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YEAR END RESULTS

HCI reported operating loss of -R2 431 000 for the year ended 31 March 2000 (-R5 297 000).
Profit attributable to ordinary shareholders amounted to R347 550 000 (R37 798 000).
Headline earnings/loss per share were -21,9c (-8,4c).

PRELIMINARY REPORT TO SHAREHOLDERS FOR THE YEAR ENDED 31 MARCH 2000

THE FOLLOWING ARE THE AUDITED RESULTS OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2000 TOGETHER WITH THE COMPARATIVE FIGURES:

ABRIDGED INCOME STATEMENTS YEAR ENDED
31 MARCH
2000 1999
R’000 R’000
OPERATING LOSS (2 431) (5 297)
INVESTMENT INCOME 27 113 21 367
SHARE OF ASSOCIATED COMPANIES’ LOSSES (86 934) (1 895)
NON-RECURRING ITEMS 428 935 67 637
PROFIT BEFORE TAXATION 366 683 81 812
TAXATION 7 909 10 633
PROFIT BEFORE PREFERENCE DIVIDENDS 358 774 71 179
PREFERENCE DIVIDENDS PAYABLE 11 224 33 381
PROFIT ATTRIBUTABLE TO ORDINARY SHAREHOLDERS 347 550 37 798
EARNINGS/(LOSS) PER SHARE (CENTS) HEADLINE (21,9) (8,4)
BASIC 93,7 10,6
WEIGHTED AVERAGE NUMBER OF SHARES IN ISSUE (‘000) 371 039 355 892

ABRIDGED BALANCE SHEETS RESTATED

31 MARCH 31 MARCH
2000 1999
R’000 R’000
ASSETS NON-CURRENT ASSETS 3 599 609 3 618 244
EQUIPMENT 153 151 INVESTMENTS 3 599 456 3 618 093
CURRENT ASSETS 11 548 5 188
TOTAL ASSETS 3 611 157 3 623 432
EQUITY AND LIABILITIES
ORDINARY SHAREHOLDERS’ EQUITY 3 399 389 2 994 665
OUTSIDE SHAREHOLDERS’ INTEREST AND PREFERENCE SHARES 75 375 271 068
NON-CURRENT LIABILITIES 25 785 82 285
CURRENT LIABILITIES 110 608 275 414
TOTAL EQUITY AND LIABILITIES 3 611 157 3 623 432

ABRIDGED CASH FLOW STATEMENTS YEAR ENDED 31 MARCH
2000 1999
R’000 R’000
CASH FLOW FROM OPERATING ACTIVITIES (206 366) 174 338
NET INTEREST INCOME 19 777 20 617
CASH FLOW FROM INVESTING ACTIVITIES FIXED ASSETS ACQUIRED (57) (153)
INVESTMENTS AND LOANS MADE (376 922) (1 003 518)
PROCEEDS ON DISPOSAL OF INVESTMENTS 780 491 496 762
CASH FLOW FROM FINANCING ACTIVITIES ORDINARY CAPITAL RAISED 14 243 65 458
PREFERENCE SHARE CAPITAL AND TERM FUNDING (252 193) 210 650
INCREASE IN CASH AND CASH EQUIVALENTS (21 027) (35 846)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR (45 037) (9 191)
AT END OF YEAR (66 064) (45 037)

STATEMENT OF CHANGES IN EQUITY
SHARE SHARE REVALUATION INVESTMENT EQUITY RETAINED CAPITAL PREMIUM SURPLUS SURPLUS RESERVES INCOME
R’000 R’000 R’000 R’000 R’000 R’000
BALANCES 1 APRIL 1998 86 740 941 675 49 657 (3 244)
SHARE CAPITAL AND PREMIUM SHARES ISSUED 4 590 60 868
CURRENT OPERATIONS PROFIT ATTRIBUTABLE TO ORDINARY SHAREHOLDERS 37 798
TRANSFER ON REALISATION OF INVESTMENTS 112 194 (44 557) (67 637)
TRANSFER OF CURRENT EQUITY EARNINGS (1 895) 1 895
REVALUATION CURRENT REVALUATION SURPLUS 1 816 581
BALANCES 31 MARCH 1999 91 330 1 002 543 1 816 581 112 194 3 205 (31 188)
SHARE CAPITAL AND PREMIUM SHARES ISSUED 1 430 12 866
SHARE ISSUE EXPENSES (53)
CURRENT OPERATIONS PROFIT ATTRIBUTABLE TO ORDINARY SHAREHOLDERS 347 550
TRANSFER ON REALISATION OF INVESTMENTS 372 543 (3 205) (369 338)
REVALUATION CURRENT REVALUATION SURPLUS 1 379 556
UNBUNDLING DIVIDEND (1 336 625)
BALANCES 31 MARCH 2000 92 760 1 015 356 1 859 512 484 737 – (52 976)

COMMENTARY
1. EVENTS AND DEVELOPMENTS THE GROUP HAS HAD AN EXTREMELY SUCCESSFUL YEAR WITH THE MAJOR INVESTMENTS PERFORMING RELATIVELY WELL DESPITE THE TURBULENT ECONOMIC AND MARKET CONDITIONS THAT HAVE PREVAILED.

EXISTING INVESTMENTS THE GROUP’S MAJOR INVESTMENT, BEING ITS 5% INTEREST IN UNLISTED VODACOM GROUP (PTY) LTD, HAS FLOURISHED IN THE LAST THREE YEARS SINCE THE GROUP’S ACQUISITION OF THIS INVESTMENT IN JANUARY 1997 FOR R390 MILLION. THIS INVESTMENT IS PRESENTLY VALUED AT R2,8 BILLION. IN COMPARISON TO VALUATIONS OF OTHER SIMILAR LISTED TELECOMMUNICATION COMPANIES, THIS IS CONSERVATIVE. CELLULAR TELEPHONY CONTINUES TO BE A RAPIDLY EXPANDING INDUSTRY IN SOUTHERN AFRICA, WITH VODACOM THE LEADING CELLULAR NETWORK OPERATOR ON THE AFRICAN CONTINENT WITH AN ESTIMATED 61% SHARE OF THE SOUTH AFRICAN MARKET AND A SUBSCRIBER BASE IN EXCESS OF THREE MILLION.
THE GROUP’S INVESTMENT IN MIDI TV (PTY) LTD HAS BEEN RESTRUCTURED DUE TO THE NON-PERFORMANCE OF 45% OF THE SHAREHOLDERS OF THE TV STATION. THE INDEPENDENT BROADCASTING AUTHORITY (“IBA”) HAS SANCTIONED THE TRANSFER OF THE LOCAL SHAREHOLDERS’ INTERESTS IN MIDI TV TO A NEW VEHICLE, SABIDO INVESTMENTS (PTY) LTD, WHICH NOW HOLDS 88% OF THE EQUITY SHARE CAPITAL OF THE TV STATION. ALL OF THE LOCAL SHAREHOLDERS OF MIDI TV HAVE BEEN ISSUED SHARES IN SABIDO INVESTMENTS (PTY) LTD IN EXCHANGE FOR TRANSFERRING THEIR SHARES IN MIDI TV. THE SHAREHOLDERS’ LOAN ACCOUNTS IN MIDI TV HAVE BEEN CAPITALISED TO EQUITY SHARE CAPITAL. SUBSEQUENT TO YEAR-END, REMBRANDT GROUP LIMITED INVESTED R280 MILLION INDIRECTLY INTO MIDI TV FOR AN EFFECTIVE 26% INTEREST THEREIN. THE EXACT STRUCTURING OF THIS INVESTMENT IS SUBJECT TO APPROVAL BY THE IBA. AS A RESULT OF ALL OF THE ABOVE, HCI CURRENTLY CONTROLS MIDI TV AND HOLDS AN EFFECTIVE 52% INTEREST THEREIN. MIDI TV (PTY) LTD HAS BEEN THROUGH AN EXCEPTIONALLY DIFFICULT YEAR AND THIS HAS NECESSITATED HCI INTERVENING IN THE MANAGEMENT OF THE BUSINESS, BRINGING IN A MORE WIDELY EXPERIENCED TEAM. YOUR DIRECTORS REMAIN OF THE VIEW THAT MIDI TV IS AN INVESTMENT WHICH WILL IN TIME BRING HIGHLY SATISFACTORY RETURNS. IT IS HOWEVER EXPECTED TO MAKE SUBSTANTIAL LOSSES FOR THE NEXT TWO YEARS.
METTLE LIMITED’S RESULTS FOR THE YEAR HAVE BEEN HIGHLY GRATIFYING, BEING SUBSTANTIALLY INCREASED FROM LAST YEAR. METTLE LIMITED POSTPONED ITS INTENTION TO LIST ON THE JOHANNESBURG STOCK EXCHANGE PENDING AN IMPROVEMENT IN THE STOCK MARKET CLIMATE.
THE GROUP DISPOSED OF ITS INVESTMENT IN DATATEC LIMITED. THE PROCEEDS OF R650 MILLION WERE UTILISED TO LIQUIDATE THE DEBT IN THE GROUP AND RECAPITALISE CURRENT INVESTMENTS.
NEW INVESTMENTS HCI ACQUIRED AN 80% INTEREST IN RED PEPPER PICTURES (PTY) LTD DURING THE YEAR. RED PEPPER PICTURES IS AN AWARD WINNING TELEVISION PRODUCTION COMPANY FOCUSING ON THE ESTABLISHMENT OF A ONE-STOP SHOP FOR THE TELEVISION AND ADVERTISING INDUSTRY.
SUBSEQUENT TO YEAR-END, THE GROUP INCREASED ITS INVESTMENT IN METTLE LIMITED BY ACQUIRING A FURTHER 17% INTEREST FROM THE BOARD OF EXECUTORS.

2. OPERATIONS AND RESULTS FOR THE YEAR THE BUSINESS OPERATIONS OF HCI ENTAIL INVESTING IN OPPORTUNITIES AS IDENTIFIED BY THE BOARD OF DIRECTORS AND TO ADD VALUE TO SUCH INVESTMENTS OVER TIME. THE COMPANIES IN WHICH THE GROUP HAS INVESTED CONTINUE TO OFFER EXCELLENT PROSPECTS IN THEIR FIELDS. THE INVESTMENTS ARE CONSTANTLY REVIEWED AND NEW ONES SOUGHT TO COMPLEMENT THEM. THE DIRECTORS ARE CONFIDENT THAT THE GROUP WILL CONTINUE TO DELIVER SATISFACTORY GROWTH.
EARNINGS PER SHARE INCORPORATE ONLY THE RESULTS OF THOSE COMPANIES EQUITY ACCOUNTED TOGETHER WITH INTEREST AND DIVIDENDS RECEIVED FROM INVESTMENTS. ACCORDINGLY, EARNINGS PER SHARE IS NOT INDICATIVE OF THE PERFORMANCE OF ALL THE UNDERLYING COMPANIES IN WHICH INVESTMENTS ARE HELD.
THE HEADLINE LOSS PER SHARE HAS ARISEN DUE TO THE EQUITY ACCOUNTED LOSSES OF MIDI TV (PTY) LTD.
THE NON-RECURRING ITEMS ARE MAINLY ATTRIBUTABLE TO THE PROFIT ON THE SALE OF THE GROUP’S INTEREST IN DATATEC LIMITED. IT ALSO INCLUDES FURTHER PROFITS REALISED ON THE SALE OF THE GROUP’S INTEREST IN UNLISTED UNIBANK GROUP LIMITED TO LISTED UNIBANK INVESTMENT HOLDINGS LIMITED IN MARCH 1999 AS A RESULT OF CERTAIN PROFIT WARRANTIES HAVING BEING ACHIEVED. THE UNBUNDLING WAS EFFECTED THROUGH AN APPLICATION OF RESERVES ARISING FROM A REVALUATION OF THE INVESTMENTS OF THE GROUP.
THE GROUP HAS CHANGED ITS ACCOUNTING POLICY TO REFLECT INVESTMENTS AT FAIR VALUE WITH REVALUATIONS BEING DONE ON AN ANNUAL BASIS. ACCORDINGLY, THE COMPARATIVE FIGURES IN THE GROUP BALANCE SHEET HAVE BEEN RESTATED. THE NET ASSET VALUE PER SHARE HAS INCREASED BY 70% FROM R5,67 PER SHARE IN JUNE 1999 (AFTER ADJUSTING FOR THE UNBUNDLING TRANSACTIONS) TO THE PRESENT R9,65 PER SHARE.

3. DISTRIBUTIONS TO SHAREHOLDERS
THE GROUP UNBUNDLED ITS INVESTMENTS IN UNIBANK INVESTMENT HOLDINGS LIMITED AND SOFTLINE LIMITED BY DISTRIBUTING THE SHARES IN THESE COMPANIES AS A DIVIDEND IN SPECIE TO ITS SHAREHOLDERS. THIS REPRESENTED R1,035 BILLION IN VALUE ON THE DATE OF THE UNBUNDLING WHICH WAS EQUIVALENT TO R2,80 PER HCI SHARE.

THE DIRECTORS HAVE DECIDED NOT TO DECLARE A DIVIDEND FOR THE YEAR ENDED 31 MARCH 2000. 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 THE PROSPECTS FOR THE GROUP OVER THE COMING MONTHS REMAIN EXCITING.
THE KEY FOCUS OF THE GROUP REMAINS CONCENTRATED ON THE EXPANSION AND CONSOLIDATION OF ITS INTERESTS IN THE MEDIA, BROADCASTING, INFORMATION TECHNOLOGY, FINANCIAL SERVICES AS WELL AS GAMING AND ENTERTAINMENT SECTORS. WITH PROSPECTS FOR GROWTH IN THE ECONOMY LOOKING BETTER, THE GROUP REMAINS CONFIDENT THAT INVESTMENT OPPORTUNITIES THAT MEET ITS INVESTMENT CRITERIA WILL CONTINUE TO PRESENT THEMSELVES.

Source: HCI