Wrap Text
Unaudited interim results for the six months ended 31 August 2014
HUGE GROUP LTD
(Registration number 2006/023587/06)
Share code: HUG ISIN: ZAE000102042
("Huge" or "the Group" or "the Company")
UNAUDITED CONSOLIDATED RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST
2014
HIGHLIGHTS
- EPS and HEPS increased by 128.8% and 51.5% respectively when
compared to the previous comparable six months;
- Net asset value has increased by 39.92 cents per share, from
238.63 cents per share to 278.55 cents per share;
- Net tangible asset value has increased by 14.90 cents per
share, from (7.09) cents per share to 7.81 cents per share;
- In September 2014 Huge successfully raised R20 million by way of
a rights offer;
- In August 2014 a settlement agreement was concluded in respect
of the litigation involving MTN Service Provider (Pty) Ltd and
iTalk Cellular (Pty) Ltd, and was settled in terms of this
agreement in September 2014;
- In October 2014 Huge Telecom closed out contracts for difference
over the ordinary shares of Huge at an underlying reference
price of 170 cents per share which released margined cash of
R6.6 million; and
- In November 2014 Huge Software (Pty) Ltd raised R20 million loan
funding from AfrAsia Special Opportunities Fund (Pty) Ltd.
The board of directors ("the Board") of Huge is pleased to present
the unaudited interim results of the Company and its subsidiary
companies and joint venture ("the Group") for the six months ended
31 August 2014.
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
31 August 31 August 28 February
2014 2013 2014
(6 months) (6 months) (12 months)
R'000 R'000 R'000
Total revenue 98 961 106 698 203 578
Gross profit 41 020 46 234 94 240
Other income 890 1 421 1 542
Operating expenses (33 028) (39 368) (77 818)
Operating profit 8 882 8 287 17 964
Investment income 359 328 1 021
Net change in fair
value of financial
instruments 1 562 (1 341) (804)
Share of earnings
/(losses) from equity
accounted investments 26 (10) 73
Finance costs (1 359) (1 210) (2 293)
Profit before
taxation 9 470 6 054 15 961
Income tax (expense) (2 074) (2 843) (4 628)
Net profit for the
period 7 396 3 211 11 333
Non-controlling
interest 13 (454) (520)
Net profit
attributable to
owners of the company 7 383 3 665 11 853
Basic earnings per
share (cents) 9.20 4.11 13.54
Adjusted for: -
Impairment of non-
current assets - - 0.15
Impairment of fixed
assets - 0.01 -
Profit on disposal of
property, plant and
equipment - - (0.03)
Legal settlements - 1.95 -
Headline earnings per
share (cents) 9.20 6.07 13.66
Total number of
shares in issue
('000) 80 255 89 255 80 255
Weighted number of
shares in issue
('000) 80 255 89 255 87 530
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
31 August 31 August 28 February
2014 2013 2014
(6 months) (6 months) (12 months)
R'000 R'000 R'000
ASSETS
Property, plant and
equipment 42 133 33 605 34 451
Goodwill 215 153 215 153 215 153
Intangible assets 2 130 5 693 2 809
Investment in joint
venture 729 674 702
Investments - 188 -
Deferred tax 11 303 12 287 11 303
271 448 267 600 264 418
CURRENT ASSETS
Inventories 876 4 747 -
Trade and other
receivables 76 991 67 935 69 220
Loans to associate
companies - 367 -
Shareholders' loans - 806 -
Current tax
receivable - - 164
Derivative margin
deposits 4 874 7 147 3 400
Deferred
Discretionary
Incentive Bonuses 7 417 - 3 767
Cash and cash
equivalents 4 868 4 638 4 173
95 026 85 640 80 724
Total assets 366 474 353 240 345 142
EQUITY AND
LIABILITIES
Share capital 208 411 213 361 208 411
Reserves (482) (1 075) (482)
Retained earnings 19 270 4 293 11 887
Equity attributable
to equity holders of
parent 227 199 216 579 219 816
Non-controlling
interest (3 647) (3 594) (3 660)
223 552 212 985 216 156
Non-current
liabilities
Finance lease
obligations 557 182 459
Deferred tax 9 381 - 7 771
Investment in
associate - 55 -
9 938 237 8 230
Current liabilities
Loans from
shareholders 1 161 - 1 346
Other financial
liabilities 1 273 - 1 168
Finance lease
obligations 539 219 360
Trade and other
payables 116 764 127 126 107 881
Bank overdraft 13 247 12 672 10 001
132 984 140 017 120 756
Total liabilities 142 922 140 254 128 986
Total equity and
liabilities 366 474 353 240 345 142
Number of shares in
issue ('000) 80 255 89 255 80 255
Net asset value per
share (cents) 278.55 238.63 195.00
Net tangible asset
value per share
(cents) 7.81 (1.60) (7.09)
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
31 August 31 August 28 February
2014 2013 2014
(6 months) (6 months) (12 months)
R'000 R'000 R'000
Balance at 1 March 216 156 209 774 209 774
Total comprehensive
income for the
period 7 396 3 211 11 333
Purchase of own
shares - - (4 951)
Balance at 28
February/31 August 223 552 212 985 216 156
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
31 August 31 August 28 February
2014 2013 2014
(6 months) (6 months) (12 months)
R'000 R'000 R'000
Cash flows from
operating activities 8 707 1 561 11 583
Cash flows from
investing activities (11 456) (2 901) (9 093)
Cash flows from
financing activities 198 (1 830) (3 454)
Net cash movement for
the period (2 551) (3 170) (964)
Cash at the beginning
of the period (5 828) (4 864) (4 864)
Total cash at the end
of the period (8 379) (8 034) (5 828)
SEGMENTAL REPORTING
The directors have considered the implications of IFRS 8 Operating
segments and are of the opinion, based on the information provided
to the chief operating decision maker, that the current operations
of the Group are split into two main operating segments, namely a
Telecom Grouping and a Media, Technology and Software ("MTS")
Grouping. The operations within each of these main segments or
groupings are substantially similar to one another and the risk and
returns of the operations of these segments/groupings are likewise
similar. Resource allocation and management of the current
operations are performed on an aggregate basis within each of the
two main segments/groupings. The summarised information is included
below in line with the requirements of IAS 34. The revenue generated
from the products and services which are supplied by the respective
Group companies is distributed countrywide to all clients with no
geographical differentiation.
The Telecom Grouping comprises:
- Huge Telecom Pty Ltd ("Huge Telecom");
- Huge Mobile Pty Ltd;
- Huge Cellular Pty Ltd;
- Ambient Mobile Pty Ltd;
- Le Gacy Telecom (FRA) Pty Ltd; and
- Gonondo Telecom Pty Ltd.
The MTS Grouping comprises:
- Eyeballs Mobile Advertising Pty Ltd ("Eyeballs"); and
- Huge Software Pty Ltd.
The Corporate Office comprises:
- Huge Group Ltd
Telecom MTS Corporate
Grouping Grouping Office Total
R R R R
Total revenue 98 961 - - 98 961
Gross profit 41 020 - - 41 020
Other income 539 351 - 890
Operating
expenses (29 884) (1 606) (1 538) (33 028)
Operating
profit/(loss) 11 675 (1 255) (1 538) 8 882
Investment
income 273 - 86 359
Net change in
fair value of
financial
instruments 1 562 - - 1 562
Loss from
equity
accounted
investments 26 - - 26
Finance costs (1 073) (75) (211) (1 359)
Profit/(loss)
before income
tax 12 463 (1 330) (1 663) 9 470
Income tax
credit/ (3 549) 1 011 464 (2 074)
(expense)
Profit after
income tax 8 914 (319) (1 199) 7 396
COMMENTARY
BASIS OF PREPARATION
The unaudited consolidated interim financial results have been
prepared in accordance with the recognition and measurement
principles of International Financial Reporting Standards and
presented in accordance with the minimum content, including
disclosures, prescribed by IAS 34 Interim Financial Reporting
applied to year-end reporting, the Companies Act of South Africa,
and the JSE Limited's Listings Requirements.
Any information included in this announcement that might be
perceived as a forward looking statement has not been reviewed and
reported on by the Company's auditors in accordance with section
8.40(a) of the JSE Limited's Listings Requirements. Any references
to post interim period performance are based on management accounts.
ACCOUNTING POLICIES
The accounting policies applied in the preparation of these
unaudited consolidated interim financial results are consistent with
those applied in the last comparable six month period, as well as
those applied in the preparation of the annual financial results of
the Company for the year ended 28 February 2014.
COMPANY PROFILE
Huge is an investment holding company listed on the Alternative
Exchange ("AltX") of the JSE Limited's Stock Exchange ("JSE") and
comprises a Telecom Grouping and an MTS Grouping.
Huge Telecom, a wholly-owned subsidiary company of Huge and the
principal trading operation of the Group, is one of South Africa's
leading "Connectivity Services Providers". It provides wireless,
GSM-based, fixed-cellular, last-mile connectivity services
(connections) for voice, messaging, and data. It procures these
last-mile connectivity services from the mobile network operators
("MNOs").
Eyeballs (77% owned by Huge) is an application technology developer
and provider . The "Eyeballs" technology application is downloaded
and installed by recipient users on their mobile phones. The
application displays advertising and content images on the phone
screen when calls or messages are received on the recipient user's
phone .
Further investor and shareholder information is available at
www.hugegroup.com.
FINANCIAL OVERVIEW
GROUP FINANCIAL PERFORMANCE
During the period under review, Huge has continued to improve
operational efficiencies and contain costs.
INVESTMENT HOLDING ACTIVITIES
In August 2014, Huge announced its intention to undertake a Rights
Offer of 20 000 000 Huge ordinary shares, at an offer price of 100
cents per share. The Rights Offer, which closed in September 2014,
was 43% oversubscribed. Subsequent to the Rights Offer, a further 1
million Huge ordinary shares were issued in terms of the general
authority granted to the Company by shareholders at the Annual
General Meeting of the Company held on Tuesday, 19 August 2014.
As at 31 August 2014, the Company had 89 901 443 ordinary shares in
issue, of which 9 646 926 ordinary shares are held by its wholly
owned subsidiary, Huge Telecom, as treasury shares.
In October 2014, Huge Telecom closed out contracts for difference
which it held over the ordinary shares of Huge at an underlying
reference price of 170 cents per share. This had the effect of
releasing the restriction on R6.6 million of cash held as initial
margin.
TELECOMMUNICATIONS ACTIVITIES
Huge Telecom is the Group's principal revenue generator.
Total revenue generated in the six months ended 31 August 2014
showed a decrease of 7.3% to R98.9 million, from the R106.7 million
generated during the six months to the end of August 2013.
Notwithstanding the declines in revenue noted above, Huge Telecom's
revenue indicators (in the form of sales activity indicators)
reflect positive growth trends. The compounding effect of annuity
sales has started to come through in September and October 2014 with
revenue for these two months exceeding the revenue for the
comparable two months in the prior year by 10%. In the six months
from 1 March 2014 to 31 August 2014 (the current reporting period),
Huge Telecom acquired in excess of 1 800 new clients and grew net
connections by more than 5 300 lines.
Huge Telecom has also been successful in increasing its fixed
annuity to variable annuity ratio. The fixed annuity consists of
channel management fees, on-account fees, site management fees and
line rentals, which are largely protected from price compression.
The current monthly annuity book of fixed annuity charges is in the
order of about R2.8 million as at 31 October 2014 (R1.6 million as
at 28 February 2014).
In the six months from 1 March 2014 to 31 August 2014, operating
expenses decreased by 16.1% from R39.4 million to R33.1 million as
compared to the previous comparable six months. Huge Telecom has
continued to contain costs and this remains a key focus area.
MEDIA ACTIVITIES
Eyeballs has continued developing its proprietary mobile phone
advertising application.
GROUP NET CHANGE IN THE FAIR-VALUE OF FINANCIAL INSTRUMENTS
The profits relating to derivative instruments increased Group
operating profitability by R1.56 million in the six month period
ended 31 August 2014 compared to a loss of R1.34 million in the
comparative prior period.
FUTURE PROSPECTS
INVESTMENT HOLDING ACTIVITIES
One of the strategies of the Group is to participate in the
consolidation of the telecommunications industry by participating in
merger and acquisition activity.
TELECOMMUNICATIONS ACTIVITIES
The transformation of Huge Telecom from a least cost routing company
to a distribution company providing an enhanced telephony offering
has changed the fortunes and prospects of the Group substantially.
The distribution capability built by Huge Telecom in the last two
years has laid the foundation for significant growth in both revenue
and profits; coupled with the future delivery of data services and
asset backed financing, it is possible to increase revenues at a
rate faster than what has been achieved historically.
Huge Telecom now has in excess of 380 distribution partners and the
value of the Group lies in its distribution capability. The increase
in distribution has had a concomitant effect on Huge Telecom's sales
where the compounding effect of annuity revenue since the end of
this reporting period has gained greater momentum, with revenue for
September and October 2014 exceeding the revenue for the comparable
two months in the prior year by 10%.
Since the start of calendar year 2014, monthly sales records have
been set in 8 of the 10 trading months; monthly sales in October
2014 exceeded 1 500 telephone lines or connections and average
monthly sales for FY15 have increased by more than 70% in comparison
to the comparable six month period.
Average line rental on connections has compounded at an average of
R152 000 per month for the months of March 2014 to October 2014,
thereby increasing the monthly line rental book by R1.52 million at
the end of October 2014 (for FY14 monthly line rental compounded at
an average rate of R39 000 per month, increasing the monthly line
rental book by R468 000 at the end of February 2014).
MEDIA ACTIVITIES
The increased prevalence of lower priced smartphones is fortifying
the opportunity in providing advertising to smartphone users in the
manner envisaged by the Eyeballs Mobile Technology. The Board
remains hopeful of seeing a return on the significant investment
that has been made in this technology.
GENERAL REPURCHASE OF SHARES FOR CASH
As at 31 August 2014, the Company has 89 901 443 ordinary shares in
issue. 9 646 926 ordinary shares are held by Huge Telecom in
treasury, resulting in a net 80 275 017 listed ordinary shares.
The contracts for difference held by Huge Telecom over 3 904 579
ordinary shares of Huge were closed out during the six months under
review.
LEGAL AND REGULATORY REQUIREMENTS
Settlement of litigation:Disputes between Huge Telecom and MTN SP
Shareholders are referred to the SENS announcement dated 11
September 2014, wherein the Company advised that a settlement
agreement had been reached with MTN SP in the amount of R10 million.
The matter is therefore closed.
The Company is currently party to the following litigation:
Disputes between Huge and TeleMasters Holdings Ltd ("TeleMasters")
TeleMasters has referred a dispute to the Arbitration Foundation of
South Africa ("AFSA") and it is claiming payment of the amount of
R4.176 million, plus interest and costs. Huge has filed a
counterclaim of R4.392 million and prays for payment of R2.674
million, interest thereon as well as the costs of suit.
SUBSEQUENT EVENTS
Other than as disclosed in this announcement, there are no events
subsequent to 31 August 2014 and to the date of this announcement
which have had or may have a material impact on the Company.
GOING CONCERN
The Board has undertaken a detailed review of the going concern
capability of the Company (and all subsidiary companies of the
Company that form the Group) with reference to certain assumptions
and plans underlying various cash flow forecasts.
The Board has not identified any events or conditions that
individually or collectively cast significant doubt on the ability
of the Company and the Group to continue as a going concern.
CHANGES TO THE BOARD
There were no changes to the board of directors of the Company
during the six months ended 31 August 2014.
DIVIDENDS
No dividends were paid or declared during the six months ended 31
August 2014.
GOVERNANCE
The Group recognises the need to conduct its business with
integrity, transparency and equal opportunity, and subscribes to
good corporate governance as set out in the King III Report on
Corporate Governance.
Johannesburg
26 November 2014
Designated Adviser
AfrAsia Corporate Finance Proprietary Ltd
Level P3, Oxford Corner, cnr Jellicoe and Oxford Road, Rosebank,
Johannesburg
Registered office:
st
1 Floor, East Wing, 146a Kelvin Drive, Woodmead, Johannesburg, 2191
(PO Box 16376, Dowerglen, 1610)
Transfer Secretaries
Computershare Investor Services Proprietary Ltd
Ground Floor, 70 Marshall Street, Johannesburg
Directors:
VM Mokholo* (Chairman), SP Tredoux* (Lead Independent Director), DR
Gammie*, AD Potgieter*, JC Herbst (Chief Executive Officer), D
Deetlefs (Group Financial Director)
*Non-executive
Date: 26/11/2014 09:55:00 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
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.
Sharenet Sites 
