| Mon 27 Jun 2005, 15:48 | | HCI - Reviewed group annual results for the year |
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HCI - Reviewed group annual results for the year ended 31 March 2005
HOSKEN CONSOLIDATED INVESTMENTS LIMITED
(Registration number 1973/007111/06)(Incorporated in the Republic of South Africa)
Share code: HCI & ISIN: ZAE000003257
(`HCI` or `the company` or `the group`)
REVIEWED GROUP ANNUAL RESULTS FOR THE YEAR ENDED 31 MARCH 2005HIGHLIGHTS
* 63,8% increase in revenue;
* trading profit increased to R163m from previous year loss of R5m;
* 292% increase in profit for the year;* 1092% increase in headline earnings per share;
* adjusted headline earnings per share increases from 2,96 cents to 203,52
cents.
The following are the results for the year ended 31 March 2005 together with thecomparative figures:
ABRIDGED CONSOLIDATED BALANCE SHEET
Year ended
31 March 2005 2004
R`000 R`000
Reviewed Audited
ASSETSNon-current assets 1,677,875 577,203
Property, plant and equipment 473,434 121,971
Goodwill - 9,979
Negative goodwill - (1,492)Deferred taxation 414,521 167,582
Long term receivables 13,793 -
Investments 776,127 279,163
Current assets 1,134,718 1,743,755Cash & cash equivalents 546,637 404,261
Trading assets - 889,124
Other current assets 588,081 450,370
Total assets 2,812,593 2,320,958EQUITY AND LIABILITIES
Ordinary shareholders` equity 1,405,415 779,044
Minority interest 277,059 282,864
Non current liabilities 196,053 38,619Net financial liabilities 62,018 50,923
Deferred taxation 33,907 16,857
Current liabilities 838,141 1,152,651
Trading liabilities - 889,248Other current liablities 838,141 263,403
Total equity and liabilities 2,812,593 2,320,958
Net asset carrying value per share (cents) 1,191 756
ABRIDGED CONSOLIDATED INCOME STATEMENT Year ended
31 March
2005 2004
R`000 R`000 Reviewed Audited
Revenue 1,413,422 862,598
-Continuing operations 1,413,422 877,969
-Discontinued - (15,371)Trading expenses (1,249,570) (867,877)
-Continuing operations (1,249,570) (850,862)
-Discontinued - (17,015)
Trading profit/(loss) 163,852 (5,279)Investment income 50,627 50,062
Finance costs (11,760) (22,621)
Share of associated companies` profits 82,042 23,047
Negative goodwill released 102,470 31,981Exceptional items 138,903 16,222
Fair value adjustments 5,505 -
(Impairment)/ recoupment of investments & goodwill (9,606) 75,000
Profit before taxation 522,033 168,412Taxation 220,666 (4,397)
-Continuing operations 220,666 34,116
-Discontinued - (38,513)
Group profit 742,699 164,015Attributable to minorities (120,035) (5,159)
Profit for the year 622,664 158,856
Reconciliation of headline profit
Profit for the year 622,664 158,856Adjusted for:
Exceptional items (134,456) (19,041)
Impairment /(recoupment) of investments & goodwill 9,606 (74,188)
Revaluation of investment properties (2,109) (1,617)Negative goodwill released (102,470) (31,981)
Amortisation of goodwill 3,268 (2,328)
Impairment of assets 1,740 -
(Profit) / loss on sale of assets (24,869) 112Headline profit 373,374 29,813
Deferred taxation in respect of losses (198,014) -
Deferred taxation in respect of STC credits 39,774 (26,834)
Adjusted headline profit 215,134 2,979Earnings per share (Cents)
-Basic 589.06 157.94
-Headline 353.23 29.64
-Adjusted headline 203.52 2.96Weighted average number of shares in issue (`000) 105,704 100,581
Actual number of shares in issue at end
of year (net of treasury shares) (`000) 117,997 103,022
Diluted earnings per share (Cents)-Basic 526.35 141.38
-Headline 315.62 26.53
-Adjusted headline 181.86 2.65
Weighted average number of shares in issue (`000) 118,299 112,361CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Non
distri-
Share Share butable Accumulated capital premium reserves profits Total
R`000 R`000 R`000 R`000 R`000
Balances at 31 March 2003 as
previously stated 25,005 474,743 624,586 (602,655) 521,679Prior year adjustment - - - 88,026 88,026
Balances at 31 March 2003
Restated 25,005 474,743 624,586 (514,629) 609,705
Share capital & premiumShares issued 750 9,750 - - 10,500
Current operations
Profit for the year - - - 158,856 158,856
Currency translation differences - - (224) - (224)Change in holdings in subsidiary
companies - - - 207 207
Transfer of fair value adjustments on
realisation - - (15,749) 15,749 -Other transfers - - (524,542) 524,542 -
Balances at 31 March 2004 25,755 484,493 84,071 184,725 779,044
Share capital & premium
Shares issued 3,749 52,381 - - 56,130Treasury shares acquired by
subsidiary (5) (2,088) - - (2,093)
Share issue costs - (101) - - (101)
Current operationsProfit for the year - - - 622,664 622,664
Currency translation differences 224 224
Negative goodwill released to
equity 49,126 49,126Transfer of fair value adjustments
on realisation 13,750 13,750
Ordinary dividend (113,329) (113,329)
Transfers on realisation (84,295) 84,295 -Balances at 31 March 2005 29,499 534,685 - 841,231 1,405,415
ABRIDGED CONSOLIDATED CASHFLOW STATEMENT
Year ended
31 March 2005 2004
R`000 R`000
Reviewed Audited
Cashflows from operating activities 470,173 298,423Cashflows from investing activities (675,720) (240,790)
Cashflows from financing activities 135,491 (64,291)
(Decrease)/increase in cash and cash equivalents (70,056) (6,658)
Cash and cash equivalentsAt beginning of period 404,082 201,492
On acquisition of subsidiaries 210,378 209,248
At end of period 544,404 404,082
SEGMENT REPORTThe following are the summarised results
for the various primary group segments
Fixed
Asset addi- Depre-
Revenues Results Assets Liabilities tions ciation
R`000 R`000 R`000 R`000 R`000 R`000
Media & broadcasting 575,764 130,790 727,930 233,379 28,159 14,272Financial services 103,775 28,424 151,652 129,760 10,322 11,158
Gaming, hotels &
leisure 22,284 56,386 557,565 - 7,855 2,265
Informationtechnology - 1,938 22,486 - - -
Transport 434,131 74,084 376,589 186,156 48,513 18,727
Industrial 276,860 24 187,388 133,326 35,155 12,916
Other 608 451,053 788,983 447,498 32 69 1,413,422 742,699 2,812,593 1,130,119 130,036 59,407
Taxation is included in other as follows: Assets R 414.5 million, Liabilities R
44.8 million and results R 220.6 million.
No secondary segment report has been included as the group derives substantiallyall its revenues and income from within the Republic of South Africa.
COMMENTARY
INVESTMENTS
Media and BroadcastingMidi TV (Pty) Ltd (`e-TV`)
e-TV has benefited from improved general economic conditions and favourable
currency markets, with revenue growing significantly and a reduction in
programming costs as compared to the comparative prior period.e-TV generated R 130,7 million in headline profits for the current year, before
accounting for the recognition of a deferred tax asset of R 298,7 million in
respect of its assessed losses. This compares favourably to the R 31,3 million
headline profit generated in the previous financial year.Africa-on-Air (Pty) Limited (`Africa-on-Air`)
During the year under review shareholders approved the disposal by the group of
its financial interest in Africa-on Air for an amount of R180 million.
Shareholders are referred to announcements made and the circular issued by thecompany for details of this disposal.
Yired (Pty) Ltd (`YFM`)
Subsequent to year end the group received approval from the Independent
Communications Authority of South Africa (`ICASA`) for the acquisition of aneffective 77,5% interest in YFM.
Gaming, Hotels and Leisure
Vukani Gaming Corporation (Pty) Limited (`Vukani`)
Vukani operates limited payout gambling machines as a route operator underlicense from four provincial gaming boards.
As was previously reported expansion of trading operations continued at a slow
pace. It is anticipated that this pace will increase in the coming period.
Vukani will require the injection of significant group cash resources duringthis initial roll-out phase. The directors of HCI are confident that once the
business matures it will make a positive contribution to the group.
Tsogo Investment Holding Company (Pty) Limited (`TIH`)
As was previously reported, the group had increased its interest in TIH from27.77% to 32.07% at a cost of R45m. The group has also entered into an agreement
with the Fabcos Trust to acquire a further 19% effective interest in TIH.
Shareholders are referred to announcements made for details of this acquisition,
which is subject to approval of certain regulatory bodies.TIH owns 51% of Tsogo Sun Holdings (Pty) Limited (`Tsogo Sun`) thus the group
currently has an effective 16.35% interest in Tsogo Sun, which will to increase
to 26% on approval of the above transaction.
During the year under review TIH`s equity accounted results contributed R 58million to group headline earnings.
Johnnic Holdings Limited (`Johnnic`)
During the year under review the group acquired 20,7% of the issued share
capital of Johnnic for R311 million. This amount which is included in currentliabilities was settled after year end. Subsequent to year end the group has
increased its interest in Johnnic to 29,8% and is currently seeking to obtain
board representation.
Financial ServicesMettle Limited (`Mettle`)
Mettle, whose operations are again profitable after the disposal of the treasury
operations, has performed in line with expectations and has contributed R 17
million to group headline profit before Secondary Tax on Companies (`STC`), of R53 million, expensed on utilization of STC credits by certain subsidiaries.
During the year under review the group made a successful offer, in terms of
Section 440 of the Companies Act, to acquire all of those Mettle shares not
already owned by the group. Shareholders are referred to announcements made bythe group for detailed results of the offer.
Transport
Golden Arrow Bus Services (Pty) Ltd (`GABS`)
During the year under review shareholders approved the acquisition by the groupof GABS. Shareholders are referred to announcements made and the circular issued
by the company for details of this acquisition.
The results of GABS, which were consolidated with those of the group for the
last nine months of the year under review, contributed R 52,2 million to groupheadline profit.
Food and beverages
Subsequent to the year end, the group entered into an agreement with Clover
Industries Limited (`CIL`) in terms of which the group will subscribe for 25,1%of the total issued ordinary share capital in CIL, as well as 25 million CIL
preference shares, for an aggregate subscription consideration of R91,8 million,
subject to the fulfillment of certain conditions precedent.
Shareholders are referred to announcements made by the company for details ofthis acquisition. This investment broadens the group`s strategic investment
interests into the food and beverages sector.
OPERATIONS AND RESULTS FOR THE YEAR
Business operationsThe business operations of HCI include the making of investments in
opportunities as identified by the board of directors and to add value to these
investments over time. As such, HCI has consciously established itself and
pursued an investment policy in terms of which it has endeavoured to maintainsignificant equity and capital participation in entrepreneurially run companies
with significant growth potential. The investments are constantly reviewed and
new ones sought to complement them. Your directors are confident that the group
will deliver satisfactory growth in the future.Accounting policies
The annual financial statements are prepared on the historical cost basis, in
accordance with South African Statements of Generally Accepted Accounting
Practice, the requirements of the Companies Act 1973, as amended, and theListing Requirements of the JSE Securities Exchange SA. The accounting policies
of the group have been consistently applied with those of the previous financial
year, with the exception of the implementation of AC 501: Accounting for
secondary taxation on companies (STC).With effect from 1 April 2005 the group will implement International Financial
Reporting Standards (IFRS). Accordingly, the effects of the new standards will,
for the first time, be presented in the group`s interim report to shareholders
for the six months ended 30 September 2005.Prior year adjustment and restatement of comparative figures
Change in accounting policy
With effect from 1 April 2004 the group adopted AC 501. In terms of the
provisions of AC501, a deferred tax asset should be recognized for unused STCcredits to the extent that it is probable that future taxable profit will be
generated against which the STC credits can be utilized.
As a result of the first time application of AC 501, Mettle, a wholly owned
subsidiary of the group, has recognized a deferred tax asset in respect of STCcredits held by its subsidiaries, as a prior year adjustment. These subsidiaries
have historical contractual obligations to on-declare all such dividends
received to third party clients, with the result that these credits are not
available to the group for any other purpose. A margin is earned over the termof the contracts and the asset does not reflect the economic benefit arising
from these transactions to the group. The income on these transactions
(dividends) is accounted for on the yield to maturity basis and not on the
declaration basis as is implicit in the application of the statement. The effectis that the asset raised and the income statement impact of the fluctuations in
the value of the asset over time severely distort the economic reality of the
group`s results. Therefore, the group believes it is appropriate to present
adjusted headline earnings (as disclosed in these results), which negate theeffects of deferred tax assets raised or expensed, as additional disclosure, to
more accurately reflect the economic reality of the group`s results.
The effect of the prior year adjustment is a R 167,5 million increase in the
prior year equity of Mettle, which is expected to be expensed over the nextthree years. This has resulted in the group restating the comparative figures to
reflect an increase in financial year 2004 headline earnings by R39,1 million
and an adjustment to the opening retained earnings of R128,4 million.
Deferred tax assets in respect of STC credits raised and expensed in the currentyear amount to R53 million which have been included in headline earnings.
Deferred tax assets in respect of STC credits raised and not expensed at year
end date amount to R114,5m.
Recognition of deferred tax assets in respect of assessed lossesThe group`s subsidiary e-TV has unutilized assessed losses of R1 030 million at
year end date. As required by AC102 - Income taxes, a deferred tax asset should
be recognized for the carryforward of unused tax losses to the extent that it is
probable that future taxable profit will be available against which the unusedtax losses can be utilized. As e-TV is now profitable, a deferred tax asset of
R298,7 million was raised by e-TV which has been fully consolidated.
Results for the year
Basic earningsBasic earnings per share increased by 273% to 589,06 cents. Basic earnings per
share reflects the net earnings after exceptional items, negative goodwill
released and impairment of investments and goodwill. The increase was due mainly
to the profit on disposal of the group`s interest in Africa on Air included inexceptional items and the negative goodwill released on the acquisition of GABS.
Headline earnings
Headline earnings increased from R29,8 million to R373,3 mllion. This represents
an increase of R343,5 million during the current year, of which R131,4 millionrelates to the inclusion of net deferred tax assets raised and R212,1 million
relates to group operations.
Headline earnings per share increased substantially from 29,64 cents to 353,23
cents.Adjusted headline earnings
Adjusted headline earnings, which exclude the effects of net deferred tax assets
raised in respect of unused tax losses and available STC credits, have been
disclosed for the first time so as to more accurately reflect the economicreality of the group`s results. Adjusted headline earnings increased
significantly from R2,9 million to R215,1 million. Adjusted headline earnings
per share also increased significantly from 2,96 cents to 203,52 cents.
This substantial increase is mainly due to the improved performance of e-TV andthe recognition for the first time of income from GABS and TIH.
DISTRIBUTION TO SHAREHOLDERS
On 21st October 2004 the directors declared a dividend of ninety five cents per
share.Due to the need to retain funds for the acquisitions and operations of the group
the directors have decided not to declare any further dividends for the year
ended 31 March 2005.
AUDITORS` REVIEWThe abridged consolidated balance sheet, income statement, cash flow statement
and statement of changes in equity have been reviewed by the company`s auditors,
PKF (Jhb) Inc., and their review opinion is available for inspection at the
company`s registered office.ESTABLISHMENT OF THE HCI FOUNDATION
HCI is proud to inform its shareholders of the formation of the HCI Foundation,
incorporating the Golden Arrow Foundation (`the Foundation`).
The Foundation has been constituted by way of a Second Deed of Amendment to theGolden Arrow Foundation which was adopted unanimously by the trustees thereof
and is in the process of being duly registered.
The Foundation is in the form of a charitable trust and its objects are to:
* promote the social, educational and community development of underprivileged persons and thereby nurture and develop the personal
growth, self-reliance, independence, self-respect and self-esteem of
such persons;
* provide bursaries, scholarships, awards or other grants of financial assistance as may be necessary or desirable to promote and / or support
the social and / or educational development of underprivileged persons;
including underprivileged persons who are or whose family members are current or
past employees of the group.The Foundation will have assets to the value of approximately R250 million and
will accordingly be in a sound financial position to pursue its objectives. The
group has not itself made any financial contribution to the Foundation but HCI`s
management team provides its management resources to the Foundation.The establishment of the Foundation represents a continuation of HCI`s social
responsibility initiative and is separate and distinct from its majority
shareholder, Southern African Clothing and Textile Workers Union`s own social
responsibility initiatives.For and on behalf of the board of directors.
MJA Golding Chairman
JA Copelyn Chief Executive Officer
Durban 27 June 2005Registered office
Suite 624, Office Tower, Overport City, 430 Ridge Road, Durban, 4001
PO Box 70874, Overport City, 4067
Transfer secretariesComputershare Investor Services 2004 (Pty) Limited, 70 Marshall Street,
Johannesburg, 2001
PO Box 61051, Marshalltown, Johannesburg, 2107
DirectorsMA Golding(Chairman), JA Copelyn(Chief Executive Officer)
V E Mphande, VM Engel*, MF Magugu*, JG Ngcobo, AM Ntuli* *(non-executive)
Company Secretary
TG GovenderDate: 27/06/2005 03:34:17 PM Produced by the JSE SENS Department
