Wrap Text
Unaudited Group Interim Results for the six months ended 30 September 2012
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 2012
- Headline earnings per share +38,7%
- Earnings per share +33,5%
- Profit before tax +21,2%
ABRIDGED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
30 September 30 September* 31 March
2012 2011 2012
(unaudited) (unaudited) (audited)
R'000 R'000 R'000
ASSETS
Non-current assets 14 487 840 13 646 067 13 854 788
Property, plant and equipment 3 071 353 2 909 316 2 932 761
Investment properties 698 640 626 395 557 886
Goodwill 159 332 178 894 157 796
Interest in associates and joint ventures 9 493 094 8 445 206 9 235 179
Other financial assets 136 075 429 212 105 869
Intangibles 758 530 754 928 701 348
Deferred taxation 72 357 208 147 67 928
Operating lease equalisation asset 8 392 7 037 8 258
Long-term receivables 90 067 86 932 87 763
Current assets 3 523 997 2 872 945 3 285 616
Other 2 752 956 2 495 763 2 564 166
Bank balances and deposits 771 041 377 182 721 450
Non-current assets held for sale 5 280 24 629 15 288
Total assets 18 017 117 16 543 641 17 155 692
EQUITY AND LIABILITIES
Equity 13 352 531 11 823 742 12 836 030
Equity attributable to equity holders of the parent 12 037 076 10 999 404 11 777 703
Non-controlling interest 1 315 455 824 338 1 058 327
Non-current liabilities 1 512 299 2 416 003 1 592 601
Deferred taxation 106 098 115 124 97 898
Long-term borrowings 1 182 418 2 117 419 1 275 373
Operating lease equalisation liability 1 972 1 902 1 808
Other 221 811 181 558 217 522
Current liabilities 3 148 518 2 296 228 2 721 263
Non-current liabilities held for sale 3 769 7 668 5 798
Total equity and liabilities 18 017 117 16 543 641 17 155 692
Net asset carrying value per share (cents) 9 637 8 649 9 259
* Restated
ABRIDGED CONSOLIDATED INCOME STATEMENT
30 September 30 September 31 March
2012 2011 2012
% (unaudited) (unaudited) (audited)
change R'000 R'000 R'000
Revenue 3 607 936 3 510 221 7 092 277
Net gaming win 327 067 241 559 519 396
Income 5% 3 935 003 3 751 780 7 611 673
Expenses (3 199 038) (3 032 364) (6 109 766)
EBITDA 2% 735 965 719 416 1 501 907
Depreciation and amortisation (217 262) (186 660) (376 088)
Operating profit 518 703 532 756 1 125 819
Investment income 24 599 26 694 59 694
Finance costs (87 458) (102 287) (193 845)
Share of profits of associates and joint ventures 320 885 197 709 697 127
Gain on bargain purchase 107 659
Investment surplus 25 954 16 851 162 203
Fair value adjustments of investment properties (47 736)
Impairment reversals 192 20 365
Asset impairments (54 652)
Fair value adjustments of financial instruments 899 (9 629) 75 768
Impairment of goodwill and investments (757) (27 712)
Profit before taxation 21% 802 825 662 286 1 924 690
Taxation (138 821) (153 506) (466 583)
Profit for the period from continuing operations 31% 664 004 508 780 1 458 107
Discontinued operations (1 527) (8 966) (20 277)
Profit for the period 33% 662 477 499 814 1 437 830
Attributable to:
Equity holders of the parent 34% 548 676 408 503 1 217 978
Non-controlling interest 113 801 91 311 219 852
662 477 499 814 1 437 830
RECONCILIATION OF HEADLINE EARNINGS
Unaudited six months ended Audited year ended
30 September 2012 30 September 2011 31 March 2012
% Gross Net Gross Net Gross Net
change R'000 R'000 R'000 R'000 R'000 R'000
Earnings attributable to equity
holders of the parent 34% 548 676 408 503 1 217 978
IAS 16 gains on disposal of property (75 336) (53 463)
IAS 16 (gains)/losses on disposal of plant
and equipment (1 797) (1 674) (9 024) (7 937) (9 878) (8 875)
IAS 16 impairment of plant and equipment 53 542 47 488
IAS 38 impairment of intangible assets 7 609 7 575
IFRS 3 impairment of goodwill 757 545 27 712 24 704
IFRS 3 gain on bargain purchase (107 659) (85 655)
IAS 28 gain on disposal of associates (25 954) (25 954)
IAS 36 reversal of impairments (808) (589) (20 365) (15 903)
IAS 27 profit from disposal/part disposal
of subsidiary (16 851) (14 492) (86 867) (74 706)
IAS 40 fair value adjustment to investment
property 47 736 38 122
Re-measurements included in equity-
accounted earnings of associates
and joint ventures 9 865 9 709 (4 753) (4 747) (77 429) (77 100)
Headline profit 40% 531 302 380 738 1 020 165
Basic earnings per share (cents)
Earnings 33% 428,93 321,35 957,91
Continuing operations 429,84 326,52 973,86
Discontinued operations (0,91) (5,17) (15,95)
Headline earnings 39% 415,35 299,51 802,33
Continuing operations 416,26 305,04 813,68
Discontinued operations (0,91) (5,53) (11,35)
Weighted average number of shares in
issue ('000) 127 916 127 118 127 149
Actual number of shares in issue at end
of period (net of treasury shares) ('000) 124 908 127 177 127 198
Diluted earnings per share (cents)
Earnings 34% 418,54 311,25 927,63
Continuing operations 419,43 316,26 943,07
Discontinued operations (0,89) (5,01) (15,44)
Headline earnings 40% 405,28 290,10 776,97
Continuing operations 406,17 295,45 787,96
Discontinued operations (0,89) (5,35) (10,99)
Weighted average number of shares in
issue ('000) 131 095 131 245 131 300
ABRIDGED CONSOLIDATED STATEMENT OF OTHER
COMPREHENSIVE INCOME
30 September 30 September 31 March
2012 2011 2012
(unaudited) (unaudited) (audited)
R'000 R'000 R'000
Profit for the period 662 477 499 814 1 437 830
Other comprehensive income:
Foreign currency translation differences 87 417 169 913 150 977
Cash flow hedge reserve (16 947) (13 629) (8 411)
Asset revaluation reserve (4 360)
Total comprehensive income 732 947 656 098 1 576 036
Attributable to:
Equity holders of the company 617 606 557 306 1 349 708
Non-controlling interest 115 341 98 792 226 328
732 947 656 098 1 576 036
ABRIDGED CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
30 September 30 September* 31 March
2012 2011 2012
(unaudited) (unaudited) (audited)
R'000 R'000 R'000
Balance as restated at beginning of period 12 836 030 11 226 344 11 226 344
Balance as previously stated 12 836 030 11 231 849 11 226 344
Adjustment (5 505)
Share capital and premium
Treasury shares released 66 915 5 031 6 154
Current operations
Total comprehensive income 732 947 656 098 1 576 036
Equity settled share-based payments 9 247 5 363 14 940
Non-controlling interest on acquisition of subsidiaries 160 350
Disposal of subsidiary (497)
Effects of changes in holding (27 632) 12 747 10 865
Dividends (264 976) (81 841) (158 162)
Balance at end of period 13 352 531 11 823 742 12 836 030
* Restated
ABRIDGED CONSOLIDATED CASHFLOW STATEMENT
30 September 30 September 31 March
2012 2011 2012
(unaudited) (unaudited) (audited)
R'000 R'000 R'000
Cashflows from operating activities 219 668 288 530 687 563
Cashflows from investing activities (468 325) (595 251) (430 244)
Cashflows from financing activities 213 414 8 645 (345 337)
Decrease in cash and cash equivalents (35 243) (298 076) (88 018)
Cash and cash equivalents
At beginning of period 253 141 308 241 308 241
Foreign exchange differences 15 822 13 193 32 918
At end of period 233 720 23 358 253 141
Bank balances and deposits 771 041 377 182 721 450
Bank overdrafts (537 321) (353 824) (468 309)
Cash and cash equivalents 233 720 23 358 253 141
SEGMENTAL ANALYSIS
Unaudited six months ended Audited year ended
30 September 2012 30 September 2011 31 March 2012
Net Net Net
gaming gaming gaming
Revenue win Revenue win Revenue win
R'000 R'000 R'000 R'000 R'000 R'000
Media and broadcasting 1 079 333 931 627 1 915 134
Limited payout gaming 4 351 252 651 3 300 196 065 6 982 417 982
Information technology 155 311 183 410 326 348
Transport 570 610 519 647 1 021 412
Vehicle component
manufacture 173 563 241 131 455 578
Properties 28 974 37 803 78 289
Mining 271 840 244 800 513 012
Natural gas 113 768 133 866 257 022
Clothing and textile 1 199 283 1 207 947 2 506 794
Other 10 903 74 416 6 690 45 494 11 706 101 414
Total 3 607 936 327 067 3 510 221 241 559 7 092 277 519 396
EBITDA
Audited
year
Unaudited six months ended ended
30 September 30 September 31 March
2012 2011 2012
R'000 R'000 R'000
Media and broadcasting 440 338 396 000 765 748
Limited payout gaming 85 469 65 897 137 784
Information technology 48 403 37 065 60 034
Transport 104 483 100 069 199 331
Vehicle component manufacture 4 292 9 044 21 409
Properties 10 371 8 208 22 334
Mining 40 609 42 333 75 962
Natural gas (304) 38 464 55 294
Clothing and textile 45 864 46 975 233 145
Other (43 560) (24 639) (69 134)
Total 735 965 719 416 1 501 907
Profit before tax
Audited
year
Unaudited six months ended ended
30 September 30 September 31 March
2012 2011 2012
R'000 R'000 R'000
Media and broadcasting 355 190 332 476 639 181
Limited payout gaming 51 192 42 932 85 950
Casino gaming and hotels 307 901 228 378 708 895
Information technology 42 536 30 659 47 288
Transport 68 290 66 676 129 988
Vehicle component manufacture (5 074) (3 657) (19 210)
Beverages (16 305) (4 656) (6 883)
Properties 9 748 (5 398) 66 922
Mining 29 564 19 503 42 469
Natural gas (47 245) 1 017 (74 165)
Clothing and textile 3 586 11 961 149 327
Other 3 442 (57 605) 154 928
Total 802 825 662 286 1 924 690
Headline profit
Audited
year
Unaudited six months ended ended
30 September 30 September 31 March
2012 2011 2012
R'000 R'000 R'000
Media and broadcasting 154 910 148 536 282 056
Limited payout gaming 34 829 35 135 64 157
Casino gaming and hotels 316 485 226 130 632 204
Information technology 15 709 10 404 15 889
Transport 50 977 49 264 100 120
Vehicle component manufacture (2 638) (3 712) 5 044
Beverages (13 576) (8 170) (10 444)
Properties 7 016 (24 092) (1 077)
Mining 22 270 19 351 51 722
Natural gas (48 864) (5 842) (175 210)
Clothing and textile 2 001 1 273 110 889
Other (7 817) (67 539) (55 185)
Total 531 302 380 738 1 020 165
COMMENTARY
Profitability
The overall improvement in headline earnings of the group to R531 million for the six-month period under review
(2011: R380 million) is pleasing. Increased contributions to headline earnings from Tsogo Sun, as a result of
an increase in gaming win as well as hotel occupancies, and our media assets, predominantly through higher
advertising and subscription revenue, were well supported by the results of HCI Coal and Vukani Gaming. Both
these assets have increased their underlying profitability in the current period and are significant generators of
cash for the group. New developments by Galaxy Bingo have been successful to date and the company has
reported its first headline profit since being acquired by the group. Our investment in Australia also produced its
first headline profit after the reverse acquisition of Oceania Capital Partners in February of this year. Your directors
remain confident in the underlying quality of these assets and their prospects going forward.
Our difficulties with turnarounds in Seardel, Formex and KWV have not yet resulted in positive earnings coming
through, though we are confident Seardel is well on track for that to happen in future periods. Turnaround
activity at KWV remains at a high input level and we are happy with the progress to date despite the losses the
company has shown in the current period.
Progress at Formex has been disappointing and we have brought in the management team at Seardel to assist,
given their experience with operating manufacturing plants with tight margins and powerful customers.
Montauk's results largely followed the very low commodity prices for natural gas in the USA in the period under
review. Nevertheless, the forward curve on Nymex continues to tick steadily upwards over the next two years
and Montauk should not experience results as poor as the current period going forward.
Labour issues
South Africa has experienced quite volatile conditions in relation to labour disputes in the period under review.
While the group is a large employer of labour and operates across a large number of industries, it weathered a
difficult period with little disruption from its own staff. Strike action was limited to a partial stay away from work
in the home textiles area, affecting a few hundred workers. While this affected the performance of that business
unit for the period under review, it is not expected to have any ongoing negative effect. In relation to the group's
performance overall, this was insignificant.
The transport strike disrupted our supply of coal to Eskom during September, which had some effect on our half
year results for the coal mining operation but we have already caught up a significant portion of this interruption
in the flow of coal and do not expect the full year's results to show any adverse effect. Likewise, we had fears
that delivery of our first significant export order at Seardel might be delayed by the backlogs that developed at
the port, but managed to bypass the problem without incident.
Listing of Niveus
During the period under review we successfully listed Niveus Investments Limited as a separate company
holding non-casino gaming assets and the group's interest in the liquor company, KWV. This listing was
achieved by the group disposing of 45% of Niveus to HCI shareholders in exchange for buying back and
cancelling approximately 4 million HCI shares. The share has performed strongly on the exchange, rising from
R7,68 to above R11 a share currently. This gives a sense of the correctness of our decision to allow the market
direct access to these smaller companies in HCI that appeared somewhat hidden in the larger mix of assets
held. HCI continues to hold 55% of Niveus.
Investment activity
We increased our consolidated holding in KWV somewhat, raising our stake to just below 40%. Likewise,
Tsogo Sun continued to clean up minorities in the Suncoast Casino and is currently making an offer to buy
out all minorities remaining there. It also purchased the Southern Sun Hyde Park hotel. Our media subsidiary
rebranded the eNews channel as eNCA so as to allow it an international footprint and launched eNCA on the
Sky bouquet out of London. HCI's property division started building two new shopping malls at The Point
(Cape Town) and at a newly acquired property in Upington. Seardel likewise commenced the development
of its industrial property at Mobeni (Durban). These developments are for rent to tenants outside the group.
Vukani Gaming opened its doors in Swaziland. Apart from completing upgrades to its facilities in Gauteng,
Galaxy Bingo has opened new premises in Amanzimtoti. HCI Coal has issued tenders to complete capital
developments required at Mbali mine, which should come into operation from April next year. Montauk is
likewise in the process of constructing a 5 megawatt electric facility at its landfill site at AEL in Tulsa which
should come on line about the same time.
CHANGES IN DIRECTORATE
During the period under review, Ms B Hogan was appointed to the board of HCI as an independent non-
executive director with effect from 29 August 2012.
DIVIDEND TO SHAREHOLDERS
The directors of HCI have resolved to declare ordinary dividend number 46 of 24 cents (gross) per HCI share.
The salient dates for the payment of the dividend are as follows:
Last day to trade cum dividend Friday, 7 December 2012
Commence trading ex dividend Monday, 10 December 2012
Record date Friday, 14 December 2012
Payment date Tuesday, 18 December 2012
No share certificates may be dematerialised or rematerialised between Monday, 10 December 2012 and Friday,
14 December 2012, both dates inclusive.
In terms of the new Dividends Tax ("DT") effective 1 April 2012, the following additional information is disclosed:
The local DT rate is 15%.
The total STC credits utilised as part of this declaration amount to R30 946 531.20.
The number of ordinary shares in issue at the date of this declaration is 128 943 880.
The total STC credits utilised per share amount to 24 cents per share.
The dividend to utilise for determining the DT due is Nil cents per share.
The DT amounts to Nil cents per share.
The net local dividend amount is 24 cents per share for all shareholders who are not exempt from the DT.
Hosken Consolidated Investments Limited's income tax reference number is 9050/177/71/7.
In terms of the DT legislation, any DT amount due will be withheld and paid over to the South African Revenue
Service by a nominee company, stockbroker or Central Securities Depository Participant (collectively "regulated
intermediary") on behalf of shareholders. All shareholders should declare their status to their regulated
intermediary as they may qualify for a reduced DT rate or exemption in future.
For and on behalf of the board of directors
MJA Golding JA Copelyn
Executive Chairman Chief Executive Officer
Cape Town
19 November 2012
NOTES
Basis of preparation and accounting policies
The results for the six months ended 30 September 2012 have been prepared in accordance with International
Financial Reporting Standards ("IFRS"), the disclosure requirements of IAS 34, 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 2012. As required by the JSE Limited Listings
Requirements, the Group reports headline earnings in accordance with Circular 3/2012: Headline Earnings as
issued by the South African Institute of Chartered Accountants.
The comparative results of a previous subsidiary and current associate, Tsogo Sun Holdings Limited ("TSH"),
have been restated as follows:
In terms of IAS 19: Employee Benefits, a provision of R88 million relating to long service awards was recognised
retrospectively in the statement of financial position of TSH as at 31 March 2011 for the reporting period ended
31 March 2012.
The impact of this restatement on the results presented by HCI for the six months ended 30 September 2012 is
that opening equity attributable to equity holders of the parent has been decreased by R5,5 million in the prior
corresponding reporting period.
These financial statements were prepared under the supervision of the financial director, Mr T.G. Govender,
B.Compt(Hons).
Discontinued operations and non-current assets held for sale
Discontinued operations as disclosed in the group income statement for the period under review relate to the
following:
the door module and pulley division of Formex Industries (Pty) Limited; and
certain clothing divisions of Seardel Investment Corporation Limited.
The non-current assets held for sale, as disclosed in the group statement of financial position, 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 group income statement have been restated to reflect any changes to the above.
RESULTS
Group income statement
The group results reflect an overall increase of 40% in headline earnings when compared to the prior comparative
period. Basic earnings attributable to HCI shareholders increased by 34%.
Group income has grown by 4.9% when compared to the prior period. Significant increases were recorded in
media and broadcasting mainly due to continued subscription revenue growth (up 16%), with notable increased
contributions from mining (up 11%), limited payout gaming (up 29%) and transport (up 9.8%). Decreases
were recorded in information technology (15%), vehicle component manufacture (28%) and natural gas (15%)
reflecting the difficult trading conditions in these industries.
Despite notable increases in EBITDA from media and broadcasting and limited payout gaming, decreases in
EBITDA recorded by vehicle component manufacture and natural gas resulted in group EBITDA growing by
2% when compared to the prior period. Natural gas was severely affected by the decline in commodity prices
during this period (down 100%). Mining was also negatively affected by the recent labour unrest and transport
strikes resulting in delays in the supply of coal to Eskom.
Profit from associates and joint ventures for the period comprises mainly the share of the group's equity-
accounted earnings of its 41,4% interest in Tsogo Sun Holdings Limited which itself recorded growth in headline
profits of 39% when compared to the prior period.
Investment surplus comprises of the profit on the disposal of the interest in African Unity Insurance.
Segmental results
Media and broadcasting recorded a modest 4% growth in headline profits when compared to the prior period.
During the period under review, HCI increased its interest in the offshore media holding company Longkloof
Limited from 64% to 80%. Longkloof presently holds many start up businesses which recorded losses of R20
million (2011: R6 million). Accordingly the growth in headline profits in this sector have been somewhat reduced
due to the increased portion of these start up losses.
Limited payout gaming continues to perform well, recording good growth in EBITDA and headline profits.
The comparative headline profit of R35 million excluded R11,8 million of holding company interest which was
eliminated on consolidation whilst the current year figure of R34,8 million is net of interest on bank borrowings.
Headline profits for casino gaming is up 39% in comparison to the prior period due to the improved earnings
from the Tsogo Sun Group.
Natural gas recorded increased headline losses for the period mainly due to the weak commodity prices and
the weakening of the R/$ exchange rate resulting in larger losses being translated.
Mining recorded a higher increase in profit before tax (53%) than in headline earnings (15%) in comparison to
the prior period due to an increased deferred tax charge of R7 million.
Beverages represents the group's share of its equity accounted headline losses from its liquor company, KWV.
Properties' headline earnings included an effective R45 million expense in the prior period, that related to the
settlement of a dispute with SARS, and net rental income relating to the Pan African Parliament building on the
Gallagher Estate premises, both of which have not been included in the current period's result.
Group statement of financial position and cash flow
The group's overall financial position remains strong with the major businesses still generating strong cash flows.
Group long-term borrowings at 30 September 2012 comprise borrowings of R346 million at head office level
and R836 million in operating subsidiaries. Included in current liabilities is R240 million of preference share
debt and R360 million of short-term facilities at head office level that is in the process of being refinanced into
longer-term borrowings.
Cash flow from operating activities shows a decrease compared to the prior corresponding period predominantly
due to the investment of R104 million in programming rights by the group's media interests in the period under
review. The group invested R409 million in property, plant and equipment, R67 million in distribution rights and
other intangible assets and R195 million in new and existing investments during the period under review. Also
included in cash flow from investing activities is the dividend of R182 million received from Tsogo Sun Holdings.
Funding was raised in the group's transport, property and media interests.
Directors: MJA Golding (Chairman), JA Copelyn (Chief Executive Officer), TG Govender (Financial Director),
VM Engel*, B Hogan*, MF Magugu*, ML Molefi*, VE Mphande*, JG Ngcobo*, Y Shaik*
* Non-executive
Company secretary: HCI Managerial Services Proprietary Limited
Registered office: Block B, Longkloof Studios, Darters Road, Gardens, Cape Town, 8001.
PO Box 5251, Cape Town, 8000
Transfer secretaries: Computershare Investor Services Proprietary Limited,
70 Marshall Street, Johannesburg, 2001.
PO Box 61051, Marshalltown, 2107
Sponsor: Investec Bank Limited
www.hci.co.za
Date: 19/11/2012 08:00:00 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
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