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PRELIMINARY REPORT TO SHAREHOLDERS
HOSKEN CONSOLIDATED INVESTMENTS LIMITED
(REGISTRATION NUMBER 73/07111/06)
("HCI" OR "THE COMPANY")
PRELIMINARY REPORT TO SHAREHOLDERS FOR THE YEAR ENDED 31 MARCH 1998
INCREASE IN NET ASSET VALUE 114%
THE FOLLOWING ARE THE AUDITED RESULTS OF THE GROUP FOR THE YEAR ENDED 31 MARCH
1998 TOGETHER WITH THE COMPARATIVE FIGURES:
SUMMARISED GROUP INCOME STATEMENT
YEAR ENDED 31 MARCH
1998 1997
R'000 R'000
OPERATING INCOME (LOSS) 2 935 (732)
INVESTMENT INCOME 11 049 2 423
INCOME BEFORE TAXATION 13 984 1 691
TAXATION 3 066 -
NET INCOME 10 918 1 691
SHARE OF ASSOCIATED COMPANIES'
RETAINED INCOME 16 562 6 426
INCOME ATTRIBUTABLE TO ORDINARY SHAREHOLDERS
BEFORE NON-RECURRING ITEMS 27 480 8 117
NON-RECURRING ITEMS 2 666 20 797
- ASSOCIATED COMPANY
INCOME ATTRIBUTABLE TO ORDINARY SHAREHOLDERS 30 146 28 914
ATTRIBUTABLE EARNINGS PER SHARE (CENTS)
BEFORE NON-RECURRING ITEMS 9,1 11,0
AFTER NON-RECURRING ITEMS 9,9 39,3
WEIGHTED AVERAGE NUMBER OF ORDINARY
SHARES ON WHICH THE ATTRIBUTABLE EARNINGS
PER SHARE HAS BEEN CALCULATED ('000) 303 441 73 563
ACTUAL NUMBER OF ORDINARY SHARES IN ISSUE
AT END OF YEAR ('000) 346 961 230 729
SUMMARISED GROUP BALANCE SHEET
31 MARCH 31 MARCH
1998 1997
R'000 R'000
FUNDS EMPLOYED
SHAREHOLDERS' INTEREST 1 074 828 551 055
OUTSIDE SHAREHOLDERS' INTEREST
AND PREFERENCE SHARES 50 068 -
LOANS PAYABLE 92 635 104 620
CURRENT LIABILITIES 13 901 24 662
1 231 432 680 337
EMPLOYMENT OF FUNDS
FIXED ASSETS 64 10
INVESTMENTS 1 229 014 651 303
- ASSOCIATED COMPANIES 394 556 128 861
- NON-CONSOLIDATED
SUBSIDIARY 116 461 128 375
- OTHER INVESTMENTS 717 997 394 067
CURRENT ASSETS 2 354 29 024
1 231 432 680 337
NET ASSET VALUE PER SHARE (CENTS)
INVESTMENTS AT COST 310 239
INVESTMENTS AT MARKET/DIRECTORS
VALUE (AT 22 JUNE 1998) 910 425
NOTES
1. EVENTS AND DEVELOPMENTS
THE GROUP CONTINUED TO EXPAND IN ITS FIVE PRINCIPAL AREAS OF INVESTMENT, NAMELY
TELECOMMUNICATIONS, INFORMATION TECHNOLOGY, MEDIA, GAMING AND FINANCIAL
SERVICES.
INVESTMENTS HELD AT 31 MARCH 1997
THE INVESTMENT BY SAFLIFE LTD IN JCI LTD IN THE PREVIOUS YEAR PROVED TO BE
UNSUCCESSFUL AND THAT GROUP IS PRESENTLY BEING UNBUNDLED. DURING THE YEAR THE
COMPANY RECEIVED 6 857 504 SHARES IN CAPITAL ALLIANCE HOLDINGS LTD AS PART OF
THE UNBUNDLING PROCESS. THE VALUE OF THIS INVESTMENT AT THE UNBUNDLING DATE WAS
R206 MILLION. IN ADDITION THE GROUP WILL RECEIVE APPROXIMATELY R146 MILLION IN
CASH ONCE THE REMAINING ASSETS OF SAFLIFE LTD ARE REALISED AND DISTRIBUTED.
CONSEQUENTLY, UNLIKE THE PRIOR YEAR, THE RESULTS OF SAFLIFE LTD HAS NOW NOT
BEEN EQUITY ACCOUNTED.
OF THE OTHER INVESTMENTS HELD AT 31 MARCH 1997, THE GROUP INCREASED ITS STAKE
IN SA VIDEO GAMING CORPORATION (PTY) LTD FROM 5% TO 25%. THIS COMPANY TRADES AS
VIDEO GAMES OPERATOR, SUPPLYING AND DISTRIBUTING CENTRAL ELECTRONIC MONITORING
SYSTEMS, VIDEO GAMING MACHINES AND IS CURRENTLY A CONTENDER FOR ROUTE OPERATOR
LICENCES BEING ISSUED BY REGIONS.
THE GROUP CONTINUES TO HOLD ITS 51% FINANCIAL INTEREST IN AFRICA-ON-AIR (PTY)
LTD, WHICH OPERATES THE 94.7 HIGHVELD STEREO RADIO STATION. IN THE PRIOR YEAR
THE RESULTS OF THIS COMPANY WERE CONSOLIDATED. THE OTHER SHAREHOLDER IN
AFRICA-ON-AIR (PTY) LTD, PRIMEDIA BROADCASTING (PTY) LTD, HAS MANAGEMENT
CONTROL OF THE COMPANY AND IN ADDITION OWNS ONE A SHARE WHICH, ON CONVERSION,
WILL RESULT IN PRIMEDIA BROADCASTING (PTY) LTD OWNING 50% OF AFRICA-ON-AIR
(PTY) LTD. THIS CONVERSION WILL TAKE PLACE SHOULD THE PRIMEDIA BROADCASTING
(PTY) LTD LOAN NOT BE REPAID BY THE YEAR 2002. AS THERE IS A POSSIBILITY OF
THIS HAPPENING, AFRICA-ON-AIR (PTY) LTD HAS NOW BEEN EQUITY ACCOUNTED AND NOT
CONSOLIDATED. THE SUMMARISED GROUP INCOME STATEMENT FOR THE YEAR ENDED 31 MARCH
1997 AND THE SUMMARISED GROUP BALANCE SHEET AT THAT DATE SET OUT ABOVE, HAVE
BEEN RESTATED ON THE EQUITY ACCOUNTING BASIS. THIS HAS NO EFFECT ON EARNINGS
PER SHARE OR NET ASSET VALUE.
THE GROUP ALSO CONTINUES TO OWN ITS 5% INTEREST IN VODACOM GROUP (PTY) LTD.
THIS COMPANY OWNS ONE OF THE TWO CELLULAR TELEPHONE OPERATORS IN SOUTH AFRICA
AND IS OPERATING VERY SUCCESSFULLY.
NEW INVESTMENTS
THE GROUP MADE A NUMBER OF EXCITING INVESTMENTS DURING THE YEAR. MOST OF THESE
HAVE BEEN REPORTED IN THE PRESS OR IN CIRCULARS TO SHAREHOLDERS AND ARE
SUMMARISED BELOW:
A 12,1% INTEREST IN DATATEC LTD.
DATATEC IS A SOUTH AFRICAN LISTED INTERNATIONAL NETWORKING, TECHNOLOGY AND
SERVICES GROUP. THE DATATEC GROUP OPERATES PRINCIPALLY IN MARKETS WHERE THE
PRODUCTS AND SERVICES ARE DIRECTLY AIMED AT EXPLOITING THE CONTINUING GROWTH IN
MARKETS INFLUENCED BY THE INTERNET.
A 25% INTEREST IN SOFTLINE LTD.
SOFTLINE IS AN INFORMATION TECHNOLOGY GROUP FOCUSED ON THE DEVELOPMENT,
IMPLEMENTATION AND SUPPLY OF TECHNOLOGY PRODUCTS AND SERVICES, CONCENTRATING ON
THE SOFTWARE, SERVICES AND TRAINING SECTORS OF THE MARKET WITH A MAIN FOCUS ON
SUPPLYING MISSION CRITICAL FINANCIAL SOLUTIONS.
A 32,59% INTEREST IN UNIBANK GROUP LTD.
UNIBANK OFFERS A SELECTED RANGE OF DEPOSIT TAKING AND ASSET BASED FINANCE
ACTIVITIES, CO-BRANDED GENERAL PURPOSE CREDIT CARDS AND CORPORATE AND
STRUCTURED FINANCE SERVICES, AS WELL AS A RAPIDLY GROWING SAVINGS AND MICRO
LOANS DIVISION FOCUSED PRIMARILY ON PAYROLL EMPLOYEE NEEDS.
A 26% INTEREST IN MIDI TV (PTY) LTD.
MIDI TV WAS THE SUCCESSFUL BIDDER FOR THE COMMERCIAL TV CHANNEL TO BE OPERATED
LATER THIS YEAR.
A 50% INTEREST IN EVEREST SYSTEM SOLUTIONS (PTY) LTD.
EVEREST SYSTEMS SOLUTIONS IS A COMPANY PROVIDING SPECIALISED COMPUTER
CONSULTANCY AND SOFTWARE DEVELOPMENT.
SUBSEQUENTLY TO THE FINANCIAL YEAR END, THE GROUP MADE THE FOLLOWING
INVESTMENTS:
A 30% INTEREST IN BFS CAPITAL LTD.
BFS CAPITAL PROVIDES SPECIALISED DEBT AND EQUITY FINANCE SERVICES TO MANY
LEADING COMPANIES IN SOUTHERN AFRICA. THE RANGE OF SERVICES OFFERED INCLUDE
CORPORATE AND STRUCTURED FINANCE, PROPERTY FINANCE AND SPECIALISED TREASURY
PRODUCTS.
A 33,33% INTEREST IN GLOBAL PAYMENT TECHNOLOGY HOLDINGS (PTY) LTD
GLOBAL PAYMENT TECHNOLOGY HOLDINGS HAS THREE OPERATING COMPANIES SPECIALISING
IN SMART CARD AND POINT OF SALE TERMINALS, GAMING AND CASH HANDLING SYSTEMS.
ALL THREE OPERATING COMPANIES ARE MARKET LEADERS IN THEIR RESPECTIVE FIELDS AND
HAVE EXCLUSIVE DISTRIBUTION AGREEMENTS WITH THEIR RESPECTIVE INTERNATIONAL
SUPPLIERS.
AN ADDITIONAL 13,58% INTEREST IN UNIBANK GROUP LTD, SUBJECT TO CERTAIN
PRECONDITIONS BEING FULFILLED, THUS INCREASING THE GROUP'S INTEREST IN UNIBANK
TO 46,17%.
2. OPERATIONS & RESULTS FOR THE YEAR
THE COMPANIES IN WHICH THE GROUP IS NOW INVESTED OFFER EXCITING PROSPECTS IN
THEIR FIELDS. THESE INVESTMENTS WILL BE CONSOLIDATED IN THE YEAR AHEAD AND NEW
ONES SOUGHT TO COMPLEMENT THEM. THE DIRECTORS ARE CONFIDENT THAT THE GROUP WILL
CONTINUE TO DELIVER SATISFACTORY GROWTH.
EARNINGS PER SHARE INCORPORATES ONLY THE RESULTS OF THOSE COMPANIES EQUITY
ACCOUNTED AND INTEREST AND DIVIDENDS RECEIVED FROM INVESTMENTS. ACCORDINGLY,
EARNINGS PER SHARE IS NOT INDICATIVE OF THE PERFORMANCE OF THE UNDERLYING
COMPANIES IN WHICH INVESTMENTS ARE HELD. THE DIRECTORS ARE SATISFIED THAT THE
COMPANIES IN WHICH THE GROUP OWNS STRATEGIC STAKES WILL PROSPER IN THE YEAR
AHEAD.
THE NET ASSET VALUE PER SHARE HAS INCREASED FROM R2,50 PER SHARE IN JANUARY
1997 TO THE PRESENT R9,10 PER SHARE REPRESENTING A 264% INCREASE.
3. DIVIDENDS
THE DIRECTORS HAVE DECIDED NOT TO DECLARE A DIVIDEND FOR THE YEAR ENDED
31 MARCH 1998. THE COMPANY REQUIRES ITS CASH RESOURCES FOR FURTHER INVESTMENTS.
PAYMENT OF A DIVIDEND WILL BE CONSIDERED IN FUTURE YEARS OUT OF DIVIDENDS
RECEIVED BY THE COMPANY FROM ITS INVESTMENTS WHEN CIRCUMSTANCES WARRANT.
4. PROSPECTS FOR THE FUTURE
GAMING
THE GROUP IS CURRENTLY STRATEGICALLY PLACED IN BIDS FOR ROUTE OPERATOR LICENCES
TO BE ISSUED BY REGIONS DURING THE NEXT 12 MONTHS. IT IS ALSO INVOLVED WITH
PARTNERS IN BIDDING FOR THE NATIONAL LOTTERY LICENCE. WHILST NONE OF THESE
APPLICATIONS MAY ULTIMATELY BE CONCLUDED, THESE OPPORTUNITIES CAN PROVIDE THE
GROUP'S SHAREHOLDERS WITH SIGNIFICANT BLUE SKY DURING THE YEAR IF THE GROUP
IS SUCCESSFUL.
MEDIA
THE GROUP INTENDS EXTENDING ITS INTERESTS IN THE MEDIA SECTOR BY ACQUIRING
VARIOUS RADIO, TELEVISION AND OTHER INTERESTS. THIS SHOULD RESULT IN A BROADER
INTEREST IN A HIGHLY LUCRATIVE AND GROWING SECTOR.
INFORMATION TECHNOLOGY
THE GROUP INTENDS TO EXPAND ITS RELATIONSHIP WITH DATATEC LTD DURING THE
FORTHCOMING YEAR. THE DIRECTORS ANTICIPATE THAT THIS WILL RESULT IN BOTH AN
INCREASED STAKE IN DATATEC LTD ITSELF AS WELL AS JOINT VENTURES BETWEEN THE
GROUP AND DATATEC LTD.
FINANCIAL SERVICES
THE GROUP HAS SUCCEEDED IN BUYING TWO HIGHLY PROFITABLE PRIVATE FINANCIAL
SERVICES COMPANIES BOTH OF WHICH ARE LIKELY TO BE LISTED DURING THE NEXT 12 TO
18 MONTHS. IF CURRENT FINANCIAL SERVICE PRICE/EARNINGS RATIOS OF COMPARABLE
LISTED COMPANIES ARE MAINTAINED, HCI SHAREHOLDERS WILL GAIN SIGNIFICANTLY ON
THESE LISTINGS.
THE CURRENT INVESTMENTS WITHIN THE GROUP ARE PERFORMING WELL ABOVE AVERAGE AND
THE DIRECTORS EXPECT THIS TO CONTINUE INTO THE NEXT PERIOD.
FOR AND ON BEHALF OF THE BOARD OF DIRECTORS
M A GOLDING (CHAIRMAN) J A COPELYN (CHIEF EXECUTIVE OFFICER)
26 JUNE 1998
JOHANNESBURG
REGISTERED OFFICE: 3RD FLOOR, JAMES BOLTON HALL, 127 GALE STREET, DURBAN, 4001,
P.O. BOX 18881, DALBRIDGE, 4014.
TRANSFER SECRETARIES: MECANTILE REGISTRARS LIMITED, 5TH FLOOR, MECANTILE
BUILDING, 94 PRESIDENT STREET, JOHANNESBURG, 2001, P.O. BOX 1053, JOHANNESBURG,
2000.
DIRECTORS: M A GOLDING (CHAIRMAN), J A COPELYN (CHIEF EXECUTIVE OFFICER), M F
MAGUGU, V E MPHANDE, A P NKUNA, L M PIEPKE, K PILLAY
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