| Thu 17 Nov 2011, 17:19 | | HCI - Hosken Consolidated Investments Limited - Unaudited group interim results |
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HCI
HCI
HCI - Hosken Consolidated Investments Limited - Unaudited group interim results
for the six months ended 30 September 2011
HOSKEN CONSOLIDATED INVESTMENTS LIMITED
Incorporated in the Republic of South Africa
Share code: HCI
ISIN: ZAE000003257
Registration number 1973/007111/06
("HCI" or "the company" or "the group")
UNAUDITED GROUP INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2011
+15,5% REVENUE
+35,1% EBITDA
+34,0% HEADLINE EARNINGS
ABRIDGED CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 September 30 September 31 March
% 2011 2010 2011
change R`000 R`000 R`000
Revenue 3 510 221 3 061 221 6 333 785
Net gaming win 241 559 186 874 403 292
Income 16% 3 751 780 3 248 095 6 737 077
Expenses (3 034 945) (2 717 634) (5 459 132)
EBITDA 35% 716 835 530 461 1 277 945
Depreciation and
amortisation (186 660) (163 269) (314 745)
Operating profit 44% 530 175 367 192 963 200
Investment income 26 694 38 422 78 323
Finance costs (102 287) (99 729) (242 717)
Share of profits of
associates and joint
ventures 197 709 3 205 83 212
Investment surplus 16 851 - 57 195
Fair value
adjustments to
investment properties - - 84 303
Impairment reversals 192 4 461 5 691
Asset impairments - - (43 483)
Fair value
adjustments to
financial instruments (9 629) - (1 179)
Impairment of
goodwill and
investments - - (37 195)
Profit before taxation 659 705 313 551 947 350
Taxation (153 506) (115 251) (256 367)
Profit for the period
from continuing
operations 506 199 198 300 690 983
Discontinued
operations (6 385) 476 896 6 321 551
Profit for the period 499 814 675 196 7 012 534
Attributable to:
Equity holders of the
parent 39% 408 503 293 163 6 418 327
Minority interest 91 311 382 033 594 207
499 814 675 196 7 012 534
RECONCILIATION OF HEADLINE EARNINGS
Unaudited
Six months ended
30 September
2011
% Gross Net
change R`000 R`000
Earnings attributable to equity holders
of the parent 39% 408 503
IAS 16 Gains on Disposal of Property - -
IAS 16 Losses/(Gains) on Disposal of
Plant and Equipment (9 024) (7 937)
IAS 16 Impairment of Plant and Equipment - -
IFRS 3 Impairment of Goodwill - -
IAS 28 Gain on Disposal of Associates - -
IAS 36 Impairment of Assets - -
IAS 36 Reversal of Impairments (808) (589)
IAS 27 Profit from Disposal/Part Disposal
of Subsidiary (16 851) (14 492)
IAS 40 Fair Value Adjustment to
Investment Property - -
IAS 39 Profit on Disposal of Available for
Sale Asset - -
Remeasurements included in equity-
accounted earnings of associates (4 753) (4 747)
Headline profit 34% 380 738
Basic earnings per share
Earnings (cents) 38% 321,35
Continuing operations 325,05
Discontinued operations (3,70)
Headline earnings (cents) 32% 299,51
Continuing operations 303,56
Discontinued operations (4,05)
Weighted average number of shares
in issue (`000) 127 118
Actual number of shares in issue at end
of period (net of treasury shares) (`000) 127 177
Diluted earnings per share
Earnings (cents) 38% 311,25
Continuing operations 314,83
Discontinued operations (3,58)
Headline earnings (cents) 33% 290,10
Continuing operations 294,02
Discontinued operations (3,92)
Weighted average number of shares in
issue (`000) 131 245
Unaudited
Six months ended
30 September
2010
Gross Net
R`000 R`000
Earnings attributable to equity holders
of the parent 293 163
IAS 16 Gains on Disposal of Property (78) (30)
IAS 16 Losses/(Gains) on Disposal of
Plant and Equipment (22 151) (13 633)
IAS 16 Impairment of Plant and Equipment 13 911 10 477
IFRS 3 Impairment of Goodwill - -
IAS 28 Gain on Disposal of Associates - -
IAS 36 Impairment of Assets - -
IAS 36 Reversal of Impairments (4 461) (4 461)
IAS 27 Profit from Disposal/Part Disposal
of Subsidiary - -
IAS 40 Fair Value Adjustment to
Investment Property (1 882) (1 332)
IAS 39 Profit on Disposal of Available for
Sale Asset - -
Remeasurements included in equity-
accounted earnings of associates - -
Headline profit 284 184
Basic earnings per share
Earnings (cents) 233,53
Continuing operations 120,23
Discontinued operations 113,30
Headline earnings (cents) 226,38
Continuing operations 117,20
Discontinued operations 109,18
Weighted average number of shares
in issue (`000) 125 534
Actual number of shares in issue at end
of period (net of treasury shares) (`000) 126 001
Diluted earnings per share
Earnings (cents) 225,57
Continuing operations 116,13
Discontinued operations 109,44
Headline earnings (cents) 218,66
Continuing operations 113,20
Discontinued operations 105,46
Weighted average number of shares in
issue (`000) 129 966
Audited
Year ended
31 March
2011
Gross Net
R`000 R`000
Earnings attributable to equity holders
of the parent 6 418 327
IAS 16 Gains on Disposal of Property - -
IAS 16 Losses/(Gains) 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
IAS 28 Gain on Disposal of Associates (401) (404)
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)
Remeasurements included in equity-
accounted earnings of associates (42 685) (42 685)
Headline profit 731 946
Basic earnings per share
Earnings (cents) 5 088,46
Continuing operations 369,48
Discontinued operations 4 718,98
Headline earnings (cents) 580,29
Continuing operations 292,55
Discontinued operations 287,74
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
Earnings (cents) 4 921,28
Continuing operations 357,35
Discontinued operations 4 563,93
Headline earnings (cents) 561,22
Continuing operations 282,94
Discontinued operations 278,28
Weighted average number of shares in
issue (`000) 130 420
ABRIDGED CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited* Audited
30 September 30 September 31 March
2011 2010 2011
R`000 R`000 R`000
ASSETS
Non-current assets 13 651 572 14 372 063 12 885 346
Property, plant and equipment 2 909 316 9 467 582 2 769 835
Investment properties 626 395 363 901 564 685
Goodwill 178 894 1 475 791 144 205
Interest in associates and joint
ventures 8 450 711 1 815 155 8 441 951
Other financial assets 429 212 177 914 116 230
Other intangible assets 754 928 647 522 577 218
Deferred taxation 208 147 234 515 189 203
Operating lease equalisation asset 7 037 1 137 2 658
Non-current receivables 86 932 188 546 79 361
Current assets 2 872 945 4 309 503 2 948 801
Other 2 495 763 2 673 202 2 368 669
Bank balances and deposits 377 182 1 636 301 580 132
Non-current assets held for sale 24 629 201 530 35 218
Total assets 16 549 146 18 883 096 15 869 365
EQUITY AND LIABILITIES
Equity 11 829 247 8 912 957 11 231 849
Equity attributable to equity
holders of
the parent 11 004 909 4 863 222 10 505 914
Minority interest 824 338 4 049 735 725 935
Non current liabilities 2 416 003 5 523 041 2 350 869
Deferred taxation 115 124 651 745 114 138
Borrowings 2 117 419 4 335 978 2 056 658
Operating lease equalisation
liability 1 902 284 682 4 447
Other 181 558 250 636 175 626
Current liabilities 2 296 228 4 388 242 2 270 279
Non-current liabilities held for
sale 7 668 58 856 16 368
Total equity and liabilities 16 549 146 18 883 096 15 869 365
Net asset value carrying
per share (cents) 8 653 3 860 8 267
*Restated
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited* Audited
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2011 2010 2011
R`000 R`000 R`000
Balance as restated at beginning
of period 11 231 849 8 388 971 8 388 971
Balance as previously stated 11 231 849 8 380 190 8 380 190
Adjustment - 8 781 8 781
Share capital and premium
Treasury shares released 5 031 10 965 14 595
Current operations
Total comprehensive income 656 098 615 530 6 977 327
Equity settled share-based
payments 5 363 6 412 15 810
Disposal of subsidiary - - (2 761 828)
Effects of changes in holding 12 747 (14 097) (1 217 184)
Capital reductions and dividends (81 841) (94 824) (185 842)
Balance at end of period 11 829 247 8 912 957 11 231 849
*Restated
ABRIDGED CONSOLIDATED STATEMENT OF
OTHER COMPREHENSIVE INCOME
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2011 2010 2011
R`000 R`000 R`000
Profit for the period 499 814 675 196 7 012 534
Other comprehensive income:
Foreign currency translation
differences 169 913 (46 455) (37 653)
Cash flow hedge reserve (13 629) (12 174) 23 081
Asset revaluation reserve - (1 037) (20 635)
Total comprehensive income 656 098 615 530 6 977 327
Attributable to:
Equity holders of the company 557 306 260 028 6 385 176
Minority interests 98 792 355 502 592 151
656 098 615 530 6 977 327
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
30 September 30 September 31 March
2011 2010 2011
R`000 R`000 R`000
Cash flows from operating
activities 288 530 956 118 1 968 597
Cash flows from investing
activities (595 251) 203 952 (2 059 505)
Cash flows from financing activities 8 645 (653 172) (558 794)
(Decrease)/increase in cash and
cash equivalents (298 076) 506 898 (649 702)
Cash and cash equivalents
At beginning of period 308 241 959 539 959 539
Foreign exchange difference 13 193 (1 802) (1 596)
At end of period 23 358 1 464 635 308 241
Bank balances and deposits 377 182 1 663 882 586 567
Bank overdrafts (353 824) (199 247) (278 326)
Cash and cash equivalents 23 358 1 464 635 308 241
SEGMENT ANALYSIS
Unaudited Unaudited
Six months Six months
ended ended
30 September 30 September
2011 2010
Net Net
gaming gaming
Revenue win Revenue win
R`000 R`000 R`000 R`000
Media and
broadcasting 931 627 - 766 265 -
Limited payout gaming 3 300 196 065 3 180 150 139
Information
technology 183 410 - 125 946 -
Transport 519 647 - 470 095 -
Vehicle component
manufacture* 241 131 - 213 811 -
Exhibition and
properties 37 803 - 30 209 -
Mining 244 800 - 167 844 -
Natural gas 133 866 - 93 309 -
Clothing and textile 1 207 947 - 1 177 020 -
Other 6 690 45 494 13 542 36 735
Total 3 510 221 241 559 3 061 221 186 874
* Comparative amount for the period ended September 2010 includes surcharge
billings which were previously included in Expenses.
Audited
Year ended
31 March
2011
Net
gaming
Revenue win
R`000 R`000
Media and broadcasting 1 620 397 -
Limited payout gaming 6 527 327 979
Information technology 256 051 -
Transport 963 619 -
Vehicle component
Manufacture 440 757 -
Exhibition and properties 66 843 -
Mining 363 166 -
Natural gas 214 871 -
Clothing and textile 2 372 981 -
Other 28 573 75 313
Total 6 333 785 403 292
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2011 2010 2011
R`000 R`000 R`000
Profit before tax
Media and broadcasting 332 476 246 658 555 687
Limited payout gaming 42 932 21 980 56 288
Casino gaming and hotels 228 378 - 42 183
Information technology 30 659 21 142 46 277
Transport 66 676 69 027 159 062
Vehicle component manufacture (3 657) (6 378) (42 506)
Beverages (4 656) - -
Exhibition and properties (5 398) 5 715 146 421
Mining 19 503 8 671 17 720
Natural gas 1 017 (37 275) (44 445)
Clothing and textile 9 380 7 174 96 354
Other (57 605) (23 163) (85 691)
Total 659 705 313 551 947 350
EBITDA
Media and broadcasting 396 000 294 296 654 691
Limited payout gaming 65 897 41 687 97 678
Information technology 37 065 28 046 59 860
Transport 100 069 98 791 218 386
Vehicle component manufacture 9 044 3 863 17 833
Exhibition and properties 8 208 5 830 30 105
Mining 42 333 15 130 30 263
Natural gas 38 464 7 893 49 988
Clothing and textile 44 394 33 736 160 732
Other (24 639) 1 189 (41 591)
Total 716 835 530 461 1 277 945
Headline earnings
Media and broadcasting 148 536 117 792 251 623
Limited payout gaming 35 135 13 767 39 684
Casino gaming and hotels 226 130 187 661 417 363
Information technology 10 404 7 896 17 833
Transport 49 264 50 724 120 247
Vehicle component manufacture (3 712) (5 932) 774
Beverages (8 170) - -
Exhibition and properties (24 092) 13 401 20 237
Mining 19 351 8 671 22 216
Natural gas (5 842) (18 774) (8 923)
Clothing and textile 1 273 (56 170) (11 881)
Other (67 539) (34 852) (137 227)
Total 380 738 284 184 731 946
NOTES
Basis of preparation and accounting policies
The results for the six months ended 30 September 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, 2008, 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 2011 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 early adopted the amendments to IAS 12 that was released in December
2010 for the results for the year ended 31 March 2011. 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 opening
equity for the comparative interim results for the period ended
30 September 2010 was increased by R8.8 million.
These financial statements were prepared under the supervision of the financial
director, Mr T.G. Govender, B.Compt(Hons).
BUSINESS COMBINATIONS
Media and broadcasting
During the period under review Sabido Investments acquired a 100% interest in
Powercorp International Limited, a London based global content distributor of
films and television series with effect from 21 July 2011. An interest of 90%
and 80% in Media Film Equipment Services (Pty) Ltd and Media Film Services
Incorporated, respectively, were acquired with effect from 1 September 2011.
These entities sell and rent specialised equipment to the film industry. The
acquired businesses contributed revenues of R8.7m and net losses after tax of
R10.4m to the group for the six month period ended 30 September 2011. Had the
acquisition been effective on 1 April 2011, the contribution to revenue would
have been R47.1m and losses of R9.3m 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 77 407
Current assets 76 942
Non-current liabilities (15 306)
Current liabilities (41 134)
Net assets acquired 97 910
Minority interest 3 565
Goodwill on acquisition 1 791
Cash balances acquired (11 224)
Net cash paid 92 041
The acquisitions of Powercorp International, Media Film Equipment Services and
Media Film Services have been provisionally accounted for as permitted by IFRS
3. The purchase price allocation will be completed within 12 months from the
respective dates of acquisition and any resulting adjustments to assets and
liabilities acquired will be accounted for accordingly.
Discontinued operations and non-current assets held for sale
Discontinued operations as disclosed in the group income statement for the
period under review relates to the following:
- The door module and pulley division of Formex Industries (Pty) Limited; and
- Certain clothing divisions of Seardel Investment Corporation Limited.
Discontinued operations as disclosed in the group income statement for the prior
comparable period relates mainly to the results of the group`s casino gaming and
hotel business, following 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 the Tsogo Sun group on the JSE Limited in
March 2011, and resulting in the group diluting its interest in the new merged
company from 51% to 41.3%. Accordingly, due to the loss of control over this
business, the results for the prior comparable period have been restated and are
reflected under discontinued operations.
The non-current assets held for sale, as disclosed in the group balance sheet,
relate to the following:
- 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 following the closure of the related divisions.
Comparative figures in the income statement have been restated to reflect the
above changes.
Group income statement
The group results reflect an overall increase of 39% in earnings attributable to
HCI shareholders and an increase of 34% in headline earnings.
Revenue has grown by 16% over the period when compared to the prior period
mainly due to increased advertising spend in the media and broadcasting sector
and increased contributions from mining, limited payout gaming, information
technology and natural gas. Costs have been well controlled resulting in group
EBITDA growing by 35% in comparison to the prior period.
Profit from associates and joint ventures for the period is significantly higher
due to the equity-accounted earnings of the group`s 41.3% interest in Tsogo Sun
Holdings Ltd which was consolidated and included in discontinued operations for
the prior comparable period.
Included in investment surplus is the profits on the disposal of the Gallagher
Estate conferencing and exhibition business and a further R6m in additional
proceeds on sale relating to the sale of the group`s interest in Mettle Ltd in
April 2008.
Group balance sheet and cash flow
The comparative amounts for the period ended 30 September 2010 are not
comparable due to Tsogo Sun Holdings Ltd not being consolidated on a line-by-
line basis in the current period 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 balance sheet at 31 March
2011 is comparable to the balance sheet at 30 September 2011.
The group`s overall financial position remains strong with the major businesses
still generating strong cash flows.
Group long-term borrowings at 30 September 2011 comprise borrowings of R1 452m
at head office level (including the R500m of preference shares outstanding to
Nafhold) and R665m in operating subsidiaries.
The cash flow statement is not comparable to the prior period due to the
accounting treatment of the group`s investment in Tsogo Sun Holdings Ltd.
Included in cash flows from investing activities is the investment made in HCI
Investments Australia Pty Ltd (R297m), media distribution rights (R134m),
acquisition of media-related entities (R92m) and capital expenditure relating to
property, plant and equipment.
COMMENTARY
Our headline profits were up some 34% on the same period last year which is
pleasing by any standards. This was achieved by our main assets growing
attributable earnings more than 20% over the previous period, two of our growth
subsidiaries starting to come seriously into their own. Both HCI Coal and Vukani
Gaming more than doubled headline profit over the period and the turnaround at
Seardel, which resulted in more than a R50m loss for the previous period
disappearing in this year`s interims. The results are all the more impressive
for the fact that they include a R45m provision for a long outstanding tax issue
arising from two Johnnic Holdings structured property transactions done more
than ten years ago and raised for the first time following a settlement with
SARS.
The group has continued to busy itself with new activity on several fronts. In
the casino area Tsogo Sun Holdings bought out a significant minority from the
Suncoast casino, effectively raising its interest in that casino to 90%. In the
hotel space Southern Sun Hotels purchased The Grace Hotel in Rosebank,
Johannesburg. Montauk Energy Capital has succeeded in concluding an extended gas
usage agreement for twenty years at Bowerman California which is a significant
milestone to finally developing its electricity project there. HCI has likewise
been very active in developing a partnership with Sun Edison, a company bidding
to be a supplier of solar-based electricity to Eskom which is currently on
tender. If it is successful it is intended to partner with this company together
with the J & J Group.
DIVIDEND TO SHAREHOLDERS
The directors of HCI have resolved to declare ordinary dividend number 44 of 20
cents per HCI share. The last day to trade cum dividend will be Friday 2
December 2011. HCI shares will commence trading ex dividend as from Monday, 5
December 2011 and the record date will be Friday, 9 December 2011. The dividend
will be paid on Monday, 12 December 2011. Share certificates may not be
dematerialised or rematerialised between Monday, 5 December 2011 and Friday, 9
December 2011, both days inclusive.
For and on behalf of the board of directors
MJA Golding JA Copelyn
Executive Chairman Chief Executive Officer
Cape Town 17 November 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
MJA 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
Date: 17/11/2011 17:19:30 Produced by the JSE SENS Department.
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