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INTERIM RESULTS

NTERIM REPORT TO SHAREHOLDERS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 1998

THE FOLLOWING ARE THE UNAUDITED RESULTS OF THE GROUP FOR THE SIX MONTHS ENDED 30 SEPTEMBER 1998 TOGETHER WITH THE COMPARATIVE FIGURES:
SUMMARISED GROUP INCOME STATEMENT SIX MONTHS ENDED YEAR ENDED 30 SEPTEMBER 31 MARCH
1998 1997 1988 R’000 R’000 R’000
OPERATING INCOME (LOSS) (3 095) (1 019) 2 935
NET INTEREST RECEIVED 5 926 4 750 11 049
INCOME BEFORE TAXATION 2 831 3 731 13 984
TAXATION (2 054) – (3 066)
NET INCOME 777 3 731 10 918
SHARE OF ASSOCIATED COMPANIES’ RETAINED INCOME 13 055 2 681 16 562
INCOME BEFORE NON-RECURRING ITEMS 13 832 6 412 27 480
NON-RECURRING ITEMS 42 500 1 345 2 666 –
GROUP 41 629 1 345 – –
ASSOCIATED COMPANY 871 – 2 666
GROUP NET INCOME 56 332 7 757 30 146
PREFERENCE DIVIDENDS ACCRUED 11 406 – –
INCOME ATTRIBUTABLE TO ORDINARY SHAREHOLDERS 44 926 7 757 30 146
ATTRIBUTABLE EARNINGS PER SHARE (CENTS) BEFORE NON-RECURRING ITEMS 0,7 2,4 9,1
AFTER NON-RECURRING ITEMS 12,9 2,9 9,9
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES ON WHICH THE ATTRIBUTABLE EARNINGS PER SHARE HAS BEEN CALCULATED (‘000) 347 477 266 507 303 441
ACTUAL NUMBER OF ORDINARY SHARES IN ISSUE AT END OF PERIOD (‘000) 353 157 313 884 346 961
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES ON WHICH THE ATTRIBUTABLE EARNINGS PER SHARE HAS BEEN CALCULATED (‘000) 347 477 266 507 303 441
ACTUAL NUMBER OF ORDINARY SHARES IN ISSUE AT END OF PERIOD (‘000) 353 157 313 884 346 961

SUMMARISED GROUP BALANCE SHEET 30 SEPTEMBER 31 MARCH 1998 1998 R’000 R’000
FUNDS EMPLOYED SHAREHOLDERS’ INTEREST 1 142 754 1 074 828
PREFERENCE SHARE CAPITAL 251 970 46 693
OUTSIDE SHAREHOLDERS’ INTEREST 3 375 3 375
LONG TERM LIABILITIES 170 538 92 635
CURRENT LIABILITIES 19 812 13 901 1 588 449 1 231 432
EMPLOYMENT OF FUNDS FIXED ASSETS 219 64
INVESTMENTS 1 338 562 1 229 014 –
ASSOCIATED COMPANIES 822 511 394 556 –
NON-CONSOLIDATED SUBSIDIARIES 119 912 116 461 –
OTHER INVESTMENTS 396 139 717 997
CURRENT ASSETS 249 668 2 354 1 588 449 1 231 432

NET ASSET VALUE PER SHARE (CENTS) INVESTMENTS AT COST 3,24 3,10
INVESTMENTS AT MARKET/DIRECTORS’ VALUE (AT 15 DECEMBER 1998) 6,80 9,10
NET ASSET VALUE PER SHARE (CENTS) INVESTMENTS AT COST 3,24 3,10
INVESTMENTS AT MARKET/DIRECTOR’S VALUE (AT 15 DECEMBER 1998) 6,80 9,10 NOTES

1. BACKGROUND THE GROUP CONTINUED TO EXPAND IN ITS FIVE PRINCIPAL AREAS OF INVESTMENT, NAMELY TELECOMMUNICATIONS, INFORMATION TECHNOLOGY, FINANCIAL SERVICES, MEDIA AND GAMING.

2. NEW INVESTMENTS THE GROUP MADE A NUMBER OF EXCITING INVESTMENTS DURING THE PERIOD UNDER REVIEW. THESE ACQUISITIONS ARE SUMMARISED BELOW.
* A 30% INTEREST IN METTLE LTD (PREVIOUSLY BFS CAPITAL LTD). METTLE 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% 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 COMPANIES ARE MARKET LEADERS IN THEIR RESPECTIVE FIELDS AND HAVE EXCLUSIVE DISTRIBUTION AGREEMENTS WITH THEIR RESPECTIVE INTERNATIONAL SUPPLIERS.
* A 10% STAKE IN ATLANTIC INTERNATIONAL ENTERTAINMENT LTD (AIE). AIE IS A FULLY REPORTING PUBLIC COMPANY LISTED ON THE NASDAQ OVER THE COUNTER (OTC) BULLETING BOARD, AND INCORPORATED IN DELAWARE, UNITED STATES. AIE DEVELOPS AND MARKETS INTERACTIVE AND PRIVATE NETWORK TRANSACTION-BASED PRODUCTS FOR THE CASINO, GAMING/WAGERING AND ENTERTAINMENT INDUSTRIES.
* A 22% INTEREST IN IQ BUSINESS GROUP (PTY) LTD. IQ BUSINESS GROUP SPECIALISES IN THE HOLISTIC DESIGN, IMPLEMENTATION AND MANAGEMENT OF TECHNOLOGY-ENABLED BUSINESS PROCESSES.
* A 26% INTEREST IN LOTTOYETU (A BID FOR THE NATIONAL LOTTERY). HCI HAS PARTNERED WITH INTERNATIONAL GAMING NETWORK (IGN) AND OTHER EMPOWERMENT AND PHILANTHROPIC GROUPS IN THE BID FOR SOUTH AFRICA’S FIRST NATIONAL LOTTERY.
* AN ADDITIONAL 13,58% INTEREST IN UNIBANK GROUP LTD, THUS INCREASING THE GROUP’S INTEREST IN UNIBANK TO 46,17%.
* AN ADDITIONAL 1,6% INTEREST IN DATATEC LTD, THUS INCREASING THE GROUP’S INTEREST IN DATATEC TO 8%.
* AN ADDITIONAL INTEREST IN MIDI TV (PTY) LIMITED, THUS INCREASING THE GROUP’S INTEREST IN MIDI TV TO 34%.

3. OPERATIONS & RESULTS FOR THE PERIOD EARNINGS PER SHARE INCORPORATED 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. MIDI TV WAS EQUITY ACCOUNTED FOR THE FIRST TIME AND RECORDED A LOSS OVER THE INTERIM PERIOD.
IT IS ANTICIPATED THAT THE START-UP COSTS IN MIDI-TV WILL RESULT IN LOSSES IN THIS COMPANY OVER THE NEXT THREE YEARS.
THE NON-RECURRING ITEMS ARE ATTRIBUTABLE TO THE UNBUNDLING OF SAFLIFE OVER THE PERIOD UNDER REVIEW AND THE SALE OF CERTAIN NON-CORE ASSETS UNBUNDLED FROM SAFLIFE. THE NET ASSET VALUE PER SHARE HAS INCREASED FROM 435C IN SEPTEMBER 1997 TO THE PRESENT 680C PER SHARE REPRESENTING A 56% INCREASE.

4. DIVIDENDS THE DIRECTORS HAVE DECIDED NOT TO DECLARE A DIVIDEND AS 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.

5. PROSPECTS FOR THE FUTURE THE COMPANIES IN WHICH THE GROUP IS NOW INVESTED OFFER EXCITING PROSPECTS IN THEIR FIELDS. THESE INVESTMENTS WILL BE CONSOLIDATED IN THE CURRENT FINANCIAL YEAR AND NEW OPPORTUNITIES WILL BE SOUGHT TO COMPLEMENT THEM. THE DIRECTORS ARE SATISFIED THAT THE COMPANIES IN WHICH THE GROUP OWNS STRATEGIC STAKES WILL PROSPER IN THE YEAR AHEAD.
TELECOMMUNICATIONS – VODACOM IS EXPECTED TO CONTINUE TO SIGNIFICANTLY GROW ITS SUBSCRIBER BASE. IN ADDITION, THE GROUP’S SUBSTANTIAL CASH FLOWS WILL ENABLE THE GROUP TO ENTER THE INTERNET ARENA.
INFORMATION TECHNOLOGY – HCI CONTINUES TO INCREASE ITS INVOLVEMENT IN THE INFORMATION TECHNOLOGY SECTOR WHICH IS EXPECTED TO SHOW STRONG GROWTH INTO THE FUTURE.
FINANCIAL SERVICES – BOTH UNIBANK AND METTLE ARE EXPECTED TO SHOW SIGNIFICANT GROWTH OVER THE NEXT FEW YEARS. BOTH COMPANIES ARE LIKELY TO BE LISTED DURING THE NEXT 12 MONTHS.
MEDIA – HCI INTENDS EXTENDING ITS INTEREST IN THE MEDIA SECTOR OVER THE NEXT 12 MONTHS IN ORDER TO BROADEN ITS EXPOSURE TO A SOUND, GROWING INDUSTRY.
GAMING – HCI 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 SUCCESSFUL, THESE OPPORTUNITIES CAN PROVIDE THE GROUP’S SHAREHOLDERS WITH SIGNIFICANT BLUE SKY DURING THE YEAR IF THE GROUP IS SUCCESSFUL.
THE CURRENT INVESTMENTS WITHIN THE GROUP ARE PERFORMING WELL AND THE DIRECTORS EXPECT THIS TO CONTINUE OVER THE NEXT PERIOD.

Source: HCI