Not a member yet? Register now and get started.

lock and key

Sign in to your account.

Account Login

Forgot your password?




–    35% increase in headline profit for the year

–    52% increase in profit attributable to HCI shareholders

–    35% increase in headline earnings per share

–    37% increase in adjusted headline earnings per share






See Financial Section of the website for full results


Basis of preparation and accounting policies

The results for the year ended 31 March 2008 have been prepared in accordance   with International Financial Reporting Standards (“IFRS”), specifically IAS 34: Interim Financial Reporting, and comply with the requirements of the South

African Companies Act, 1973 and the listings Requirements of the JSE Limited.   The accounting policies of the group are consistent with those applied for the  year ended 31 March 2007. As required by the JSE Limited Listings requirements, the group reports headline earnings in accordance with Circular 8/2007:         Headline Earnings as issued by the South African Institute of Chartered  Accountants.


Business combinations

During the year under review the group acquired control of the following        entities:                                                                       Viamedia (Pty) Ltd                       (50.01% on 16 July 2007)               Sasani Africa (Pty) Ltd                  (100% on 16 March 2008)                Mikros Traffic Monitoring (Pty) Ltd      (100% on 1 April 2007)                 Syntell Imaging (Pty) Ltd                (Increase to 50.5% on 1 April 2007)    Tube worx (Pty) Ltd                      (100% on 1 April 2007)                 Auto Tube Manufacturers (Pty) Ltd        (100% on 1 October 2007)               The acquired businesses contributed revenues of R396 m and profit before tax    of R79m to the group for the periods from dates of effective control to         31 March 2008. Had the acquisitions been effective on 1 April 2007 the          contribution to revenue would have been R635m and the contribution to profit    before tax would have been R116m.                                               The details of the net assets acquired and goodwill at acquisition on business  combinations is as follows:                                                                                                                          R`000      Non-current assets                                                   85 180     Current assets                                                      203 215     Non-current liabilities                                            (25 868)     Current liabilities                                               (127 876)     134 651
Minority                                                           (23 804)     Existing share of net assets before Bus. Comb.                        (341)     Net assets acquired                                                 110 506     Goodwill arising on acquisition                                     103 436     Purchase price                                                      213 942     Deferred payment                                                   (24 500)     Cash paid                                                           189 442     Cash on acquisition                                                (79 605)     Net cash paid                                                       109 837     The acquisition of Sasani Africa (Pty) Ltd and Viamedia (Pty) Ltd have been     provisionally accounted for as permitted by IFRS 3.The purchase price           allocation will be completed within the next 12 months an d any resulting fair  value adjustments to assets and the recognition of intangible assets will be    accounted for accordingly.                                                      As stated in the March 2007 results, the acquisition of the Tsogo Sun Group was accounted for using provisional figures provided by the Tsogo Sun Group. The    detailed assessment of Tsogo`s assets, liabilities and contingent liabilities   has been completed and has resulted in the following adjustments:               Property, plant and equipment on business combination has been revalued upwards in the amount of R1251 million resulting in reduction of R297 million of        goodwill and an increase in minority interest of R592 million. As a result of   the revaluation, the depreciation charge in the current year has increased by   R13 million and in the prior year by R6 million.                                Comparative figures have been restated to reflect these changes.                Discontinued operations and non-current assets held for sale                    Discontinued operations as disclosed in the group income statement and          non-current assets/liabilities held for sale as disclosed in the group balance  sheet relate to the following:                                                  – A subsidiary of Johnnic Holdings USA, Montauk Energy Capital LLC, has taken   a decision to dispose of certain of its non material passive landfill sites in  the next 12 months.                                                             – During the year under review, the group has entered into agreements to        dispose of its interest in the Mettle Group of Companies for an amount of R85   million, subject to certain remaining suspensive conditions, namely             Competition Commission approval. This approval is expected to be granted in     June 2008.                                                                      COMMENTARY                                                                      OVERVIEW OF RESULTS                                                             Group results                                                                   The group as a whole has performed well in an increasing difficult trading      environment, with some businesses outperforming and others delivering below     management`s expectations. Increases in revenue, EBITDA and operating profits   in the group`s media and gaming subsidiaries, together with the effects of the  recent acquisitions in these sectors have resulted in increases in both         headline profits (up 35%) and adjusted headline profits (up 37%) for the year   when compared to the prior year.                                                As reflected in the group`s results for the year ended 31 March 2007, the group acquired control of the Tsogo Sun Group with effect from 1 December 2006.       Accordingly the year under review is the first full reporting year where Tsogo  Sun Group is consolidated. The group`s share of the results of the Tsogo Sun    Group for the first eight months of the prior year were equity accounted, with  the remaining four months being fully consolidated.                             The consolidation of the results of the Tsogo Sun Group has resulted in         significant increases in many of the disclosable line items in the group income statement. As a result all of the line items in the income statement up to and  including profit for the year are not comparable with the prior year. The       profit attributable to HCI shareholders (up 52%), headline profit (up 35%) and  adjusted headline profit (up 37%) are comparable with that of the prior year.   The basic earnings per share, headline earnings per share and adjusted          headline earnings per share are also comparable with that of the prior year.    Basic earnings per share amounted to 702 cents for the year. This represents a  52% increase when compared to the prior year. This increase is due to the       continued improve d performance of the group`s major investments and the        group`s share of profits on the disposal of Johnson Crane Hire and the sale of  the Clover Ultramel business by Clover Industries Limited included in           investment surpluses and share of profits of associates respectively.           Headline earnings increased during the period to R689,5 million from R509,8     million in the prior year.                                                      Adjusted headline earnings, which your directors feel are more reflective of    the sustainable earnings of the group, increased by R190m from R509 million to  R699 million. Adjusted headline earnings exclude all abnormal profits and       losses and the effects of net deferred tax assets raised or expensed in respect of unused tax losses and available STC credits. Adjusted headline earnings per  share increased by 37% from 411 cents to 563 cents. This increase is mainly due to the continued improved overall performance of the group`s major investments  during the year.                                                                Group balance sheet                                                             As stated above the group is in the process of disposing off its interest in    the Mettle group of companies and has accordingly in line with IFRS 5,          disclosed the assets and liabilities of these businesses as held for sale. The  most notable effect of this disclosure is the significant reduction in the      group`s financial assets and financial liabilities when compared to the prior   year.                                                                           Non-current liabilities at year end comprise non-recourse debt that is          presently ringfenced in operating subsidiaries (R1 236m) and recourse debt at   the HCI corporate level (R1 000m). The increase in recourse debt at the HCI     Corporate level was used to fund the acquisition of further shares in Johnnic   Holdings Ltd.                                                                   During the period under review shareholders approved the specific repurchase of 1 million HCI shares from the Fabcos Group for a total consideration of R67     million.                                                                        INVESTMENTS                                                                     Media and broadcasting                                                          Sabido Investments (Pty) Limited (“Sabido”) – 63% interest                      HCI`s media interests have all been consolidated in Sabido. While remains  the primary asset in Sabido t here are a growing number of other media          businesses including Yfm; Cape Town Film Studios; Viamedia; eSat and various    properties that house studios and other media related businesses.               Sabido had an excellent year with strong revenue growth and well controlled     costs.                                                                          Business activities were concentrated on developing a multi-channel capacity    to enter the pay television market. We decided not to start a new pay bouquet   in competition with DSTV in light of the fact that several licences to operate  pay bouquets were simultaneously granted. Instead we have agreed to build       several pay channels for DSTV, the first of which, the 24 hour eNews channel,   is due to be launched from 1st June 2008.                                       We also launched our first channel in a neighbouring territory (Botswana) which takes our Africa expansion beyond program sales for the first time.             Sabido has also developed a significant property portfolio. It has acquired     Sasani Africa (Pty) Ltd which has given it considerable studio capacity in      Johannesburg needed for multi-channel broadcasting. Cape Town Film Studios is   finally set to be built with Wesgro and the City of Cape Town now being fully   on board. It is hoped the building of the studios will commence in the second   quarter of this financial year and will be completed over an 18 month period    thereafter.                                                                     Gaming, hotels and leisure                                                      Tsogo Sun Holdings (Pty) Ltd (“Tsogo Sun”) 34%-interest                         The group`s casino and hotel interests are held via holdings in Johnnic         Holdings Ltd (“Johnnic”) and Tsogo Investment Holding Company (Pty) Ltd. The    group controls Tsogo Sun Holdings and has an effective 34% interest therein as  well as a share of the minority interest in Suncoast giving HCI an effective    35% stake in Suncoast.                                                          During the year HCI increased its holding in Johnnic from 51% to 67% and        shareholders are referred to Johnnic`s financials and commentary for further    details.                                                                        The group`s review application against the Mpumalanga Gaming Board`s refusal to approve HCI`s acquisition of control over Tsogo Sun is currently set down for   hearing in April 2009.                                                          The improvements in Tsogo Sun`s performance are not obvious from reading the    comparables to our 2007 report as we only consolidated its results from         December 2006. The Tsogo Sun Group performed very well. Tsogo Sun Gaming        increased revenues by 15% and EBITDAR (before rentals) grew to R1 711m for      the year (up 21%) when compared to the prior year. Hotels had an outstanding    year with revenues increasing by 19% and EBITDAR (before rentals) growing to    R726m for the year (up 61%) when compared to the prior year. Net interest       bearing debt reduced to R718m at year end.                                      During the year the group continued its substantial refurbishments of its       hotels. StayEasy hotels are being constructed at Witbank and Rustenburg as      well as expanded at Century City and at Emnotweni.                              Several new management contracts have been entered into in Dubai and U.A.E.     Southern Sun Ikoyi Lagos is scheduled to open in October 2008.                  The SunSquare hotel built at the East End at Montecasino delivered some R14m    in EBITDA in its first year on a building cost of R98m making it the fastest    take off hotel in Southern Sun history. The east end development includes the   2 000 seat Teatro. Its opening show, The Lion King, was the most successful     event of its kind in South Africa selling some 550 000 tickets.                 At Hemingways a shopping centre is currently under development scheduled for    completion November 2009. The shopping centre at the Ridge has been completed.  Vukani Gaming Corporation (Pty) Ltd (“Vukani”) – 100% interest                  Vukani`s net gaming revenues increased to R169,2m (2007:R119,1m) Likewise its   machine-base grew to 2 087 machines (2007:1 525). EBITDA grew by 138% to R31m   (2007 : R13m) with the average GGR per machine up marginally.                   Increases in the cost base were occasioned by it operating across more regions  which each carry their own cost base rather than simply growing the machine     base significantly in established regions. The company incurred significant     further expenses bidding for a licence in the Free State which required it to   employ staff and secure potential sites ahead of licences being awarded. This   award was made but inexplicably excluded Vukani. This decision is currently     being challenged by Vukani.                                                     The cost base was further stretched by having to develop an organization in     Gauteng pursuant to an RFA in that region which is currently being tendered     for. It is expected an award will be made in the last quarter of this financial year.                                                                           Exhibitions and services – 67% interest and                                     Energy – 60.7% interest                                                         Details of these investments may be found in the commentary to the financial    results of Johnnic Holdings which are consolidated into HCI`s results.          Financial services                                                              Mettle (Pty) Limited (“Mettle”) – 100% interest                                 During the second half of the year, the group entered into agreements to        dispose of its interest in the Mettle Group of companies to a consortium led    by its management. The transaction is subject to Competition Commission         approval which is anticipated soon. The group will retain its interest in Noah  Financial Innovation, the stock broking firm, and certain property bare         dominiums.                                                                      Transport                                                                       Golden Arrow Bus Service (Pty) Ltd – 100% interest                              The group`s interest in Golden Arrow Buses continued to provide it with stable  earnings and strong cash flow. We anticipate this will come under a lot of      pressure in the coming year as the group has the view it will not be possible   to raise bus fares in line with the very significant cost pressures which are   driven mainly by diesel price rises. Hopefully short term sacrifices can be     recovered in future periods. Investment in new buses and the refurbishment of   the existing fleet continues with the object of improving the quality of our    service. Since acquiring the company in 2004, we have acquired 279 new buses    and refurbished a further 114 buses, approximately 37% of the entire fleet, at  a total cost of R327m.                                                          Food and beverages                                                              Clover Industries Limited (“Clover”) – 44% economic interest                    During the year under review, the group increased its interest in Clover`s      ordinary shares to 34.9%. HCI currently holds 44% of Clover`s preference        shares.                                                                         Clover has contributed R64,3m (2007: R28,8m) to HCI`s headline earnings.        Admittedly, the comparative was a low base, but the increase is encouraging.    The pre-tax segmental figure also includes the groups` share of the profit      from the disposal of the Ultramel business to Danone-Clover.       Disappointingly there has been no progress in restructuring the company`s  capital structure which remains tied to milk quotas of its suppliers.           Charges brought against the company relating to alleged offences under competition law in December 2006 remain outstanding. The allegations all relate to matters which preceded HCI`s acquiring its interest in Clover and the  company has provided a public refutation of these charges on its website

Information technology

Syntell (Pty) Limited (“Syntell”) – 50,01% interest   The improvement in results is primarily in consequence of Syntell which has     been operating a significant contract in Johannesburg for the whole year for the first time.


Industrial assets comprise primarily the group`s interests in Formex Industries and Johnson Access. The segmental results for the prior year include the   profits from Johnson Crane Hire that was disposed off at the beginning of the   financial year.

Formex Industries contributed R16,7m to second half profit before tax           Compared to R7,5m for the first half (total R24,2m for the year). The           improvement is mainly due to the profit contribution from the acquisition of    Autotube Manufacturing and improved operational efficiency in the pressings  division. The pulley division was only marginally profitable due to the   expensing of new business development costs and unbudgeted airfreight charges.  Johnson Access grew profit before tax by 59% compared to the prior year. The    increased profit was the result of the buoyant construction industry but a   reduced depreciation charge, necessitated by higher residual asset value assumptions, also had a significant impact. The business now operates in   excess of 300 access platforms.

HCI Khusela Coal (Pty) Ltd – 80% interest

HCI-Khusela Coal has developed three coal properties and expects to commence   mining on two of them in the immediate future. These properties ought to   contribute significantly to the group`s profit in the future once start-up  costs have been absorbed.


During the year under review, Mr R Garach was appointed an independent non-  executive director of the Company.


These results have been reviewed by the company`s auditors, PKF (Jhb) Inc.      Their unqualified review opinion is available for inspection at the registered  office of the company.


Your directors have resolved to declare ordinary dividend number 40 of 60 cents per HCI share. The last day to trade cum distribution will be Friday 27th June  2008. HCI shares will commence trading ex dividend as from Monday, 30 June 2008 and the record date will be Friday, 4 July 2008. The dividend will be paid on   Monday, 7 July 2008. Share certificates may not be dematerialised or   rematerialised between Monday 30 June 2008 and Friday, 4 July 2008, both days   inclusive.

For and behalf of the Board of Directors

MJA Golding  – Chairman

JA Copelyn – Chief Executive Officer