Losses on its single stock futures and contracts for difference knocked R6.4 million off its operating profit in the first half of the year, compared with a R13.7 million gain a year ago, says listed telecoms company Huge Group.
Former chairman Anton Potgieter and CEO James Herbst bought future shares in Huge worth R8 million, which were then sold back to the company, between July and October 2009.
The directors were censored by the JSE for flouting its rules, because minority shareholders were not informed of the deal, and had no say in the matter. The fine has since been appealed.
However, the purchase of the stake, at an average price of 360c, weighed on the company's results for the six months to August.
In a statement released this morning, it says the losses on the single stock futures contracts, and contracts for difference shares, trimmed operating profit. Huge's share price closed at 70c yesterday.
Huge says in its financial statements that revenue slowed to R212.3 million, from R275.4 million in the previous half-year, while net profit slumped to R2.7 million, from R9.6 million in the first half of last year. However, this is an improvement on the full-year loss of R16.9 million.
Huge says the net change in the fair value of the instruments led to a negative R6.35 million, compared with a R13.7 million positive shift a year ago. Despite the decline in the value of the shares, Huge bolstered its operating profit, which came in at R8.6 million, compared to an operating loss of R4.2 million a year ago.
Net profit before tax was R6.2 million, a 42% decline. However, stripping out the share contracts, the company reported an adjusted net pre-tax profit of R12.6 million. Group operating expenses dropped by R19.2 million, a 33.5% decrease.
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