago.
“Trading conditions reported in previous years have remained extremely difficult and were only exacerbated by the local government elections. Historically we have seen a slowdown in spend over election periods,” the company said.
It added that the authorities are slowing down tender issuance, which “is reflected in the number of tenders that have been extended and remain in the adjudication phase”.
The group suffered a R401m writedown over the last year because of its recent sale of businesses to wholly black-owned Inzalo Capital.
In 2020 the group’s shareholders approved the handover of its majority interests in water metering and software businesses to Inzalo in a bid to improve its empowerment credentials. The terms of the agreement entailed Inzalo meeting profit targets before making payment, failing which the shares would return to Sebata.
Inzalo received an extension of a year, until March 2022, to reflect the effects of Covid-19 on tender activity, but Sebata said in December there was “significant concern” the profit targets would not be achieved. On Monday, it said the odds of finalising these transactions “remain at risk” and it has decided to be “prudent”. The assets need to be written down on their face value, but a contract for the full value remains, it said.
“The board remains committed to bringing finality to the Inzalo transactions and returning maximum value to shareholders,” it added.
In February 2020, Sebata sold the Software Group Companies for R501.9m to Inzalo, giving up a 55% stake in the group made up of Sebata Municipal Solutions, R-Data and Micromega Accounting and Professional Services, all wholly owned subsidiaries of the company. A further 5% stake was donated, but Sebata will need to pay for it at fair value if it gets control back.
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