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HUG - Huge Group Limited - Unaudited interim results of huge for the six months

Release Date: 25/11/2010 17:42
Code(s): HUG
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HUG - Huge Group Limited - Unaudited interim results of huge for the six months ended 31 August 2010 and update on the previously announced SSF transactions HUGE GROUP LIMITED (Registration number 2006/023587/06) Share code: HUG ISIN: ZAE000102042 ("Huge" or "the Group" or "the Company") UNAUDITED INTERIM RESULTS OF HUGE FOR THE SIX MONTHS ENDED 31 AUGUST 2010 AND UPDATE ON THE PREVIOUSLY ANNOUNCED SSF TRANSACTIONS HIGHLIGHTS FOR 31 AUGUST 2010 * Financial turnaround continues to improve profitability * Basic earnings per share up 274.8% * Headline earnings per share up 272.5% * Long term debt of only R1.3 million * Net asset value per share up 19.1% to 272.3c per share The board of directors of Huge is pleased to present the unaudited interim results for the six months ended 31 August 2010. UNAUDITED INTERIM RESULTS FOR SIX MONTHS ENDED 31 AUGUST 2010 Condensed Consolidated Statements of Financial Performance Unaudited Unaudited Audited 31 August 31 August 28 February
2010 2009 2010 (6 months) (6 months) (12 months) R R R Revenue 275 371 023 282 009 503 573 516 182 Gross profit 52 590 049 51 076 777 119 495 995 Other income 614 916 2 038 892 830 975 Operating expenses (57 440 528) (49 986 018) (117 045 158) Operating (loss)/profit from operations (4 235 563) 3 129 651 3 281 812 Investment income 3 202 968 - 4 485 384 Net change in fair value of financial instruments 13 705 772 (9 434 325) 8 360 236 (Loss)/Income from equity accounted investments (483 934) 329 780 166 284 Finance costs (1 419 221) (4 977 125) (8 038 923) Profit / (loss) before taxation 10 770 022 (10 952 019) 8 254 793 Income tax expense (1 676 910) 5 198 665 (187 087) Net profit / (loss) for the period 9 093 112 (5 753 354) 8 067 706 Non controlling interest 464 005 (101 263) 961 153 Net profit / (loss) 9 557 117 (5 854 617) 9 028 859 attributable to owners of the Company Earnings before interest, taxation, depreciation and amortisation 21 388 735 27 297 667 36 865 712 Basic earnings per share (cents) 9.49 (5.43) 8.58 Headline earnings per share (cents) 9.42 (5.46) 8.79 Diluted earnings per share (cents) 9.49 (5.43) 8.58 Diluted headline 9.42 (5.46) 8.79 earnings per share(cents) Dividends - - - Total number of shares in issue (`000) 95 901 106 167 102 113 Weighted number of shares in issue (`000) 100 752 107 858 105 199 Earnings/(loss) 9 557 117 (5 854 617) 9 028 859 attributable to ordinary shareholders Adjusted for: Profit on disposal of property, plant and equipment (66 600) (37 168) (59 957) Net loss on further - - 366 773 acquisition of Eyeballs Mobile Advertising Tax effect - - (86 346) Headline earnings/(loss) 9 490 517 (5 891 785) 9 250 892 Condensed Consolidated Statement of Financial Position Unaudited Unaudited Audited 31 August 31 August 28 February 2010 2009 2010
R R R Assets Property, plant and equipment 36 856 468 50 143 113 43 573 867 Goodwill 215 153 482 223 475 925 215 153 482 Intangible assets 22 196 773 6 612 873 22 106 583 Investments in joint venture 383 042 563 885 540 291 Investment in associates 2 063 986 2 062 025 2 390 672 Investments 389 409 336 840 389 409 Loans to associate companies 234 972 - - Deferred tax 3 996 975 14 955 720 9 497 797 Current assets Inventories 28 200 363 23 648 593 14 825 421 Trade and other receivables 135 770 718 101 409 112 108 069 904 Loans to associate companies 1 710 925 1 096 064 1 637 478 Current tax receivable 1 797 816 1 797 816 2 488 386 Cash and cash equivalents 13 540 511 - 11 430 271 Total assets 462 295 440 426 101 966 432 103 561 Equity and liabilities Share capital 9 590 10 617 10 211 Share premium 221 073 428 228 822 360 226 429 430 Reserves 1 215 038 296 467 1 215 038 Retained earnings 38 864 016 14 423 429 29 306 900 Equity attributable to equity holders of parent 261 162 072 - 256 961 579 Non controlling interest 257 492 888 476) 721 499 Non current liabilities Loans from shareholders - 18 416 104 - Finance lease obligations 1 293 153 7 025 385 4 171 704 Other financial liabilities - - - Deferred tax - - 3 885 162 Current liabilities Loans from associate companies 809 006 - 2 208 308 Loans from shareholders 4 425 603 - 8 973 884 Other financial liabilities 850 649 24 659 930 2 606 254 Finance lease obligations 5 547 100 4 833 657 5 199 529 Trade and other payables 187 229 291 107 820 791 147 046 550 Shareholders for dividends 14 952 14 952 14 952 Bank overdraft - 20 666 750 - Current tax payable 706 122 - 314 140 Total equity and liabilities 462 295 440 426 101 966 432 103 561 Number of shares in issue (`000) 95 901 106 167 102 113 Net asset value per share (cents) 272.32 228.57 251.64 Net tangible asset value per share (cents) 24.83 11.85 19.29 Condensed Consolidated Statement of Comprehensive Income Unaudited Unaudited Audited 31 August 31 August 28 February
2010 2009 2010 R R R Net profit (loss) for the period attributable to owners of the Company 9 557 117 (5 854 617) 9 028 859 Other comprehensive income - Gains on property revaluation - - 797 044 Taxation related to components of other comprehensive income - - (537 865) Other comprehensive income for the period net of taxation - - 259 179 Total comprehensive income/(loss) for the period attributable to owners of the Company 9 557 117 (5 854 617) 9 288 038 Condensed Consolidated Statement of Changes in Equity Unaudited Unaudited Audited 31 August 31 August 28 February 2010 2009 2010 R R R
Balance at 1 March 257 683 078 249 407 489 249 407 483 Total comprehensive income/ (loss) for the period 9 557 117 (5 854 617) 8 326 885 Issue of shares - - - Purchase of own shares (5 356 623) - (2 393 334) Share option reserve - - 659 392 Non controlling interest (464 005) (888 476) 1 682 652 Balance at 28 February/ 31 August 261 419 564 242 664 397 257 683 078 Condensed Consolidated Statement of Cash Flows Unaudited Unaudited Audited 31 August 31 August 28 February
2010 2009 2010 (6 months) (6 months) (12 months) R R R Cash flows from operating activities 22 043 101 (25 393 896) 27 177 889 Cash flows from investing activities (9 698 693) (3 813 781) (6 203 956) Cash flows from financing activities (10 234 168) (5 244 217) (23 370 152) Net cash movement for the period 2 110 240 (34 451 894) (2 354 871) Cash at the beginning of the period 11 430 271 13 785 144 13 785 142 Cash and cash equivalents acquired - 41 348 Total cash at the end of the period 13 540 511 (20 666 750) 11 430 271 SEGMENTAL REPORTING The directors have considered the implications of IFRS 8: Operating Segments and are of the opinion that the current core operations of the Group are substantially similar to one another and that the risk and returns of these operations are likewise similar. Resource allocation and management of the current operations are performed on an aggregate basis and as such the business of the Group is considered to be a single aggregated business. The lines of revenue are disclosed separately to the chief operating decision maker, the Group`s CEO, and are therefore reported as such in terms of IFRS 8. Eyeballs Mobile Advertising (Proprietary) Limited ("Eyeballs") and Huge Media (Proprietary) Limited ("Huge Media") represent separate operating segments but are still in the start up phases of their respective businesses and revenues are immaterial relative to the quantitative thresholds set out in IFRS 8. The revenue lines are indicative of the products and services the Group provides. These products and services are distributed countrywide to all clients with no geographical differentiation. Revenue by operating segment Unaudited Unaudited Unaudited 31 August 31 August 28 February
2010 2009 2010 (6 months) (6 months) (12 months) R R R Airtime 249 871 646 243 307 822 496 657 976 Connection incentive bonus 13 676 680 29 110 100 57 555 950 Marketing incentive 3 610 740 3 605 730 7 216 320 Telephone managed services 2 254 914 1 844 998 3 469 679 SMS services 2 878 607 2 453 606 5 082 880 International airtime 1 475 913 1 179 062 2 492 624 Hardware rental and sales 690 524 508 186 1 040 753 Advertising income 40 375 - - Distributer income 871 624 - - Total revenue 275 371 023 282 009 503 573 516 182 All inter-segment revenues have been excluded. COMMENTARY COMPANY PROFILE Huge is an investment holding company listed on the Alternative Exchange (AltX) of the Johannesburg Stock Exchange Limited ("JSE"). The Group is focused on building shareholder value. Its treasury operations are mandated to maximise the financial position of the Company in the debt and equity markets using cash and derivative based instruments. Huge Telecom (Proprietary) Limited ("Huge Telecom"), a wholly owned subsidiary of Huge and the principal trading operation of the Group, is South Africa`s leading "Communication Expense Management" and "Managed Telecommunications" company. Eyeballs (77% owned by Huge) is a technology provider whose "Eyeballs" technology consists of a software application that recipient users download and install on their mobile phones. It displays advertising and content images on the phone screen when calls are made or messages are received. Huge Media`s (100% owned by Huge) strategy is to be a media owner focused on the advertising industry. It commenced commercial operation on 20 January 2010. Further investor and shareholder information is available at www.hugegroup.com. ACCOUNTING POLICIES The condensed consolidated financial statements for the period ended 31 August 2010 have been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS) and the presentation and disclosure requirements of International Accounting Standard 34, Interim Financial Reporting, as well as AC500 as issued by the Accounting Practices Board, the Listings Requirements of the JSE Limited and Schedule 4 of the Companies Act, Act 61 of 1973, as amended. The accounting policies applied to the six month period ended 31 August 2010 are consistent, in all material respects, with those used in the Annual Financial Statements of the prior periods. CHANGE IN ACCOUNTING ESTIMATES In the current period management revised the accounting estimate in providing for possible bad debts. The effect of this revision is a decrease in the provision for bad debts for the current period of R1.2 million, and an increase in the income tax expense of R0.3 million. The after tax effect of this change in estimate was approximately R0.9 million. FINANCIAL OVERVIEW GROUP`S FINANCIAL PERFORMANCE Huge continues to focus on operational efficiencies, treasury management and cost containment in an effort to further increase operating profitability and shareholder value. The Group has achieved considerable success in each of these areas in the last six months and continues to strive for further improvement. INVESTMENT HOLDING ACTIVITIES The Company has been acquiring its own shares under the general authority granted to the directors at the last four annual general meetings. The most recent of these AGM`s was held on Friday, 1 October 2010. The dates of the acquisitions of the shares are set out below: Transaction Purchaser Number of Price Total Date ordinary per value shares share of acquired transaction 01 Jun 2010 Huge 3 200 000 75.00 2 416 924.78 10 Jun 2010 Huge 74 500 75.00 56 275.37 11 Jun 2010 Huge 320 330 80.00 257 271.17 15 Jun 2010 Huge 836 910 80.00 668 058.89 18 Jun 2010 Huge 8 015 81.00 6 519.44 20 Jun 2010 Huge 12 000 86.00 10 329.87 21 Jun 2010 Huge 106 000 84.00 89 415.47 28 Jun 2010 Huge 244 600 89.00 219 945.11 29 Jun 2010 Huge 72 000 98.00 71 047.34 30 Jun 2010 Huge 1 337 750 116.00 1 560 836.09 Total 6 212 105 5 356 623.53 On a net basis the Group has repurchased exposure over 15 859 031 ordinary shares giving the Company the future prospect of reducing the number of ordinary shares in issue to 95 900 969. TELECOMMUNICATIONS ACTIVITIES Huge Telecom is the Group`s principal revenue generator. Total turnover generated in the six months ended 31 August 2010, showed a decrease of 2.3% to R275.3 million, from the R282.0 million generated during the six months to the end of August 2009. The decline in total turnover is a direct result of the decisions of the major mobile network operators (MNOs) to cease paying connection incentive bonuses (CIB). CIB revenues earned by Huge Telecom in the current period were R13.7 million compared to R29.1 million in the prior period. Although the loss of CIB revenue will affect Huge Telecom`s revenue line, the Group has identified cost containment measures in respect of this revenue item, which will largely eliminate the impact on operating profit margins over the medium to longer term. Excluding the effects of lost CIB revenue, overall Group revenue reflects an improvement in the current period. Cellular airtime sales increased 2.7% from R243.3 million to R249.9 million. Sales of other products and services increased 23.4% from R9.6 million to R11.8 million. The directors of Huge Telecom believe that the significant investment which it made in new executive and senior management skills will support a continuation of this positive trend. Gross profit for the first six months of the year amounted to R52.6 million, an increase of 3.0% from the R51.0 million recorded in the first half of the 2009 financial year. The increase in gross profit margins was primarily due to further improvements in the management of Huge Telecom`s directly controllable input costs. The revenue assurance department that was established in the prior reporting period to enhance the management of airtime available for sale was instrumental in continuing to reduce the airtime lost through expiry. MEDIA ACTIVITIES Eyeballs continued to develop its proprietary in-application mobile phone advertising technology, in support of its technology provider strategy. The Eyeballs technology is available for all Symbian Smartphones (which includes most Nokia phones and several LG, Samsung and Sony Ericsson models). The BlackBerry version was successfully released, as planned, in June 2010. Other operating systems will continually be considered based on the size of the addressable market. Currently, Blackberry installations account for four out of five successful downloads. The technology was independently valued at R16 million on the acquisition of a controlling interest in Eyeballs by the Group and is recognized as a technology- related intangible asset of the Group in terms of IAS38: Intangible Assets and IFRS 3: Business Combinations. Huge Media, a wholly owned subsidiary of Huge, which was established with the objective of taking the Eyeballs` technology to market under the consumer brand name "Goodyz" has acquired more than 65 000 installed users since its commercial launch in late January 2010. To date Goodyz has served 43 million user impressions, of which 28.7 million were available to be sold for advertising. At an expected retail rate, based on similar retail rates of other types of media, of 15 cents per advertising impression the revenue generating capability of Huge Media is substantial. GROUP OPERATING EXPENSES Group operating expenses incurred during the period increased by R7.5 million from R49.9 million to R57.4 million. This increase is predominantly attributed to employment costs, which increased from R30.4 million to R38.0 million. Because Huge Telecom`s fixed overhead platform has the capacity to support a twofold increase in volumes, the Group can leverage the existing overhead platform to increase operating profit margins. These investments in skills to support significant growth in throughput, which were initiated in the previous financial year, resulted in increased employment costs. The Huge directors continue to regard these investments as a catalyst for sustainable profit growth. The positive effects of the investment have already been felt. The level of bad debts in the current period continued to decline, showing a decrease of R2.3 million versus the comparative reporting period as a result of the Group`s continued focus on the management, analysis and categorisation of the debtors` book of Huge Telecom. The current provision of R10.6 million is considered to be an adequate bad debt provision. Management continues to believe that a normalised bad debt to revenue ratio of 1% represents the inherent risks in a business such as Huge Telecom. Huge Telecom`s current policy in providing for possible bad debts is as follows: a 50% of all debtors older than 180 days with an active, status; b 50% of all "disconnected" debtors; c 70% of all "handed over" debtors; d 100% of all "liquidated" debtors; e 20% of all debtors on an agreed "payment plan"; f 30% of all "suspended" debtors; GROUP NET CHANGE IN FAIR VALUE OF FINANCIAL INSTRUMENTS The gain on single stock futures (SSFs) and contracts for difference (CFDs) increased the pre-tax earnings of the Group by R13.7 million in the six month period ended 31 August 2010 - this compared to the loss of R9.4 million in the comparative prior period. GROUP PROFIT The Group reported net profit before taxation of R10.7 million for the six month period ended 31 August 2010, reflecting an increase of 198% compared to the loss of R11.0 million reported in the six months ended 31 August 2009. The Group achieved net profit after tax for the six months ended 31 August 2010 of R9.6 million, up 263% from the 31 August 2009 results. BALANCE SHEET CONSIDERATIONS The increase in inventories is a result of recent change in suppliers of airtime to Huge Telecom. Management expects significant destocking in the second half of the financial year. The increase in inventories and accounts receivable balances is supported by a similar increase in accounts payable, thereby positively impacting cash and cash equivalents. Cash generated from operating activities during the six month period ended 31 August 2010 amounted to R22.0 million, which compares favourably to earnings before interest, taxation, depreciation and amortisation (EBITDA), which amounted to R21.4 million. Long-term debt, including finance lease obligations and loans from shareholders, declined R7.5 million during the period under review. The board of directors has considered the impact of the termination of CIB revenue and is of the opinion that over the medium term cost containment measures and alternative strategies identified by the Company will largely eliminate the negative effects of the termination of CIB revenue. Accordingly, the directors are of the view that no impairment of goodwill is required in the current period. FUTURE PROSPECTS While the Group anticipates increasing returns from its investment in Huge Telecom in the medium to long term, factors outside the control of the directors, such as the termination of CIBs, negatively impacted the profitability of the Company in the current period. Accordingly, Huge Telecom is focussing on ensuring that the company has the required flexibility to navigate any short term industry changes. Investor interest in the Eyeballs technology is growing and is indicative of the underlying value of this investment. Investment Holding Activities The Group will continue to consider the purchase of shares in the Company that trade at a discount to its fair value by making use of its general authority to repurchase shares. This general authority is limited to a maximum of 20% of the issued ordinary share capital and will be used by Huge to unlock long-term value for shareholders. Telecommunication Activities Huge Telecom remains committed to its strategy of providing a complete spectrum of managed telecommunication services to South African businesses. During the period under review, it continued to improve its positioning to benefit directly from the increased demand for managed services including Communications Expense Management. Huge Telecom continues to monitor developments in the telecommunications industry to ensure that its business model is appropriate, optimal and sustainable. The recent decisions of the major MNOs to cease payment of CIBs only to those customers acquiring SIM cards for use in providing managed telecommunications or traditional LCR (least cost routing) services has been considered by the company. Although CIB is treated as turnover from an accounting perspective, it is better reflected as a reduction in the wholesale input cost of terminating minutes on the networks of the MNOs. This reduction in cost can be aggregated with the retail discounts currently enjoyed by the company. Accordingly, the termination of CIB by the major MNOs has had the effect of raising the input price of wholesale suppliers in the industry by approximately 30%, which effect is totally opposite to the stated objectives of the Department of Communications (DOC) and ICASA (the Independent Communications Authority of South Africa) of lowering call termination charges in South Africa. Huge welcomes the announcement made by ICASA on 29 October 2010 of an impending drop in interconnect rates between telecommunications providers in South Africa on the basis that the reductions in interconnect rates should reverse the effects of the termination of CIBs referred to above. Huge Telecom, a significant wholesale client of the MNOs, supplies mobile voice services to 6,000 clients across South Africa, totalling some 500 million outbound mobile airtime minutes per annum. Because of this significant client base Huge Telecom has the bargaining power to negotiate favourable terms of trade. The industry regulator, ICASA, announced that from 1 March 2011, peak mobile termination rates will drop to 73 cents per minute, from the current level of 89 cents per minute, the peak national fixed line termination rate will decline to 28 cents per minute, and the peak local fixed line termination rate will drop to 20 cents per minute. Further reductions are to be enforced in 2012 and 2013. Huge expects that the Least Cost Routing industry will be an immediate beneficiary of the regulated price reductions. Huge expects market forces to drive price point parity in wholesale termination rates, with a positive impact on revenues and profits. A reduction in input costs could translate into additional profit for Huge Telecom as well as downstream benefits for Huge Telecom`s clients. Huge Telecom`s business model has deliberately avoided the large capital investments in infrastructure required by a VoIP (voice over Internet protocol) over legacy Diginet operation, whilst delivering a competitive offering as a leading player in its target market. Huge Telecom welcomes lower termination rates on the basis that lower termination costs will drive down input costs, increase demand, and deliver growth in the voice traffic generated by Huge Telecom`s 6,000 clients. The current business models involving the provision of VoIP generally require the commissioning of Diginet leased lines, copper cables supplied by Telkom that serve the purpose of mimicking the copper last mile. New technologies are reducing the reliance on the copper last mile to homes and businesses, with an emphasis on a wireless last mile. Huge Telecom, with its 32,000 network and customer premises equipment components, is a current provider of the equivalent of a wireless last mile. Huge Telecom believes that VOIP over a wireless environment will replace VOIP over a fixed line Diginet environment. Huge Telecom will continue focusing on introducing alternative revenue streams that complement its business. It will also pursue opportunities to increase its client base to enhance capacity utilisation and further improve gross and operating profit margins. Media Activities Having established the commercial viability of its product set in South Africa, Eyeballs is exploring partnerships to deploy its offering in the international market. To this end, a number of international distribution agreements have already been signed. It is the view of the board of directors of Eyeballs that the technology represents an international rather than local opportunity - notwithstanding its success to date in the South African market. Huge Media continues to expand its base of installed users in the South African mobile advertising market. Vodacom, South Africa`s largest mobile phone operator, currently has more than 2.5 million Smartphones on its network, up 65% over the prior year. On the basis that Vodacom estimated its share of the mobile market at 53% at the end of March 2010, Huge Media estimates that the market for mobile Smartphones in South Africa is approximately 4.7 million devices. As at the date of this report, and since its commercial launch in South Africa in January 2010, the Eyeballs technology has been installed successfully on approximately 64 000 compatible devices. Further South African growth in users is expected to be substantial. GENERAL REPURCHASE OF SHARES FOR CASH From 1 March 2010 to 31 August 2010 financial year Huge repurchased 6 212 105 shares. The Company has been unable to cancel these shares in accordance with Section 85 of the Companies Act (Act 61 of 1973), as amended, as errors have been identified on the CM15 forms previously submitted by the Company to CIPRO. The Company is in the process of submitting CM16 and CM14A forms to CIPRO with a view to correcting these errors. On confirmation from CIPRO that the updated CM16 and CM14A forms have been registered the Company will take the necessary steps to cancel the shares and terminate them from listing on the JSE. The cost of the shares acquired was R5 356 624 and the average price was 86.2 cents per share. LEGAL AND REGULATORY REQUIREMENTS Shareholders are referred to the condensed audited results of Huge for the year ended 28 February 2010, which results were released on SENS on 31 May 2010. The condensed audited results included a modified audit opinion as a result of the auditors identifying what they believed to be a reportable irregularity. The Company`s directors continue to believe that, having regard to the information currently available, no reportable irregularity has taken, or is taking, place for the reasons set out in the SENS announcement. CIRCULAR Shareholders are referred to the previous announcements dated 27 November 2009, 29 March 2010, and 3 May 2010 updating shareholders on the progress made by the Company in producing the circular required by the JSE Limited ("the JSE") in terms of certain SSF transactions undertaken by the Company on 16 October 2008. In terms of the SENS announcement dated 3 May 2010 it was anticipated by the directors that the circular would be approved by the JSE and posted by the Company to shareholders on or about 17 May 2010, with a general meeting of the Company scheduled to take place on or about 8 June 2010. The Company was given permission, in terms of the JSE`s approved process, to submit the circular for formal approval on 7 June 2010. On the 30th September 2010 the JSE Limited wrote to the Designated Advisor to the Company, expressing its concern about the content of the circular in question and declining the approval thereof. The 30 September 2010 Letter was extensive, incorporating 99 paragraphs and 23 pages of comment relating to the subject matter of the circular. The Company replied swiftly to the comments raised by the JSE by incorporating these paragraphs, where applicable, verbatim into the circular. The revised circular was emailed to the Designated Advisor on or about 7 October 2010 and forwarded to the JSE shortly thereafter. On 14 November 2010 the JSE wrote to the Designated Advisor requesting them to cross reference the circular with the 30 September 2010 Letter. The amended circular, incorporating the requested cross-referencing, was delivered to the JSE on 17 November 2010. The Company accordingly awaits the approval of the JSE of the circular. The failure to close the matter is of concern to the board of directors of the Company. However, the board of directors is committed to resolving the matter within the time frames and processes stipulated by the JSE. The Company is therefore no longer in a position to estimate the date of approval by the JSE of the circular in question. Shareholders will be advised as soon as the circular has been approved by the JSE. SUBSEQUENT EVENTS No events material to the understanding of this report have occurred in the period between the period-end date and the date of this report. CHANGES TO THE BOARD OF DIRECTORS AND COMPANY SECRETARY With effect from 4 August 2010, Mr Manogaran Pillay resigned from the board of directors. Mr Pillay remains a director of Huge Telecom. With effect from 6 October 2010 Mr Anton Daniel Potgieter resigned as Executive Chairman of the Company and from the office of Executive Chairman of the board of directors. Mr Potgieter remains an executive director of the Company and a member of the board. With effect from 6 October 2010 Mr Stephen Peter Tredoux was appointed to the office of Chairman of the Company and the board of directors. Mr Tredoux remains a non-executive director of the Company. With effect from 21 October 2010, Mrs Michelle Allison Meth resigned from the board of directors. Mr James Charles Herbst will be acting as interim financial director whilst the Company secures the services of a new financial director. DIVIDENDS No dividends will be declared. GOVERNANCE The Group recognises the need to conduct its business with integrity, transparency and equal opportunity and subscribes to the spirit of good corporate governance as set out in the King III Report on Corporate Governance. JOHANNESBURG 25 November 2010 Designated Advisor: Arcay Moela Sponsors (Proprietary) Limited Number 3, Anerley Road, Parktown, 2193 Auditors: KPMG Inc. KPMG Crescent 85 Empire Road, Parktown, 2193 Registered office: Block 2, Woodlands Drive Office Park, 5 Woodlands Drive, Woodmead, Johannesburg, 2191 (PO Box 16376, Dowerglen, 1610) Transfer secretaries: Computershare Investor Services (Proprietary) Limited, Ground Floor, 70 Marshall Street, Johannesburg Directors: SP Tredoux (Non-executive Chairman), KD Jarvis* (Lead Independent Director), BA McQueen*, D Tredoux*, MR Beamish*, JC Herbst (CEO & Acting Financial Director), AD Potgieter, VM Mokholo *Non-executive Date: 25/11/2010 17:42:20 Supplied by www.sharenet.co.za 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.

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