| Wed 12 Dec 2007, 10:41 | | HUG - Huge Group - Unaudited Interim Results Of The Huge Group Limited For The |
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HUG
HUG
HUG - Huge Group - Unaudited Interim Results Of The Huge Group Limited For The
Six Months Ended 31 August 2007
HUGE GROUP LIMITED
(Incorporated in the Republic of South Africa)
(formerly Vanquish Fund Managers Limited)
(Registration number 2006/023587/06)
Share code: HUG & ISIN: ZAE000102042
("Huge" or "the Company")
UNAUDITED INTERIM RESULTS OF THE HUGE GROUP LIMITED FOR THE SIX MONTHS ENDED 31
AUGUST 2007
Highlights
Huge operates through its only subsidiary, Huge Telecom (Proprietary) Limited
("Huge Telecom") (formerly TelePassport (Proprietary) Limited.
These results represent a single month of trading from Huge Telecom. Although
the effective date of the change in control of Huge Telecom was the date of
listing of Huge, namely 8 August 2007, the deemed date for the change in control
has been assumed as 1 August 2007 on the basis that it is impractical to compile
trading results for a period shorter than one month.
Furthermore, these results do not incorporate the acquisition of CentraCell
(Proprietary) Limited ("CentraCell").
This result, being the trading performance for one month, reflects positively on
the estimated revenues of Huge Telecom for a rolling twelve-month period of
R336mn, and is expected to contribute to a 20% increase in revenues over the
corresponding period in the previous year. The impetus created through the
listing has been remarkable and the addition of CentraCell is expected to
further augment the revenues and profitability of the group.
UNAUDITED RESULTS FOR THE 6 MONTH PERIOD ENDED 31 AUGUST 2007
Consolidated Income Statement Unaudited Unaudited Audited
31 August 31 August 28 February
2007 2006 2007
(6 months) (6 months) (12 months)
R R R
Revenue 29 443 688 - -
Gross profit 5 866 281 - -
Other income 94 925 - -
Operating costs (3 245 753) - -
Earnings before interest,
taxation, depreciation
and amortization (731 787) - -
Finance costs (780 212) - -
Interest income 1 712 575 - -
Net income before taxation 2 916 029 - -
Taxation (845 649) - -
Attributable earnings 2 070 380 - -
Basic earnings per share (c) 3.50 - -
Dividends - - -
Total number of shares
in issue (`000) 100 000 1 000 1 000
Weighted number of
shares in issue (`000) 59 178 1 000 1 000
Consolidated Balance Sheet Unaudited Unaudited Audited
31 August 31 August 28 February
2007 2006 2007
R R R
Assets
Property, plant and equipment 23 011 823 - -
Investments in associate 320 762 - -
Advance payment for investment 76 228 728 - -
Intangible assets 102 829 838 - -
Accounts receivable 57 682 738 - -
Bank and cash 5 954 246 - -
Total assets 266 028 135 - -
Equity and liabilities
Issued share capital 200 562 393 100 100
Reserves 2 070 381 - -
Non-current liabilities 2 543 403 - -
Account payable 56 761 075 - -
Provision for taxation 4 090 883 - -
Total equity and liabilities 266 028 136 100 100
Number of shares in
issue (`000) 10 000 1 000 1 000
Net asset value per
share (cents) 266.03 0.01 0.01
Net tangible asset value
per share (cents) 163.20 0.01 0.01
Consolidated statement of changes in equity
Unaudited Unaudited Audited
31 August 31 August 28 February
2007 2006 2007
R R R
Balance at incorporation 100 100 100
Profit for the 6 month period
ended 31 August 2006 - - -
Balance at 31 August 2006 100 100 100
Profit for the 6 month period
ended 28 February 2007 - - -
Balance at 28 February 2007 100 100 100
Shares issued 200 934 833
Share issue expenses (373 400)
Profit for the 6 month period
ended 31 August 2007 2 070 831
Balance at 31 August 2007 200 561 533
Consolidated cash flow statement
Unaudited Unaudited Audited
31 August 31 August 28 February
2007 2006 2007
(6 months) (6 months) (12 months)
R R R
Cash flows from operating
activities (1 739 231) - -
Cash flows from investing
activities (69 242 315) - -
Cash flows from financing
activities 76 935 692 100 -
Net cash movement for the
period 5 954 146 100 -
Cash at the beginning of
the period 100 - 100
Total cash at the end of the
period 5 954 246 100 100
Comments
The board of directors is pleased to present the interim unaudited financial
statements of the group for the 6 month period ended 31 August 2007. These
results represent the trading results of the wholly owned subsidiary of Huge,
Huge Telecom (Proprietary) Limited (formerly TelePassport (Proprietary) Limited)
for a one month period, being the month of August 2007.
Nature of the business and products and services sold
Huge Telecom is a "Managed Telecommunications" company. It offers corporate
customers in SA and Namibia the management of mainstream voice, data, video and
mobility services ("quadruple play"), as well as the efficient outsourced
management of the (global and local) telecommunications companies that provide
them.
The management of voice, data, video and mobility services incorporates the
concept of least-cost-routing ("LCR"). LCR is only possible when the customer`s
telecommunications equipment has access to more than one route, and was
therefore impossible in SA until the advent of the local GSM cellular networks
in 1994, which provided alternatives to Telkom.
Prior to 1994, Telkom held a monopoly over all local communications and thus any
form of local customer-premises-LCR was impossible.
In SA the only LCR possibility at the time was the arbitrage that existed as a
result of the fact that in-bound international telephone calls (made from a
foreign telephone network to South Africa) were cheaper than out-bound
international telephone calls made locally through Telkom. Methods or protocols
were developed to ensure that international telephone calls were originated
outside of SA rather than from inside SA.
With the introduction of MTN and Vodacom as GSM mobile network operators in
1994, SATRA, the then regulatory authority for telecommunications in SA,
established settlement rates for the termination of traffic originated by one
network and terminated on another network. These settlement rates are often
referred to as mobile termination rates (MTR) or inter-connect rates depending
on the direction of the traffic.
The mobile termination rates referred are the rates that the mobile network
operators or MNO`s, currently Cell C, MTN and Vodacom, are entitled to charge
the fixed-line network operator, currently Telkom, for use of their networks for
the purposes of terminating telephone calls that have originated from the fixed-
line network of Telkom.
It is evident from an inspection of MTR and interconnection rates that the rates
are asymmetric in that the fixed-line to mobile termination rate is higher
(R1.25 per minute) than the mobile to fixed-line termination rate (R0.27 per
minute).
Cellular-least-cost-routing ("CLCR") is focused on keeping mobile telephone
calls "on-network" and eliminating the additional cost for mobile termination.
Substantially all the revenue of Huge Telecom is derived from CLCR.
Financial review
The company converted to a public company on 5 July 2007 and subsequently listed
on the AltX exchange of the JSE Limited on 8 August 2007.
Headline earnings per share Unaudited Unaudited Audited
31 August 31 August 28 February
2007 2006 2007
(6 months) (6 months) (12 months)
R R R
Net profit attributable to
ordinary shareholders 2 070 380 - -
Profit on disposal of
property, plant and equipment (5 563) - -
Headline earnings attributable
to ordinary shareholders 2 064 817 - -
Weighted average number of
ordinary shares in issue (`000) 59 178 1 000 1 000
Headline earnings per share
(cents) 3.49 - -
Revenue
A substantial component of the revenue of R29.4mn represents mobile voice
minutes generated by customers of Huge Telecom using the networks of Cell C, MTN
and Vodacom.
Gross margin
The gross margin percentage represents the discounts given by the mobile network
operators for the aggregated voice traffic generated by customers of Huge
Telecom.
Non-current assets
An advance of R77mn was made to the vendors of CentraCell for the acquisition of
100% of CentraCell. The share certificates are being held in escrow with Webber
Wentzel Bowens pending approval for the implementation of the transaction from
the Competition Commission. The balance of R22mn represents the excess of the
purchase price over the goodwill paid in terms of the acquisition of Huge
Telecom.
Intangible assets
Intangible assets comprises goodwill on the acquisition of TelePassport and is
representative of the excess of the purchase price over the net assets acquired.
Equity
The group restructured its equity by sub-dividing the issued share capital and
issuing additional share capital. At the end of August 2007 there were
100 000 000 ordinary shares in issue.
Borrowings
The company has no material long term borrowings.
Prospects
The SA telecommunications market for mobile voice traffic is growing at around
22% per annum.
Mobile to mobile telephone calls terminated in SA today using CLCR is around
2.4bn minutes per annum. Taking into account that total fixed-line to mobile
voice traffic originated by Telkom and terminated on the MNOs is around 4.1bn
minutes per annum, the scope for organic growth in managed telecommunications is
capable of exceeding the growth rates of the broader mobile telecommunications
market.
The African telecommunications market, and particularly the advent of VoIP
technology, represents the latest trend towards an increase in telecommunication
routing alternatives and this increases the growth opportunity for
communications services companies involved in managing telecommunications both
domestically and abroad.
Huge Telecom has calculated that the cost of organic acquisition of customers is
less than R2 500 per corporate subscriber based on a "Talk 500 s" subscription
package. Consolidation of industry participants will be measured against this
benchmark and adjusted for variables related to the time taken to procure
customers of the magnitude in question.
Huge Telecom is not an infrastructure player and does not face any competitive
infrastructural risks.
Revenue generated is by nature recurring or annuity based and the monthly
annuity book has a value in excess of R45mn (including the revenues of
CentraCell) per month representing corporate customers, and this represents the
embedded/in-force/book value of the company.
The company is well positioned to increase its market share in CLCR above the
current 18% level. Furthermore increased subscriber numbers have historically
lead to greater margins given the economics of the industry and as such these
will improve by at least 3% this year.
Contingencies
No major contingencies exist at the reporting date.
Accounting Standards
The financial statements have been prepared in accordance with International
Financial Reporting Standards and IAS 34.
Corporate governance
The group subscribes to the principles of, and implements where possible, the
recommendations of the King II Code on Corporate Governance.
Dividends
No dividends are proposed for this interim period.
Johannesburg
12 December 2007
James Herbst
Group Financial Director
Auditors
Horwath Leveton Boner
Corporate Advisor
Manhattan Equity Corporate Finance (Proprietary) Limited
Designated Advisor
Arcay Moela Sponsors (Proprietary) Limited
Registered office:
Block 2, Woodlands Drive Office Park, 5 Woodlands Drive, Woodmead, Johannesburg,
2191 (PO Box 16376, Dowerglen, 1610)
Transfer secretaries
Computershare Limited, Ground Floor, 70 Marshall Street, Johannesburg
Directors:
EF Lediga*, BA McQueen*, AD Potgieter (CEO), JC Herbst (FD), MR Nordien, VM
Mokholo
*Non-executive
Date: 12/12/2007 10:41:05 Produced by the JSE SENS Department.
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