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JCM
JCM
JCM - Johnnic Communications Limited - Reviewed condensed group interim results
for the six months ended 30 September 2007
JOHNNIC COMMUNICATIONS LIMITED (Johncom)
Incorporated in the Republic of South Africa
Registration number: 1889/000352/06
Share code: JCM
ISIN code: ZAE000024584
American Depositary Receipt (ADR) programme CUSIP no: 47805P102
ADR to ordinary share: 1:1
Johncom House, 4 Biermann Avenue, Rosebank, 2196, Johannesburg
PO Box 1746, Saxonwold, 2132
www.johncom.co.za
Reviewed condensed group interim results for the six months ended 30 September
2007
Revenue+16%
Profit from operations before exceptional items +25%
Prakash Desai, Group CEO commented: "Our media and entertainment assets housed
in OpCo performed commendably growing revenue by 15% and profit by 13%, while we
continue to invest in new revenue streams in terms of our growth strategy. In
fact, OpCo`s profit increased by a very pleasing 29% excluding development
costs. With our investment for growth, and given the current economic
environment, we expect to deliver a full-year operating performance in OpCo at
least in line with the previous year.
We need to view these results against the backdrop of lower levels of business
confidence, rising interest rates, and softer advertising revenues."
Enquiries
Johncom 011 280 5003
Prakash Desai, Group CEO 083 380 1528
Howard Benatar, CFO 083 302 3704
College Hill 011 447 3030
Johannes van Niekerk 082 921 9110
Income statement
% Reviewed Reviewed Audited
change 6 months 6 months 12 months
ended ended ended
30 Sept 30 Sept 31 March
2007 2006 2007
Rm Rm Rm
Revenue 16 2 974 2 558 5 359
Cost of sales (1 691) (1 460) (3 074)
Gross profit 17 1 283 1 098 2 285
Operating expenses (874) (772) (1 641)
Operating costs (770) (690) (1 370)
Depreciation and amortisation (61) (52) (109)
Goodwill impairment - (5) (5)
Share-based payments (43) (25) (157)
Profit from operations before 25 409 326 644
exceptional items
Exceptional items 1 598 4 (18)
Profit from operations 508 2 007 330 626
Net finance income 38 17 45
Finance income 56 31 72
Finance costs (18) (14) (27)
Share of profits of associates 4 92 209
Profit before taxation 367 2 049 439 880
Taxation (300) (121) (257)
Profit for the period 450 1 749 318 623
Attributable to:
Shareholders of Johncom 459 1 743 312 613
Minority interest 6 6 10
1 749 318 623
Attributable earnings per
ordinary share (cents)
Basic 458 1 679 301 590
Diluted 456 1 674 301 589
Number of ordinary shares in
issue (`000)
At beginning and end of period 103 821 103 821 103 821
Weighted average for period 104 100 103 821 104 004
(diluted)
Balance sheet
Reviewed Reviewed Audited
30 Sept 30 Sept 31 March
2007 2006 2007
Rm Rm Rm
ASSETS 3 798 2 093 2 133
Non-current assets
Tangible and intangible assets 935 834 850
Investments and loans 2 682 1 112 1 094
Deferred taxation assets 181 147 188
Embedded derivatives - - 1
Current assets 3 183 2 474 2 921
Inventories, receivables and other 2 200 1 704 1 801
current assets
Investments 158 108 150
Bank balances, deposits and cash 825 662 970
Total assets 6 981 4 567 5 054
EQUITY AND LIABILITIES
Capital and reserves
Interest of Johncom shareholders 4 423 2 560 2 823
Minority interest 40 38 39
Total equity 4 463 2 598 2 862
Non-current liabilities 606 390 506
Long-term borrowings 45 32 36
Post-retirement benefits liabilities 164 135 161
Operating leases equalisation 90 98 96
liabilities
Share-based payments liabilities 133 102 190
Deferred taxation liabilities 174 23 23
Current liabilities 1 912 1 579 1 686
Payables and other current liabilities 1 541 1 361 1 408
Share-based payments liabilities 130 79 115
Short-term borrowings 75 88 74
Bank overdrafts 166 51 89
Total equity and liabilities 6 981 4 567 5 054
Net asset value per ordinary share 4 299 2 502 2 757
(cents)
Cash flow statement
Reviewed Reviewed Audited
6 months 6 months 12 months
ended ended ended
30 Sept 30 Sept 31 March
2007 2006 2007
Rm Rm Rm
Net cash from operating activities 41 203 535
Net cash used in investing activities (149) (135) (176)
Net cash used in financing activities (114) (83) (104)
Net (decrease) increase in cash and (222) (15) 255
cash equivalents
Cash and cash equivalents at beginning 881 622 622
of period
Foreign operations translation - 4 4
adjustment
Cash and cash equivalents at end of 659 611 881
period
Segmental
Reviewed Reviewed Audited
6 months 6 months 12 months
ended ended ended
30 Sept 30 Sept 31 March
% 2007 2006 2007
change Rm Rm Rm
Revenue from external customers
Continuing operations
Media 15 1 036 904 1 884
Retail 15 464 404 897
Books and Maps 16 214 185 394
Home Entertainment 21 216 178 353
Africa 62 76 47 118
Music - 55 55 121
Distribution, Manufacturing and (5) 105 111 210
Support Services
Pay Television 20 808 674 1 382
16 2 974 2 558 5 359
Profit from operations before
exceptional items
Continuing operations
Media - 140 140 299
Retail 44 13 9 60
Books and Maps (37) 19 30 54
Home Entertainment 10 23 21 41
Africa 63 (12) (32) (70)
Music (100) (4) (2) 2
Distribution, Manufacturing and (29) 12 17 45
Support Services
Pay Television 41 279 198 424
23 470 381 855
Corporate (18) (27) (50)
Disposed operations - (3) (4)
29 452 351 801
Share-based payments (43) (25) (157)
Profit from operations before 25 409 326 644
exceptional items
Statement of changes in equity
Share Share Other Accum- Share- Minority Total
capital premium reserves ulated holder interest equity
Rm Rm Rm profits interest Rm Rm
Rm Rm
Balance at 10 796 17 1 517 2 340 53 2 393
31 March
2006
Total income 46 278 324 6 330
and expense
recognised
Income and 46 (34) 12 12
expense
recognised
directly in
equity
Attributable 312 312 6 318
earnings
Effect of (21) (21)
acquisitions
and
disposals
Dividends on (104) (104) (104)
ordinary
shares
Balance at 10 796 63 1 691 2 560 38 2 598
30 September
2006
Total income 4 259 263 4 267
and expense
recognised
Income and 2 (42) (40) (40)
expense
recognised
directly in
equity
Attributable 2 301 303 4 307
earnings
Effect of (3) (3)
acquisitions
and
disposals
Balance at 10 796 67 1 950 2 823 39 2 862
31 March
2007
Total income (18) 1 743 1 725 6 1 731
and expense
recognised
Income and (21) (21) (21)
expense
recognised
directly in
equity
Attributable 3 1 743 1 746 6 1 752
earnings
Effect of (5) (5)
acquisitions
and
disposals
Dividends on (125) (125) (125)
ordinary
shares
Balance at 10 796 49 3 568 4 423 40 4 463
30 September
2007
Notes
1. Accounting policies and bases of preparation
These condensed interim financial statements have been prepared
using accounting policies compliant with International Financial
Reporting Standards (IFRS), and are in compliance with IAS 34
Interim Financial Reporting, the JSE Limited`s Listing
Requirements and the South African Companies Act.
The accounting policies and bases of preparation are consistent
with those applied in the preparation of the annual financial
statements for the year ended 31 March 2007, except for the
following:
*the updated IAS 1 Presentation of Financial Statements was
adopted on 1 April 2007. The statement imposes additional
disclosures regarding capital and capital management. These
additional disclosures, which have no impact on reported results,
will be detailed in the 2008 annual report;
*IFRS 7 Financial Instruments: Disclosures was adopted on 1 April
2007. The statement introduces new disclosures about financial
instruments, including the exposure to risks arising from
financial instruments. These new disclosures, which have no impact
on reported results, will be included in the 2008 annual report;
*IFRIC 10 Interim Financial Reporting and Impairment was adopted
on 1 April 2007, with no impact on the group financial statements.
This interpretation rules that impairment losses recognised in an
interim period in respect of goodwill or investments in equity
instruments and financial assets carried at cost shall not be
reversed;
*the revised formula for the calculation of headline earnings
which was released by the South African Institute of Chartered
Accountants on 31 July 2007 in the form of Circular 8/2007
Headline Earnings, was adopted on 31 July 2007, and has no impact
on the group`s reported headline earnings. The formula was revised
to align it with changes in IFRS; and
*as detailed in the commentary above, Caxton has been accounted
for as a financial asset at fair value through profit or loss, and
not as an associate.
Reviewed Reviewed Audited
6 months 6 months 12 months
ended ended ended
30 Sept 30 Sept 31 March
2007 2006 2007
Rm Rm Rm
2. Exceptional items
Fair value adjustment of investments 1 598 (1) 43
Reversal of loan impairments - 5 5
Impairment of non-current assets in - - (68)
Africa business
- Property, plant and equipment - - (53)
- Goodwill - - (15)
Other - - 2
1 598 4 (18)
% Reviewed Reviewed Audited
change 6 months 6 months 12 months
ended ended ended
30 Sept 30 Sept 31 March
2007 2006 2007
Rm Rm Rm
3. Reconciliation between
attributable and headline
earnings
Attributable earnings 459 1 743 312 613
Impairment of property, 1 - -
plant and equipment
Impairment of non-current - - 68
assets in Africa business
Goodwill impairment - 5 5
(Profit) loss on disposal of - (1) 2
tangible and intangible
assets
Other 1 (5) (4)
Total tax effect of - - -
adjustments
Total minority interest of - - -
adjustments
Headline earnings 461 1 745 311 684
Headline earnings per
ordinary share (cents)
Basic 460 1 681 300 659
Diluted 459 1 676 300 658
Basic excluding Caxton 35 288 214 464
The calculation of basic headline earnings per ordinary share
excluding Caxton is based on headline earnings after the
elimination of fair value adjustments (net of capital gains tax)
and equity accounted earnings.
4. Inter-segment revenue
Media 116 59 150
Retail - - -
Books and Maps 9 10 22
Home Entertainment - - -
Africa - - -
Music - - -
Distribution, Manufacturing 76 65 117
and Support Services
Pay Television 44 35 77
Group eliminations (245) (169) (366)
- - -
5. Earnings per ordinary share
The calculation of basic attributable and headline earnings per
ordinary share is based on attributable earnings of R1 743 million
(2006: R312 million) and headline earnings of R1 745 million
(2006: R311 million) respectively, and 103 821 159 (2006: 103 821
159) ordinary shares in issue.
The calculation of diluted attributable and headline earnings per
ordinary share is based on attributable earnings of R1 743 million
(2006: R312 million) and headline earnings of R1 745 million
(2006: R311 million) respectively, and a weighted average of 104
099 542 (2006: 103 821 159) diluted ordinary shares.
Reviewed Reviewed Audited
30 Sept 30 Sept 31 March
2007 2006 2007
Rm Rm Rm
6. Contingent liabilities and
commitments
Contingent liabilities 10 18 24
Unconditional programme and film 1 050 693 687
rights purchase obligations
Operating leases 695 679 715
- due within one year 134 102 128
- due after one year 561 577 587
7. Capital expenditure commitments
Contracted but not provided for 7 14 7
Approved but not yet contracted for 109 23 66
116 37 73
The capital expenditure will be
financed from cash resources.
OpCo M-Net/ As
Rm Super- reported
Sport Rm
Rm
8. Further segmental analysis
The following significant income
statement line items can be analysed
as set out below:
Six months ended 30 September 2007
Revenue 2 166 808 2 974
Profit from operations before share- 173 279 452
based payments, exceptional items and
disposed operations
Six months ended 30 September 2006
Revenue 1 884 674 2 558
Profit from operations before share- 156 198 354
based payments, exceptional items and
disposed operations
9. Reviewed results
These condensed group interim financial statements have been
reviewed by our auditors, Deloitte & Touche. A copy of their
unmodified review report is available for inspection at the
company`s registered office.
Our talented executives and employees, supported by strong brands and
businesses, are delivering the next growth phase
Overview
Our operating media and entertainment assets (OpCo) performed commendably, while
investing in new revenue streams in a growth strategy.
These results need to be seen against the backdrop of lower levels of business
confidence, rising interest rates, and softer advertising revenues.
Financial results and position
Revenue for the six months grew by 16% to R2,974 billion. Profit from operations
before exceptional items increased by 25% from R326 million to R409 million.
As detailed in the commentary below, Caxton has been accounted for as an
investment at fair value, and no longer as an associate. Accordingly, an
exceptional profit of R1,590 billion and a deferred capital gains tax charge of
R144 million have been recognised in profit and loss.
The balance sheet remained strong and ungeared. Net cash from operating
activities was impacted by share-based payments, development costs in the Media
division and investment in premium programming by pay television.
Operational review
The review of operations follows the segmental reporting presented in Johncom`s
2007 year-end results.
Given the changes in management responsibilities that took effect on 1 October
2007, future segmental reporting and operational reviews will be aligned with
the group structure announced in July. This structure appears on the inside back
cover of the 2007 annual report, and on our website.
Media
The Media division`s performance was affected by a slowdown in advertising and
increased printing and distribution costs. Compared to last year, when
advertising revenues grew by 22%, growth in the half-year was restricted to
single digits.
Digital online initiatives and the recently-launched titles, Weekender and The
Times, had a R33 million (2006: R7 million) impact on profits.
The Times, our new daily newspaper, enjoyed immediate acceptance among readers.
It is receiving increasing advertising support.
The Sunday Times, which enjoyed strong readership growth, also increased its
subscriber base by 20 000 since the launch of The Times in June. The Sowetan and
Sunday World both posted solid circulation and readership increases.
Our Eastern Cape titles, which recorded outstanding profit growth last year,
delivered marginally less profit.
The digital businesses continued to grow rapidly. I-Net Bridge and Career
Junction both increased profits by over 50%. On 2 April, Johncom acquired a
further 25% of Career Junction for R54 million cash, increasing its holding to
85%. As reported below in post balance sheet events, the remaining 15% was
purchased effective 1 November for R32 million cash.
The magazine business delivered a strong performance, with profits ahead of the
corresponding period last year.
Business Day and Financial Mail improved their profits. The Weekender`s
circulation passed the 10 000 mark. Summit TV`s viewership shows continued
growth despite the entrance of new competitors.
Retail
Revenue at Exclusive Books was up 21%, with same-store revenue growing by 18%.
Three stores were opened, including one in Soweto`s new Maponya Mall.
The launch by Nu Metro Theatres of a simple, transparent ticket price in July
has improved the average ticket price for the business.
Although the termination in mid-September of the loyalty programme run with
Edgars Club has not had a significant effect on the business, its impact will
continue to be monitored over a longer period.
The programme to update sites to a stylish, contemporary look continues, with
the Canal Walk revamp nearing completion.
Our cinema advertising business, Popcorn Advertising, is extending its reach and
bringing new advertisers to cinemas.
Books and Maps
The Books and Maps results include a forex loss of R1 million compared to a R6
million forex gain last year.
Strong performances from the South African businesses were offset by poor
results from the overseas operations.
Local publishing remained robust, although there are now indications of a
slowdown in the local market. MapIT, the digital mapping business, doubled
revenues and profits, driven by spectacular growth in the satellite navigation
device market, and demand for mapping applications on mobile phones.
International results were significantly affected by poor trading in the United
Kingdom as a result of a soft retail book market.
Home Entertainment
Home Entertainment had a solid start to the year, with strong content releases.
Strategic benefits are flowing from expansion into new retail footprints in
developmental nodes.
The division, which represents 20th Century Fox, the BBC, Walt Disney Pictures,
Warner Brothers and Universal International Pictures, has renewed all key
licences and continues to earn accolades for its performance on behalf of the
studios it represents. In September, Nu Metro Home Entertainment again won an
award for best licensee from Walt Disney Pictures. The recently-acquired
Universal licence is performing well.
Nu Metro Interactive has signed two publishers, Eidos and Sega, for interactive
game representation in South Africa, and currently has a 10% share of the gaming
market.
Africa
The rationalisation of operations in the Africa division during the period,
including closing the division`s South African head office, has contributed to
improved financial results. Losses, albeit at reducing levels, are forecast for
the short to medium term.
Music
In line with the music industry trend internationally, Gallo Music`s earnings
were disappointing. The digital business is still in its infancy and revenues
need to gain momentum. The second half of the financial year, traditionally the
key sales period for the business, is expected to include improved product.
Distribution, Manufacturing and Support Services
Compact Disc Technologies (CDT) further enhanced its manufacturing capacity and
turnaround times to customers by commissioning new capital equipment, including
a moulding line, mastering suite, printing machine and packing machine. CDT
remains the South African leader in CD and DVD manufacturing.
Entertainment Logistic Services (ELS) continues to be the front-runner for
warehousing and distributing CD and DVD product.
Nu Metro Distribution released blockbuster product into the market.
Results for the division are below last year`s primarily because last year`s
results included a release from the debtors` provision.
Pay Television
Excellent results were produced by M-Net and SuperSport on the back of strong
subscription sales. Although advertising revenues have recently come under
pressure, SuperSport benefited from advertising relating to the Rugby World Cup.
Caxton
Johncom`s investment in Caxton and CTP Publishers and Printers Limited (Caxton),
which remains unchanged from the year-end, carries less than 20% of the voting
power in Caxton, and has previously been accounted for as an associate, and
equity accounted, on the presumption of significant influence.
Following the resignation of Johncom`s group chief executive officer from the
Caxton board on his appointment as group chief executive officer, and Johncom`s
announcement of its intended unbundling of OpCo, the Johncom board of directors
no longer considers that Johncom has significant influence over Caxton.
The use of the equity method of accounting has therefore been discontinued for
the Caxton investment, with the investment now being accounted for as a
financial asset at fair value through profit or loss. An exceptional profit of
R1,590 billion and a deferred capital gains tax charge of R144 million have been
recognised in profit and loss.
Post balance sheet events
With all outstanding conditions precedent met, Johncom acquired Van Schaik
Bookstores on 1 October for a cash price of approximately R65 million.
The remaining 15% of Career Junction was purchased effective 1 November.
On 23 October, Caxton declared an ordinary dividend of 50 cents per share,
payable on 10 December.
On 8 November, the Competition Tribunal unconditionally approved the sale of
Johncom`s stakes in M-Net and SuperSport to Naspers Limited (Naspers). Johncom
will now proceed with the implementation of the sale agreement and subsequent
unbundling of the Naspers N shares to be received as part consideration for the
sale. The listing and unbundling of OpCo is expected to follow shortly
thereafter. Johncom stands to make a profit of approximately R1,1 billion on
the sale of the 12,53% interest in M-Net and SuperSport acquired in 2004.
Johncom will commence trading on the JSE under its new name, Avusa Limited, on
Monday 26 November 2007.
Prospects
With our investment for growth, and given the current economic environment, we
expect to deliver a full-year OpCo operating performance at least in line with
the previous year.
Mashudu E Ramano
Chairperson
Prakash C Desai
Group Chief Executive Officer
Howard Benatar
Chief Financial Officer
On behalf of the board
Rosebank
20 November 2007
Directors: M E Ramano (Chairperson), P C Desai* (Group Chief Executive Officer),
H Benatar* (Chief Financial Officer), M D Brand, C B Brayshaw, L M Machaba-
Abiodun, D M Mashabela, W S Moutloatse, T R A Oliphant, F J van der Merwe, T A
Wixley *Executive director
Company secretary: J R Matisonn E-mail: matisonnj@johncom.co.za These
results may be viewed on the internet at http://www.johncom.co.za
Date: 22/11/2007 07:09:37 Produced by the JSE SENS Department.
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