Dividend resumption announcement HUGE GROUP LIMITED (Registration number 2006/023587/06) Share code: HUG ISIN: ZAE000102042 (“Huge” or “the Company” or “the Group”) Dividend resumption announcement The board of directors of Huge Group Limited (“the Board”) has recently approved the budget for the financial year (“FY”) ending on 28 February 2016 (“the FY16 Budget”). After considering the FY16 Budget, the current financial position and the current trading performance of the Group, the Board has resolved to resume paying dividends. In resolving to do so, the Board has also considered the existing dividend policy of the Company, which was established at the time of the Company’s listing on the JSE Limited’s stock exchange in August 2007. The existing dividend policy of the Company is to pay a low, regular dividend supplemented by additional dividends when earnings exceed expectations. If earnings were to be higher than budgeted expectations in a given period, an additional dividend might be paid, which would then be designated a special dividend. The existing dividend policy is based on the application of a target dividend-payout ratio of 50%, implying a dividend cover of two. The Board has resolved to resume paying dividends in terms of its existing policy which, together with any special dividends, will result in a maximum target dividend-payout ratio of 50%. The Board has taken into account the following factors when arriving at its decision to resume paying dividends: - The contractual constraints embodied in the provisions of the Group’s banking facility agreements with Firstrand Bank Limited and the loan agreements with Afrasia Special Opportunities Fund (Pty) Limited, both of which require the consent of the lender to the payment by the borrower of dividends; - The current trading performance of the Group; - The growth prospects of the Group, the associated funding requirements for expansion and the enhancement of the Company’s asset base; and - The Company’s ability to raise external capital after consideration of associated costs and timing. With regard to the current trading performance of the Group, the Board has taken into account the following: - Revenue generation: - Revenue generation is annuity based, compounding and is associated with contractual terms in excess of 24 months; - Revenue for FY15 is expected to be marginally higher than revenue for FY14, providing evidence that the declines in revenue over the prior three financial years have been reversed; - Measures of cumulative revenue from August 2014 (example, August 2014 to February 2015, September 2014 to February 2015, etc.) compared to measures of cumulative revenue in the previous year have been about 4% higher on average; and - Revenue during February 2015 is 7% higher than revenue generated in February 2014. - Distribution: - The total number of resellers (Business Partners) at the end of February 2014 of 293, increased by 132 to 425 at the end of February 2015 (a 45% increase). - Sales activity - The average number of active Business Partners during FY15 was 76% higher when compared to the average number of active Business Partners during FY14; - The average monthly sales of units of telephone lines (or connections) during FY15 was approximately double the average monthly sales of units of telephone lines during FY14; and - The total number of client accounts increased by 52% during FY15. - Gross margins - Wholesale input costs continue to fall; - Selling prices have fallen at a much slower rate; - The average monthly increase in fixed annuity revenue generated during FY15 was 3.7 times the average monthly increase in fixed annuity revenue generated during FY14; and - The increasing contribution from fixed annuity revenue, which has grown by R1.3 million from a monthly value of R2.4 million to a monthly value of R3.7 million during FY15 (a 54% increase). - Client base - The total base of installed telephone lines (the principal business division of Huge) increased by 31% during FY15. With regard to the growth prospects of the Group, the associated funding requirements for expansion and the enhancement of the Company’s asset base, the Board has taken into account the following: - The current trading performance of the Group; - The low stock holding requirements; - Trade creditors financing trade debtors; - Low capital expenditure (“CAPEX”) requirements of maintaining a last mile network (as opposed to the high CAPEX requirements of maintaining a core network); - The low maintenance requirements of maintaining a last mile, GSM network (as opposed to the high maintenance costs of maintaining a core fixed-line or core VoIP network); and - The high level of operational leverage in the Group’s principal business (where an ever greater percentage of gross profit filters to operating profit because of a low requirement for additional fixed overheads). With regard to the Company’s ability to raise external capital after consideration of associated costs and timing, the Board has taken into account the following: - The resolution of material items of litigation during FY15; - The successful raising of capital by way of a rights offer to shareholders in September 2014; - The successful raising of debt capital during November 2014; - The improved liquidity of the Company’s shares as traded on the JSE; and - The introduction of certain strategic shareholders to the Company. Shareholders are referred to the Company’s current investor presentation, which can be found on the Company’s web-site at www.hugegroup.com. Further particulars with regard to the quantum of dividends and payment dates of dividends will be provided to shareholders once the final results for the year to 28 February 2015 have been finalised. Shareholders are advised that any information contained in this announcement that might be viewed as a profit forecast or forward looking statement has not been reviewed nor reported on by the Company’s auditors in accordance with section 8.40 (a) of the JSE Listing Requirements. 1 April 2015 Johannesburg Designated adviser: AfrAsia Corporate Finance (Pty) Limited Date: 01/04/2015 04:45:00 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.