HOSKEN Consolidated Investments, the R17bn investment conglomerate, won’t be giving much away … no matter how investors look at it.

Speaking at the HCI annual general meeting on Monday, CEO Johnny Copelyn ruled out a more generous dividend policy and reiterated a determination not to dilute current shareholders by issuing new scrip for acquisitions.

Shareholder Abe Gordon raised the question of whether HCI — one of the best-performing investment companies on the JSE in the past decade — would consider a more generous dividend policy. For the year to end March, HCI paid a 108c/share dividend, which was covered an ultraconservative eight times by earnings of 860c/share.

Mr Copelyn, however, argued there was not much scope to change the policy as HCI had largely financed growth strategies since its formation in the late 90s with debt. HCI — which has the cash-spinning casino group Tsogo Sun as its anchor investment — still about R1bn in debt.

“It would be imprudent to have too much debt in a company that effectively earns most of its income in dividends. If we increase the dividend cover we will inhibit our opportunities to make new acquisitions.”

Aside from casinos, HCI also has controlling stakes in listed investment companies Seardel (which holds HCI’s media assets including e.tv), Australian-based Oceania Capital and Niveus (noncasino gaming assets) and liquor group KWV. Smaller interests include coal mining, public transport, US-based natural gas interests and property development.

Mr Copelyn told shareholders HCI’s dividends had risen steadily over the years. In the last four years, the company has declared payouts of 60c/share, 75c/share, 90c/share and 108c/share.

He also reiterated HCI’s long-held policy of not diluting the current shareholder base by issuing new shares to fund deal flow.

HCI’s largest shareholder is the Southern African Clothing and Textile Industry Workers Union, with Copelyn and chairman Marcel Golding — the founders — also holding significant minority stakes.

It was during the Niveus annual general meeting that Mr Copelyn stressed HCI was very focused on limiting the number of shares it issued for acquisitions. “We don’t want to dilute current shareholders.”

Mr Copelyn was responding to a shareholder query around a decision by Niveus to acquire a more influential share of liquor group KWV by offering that company’s minority shareholders a buyout offer comprising cash and new Niveus shares.

The shareholders intimated that the share issue might prejudice Niveus shareholders as the value of the gaming assets in limited payout machines and electronic bingo would be diluted by the struggling KWV operations.

Mr Copelyn argued it was vital for Niveus to gain control of KWV “to pass resolutions on our own steam”. He said HCI viewed KWV as a long-term play.

CEO Andre van der Veen noted Niveus’ decision to offer KWV shareholders a choice of cash or shares was to ensure flexibility. “We needed to allow sellers the choice of being able to participate in the future of the company.”
Source: BDLive – Marc Hasenfuss