To view the PDF file, sign up for a MySharenet subscription.

HOSKEN CONSOLIDATED INVESTMENTS LIMITED - Unaudited Condensed Consolidated Interim Results for the six months ended 30 september 2016

Release Date: 23/11/2016 15:42
Code(s): HCI     PDF:  
Wrap Text
Unaudited Condensed Consolidated Interim Results for the six months ended 30 september 2016

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 CONDENSED CONSOLIDATED INTERIM RESULTS 
for the six months ended 30 September 2016


Income +10.6%
EBITDA +5.8%
Headline earnings +14.3%
Headline earnings per share +18.5%


CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                                                Unaudited     Unaudited       Audited
                                             30 September  30 September      31 March
                                                     2016          2015          2016
                                                    R'000         R'000         R'000
ASSETS                                                  
Non-current assets                             59 864 455    54 023 442    55 610 831 
Property, plant and equipment                  24 019 665    23 967 472    24 371 720 
Investment properties                           8 054 717     2 690 174     3 021 423 
Goodwill                                        4 795 402     4 933 274     4 999 944 
Interest in associates and joint ventures       1 341 019     1 087 485     1 453 268 
Other financial assets                          1 284 787       336 221       666 581 
Intangibles                                    19 627 928    19 998 614    19 978 722 
Deferred taxation                                 492 233       396 504       449 789 
Operating lease equalisation asset                 54 759        46 725        88 275 
Long-term receivables                             193 945       566 973       581 109 
Current assets                                  8 089 815     9 474 141     8 850 081 
Inventories                                     1 092 446     2 038 748     2 010 102 
Programme rights                                  691 906       612 032       490 973 
Other financial assets                             45 757        73 504        87 056 
Trade and other receivables                     3 039 254     2 965 153     2 570 221 
Taxation                                          153 232       131 484       152 071 
Bank balances and deposits                      3 067 220     3 653 220     3 539 658 
Disposal group assets held for sale             1 820 177       566 072       147 298 
Total assets                                   69 774 447    64 063 655    64 608 210 

EQUITY AND LIABILITIES                                                  
Equity                                         34 381 060    31 418 534    32 927 180 
Equity attributable to equity holders 
  of the parent                                15 007 827    15 542 945    16 539 747 
Non-controlling interest                       19 373 233    15 875 589    16 387 433 
Non current liabilities                        21 966 011    21 927 294    21 482 544 
Deferred taxation                               8 133 852     7 818 406     8 135 293 
Long-term borrowings                           12 563 088    12 860 994    12 098 381 
Operating lease equalisation liability            271 351       300 611       280 497 
Other                                             997 720       947 283       968 373 
Current liabilities                            13 214 892    10 695 486    10 181 883 
Trade and other payables                        4 322 448     3 193 028     2 966 211 
Current portion of borrowings                   5 977 486     3 261 854     3 247 985 
Taxation                                          118 757       111 258       155 846 
Bank overdrafts                                 2 164 938     3 484 624     3 058 696 
Other                                             631 263       644 722       753 145 
Disposal group liabilities held for sale          212 484        22 341        16 603 
Total equity and liabilities                   69 774 447    64 063 655    64 608 210 

Net asset carrying value per share (cents)         17 055        14 918        15 887


CONDENSED CONSOLIDATED INCOME STATEMENT                                        
                                                              Unaudited     Unaudited*
                                                           30 September  30 September
                                                        %          2016          2015
                                                   change         R'000         R'000
Revenue                                                       7 000 076     6 120 938 
Net gaming win                                                4 324 914     4 117 201 
Income                                              10.6%    11 324 990    10 238 139 
Expenses                                                     (8 508 555)   (7 574 866)
EBITDA                                               5.8%     2 816 435     2 663 273 
Depreciation and amortisation                                  (712 829)     (675 250)
Operating profit                                              2 103 606     1 988 023 
                                        
Investment income                                               120 199        81 667 
Finance costs                                                  (782 572)     (652 100)
Share of profits of associates and joint ventures                22 234        14 791 
Gain on bargain purchase                                         12 764             - 
Investment surplus                                               46 131           529 
Asset impairments                                                (4 997)       (5 403)
Fair value adjustments of financial instruments                       -       (22 552)
Impairment of goodwill and investments                                -        (2 248)
Profit before taxation                               8.2%     1 517 365     1 402 707 
Taxation                                                       (396 419)     (437 250)
Profit for the period from continuing operations              1 120 946       965 457 
Discontinued operations                                        (203 929)       29 919 
Profit for the period                                           917 017       995 376 
                                        
Attributable to:                                        
Equity holders of the parent                                    376 611       506 676 
Non-controlling interest                                        540 406       488 700 
                                                                917 017       995 376 
* Restated                                        


CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
                                                              Unaudited     Unaudited
                                                           30 September  30 September
                                                                   2016          2015
                                                                  R'000         R'000
Profit for the period                                           917 017       995 376 
Other comprehensive income:                              
Items that may be reclassified subsequently to profit or loss
Foreign currency translation differences                       (412 532)      325 909 
Cash flow hedge reserve                                         (73 683)       37 954 
Available-for-sale financial asset revaluations                 (19 006)            - 
Total comprehensive income                                      411 796     1 359 239 
                              
Attributable to:                              
  Equity holders of the parent                                    1 975       727 428 
  Non-controlling interest                                      409 821       631 811 
                                                                411 796     1 359 239 


CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY                              
                                                              Unaudited     Unaudited
                                                           30 September  30 September
                                                                   2016          2015
                                                                  R'000         R'000
Balance at the beginning of the period                       32 927 180    30 503 423 
Share capital and premium                              
Treasury shares released                                         13 545        29 592 
Shares repurchased                                           (1 722 859)      (14 160)
Current operations                              
Total comprehensive income                                      411 796     1 359 239 
Equity-settled share-based payments                               5 106         4 786 
Non-controlling interest on acquisition of subsidiaries       1 954 607             - 
Disposal of subsidiary                                         (327 275)            - 
Effects of changes in holding                                 1 655 996        (7 729)
Dividends                                                      (537 036)     (456 617)
Balance at the end of the period                             34 381 060    31 418 534


RECONCILIATION OF HEADLINE EARNINGS
                                                                       Unaudited                   Unaudited
                                                                   30 September 2016           30 September 2015
                                                        %         Gross           Net         Gross           Net 
                                                   change         R'000         R'000         R'000         R'000
                                                  
Earnings attributable to equity holders                                                   
  of the parent                                    (25.7%)                    376 611                      506 676 
Gain on bargain purchase                                        (12 764)       (5 535)            -              - 
Impairment of goodwill                                                -             -         2 248          1 443 
Remeasurement to fair value less cost to sell                   191 134        37 533             -              - 
Losses/(gains) on disposal of plant and equipment                   171           239        (5 093)        (2 073)
Impairment of plant and equipment                                 1 775           597         5 195          1 876 
Foreign currency translation reserve recycled                  (253 844)     (216 314)            -              - 
Losses/(profit) from disposal/part disposal 
  of subsidiary                                                 419 370       401 702          (529)          (274)
Gain on disposal of associates and joint ventures                     -             -        (4 873)        (2 129)
Impairment of associates and joint ventures                          85            18             -              - 
Impairment of intangible assets                                       -             -           208            133 
Recycling of fair value reserves relating to 
  available-for-sale financial instruments                      (46 250)      (20 056)
Gains on disposal of investment property                            119            30        (8 497)        (2 936)
Headline profit                                     14.3%                     574 825                      502 716 
                                                  
Basic earnings per share (cents)                                                  
Earnings                                           (23.0%)                     374.64                       486.42 
Continuing operations                                                          564.75                       467.40 
Discontinued operations                                                       (190.11)                       19.02 
                                                  
Headline earnings                                   18.5%                      571.82                       482.61 
Continuing operations                                                          540.07                       465.17 
Discontinued operations                                                         31.75                        17.44 
                                                  
                                                  
Weighted average number of shares in issue ('000)                             100 526                      104 165 
Actual number of share in issue at the end of 
  the period (net of treasury shares) ('000)                                   87 997                      104 188 
                                                  
Diluted earnings per share (cents)                                                  
Earnings                                           (23.0%)                     370.45                       480.85 
Continuing operations                                                          558.44                       462.05 
Discontinued operations                                                       (187.99)                       18.80 
                                                  
Headline earnings                                   18.5%                      565.43                       477.09 
Continuing operations                                                          534.04                       459.85 
Discontinued operations                                                         31.39                        17.24 
                                                  
Weighted average number of shares in issue ('000)                             101 662                      105 371


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS                    
                                                              Unaudited     Unaudited
                                                           30 September  30 September
                                                                   2016          2015
                                                                  R'000         R'000
Cash flows from operating activities                            863 086     1 020 926 
Cash generated by operations                                  2 708 241     2 522 286 
Net finance costs                                              (677 200)     (539 927)
Taxation paid                                                  (511 879)     (504 816)
Dividends paid                                                 (656 076)     (456 617)
                    
Cash flows from investing activities                         (1 051 070)   (2 003 208)
Business combinations and disposals                             347 083             - 
Investments acquired                                           (514 686)     (264 910)
Dividends received                                               66 602        13 858 
Decrease/(increase) in loans and receivables                    366 332      (272 517)
Intangible assets acquired                                      (16 093)      (28 200)
Investment properties                     
- Additions                                                    (234 451)     (265 063)
- Disposals                                                           -        31 178 
Property  plant and equipment                    
- Additions                                                  (1 119 068)   (1 234 690)
- Disposals                                                      53 211        17 136 
                    
Cash flows from financing activities                            652 098       444 011 
Ordinary shares issued and treasury shares released               7 838         3 223 
Ordinary shares repurchased                                  (1 718 936)      (14 159)
Transactions with non-controlling shareholders                  688 055         4 876 
Net funding raised                                            1 675 141       450 071 
                    
Increase/(decrease) in cash and cash equivalents                464 114      (538 271)
Cash and cash equivalents                     
At the beginning of the period                                  520 432       709 231 
Foreign exchange differences                                    (23 595)       16 124 
At the end of the period                                        960 951       187 084 
                    
Bank balances and deposits                                    3 067 220     3 653 220 
Bank overdrafts                                              (2 164 938)   (3 484 624)
Cash in disposal groups held for sale                            58 669        18 488 
Cash and cash equivalents                                       960 951       187 084


SEGMENTAL ANALYSIS                                        
                                 Unaudited six months ended   Unaudited six months ended
                                     30 September 2016            30 September 2015*
                                               Net gaming                  Net gaming
                                      Revenue         win       Revenue           win
                                        R'000       R'000         R'000         R'000
Media and broadcasting              1 266 149           -     1 137 719             - 
Non-casino gaming                      46 036     646 009        25 390       555 435 
Casino gaming and hotels            2 615 271   3 678 905     2 288 786     3 561 766 
Transport                             817 064           -       725 088             - 
Vehicle component manufacture         176 552           -       154 207             - 
Properties                            216 921           -       109 128             - 
Mining                                512 835           -       375 561             - 
Branded products and manufacturing  1 348 233           -     1 303 875             - 
Other                                   1 015           -         1 184             - 
Total                               7 000 076   4 324 914     6 120 938     4 117 201 
                                        
                                                                        EBITDA          
                                                              Unaudited six months ended
                                                                     30 September
                                                                   2016          2015*
                                                                  R'000         R'000
Media and broadcasting                                          285 692       196 600 
Non-casino gaming                                               210 366       154 683 
Casino gaming and hotels                                      1 910 189     1 985 355 
Transport                                                       213 230       173 170 
Vehicle component manufacture                                    11 439        11 716 
Properties                                                       90 944        67 745 
Mining                                                           97 129        33 777 
Branded products and manufacturing                               59 877        75 801 
Other                                                           (62 431)      (35 574)
Total                                                         2 816 435     2 663 273 

                                                                   Profit before tax
                                                              Unaudited six months ended
                                                                     30 September
                                                                   2016          2015*
                                                                  R'000         R'000
Media and broadcasting                                          199 008       100 424 
Non-casino gaming                                               132 984        78 519 
Casino gaming and hotels                                      1 067 539     1 103 063 
Transport                                                       158 879       121 140 
Vehicle component manufacture                                       649         3 304 
Properties                                                       32 760        26 844 
Mining                                                           47 961         2 550 
Branded products and manufacturing                                7 971        25 803 
Other                                                          (130 386)      (58 940)
Total                                                         1 517 365     1 402 707 
                    
                                                                   Headline earnings
                                                              Unaudited six months ended
                                                                     30 September
                                                                   2016          2015
                                                                  R'000         R'000
Media and broadcasting                                           65 631        33 265 
Non-casino gaming                                                48 610        25 342 
Casino gaming and hotels                                        373 563       375 541 
Information technology                                            4 920         6 167 
Transport                                                       110 498        83 950 
Vehicle component manufacture                                       606         3 468 
Beverages                                                        16 491        (1 416)
Properties                                                       25 185        22 503 
Mining                                                           35 687         2 650 
Branded products and manufacturing                                1 267         8 071 
Other                                                          (107 633)      (56 825)
Total                                                           574 825       502 716 
* Restated


NOTES

BASIS OF PREPARATION AND ACCOUNTING POLICIES
The results for the six months ended 30 September 2016 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 applied by the group in the 
preparation of these condensed consolidated interim financial statements are consistent 
with those applied by the group in its consolidated financial statements for the year 
ended 31 March 2016. As required by the JSE Limited Listings Requirements, the group 
reports headline earnings in accordance with Circular 2/2015: Headline Earnings as 
issued by the South African Institute of Chartered Accountants.

These financial statements were prepared under the supervision of the financial director, 
Mr TG Govender, B.Compt (Hons) and have neither been audited nor independently reviewed 
by the group's auditors.
 
CHANGE IN ACCOUNTING ESTIMATE
Non-casino gaming
The review of the useful life of gaming machines by the group's non-casino gaming 
operations resulted in an increase in the useful life used for depreciation purposes 
due to the use of gaming machines for longer than originally expected. The group 
revised the useful life of gaming machines from six years to seven years effective 
1 April 2016. The effect of the change in the useful life of gaming machines on the 
depreciation expense for the current period is a decrease of R5 million and an expected 
decrease for future periods of R10 million per annum. Galaxy Bingo's site development 
costs were previously depreciated over the term of the initial lease, but the estimated 
depreciation period has been amended to include guaranteed renewal options, limited 
to a 10-year total depreciation term. The effect of the change in the depreciation 
term for site development costs on the depreciation expense for the current period 
is a decrease of R4 million and an expected annual decrease for future periods of 
R7 million.

DISCONTINUED OPERATIONS AND DISPOSAL GROUPS HELD FOR SALE
Beverages
The group entered into agreements on 10 May 2016 to dispose of its interest in the 
business operations of KWV Holdings, included in the beverages segment. The results 
of these operations are accordingly included in discontinued operations in the current 
and prior periods and its assets of R1 704 million and liabilities of R212 million in 
disposal groups held for sale in the statement of financial position in the current period. 

Media and broadcasting
The board of eMedia Investments resolved to exit certain of its offshore and local 
non-core operations during the financial year ending 31 March 2015. Further local non-core 
operations have been reclassified to discontinued operations in the current year and the 
prior period results restated for these. The results of these operations are included 
in the media and broadcasting segment, are included in discontinued operations in the 
current and prior period and its assets of R12 million (31 March 2016: R145 million) 
and liabilities of R1 million (31 March 2016: R17 million) in disposal groups held for 
sale in the statement of financial position in the current and prior years.

Media and broadcasting and other
During the current period the group disposed of its Australian subsidiary, 
HCI Investments Australia. The results of these operations are included in the media 
and broadcasting and other segments and have been reclassified to discontinued 
operations in the current and prior periods in the income statement. 


Information technology
During the current period the group disposed of its information technology operations 
(Syntell). The results of these operations have been reclassified to discontinued 
operations in the current and prior periods in the income statement.

Casino gaming and hotels
The assets acquired by Tsogo Sun Holdings upon the acquisition of Hospitality Property 
Fund included properties held for sale and are consequently included in disposal group 
assets held for sale. The carrying value of these properties totalled R88 million at 
30 September 2016.

Branded products and manufacturing
Property, plant and equipment to the value of R16 million is held as disposal group 
assets held for sale by Deneb Investments. 

The results of discontinued operations were as follows:

                                     eMedia           HCI
                                   offshore   Investments                         KWV
                                 operations     Australia       Syntell      Holdings
                                         Rm            Rm            Rm            Rm
(Loss)/profit after tax                  (6)           28            11           (71)
Loss on disposal                        (59)         (345)          (15)            -
Foreign currency translation reserves 
  reclassified to profit and loss       104           149             -             -

DISPOSALS
The group disposed of the following subsidiaries during the current period:

-  HCI Investments Australia (including Oceania Capital Partners), effective 
   16 August 2016, for proceeds of R325 million.
-  Mars Holdings (including Syntell), effective 15 September 2016, for proceeds of 
   R92 million. The timing and amount in respect of contingent proceeds of a maximum 
   of R19.2 million has not been determined as at the reporting date. 
-  Power Entertainment, effective 1 July 2016, for proceeds of US$0.6 million. 

The following were the assets and liabilities disposed of:
                                                                                   Rm
Non-current assets                                                                812
Current assets                                                                    657
Non-current liabilities                                                          (133)
Current liabilities                                                              (168)
Net assets disposed of                                                          1 168
Non-controlling interest                                                         (317)
Loss on disposal                                                                 (419)
Disposal proceeds                                                                 431
Cash balances disposed of                                                        (226)
Net cash received                                                                 205

BUSINESS COMBINATIONS
Casino gaming and hotels
Tsogo Sun Holdings acquired control of Hospitality Property Fund ("HPF") effective 
1 September 2016. The group initially acquired 55% of the HPF B-linked units (27% of 
the voting interest) in August 2015. It subsequently acquired a controlling stake 
through the injection of hotel assets for shares such that the issue of shares to the 
group resulted in the group owning 50.6% of the shares following the reconstitution 
of HPF's capital into a single class of shares. 

The acquired business contributed incremental revenues of R32 million and profit after 
tax of R31 million to the group for the period from date of control to 30 September 2016. 
Had the acquisition occurred on 1 April 2016 group income would have increased by an 
additional R128 million and profit after tax (including exceptional items recognised 
during the HPF capital restructure) would have increased by R297 million. The assets 
and liabilities acquired, for which the final fair values have been determined, are 
as follows:

                                                                                   Rm
Investment properties                                                           4 781
Other non-current assets                                                            6
Other current assets                                                              385
Borrowings                                                                     (1 725)
Other current liabilities                                                        (223)
Net assets acquired                                                             3 224
Purchase consideration paid in assets                                          (2 913)
Existing interest at fair value                                                  (298)
Gain on bargain purchase                                                           13

Non-controlling interests are recognised at their proportionate share of the entity's 
net assets at fair value.

Media and broadcasting
The group acquired 100% of the shares in Waterfront Film Studios effective 1 July 2016. 
The purchase consideration was R7.5 million, settled in cash. The purchase price 
allocation is provisional and goodwill of R2 million was recognised upon acquisition. 
The acquired business contributed incremental revenues of R3 million and losses after 
tax of R2 million to the group for the period from date of control to 30 September 2016. 
Had the acquisition occurred on 1 April 2016 group income would have increased by an 
additional R10 million and profit after tax would have decreased by R1 million. 

Branded products and manufacturing
Effective 31 May 2016 the group acquired 100% of the shares in Premier Rainwater Goods 
for a cash consideration of R77 million. Goodwill of R28 million arose on acquisition, 
for which the purchase price allocation is provisional. The acquired business 
contributed incremental revenues of R34 million and profit after tax of R3 million to 
the group for the period from date of control to 30 September 2016. Had the acquisition 
occurred on 1 April 2016 group income would have increased by an additional R25 million 
and profit after tax would have increased by R4 million.

RESULTS

GROUP INCOME STATEMENT AND SEGMENTAL ANALYSIS
Media and broadcasting
Revenue in respect of media and broadcasting includes only revenue from eMedia Holdings 
as revenue from the Australian media operations is included in discontinued operations. 
eMedia recorded an increase in revenue of 11% against the backdrop of an 11% increase 
in advertising revenue. New scheduling and programming since March 2015 have led to 
the regaining of lost market share in the second half of the previous financial year, 
with increased advertising revenue following in the current period. Property and 
facility revenue increased as well, with subscription and content revenue stable. 
EBITDA increased by 45% and is all attributable to eMedia. The increase is mainly 
attributable to the increase in advertising revenue and foreign exchange gains of 
R20 million included in cost of sales, as opposed to a loss of R20 million in the 
prior comparative period. EBITDA includes losses of R137 million in respect of the 
multichannel and OVHD businesses, which remain in a start-up phase. Profit before tax 
and headline earnings increased by similar margins, with no significant once-off items 
included in the results of continuing operations. 

Non-casino gaming
Net gaming win from non-casino gaming increased by 16% (Vukani 13% and other gaming 23%). 
The number of active limited payout machines in Vukani have increased by 1.4% to 5 341 
and average GGR per machine by 8.1% to R19 989 during the period. The number of 
electronic bingo terminals increased by 14.9% to 1 886 during the period. EBITDA 
increased 36%, with gains of R27 million in Vukani assisted by gains of R28 million 
in other gaming. Due to overheads being kept stable, especially staff costs and salaries, 
profit before tax showed a 70% improvement following the increase in EBITDA. 

Casino gaming and hotels
Revenue contributed by Tsogo Sun increased by 14%, significantly as a result of a 12% 
increase in rooms revenue and 63% increase in property rental income following the 
acquisition of HPF. Net gaming win increased by 3%, with Gold Reef recording an 
increase of 11% and the rest of the major casinos recording stable net gaming win. 
EBITDA decreased by 4%, the decrease mainly attributable to a R98 million charge 
relating to Tsogo Sun's long-term incentive scheme (R41 million gain in the prior 
comparative period). Profit before tax decreased by 3% and includes a gain on bargain 
purchase of R13 million relating to the acquisition of HPF. Also included are recycled 
reserves in respect of available-for-sale financial instruments of R46 million, 
relating to the shares held in HPF prior to the business combination. Contribution 
to headline earnings remained stable at R374 million. This amount includes the effect 
of the group's dilution of its stake in Tsogo Sun in August 2016. Headline earnings 
were adjusted for the R46 million recycling of fair value reserves and R13 million 
gain on bargain purchase.

Information technology
The results of Syntell have been reclassified to discontinued operations in the current 
and prior periods following its disposal in September 2016.

Transport
Golden Arrow Bus Services ("GABS") managed to increase revenue by 13% subsequent to a 
subsidy increase in excess of previous escalations and new routes having generated 
additional revenue. EBITDA increased by 23% following the increase in revenue. 
In addition, savings were achieved on supplies and services. Transport remains the 
group's second-largest contributor to headline earnings, with gains in profit before 
tax not affected by exceptional items reversed for headline earnings. 

Vehicle component manufacture
The increase in vehicle component manufacture revenue of R22 million related significantly 
all to tooling sales. The increase in revenue yielded no increase in EBITDA due to 
tooling sales to manufacturers attracting no margin. These sales will, however, generate 
future revenue and profit once the constructed production lines have started operations. 
Increased finance costs resulted in a decrease of 80% in profit before tax.

Beverages
The results of KWV Holdings have been classified as discontinued operations in the prior 
and current periods. Losses after tax of R71 million (2015: R4 million) in the current 
year includes impairments of R191 million.

Properties
Properties' revenue increased by 99% due to additional revenue from the exhibition 
business at Gallagher Estate acquired in March 2016, new development revenue for 
Olympus Village Mall, Blue Hills Mall and Rand Daily Mail House, and annual escalations 
in Kalahari Village Mall, The Point and Gallagher Estate. Properties' EBITDA gains 
were somewhat off-set by increases in finance charges of R22 million, predominantly in 
relation to the completion of Blue Hills Mall, Olympus Village Mall and the 
Alexander Forbes office building in La Lucia.

Mining
Increased revenue was recorded at the Palesa and Mbali Collieries in mining. Sales 
volumes at Palesa increased by 12% following reduced stockpile failures during the 
period as compared to the prior comparative period. Sales volumes at Mbali increased 
by 27%. In addition, export sales prices achieved at Mbali were 25% higher than the 
prior comparative period. EBITDA increased by 188%, mainly as a result of coal quality 
issues encountered at Palesa Colliery during the prior comparative period not recurring 
and gross profit margins at the Mbali Colliery increasing from 29% to 42%. Profit before 
tax increased by R45 million, with additional depreciation of R19 million reducing 
EBITDA gains due to increased tonnages mined. Earnings increased in line with the 
profit before tax increase, adjusting for tax.

Branded products and manufacturing
Deneb Investments increased revenue by 3%, with growth attributable to their industrial 
operations and in particular the first-time recognition of revenue from Premier Rainwater 
Goods. EBITDA decreased by 21% as foreign exchange losses of R20 million were recorded 
compared to gains of R12 million in the prior comparative period, reversing gains made 
in the industrials division. These losses were largely unrealised and relate to hedging 
instruments. Combined with a marginal increase in finance costs, these losses resulted 
in profit before tax and headline earnings decreasing significantly.

Other
EBITDA losses from other increased following a share-based payment charge in respect 
of cash-settled options of certain directors of Niveus and the receipt of a raising 
fee from the Ithuba funding arrangements in the prior period not recurring. Losses 
before tax includes the mentioned share-based payment charge and head office finance 
costs of R100 million. Furthermore, losses of R9 million from associate investments 
at holding company level, investment income of R40 million from the Ithuba funding 
arrangements and HCI and Niveus head office overheads are included. Headline earnings 
also include R20 million headline profit from HCI Australia (non-media).

Notable items on the consolidated income statement include:

Finance costs increased as a result of head office finance costs increasing by R21 million, 
Tsogo Sun finance costs by R74 million and HCI Properties finance costs by R22 million. 
The gain on bargain purchase and investment surplus relate to the HPF acquisition.

Increased profitability in eMedia and Niveus led to the increase in non-controlling 
interests' share of earnings.

Headline earnings per share increased by 18.5% with gross headline earnings increasing 
14.3%. The weighted average number of shares in issue in the prior period of 104 165 000 
was reduced to 100 526 000 in the current period due to 16 140 000 shares being 
repurchased during August 2016, which resulted in the discrepancy between the gross 
and per share profit increase.

GROUP STATEMENT OF FINANCIAL POSITION AND CASH FLOW
Group long-term borrowings at 30 September 2016 comprise central borrowings of 
R1 629 million, central investment property-related borrowings of R1 250 million, 
borrowings in Tsogo Sun of R8 787 million and the remainder in other operating 
subsidiaries. Included in the current portion of borrowings is R551 million owing 
to SACTWU, being part of their proportionate non-controlling share in eMedia Holdings, 
R636 million central borrowings and R3 764 million in short-term borrowings in Tsogo Sun. 
Current central borrowings of R200 million have been refinanced subsequent to reporting 
date and a further R136 million is expected to be refinanced into longer-term borrowings 
in due course. Bank overdraft facilities include R1 789 million in Tsogo Sun.

Included in cash flow from investing activities is R392 million received by the group 
as part of the premature repayment of funding advanced to Ithuba Holdings, the current 
operator of the National Lottery. Net funding of R1 675 million was raised during the 
period, R574 million of which is short term. Transactions with non-controlling 
shareholders include the repurchase of shares by Deneb Investments in the amount of 
R268 million and the dilution of the group's interest in its Tsogo Sun holding vehicle 
through an issue of shares to non-controlling shareholders. 

Shareholders are referred to the individually published results of eMedia Holdings 
Limited, Tsogo Sun Holdings Limited, Niveus Investments Limited and Deneb Investments 
Limited for further commentary on the media and broadcasting; casino gaming and hotels, 
non-casino gaming, beverages, and branded products and manufacturing operations.

COMMENTARY

Headline earnings of the group increased by 14.3% for the six-month period to the end 
of September over the previous year. In itself this is a good result. When one 
recognises that the resultant growth in headline earnings per share is enhanced some 
15% by virtue of the share buy-back effected earlier this year, the result is rather better. 

In truth, our results are a mixed bag of a flat performance by our main asset Tsogo Sun 
combined with really encouraging performances by most of the other businesses in the group.

Tsogo Sun succeeded in closing its merger with the Hospitality Property Fund, which 
over time will allow it to hold more of its valuable hotel properties in the form of 
a listed REIT rather than simply having them privately held. It likewise succeeded in 
implementing its purchase of 20% of Grand West and has commenced its major expansion 
of Sun Coast Casino in Durban. These developments will strengthen the longer-term 
performance of that company.

Our coal mining division improved significantly, both as a result of production 
improving as well as the price of export coal starting to recover. 

Likewise the media division doubled its headline earnings, admittedly off a low base. 
The turnaround of eTV's audience share noted in our last year-end comment has been 
followed by revenues lifting in its wake. The rollout of OVHD was a little slower 
than hoped but approximately 150 000 new boxes were rolled out during the period. 
There is every expectation that the bouquet will have grown sufficiently by our next 
report for media agencies to be provided with independent daily ratings of the 
performance of its channels. This will allow our multichannel offering on that 
platform to be independently valued by the advertising industry, which is an important 
start-up milestone.

We have not yet concluded any agreement extending the life of eNCA as an exclusive 
channel on the DSTV platform but our relationship remains stable and we do not 
currently foresee any major obstacle to doing so in the near future.

GABS has again done exceptionally well. Weak diesel prices have undoubtedly assisted, 
but the company has performed well by any number of standards. We are happy to report 
GABS recently bought its 1 000th MAN bus. This virtually completes the renewal of the 
entire fleet since we took over the company 10 years ago. Unquestionably Cape Town 
currently has the most modern bus fleet providing scheduled public transport of any 
city in the country and we are really proud to have been able to play a major part 
in that record. It is certainly a far cry from where we were 10 years ago when the 
majority of the fleet was considerably more than 10 years old.

The property division has not yet emerged as a major contributor to profits in light 
of the fact that many of the properties are either in the process of construction or 
are heavily geared, having been recently developed. However, the growth of this division 
is already visible as the EBITDA comparatives reveal. We remain excited at the progress 
of this division, which has performed exceptionally well, identifying new developmental 
stock, tightly managing developments within budget and efficiently managing completed 
developments across a wide range of properties from shopping centres to office blocks, 
industrial parks, warehousing, convention spaces and inner-city residential developments.

The continued growth of non-casino gaming has been very encouraging. Despite endless 
obstruction to the rollout of new licences granted to us we have persevered. A good 
step forward has been achieved in the KwaZulu-Natal region, where the Gambling Board 
has settled such litigation with us. Hopefully this will allow our bingo operation to 
finally roll out its licences which have been loss-making for quite some time while 
legal impediments to their implementation were dealt with. 

Deneb has had its rather encouraging progress disguised at the finish post by the 
volatility in the Rand's exchange rate. Our policy of hedging foreign currency risk 
has obliged the company to take on the chin a rather significant swing in its short-term 
fortunes due to the reporting date valuation of hedging instruments. There is, however, 
a steady increase in the underlying profitability of the business and we remain confident 
this reversal will be recovered in consequentially wider margins as sales are realised 
in the second half of the year. When one takes into consideration the fact that Deneb 
succeeded in buying back approximately 24% of its equity during the period, this will 
have an enhanced positive effect in the future.

The group also disposed of KWV, Power Entertainment and Syntell during the period for 
cash. Likewise the buy-back of HCI shares was effected through a mixture of cash, the 
sale of Oceania Capital Partners and an effective dilution of our holding into Tsogo Sun.

HCI is currently underwriting a rights issue for Impact Oil and Gas, which remains a key 
developmental project of the group. Drilling in any of its marine areas in South Africa 
remains on hold, pending government finalising amendments to the Mineral and Petroleum 
Resources Development Act. Despite an apparent mutual understanding between industry 
and the government department responsible early in the year, as well as encouraging 
indications of intent to prioritise rapid implementation by both Treasury and Cabinet 
as a whole, the progress of this Bill through its various parliamentary processes has 
not been fast by any stretch of the imagination, though we remain hopeful for next year.

CHANGES IN DIRECTORATE
Mr Mahomed Gani was appointed as independent non-executive director and chairman of 
the audit committee with effect from 30 August 2016.

DIVIDEND TO SHAREHOLDERS
The directors of HCI have resolved to declare an interim ordinary dividend number 54 
of 45 cents (gross) per HCI share for the six months ended 30 September 2016 from 
income reserves. The salient dates for the payment of the dividend are as follows:

Last day to trade cum dividend                               Monday, 12 December 2016
Commence trading ex dividend                                Tuesday, 13 December 2016
Record date                                                Thursday, 15 December 2016
Payment date                                                 Monday, 19 December 2016

No share certificates may be dematerialised or rematerialised between Tuesday, 
13 December 2016 and Thursday, 15 December 2016, 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 number of ordinary shares in issue at the date of this declaration is 92 814 648
   (excluding treasury shares held by the company).
-  The DT amounts to 6.75 cents per share.
-  The net local dividend amount is 38.25 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.

For and on behalf of the board of directors 

JA Copelyn                                 TG Govender
Chief Executive Officer                    Financial Director

Cape Town 
23 November 2016


Directors: 
JA Copelyn (Chief Executive Officer), TG Govender (Financial Director), Y Shaik, 
MSI Gani*, MF Magugu*, ML Molefi*, VE Mphande* (Chairman), JG Ngcobo*, R Watson* 
* Independent non-executive 

Company secretary: 
HCI Managerial Services Proprietary Limited

Registered office:
5th Floor, 4 Stirling Street, Zonnebloem, Cape Town, 7925. PO Box 5251, Cape Town, 8000
Telephone: 021 481 7560
Telefax: 021 434 1539

Auditors:
Grant Thornton Johannesburg Partnership
@Grant Thornton, Wanderers Office Park, 52 Corlett Drive, Illovo, 2196
Private Bag X10046, Sandton, 2146

Transfer secretaries:
Computershare Investor Services Proprietary Limited
70 Marshall Street, Johannesburg, 2001. PO Box 61051, Marshalltown, 2107

Sponsor:
Investec Bank Limited
100 Grayston Drive, Sandton, Sandown, 2196

Website address:
www.hci.co.za







Date: 23/11/2016 03:42:00 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.

Share This Story