+15,5% REVENUE

+35,1% EBITDA


(For results, please see pdf on the financial section of the website)


Our headline profits were up some 34% on the same period last year which is pleasing by any standards. This was achieved by our main assets growing attributable earnings more than 20% over the previous period, two of our growth subsidiaries starting to come seriously into their own. Both HCI Coal and Vukani Gaming more than doubled headline profit over the period and the turnaround at Seardel, which resulted in more than a R50m loss for the previous period disappearing in this year`s interims. The results are all the more impressive for the fact that they include a R45m provision for a long outstanding tax issue arising from two Johnnic Holdings structured property transactions done more than ten years ago and raised for the first time following a settlement with SARS.

The group has continued to busy itself with new activity on several fronts. In the casino area Tsogo Sun Holdings bought out a significant minority from the Suncoast casino, effectively raising its interest in that casino to 90%. In the hotel space Southern Sun Hotels purchased The Grace Hotel in Rosebank, Johannesburg. Montauk Energy Capital has succeeded in concluding an extended gas usage agreement for twenty years at Bowerman California which is a significant milestone to finally developing its electricity project there. HCI has likewise been very active in developing a partnership with Sun Edison, a company bidding to be a supplier of solar-based electricity to Eskom which is currently on tender. If it is successful it is intended to partner with this company together with the J & J Group.

DIVIDEND TO SHAREHOLDERS The directors of HCI have resolved to declare ordinary dividend number 44 of 20 cents per HCI share. The last day to trade cum dividend will be Friday 2 December 2011. HCI shares will commence trading ex dividend as from Monday, 5 December 2011 and the record date will be Friday, 9 December 2011. The dividend will be paid on Monday, 12 December 2011. Share certificates may not be dematerialised or rematerialised between Monday, 5 December 2011 and Friday, 9 December 2011, both days inclusive.

NOTES The results for the six months ended 30 September 2011 have been prepared in accordance with International Financial Reporting Standards (“IFRS”), specifically IAS 34: Interim Financial Reporting, the AC 500 series of interpretations as issued by the Accounting Practices Board (“APB”) the requirements of the South African Companies Act, 2008, 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 2011 except as noted below. As required by the JSE Limited Listings Requirements, the group reports headline earnings in accordance with Circular 3/2009: Headline Earnings as issued by the South African Institute of Chartered Accountants.

The group early adopted the amendments to IAS 12 that was released in December 2010 for the results for the year ended 31 March 2011. In terms of this amendment there is a rebuttable presumption that the carrying value of investment property will ultimately be recovered through sale and therefore the deferred tax liabilities raised on the revaluations should be done at the CGT rate being 14%. The impact of this early application was that the opening equity for the comparative interim results for the period ended 30 September 2010 was increased by R8.8 million.

These financial statements were prepared under the supervision of the financial director, Mr T.G. Govender, B.Compt(Hons).


Media and broadcasting

During the period under review Sabido Investments acquired a 100% interest in Powercorp International Limited, a London based global content distributor of films and television series with effect from 21 July 2011. An interest of 90% and 80% in Media Film Equipment Services (Pty) Ltd and Media Film Services Incorporated, respectively, were acquired with effect from 1 September 2011. These entities sell and rent specialised equipment to the film industry. The acquired businesses contributed revenues of R8.7m and net losses after tax of R10.4m to the group for the six month period ended 30 September 2011. Had the acquisition been effective on 1 April 2011, the contribution to revenue would have been R47.1m and losses of R9.3m would have been the contribution to profit after tax.

The details of the net assets acquired on the above business combinations, for which the purchase price has been allocated to the respective assets and liabilities, is as follows: 2011


Non-current assets 77 407

Current assets 76 942

Non-current liabilities (15 306)

Current liabilities (41 134)

Net assets acquired 97 910

Minority interest 3 565

Goodwill on acquisition 1 791

Cash balances acquired (11 224)

Net cash paid 92 041

The acquisitions of Powercorp International, Media Film Equipment Services and Media Film Services have been provisionally accounted for as permitted by IFRS 3. The purchase price allocation will be completed within 12 months from the respective dates of acquisition and any resulting adjustments to assets and liabilities acquired will be accounted for accordingly.

Discontinued operations and non-current assets held for sale

Discontinued operations as disclosed in the group income statement for the period under review relates to the following:

– The door module and pulley division of Formex Industries (Pty) Limited; and

– Certain clothing divisions of Seardel Investment Corporation Limited.

Discontinued operations as disclosed in the group income statement for the prior comparable period relates mainly to the results of the group`s casino gaming and hotel business, following the merger of the group`s major gaming and hotel subsidiary, Tsogo Sun Holdings (Pty) Limited with Gold Reef Resorts Ltd (GRR), culminating in the reverse listing of the Tsogo Sun group on the JSE Limited in March 2011, and resulting in the group diluting its interest in the new merged company from 51% to 41.3%. Accordingly, due to the loss of control over this business, the results for the prior comparable period have been restated and are reflected under discontinued operations.

The non-current assets held for sale, as disclosed in the group balance sheet, relate to the following:

– The remaining assets of the pulley division of Formex, the operations of which had ceased in the year to March 2010; and

– Certain assets of the Seardel group which have been committed to being disposed of following the closure of the related divisions.

Comparative figures in the income statement have been restated to reflect the above changes.

Group income statement

The group results reflect an overall increase of 39% in earnings attributable to HCI shareholders and an increase of 34% in headline earnings.

Revenue has grown by 16% over the period when compared to the prior period mainly due to increased advertising spend in the media and broadcasting sector and increased contributions from mining, limited payout gaming, information technology and natural gas. Costs have been well controlled resulting in group EBITDA growing by 35% in comparison to the prior period.

Profit from associates and joint ventures for the period is significantly higher due to the equity-accounted earnings of the group`s 41.3% interest in Tsogo Sun Holdings Ltd which was consolidated and included in discontinued operations for the prior comparable period.

Included in investment surplus is the profits on the disposal of the Gallagher Estate conferencing and exhibition business and a further R6m in additional proceeds on sale relating to the sale of the group`s interest in Mettle Ltd in April 2008.

Group balance sheet and cash flow

The comparative amounts for the period ended 30 September 2010 are not comparable due to Tsogo Sun Holdings Ltd not being consolidated on a line-by-line basis in the current period as a result of the group`s loss of control following the Tsogo Sun/Gold Reef merger and the investment now being reflected under interest in associates and joint ventures. The balance sheet at 31 March 2011 is comparable to the balance sheet at 30 September 2011.

The group`s overall financial position remains strong with the major businesses still generating strong cash flows.

Group long-term borrowings at 30 September 2011 comprise borrowings of R1 452m at head office level (including the R500m of preference shares outstanding to Nafhold) and R665m in operating subsidiaries.

The cash flow statement is not comparable to the prior period due to the accounting treatment of the group`s investment in Tsogo Sun Holdings Ltd.

Included in cash flows from investing activities is the investment made in HCI Investments Australia Pty Ltd (R297m), media distribution rights (R134m), acquisition of media-related entities (R92m) and capital expenditure relating to property, plant and equipment.