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JNC
JNC
JNC - Johnnic Holdings Limited - Reviewed preliminary results for the year
ended 31 March 2007
Johnnic Holdings Limited ("Johnnic" or "the Company")
Incorporated in the Republic of South Africa
Registration number 1889/000429/06
Share code: JNC - ISIN: ZAE000024352
Reviewed preliminary results for the year ended 31 March 2007
Consolidated condensed income statement
Reviewed Audited
31 March 31 March
2007 2006
For the year ended Notes Rm Rm
Revenue 175 175
Cost of sales (41) (54)
Gross profit 134 121
Other income 6 -
Fair value adjustments 3 (47) 62
Other operating expenses (113) (62)
(Loss)/profit from operations before
exceptional items (20) 121
Exceptional items - 6
(Loss)/profit from operations (20) 127
Share of profits of associated 127 85
companies
Profit before interest and taxation 107 212
Finance costs (14) (2)
Finance income 37 82
Profit before taxation 130 292
Taxation 3 (116)
Discontinued operations 4 4 -
Profit for the year 137 176
Attributable to:
Equity holders of the parent 114 159
Minority interest 23 17
137 176
Profit attributable to equity holders 114 159
of the parent
Fair value adjustment of investment - (44)
properties
Fair value adjustment of property, - (18)
plant and equipment
Write up on investment property (1) -
Associated companies` exceptional items - (1)
Exceptional items after taxation and - (6)
minority interests
Headline profit 113 90
Earnings per share (cents) 2
- Basic 68 96
- Headline 68 54
Weighted average number of shares in issue 166 470 166 470
(`000)
Actual number of shares in issue at end of 166 470 166 470
period (`000)
Condensed balance sheet
Reviewed Audited
31 March 31 March
2007 2006
As at Notes Rm Rm
Assets
Non-current assets 1 996 785
Property, plant and equipment 629 179
Investment properties 174 129
Goodwill 26 6
Derivatives 63 -
Intangible assets 140 -
Interests in associated companies 8 878 415
Available for sale investments 30 24
Deferred tax assets 36 27
Operating lease equalisation asset 5 3
Long-term receivables 15 2
Current assets 121 581
Other current assets 73 208
Bank balances, deposits and cash 9 48 373
Total assets 2 117 1 366
Equity and liabilities
Capital and reserves
Share capital and premium 17 17
Accumulated profits 1 264 1 150
Other reserves 127 104
Equity attributable to equity holders of
the parent 1 408 1 271
Minority interests 126 16
Total equity 1 534 1 287
Non-current liabilities 470 40
Long-term borrowings 427 -
Deferred tax liability 20 18
Operating leases equalisation liability 23 22
Current liabilities 113 39
Payables and other current liabilities 113 39
Total equity and liabilities 2 117 1 366
Net asset carrying value per ordinary
share (rand) 8 8
Condensed cash flow statement
Reviewed Audited
31 March 31 March
2007 2006
For the year ended Notes Rm Rm
Net cash outflow from operating
activities (46) (325)
Net cash outflow from investing
activities (365) (103)
Net cash inflow/(outflow) from
financing activities 86 (512)
Net decrease in cash and cash (325) (940)
equivalents
Cash and cash equivalents at beginning
of year 373 1 313
Cash and cash equivalents at end of 9 48 373
year
Condensed statement of changes in equity
Share Accumulated Capital Revaluation
capital profits reserves reserves
Rm Rm Rm Rm
Balances at 1 April 17 1 490 85 13
2005
Profit for the year - 159 - -
Dividend paid - (499) - -
Revaluation increase - - - 6
Balances at 31 March
2006 17 1 150 85 19
Profit for the period - 114 - -
Exchange difference
arising on translation
of foreign entities - - - -
Revaluation increase - - - 6
Acquisition of
subsidiary - - - -
Dividends paid to
minorities - - - -
Effects of changes in
holding - - - -
Balances at 31 March
2007 17 1 264 85 25
Attributable
to equity
Foreign holders
currency of the Minority
reserves parent interest Total
Rm Rm Rm Rm
Balances at 1 April 2005 - 1 605 2 1 607
Profit for the year - 159 17 176
Dividend paid - (499) (3) (501)
Revaluation increase - 5 - 5
Balances at 31 March 2006 - 1 271 16 1 287
Profit for the period - 114 23 137
Exchange difference arising
on translation of foreign
entities 17 17 - 17
Revaluation increase - 6 - 6
Acquisition of subsidiary - - 31 31
Dividends paid to - - (3) (3)
minorities
Effects of changes in
holding - - 59 59
Balances at 31 March 2007 17 1 408 126 1 534
Group segmental analysis
Gallagher
and
Energy Gaming properties Other Total
For the year ended 31
March 2007 Rm Rm Rm Rm Rm
Revenue
External sales 44 13 118 - 175
Segment results
Operating (loss)/profit
from continuing operations (52) 11 36 (15) (20)
Share of profit from
associate - 127 - - 127
(Loss)/profit before
interest and tax (52) 138 36 (15) 107
Finance revenue 37
Finance cost (14)
Profit before tax 130
Taxation 3
Profit for the year from
continuing operations 133
Profit from discontinuing
operations 4
Total profit for the year 137
BALANCE SHEET
Assets
Segment assets 819 19 378 23 1 239
Interest in associates 96 782 - - 878
Consolidated total assets 915 801 378 23 2 117
Liabilities
Segment liabilities 472 2 67 42 583
Consolidated total
liabilities 472 2 67 42 583
31 March 2006
Revenue
External sales - 11 164 - 175
Segment results
Operating profit/(loss)
from continuing operations - 9 136 (24) 121
Exceptional items - - - 6 6
Share of profit from
associate - 85 - - 85
Profit/(loss) before
interest and tax - 94 136 (18) 212
Finance revenue 82
Finance cost (2)
Profit before tax 292
Taxation (116)
Profit for the year from
continuing operations 176
Profit from discontinuing
operations -
Total profit for the year 176
BALANCE SHEET
Assets
Segment assets - 3 389 559 951
Interest in associates - 415 - - 415
Consolidated total assets - 418 389 559 1 366
Liabilities
Segment liabilities - 2 69 8 79
Consolidated total
liabilities - 2 69 8 79
NOTES
1. Basis of accounting
These summarised consolidated financial statements have been prepared in
accordance with IAS 34: Interim Financial Reporting and the requirements of
the Companies Act of South Africa and the Listing Requirements of the JSE.
The accounting policies and methods of computation of the group have been
consistently applied with those of the previous financial year except for
the adoption of IFRS 8, operating segments. The adoption of the aforesaid
standard has not had a material impact on the Group`s results.
2. Earnings per ordinary share
The calculation of basic and headline earnings per share is based on basic
earnings of R 114 million (2006: R159 million) and headline earnings of
R113 million (2006: R90 million) and a weighted average of 166 470 398
(2006: 166 470 398) shares in issue. No fully diluted earnings per share
has been disclosed as the potential dilution is not considered to be
material.
Reviewed Restated
31 March 31 March
2007 2006
Rm Rm
3. Fair value adjustments
Fair value adjustment of investment properties - (44)
Fair value adjustment of property, plant and
equipment - (18)
Mark to market - Energy Commodity sales (47) -
(47) (62)
4. Discontinued operations
Revenue 6 -
Operating costs (10) -
Amortisation of intangibles (5) -
Profit before tax (9) -
Tax 13 -
Profit after tax 4 -
The discontiued operations relate to interests
that Montauk owns in certain passive
landfill sites. It is anticipated that these
interests will be disposed of in the next 12
months.
5. Contingent liabilities
Suncoast Casino
- Equity guarantee secured by cash deposits - 192
- Corporate guarantee - 300
- 492
The Group has entered into certain structured
finance arrangements, in relation to
intellectual
property sale and leaseback transactions, with
Nedbank. South African Revenue Services
("SARS") is currently assessing these financial
structures, the outcome of which remains
uncertain. This could have an adverse effect on
the group. The directors have taken advise
on the matter and believe that the Group will
be able to defend any actions.
6. Capital commitments
Authorised for 2 -
Contracted for 14 -
Total 16 -
These capital commitments are being funded by a
combination of working capital and borrowings.
7. Lease commitments
Operating leases
- within one year 5 5
- more than one year 57 62
Total 62 67
8. Interests in associated companies
- Unlisted 878 415
Book value of interests in associated companies 878 415
9. Cash and cash equivalents
Bank balances, deposits and cash 48 373
Head office cash included in the above 14 356
10. Reviewed results
These summarised consolidated annual financial statements have been
reviewed by our auditors, Deloitte & Touche.
11. Listings requirements
This preliminary announcement has been prepared in compliance with the
Listings Requirements of the JSE.
COMMENTARY
OVERVIEW
Johnnic`s major assets at 31 March 2007 comprise:
* 30,2% effective interest in Suncoast Casino and Entertainment World
("Suncoast");
* 9,7% effective interest in Tsogo Sun Holdings ("Tsogo Sun");
* 93,5% effective interest in Montauk Energy Capital ("Montauk"); and
* 100% of Gallagher Estate
The year under review has seen Johnnic increase its effective stake in
Suncoast from 28,6% to 30,2%. It also acquired on
29 December 2006, through its 100% owned subsidiary Blue Wolf Energy
Holdings LLC ("BWEH"), an effective 93,5% interest in Montauk for an equity
consideration of US$61,1 million (R428 million). Subsequent to year end
BWEH`s interest has been diluted to 91,5% through the exercise of certain
co-investment rights awarded to management and other investors.
The R23 million (26%) growth in headline earnings from R90 million in 2006
to R113 million in the current year can be attributed to the following main
factors:
* A R42 million increase in our share of profits from associates (Tsogo Sun
and Suncoast) due to the strong performance of these operations; and
* A R119 million decrease in the taxation charge which is largely as a
result of the non-recurrence of a R63 million STC charge incurred in the
previous year as well as the recognition of a R30 million deferred tax
asset in Montauk in the current year;
offset by
* An R80 million reduction in profits from operations, as a result of
Montauk delivering an operating loss of some R52 million for the period
since acquisition and the non-recurrence of a R21 million profit in 2006
relating to the profit on disposal of property plant and equipment; and
* A R45 million reduction in finance income due to the reduction in cash
balances as a result of the dividend paid in the prior year and the
acquisition of Montauk.
Although headline earnings were above those recorded in the previous year,
basic attributable earnings were down R45 million (28%) from that recorded
last year. The main reason for this is that the results to 31 March 2006
included a R62 million fair value adjustment to property plant and
equipment and a reversal of a rationalization and restructuring provision
of R6 million.
DIVISIONAL REVIEW
Suncoast
Suncoast continued to perform well in a buoyant discretionary spend
environment. In December the company also opened a new beachfront hotel in
partnership with Tsogo Sun which should increase earnings from the complex
and fulfills a condition of the casino license. Suncoast remains in
litigation with the Durban city council over certain other developments,
the most significant of which is the casino`s plans to develop parking
facilities. It is hoped these issues can be suitably resolved in the near
future.
The groups equity accounted share of Suncoast`s profit was R66 million in
the current year up R21 million (47%) from the R45 million recorded for the
same period last year.
Tsogo Sun
The groups equity accounted share of Tsogo Sun`s profit was R61 million in
the current year up R21 million (53%) from the
R40 million recorded for the same period last year.
Montauk
During the year the group entered into an agreement to fund Blue Wolf
Capital Management in its efforts to establish a private equity fund the
USA. It was the intention to raise a fund in the USA and to acquire a 51%
stake in the general partnership that manages the fund, inter alia, for
sponsoring 25% of the first fund. This transaction required the approval of
the SARB who were unable to accommodate the transaction on the grounds that
the group`s participation in the fund would require funds to be invested in
the USA without the group acquiring a majority stake in the businesses
concerned. As a result the group has not been able to proceed with the
investment into the fund and is in the process of reviewing its
relationship with BWCM.
Despite the difficulties in establishing the private equity business, the
group did, by virtue of its prefund investment rights, acquire a 93,5%
interest in Montauk for an equity contribution of US$61,1 million (R428
million). The balance of the US$101 million purchase consideration was
funded by Montauk raising non-recourse debt in the US.
Montauk extracts natural gas from land fills under contract for use either
to generate electricity or for use as natural gas energy.
The directors believe that the market for green energy will develop
significantly as concerns around the emission of greenhouse gasses and
global warming grows and that this business, given its position as market
leader in its niche market, will grow in significance over time. Know how
in extracting landfill gas and its commercial exploitation potentially has
application in South Africa.
The results for Montauk are included in the group`s results from 29
December 2006 and comprised a loss of some US$4,3 million (R31 million).
The main reason for this loss is a pre tax mark to market adjustment of
US$6,5 million which relates to put options acquired in order to protect
the company from falling gas prices in the 5 year period until the debt is
repaid. Natural gas prices during the reporting period have been above the
put level resulting in an out of the money put position. Accounting
conventions did not allow us to treat the put options acquired as a hedge
for the period to 31 March 2007 and hence they were revalued to market at
31 March 2007. If the put options had been accounted for as a hedge,
thereby matching the put cost to the gain in the higher natural gas prices,
the after tax loss of Montauk would have been USD3,7 million lower than
that recorded, resulting in a net loss after tax for the three months of
USD0,6 million. The put options will be treated using hedge accounting in
subsequent reporting periods.
Gallagher Estate Properties and Exhibitions
The performance of Gallagher Exhibitions has been pleasing and it has shown
good revenue growth in an increasingly competitive environment.
In terms of an order issued by the Competition Tribunal the group disposed
of its interest in the conferencing and exhibition business of Gallagher
Estate during March 2007 and entered into a lease agreement with the
purchaser with regard to the conferencing and exhibition properties. In
addition, the group has granted an option to the lessee to purchase the
properties at fair value on completion of our application to subdivide
these buildings from the rest of Gallagher Estate (namely an office block,
the Pan African Parliament building and certain undeveloped land). The
disposal of the exhibition business was subject to the approval of the
Competition Commission who regrettably holds the view that the disposal of
the exhibition business can effectively only be achieved by Johnnic selling
the entire property of Gallagher Estate including the unrelated properties
and land. Johnnic has appealed this ruling and has obtained an interdict
restraining the competition authorities from compelling the sale of land
pending a review of their findings.
MANAGEMENT CHANGES
During the period under review the following appointments were made to the
board:
* Mr Andre van der Veen was appointed as Chief Executive Officer;
* Mr Stuart Queen was appointed as Chief Financial Officer;
* Mr Adam Blumenthal was appointed as an Executive Director;
* Mr Leslie Maasdorp and Miss Sibongile Zwane were appointed as Non-
Executive Directors however subsequently Miss Zwane has unfortunately
passed away;
* Subsequent to year end Mr Freddie Magugu was appointed as a Non-Executive
Director
Resignations during the period under review:
* Mr Connie Molusi and Mr Michael Jacobson
DIVIDEND
Due to the need to retain cash resources for potential investment the
directors have decided not to propose a dividend at this time.
For and on behalf of the Board
MA Golding A van der Veen
Chairman Chief Executive Officer
24 May 2007
DIRECTORS: MA Golding (Chairman), A van der Veen (Chief Executive Officer),
JA Copelyn, VE Mphande, F Magugu, A Blumenthal, S Queen, RK Jackson
COMPANY SECRETARY: HCI Managerial Services (Pty) Limited
HEAD OFFICE AND REGISTERED OFFICE: Suite 624, Office Tower, Overport City,
Durban.
PO Box 70874, Overport City, 4067
AMERICAN DEPOSITARY RECEIPT ("ADR") PROGRAM: Cusip number 478058100. ADR to
ordinary share 1:1.
DEPOSITARY: The Bank of New York, 22nd Floor, 101 Barclay Street, New York,
N.Y. 10286, USA.
REGISTRAR: Computershare Investor Services 2004 (Pty) Limited, 70 Marshall
Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107. Telephone number 0800 117472/(+27 11) 870
8201
INFORMATION AGENT: Symphony Investor Communications (Pty) Limited, 1st
Floor, 9 Fricker Road,
Illovo Boulevard, Illovo, 2196.
Postnet Suite #182, Private Bag X31, Saxonwold, 2132. Tollfree number 0800
117 472
These results may be viewed on the internet at http://www.johnnic.co.za
Date: 24/05/2007 17:50:02 Produced by the JSE SENS Department.
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