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HOSKEN CONSOLIDATED INVESTMENTS LIMITED - Reviewed provisional consolidated results for the year ended 31 March 2019

Release Date: 23/05/2019 16:51
Code(s): HCI     PDF:  
 
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Reviewed provisional consolidated results for the year ended 31 March 2019

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 PROVISIONAL CONSOLIDATED RESULTS 
for the year ended 31 March 2019


CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                                                                             Reviewed       Audited
                                                                             31 March      31 March
                                                                                 2019          2018*
                                                                                R'000         R'000
            
ASSETS            
Non-current assets                                                         63 692 254    61 910 009 
Property, plant and equipment                                              25 693 836    24 913 188 
Investment properties                                                      10 053 377     9 587 532 
Goodwill                                                                    4 744 030     4 673 735 
Interest in associates and joint arrangements                               2 469 742     1 719 947 
Other financial assets                                                      1 367 737     1 324 206 
Intangibles                                                                18 709 694    18 726 572 
Deferred taxation                                                             428 711       487 352 
Operating lease equalisation asset                                            122 474        96 628 
Other                                                                         102 653       380 849 
            
Current assets                                                              8 458 552     8 090 494 
Inventories                                                                   995 207       939 711 
Programme rights                                                              792 611       870 674 
Other financial assets                                                         15 425        18 317 
Trade and other receivables                                                 2 386 424     2 478 554 
Taxation                                                                       88 267        59 433 
Bank balances and deposits                                                  4 180 618     3 723 805 
            
Disposal group assets held for sale                                           436 100       329 473 
            
Total assets                                                               72 586 906    70 329 976 
            
EQUITY AND LIABILITIES            
Equity                                                                     35 333 734    35 661 005 
Equity attributable to equity holders of the parent                        16 162 393    15 273 850 
Non-controlling interest                                                   19 171 341    20 387 155 
            
Non-current liabilities                                                    25 441 006    24 872 726 
Deferred taxation                                                           7 762 592     7 603 033 
Long-term borrowings                                                       16 788 127    16 275 305 
Operating lease equalisation liability                                        233 175       242 094 
Provisions                                                                    265 327       249 247 
Other                                                                         391 785       503 047 
            
Current liabilities                                                        11 655 863     9 691 070 
Trade and other payables                                                    3 054 866     3 036 220 
Current portion of borrowings                                               4 933 280     3 857 154 
Taxation                                                                      167 845       171 331 
Provisions                                                                    391 285       394 672 
Bank overdrafts                                                             2 907 507     2 033 702 
Other                                                                         201 080       197 991 
            
Disposal group liabilities held for sale                                      156 303       105 175 
            
Total equity and liabilities                                               72 586 906    70 329 976 
            
Net asset carrying value per share (cents)                                     19 043        17 785 
            
* Restated            


CONDENSED CONSOLIDATED STATEMENT OF PROFIT AND LOSS
                                                                             Reviewed       Audited
                                                                             31 March      31 March
                                                                      %          2019          2018*
                                                                 change         R'000         R'000
                  
Revenue                                                                    15 332 626    14 595 865 
Net gaming win                                                              9 827 869     9 278 038 
Income                                                             5.4%    25 160 495    23 873 903 
Expenses                                                                  (18 572 770)  (17 527 936)
EBITDA                                                             3.8%     6 587 725     6 345 967 
Depreciation and amortisation                                              (1 446 962)   (1 412 302)
Operating profit                                                            5 140 763     4 933 665 
Investment income                                                             264 935       299 216 
Finance costs                                                              (1 898 312)   (1 805 549)
Share of (losses)/profits of associates and joint arrangements               (169 479)      103 170 
Investment surplus                                                             14 275       134 030 
Fair value adjustments of investment properties                              (530 339)      (72 604)
Impairment reversals                                                          111 319        40 653 
Asset impairments                                                            (152 694)     (950 576)
Fair value adjustments of financial instruments                                 7 140       (23 690)
Impairment of goodwill and investments                                              -      (103 897)
Profit before taxation                                             9.1%     2 787 608     2 554 418 
Taxation                                                                   (1 000 365)     (453 959)
Profit for the year from continuing operations                              1 787 243     2 100 459 
Discontinued operations                                                      (122 833)     (124 076)
Profit for the year                                                         1 664 410     1 976 383 
                  
Attributable to:                   
Equity holders of the parent                                                  707 984       939 749 
Non-controlling interest                                                      956 426     1 036 634 
                                                                            1 664 410     1 976 383 
                  
* Restated                  


CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
                                                                             Reviewed       Audited
                                                                             31 March      31 March
                                                                                 2019          2018
                                                                                R'000         R'000
            
Profit for the year                                                         1 664 410     1 976 383 
Other comprehensive income:            
Items that may subsequently be reclassified to profit or loss             
Foreign currency translation differences                                      410 067      (192 785)
Reclassification of foreign currency differences on disposal                   (1 005)       (1 448)
Cash flow hedge reserve                                                        46 810       (54 906)
Share of other comprehensive losses of equity-accounted investments           (21 125)            -
Available-for-sale financial asset revaluations                                     -         3 401 
Items that may not subsequently be reclassified to profit or loss             
Revaluation of land and buildings                                              35 895        42 413 
Actuarial gains on post-employment benefit liability                            7 667        11 073 
Fair value adjustments on equity instruments designated at fair value 
  through other comprehensive income                                           (5 613)            -
            
Total comprehensive income                                                  2 137 106     1 784 131 
            
Attributable to:             
Equity holders of the parent                                                1 048 592       803 795 
Non-controlling interest                                                    1 088 514       980 336 
            
                                                                            2 137 106     1 784 131


CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
                                                                             Reviewed       Audited
                                                                             31 March      31 March
                                                                                 2019          2018
                                                                                R'000         R'000
            
Balance at the beginning of the year**                                      35 639 118    36 119 875 
Share capital and premium            
Treasury shares released                                                        1 968        32 179 
Shares repurchased                                                           (124 853)     (377 261)
Current operations            
Total comprehensive income                                                  2 137 106     1 784 131 
Equity-settled share-based payments                                            16 048        13 509 
Acquisition of subsidiaries                                                         -         1 536 
Disposal of subsidiaries                                                      (23 083)        7 688 
Effects of changes in holding                                                (565 897)     (770 728)
Dividends                                                                  (1 746 673)   (1 149 924)
            
Balance at the end of the year                                             35 333 734    35 661 005 
            
** Accumulated profits and non-controlling interest as at 1 April 2018 restated by R17.902 million and 
   R3.985 million, respectively, for the adoption of IFRS 9 and IFRS 15.            


RECONCILIATION OF HEADLINE EARNINGS
                                                                     Reviewed year ended    Audited year ended
                                                                         31 March 2019         31 March 2018
                                                              %       Gross         Net       Gross         Net 
                                                         change       R'000       R'000       R'000       R'000

                              
Earnings attributable to equity holders of the parent     (24.7%)               707 984                 939 749 
                              
Impairment of goodwill                                               16 604       7 057      31 299      13 415 
Gains on disposal of property                                             -           -     (63 600)    (49 354)
Losses on disposal of plant and equipment                             6 195       2 117       2 910       2 450 
Impairment of property, plant and equipment                         110 958      63 232     111 124      47 024 
Foreign currency translation reserve recycled                        (1 005)       (427)     (1 448)       (686)
(Gains)/losses from disposal/part disposal of subsidiary             (2 989)     (1 899)     13 704       7 633 
Gain on disposal of associates and joint arrangements               (14 275)     (6 067)          -           -
Impairment of associates and joint arrangements                           -           -      72 598      31 237 
Reversal of impairment of assets                                   (111 319)    (39 394)        (77)        (46)
Profits on disposal of intangible assets                                  -           -     (70 430)    (55 370)
Impairment of intangible assets                                      82 324      31 421     831 028     286 374 
Fair value adjustment to investment property                        530 339     133 375      72 604      (2 820)
Impairment of non-current assets held for sale                            -           -       1 307         617 
Write-off of intangible assets                                       14 579       4 633           -           -
Insurance claim for capital assets                                  (10 291)     (5 764)        (30)        (18)
Remeasurements included in equity-accounted earnings of 
  associates and joint arrangements                                 137 309     132 255     (60 371)    (56 663)
                              
Headline profit                                           (11.6%)             1 028 523               1 163 542 
                              
Basic earnings per share (cents)                               
Earnings                                                  (22.3%)                826.16                1 062.91 
Continuing operations                                                            923.31                  966.49 
Discontinued operations                                                          (97.15)                  96.42 
                              
Headline earnings per share (cents)                        (8.8%)              1 200.20                1 316.04 
Continuing operations                                                          1 262.16                1 213.43 
Discontinued operations                                                          (61.96)                 102.61 
                              
Weighted average number of shares in issue ('000)                                85 696                  88 412 
Actual number of shares in issue at the end of the year 
  (net of treasury shares) ('000)                                                84 875                  85 882 
                              
Diluted earnings per share (cents)                               
Earnings                                                  (22.2%)                821.49                1 056.23 
Continuing operations                                                            918.09                  960.41 
Discontinued operations                                                          (96.60)                  95.82 
                              
Headline earnings per share (cents)                        (8.7%)              1 193.42                1 307.76 
Continuing operations                                                          1 255.03                1 205.79 
Discontinued operations                                                          (61.61)                 101.97 
                              
Weighted average number of shares in issue ('000)                                86 183                  88 972


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                                                             Reviewed       Audited
                                                                             31 March      31 March
                                                                                 2019          2018
                                                                                R'000         R'000
            
Cash flows from operating activities                                        2 211 232     2 842 768 
Cash generated by operations                                                7 052 328     6 795 004 
Net finance costs                                                          (1 721 092)   (1 596 864)
Changes in working capital                                                   (508 047)     (237 466)
Taxation paid                                                                (867 910)     (968 276)
Dividends paid                                                             (1 744 047)   (1 149 630)
            
Cash flows from investing activities                                       (3 125 952)   (2 773 743)
Business combinations and disposals                                           (25 903)     (109 923)
Investments acquired                                                         (753 393)     (425 581)
Dividends received                                                            120 053       116 156 
Decrease in loans and receivables                                             271 440        69 944 
Intangible assets             
- Additions                                                                   (26 125)      (59 744)
- Disposals                                                                         3        85 004 
Investment properties             
- Additions                                                                  (591 237)     (924 105)
- Disposals                                                                       234        27 811 
Property, plant and equipment            
- Additions                                                                (2 201 384)   (1 681 145)
- Disposals                                                                    80 360       127 840 
            
Cash flows from financing activities                                          427 688       (11 176)
Ordinary shares issued and treasury shares released                                 -        26 616 
Ordinary shares repurchased                                                  (124 853)     (377 261)
Other liabilities raised                                                        1 258           908 
Transactions with non-controlling shareholders                               (160 664)     (748 810)
Net funding raised                                                            711 947     1 087 371 
            
            
(Decrease)/increase in cash and cash equivalents                             (487 032)       57 849 
Cash and cash equivalents             
At the beginning of the year                                                1 721 499     1 673 363 
Foreign exchange differences                                                   48 185        (9 713)
            
At the end of the year                                                      1 282 652     1 721 499 
            
Bank balances and deposits                                                  4 180 618     3 723 805 
Bank overdrafts                                                            (2 907 507)   (2 033 702)
Cash in disposal groups held for sale                                           9 541        31 396 
            
Cash and cash equivalents                                                   1 282 652     1 721 499


SEGMENTAL ANALYSIS                                        
                                                      31 March 2019               31 March 2018*
                                                             Net gaming                  Net gaming
                                                  Revenue           win       Revenue           win
                                                    R'000         R'000         R'000         R'000
                        
Media and broadcasting                          2 405 548             -     2 318 357             -
Gaming and hotels                               6 102 160     9 827 869     6 044 403     9 278 038 
Transport                                       1 779 849             -     1 808 472             -
Properties                                        594 816             -       503 354             -
Mining                                          1 472 734             -     1 202 161             -
Branded products and manufacturing              2 955 836             -     2 694 225             -
Other                                              21 683             -        24 893             -
                        
Total                                          15 332 626     9 827 869    14 595 865     9 278 038

                                                           EBITDA           Profit/(loss) before tax
                                                          31 March                   31 March  
                                                     2019          2018*         2019          2018*
                                                    R'000         R'000         R'000         R'000
                                    
Media and broadcasting                            344 268       244 207       224 658        (8 865)
Gaming and hotels                               5 067 777     5 038 901     2 399 715     1 953 107 
Transport                                         429 398       462 135       349 363       333 832 
Properties                                        287 084       246 175       138 158       126 307 
Mining                                            389 949       311 517       294 809       361 722 
Branded products and manufacturing                204 494       126 172        65 460        36 167 
Other                                            (135 245)      (83 140)     (684 555)     (247 852)
                        
Total                                           6 587 725     6 345 967     2 787 608     2 554 418

                                                                                Headline earnings
                                                                                     31 March
                                                                                 2019          2018
                                                                                R'000         R'000
                  
Media and broadcasting                                                         69 360        16 519 
Gaming and hotels                                                             935 650     1 028 882 
Transport                                                                     177 836       224 839 
Properties                                                                     67 862        64 850 
Mining                                                                        211 348       168 791 
Branded products and manufacturing                                            (15 124)      (19 949)
Other                                                                        (418 409)     (320 390)
            
Total                                                                       1 028 523     1 163 542 
            
* Restated            


NOTES AND COMMENTARY
 
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The results for the year ended 31 March 2019 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 
financial statements are consistent with those applied by the group in its consolidated financial 
statements for the year ended 31 March 2018, except for the adoption of IFRS 9 and IFRS 15 in the 
current year, which did not have a material impact on the results of the group. Opening retained 
earnings and opening non-controlling interest in the current year were decreased by R14.7 million 
and R2.9 million, respectively, in respect of the adoption of IFRS 9: Financial Instruments. 
This adjustment was made in accordance with the transitional provisions of IFRS 9, in terms of 
which comparative results do not need to be restated. Opening retained earnings and opening 
non-controlling interest in the current year were decreased by R3.2 million and R1.1 million, 
respectively, in respect of the adoption of IFRS 15: Revenue from Contracts with Customers. 
This adjustment was made in accordance with the transitional provisions of IFRS 15, in terms of 
which comparative results do not need to be restated. As required by the JSE Limited Listings 
Requirements, the Company reports headline earnings in accordance with Circular 4/2018: 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).

AUDITOR'S REVIEW
These condensed consolidated financial statements for the year ended 31 March 2019 have been 
reviewed by BDO South Africa Inc., who expressed an unmodified review conclusion.

A copy of the auditor's review report is available for inspection at the company's registered office 
together with the financial statements identified in the auditor's report. The auditor's report does 
not necessarily report on all of the information contained in this announcement. Shareholders are 
therefore advised that, in order to obtain a full understanding of the nature of the auditor's 
engagement, they should obtain a copy of the auditor's report together with the accompanying 
financial information from the issuer's registered office.

RESTATEMENT OF PRIOR YEAR RESULTS
Gaming and hotels
The group has established during the year under review that it had treated the share of net gaming 
win paid to site owners in its limited payout operations incorrectly in prior years. Net gaming 
win was previously recognised net of payments made to site owners in respect of their share of net 
gaming win and certain costs recovered reflected in revenue. In accordance with advice received from 
its auditors, the group wishes to restate its prior year results to correctly reflect the nature of 
the net gaming win share paid to site owners and certain costs recovered from these parties. 
The following restatement to the prior year results has been recognised:

Decrease in revenue                                                                      R9 million
Increase in net gaming win                                                             R484 million
Increase in expenses                                                                   R475 million

The restatement does not affect earnings per share or headline earnings per share and no 
restatement to equity opening balances is required.

Branded products and manufacturing
During the prior year the group acquired 100% and 60% of the shares in New Just Fun Group and 
Oops Global SA, respectively, for a total consideration of R100 million and for which the purchase 
price allocation was provisional. The fair value of assets and liabilities acquired and allocation 
of purchase price have now been finalised. The group has restated its prior year results in respect 
of changes recognised to the provisional allocation of purchase price. These restatements are as 
follows:

Non-current assets
Increase in intangible assets                                                           R35 million
Decrease in goodwill                                                                    R27 million

Non-current liabilities
Increase in deferred tax liability                                                       R8 million 

CHANGE IN ESTIMATE
Transport
During the current year the group reviewed the residual values of its bus fleet. The residual values 
were considered to be higher than those applied previously, which resulted in a reduction in 
depreciation recognised of R42 million in the current year.

DISCONTINUED OPERATIONS AND DISPOSAL GROUPS HELD FOR SALE
Media and broadcasting
The results of Silverline Three Sixty and certain non-core local and offshore operations are 
included in the media and broadcasting segment and are included in discontinued operations in the 
current and prior years. Disposal group assets of R6 million and liabilities of R3 million relate 
to eMedia Holdings' offshore holding company. 

Branded products and manufacturing
The board of Deneb Investments resolved during the prior year to significantly rationalise its 
Winelands Textiles division, as well as its Seartec digital and electronic equipment division. 
During the current year the board resolved to dispose of its interests in Winelands Textiles, 
Frame Knitting Manufacturers, First Factory Shops and Brand ID. The results of the operations of 
these divisions are included in discontinued operations in the income statement in the current and 
prior years and the assets of R393 million and liabilities of R139 million classified as disposal 
groups in the current year.

Gaming and hotels
The assets acquired by Tsogo Sun Holdings upon the acquisition of Hospitality Property Fund included 
properties in the amount of R65 million held for sale and were included in disposal group assets 
held for sale the prior year. Due to the delay in sale of these properties, they were reclassified 
to investment properties in the current year.

Niveus Investments initiated the process to dispose of its online and retail sports betting interests 
during March 2019. As a result the assets of R37 million and liabilities of R15 million of these 
operations have been reclassified to disposal groups held for sale in the current year and their 
results to discontinued operations in the current and prior years.

The results of discontinued operations were as follows in the current year (R'million):

                                                            Branded products and
                                                          manufacturing textiles
                                Media and broadcasting            and electronic    Gaming non-core
                                   non-core operations       equipment divisions         operations
Loss after tax                                     (35)                      (84)                (6)
Profit/(loss) on disposal                            -                         1                  2

BUSINESS COMBINATIONS
Gaming and hotels
Vukani Gaming Corporation concluded agreements with TAB-Austria (TAB) to acquire the intellectual 
property rights to the Golden Island Casino Limited payout machines for Africa, which include 
the processes, formulae, methods and information controlled and owned by TAB, currently being 
manufactured by TAB. The effective date was 21 September 2018. The acquired business contributed 
no revenue or profit after tax to the group for the year ended 31 March 2019. The fair value of net 
assets acquired is as follows: 

                                                                                          R'million
Intangible assets                                                                                49 
Deferred tax liabilities                                                                        (14)
Net assets acquired                                                                              35 
Goodwill                                                                                         14
Purchase consideration                                                                           49
Deferred purchase consideration                                                                 (31)
Cash outflow on acquisition of business                                                          18

BUSINESS COMBINATIONS SUBSEQUENT TO REPORTING DATE
Transport
As at the reporting date the group held 33.33% of the issued share capital of Sibanye Bus Services 
Proprietary Limited (Sibanye). On 1 April 2019 the group acquired an additional 33.33% of the issued 
share capital of Sibanye for a purchase consideration of R27 million, increasing its holding in the 
company to 66.66%.

Had the acquisition occurred on 1 April 2018, revenue would have increased by R87 million and profit 
after tax by R17 million.

The fair value of net assets acquired in Sibanye, for which the purchase price allocation remains 
provisional, is as follows:

                                                                                          R'million
Property, plant and equipment                                                                    59
Current assets                                                                                   48
Non-current liabilities                                                                         (35)
Current liabilities                                                                             (20)
Net assets acquired                                                                              52
Non-controlling interest                                                                        (17)
Fair value of interest previously held                                                          (17)
Goodwill                                                                                          9
Purchase consideration                                                                           27


RESULTS

GROUP INCOME STATEMENT AND SEGMENTAL ANALYSIS

Revenue increased by 5.4% to R25 160 million
EBITDA increased by 3.8% to R6 588 million
Profit before tax increased by 9.1% to R2 788 million
Headline earnings decreased by 11.6% to R1 029 million
Headline earnings per share decreased by 8.8% to 1 200 cents per share

Media and broadcasting
eMedia recorded an increase in revenue of 4%. A 4% increase in gross advertising revenue was 
recorded in a difficult television advertising environment. Licence fee revenue increased by 5% due 
to the annual contractual increase. Property and facility revenue increased by 10%. EBITDA 
increased by 41%, assisted by an increase of only 1% in programming and employee costs and a 19% 
decrease in signal distribution costs. EBITDA includes subsidy costs of R55 million in respect of 
OpenView set top boxes. The multi-channel business (including OpenView) earned increased advertising 
revenue of R132 million in the current year. To be noted is that active set top boxes have increased 
from 1 149 217 in the prior year to 1 574 395 at reporting date. Profit before tax increased by 
R234 million, with the prior year including impairments of investments and goodwill of R95 million 
and the current year including R14 million investment surplus on the disposal of eMedia's interest 
in Da Vinci Learning. Headline earnings represents the group's share of eMedia's earnings, adjusted 
for non-headline items totalling a loss of R17 million. Discontinued operations, consisting 
significantly of Silverline Three Sixty and Strika Entertainment, incurred losses of R35 million, 
including the impairment of goodwill of R17 million and intangibles of R11 million. 

Gaming and hotels
Revenue in respect of gaming and hotels increased by 1%. Overall net gaming win increased by 6%, 
with casino gaming win increasing by 2%. Casino gaming win increased by 5%, 2% and 2% at Montecasino, 
Silverstar and Suncoast Casino, respectively. Gold Reef City recorded a 2% decline. Alternative 
gaming win increased by 15%. SA hotel revenue was stagnant, significantly affected by the water 
shortages in Cape Town and general oversupply in that area. Offshore hotel revenue increased by 7% 
following the opening of the StayEasy Maputo and favourable currency movements. Overall hotel 
occupancies reduced from 62.4% to 60.6% in the current year. EBITDA increased by 1%, with gains in 
gaming largely off-set by a decrease in hotels' EBITDA. Profit before tax increased by 23%. A downward 
revaluation of investment properties in the amount of R454 million was recognised, together with 
the impairment of R65 million on owner-occupied property in the current year. The group has also 
recognised impairment charges on the carrying values of casino licences recognised upon the deemed 
acquisition of Tsogo Sun in August 2014. An impairment of R72 million was recognised in the current 
year in respect of the Emnotweni Casino due to continued poor trading conditions. A reversal of a 
prior year impairment of R111 million was recognised in respect of the Goldfields Casino. The total 
licence impairment amount in the prior year was R823 million and the group also recognised 
impairments of property, plant and equipment totalling R129 million in the prior year. A downward 
revaluation of investment properties in the amount of R191 million was recognised on HPF investment 
properties in 2018. Contribution to headline earnings decreased by 9% to R936 million. The prior 
year included an effective share of R133 million of a deferred tax liability reversal following 
the sale of certain hotel properties to HPF. Excluding the effect of this reversal results in an 
increase in contribution to headline earnings of approximately 4%.

The number of active machines in Vukani has increased by 3% to 6 058 during the current year. 
The number of electronic bingo terminals increased by 21% to 3 507 during the current year.

Transport
Transport revenue decreased by 2%, following a prolonged industry-wide protected bus driver strike 
during April and May 2018 and illegal strikes from October to December 2018 affecting the MyCiti 
routes. EBITDA decreased by 7%. Above-inflation wage increases at 8.5% and significantly increased 
fuel costs resulted in a R33 million decrease in EBITDA. Profit before tax increased by 5%. 
Excluding the effect of the change in estimate of residual values of buses, a decrease of 8% would 
have been recorded. Profit before tax also includes an increase of R27 million in interest income 
as a result of the promissory notes held until December 2018. Headline earnings was affected by the 
group's reduced effective interest in HPL&R of 75%, the dilution resulting in a loss of 
approximately R47 million in headline earnings to the group. 

Properties
Properties' revenue increased by 18% due to additional revenue of R25 million from Whale Coast 
Village Mall, R16 million from Shell House, R13 million from the Westlake warehouse precinct and 
R20 million from Gallagher Estate, with annual escalations and tenanting efficiencies in the rest 
of the portfolio responsible for the remaining increase. EBITDA increased in line with revenue by 
17%. EBITDA gains were somewhat off-set by an increase of R24 million in finance charges, originating 
from the launch of Shell House, Whale Coast Village Mall and Westlake warehouse facilities in the 
second half of the previous year. Fair value adjustments in the amount of R22 million were 
recognised in the current year compared to R28 million in the prior year.

Mining
Revenue increased by 22% and 23% at the Palesa and Mbali Collieries, respectively. However, sales 
volumes at Palesa increased by 35 000 tons (2%), with mining contractor inefficiencies leading to 
reduced volumes up to December 2018. These shortfalls were corrected in the last three months of 
the year following a change in mining contractor. Sales volumes increased by 1% to 915 000 tons at 
the Mbali Colliery. In addition, export sales prices achieved at the Mbali Colliery were 19% higher 
than the prior year. EBITDA increased by 25%, increasing by 31% at the Palesa Colliery and 24% at 
the Mbali Colliery. EBITDA margins remained stable at both collieries, in comparison to the prior 
year. Profit before tax in the prior year included a profit on disposal of the Nokuhle reserve. 
Headline earnings increased in line with profit before tax, adjusting for this prior year 
investment surplus.

Branded products and manufacturing
Branded products and manufacturing increased revenue by 10%, with growth attributable to the branded  
product and manufacturing operations. EBITDA increased by 62%, assisted by favourable foreign 
exchange movements, however branded product operations faced reduced gross margins and gross profits. 
The prior year profit before tax included fair value adjustments to investment properties of 
R44 million, whereas the current year includes only R13 million. Included in losses from discontinued 
operations of R84 million are impairments to property, plant and equipment and intangibles totalling 
R40 million which were reversed to arrive at headline earnings.

Other
EBITDA losses increased by R52 million, a large portion of that increase relating to the group's take- 
on of the internal audit operations previously performed by an external party and legal fees incurred 
in the Ithuba arbitration. Losses before tax increased by R437 million compared to the prior year. 
The increase in losses is attributable to equity earnings in respect of Impact Oil and Gas (IOG) 
in the prior year being R29 million, as compared to a loss of R172 million in the current year 
(including the group's effective share of R127 million of the impairment of an exploration licence 
in Gabon); equity losses of R37 million in respect of Platinum Group Metals (PGM) being recognised 
for the first time in the current year; R112 million in downward fair value adjustments to investment 
properties being recognised by La Concorde (R47 million upward adjustments in the prior year). 
In addition, interest earned by La Concorde reduced following its distribution of cash and transfer 
of promissory notes during the group's restructure of its interest in HPL&R, finance costs at head 
office increased by R14 million to R225 million in the current year and certain costs at Niveus, 
previously included in non-casino gaming, are now included in other. Included in the current year's 
headline loss is R225 million head office finance costs; costs relating to the group's new internal 
audit operations; R45 million equity losses from IOG; R37 million equity losses from PGM; R6 million 
equity losses from the Karoshoek concentrated solar project; with the remainder being head office and 
other overheads of the company, Niveus and La Concorde.

Notable items on the consolidated income statement include:
Consolidated investment income decreased by R34 million, significantly as a result of the 
distribution of cash by La Concorde during the restructure of the group's interest in HPL&R and 
reduced interest earned on promissory notes recognised in respect of the sale of La Concorde's 
operational assets in October 2016.

Finance costs increased by R93 million, R23 million of which in HCI Properties and R78 million in 
Tsogo Sun.

Losses from associates and joint ventures include R9 million profit from BSG Africa, R22 million 
profit from International Hotel Properties and Redefine BDL, R11 million profit from Sibanye in HPL&R, 
R37 million in losses from PGM and R172 million in losses from IOG.

Investment surplus consists of a profit on disposal of associate, Da Vinci Media, by eMedia.

The fair value adjustments of investment properties are downward adjustments of R454 million in 
respect of properties held by HPF, downward adjustments of R112 million in respect of La Concorde- 
held properties and upward adjustments of R22 million and R13 million in respect of properties 
held by HCI Properties and Deneb, respectively.

Fair value adjustments of financial instruments consist of ineffective portions of foreign exchange 
and interest rate hedges at Tsogo Sun and head office.

Impairments consist of impairments to property, plant and equipment, significantly R65 million in 
respect of properties held by Tsogo Sun and R11 million in respect of buses of HPL&R. An impairment 
of R72 million was recognised in respect of casino licences.

Reversal of impairments consists of the reversal of a prior year impairment to casino licences.

The average taxation rate, including once-off items, equalled 18% in the prior year due to the 
reversal of R307 million in deferred tax liabilities in Tsogo Sun upon the sale of certain hotel 
properties to HPF. The current year average taxation rate of approximately 36% is the result of 
head office finance and other costs and the group's losses from associates and joint ventures not 
yielding any significant tax benefits. Excluding these, the average tax rate normalises to 
approximately 30%.

Headline earnings decreased by 11.6%; however, excluding the impact of the favourable deferred tax 
reversal in the prior year, headline earnings would have shown a 0% decrease. Headline earnings 
per share decreased by 8.8%. The weighted average number of shares in issue in the prior year of 
88 412 000 was reduced to 85 696 000 in the current year due significantly to the conclusion of a 
repurchase of 2.7 million shares during March 2018, which resulted in the discrepancy between the 
gross and per share profit increase. 1.02 million shares of the company were repurchased during 
the current year.

GROUP STATEMENT OF FINANCIAL POSITION AND CASH FLOW
Group long-term borrowings at 31 March 2019 comprise central borrowings of R700 million, central 
investment property-related borrowings of R1 891 million, borrowings in Tsogo Sun of 
R12 937 million and the remainder in other operating subsidiaries. Included in the current 
portion of borrowings is R2 292 million central borrowings and R1 833 million in short-term 
borrowings in Tsogo Sun. Current central borrowings of R1 584 million is due to be refinanced in 
the first half of the 2020 financial year. Bank overdraft facilities include R2 124 million in 
Tsogo Sun, R422 million at head office and R324 million in Deneb.

Included in cash flows from investing activities is net expenditure on investment properties of 
R591 million, R292 million of which in HCI Properties, R190 million in Tsogo Sun and R107 million 
in Deneb. R2 201 million in expenditure was incurred on property, plant and equipment, of which 
R1 775 million was incurred by Tsogo Sun, R125 million by Deneb and R126 million by HCI Coal. 
R750 million was invested in associates and joint ventures, with R384 million being invested into 
IOG, R119 million into PGM and R243 million into Karoshoek. Net funding of R920 million was raised 
by Tsogo Sun and R581 million by HCI Properties. 

Shareholders are referred to the individually published results of eMedia Holdings Limited, 
Tsogo Sun Holdings Limited, Niveus Investments Limited, Deneb Investments Limited and 
Hosken Passenger Logistics and Rail Limited for further commentary on the media and broadcasting, 
gaming and hotels, branded products and manufacturing, and transport operations.

CHANGES IN DIRECTORATE
Ms Ngiphiwe Mhlangu resigned as a non-executive director from the board on 5 December 2018 and 
Ms Moretlo Molefi on 22 May 2019. Ms Cornelia Carol (Connie) September was appointed to the board 
as an independent non-executive director on 25 March 2019 and resigned from that position on 
22 May 2019. Mr James Robert Nicolella was appointed to the board as an executive director on 
22 May 2019. 

DIVIDEND TO SHAREHOLDERS
The directors of HCI have resolved to declare a final ordinary dividend number 59 of 210 cents 
(gross) per HCI share for the year ended 31 March 2019 from income reserves. The salient dates 
for the payment of the dividend are as follows:

Last day to trade cum dividend                                                Tuesday, 18 June 2019
Commence trading ex dividend                                                Wednesday, 19 June 2019
Record date                                                                    Friday, 21 June 2019
Payment date                                                                   Monday, 24 June 2019

No share certificates may be dematerialised or rematerialised between Wednesday, 19 June 2019 and 
Friday, 21 June 2019, both dates inclusive.

In terms of legislation applicable to Dividends Tax (DT) the following additional information 
is disclosed:

-  The local DT rate is 20%.
-  The number of ordinary shares in issue at the date of this declaration is 90 126 648.
-  The DT amounts to 42 cents per share.
-  The net local dividend amount is 168 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 the "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 May 2019


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

Company secretary: 
HCI Managerial Services Proprietary Limited

Registered office: 
Suite 801, 76 Regent Road, Sea Point, Cape Town, 8005
PO Box 5251, Cape Town, 8000
Telephone: 021 481 7560
Telefax: 021 434 1539

Auditors: 
BDO South Africa Incorporated
Wanderers Office Park, 52 Corlett Drive, Illovo, 2196
Private Bag X60500, Houghton, 2041

Transfer secretaries: 
Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196
PO Box 61051, Marshalltown, 2107

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

Website address: 
www.hci.co.za


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