Wrap Text
Reviewed Abridged Consolidated Results for the year ended 31 March 2013
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")
REVIEWED ABRIDGED CONSOLIDATED RESULTS
for the year ended 31 March 2013
Income R8 214,1 million
Headline Earnings R1 084,9 million
Headline earnings per share 860,07 cents
REVIEWED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
Reviewed Audited* Audited
31 March 31 March 31 March
2013 2012 2011
R'000 R'000 R'000
ASSETS
Non-current assets 15 322 812 13 883 204 12 879 841
Property, plant and equipment 3 521 054 2 932 761 2 769 835
Investment properties 907 503 557 886 564 685
Goodwill 194 267 186 212 144 205
Interest in associates and joint ventures 9 461 708 9 235 179 8 436 446
Other financial assets 56 789 105 869 116 230
Intangibles 996 092 701 348 577 218
Deferred taxation 84 189 67 928 189 203
Operating lease equalisation asset 8 276 8 258 2 658
Long-term receivables 92 934 87 763 79 361
Current assets 4 878 741 3 257 200 2 948 801
Other 3 892 240 2 535 750 2 368 669
Bank balances and deposits 986 501 721 450 580 132
Non-current assets held for sale 2 543 15 288 35 218
Total assets 20 204 096 17 155 692 15 863 860
EQUITY AND LIABILITIES
Equity 15 021 468 12 836 030 11 226 344
Equity attributable to equity holders of the parent 12 788 446 11 777 703 10 500 409
Non-controlling interest 2 233 022 1 058 327 725 935
Non-current liabilities 1 718 618 1 592 601 2 350 869
Deferred taxation 163 313 97 898 114 138
Long-term borrowings 1 304 221 1 275 373 2 056 658
Operating lease equalisation liability 118 1 808 4 447
Other 250 966 217 522 175 626
Current liabilities 3 462 320 2 721 263 2 270 279
Non-current liabilities held for sale 1 690 5 798 16 368
Total equity and liabilities 20 204 096 17 155 692 15 863 860
Net asset carrying value per share (cents) 10 378 9 259 8 262
*Restated
REVIEWED CONSOLIDATED INCOME STATEMENT
Reviewed Audited
31 March 31 March
% 2013 2012
change R'000 R'000
Revenue 7 524 162 7 092 277
Net gaming win 689 953 519 396
Income 8% 8 214 115 7 611 673
Expenses (6 744 473) (6 109 766)
EBITDA -2% 1 469 642 1 501 907
Depreciation and amortisation (412 906) (376 088)
Operating profit -6% 1 056 736 1 125 819
Investment income 53 281 59 694
Finance costs (178 094) (193 845)
Share of profits of associates and joint ventures 691 799 697 127
Gain on bargain purchase 264 422 107 659
Investment surplus 35 416 162 203
Fair value adjustments of investment properties 427 (47 736)
Impairment reversals 22 822 20 365
Asset impairments (56 458) (54 652)
Fair value adjustments of financial instruments 10 834 75 768
Impairment of goodwill and investments (1 084) (27 712)
Profit before taxation -1% 1 900 101 1 924 690
Taxation (294 759) (466 583)
Profit for the year from continuing operations 10% 1 605 342 1 458 107
Discontinued operations (2 078) (20 277)
Profit for the year 1 603 264 1 437 830
Attributable to:
Equity holders of the parent 4% 1 269 229 1 217 978
Non-controlling interest 334 035 219 852
1 603 264 1 437 830
RECONCILIATION OF HEADLINE EARNINGS
2013 2013 2012 2012
% Gross Net Gross Net
change R'000 R'000 R'000 R'000
Reviewed Audited
Earnings attributable to equity holders
of the parent 1 269 229 1 217 978
IAS 16 gains on disposal of property (75 336) (53 463)
IAS 16 gains on disposal of plant and
equipment (16 846) (14 688) (9 878) (8 875)
IAS 16 impairment of plant and equipment 15 134 8 344 53 542 47 488
IAS 38 impairment of intangible assets 7 609 7 575
IFRS 3 impairment of goodwill 1 084 922 27 712 24 704
IFRS 3 gain on bargain purchase (264 422) (142 941) (107 659) (85 655)
IAS 28 gain on disposal of associates (25 954) (25 954)
IAS 28 impairment of associates 43 024 29 059
IAS 36 reversal of impairments (22 822) (17 361) (20 365) (15 903)
IAS 27 profit from disposal/part disposal
of subsidiary (86 867) (74 706)
IAS 40 fair value adjustment to investment
property (427) (463) 47 736 38 122
Other re-measurements and gains (32 012) (30 050)
Re-measurements included in equity-
accounted earnings of associates and
joint ventures 8 886 8 851 (77 429) (77 100)
Headline profit 6% 1 084 948 1 020 165
Basic earnings per share (cents)
Earnings 5% 1 006.16 957.91
Continuing operations 1 007.58 973.86
Discontinued operations (1.42) (15.95)
Headline earnings 7% 860.07 802.33
Continuing operations 860.28 813.68
Discontinued operations (0.21) (11.35)
Weighted average number of shares in
issue ('000) 126 146 127 149
Actual number of share in issue at
end of year (net of treasury shares) ('000) 123 224 127 198
Diluted earnings per share (cents)
Earnings 6% 985.05 927.63
Continuing operations 986.44 943.07
Discontinued operations (1.39) (15.44)
Headline earnings 8% 842.03 776.97
Continuing operations 842.23 787.96
Discontinued operations (0.20) (10.99)
Weighted average number of shares in
issue ('000) 128 849 131 300
REVIEWED CONSOLIDATED STATEMENT OF OTHER
COMPREHENSIVE INCOME
Reviewed Audited
31 March 31 March
2013 2012
R'000 R'000
Profit for the year 1 603 264 1 437 830
Other comprehensive income:
Foreign currency translation differences 288 244 150 977
Cash flow hedge reserve (9 973) (8 411)
Asset revaluation reserve (5 382) (4 360)
Total comprehensive income 1 876 153 1 576 036
Attributable to:
Equity holders of the parent 1 533 012 1 349 708
Non-controlling interest 343 141 226 328
1 876 153 1 576 036
REVIEWED CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
Reviewed Audited
31 March 31 March
2013 2012
R'000 R'000
Balance at beginning of year 12 836 030 11 226 344
Share capital and premium
Treasury shares released 76 410 6 154
Shares repurchased (114 324)
Current operations
Total comprehensive income 1 876 153 1 576 036
Equity settled share-based payments 17 233 14 940
Non-controlling interest on acquisition of subsidiaries 595 270 160 350
Disposal of subsidiary (497)
Effects of changes in holding 90 202 10 865
Dividends (355 506) (158 162)
Balance at end of year 15 021 468 12 836 030
REVIEWED CONSOLIDATED STATEMENT of CASH FLOWS
Reviewed Audited
31 March 31 March
2013 2012
R'000 R'000
Cashflows from operating activities 891 888 687 563
Cashflows from investing activities (992 712) (430 244)
Cashflows from financing activities 92 436 (345 337)
Decrease in cash and cash equivalents (8 388) (88 018)
Cash and cash equivalents
At beginning of year 253 141 308 241
Foreign exchange differences 67 009 32 918
At end of year 311 762 253 141
Bank balances and deposits 986 501 721 450
Bank overdrafts (674 739) (468 309)
Cash and cash equivalents 311 762 253 141
SEGMENTAL ANALYSIS
Revenue Net gaming win Revenue Net gaming win
31 March 31 March 31 March 31 March
2013 2013 2012 2012
R'000 R'000 R'000 R'000
Media and broadcasting 2 193 912 1 915 134
Non-casino gaming# 27 672 689 953 15 354 519 396
Information technology 286 527 326 348
Transport 1 130 774 1 021 412
Vehicle component manufacture 333 722 455 578
Beverages 175 565
Properties 56 521 78 289
Mining 556 129 513 012
Natural gas 237 298 257 022
Clothing, textiles and toys 2 513 486 2 506 794
Other 12 556 3 334
Total 7 524 162 689 953 7 092 277 519 396
EBITDA
31 March 31 March
2013 2012
R'000 R'000
Media and broadcasting 833 735 765 748
Non-casino gaming# 194 720 142 193
Information technology 72 422 60 034
Transport 210 228 199 331
Vehicle component manufacture 17 552 21 409
Beverages (4 496)
Properties 28 244 22 334
Mining 85 792 75 962
Natural gas 33 368 55 294
Clothing, textiles and toys 99 733 233 145
Other (101 656) (73 543)
Total 1 469 642 1 501 907
SEGMENTAL ANALYSIS continued
Profit before tax Headline earnings
31 March 31 March 31 March 31 March
2013 2012 2013 2012
R'000 R'000 R'000 R'000
Media and broadcasting 715 329 639 181 319 132 282 056
Non-casino gaming# 108 592 84 188 57 119 62 395
Casino gaming and hotels 675 324 708 895 682 272 632 204
Information technology 59 452 47 288 21 764 15 889
Transport 131 731 129 988 97 111 100 120
Vehicle component manufacture (7 397) (19 210) (11 134) 5 044
Beverages (23 873) (6 883) (14 348) (10 444)
Properties 33 146 66 922 21 690 (1 077)
Mining 64 226 42 469 45 759 51 722
Natural gas (62 727) (74 165) (86 885) (175 210)
Clothing, textiles and toys 43 041 149 327 18 420 110 889
Other 163 257 156 690 (65 952) (53 423)
Total 1 900 101 1 924 690 1 084 948 1 020 165
# Non-casino gaming includes the results of the group's limited payout gaming and bingo operations in the
current and prior year. The results of the bingo operations were previously included in Other.
NOTES
Basis of preparation and accounting policies
The results for the year ended 31 March 2013 have been prepared in accordance with International Financial
Reporting Standards ("IFRS"), the disclosure requirements of IAS 34, the SAICA Financial Reporting Guides as
issued by the Accounting Practices Committee, 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 03/2012: Headline Earnings as issued by the South
African Institute of Chartered Accountants.
The comparative results have been restated as follows:
During the year ended 31 March 2012 Sabido Investments acquired a 100% interest in Powercorp International
Limited, a London-based global content distributor of films and television series.
The purchase price allocated to certain trade receivables recognised on this acquisition has been restated
retrospectively for the year ending 31 March 2012.
The impact of this restatement on the results presented by HCI was that trade and other receivables decreased
by R28,4 million and goodwill increased by R28,4 million in the prior year. Opening equity attributable to equity
holders of the parent in the current year was not affected.
These financial statements were prepared under the supervision of the financial director, Mr TG Govender,
B.Compt (Hons).
BUSINESS COMBINATIONS
Beverages
Niveus Investments Limited ("Niveus"), through its wholly owned subsidiary, HCI-KWV Holdings Proprietary Limited,
purchased an additional 8 million shares in KWV Holdings Limited ("KWV") for a R7 million cash consideration and
through the issue of 5.5 million Niveus shares on 14 December 2012. Subsequent to the transaction, Niveus was
the holder of 51.6% KWV shares and the transaction therefore resulted in the acquisition of control.
KWV contributed revenue of R175 million and losses before tax of R9 million since the date of acquisition. Had
the acquisition occurred on 1 April 2012 the contribution to revenue would have been R783 million and the loss
before tax R61 million.
The details of the net assets acquired on the above business combination, for which the purchase price has
been allocated to the respective assets and liabilities on a provisional basis, is as follows:
R'000
Non-current assets 244 203
Current assets 1 187 637
Non-current liabilities (37 465)
Current liabilities (164 478)
Net assets acquired 1 229 897
Non-controlling interest (595 270)
Gain on bargain purchase (264 422)
Shares issued (71 499)
Interest held prior to acquisition (291 361)
Cash balances acquired (102 686)
Net cash received (95 341)
Other business combinations
Oceania Capital Partners Limited, through its 95% owned subsidiary, Eon Broadcasting Proprietary Limited,
acquired all of the shares in Sunshine Coast Broadcasters Proprietary Limited ("SCB"), effective 1 March 2013.
SCB operates two FM radio stations on the Sunshine Coast in Queensland, Australia.
The details of the net assets acquired on the above business combination, for which the purchase price has
been allocated to the respective assets and liabilities on a provisional basis, is as follows:
R'000
Non-current assets 155 651
Current assets 7 535
Non-current liabilities (609)
Net assets acquired 162 576
Net cash paid 162 576
The acquired business contributed revenues of R6.4 million and profit before tax of R2.4 million to the group for
the year ended 31 March 2013. Had the acquisition been effective on 1 April 2012, the contribution to revenue
would have been R51.1 million and profit before tax R13.9 million.
Discontinued operations and non-current assets held for sale
Discontinued operations as disclosed in the group income statement for the year under review relate to the door
module and pulley division of Formex Industries (Pty) 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.
RESULTS
Group income statement
The group results reflect an overall increase of 6.4% in headline earnings when compared to the prior year.
Earnings attributable to HCI shareholders increased by 4.2%.
The headline earnings for the prior year included the following items that have not recurred in the current year:
- reversal of contingent purchase consideration relating to the acquisition of minorities in the Suncoast casino
by Tsogo Sun, an aggregate gain of R102 million;
- net litigation settlement proceeds with former directors in Seardel, in aggregate R140 million; and
- certain deferred tax assets written off in Montauk Energy Corporation amounting to R138 million.
Headline earnings for the prior year, after adjusting for the above items, amounted to R918 million. Therefore,
comparable headline earnings of R1 084 million reported for the current year represents growth of 18%.
Headline earnings attributable to Tsogo Sun increased by 28%, taking into account the above, whereas an increase
of R23 million from properties is mainly the result of a settlement of a dispute with SARS in the prior year. Mining's
decrease in headline earnings of 12% is due to a deferred tax expense of R18 million, compared to deferred tax income of
R9 million in the prior year. Headline earnings relating to non-casino gaming has been impacted by the
distribution of 45% of the group's share in Niveus Investments. The comparative headline profit of R62 million
excluded R17.2 million of holding company interest which was eliminated on consolidation whilst the current
year figure of R57 million is net of interest on bank borrowings and non-controlling interest. Growth of 22% has
been reported for non-casino gaming by Niveus Investments. Refer to this company's individually published
results for additional information.
Group EBITDA has decreased by 2% when compared to the prior year. Group EBITDA included the Seardel
litigation settlement proceeds of R192 million in the prior year. If the effect of this is excluded, growth in group
EBITDA is 12%.
EBITDA margins in non-casino gaming have improved slightly (from 26.5% to 27%) due to increased profitability
of the Bingo operations. The EBITDA margins in media and broadcasting have proven resilient despite
substantial start-up costs recognised in relation to the eAfrica Channel and the off-shore operations. An EBITDA
improvement of 13% in mining has been achieved on stable volumes. Depressed gas prices in the US has
unfortunately resulted in a decrease of R22 million in EBITDA from natural gas despite significantly unchanged
volumes.
Group revenue has grown by 8% when compared to the prior year. Significant increases were recorded in
media and broadcasting (up 15%) on the back of continued advertising and subscription revenue growth. Other
notable increased contributions were from non-casino gaming (up 34%), which includes the group's bingo and
limited payout gaming operations, transport (up 11%) and mining (up 8%). Clothing, textiles and toys recorded
negligible growth in a difficult trading environment and the curtailment of the vehicle component manufacture
operations have resulted in a 27% decrease in revenues.
Profit from associates and joint ventures for the period consists significantly of earnings from the group's
interest in Tsogo Sun Holdings. The results of Tsogo Sun, as disclosed in the group's income statement is not
comparable to the prior year due to the reversal of contingent purchase consideration and gain on bargain
purchase recognised in the prior year. Refer to this company's individually published results for additional
information.
The R264 million gain on bargain purchase relates to the acquisition of KWV Holdings Limited.
Included in investment surplus is R25 million profit on the disposal of the group's interest in African Unity
Insurance.
An impairment of R43 million was recognised on the group's investment in an Australian joint venture, BayCorp
Holdings.
The reversals of provisions relate to the textile divisions of Seardel Investment Corporation.
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 31 March 2013 comprise borrowings of R319 million at head office level and
R985 million in operating subsidiaries. Included in current liabilities is R136 million of term facilities due in the
next 12 months and R600 million of preference share debt at head office level that will be refinanced into longer-
term borrowings subsequent to this report.
The distribution of 45% of Niveus Investments and the acquisition of KWV Holdings resulted in increases of
R370 million and R595 million respectively in the non-controlling interest reported by the group.
Cash flow from operating activities shows an increase compared to the prior year predominantly due to the
improvement in the level of trade receivables of the group's clothing and textile interests. The group invested
R819 million in property, plant and equipment, R203 million in investment properties and R136 million in
distribution rights and other intangible assets during the year. Also included in cash flow from investing activities
is the dividend of R290 million received from Tsogo Sun Holdings. Funding was raised predominantly by the
group's transport and property interests.
Commentary
The last year has seen a fair amount of growth and development in HCI's subsidiaries and associates as well as
steady growth in most of its underlying businesses.
Its main asset, Tsogo Sun, settled a significant dispute with the Gauteng gaming board on the basis of making
a large CSI commitment in exchange for the right to expand its Gauteng gaming operations by up to 1500
additional positions. This has triggered the release of a substantial redevelopment program at both Silverstar
and Gold Reef casinos. The group further bought out non-controlling interests at Suncoast casino, increasing
its stake to above 99% and is in the process of buying out non-controlling interests in the Mossel Bay casino.
It has also launched a bid for a new casino licence in Mpumalanga.
On the hotel side, Tsogo Sun purchased the Southern Sun Hyde Park hotel and a hotel in Mossel Bay, as well
as making a significant investment to acquire the Ikoyi hotel in Lagos. It opened 54 on Bath, completed the
first phase of its renovation of the 700-room Elangeni/Maharani complex in Durban and has commenced an
extension of the Maputo Southern Sun hotel, which will double its capacity in that city.
In September HCI listed Niveus Investments, allowing the public access to three smaller assets of the group
(Vukani Gaming, Galaxy Bingo and KWV). The logic of this was that these were hidden in the larger mix of assets
in HCI and not fairly valued in the group. The share price of Niveus has more than doubled since it commenced
trading, which is pleasing to see. The assets themselves have performed well with KWV returning to profit on
an operating level as the first milestone in its turnaround. Vukani Gaming continued to expand GGR at a good
pace, as did Galaxy Bingo, where the investment in its Gauteng sites significantly increased its revenue. Galaxy
Bingo has also bid for new licences in the Eastern Cape as well as opening its first site in Kwa-Zulu Natal.
In relation to our media assets, we have separated start-up operations in the United Kingdom, Europe and
China from the established African operations and have recently announced plans to substantially restructure
the African media operations in a form that will allow the public more direct access thereto over time. The coming
year will see the media operations roll out its multi-media strategy. The primary challenge and opportunity in
the television space is to respond to the move from analogue to digital channels, which clearly will diversify the
public's access to television content.
Seardel has improved its performance in leaps and bounds over last year and on a like-for-like basis of
comparison, produced approximately R85 million greater operating profit than last year. Its mix of revenue
continued to move from marginal manufacturing businesses to more lucrative branded products. Its property
developments in New Germany were completed and the Mobeni development is in its final stages. This
development had already been 100% pre-let from the second quarter of this financial year. There remain
significant difficulties in the manufacturing side of the business and clothing in particular has continued to be
a major drain on Seardel's fortunes. Notwithstanding all efforts to redress the difficulties of major disparities in
the wage rates of production facilities in different parts of the country, the bargaining forum has largely failed
to make any impact. This has made the maintenance of jobs in metro areas, paying wages more than double
those paid by others, absolutely marginal at best and remains a significant challenge to the group.
Mining operations continued well and the Department of Minerals and Energy has now complied with the court
order in our favour in relation to the Mbali mine. We now await the finalisation of the cession of the mining right
in our favour. Our development of Mbali is proceeding and production is expected to commence in the second
quarter of our financial year. Likewise, property developments are proceeding according to plan with both the
shopping centres at Seapoint, Cape Town and Upington being on track.
Formex was disappointing and has been significantly restructured into a smaller but hopefully more efficient
unit. Its management has been placed under the control of the Seardel manufacturing division, which we
believe are well able to actively oversee it. Likewise, the losses sustained by Montauk were larger than last year
as a result of the slide in both the rand and the natural gas price. We routinely call for patience in relation to the
performance of this asset and do so again this year. Every commodity business has its day and this is a well run
business that, in our opinion, will soon prove the point.
AUDITOR'S REVIEW
These results have been reviewed by the company's auditors, PKF (Jhb) Inc. Their unqualified review opinion is
available for inspection at the registered office of the company.
CHANGES IN DIRECTORATE
During the year 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 a final ordinary dividend number 47 of 84 cents (gross) per HCI share
for the year ended 31 March 2013. The salient dates for the payment of the dividend are as follows:
The salient dates for the payment of the dividend are as follows:
Last day to trade cum dividend Thursday, 13 June 2013
Commence trading ex dividend Friday, 14 June 2013
Record date Friday, 21 June 2013
Payment date Monday, 24 June 2013
No share certificates may be dematerialised or rematerialised between Friday, 14 June 2013 and Friday,
21 June 2013, both dates inclusive.
In terms of legislation applicable to Dividends Tax ("DT") the following additional information is disclosed:
- The local DT rate is 15%.
- The total STC credits utilised as part of this declaration, based on the number of ordinary shares in issue at
the date of this declaration, amount to R106 727 300.
- The number of ordinary shares in issue at the date of this declaration is 127 056 310.
- The total STC credits utilised per share amount to 84 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 84 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
23 May 2013
Directors: MJA Golding (Chairman), JA Copelyn (Chief Executive Officer), TG Govender, JG Ngcobo*,
VM Engel*, B Hogan*, MF Magugu*, Y Shaik*, ML Molefi*, VE Mphande* * 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: 23/05/2013 01:11:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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