| Wed 22 Nov 2006, 17:17 | | HCI - Unaudited group interim results for the six |
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HCI
HCI
HCI - Unaudited group interim results for the six months ended 30 September 2006
Hosken Consolidated Investments Limited
(Incorporated in the Republic of South Africa)
(Registration number 1973/007111/06)
Share code: HCI ISIN: ZAE000003257
("HCI" or "the company") or "the group"
Unaudited group interim results for the six months ended 30 September 2006
* 44% increase in revenue
* 196% increase in trading profit
* 49% increase in headline earnings per share
* 117% increase in adjusted headline earnings per share
ABRIDGED CONSOLIDATED INCOME STATEMENT
30 September 30 September 31 March
2006 2005 2006
R"000 R"000 % R"000
(Unaudited) (Unaudited) Change (Audited)
Revenue 1 227 071 850 944 44 2 111 982
Trading expenses (969 121) (763 733) 27 (1 732 237)
Trading profit 257 950 87 211 196 379 745
Transaction costs
and raising fees - (44 362) (72 479)
Net funding income 35 196 43 510 14 243
Investment income 71 727 30 807 133 106 954
Finance costs (69 360) (38 165) 82 (118 210)
Share of associated
companies" profits 118 537 52 060 128 152 099
Negative goodwill
released - - 8 968
Investment surplus 51 334 3 408 3 177
Fair value
adjustments of
investment properties - - 1 593
Fair value
adjustments of
investments 354 127 389 11 506
Impairment of
investments (2 021) - (225)
Profit before
taxation 463 717 261 858 77 487 371
Taxation (100 934) (82 009) (200 889)
Group profit 362 783 179 849 102 286 482
Attributable to:
Equity holders of
the parent 276 998 155 667 231 195
Minority interest 85 785 24 182 55 287
362 783 179 849 286 482
Reconciliation of
headline profit
Profit
attributable to
equity holders
of the parent 276 998 155 667 78 231 195
Adjusted for:
Investment surplus (40 587) (3 408) (3 151)
Impairment of
investments 2 021 - -
Revaluation of
investment
properties - - (9 837)
Negative goodwill
on acquisition of
subsidiary - - (8 476)
Impairment of
assets - - 1 673
Profit on sale of
assets (1 358) (360) (1 079)
Headline profit 237 074 151 899 56 210 325
Deferred tax in
respect
of losses - - (23 891)
Deferred tax in
respect of
STC credits 11 355 21 863 67 163
Fair value
adjustment in
respect of Johnnic
Holdings - (108 918) -
Non-recurring
transaction
costs and raising
fees - 44 362 72 479
Adjusted headline
profit 248 429 109 206 127 326 076
Earnings per share
(cents)
- Basic 223,74 131,88 70 192,90
- Headline 191,49 128,69 49 175,49
- Adjusted headline 200,66 92,52 117 272,06
Weighted average
number of
shares in issue
("000) 123 806 118 037 119 853
Actual number of
share in
issue at end of
period
(net of treasury
shares) ("000) 123 211 118 197 122 882
Diluted earnings
per share
(cents)
- Basic 220,80 128,16 72 188,39
- Headline 188,98 125,06 51 171,38
- Adjusted headline 198,03 89,91 120 265,70
Weighted average
number of
shares in issue
("000) 125 450 121 462 122 722
ABRIDGED CONSOLIDATED BALANCE SHEET
30 September 30 September 31 March
2006 2005 2006
R"000 R"000 R"000
(unaudited) (unaudited) (audited)
ASSETS
Non-current assets 7 712 093 6 116 481 7 099 468
Property, plant and equipment 838 113 521 217 795 130
Investment properties 153 955 13 729 154 235
Goodwill 91 712 14 887 82 683
Interest in associated
companies 1 273 129 343 668 904 769
Investments 120 320 878 203 120 270
Intangibles 3 941 5 017 1 876
Deferred taxation 295 213 373 001 357 664
Financial assets 4 636 740 3 951 221 4 622 921
Operating lease equalisation
asset 4 300 - 3 400
Long-term receivables 294 670 15 538 56 520
Current assets 3 602 041 5 696 846 3 441 241
Other 1 265 163 1 132 007 1 090 590
Financial assets 1 711 495 4 367 829 1 568 572
Bank balances and deposits 625 383 197 010 782 079
Total assets 11 314 134 11 813 327 10 540 709
EQUITY AND LIABILITIES
Equity 2 993 833 1 786 789 2 586 291
Equity attributable to equity
holders
of the parent 2 029 790 1 567 256 1 751 429
Minority interest 964 043 219 533 834 862
Non-current liabilities 5 649 386 4 876 998 5 431 328
Financial liabilities 4 674 666 4 005 907 4 666 651
Deferred taxation 51 131 52 435 53 737
Long-term borrowings 900 989 818 656 688 640
Operating lease equalisation
liability 22 600 - 22 300
Current liabilities 2 670 915 5 149 540 2 523 090
Other 958 838 777 758 951 765
Financial liabilities 1 712 077 4 371 782 1 571 325
Total equity and liabilities 11 314 134 11 813 327 10 540 709
Net asset value carrying
per share (cents) 1 647 1 326 1 425
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
30 September 30 September 31 March
2006 2005 2006
R"000 R"000 R"000
(unaudited) (unaudited) (audited)
Cashflows from operating
activities 214 595 (82 581) 294 575
Cashflows from investing
activities (592 848) (818 051 (1 441 057)
Cashflows from financing
activities 227 707 529 410 594 572
(Decrease)/increase in cash
and cash equivalents (150 546) (371 222) (551 910)
Cash and cash equivalents
At beginning of period 768 755 544 404 544 404
On acquisition/disposal of
subsidiaries 1 242 17 867 776 261
At end of period 619 451 191 049 768 755
Bank balances and deposits 625 383 197 010 782 079
Bank overdrafts (5 932) (5 961) (13 324)
Cash and cash equivalents 619 451 191 049 768 755
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Non- Share-based
Share Share distributable payment
capital premium reserves reserve
R"000 R"000 R"000
R"000
Balances at
31 March 2005 29 499 534 685 - 1 476
Share capital
and premium
Shares issued 1 813 149 894 - -
Shares repurchased (500) (53 500) - -
Treasury shares
acquired by
subsidiary (91) (1 749) - -
Share issue costs - (379) - -
Current operations
Profit for the year - - - -
Share of
pre-acquisition
profit of subsidiary - - - -
Equity settled
share-based payments - - - 2 531
Foreign currency
translation
differences - - (2 202) -
Minority interest on
acquisition of
subsidiaries - - - -
Capital reductions
and dividends - - - -
Balances at 31 March
2006 30 721 628 951 (2 202) 4 007
Share capital and
Premium
Shares issued 275 34 225 - -
Shares repurchased (75) (11 625) - -
Treasury shares
acquired by
subsidiary (119) (21 187) - -
Current operations
Profit for the year - - - -
Foreign currency
translation
differences - - (131) -
Effects of changes
in holding - - - -
Capital reductions
and dividends - - - -
30 802 630 364 (2 333) 4 007
Accumulated Minority
profits interest Total
R"000 R"000 R"000
Balances at
31 March 2005 823 853 126 801 1 516 314
Share capital
and premium
Shares issued - - 151 707
Shares repurchased - - (54 000)
Treasury shares
acquired by
subsidiary - - (1 840)
Share issue costs - - (379)
Current operations
Profit for the year 231 195 55 287 286 482
Share of
pre-acquisition
profit of subsidiary 34 904 - 34 904
Equity settled
share-based payments - - 2 531
Foreign currency
translation differences - - (2 202)
Minority interest on
acquisition of
subsidiaries - 660 473 660 473
Capital reductions and
dividends - (7 699) (7 699)
Balances at 31 March
2006 1 089 952 834 862 2 586 291
Share capital and
Premium
Shares issued - - 34 500
Shares repurchased - - (11 700)
Treasury shares
acquired by subsidiary - - (21 306)
Current operations
Profit for the year 276 998 85 785 362 783
Foreign currency
translation differences - - (131)
Effects of changes
in holding - 49 896 49 896
Capital reductions
and dividends - (6 500) (6 500)
1 366 950 964 043 2 993 833
SEGMENT ANALYSIS
Revenue
Six months ended Six months ended Year ended
30 September 30 September 31 March
2006 2005 2006
R"000 R"000 R"000
Media and broadcasting 401 503 279 194 669 786
Financial services 26 001 10 779 129 498
Gaming, hotels and
leisure 41 757 30 588 90 016
Information technology 58 340 7 929 56 842
Transport 372 198 319 731 664 238
Industrial 261 450 196 051 431 592
Food and beverage - - -
Exhibition and
properties 63 000 - 67 000
Other 2 822 6 672 3 010
Total 1 227 071 850 944 2 111 982
Group profit before tax
Six months ended Six months ended Year ended
30 September 30 September 31 March
2006 2005 2006
R"000 R"000 R"000
Media and broadcasting 155 124 69 948 178 245
Financial services 21 939 20 613 69 368
Gaming, hotels and
leisure 93 620 24 479 103 763
Information technology 16 471 7 613 13 444
Transport 56 747 50 139 107 018
Industrial 29 748 22 240 36 781
Food and beverage 14 433 - 15 525
Exhibition and
properties 18 000 - 22 000
Other 57 635* 66 826* (58 773)*
Total 463 717 261 858 487 371
includes investment surplus
COMMENTARY
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The results for the six months ended 30 September 2006 have been prepared in
accordance with International Financial Reporting Standards (IFRS),
specifically IAS 34 on interim financial reporting and comply with 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 2006 and the six
months ended 30 September 2005.
OVERVIEW OF RESULTS
Improved performance by the group"s subsidiaries has resulted in revenue and
trading profit increasing by 44% and 196% respectively when compared to the
prior comparative period. The group"s share of the profit of associated
companies increased to R118 million for the period under review as compared to
the R52 million reported in the prior comparative period. This increase is as a
result of the inclusion of Johnnic"s share of its associate"s profits (Tsogo
Sun and Suncoast Casino) and Clover now being classified as an associate.
Investment income which increased by R40,9 million compared to the previous
period, includes interest of R29 million on the loans provided to the Fabcos
Trust and interest on the cash balances in Johnnic which were not consolidated
in the previous period. Finance costs have risen as a result of the increased
levels of debts associated with the acquisition of Johnnic.
Basic earnings per share amounted to 223,7 cents for the period. This
represents a 70% increase when compared to the prior comparative period and is
due to the continued improved performance of the group"s major investments and
the profit on the disposal of the group"s interest in Tylon included in
investment surpluses for the period under review.
Headline earnings increased during the year from R151,8 million to R237 million
which represents an increase of 56%. Headline earnings for the prior
comparative period includes non recurring transaction costs and raising fees
amounting to R44,3 million in respect of the Johnnic offer and Fabvest
acquisition and also fair value gains amounting to R108,9 million (net of tax)
in respect of the mark to market of the investment in Johnnic.
Adjusted headline earnings has once again been disclosed so as to more
accurately reflect the economic reality of the group"s results. Adjusted
headline earnings exclude all abnormal profits and losses including non
recurring transaction costs and raising fees and the effects of net deferred
tax assets raised or expensed in respect of unused tax losses and available STC
credits. To aid comparability adjusted headline earnings for the prior
comparative period has been restated to exclude the fair value gain in respect
of the investment in Johnnic and non recurring transaction costs and raising
fees. Adjusted headline earnings increased from R109,2 million to R248,4
million. Adjusted headline earnings per share increased significantly by 117%
from 92,52 cents to 200,66 cents. This increase is mainly due to the continued
improved overall performance of the group"s major investments during the
period.
INVESTMENTS
Media and broadcasting
Midi TV (Pty) Limited (`e-TV") - 63% interest
Strong demand for advertising together with innovative sales strategies have
resulted in e-TV producing excellent results for the period under review. With
revenue increasing by 35% during the period and a minimal increase in operating
costs, the station has doubled its profit after tax to R101,2 million.
Audience share has been stable during the period with news and local soaps
holding their own in a very competitive environment.
As previously reported, future growth areas lie in the station"s expansion into
Africa with the station having acquired broadcasting licences in East and West
Africa. The African venture provides new markets for the sale of e-TV"s
intellectual properties and programming rights without substantial cash
resources being committed.
e-TV has also bid for a licence to participate in PAY-TV. If successful, the
investment is expected to be significant and shareholders will be advised
separately in this regard.
Yired (Pty) Limited ("YFM") - 77,5% interest
YFM is a Gauteng based radio station focusing mainly on the black urban youth
market and has a weekly audience in excess of 1,2 million listeners.
The radio station has performed satisfactorily but below management"s
expectations.
Gaming, hotels and leisure
Vukani Gaming Corporation (Pty) Limited ("Vukani") - 100% interest
Vukani has been awarded licences to operate limited payout gambling machines as
a route operator in five provinces in South Africa. The company is presently
operational in Mpumalanga, Western Cape and Eastern Cape and more recently in
Limpopo. Operations are expected to commence in KwaZulu-Natal during the second
half of the current financial year.
The roll out of machines continues to be slow with approximately 40 machines
being rolled out per month during the period under review. Gross gaming revenue
per machine continues to grow steadily on a month on month basis as more sites
are rolled out.
The business is profitable with cash injections required only for initial
capital expansion as machines are rolled out in new sites. As more sites are
rolled out, profits are expected to increase significantly.
It is expected that as this investment matures over the next two years it will
add significant value to the group.
Tsogo Investment Holding Company (Pty) Limited ("TIH") - 51% interest
(including Johnnic"s 19%)
Currently HCI directly owns 32,07% of TIH. Johnnic owns an additional 19,0%.
The group entered into an agreement with the Fabcos Group to acquire a further
19% effective interest in TIH ("the Fabcos acquisition"). The Fabcos
acquisition remains subject to approvals from certain Provincial Gaming
Regulators. Approval has been obtained from the KwaZulu-Natal and Eastern Cape
Gaming Boards. Approvals from the other Gaming Boards are expected during the
current financial year.
The group has also entered into an agreement for the acquisition of a further
4,6% interest in TIH which remains subject to certain regulatory approvals.
The total interests of the group in TIH after all the above mentioned
transactions are approved and implemented will therefore amount to 74,6%,
resulting in an effective economic interest, after taking the Johnnic
minorities into consideration, of 65%.
During the period under review the group equity accounted its share of the
earnings of TIH. This amounted to R54,5 million before accounting for the
Johnnic minorities earnings. Once the Fabcos transaction becomes unconditional,
the group will have effective control of the entire Tsogo Sun Group, whose
results will in future be fully consolidated into the group"s results.
The group has made an offer of R750 million to the shareholders of Nafcoc
Investment Holding Company (Pty) Limited ("Nafhold") for the entire issued
share capital of Nafhold, subject to certain terms and conditions. Nafhold"s
primary asset is a 25% interest in TIH. Shareholders are referred to
announcements made in this regard.
Johnnic Holdings Limited ("Johnnic") - 51% interest
Johnnic has increased its effective interest in Durban Add-Ventures Limited
("DAV") to 75% via a capitalisation and rights offer resulting in the injection
of R191,7 million into DAV to fund DAV"s commitments in respect of its 40%
interest in the Suncoast Casino and Entertainment World ("Suncoast").
This has resulted in Johnnic now owning an effective interest of 30% interest
in Suncoast, after accounting for minorities in DAV.
The process of the disposal of the group"s interest in the exhibition business
of Gallagher Estate Holdings Limited ("Gallagher Estates"), in accordance with
the ruling of the Competition Tribunal when HCI acquired control of Johnnic, is
continuing. Various bids have been received from interested parties and the
group is presently evaluating these.
As stated in the group interim results for the six months ended 30 September
2005, the investment in Johnnic at that date was accounted for as an available
for sale asset as the group did not have control of Johnnic or representation
on the Johnnic board. The group had accordingly fair valued the investment at
that date resulting in a fair value gain of R108,9 million, net of tax, being
included in the group"s interim headline earnings for the comparative period.
On the group acquiring control of Johnnic in December 2005, this fair value
gain was reversed and the group"s share of Johnnic"s profit after tax were
fully consolidated, from that date, in the results for the year ended 31 March
2006 in accordance with IFRS 3: Business Combinations. Accordingly, adjusted
headline earnings per share for the prior comparative period has been restated
to exclude this fair value gain.
Johnnic"s reported profit after tax for the period under review amounted to R59
million of which the majority relates to Johnnic"s gaming interests which
income is included in the group"s share of associated companies" profit.
Shareholders are referred to Johnnic"s results for its performance and
activities.
Financial services
Mettle Limited ("Mettle") - 100% interest
Mettle"s start up businesses, namely Mettle Motor Loans, which provides loan
finance to purchasers of motor vehicles, and Mettle Factors, which provides
bridging loans to facilitate inter alia fixed property transactions, have
performed in line with expectation. The debtors" books in these businesses are
geared and have grown rapidly during the period under review. Mettle Factors
is presently profitable whilst Mettle Motor Loans is expected to become
profitable within the next two years. It is expected that these businesses
will have excellent growth potential in the coming years and are expected to
become meaningful contributors to group profits in future years.
During the period under review, Mettle"s traditional business contributed
R20,7 million to group headline earnings.
Transport
Golden Arrow Bus Services (Pty) Limited ("GABS") - 100% interest GABS continues
to perform well reporting profits after tax of R45 million for the period under
review, which represents an increase of 34% when compared to the prior year.
Passenger numbers have increased steadily. There has been an increase in fares
of 4,5% to combat the rising fuel costs during the period.
As part of its commitment to providing a modernised fleet, the company has
continued to invest in new buses during the period under review.
Food and beverages
Clover Industries Limited ("Clover") - 46,3% economic interest
The group continued to hold its 25,1% interest in the ordinary share capital of
Clover but had increased its investment in Clover preference shares to 38,5
million shares by acquiring a further 2,45 million preference shares on the
open market. This results in the group presently holding an effective 46,3%
economic interest in Clover.
Clover"s results for the year ending 30 June 2006 reflect some improvement in
profitability in relation to the prior year but it is not performing to HCI
management"s expectations. It is hoped plans of the board, in relation to the
ongoing commercialisation of the company"s operations will result in further
improvements in profitability in future periods.
Clover has been classified as an associate company of the group. The group has
equity accounted its share of the profits of Clover amounting to R14,4 million
for the period under review.
Information technology
Syntell (Pty) Limited ("Syntell") - 50,01% interest
Syntell provides electronic monitoring of traffic and traffic violations to
municipalities throughout South Africa.
Subsequent to the period under review Syntell was awarded a significant
contract to provide monitoring services to the Johannesburg Municipality. It is
anticipated that the awarding of this contract will significantly enhance its
profitability.
Syntell reported profits after tax of R9,8 million for the period under review.
The group has fully consolidated the profits of this company in these results.
Industrial
The group previously acquired a number of companies in leveraged buyouts
primarily financed by ring fenced debt in each company. These companies include
Johnson Crane Hire, Tylon, Johnson Access and Formex Industries. The growth in
the construction and automotive components industries has enabled these
businesses to perform above expectation.
During the period under review, the group disposed of its interest in Tylon,
realising a net surplus of R40,5 million after tax.
Subsequent to the period under review, the group has concluded an agreement for
the disposal of its interest in Johnson Crane Hire for an after tax
consideration of R105 million.
HCI sees potential to expand the operations of Formex both organically and by
acquisition in the future and has also increased its stake in Formex from 80%
to 90% during the period under review.
HCI Khusela Coal
HCI acquired 80% of HCI Khusela Coal ("HKC") effective 3 August 2006. HCI
Khusela Coal is focused on the acquisition, exploration and mining of
bituminous and metallurgical coal resources in Southern Africa. Two properties
were acquired by HKC prior to 30 September, with a third property acquired
thereafter. Perfection of these transactions requires the approval of the DME
of the cessions of the applicable prospecting rights to HKC, which approvals
are still pending, but are expected in the current financial year. The first
reserve, located in Bronkhorstspruit can be classified in terms of the SAMREC
as a measured resource. The total tons in-situ resource is 22 million tons of
coal with a beneficiated heat value of 21 MJ/kg.
The second, located in Ogies, cannot be yet be classified in terms of SAMREC
code and is termed a reconnaissance resource. The gross tons in-situ of this
resource has been calculated using only the No. 4 seam and is estimated to be 8
million tons over a total area of 129 ha. The third resource, also located in
Ogies, is a reconnaissance resource. The gross tons in-situ estimated to be 8,3
million tons.
DISTRIBUTION TO SHAREHOLDERS
The directors have decided not to declare or pay any dividends for the period
under review. A distribution to shareholders will be considered once the board
has more clarity on the Nafhold offer.
MJA Golding JA Copelyn
Chairman Chief Executive Officer
Durban 22 November 2006
Registered office
Suite 624, Office Tower, Overport City, 430 Ridge Road, Durban, 4001 PO Box
70874, Overport City, 4067
Transfer secretaries
Computershare Investor Services 2004 (Pty) Limited, 70 Marshall Street,
Johannesburg, 2001
PO Box 61051, Marshalltown, Johannesburg, 2107
Directors
MA Golding (Chairman), JA Copelyn (Chief Executive Officer), VE Mphande, A van
der Veen, JG Ngcobo*, VM Engel*, MF Magugu*, AM Ntuli*, Y Shaik*, JA Mabuza*
*(non-executive)
Company secretary
TG Govender
Mettle
GA
Clover
Noah
Hjs
Yfm
JA
Etv
Syntell
Tsogo Sun Group
Vukani
Gaming Corporation
Formex
Engineering: delivered right
Bsg
Business Systems Group (Africa)
Make your technology go to work
Johnson
Cranehire
Isilumko
Staffing
Studentwise.Outsoucing.Graduate & Permanent
Tbm
www.hci.co.za
Date: 22/11/2006 05:17:40 PM Produced by the JSE SENS Department
