| Thu 19 May 2011, 15:54 | | HCI - Hosken Consolidated Investments - Reviewed consolidated results for the |
|
HCI
HCI
HCI - Hosken Consolidated Investments - Reviewed consolidated results for the
year ended 31 March 2011
Hosken Consolidated Investments
Incorporated in the Republic of South Africa
Registration number 1973/007111/06
Share code: HCI ISIN: ZAE000003257
("HCI" or "the company" or "the group")
Reviewed consolidated results for the year ended 31 March 2011
Highlights
* Revenue +18,6%
* EBITDA +35,5%
* Headline earnings +97,4%
REVIEWED CONSOLIDATED INCOME STATEMENT
Audited
% Reviewed (Restated)
change 31 March 31 March
2011 2010
R`000 R`000
Revenue 6 381 408 5 445 441
Net gaming win 403 292 276 705
Income 19 6 784 700 5 722 146
Expenses (5 509 758) (4 781 475)
EBITDA 35 1 274 942 940 671
Depreciation and amortisation (316 638) (276 699)
Operating profit 44 958 304 663 972
Investment income 78 323 64 691
Finance costs (245 483) (248 286)
Share of profits of associates and joint
ventures 83 212 448 787
Investment surplus 57 195 41 976
Fair value adjustments of investment
properties 84 303 17 834
Impairment reversals 5 691 51 681
Asset impairments (43 483) (48 692)
Fair value adjustments of financial
instruments (1 179) 3 869
Impairment of goodwill and investments (37 195) (197 573)
Profit before taxation 18 939 688 798 259
Taxation (256 367) (244 899)
Profit for the year from continuing
operations 23 683 321 553 360
Discontinued operations 6 329 213 779 499
Profit for the year 7 012 534 1 332 859
Attributable to:
Equity holders of the parent 960 6 418 327 605 366
Minority interest 594 207 727 493
7 012 534 1 332 859
RECONCILIATION OF HEADLINE EARNINGS
2011 2011
% Gross Net
change R`000 R`000
Earnings attributable to equity holders
of the parent 6 418 327
IAS 16 (Gains)/Losses on Disposal of
Plant and Equipment (6 479) (1 980)
IAS 16 Impairment of Plant
and Equipment 4 000 3 420
IFRS 3 Impairment of Goodwill 37 194 33 475
IFRS 3 Negative Goodwill - -
IAS 28 Gain on Disposal of Associates (401) (404)
IAS 28 Impairment of Joint Venture - -
IAS 36 Impairment of Assets 370 133 209 809
IAS 36 Reversal of Impairments (46 986) (35 460)
IAS 27 Profit from Disposal/Part
Disposal of Subsidiary (5 782 141) (5 736 378)
IAS 40 Fair Value Adjustment to
Investment Property (105 878) (82 955)
IAS 39 Profit on Disposal of
Available-for-Sale Asset (33 398) (33 223)
Re-measurements included in
equity-accounted earnings of
associates and joint ventures (42 685) (42 685)
Headline profit 97 731 946
Basic earnings per share (cents)
Earnings 951 5 088,46
Continuing operations 365,11
Discontinued operations 4 723,35
Headline earnings 96 580,29
Continuing operations 288,17
Discontinued operations 292,12
Weighted average number of
shares in issue (`000) 126 135
Actual number of shares in issue at end
of period (net of treasury shares) (`000) 127 089
Diluted earnings per share (cents)
Earnings 945 4 921,28
Continuing operations 353,11
Discontinued operations 4 568,17
Headline earnings 94 561,22
Continuing operations 278,70
Discontinued operations 282,52
Weighted average number of shares
in issue (`000) 130 420
2010 2010
(Restated)
Gross Net
R`000 R`000
Earnings attributable to equity holders of the parent 605 366
IAS 16 (Gains)/Losses on Disposal of
Plant and Equipment 29 486 20 789
IAS 16 Impairment of Plant
and Equipment 29 599 24 020
IFRS 3 Impairment of Goodwill 75 314 75 314
IFRS 3 Negative Goodwill (2 544) (969)
IAS 28 Gain on Disposal of Associates - -
IAS 28 Impairment of Joint Venture 1 539 1 429
IAS 36 Impairment of Assets 161 589 142 129
IAS 36 Reversal of Impairments (49 338) (34 926)
IAS 27 Profit from Disposal/Part
Disposal of Subsidiary (39 231) (36 483)
IAS 40 Fair Value Adjustment to
Investment Property (17 834) (15 009)
IAS 39 Profit on Disposal of
Available-for-Sale Asset (2 747) (2 747)
Re-measurements included in
equity-accounted earnings of
associates and joint ventures (408 026) (408 026)
Headline profit 370 887
Basic earnings per share (cents)
Earnings 483,96
Continuing operations 338,48
Discontinued operations 145,48
Headline earnings 296,51
Continuing operations 133,89
Discontinued operations 162,62
Weighted average number of shares in issue (`000) 125 085
Actual number of shares in issue at end of
period (net of treasury shares) (`000) 125 254
Diluted earnings per share (cents)
Earnings 471,06
Continuing operations 329,46
Discontinued operations 141,60
Headline earnings 288,60
Continuing operations 130,32
Discontinued operations 158,28
Weighted average number of shares in issue (`000) 128 512
REVIEWED CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
Audited
Reviewed (Restated)
31 March 31 March
2011 2010
R`000 R`000
ASSETS
Non-current assets 12 885 346 14 968 791
Property, plant and equipment 2 769 835 9 660977
Investment properties 564 685 218585
Goodwill 144 205 1 544195
Interest in associates and joint ventures 8 441 951 2 405254
Other financial assets 116 230 62827
Intangibles 577 218 644402
Deferred taxation 189 203 230997
Operating lease equalisation asset 2 658 962
Long-term receivables 79 361 200 592
Current assets 2 948 801 3 790 747
Other 2 368 669 2 499 162
Bank balances and deposits 580 132 1 291 585
Non-current assets held for sale 35 218 110 886
Total assets 15 869 365 18 870 424
EQUITY AND LIABILITIES
Equity 11 231 849 8 388 971
Equity attributable to equity holders
of the parent 10 505 914 4 647 948
Minority interest 725 935 3 741 023
Non-current liabilities 2 350 869 5 886 506
Deferred taxation 114 138 644 067
Long-term borrowings 2 056 658 4 715 207
Operating lease equalisation liability 4 447 287 429
Other 175 626 239 803
Current liabilities 2 270 279 4 574 694
Non-current liabilities held for sale 16 368 20 253
Total equity and liabilities 15 869 365 18 870 424
Net asset carrying value per share (cents) 8,267 3,711
REVIEWED CONSOLIDATED
STATEMENT OF CHANGES IN EQUITY
Audited
Reviewed (Restated)
2011 2010
R`000 R`000
Balance as restated at beginning of year 8 388 971 7 627 335
Balance as previously stated 8 380 190 7 619 925
Adjustment 8 781 7 410
Share capital and premium
Treasury shares released 14 595 11 751
Current operations
Total comprehensive income 6 977 327 1 055 414
Equity settled share-based payments 15 810 7 408
Disposal of subsidiary (2 761 828) -
Effects of changes in holding (1 217 184) 5 061
Capital reductions and dividends (185 842) (317 998)
Balance at end of year 11 231 849 8 388 971
REVIEWED CONSOLIDATED STATEMENT OF
OTHER COMPREHENSIVE INCOME
Audited
Reviewed (Restated)
2011 2010
R`000 R`000
Profit for the year 7 012 534 1 332 859
Other comprehensive income:
Foreign currency translation differences (37 653) (276 836)
Cash flow hedge reserve 23 081 (1 478)
Asset revaluation reserve (20 635) 869
Total comprehensive income 6 977 327 1 055 414
Attributable to:
Equity holders of the company 6 385 176 410 447
Minority interests 592 151 644 967
6 977 327 1 055 414
REVIEWED CONSOLIDATED CASH FLOW STATEMENT
Reviewed Audited
31 March 31 March
2010 2010
R`000 R`000
Cash flows from operating activities 1 968 597 1 765 164
Cash flows from investing activities (2 059 505) (2 061 381)
Cash flows from financing activities (558 794) 717 752
Decrease/increase in cash and cash equivalents (649 702) 421 535
Cash and cash equivalents
At beginning of year 959 539 549 698
Foreign exchange differences (1 596) (11 694)
At end of year 308 241 959 539
Bank balances and deposits 586 567 1 291 728
Bank overdrafts (278 326) (332 189)
Cash and cash equivalents 308 241 959 539
SEGMENTAL ANALYSIS
31 March 31 March 31 March 31 March
2011 2011 2010 2010
Net gaming Net gaming
Revenue Win Revenue Win
R`000 R`000 R`000 R`000
Media and broadcasting 1 620 397 - 1 431 586 -
Limited payout gaming 6 527 327 979 10 984 259 822
Information technology 256 051 - 230 281 -
Transport 963 619 - 897 554 -
Vehicle component manufacture 440 757 - 311 426 -
Exhibition and properties 66 843 - 69 592 -
Mining 363 166 - 141 551 -
Natural gas 214 871 - 172 468 -
Clothing and textile 2 420 604 - 2 165 728 -
Other 28 573 75 313 14 271 16 883
Total 6 381 408 403 292 5 445 441 276 705
Profit before tax Headline profit
31 March 31 March 31 March 31 March
2011 2010 2011 2010
R`000 R`000 R`000 R`000
Media and broadcasting 555 687 502 429 251 623 227 744
Limited payout gaming 56 288 14 168 39 684 29 239
Casino gaming and hotels 42 183 - 417 363 375 704
Information technology 46 277 35 724 17 833 15 931
Transport 159 062 98 048 120 247 76 225
Vehicle component
manufacture (42 506) (46 438) 774 (122 182)
Food and beverage - 348 255 - 35 197
Exhibition and properties 146 421 47 377 20 237 27 347
Mining 17 720 (6 643) 22 216 (6 643)
Natural gas (44 445) (53 734) (8 923) (27 686)
Clothing and textile 88 692 37 766 (11 881) (103 236)
Other (85 691) (178 693) (137 227) (156 753)
Total 939 688 798 259 731 946 370 887
EBITDA
31 March 31 March
2011 2010
R`000 R`000
Media and broadcasting 654 691 574 968
Limited payout gaming 97 678 56 829
Information technology 59 860 49 279
Transport 218 386 168 307
Vehicle component manufacture 17 833 (30 180)
Exhibition and properties 30 105 28 611
Mining 30 263 (3 833)
Natural gas 49 988 38 468
Clothing and textile 157 729 98 390
Other (41591) (40 168)
Total 1 274 942 940 671
COMMENTARY
REVIEW OF INVESTMENTS
Growth in profitability
The 2011 financial year has been a good year for HCI in several ways. Its
headline profits are up on last year by 97%. This was achieved by the group`s
major contributors (Tsogo and Sabido) improving their contribution to group
headline profits on last year by 10,8% and several investments turning in really
excellent performances. Of these Golden Arrow`s improvement of 57% over last
year is really remarkable, particularly as the business might reasonably be
regarded as "mature". This is its 150th year of providing passenger transport to
the City of Cape Town. Also, Vukani`s 35% uptick despite all its difficulties is
most encouraging. Among the turnaround operations, Formex broke even after
losing R122 million the previous year and Seardel turned in substantial profits
from continuing businesses. Losses from discontinued operations in Seardel will
not be ongoing and the underlying business going forward is significantly
profitable. EBITDA from Montauk improved by approximately 30% for the year,
allowing them to significantly reduce their losses. Amongst the start up
businesses, unstoppable drive and enthusiasm from the management of Galaxy Bingo
has resulted in it turning cash positive from December 2010, and systematic
attention to detail by management in our mining subsidiary produced its first
annual profit of R22 million.
Investment activity
The group was engaged in a wide variety of new business activity. We purchased a
34,9% stake in KWV and, subsequent to year end, have obtained permission from
the Competition authorities to take control of the company. The business has not
been performing well and we hope our entry into its shareholding will result in
it developing a stronger vision of its participation in the liquor industry
going forward. We believe it is in any event a good base for HCI to grow into
that industry and are very excited at the prospect of facilitating this.
We also started a new investment holding subsidiary in Australia in consequence
of three key former HCI employees emigrating there.
Several other developments took place within the group`s subsidiaries and
associates during the year. As reported at our interim results, Sabido disposed
of its interest in Viamedia, TIH bought back 25% of its shares formerly owned by
Nafhold, and Seardel resolved to close Intimate Apparel.
Since that report we are in the process of taking over a London-based global
content distributor of films and TV series, Powercorp. During the year Tsogo
concluded its reverse takeover of Gold Reef Resorts. This resulted in HCI`s
share in a major subsidiary being diluted to 41,3% and, whilst we remain very
active in the company, we in consequence no longer consolidate the results. The
merger itself resulted in the merged group becoming not only the central
provider of hotel accommodation in South Africa but also the largest owner of
casinos in South Africa. It has a strong balance sheet with relatively low debt
levels in consequence of the merger having been achieved by a share swap and we
believe it is in the best position to take advantage of consolidation
opportunities arising within its industries.
Montauk acquired a company called Viridis which produces some 30 megawatts of
electricity from land fill gas and also commenced developing a new electricity
site on its own site at the McKinney land fill. This should go into production
in June 2011. Seardel commenced the redevelopment of the large industrial
property vacated by the vertical pipeline formerly operated by the Frame group.
This substantial redevelopment will result in that group renting to third
parties approximately 150 000 square metres of additional industrial property.
The development is being done in phases and is expected to be completed in the
second half of 2012. The disposal of the Gallagher Convention business was
achieved by leasing the premises to a third party accepted by the Competition
authorities with effect from 1 April 2011.
Legal disputes
The group`s subsidiaries and associates have unfortunately been obliged to
litigate in several matters we believe are vital to their interests. Other than
ordinary commercial disputes which unavoidably arise from time to time, the
central matters have been the following:
Seardel has referred a dispute against certain previous directors amounting to
approximately R320 million arising from their dealings in various property
matters which Seardel alleges should have been for the benefit of the company
rather than the individual directors. This matter is currently being heard
through an arbitration process.
There have been several cases against various Gambling Boards that have
inhibited the growth of the business of Vukani Gaming Corporation. Fortunately
most of this litigation has either been completed or settled on terms which
should allow the business to roll out licensed machines over the next period.
Progress in the mining area has been severely delayed arising from the
Department of Minerals and Energy purporting to award mining rights to a state
owned entity on property on which HCI Coal had been granted a prospecting
licence, had prospected and submitted a mining right application.
Lastly Golden Arrow Bus company has been forced to apply for relief in order to
protect the business, arising from the City of Cape Town purporting to allocate
bus operator licences to various others to operate buses. We have settled this
litigation on the basis of compromise in exchange for written undertaking by the
City to honour our contractual exclusivity going forward.
AUDITOR`S REVIEW
These results have been reviewed by the company`s auditors, PKF (Jhb) Inc. Their
unqualified review opinion is available for inspection at the registered office
of the company.
CHANGES IN DIRECTORATE
During the year under review, Mr VE Mphande who had previously resigned from all
executive positions in the group, had been appointed to the board of HCI as a
non-executive director with effect from 1 September 2010.
Mr Yunis Shaik has been appointed as lead independent non-executive director
with effect from 31 August 2010. He was appointed to the board of HCI as a non-
executive director in August 2005.
DISTRIBUTIONS TO SHAREHOLDERS
The directors of HCI have resolved to declare ordinary dividend number 43 of 60
cents per HCI share. The last day to trade cum dividend will be Friday, 17 June
2011. HCI shares will commence trading ex dividend as from Monday, 20 June 2011
and the record date will be Friday, 24 June 2011. The dividend will be paid on
Monday, 27 June 2011. Share certificates may not be dematerialised or
rematerialised between Monday, 20 June 2011 and Friday, 24 June 2011, both days
inclusive.
For and behalf of the board of directors
MJA Golding JA Copelyn
Executive Chairman Chief Executive Officer
Cape Town 19 May 2011
Registered office
Block B, Longkloof Studio, Darters Road, Gardens, Cape Town, 8001
PO Box 5251, Cape Town, 8000
Transfer secretaries
Computershare Investor Services (Pty) Limited
70 Marshall Street, Johannesburg, 2001, PO Box 61051, Marshalltown, 2107
Sponsor
Investec Bank Limited
Directors
MA Golding (Chairman), JA Copelyn (Chief Executive Officer), TG Govender,
JG Ngcobo*, VM Engel*, MF Magugu*, Y Shaik*, ML Molefi*, R Garach*, VE Mphande*
*(Non-executive)
Company secretary
HCI Managerial Services (Pty) Limited
NOTES TO THE REVIEWED CONSOLIDATED FINANCIAL STATEMENTS
Basis of preparation and accounting policies
The results for the year ended 31 March 2011 have been prepared in accordance
with International Financial Reporting Standards ("IFRS"), specifically IAS 34:
Interim Financial Reporting, the AC 500 series of interpretations as issued by
the Accounting Practices Board ("APB") the requirements of the South African
Companies Act, 1973, and the Listings Requirements of the JSE Limited. The
accounting policies of the group are consistent with those applied for the year
ended 31 March 2010 except as noted below. As required by the JSE Limited
Listings requirements, the group reports headline earnings in accordance with
Circular 3/2009: Headline Earnings as issued by the South African Institute of
Chartered Accountants. The group has applied the revised IAS 27 in the current
period. This standard requires that changes in a parent`s ownership interest in
a subsidiary after control is obtained, that do not result in a loss of control,
are accounted for as equity transactions.
During the current period the group early adopted the amendments to IAS 12 that
was released in December 2010. In terms of this amendment there is a rebuttable
presumption that the carrying value of investment property will ultimately be
recovered through sale and therefore the deferred tax liabilities raised on the
revaluations should be done at the CGT rate being 14%. The impact of this early
application was that the deferred tax charge in the current year decreased by
R16,6 million, the deferred tax charge in the prior year has been restated by
R1,4 million and opening equity for 2010 by R7,4 million.
BUSINESS COMBINATIONS
Natural gas
Montauk Energy Holding, LLC acquired a 100% interest in Viridis Energy, LLC and
Toyon Landfill Gas Conversion, LLC on 01 February 2011. the acquired businesses
contributed revenues of R5,4m and net losses after tax of R0,9m to the group for
the year ending 31 March 2011. Had the acquisition been effective on 01 April
2010, the contribution to revenue would have been R39,8m and losses of R8,6m
would have been the contribution to profit after tax.
The details of the net assets acquired on the above business combinations, for
which the purchase price has been allocated to the respective assets and
liabilities, is as follows:
2011
R`000
Non-current assets 82 284
Non-current liabilities (3 710)
Net current liabilities (13 155)
Net assets acquired 65 419
Purchase price 65 419
Liabilities acquired 2 232
Net cash paid 63 187
Discontinued operations and non-current assets held for sale
Discontinued operations as disclosed in the group income statement relates to
the following:
- The convention business of Gallagher Estates which the group has disposed of
subsequent to the year end further to an order by the Competition Commission;
- Sabido`s cellphone content provider, Viamedia, which was disposed of during
the year under review;
- The door module and pulley division of Formex Industries (Pty) Limited;
- Seardel`s Intimate Apparel division and four of its manufacturing operations
in the Frame division`s vertical pipeline - spinning, weaving, finishing and
denim; and
- The merger of the group`s major gaming and hotel subsidiary, Tsogo Sun
Holdings (Pty) Limited with Gold Reef Resorts Ltd (GRR), culminating in the
reverse listing of Tsogo Sun on the JSE Limited, and resulting in the group
diluting its interest in the new merged company from 51% to 41,3%. The result of
the dilution is a change in the classification of the investment in GRR to
Investment in Associate. The results of Tsogo Sun for the 11-month period ending
1 March 2011, whilst still a subsidiary and prior to the merger, have been
reflected under discontinued operations and the results for the month of March
2011 have been reflected under the group`s share of profits from associate
companies.
The non-current assets held for sale, as disclosed in the group balance sheet,
relate to the following:
- The assets of the convention business of Gallagher Estates;
- The remaining assets of the pulley division of Formex, the operations of which
had ceased in the year to March 2010; and
- Certain assets of the Seardel group which have been committed to being
disposed of, including those of the Intimate Apparel division.
Group income statement
The group results reflect an overall increase of 951,4% in basic earnings
attributable to HCI shareholders and an increase of 95,7% in headline earnings.
There has been growth in revenue across all segments. In line with this growth
in revenue group EBITDA has grown by 35,4% in comparison to the prior period on
a (like for like) basis.
Profit from associates and joint ventures for the period is significantly lower
than reported in the prior year primarily because of the disposal of Clover
Industries Limited (CIL) which had contributed significantly in the prior year.
The prior year profit from associates and joint ventures included the disposal
of CIL`s interest in its Danone subsidiary. The current year profit from
associates includes the contribution from the merged Tsogo Sun Holdings for one
month.
Included in investment surplus is the profits on the unwinding of the Gallagher
Estates property financing agreements and an agterskot payment amounting to R27m
relating to the sale of the group`s interest in Suncoast Casino to Tsogo Sun in
October 2009.
Fair value adjustments of investment properties relate largely to the upward
revaluation of the Gallagher Estates investment properties.
Asset impairments relate primarily to property, plant and equipment impaired by
Seardel and Gallagher Estate.
The impairment of goodwill and investments relates primarily to the impairment
of goodwill in Formex.
Discontinued operations as per the consolidated income statements include:
Reviewed Restated
31 March 31 March
2011 2010
Discontinued operations R`000 R`000
Tsogo Sun Holdings - profit on disposal/dilution 5 727 405 -
Tsogo Sun Holdings - results for 11 months in
2011 (12 months in 2010) 631 649 1 016 597
Sabido - Viamedia 50 856 44 960
Seardel - Intimate Apparel and divisions of Frame (87 781) (234 706)
Other 7 084 (47352)
Total 6 329 213 779 499
Group balance sheet and cash flow
The comparative amounts for the year ended 31 March 2010 (Restated) are not
comparable due to Tsogo Sun not being consolidated on a line by line in the
current year as a result of the group`s loss of control following the Tsogo
Sun/Gold Reef merger and the investment now being reflected under interest in
associates and joint ventures.
The group`s overall financial position remains strong with the major businesses
still generating strong cash flows.
Group long-term borrowings have reduced from R4,7 billion in the prior year to
R2 billion at year end due to the borrowings of Tsogo Sun being excluded as a
result of the accounting treatment of Tsogo Sun in the current year.
The net asset carrying value per share has increased by 122% at year end mainly
due to the realisation of the investment in Tsogo Sun via the Gold Reef merger
with the investment in Tsogo Sun/Gold Reef being recognised at fair value at the
date of the transaction in terms of IAS 28.
www.hci.co.za
Date: 19/05/2011 15:54:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
