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HCI - Hosken Consolidated Investments Limited - Unaudited group interim results

Release Date: 17/11/2011 17:19
Code(s): HCI
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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 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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