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HUGE GROUP LIMITED - Reviewed Provisional Condensed Consolidated Annual Financial Results for the year ended 28 February 2019

Release Date: 03/06/2019 17:44
Code(s): HUG     PDF:  
 
Wrap Text
Reviewed Provisional Condensed Consolidated Annual Financial Results for the year ended 28 February 2019

HUGE GROUP LTD
(Registration number 2006/023587/06)
Share code: HUG ISIN: ZAE000102042
("Huge" or "the Company")

REVIEWED PROVISIONAL CONDENSED CONSOLIDATED ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2019

HIGHLIGHTS

-      Gross dividend declared of 12.5 cents per share (0.00 cents in FY2018)
-      Total revenue increased by 8% from R401 million to R433 million
-      EBITDA increased by 16% from R129 million to R149 million
-      Operating profit increased by 8% from R113 million to R122 million
-      Basic earnings per share increased by 20% from 47.40 cents per share to 56.84 cents per share
-      Headline earnings per share increased by 20% from 46.34 cents per share to 55.81 cents per share

The board of directors (the Board or the Directors) of Huge is pleased to present the reviewed provisional
condensed consolidated annual financial results of the Company, its subsidiary companies and joint
venture (the Group) for the year ended 28 February 2019.

COMPANY PROFILE

Huge is company listed on the Main Board of the JSE Limited (the JSE).

It has four principal operating subsidiary companies:

-      Huge Connect Proprietary Limited (Huge Connect)
-      Huge Networks Proprietary Limited (Huge Networks)
-      Huge Software Proprietary Limited (Huge Software)
-      Huge Telecom Proprietary Limited (Huge Telecom)

Huge Connect is a telecommunications services company with a focus on growing its payment
connectivity services. It was established in 2004 and provides connectivity to the card payment
terminals of merchants, payment service providers and the commercial banks in South Africa by
making use of secure, managed, dual SIM connectivity over GSM data networks. The company has
also expanded into other markets for payment connectivity, including connectivity for ATMs, integrated
points of sale, medical/script verifications, telemetry applications, micro-lending applications and cash vaults.

Huge Networks is a network service provider and data communications company that markets and
sells a variety of products and services including internet data services, managed network services,
branch connectivity, hosting services and website and system development. Huge Networks is a
subsidiary of Huge Telecom. Prior to the end of the financial year, Huge Networks concluded
agreements with Otel Communications Proprietary Limited and Otel Business Proprietary Limited
(collectively referred to as Otel) which contemplated the acquisition by Huge Networks of the
businesses of Otel (the Otel Transaction). These agreements became unconditional on 27 February 2019. 
The purchase consideration for the Otel Transaction was settled in Huge Networks ordinary shares,
such that, after the issue of shares, Huge Telecom's shareholding in Huge Networks decreased from
100% to 50.03%.

Huge Software is an accounting software development company. It is a 75% held subsidiary of Huge.
Huge Software presently offers two products to the SME market, being WebAccounting and its online
Application, Webatar.

Huge Telecom is a voice connectivity or telephony services business that makes use of GSM to provide
a wireless 'last mile' connection from the customer's premises to the core of a mobile telephone
network (the last mile is the final connection from the core network to the customer's premises). Its
principal service is substituting fixed-line voice infrastructure, like that provided by a public switched
telephone network such as Telkom, with wireless GSM services. Huge Telecom's customer base
comprises corporate organisations of any size and residential consumers, who require a fixed location
telephony service.

REVIEWED PROVISIONAL CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

                                                                         Reviewed             Audited
                                                                 28 February 2019    28 February 2018
                                                                           FY2019              FY2018
                                                                      (12 months)         (12 months)
                                                                            R'000               R'000
Total revenue                                                             432 662             401 382
Gross profit                                                              257 320             224 538
Other income                                                               17 447               2 580
Operating expenses                                                      (123 943)           (101 113)
Movement in credit loss allowances                                        (2 197)               2 465
EBITDA                                                                    148 627             128 470
Depreciation and Amortisation                                            (26 592)            (15 495)
Operating profit                                                          122 035             112 975
Investment income                                                           3 505               4 332
Gain on sale of investment                                                   1530
Share of (losses) / earnings from equity                    
accounted investments                                                        (19)                (72)
Impairment of property, plant and
equipment                                                                                     (2 794)
Reversal of impairment of financial assets                                    509               4 520
Finance costs                                                            (15 339)            (11 036)
Profit before taxation                                                    112 221             107 925
Income tax credit / (expense)                                            (21 716)            (30 861)
Net profit for the period                                                  90 506              77 064
Non-controlling interest                                                  (3 087)                 223
Net profit attributable to owners of the                    
company                                                                    93 593              76 841
Basic earnings per share (cents)                                            56.84               47.40
Diluted basic earnings per share (cents)                                    56.55               47.40

REVIEWED PROVISIONAL CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

                                                                         Reviewed             Audited
                                                                 28 February 2019    28 February 2018
                                                                           FY2019              FY2018
                                                                      (12 months)         (12 months)
                                                                            R'000               R'000
ASSETS
Non-current assets
Property, plant and equipment                                             226 682             178 669
Goodwill                                                                  609 821             593 443
Intangible assets                                                          13 431               8 680
Investment in joint venture                                                   597                 616
Investment in associates                                                       10                   -
Loans to group companies                                                   62 401                   -
Loans receivable                                                            8 454               7 496
Contract assets                                                            14 912                   -
Investments at fair value                                                  45 006                   -
Finance lease receivable                                                    1 777                   -
Deferred tax                                                               16 453              12 805
                                                                          999 544             801 709
Current assets
Inventories                                                                 2 510               1 219
Loans to group companies                                                    4 208                   -
Loans to shareholders                                                          13                   -
Loans receivable                                                               10                   -
Trade and other receivables                                                65 093             103 284
Finance lease receivables                                                     608                   -
Current tax receivable                                                      1 891                  15
Cash and cash equivalents                                                  23 958              30 265
                                                                           98 292             134 783
Total assets                                                            1 097 836             936 492
EQUITY AND LIABILITIES
Share capital                                                             605 893             618 772
Share based payment reserve                                                 2 277
Retained earnings                                                         223 474             128 774
Equity attributable to equity holders of parent                           831 665             747 546
Non-controlling interest                                                    5 667             (3 016)
                                                                          837 312             744 530
Non-current liabilities
Interest bearing liabilities                                               96 536              82 500
Finance lease liabilities                                                   4 455               2 155
Deferred tax                                                               37 539              30 670
                                                                          138 530             115 325

Current liabilities
Interest bearing liabilities                                               73 989              22 199
Current tax payable                                                         2 267               9 683
Finance lease liabilities                                                   3 175               1 918
Deferred income                                                               587                   -
Trade and other payables                                                   39 225              41 506
Bank overdraft                                                              2 751               1 331
                                                                          121 994              76 637

Total liabilities                                                         260 524             191 962
Total equity and liabilities                                            1 097 836             936 492

Number of ordinary shares in issue ('000)                                 175 627             175 602
Net asset value per share (cents)                                          476.76              423.99
Net tangible asset value per share (cents)                                 121.88               81.10

REVIEWED PROVISIONAL CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

                                                    Share                      
                                                    based                        Non-
                             Share       Share    payment   Accumulated   controlling      
                           capital     premium    reserve        profit      interest    Total equity
                             R'000       R'000      R'000         R'000         R'000           R'000
Audited Balance as              12     319 409          -        51 933       (3 001)         368 353
at 1 March 2017
Profit for the year              -           -          -        76 841           223          77 064
Issue of shares                  5     299 346          -             -             -         299 351
Business                         -           -          -             -         (238)           (238)
combinations
Audited Balance as              17     618 755          -       128 774       (3 016)         744 530
at 28 February 2018
Profit for the year              -           -          -        93 593       (3 087)          90 506
Issue of shares                  -         225          -             -             -             225
Capital raising                  -       (729)          -             -             -           (729)
expenses
Elimination of                   -    (12 375)          -                           -        (12 375)
treasury shares
Share-based                      -           -      7 038                           -           7 038
payment
Common control                   -           -          -       (4 761)             -         (4 761)
transaction
Derecognition of                 -                                (133)           133               -
non-controlling
interest
Business                         -                                1 241        11 636          12 878
combinations
Reviewed Balance                17     605 876      7 038       218 714         5 667         837 312
as at 28 February 2019

During FY2018:

-   24 373 551 ordinary shares were issued for cash at a price of 615 cents per share, amounting to R149 897 339.
-   25 208 333 ordinary shares issued were issued as part of a business combination involving
    Connectnet Broadband Wireless Proprietary Limited (which has subsequently been renamed Huge
    Connect) at a price of 600 cents per share, amounting to R151 249 998.
-   468 750 ordinary shares were issued at a price of 800 cents per share, amounting to R3 750 000.

During FY2019:

-   25 000 ordinary shares were issued as part of the acquisition of additional shares in Ambient Mobile
    Proprietary Limited (which was subsequently renamed Huge Messaging) at a price of 900 cents per
    share, amounting to R225 000.

REVIEWED PROVISIONAL CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                                                  
                                                                          Reviewed            Audited
                                                                  28 February 2019   28 February 2018
                                                                            FY2019             FY2018
                                                                       (12 months)        (12 months)
                                                                             R'000              R'000
Profit before taxation                                                     112 221            107 925
Adjusted for non-cash movements                                             31 293             19 399
Adjusted for working capital movements                                    (44 339)           (38 452)
Net finance costs                                                              864            (5 744)
Tax (paid) received                                                       (25 865)           (16 566)
Cash flows from operating activities                                        74 174             66 562
Cash flows from investing activities
Purchase of property, plant and equipment                                (110 946)           (96 709)
Proceeds from disposal of property, plant                             
and equipment                                                               36 575              1 995
Purchase of intangible assets                                              (4 115)            (5 132)
Business combinations                                                      (4 219)          (109 330)
Change in degree of control                                                (4 761)                  -
Purchase of financial assets                                                                  (1 284)
Purchase of investment in associate                                            (5)                  -
Loans to group companies repaid                                                 10                  -
Purchase of investment at fair value                                      (45 006)                  -
Advances of loans receivable at amortised                             
cost                                                                         (968)                  -
Loans to shareholders repaid                                                  (13)                  -
                                                                         (133 446)          (210 460)
Cash flows from financing activities
Proceeds from share issue                                                 (12 879)            148 101
Repayment of other financial
liabilities                                                                      -           (37 249)
Repayment of interest bearing liabilities                                   64 624                  -
Repayment of shareholder loans                                                   -              (170)
Finance lease receipts/(payments)                                            (201)                615
                                                                            51 544            111 297
Net cash movement for the period                                           (7 727)           (32 601)
Cash at the beginning of the period                                         28 934             61 535
Total cash at the end of the period                                         21 207             28 934

SEGMENTAL REPORTING

The Directors have considered IFRS 8 Operating Segments and are of the opinion, based on the
information provided to the chief operating decision maker (CODM), that the current operations of the
Group can be split into three main operating segments, namely a Corporate Office Grouping, a
Telecom Grouping and a Financial Technology (Fintech) Grouping. The summarised information
included below is in line with the requirements of IAS 34. The revenue generated from the products and
services provided by the various Group companies to all customers is done so on a countrywide basis,
with no geographical differentiation.

Operating Segments

In terms of Huge's segmental reporting, for FY2019 the Telecom Grouping comprised the following
companies:

-   100% held Huge Telecom, the holding company of which is Huge
-   50.03% held Huge Networks, the holding company of which is Huge Telecom (the effective date of
    the Otel Transaction was 27 February 2019; prior to this date Huge Networks was a wholly owned
    subsidiary company of Huge Telecom)
-   100% held Huge Technologies Proprietary Limited (previously Huge Software and Technologies
    Proprietary Limited), the holding company of which is Huge
-   49% held Huge Cellular Proprietary Limited (Huge Cellular), the holding company of which was,
    prior to 26 February 2019, Huge Telecom (on 26 February 2019 Huge Telecom undertook a Broad-
    Based Black Economic Empowerment (BBBEE) transaction in which it disposed of 51% of Huge
    Cellular to Windfall 111 Proprietary Limited (Windfall), a company controlled by Mr V Mokholo and
    Mrs S Mokholo, a related party to Huge given that Mr Mokholo is a non-executive director of the Company)
-   49% held Huge Soho Proprietary Limited, the holding company of which was, prior to 26 February
    2019, Huge (on 26 February 2019, Huge undertook a BBBEE transaction in which it disposed of 51%
    of Huge Soho to Windfall)
-   96% held Huge Media Proprietary Limited (previously Eyeballs Mobile Advertising Proprietary
    Limited), the holding company of which is Huge
-   100% held Huge Messaging Proprietary Limited (previously Ambient Mobile Proprietary Limited),
    the holding company of which is Huge (previously, 50.2% of Huge Messaging was held by Huge Telecom)
-   100% held Huge Mobile Proprietary Limited (previously Le Gacy Telecom (FRA) Proprietary
    Limited), the holding company of which is Huge (previously 49.66% of Huge Mobile was held by
    Huge Telecom)

In terms of Huge's segmental reporting, for FY2019 the Fintech Grouping comprised the following
companies:

-   100% held Huge Connect, the holding company of which is Huge

In terms of Huge's segmental reporting, for FY2019 the Corporate Office Grouping comprised the
following companies:

-   Huge itself
-   75% held Huge Software Proprietary Limited (previously Accknowledge Systems Proprietary Limited),
    the holding company of which is Huge
-   The Connectnet Incentive Trust (the CI Trust), the beneficiaries of which are certain employees,
    directors and/or consultants of the Connectnet Broadband Wireless Group.

Changes to the Operating Segments

For FY2019, Huge Media Proprietary Limited and Huge Messaging Proprietary Limited formed part of the
Telecom Grouping. For FY2018, Huge Media Proprietary Limited and Huge Messaging Proprietary
Limited formed part of the Corporate Office Grouping. The results of Huge Media Proprietary Limited
and Huge Messaging Proprietary Limited are not regarded as material in the FY2019 or FY2018 financial
periods.

                                             Reviewed   Elimination    Telecom    Fintech   Corporate   
                                          28 February                 Grouping   Grouping      Office   
                                                 2019                                        Grouping   
                                                R'000         R'000      R'000      R'000       R'000   
Total revenue                                 432 662                  269 954    160 354       2 354   
Gross profit                                  257 320                  145 990    109 372       1 958   
Other income                                   17 447                    1 967      1 009      14 471   
Operating expenses                          (126 140)                 (62 748)   (35 510)    (27 882)   
EBITDA                                        148 627                   85 209     74 872    (11 453)   
Depreciation and                             (26 592)                 (16 196)   (10 184)       (213)   
amortisation                                                                                            
Operating profit/(loss)                       122 035                   69 013     64 688    (11 666)   
Investment income                               3 505                    1 072      1 642         791   
Gain/(loss) on sale of                          1 530                     (13)          -       1 543   
investment                                                                                              
Loss from equity                                 (19)                     (19)          -           -   
accounted investments                                                                                   
Reversal of impairment                            509                      509          -           -   
of financial assets                                                                                     
Finance costs                                (15 339)                  (5 210)       (17)    (10 112)   
Profit/(loss)before                           112 221                   65 352     66 313    (19 444)   
income tax                                                                         

                                             Audited   Elimination    Telecom     Fintech   Corporate
                                         28 February                 Grouping    Grouping      Office
                                                2018                                         Grouping
                                               R'000         R'000      R'000       R'000       R'000   
Total revenue                                401 382             -    262 524     136 920       1 938   
Gross profit                                 224 538             -    126 855      96 054       1 629   
Other income                                   2 580             -      1 285       1 295           -   
Operating expenses                          (98 648)             -   (56 880)    (21 700)    (20 068)   
EBITDA                                       128 470             -     71 260      75 649    (18 439)   
Depreciation and                                                                                        
amortisation                                (15 495)             -    (9 679)     (5 816)           -   
Operating profit/(loss)                      112 975             -     61 581      69 833    (18 439)   
Investment income                              4 332             -        611       2 973         748   
Loss from equity                                                                                        
accounted                                                                                               
investments                                     (72)             -       (72)           -           -   
Impairment of                                                                                           
property, plant and                                                                                     
equipment                                    (2 794)             -    (2 794)           -           -   
Reversal of impairment                                                                                  
of financial assets                            4 520             -                  4 520           -   
Finance costs                               (11 036)             -    (1 600)        (13)     (9 423)   
Profit/(loss) before                                                                                    
income tax                                   107 925             -     57 726      77 313    (27 114)   

COMMENTARY

REVIEW OF OPERATIONS

General overview

Huge has, like many South African companies, been impacted by the prevailing negative local
economic environment. The Group has also faced challenges in respect of market volatility, personnel
changes and a demanding M&A environment. Notwithstanding these challenges, the Group has
produced growth in earnings for the year under review, underpinned by solid operational results.
Following engagement with its shareholders, Huge has shifted its emphasis to cash generation. In doing
so the Board has taken into account the need to balance the Company's growth aspirations. The Company 
is therefore pleased to announce the declaration of a gross cash dividend of 12.50 cents per share.

In the three years since moving its listing onto the Main Board of the JSE, Huge has delivered 450%
growth in profit after tax. It has also expanded its offering to include numerous products and services.

It has increased its market capitalisation substantially and it has created a head office structure which
will enable future expansion. Notwithstanding its focus on delivering earnings, it appears that the market
has down-rated Huge for not having delivered a significant acquisition during FY2019. In this regard, the
Company expended considerable time on two significant opportunities which were aligned with the
Growing Huge Strategy but was unfortunately not successful in closing out either opportunity.
Fortunately, the Group was successful in concluding two strategic but smaller bolt-on acquisitions.

In February 2017, Huge Cellular concluded an Enterprise Supply Agreement (ESA) with Cell C Service
Provider Company (Cell C) which contemplated the development of a full suite telephony (FST) service
which would allow the Group, though Huge Telecom, to sell customers FST as a substitute for last mile
copper telephone cable connections. FST is a wireless GSM-based telephone connection and its
introduction as a substitute for copper telephone cable connections is a South African and world first.
FST was expected to deliver substantial increases in unit sales of telephone lines and substantial
increases in revenues. The development of FST was expected to take nine months to complete and
the launch of FST was expected to take place in November 2017. It was therefore contemplated that
FST would have only a small effect on FY2018 but a much more material effect on FY2019.

In anticipation of the launch and success of FST, Huge Cellular paid significant amounts to Cell C for
access to the Cell C network. From March 2017 and up to the launch of FST in November 2017, Huge
Cellular paid Cell C R56 million for future access to the Cell C network. When FST was launched in
November 2017 the initial unit sales were phenomenal (in excess of eight times monthly sales in the
previous six months), suggesting that Huge Telecom could grow its monthly sales of telephone lines by
at least eight times. However, when the FST service was launched it encountered technology
challenges and had to be partially withdrawn from the market. It took the better part of FY2019 to
resolve these challenges which had the effect of curtailing Huge Telecom's growth expectations.
Meanwhile, Huge Cellular continued to pay Cell C for future access to the Cell C network and from
December 2017 to August 2018 Huge Cellular paid Cell C a further R74 million, bringing its total
payments to Cell C for future access to the Cell C network to R130 million. However, with the challenges
relating to FST, Huge Cellular was only able to deplete R50 million of the R130 million it had paid to Cell
C and by the end of August 2018, the balance of future services owed by Cell C to Huge Cellular was
R80 million.

In terms of the ESA, Huge Cellular had the right but not the obligation to extend the term of the ESA for
a further period of three years commencing on 1 March 2019 and terminating on 28 February 2022.
Huge Cellular elected to not renew the ESA. This decision was made in light of the fact that the balance
of future services owed by Cell C to Huge Cellular was estimated would be c. R50 million by 28 February
2019. In addition, by renewing the ESA, Huge Cellular would be agreeing to pay Cell C a further R255.4 million 
for the renewal period. Attempts were made to extend the ESA on different commercial terms
but ultimately the negotiations failed and the ESA came to an end on 28 February 2019.

Notwithstanding the challenges relating to FST, it has been proved to be a viable substitute for copper
cable connections and as a result, the other mobile telephone network operators in South Africa are
also eager to partner with Huge Cellular in taking FST to the market.

During FY2019, Huge enjoyed a full year's contribution from Huge Connect, Huge Networks and Huge
Software, whereas in FY2018 it only enjoyed a contribution of eleven months from Huge Connect and
Huge Networks and a contribution of nine months from Huge Software.

Operational overview

Group revenue increased by 8%. While the Fintech Grouping enjoyed larger revenue gains this was
offset by smaller revenue gains in the Telecom Grouping, mainly as a result of the challenges with FST.
Group gross profit margins remained healthy at c. 60%. Declining margins in the Fintech Grouping
where offset by rising margins in the Telecom Grouping. Group EBITDA, after adding back depreciation
in cost of sales and depreciation as a separate line item, amounted to R149 million EBITDA. The
termination of the ESA has improved the Group's conversion of EBITDA into free cash, which is expected
to improve while Huge Cellular depletes the amounts owing by Cell C to Huge Cellular in terms of the
ESA. No further cash outflows relating to GSM transmission costs are expected for FY2020.

Group operating expenses increased by 28% largely as a result of the inclusion of Huge Connect,
Huge Networks and Huge Software for a full twelve months and the inclusion of the aforesaid IFRS share
based charges relating to the Fintech Grouping and Huge Connect. On a like for like basis, Group
operating expenses decreased by 2.8%. The creation of the Corporate Office Grouping is a recent
development, having only taken place in the FY2018. Previously, costs related to Huge were absorbed
at subsidiary company level. Given the need to support the implementation of the Growing Huge
Strategy, the formation of suitably resourced head office structure has been essential. The Corporate
Office Grouping includes consulting and professional fees, all insurance costs, statutory and listing costs,
audit and legal fees. The head office also funds all corporate action events. Ultimately, the intention is
that the head office costs included in the Corporate Office Grouping will be funded by acquisitions.
During FY2019, the operating costs relating to the Corporate Office Grouping increased by 38% from
R20.1 million to R27.8 million.

During FY2019, the Group concluded a ZAR200 Million Term Facility Agreement with Futuregrowth Asset
Management Proprietary Limited (the Facility). The Facility replaced the ZAR90 Million Term Facility
Agreement concluded as part of the acquisition of Huge Connect and Huge Networks. The Facility
provides the Group with access to cash resources at improved interest rates.

As at 28 February 2019, the Group's net debt position was R91 million, while it still has access to R50.5 million 
in terms of the Facility. At 28 February 2019, the Group's debt to EBITDA ratio was 0.60. In terms
of the Facility, the Group's debt to EBITDA ratio may not exceed 2.5 times. The Company is entitled to
make a distribution provided that, after taking into account the intended distribution, the Group's debt
to EBITDA ratio is less than 2.5 times.

The effective tax rate applicable to Group profit before tax is c. 20%. It is expected that the Group will
continue to enjoy this level of effective tax for the medium-term.

FUTURE PROSPECTS

In fortifying the sustainability of the Group, the Board has sought to build a management team which
can support the Growing Huge Strategy, which includes growing by acquisition. The Board is of the view
that the changes which have taken place recently will augment this strategy. The Board is confident in
the value that will be delivered with the inclusion of its new Chief Operating Officer, Andy Openshaw,
and the appointment of a new Chief Financial Officer, Samantha Sequeira.

The Board continues to believe that Huge Telecom's FST is a game changer. FST has been proved and
accepted by the market and its application will become more pervasive, as is being evidenced by the
appetite of a wider audience of mobile telephone network operators and customers. The Board views
Huge Telecom as an important growth engine for the Group.

The Board continues to explore initiatives to participate in the digital world relating to payments by
leveraging Huge Connect's real estate of 48 000 customers and circa 180 000 connected devices.
Huge Connect provides Huge with a platform to pursue high growth opportunities in this area. In
particular, Huge Connect provides Huge with a gateway into Fintech where Huge can create, in
partnership with financial institutions, disruptive and innovative solutions for its customer real estate.

The acquisition of the Otel businesses and the acquisition of a controlling stake in Pansmart Proprietary
Limited (Pansmart) will position the Telecom Grouping well to grow organically at rates of growth higher
than those it has previously enjoyed.

The Board has engaged with various shareholders during the year under review and based on these
engagements has decided to balance the growth objectives of the Growing Huge Strategy with
income objectives of its shareholders, which has enabled the Board to propose the declaration of a
dividend to shareholders.

BASIS OF PREPARATION

The reviewed provisional condensed consolidated annual financial results have been prepared in
accordance with the framework concepts and the recognition and measurement principles of
International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued
by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial
Reporting Standards Council and includes the information required by IAS 34: Interim Financial
Reporting, the Companies Act of South Africa, and the JSE's Listings Requirements (Listings
Requirements).

The reviewed provisional condensed consolidated annual financial results are prepared on the historical cost
basis, with the exception of certain financial instruments subsequently measured at fair value. Details
of the group's significant accounting policies are consistent with those applied in the previous financial
year except for those listed below.

Any information included in this announcement that might be perceived as a forward-looking
statement has not been reviewed and reporting on by the Company's auditors in accordance with
section 8.40 of the Listings Requirements.

The reviewed provisional condensed consolidated annual financial results for the year ended 
28 February 2019 were prepared under the supervision of the Chief Financial Officer of the Company, 
S Sequeira, and will be included in the 2019 Integrated Annual Report to be issued to shareholders on or
before 28 June 2019.

SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

In preparing these reviewed provisional condensed consolidated annual financial results, the significant
judgements made by management in applying the Group's accounting policies and the key sources
of estimation uncertainty were consistent with those applied to the consolidated annual financial
statements for the year ended 28 February 2018, with the exception of the judgements and estimates
related to the adoption of IFRS 15 Revenue from Contracts with Customers.

SIGNIFICANT ACCOUNTING POLICIES

The accounting policies used in the preparation of these reviewed provisional condensed consolidated
annual financial results comply with IFRS and are consistent with those used in the preparation of the
annual financial results of the Group for the year ended 28 February 2018, with the exception of IFRS 15
Revenue from Contracts with Customers which was adopted in the period under review commencing
from 1 March 2018.

ADOPTION OF IFRS 15 REVENUE FROM CONTRACTS WITH CUSTOMERS

IFRS 15 establishes a single comprehensive model for entities to use in accounting for revenue arising
from contracts with customers. The standard replaces revenue recognition guidance including IAS 18
Revenue, IAS 11 Construction Contracts and the related Interpretations.

The core principle of IFRS 15 is that an entity should recognise revenue to depict the transfer of promised
goods or services to customers at an amount that reflects the consideration to which the entity expects
to be entitled in exchange for those goods or services. The standard requires the entities in the 
Group to apportion revenue earned from contracts to the identified performance obligations in the
contracts on a relative stand-alone selling price basis, based on a five-step model.

The standard also requires the capitalisation of costs incremental to obtaining the contract and
recognition of these costs as an expense over the contract term. The Group has applied the practical
expedient to only defer costs related to contracts with terms over the 12 months.

The Group is in the business of supplying network devices, network services and software licence fees
to SME's.

INDEPENDENT AUDITOR'S REVIEW CONCLUSION

A donation, to the value of R14 470 932 (being R1 200 000 in cash and R13 270 932 in Huge Group Limited 
shares) made by the Connectnet Vendors has been treated as other income in the condensed consolidated 
statement of profit and other comprehensive income statement.  

In our opinion, the donation of Huge Group Limited shares should have been accounted for in the reviewed 
condensed consolidated statement of changes in equity when taking into account the requirements of IAS 32.   

Based on our review, other than this, nothing else has come to our attention that causes us to believe that 
the provisional condensed consolidated financial statements do not fairly present, in all material respects, 
the financial position of Huge Group Limited for the year ended 28 February 2019 and its financial performances
and cash flows for the year then ended, in accordance with JSE Limited Listing Requirements, International 
Financial Reporting Standards and the requirements of the Companies Act of South Africa. 

BOARD'S RESPONSE TO THE INDEPENDENT AUDITOR'S REVIEW CONCLUSION

During FY2018, the vendors of the Connectnet Broadband Wireless Group (the Connectnet Vendors), which comprised 
Connectnet Broadband Wireless Proprietary Limited (which was subsequently renamed Huge Connect) and Sainet 
Internet Proprietary Limited (which was subsequently renamed Huge Networks) established the Connectnet Incentive 
Trust and made, of their own volition, donations of Huge ordinary shares with a value of R13 270 932 and cash 
amounting to R1 200 000 to the Connectnet Incentive Trust. In terms of the Connectnet Incentive Trust, the 
donations made by the Connectnet Vendors was/is to be distributed over a period of four years (from June 2017 
to June 2020) to beneficiaries who are employees, directors and/or consultants of the Connectnet Broadband 
Wireless Group.  

The Connectnet Incentive Trust was established by the Connectnet Vendors for the purpose of influencing the 
performance and long-term sustainability of the companies that had been ultimately sold by the Connectnet 
Vendors to Huge in order to assist the Connectnet Vendors in meeting the profit warranties they have given 
to Huge. 

The value of the distributions of Huge ordinary shares over a five-year were estimated to be R1 170 994 
in May 2017, R2 341 996 in May 2018, R3 512 990 in May 2019, R4 683 983 in May 2020 and thereafter R1 560 969.  
Therefore, over a period of five years, the total donations received by the Connectnet Incentive Trust were 
expected to be distributed to the aforesaid beneficiaries.

In terms of IFRS 2 Share-based Payments the distributions to the aforesaid beneficiaries are required to be 
treated as charges to be debited to the income statement of Huge. In other words, Huge will bear a charge 
of R14 470 932 for which there is no corresponding outflow of resources embodying economic benefits.

Subsequent to the release of the reviewed provisional condensed consolidated annual financial results of the 
Company, its subsidiary companies and joint venture for the year ended 28 February 2018, Huge received an 
opinion from an IFRS advisor that stated that the Connectnet Incentive Trust was/is an entity controlled by 
Huge in accordance with IFRS10 Consolidated Financial Statements. At the same time, the opinion of the IFRS 
advisor stated that the donations made by the Connectnet Vendors was income of the Connectnet Incentive Trust.

On the basis of the aforementioned opinion, Huge accounted for the Connectnet Incentive Trust as an entity 
controlled by it. As a result, the donations received by the Connectnet Incentive Trust, which have been 
treated as income in the separate financial statements of the Connectnet Incentive Trust were treated as 
income in the consolidated statement of financial performance of Huge.  

In FY2019, Huge has accounted for donations received of R14 470 932 and IFRS 2 Share-based Payments of 
R7 037 595. The net effect of this accounting is an increase in profit before taxation for the current 
year of R7 433 337. In the next three financial years, it is estimated that Huge will account for IFRS 2 
Share-based payments of R7 334 337. Therefore, over a five-year period, there will, on the basis of Huge's 
accounting treatment, be no effect on the profit or loss of the Group. On the other hand, the accounting 
treatment preferred by the auditor of Huge will, over a period of five years, result in a negative impact 
on Huge's profits of R14 470 932 with no associated outflow from the Group of resources embodying economic 
benefits.

As a result of the application of IFRS10 to the Connectnet Incentive Trust, the Huge ordinary shares donated 
by the Connectnet Vendors are also required to be included as part of the Group's treasury shares. Accordingly, 
the Group's treasury share capital has increased from 9 646 926 shares in the previous reporting period to 
10 852 953 shares in the year under review. 

The Board is of the view that the auditor's application of IAS 32 is inappropriate in the circumstances and 
has chosen to adopt the approach suggested in the IFRS advisor's opinion. In the Board's opinion, its 
accounting treatment does result in the fair presentation of Huge's financial performance.

NOTES TO THE REVIEWED PROVISIONAL CONDENSED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

Standards and interpretations in issued but not yet adopted and not yet effective

Information on standards issued by the IASB, but not effective for the current financial year, has been
provided below where it is expected that the new standards will have a material impact on the Group.

Management anticipates that all relevant pronouncements will be adopted in the Group's accounting
policies for the first period beginning after the effective date of the pronouncement. New standards,
interpretations and amendments neither adopted nor listed below are not expected to have a material
impact on the Group's financial statements.

IFRS 16 Leases

This standard is effective for years commencing on or after 1 January 2019. This standard will be
adopted by the Group for the financial reporting period commencing on 1 March 2018 but must be
implemented by no later than the financial reporting period commencing on 1 March 2019. IFRS 16
requires a lessee to recognize a right of use of an asset and its concomitant lease obligation for any
lease other than a short term lease, or a lease relating to low value assets - which leases may be treated
similarly to operating leases under the current standard IAS 17, if the exceptions are applied. A lessee
measures its lease obligation at the present value of future lease payments and recognises a right of
use of an asset initially measured at the same amount as the lease obligation, including costs directly
related to entering into the lease. A right of use of an asset is subsequently treated in a similar way to
other assets such as property, plant and equipment, or intangible assets, dependent on the nature of
the underlying item.

The Group has a number of property rental agreements in place. In accordance with IFRS 16 Leases, a
right of use of an asset and the lease obligations associated with rentals would be recognised in the
statement of financial position. The extent of the recognition is yet to be determined. The Group will
take a decision on the transition method to be applied, or the application of exceptions related to
short term and low value asset leases at a later point in time.

Standards Early Adopted

No standards were early adopted in the current financial year.

Basic Earnings and Headline Earnings Per Share

                                                   Reviewed      Reviewed       Audited       Audited   
                                                28 February   28 February   28 February   28 February   
                                                       2019          2019          2018          2018   
                                                (12 months)   (12 months)   (12 months)   (12 months)   
                                                      R'000         cents         R'000         cents   
Basic Earnings per share                                                                                
Profit or loss attributable to the equity            93 593         56.84        76 841         47.40   
owners of the parent                                                                                    
Weighted average number of shares in                164 671             -       162 100             -    
issue ('000)                                                                                            
Basic earnings per share (cents)                     93 593         56.84        76 841         47.40   
Headline Earnings Per Share                                                                             
Profit or loss attributable to the equity            93 593         56.84        76 841         47.40   
owners of the parent                                                                                    
Adjusted for:                                                                                           
Impairment of property, plant and                         -             -         2 794          1.72   
equipment                                                                                               
Reversal Impairment of financial assets                                         (4 520)        (2.78)   
Gain on disposal of investment                      (1 548)        (0.94)             -             -     
Gain on disposal of property, plant and               (807)        (0.49)             -             -     
equipment                                                                                            
Tax effects                                             659          0.40             -             -
Headline earnings per share (cents)                  91 897         55.81        75 115         46.34   
Weighted average number of shares in                164 787             -       162 100             -       
issue ('000)                                                                                        
Diluted basic earnings per share
Profit or loss attributable to the equity            93 593         56.55        76 841         47.40
owners of the parent
Weighted diluted average number of shares           165 505             -       162 100             -
in issue ('000)
Diluted basic earnings per share (cents)             93 593         56.55        76 841         47.40 
Diluted headline earnings per share
Headline profit or loss attributable to              91 897         55.53        75 115         46.34
the equity owners of the parent
Weighted diluted average number of                  165 505             -       162 100             -
shares in issue ('000)
Diluted headline earnings per share (cents)          91 897         55.53        75 115         46.34


Fair Value Disclosures

Categories of financial instruments

Categories of financial assets

Reviewed 28 February 2019             Fair value
(12 months)                       through profit    
                                        or loss-       Amortised    
                                       Mandatory            cost     Leases      Total     Fair value   
                                           R'000           R'000      R'000      R'000          R'000
Loans to group
companies                                      -          66 608          -     66 608         66 608
Loans to shareholders                          -              13          -         13             13
Loans receivable                               -           8 464          -      8 464          8 464
Investments at fair
value                                     45 006               -          -     45 006         45 006
Finance lease
receivables                                    -               -      2 385      2 385          2 385
Trade and other
receivables                                    -          59 646          -     59 646         59 646
Cash and cash
equivalents                                    -          23 958          -     23 958         23 958
                                          45 006         158 689      2 385    206 080        206 080

Audited 28 February 2018                                          Amortised
(12 months)                                                            cost      Total     Fair value
                                                                      R'000      R'000          R'000
Loans receivable                                                      7 496      7 496          7 496
Trade and other
receivables                                                          60 322     60 322         60 322
Cash and cash
equivalents                                                          30 265     30 265         30 265
                                                                     98 083     98 083         98 083

Categories of financial liabilities
                                                   
Reviewed 28 February 2019                              Amortised  
(12 months)                                                 cost     Leases      Total     Fair value
                                                           R'000      R'000      R'000          R'000
Trade and other
payables                                                  32 835         21     32 856         32 856
Borrowings                                               170 525          -    170 525        170 525
Finance lease
obligations                                                    -      7 631      7 631          7 631
Bank overdraft                                             2 748          -      2 748          2 748
                                                         206 108      7 652    213 760        213 760

Audited 28 February 2018                               Amortised                        
(12 months)                                                 cost     Leases      Total     Fair value
                                                           R'000      R'000      R'000          R'000
Trade and other
payables                                                  37 436        253     37 689         37 689
Borrowings                                               104 699          -    104 699        104 699
Finance lease
obligations                                                    -      4 073      4 073          4 073
Bank overdraft                                             1 331          -      1 331          1 331
                                                         143 466      4 326    147 792        147 792

Disaggregation of revenue- Quantitative disclosure

                        Fintech Grouping       Corporate              Telecom        Total Operating
                                                 Office              Grouping            Segments  
                            2019       2018    2019    2018      2019      2018       2019       2018   
South Africa             145 668    121 841   2 354   1 938   269 573   264 220    417 595    387 999   
Africa                    14 686     15 079       -       -       381       462     15 067     15 541   
                         160 354    136 920   2 354   1 938   269 954   264 682    432 662    403 540   
Major                                                                                                   
goods/service                                                                                           
lines                                                                                                   
Network devices            1 457        413       -       -    70 868    72 594     72 325     73 007   
Network services         158 897    136 507       -       -   199 086   191 636    357 983    328 143   
Software                       -          -   2 354   1 938         -         -      2 354      1 938   
licence fees                                                                                            
                         160 354    136 920   2 354   1 938   269 954   264 229    432 662    403 087   
Timing of                                                                                               
revenue                                                                                                 
recognition                                                                                             
Goods                      1 457        413       -       -       692       508      2 149        921   
transferred at a                                                                                        
point in time                                                                                           
Services                 158 897    136 507   2 354   1 938   269 262   263 721    430 513    402 166   
transferred over                                                                                        
time                                                                                                    
                         160 354    136 920   2 354   1 938   269 954   264 229    432 662    403 087   

Business Combinations

Huge Cellular

On 26 February 2019 Huge Telecom, the holding company of Huge Cellular, entered into a Sale of
Shares Agreement with Windfall in terms of which it disposed of 51% of Huge Cellular to Windfall in a
BBBEE transaction. Windfall is controlled by Mr V Mokholo and Mrs S Mokholo, a related party to Huge
given that Mr Mokholo is a non-executive director of the Company. Huge did not retain control of this
entity, which is now an associate of the Group.

Huge Messaging

On 31 August 2018 Huge Telecom, which held 50.2% of Huge Messaging (previously Ambient Mobile
Proprietary Limited), entered in a Sale of Shares Agreement in terms of which it acquired 49.8% of the
shares from minority shareholders. Huge Messaging became a wholly owned subsidiary company of
Huge Telecom.

On 22 January 2019, Huge acquired 100% of the shares of Huge Messaging from Huge Telecom. As a
result, Huge Messaging became a wholly owned subsidiary company of Huge.

Huge Mobile

On 17 August 2018 Huge Telecom, which held 49.66% of Huge Mobile Proprietary Limited (previously Le
Gacy Telecom (FRA) Proprietary Limited), entered in a Sale of Shares Agreement in terms of which it
acquired 50.44% of the shares from minority shareholders. Huge Mobile became a wholly owned
subsidiary company of Huge Telecom.

On 31 August 2019, Huge acquired 100% of the shares of Huge Mobile from Huge Telecom. As a result,
Huge Mobile became a wholly owned subsidiary company of Huge.

Huge Networks

Huge Networks concluded agreements with Otel Communications Proprietary Limited and Otel
Business Proprietary Limited which contemplated the acquisition by
Huge Networks of the businesses of Otel. These agreements became unconditional on 27 February
2019. The purchase consideration for the businesses of Otel was settled in Huge Networks ordinary
shares, such that, after the issue of shares, Huge Telecom's shareholding in Huge Networks decreased
from 100% to 50.03%. Huge Telecom has retained control of Huge Networks.

Huge Soho

On 26 February 2019 Huge, the holding company of Huge Soho, entered into a Sale of Shares
Agreement with Windfall in terms of which it disposed of 51% of Huge Soho to Windfall in a BBBEE
transaction. Windfall is controlled by Mr V Mokholo and Mrs S Mokholo, a related party to Huge given
that Mr Mokholo is a non-executive director of the Company. Huge did not retain control of this entity,
which is now an associate of the Group.

Aggregated business combinations

The aggregated business combinations include the sale of Huge Soho Proprietary Limited, Huge Cellular
Proprietary Limited and acquisition of the Otel Communications Proprietary Limited and Otel Business
Proprietary Limited assets and assumed liabilities.

                                                                          Reviewed            Audited   
                                                                  28 February 2019   28 February 2018   
                                                                       (12 months)        (12 months)   
                                                                             R'000              R'000   
Property, plant and equipment                                                1 964             27 151   
Intangible assets                                                            2 023                345   
Finance lease receivable                                                     2 385                  -   
Loans receivable                                                                 -              1 692   
Deferred expenditure                                                             -              1 390   
Inventories                                                                    188                787   
Current tax receivable                                                           -                 12   
Trade and other receivables                                               (77 526)             10 006   
Cash and cash equivalents                                                  (1 471)             18 170   
Financial liabilities at fair value                                              -          (141 195)   
Financial lease liabilities                                                (2 895)                  -     
Deferred tax                                                                 (247)            (3 891)   
Provisions                                                                       -            (2 133)   
Borrowings                                                                 (1 201)                  -     
Loans from group companies                                                  59 949              (120)   
Loans from shareholders                                                          -              (771)   
Current tax payable                                                          2 169            (2 712)   
Bank overdraft                                                             (2 748)                  -   
Trade and other payables                                                    15 443            (8 509)   
Total identifiable net liabilities                                         (1 968)           (99 778)   
Non-controlling interest                                                         -                238   
Goodwill                                                                    16 378            378 290   
                                                                            14 409            278 750   
Consideration (paid)/received                                                                           
Cash                                                                             -          (270 500)   
Purchase consideration receivable                                               10                  -    
Equity - Renounceable Letters of Allocation                                      -          (151 250)   
Equity                                                                    (12 877)                  -   
Liabilities assumed                                                              -              1 805   
Liabilities settled                                                              -            141 195   
                                                                                            (278 750)   
Net cash outflow on acquisition                                                                         
Cash consideration paid                                                          -          (278 750)   
Cash acquired                                                              (4 219)             18 170   
                                                                           (4 219)          (260 580)   

Related Party Disclosures

  Relationships
  Subsidiary companies:
          Huge Connect
          Huge Media
          Huge Messaging
          Huge Mobile
          Huge Networks
          Huge Software
          Huge Technologies
          Huge Telecom
  Joint Controlled Arrangement
          Gonondo
  Associates
          Huge Cellular
          Huge Soho
  IFRS 10 Controlled Entities
          Connectnet Incentive Trust
  Members of key management
          James Charles Herbst
          Zunaid Bulbulia
          (resigned 31 December 2018)
  Directors of subsidiary companies
          Andre Lessing
          Marius Oberholzer
          Gunter Engling
          (resigned 6 November 2018)
          Craig Rowan
          Robert Burger
  Shareholders behind non-controlling interests
          Jarratt Ingram
          Edward Mitchell Kerby
          Gregory Beaufort Shiers
Associate of non-executive directors
          Casa Da Luz Proprietary Limited
          (an associate company of Dr Duarte
          Da Silva)

                                                                  28 February 2019   28 February 2018
                                                                       (12 months)        (12 months)
                                                                             R'000              R'000

Loan Account - owing (to) by related parties               
Gunter Engling                                                                   -                  -
James Charles Herbst                                                          (13)                  -
Jarratt Ingram                                                                   -               (98)
Edward Mitchell Kerby                                                            -              (693)
Gregory Beaufort Shiers                                                          -               (50)
Huge Cellular (Pty) Ltd                                                     64 201                  -
Huge Soho (Pty) Ltd                                                          2 408                  -
Windfall 111 Properties (Pty) Ltd                                               10                  -
                                                                          (66 606)              (841)
Interest paid to (received from) related parties               
James Charles Herbst                                                             -                  5
Jarratt Ingram                                                                   -                  6
Edward Mitchell Kerby                                                            -                 39
Anton Daniel Potgieter                                                           -               (61)
Gregory Beaufort Shiers                                                          -                  3
                                                                                 -                (8)
Purchases from (sales to) related parties
Casa Da Luz Proprietary Limited                                                838                770
Dee-Anco Investments Proprietary Limited                                         -              1 762
Gonondo                                                                        470              1 097
                                                                             1 308              1 498

TREASURY SHARES

As at 28 February 2019, the Company had 175 627 077 ordinary shares in issue, of which 9 646 926
ordinary shares are held by Huge Telecom as treasury shares. 1 206 027 ordinary shares are held by the
Connectnet Incentive Trust, which has been classified in terms of IFRS10 as an entity controlled by Huge
Connect and therefore by Huge. As a result of the consolidation of the Connective Incentive Trust the
investment in Huge ordinary shares has been reclassified as treasury shares.

LITIGATION STATEMENT

Dispute between Huge and TeleMasters Holdings Limited (TeleMasters)
During February 2013 Telemasters cancelled an agreement with Huge for the supply of MTN airtime and
suspended the SIM cards held by the Company. In its Statement of Claim issued on 31 May 2013,
Telemasters alleges that the Company is indebted to it in the amount of R4.176 million plus interest thereon.

In its Plea and Counterclaim issued on 11 June 2014, the Company:

1.   admitted that TeleMasters was entitled to raise R1.7 million for monthly subscriptions for the period
     15 January 2013 to 14 February 2013 in respect of 2 820 SIM cards;
2.   admitted that TeleMasters was entitled to raise R8 084 for monthly subscriptions for the period 
     15 February 2013 to 18 February 2013 in respect of 100 SIM cards;
3.   claimed that Telemasters is indebted to it in the amount of R4.392 million plus interest thereon in
     respect of amounts overcharged by Telemasters and which is made up as follows:
a)   R1.215 million in respect of "Itemised Billing" for which it was not entitled to charge;
b)   R1.034 million in respect of "Administration Fees" for which it was not entitled to charge;
c)   R2.143 million in respect of "Gross Out of Bundle Charges" (being a claim of R4.053 million in
     respect of Gross Out of Bundle Charges, less a credit note passed by TeleMasters in respect
     thereof of R1.910 million) in respect of which it was not entitled to charge.

The matter is subject to arbitration by the Arbitration Foundation of Southern Africa. The assets and
liabilities relating to this dispute have been recognised at levels appropriate to the Company's
assessment of the outcome of the arbitration hearing.

During February 2017, Huge and TeleMasters decided to separate out for decision (the Separation),
before deciding on the claim and counterclaim, the following issues (the Separated Issues):

  i. Was TeleMasters entitled to charge Huge a fee in respect of Itemised Billing?
 ii. Was TeleMasters entitled to charge huge the Administration Fees?
iii. Was TeleMasters entitled to charge Huge for calls made on SIM cards, where those calls had
     been zero rated by the network operator in the depleting of any accumulated value?"

The hearing was set down for five days, commencing on 2 October 2017. The parties argued the
Separated Issues before the arbitrator on 4 October 2017.
No definitive relief was claimed on account of the Separation but the arbitrator's decision on the
Separated Issues was anticipated to contribute to a convenient resolution of some issues between the
parties.

In terms of an award of the arbitrator, dated 6 October 2017, the arbitrator made the following award
in respect of the Separated Issues:

A.   In respect of issue number i above, the arbitrator decided in favour of Huge;
B.   In respect of issue number ii above, the arbitrator decided in favour of TeleMasters;
C.   In respect of issue number iii above, the arbitrator decided in favour of TeleMasters.

The remaining issues arising out of the Statement of Claim and the Plea and Counterclaim were
postponed sine die and no order was made thereon.

Dispute between Cell C Service Provider Company (Cell C)

In October 2012 Huge Cellular and Cell C Service Provider Company Proprietary Limited (Cell C)
entered into a written agreement in terms of which Cell C sold specified cellular telephone services
referred to as the Cell C services to Huge Cellular. The agreement was amended on several occasions.
In its amended form the agreement amended the type and nature of the cellular telephone services
that Cell C was to provide, and obliged Huge Cellular to pay a minimum monthly amount to Cell C.
Cell C was obliged to deduct the cost of the cellular telephone services actually used by Huge Cellular
during the term of the agreement from the minimum monthly amount that Huge Cellular had agreed
to pay in advance. The amended agreement created a mechanism to allow Huge Cellular to carry
forward any portion of the cumulative minimum monthly amounts not actually used by Huge Cellular
in prior months. The amount carried forward by Huge Cellular was referred to as the accumulated
shortfall. The amended agreement specifically dealt with Huge Cellular's entitlement to carry forward
the accumulated shortfall and stipulated that the accumulated shortfall could be carried forward on
an unlimited basis until July 2019, and thereafter up to a maximum of the value of 250 million airtime
minutes, with any unused accumulated shortfall to expire in February 2022. A further amendment to
the agreement related to an amendment to its term, and the extension of the agreement. In its
amended form the agreement contemplated an initial period, which would have ended on 28 February 2022. 
Huge Cellular was given the option to renew the agreement. Huge Cellular did not
elect to renew the agreement and it came to an end on 28 February 2019. Over time the amount
which Huge Cellular paid to Cell C as minimum monthly amounts was consistently more than its actual
usage, with the result that Huge Cellular built up a very large accumulated shortfall. The accumulated
shortfall at the end of February 2019 was in the region of R50 million.

Cell C threatened to terminate Huge Cellular's access to the Cell C mobile telephone network at
midnight on 28 February 2019 notwithstanding that Huge Cellular would have an unused accumulated
shortfall of about R50 million, and notwithstanding that the parties had specifically agreed that Huge
Cellular could carry forward the accumulated shortfall until specified dates and that it would only
expire in February 2022. Given Cell C's stated intention to terminate Huge Cellular's access to the Cell
C mobile telephone network, Huge Cellular declared a dispute under the agreement and activated
the dispute resolution mechanisms in the agreement. The dispute resolution mechanisms required the
parties' Chief Executive Officers to attempt to resolve the matter and if that was not successful the
dispute was then to be arbitrated. Therefore, the final determination of whether Huge Cellular is entitled
to continued access to the Cell C mobile telephone network until it has used up all of the accumulated
shortfall is a matter that will be finally determined by arbitration.

Prior to launching the urgent application Huge Cellular requested Cell C, on an interim basis, and
pending finalisation of the dispute, to agree that Huge Cellular was entitled to continued access to the
Cell C mobile telephone network after February 2019 until it had used up the accumulated shortfall.
Cell C refused to provide the interim undertaking and Huge Cellular resolved to bring an urgent
application.

The urgent application was heard by his Lordship Mr Justice Mashile. On 26 February 2019 his Lordship
handed down the judgement which contained the following Order:

        "Pending final resolution of the dispute between [Huge Cellular] and [Cell C] in terms of clause
        16 of the agreement, which is annexure 'D' to the founding affidavit and which dispute was
        declared in annexure 'I' of the founding affidavit:

        Cell C is interdicted from terminating [Huge Cellular's] access to the Cell C mobile telephone
        network in respect of SIM cards issued to [Huge Cellular] prior to 28 February 2019; and..."

Subsequent to the Order the Chief Executive Officers of Huge Cellular and Cell C met to see whether
the dispute could be amicably resolved, but no agreement could be reached. The parties have
engaged each other to deal with the dispute by way of arbitration. The parties have agreed that
Advocate CDA Loxton SC will act as the arbitrator and on 7 May 2019 a first pre-arbitration meeting
was held. At the pre-arbitration meeting the parties agreed a comprehensive timetable to conduct
the arbitration and agreed that the arbitration hearing will take place from 23 to 27 March 2020.

Other litigation

The Company and Group engage in a certain level of litigation in the ordinary course of business. The Directors 
have considered all pending and current litigation and are of the opinion that, unless
specifically provided, none of these will result in a loss to the Group. All significant litigation which the
Directors believe may result in a possible loss has been disclosed.

SUBSEQUENT EVENTS

Subsequent to 28 February 2019, Huge acquired a controlling shareholding in Pansmart. Huge's
acquisition of a controlling shareholding in Pansmart took effect on 13 May 2019.

GOING CONCERN

The Board has undertaken a detailed review of the going concern capability of the Company (and all
subsidiary companies of the Company that form the Group) with reference to certain assumptions and
plans underlying various cash flow forecasts.

The Board has not identified any events or conditions that individually or collectively cast significant
doubt on the ability of the Company and the Group to continue as a going concern.

DIVIDENDS

DIVIDEND DECLARATION

Ordinary shareholders are advised that the Board has declared a gross cash dividend of 12.50 cents
per ordinary share for the year ended 28 February 2019.

The dividend will be paid out of retained earnings of the Company.

A dividend withholding tax of 20% will be applicable to all shareholders who are not exempt from, or
who do not qualify for a reduced rate of withholding tax. Accordingly, for those shareholders subject
to withholding tax, the net dividend amounts to 10.00 cents per share.

The issued share capital of the Company at the declaration date is 175 627 077 ordinary shares. The
Company's tax reference number is 9378909155.

In compliance with the requirements of Strate Proprietary Limited and the JSE Limited, the following
timetable is applicable:

Declaration date                                                                  Friday, 31 May 2019   
Last day to trade cum dividend                                                  Tuesday, 18 June 2019   
Shares commence trading ex dividend                                           Wednesday, 19 June 2019   
Record date                                                                      Friday, 21 June 2019   
Dividend payment date                                                            Monday, 24 June 2019   

Share certificates may not be dematerialised or re-materialised between Wednesday, 19 June 2019,
and Friday, 21 June 2019, both days inclusive.

GOVERNANCE

The Group recognises the need to conduct its business with integrity, transparency and equal
opportunity, and subscribes to good corporate governance as set out in the King IV Report on
Corporate Governance.

Johannesburg
3 June 2019

Sponsor
Questco Corporate Advisory (Pty) Ltd
1st Floor, Ballywoods Office Park, 33 Ballyclare Drive, Bryanston, 2021

Registered office
Unit 6, 1 Melrose Boulevard, Melrose Boulevard, Johannesburg, 2076 (PO Box 1585, Kelvin, 2054)

Transfer Secretaries
Computershare Investor Services (Pty) Ltd
2nd Floor, Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196

Directors
Non-Executive: Dr DF Da Silva (Chairman), SP Tredoux* (Lead Independent Director), DR Gammie*, 
BC Armstrong*, CWJ Lyons*, VM Mokholo
Executive: JC Herbst (Chief Executive Officer), AP Openshaw (Chief Operating Officer), 
S Sequeira (Chief Financial Officer)
*Independent



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