| Tue 27 Nov 2001, 0:00 | | Johnnic Communications Limited - Interim Results F |
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Johnnic Communications Limited
a Johnnic group subsidiary
Incorporated in the Republic of South Africa
Registration Number 1889/000352/06
("Johncom")
Share code: JCM
ISIN code : ZAE000024584
Interim results for the six months ended 30 September 2001
HIGHLIGHTS:
R9,3 billion M-Cell shares unbundled to shareholders
The group ceased to consolidate M-Cell as of July 2001
Media and Entertainment assets now separately listed
The future of Media and Entertainment
Commentary
OVERVIEW
The financial results of Johnnic Communications Limited ("Johncom") for the
six months ended 30 September 2001 are not comparable with the prior interim
period as a result of Johncom's unbundling of 34,1% of its shareholding in M-
Cell Limited ("M-Cell"), amounting to 552203364 shares, to shareholders on 9
July 2001.
The unbundling exercise was in line with the ongoing restructuring of the
Johnnic group and has resulted in the following benefits for Johncom:
Unlocking shareholder value - Johncom shareholders received 530 M-Cell
shares for every 100 Johncom shares held, unlocking part of the discount at
which Johncom was trading to its underlying assets of close to 40% prior to
the announcement;
Improving the liquidity of M-Cell shares on the JSE - the free float of M-
Cell has almost doubled to approximately 30%: and
Enabling the placement of greater market value on Johncom's media and
entertainment interests.
Johncom currently comprises three divisions:
Johnnic Publishing - representing the group's major interests in newspaper
publishing, of which Sunday Times (circulation in excess of 500 000) is the
flagship; magazines; books and maps.
Johnnic Entertainment - comprising the group's interests in filmed
entertainment, music and book retailing.
Digital Media - comprising the group's e-business interests.
The group also holds interests in a number of associated companies, namely:
Electronic Media Network Limited;
SuperSport International Holdings Limited; and
CTP Holdings Limited.
RESULTS
In accordance with Generally Accepted Accounting Practice, the results of M-
Cell have been included for the three months prior to the effective date of
the unbundling on 9 July 2001.
Revenue from continuing operations increased by 12% to R1 308,9 million
(2000: R1 172,7 million) and Ebitda from continuing operations also rose by
70% to R58,7 million (2000: R34,5 million).
Exceptional items of R2 508,4 million mainly comprised of the surplus
arising on the revaluation of the M-Cell shares to market value at the date
of the unbundling, amounting to R2 520,9 million, reduced by the write-down
of the investment in Magic Company, in Johnnic Entertainment, of R10
million.
The full benefit of the substantially reduced level of head office debt
following the rights offer in August 2000 has begun to emerge with a 39%
decline in finance costs to R27,6 million in respect of continuing
operations.
Basic headline earnings from continuing operations grew 183% to R36,1
million, while that from unbundled operations totalled R96,8 million.
Attributable earnings per share increased 1 900% to 2 500 cents (2000: 125
cents), reflecting the impact of the surplus on the revaluation of the M-
Cell shares.
Basic headline earnings per share from continuing operations increased by
167% to 35 cents (2000: 52 cents loss).
Ordinary shareholders' interest declined from R4,7 billion at year-end to
R1,5 billion as a result of the M-Cell unbundling.
Cash and cash equivalents declined from a favourable R647,4 million to
R314,3 million net borrowings as a result of the M-Cell unbundling.
ENTERTAINMENT
Influenced by the prevailing economic and political climate around the
world, revenue grew only 6% to R750,9 million, while Ebitda declined 4% to
R19,7 million in comparison to the prior year. However, on a like for like
basis, Ebitda from Johnnic Entertainment rose 11% to R23 million.
The second six months of the year traditionally yields proportionately a
greater contribution to the projected year-end results and substantial
efforts are being made to ensure that the group performs well in the
following six months.
Filmed Entertainment
Revenue grew 19% to R216,0 million with a corresponding growth in Ebitda of
60% to R14,1 million.
NuMetro
In the face of continued tough trading conditions, NuMetro delivered a
pleasing performance with a 20% increase in revenue to R212million.
Roll-out of new screens, the introduction of business class cinemas, Cinema
Priv and an improved line-up of product contributed to Ebitda from the
Theatres Division of R8,7 million, up 76% on the prior year.
Home Entertainment achieved Ebitda of R8,8 million, a 51% improvement on
2000, attributable to increased adoption of the DVD format to the benefit of
NuMetro Video. Video Rental had a pleasing first six months, despite a
difficult trading environment. Video Sellthru saw a decline in VHS sales in
line with the decline in retail.
Route 66
Declining demand for high-end wildlife television programming worldwide
affected the performance at Route 66 negatively, resulting in an Ebitda loss
of R3,8 million.
Associate: Electronic Media Network Limited ("M-Net") (24,7% interest)
M-Net continues to perform well, recording a 5% increase in revenue from
subscriptions and advertising, despite the constrained advertising spend
during the review period limiting growth from this sector. After-tax profits
rose by 22% on the prior year, achieved by improving operating efficiencies.
The M-Net subscriber base grew marginally over the six months, stimulated by
growth in West Africa. More than 1,25 million households in 45countries on
the African continent and adjacent islands currently subscribe to the pay-
television service.
Associate: SuperSport International Holdings Limited ("SuperSport") (24,7%
interest)
Revenue reported by SuperSport during the interim period amounted to R372,6
million,12% higher than last year's R333,3million. After-tax profits
amounted to R32,1 million, translating into earnings per share of 11,3 cents
- a 22% increase on the prior comparable period. Dedicated to broadcasting
coverage of more than 70 different sporting codes, SuperSport has extended
its reach by launching a new pan-African sports channel. The new channel
broadcasts South African Premier Soccer League and various Confederation of
African Football matches, and has already secured a multi-year deal for
English Premier League, Italian Serie A and Bundesliga soccer.
Music
The Gallo Group of Companies
The global music industry has had a difficult year. Gallo's results for the
interim were impacted by the ongoing downturn in the industry. Net revenue
of R203,8million was achieved, down 21% on last year. Ebitda declined 31% to
R7,0 million.
The Record Company and Publishing businesses produced a 4% decline in
revenue to R82 million, yielding Ebitda of R4,5 million. Gallo Record
Company nevertheless grew market share to 23,4% (2000: 21,5%).
The downturn in the music industry worldwide impacted on the Manufacturing
and Distribution businesses, producing a 30% decline in Ebitda to R7,7
million. Music racking and logistics company Music For Pleasure ("MFP") also
suffered the consequences of the downturn, with revenue down 14% on last
year and Ebitda of R1 million loss being reported.
Book retailing
Both Exclusive Books and Hammicks Bookshops performed strongly, boosting
revenue by 24% to R331,1 million on the back of increased market share, roll-
out of new stores and the appreciating value of the pound sterling against
the rand. Ebitda for the period rose 66% to R4,8 million (2000: R2,9
million).
MEDIA
JOHNNIC PUBLISHING
The Media division performed strongly despite a very tough trading
environment, posting a 60% increase in headline earnings to R58,0 million
from R36,3 million in the prior year.
Revenue rose 12% to R518,9 million from R461,7 million in the prior year,
while Ebitda increased 22% to R47,3 million from R38,9 million in the prior
year.
Newspaper and magazine publishing
Newspapers and magazines produced revenue growth of 9,9%, with an 18,7%
increase in Ebitda. The Sunday Times performed exceptionally well,
validating our strategy of investing in growing circulation and containing
costs. The Johnnic-BDFM training school has been established, reinforcing a
reputation of leadership among newspapers in training.
Extremely difficult market conditions and the launch of many new
international titles, resulted in the closure of certain titles and led to a
loss at the Ebitda level from the Magazine division. Initiatives to arrest
the decline in fortunes include dismantling the Yearbooks division and
combining titles where appropriate. The consolidation of the Magazine
division under one management team will yield significant costs savings
through the elimination of head offices.
Sowetan Sunday World continues to grow circulation, with current copy sales
exceeding 140000, although advertising continues to be soft. We have
certainly laid a firm foundation to grow our share of the advertising
market.
Books and maps publishing
Books and maps lifted revenue by 22,7% and grew Ebitda by 46,3%, beating a
tough trading environment. We are delighted by the turnaround achieved at
the Australian book operations, which has started to contribute positively
following the restructuring exercise undertaken last year. The prospects
for the Map division look quite promising following the creation of a new
venture Map Information Solutions, in partnership with the Net Group. This
new venture will service the growing demands for digital mapping
applications.
Associate: CTP Holdings Limited ("CTP") (44,2% interest)
CTP reported turnover growth of 5,4% for the year ended 30 June 2001, which
is indicative of the difficult trading conditions in consumer goods during
the period. A 25,4% increase in Ebitda to R329,3 million was achieved,
reflecting in part the positive impact of enhanced operating efficiencies
and the resultant increase in margin to 11,6%. The group is now structured
as optimally as possible and is geared to take advantage in an upturn in the
market.
DIGITAL MEDIA
Digital Media showed strong revenue growth by continuing to focus on the
business-to-business market while diversifying into e-learning with the
launch of Johnnic Learning and minimising the division's exposure to the
consumer Internet market. Revenue rose to R39,1 million, with losses at
Ebitda and headline earnings level of R10,7 million and R20,5 million,
reflecting the evolutionary stage of the start-up business.
Revenue and Ebitda are not directly comparable to 30September2000, since I-
Net Bridge, which is now proportionately consolidated, was previously equity
accounted. The prior year's figures have not been restated, as the impact is
not material to Johnnic Communications.
Bridge, the international 25% shareholder in I-Net Bridge, which is the
largest component of the Digital Media division, has been broken up and its
assets sold to various parties. I-Net Bridge is currently finalising
arrangements for alternative feeds of international prices and financial
data. The exact financial impact of these new agreements is still being
determined.
PROSPECTS
An array of very good product in both Gallo and Nu Metro for the 2001/2002
Christmas trading period bodes well for Johnnic Entertainment's performance
in the latter half of the year.
Development losses in Digital Media are anticipated to continue, although
the business promises to move closer towards profitability in the months
ahead. With the acquisition phase completed, ongoing consolidation will
occur.
Newspaper publishing will continue to perform well despite the tough trading
conditions, mainly as a result of the market positioning of the group's
major titles.
The continued consolidation in the Magazine division is expected to yield
significant cost savings and this will improve profitability in the future.
The Australian book operation has begun to contribute positively to profits,
following the restructuring exercise undertaken last year and is expected to
continue into the future.
The prospects for the Map division look quite promising, following the
creation of a new venture, Map Information Solutions, in partnership with
the Net Group.
STRATE
The share settlement of Johncom was transferred to Share Transactions
Totally Electronic ("STRATE") on 5 November 2001. The move to STRATE will
ensure Johncom's participation in a sophisticated settlement process in line
with international best practices.
Shareholders requiring further information in this regard should contact
Georgeson Shareholder Communications, the company's information agent
service provider on 0800-117-472 or +27 11 755-3433 if calling from outside
South Africa.
MANAGEMENT CHANGES
Mr Mashudu Ramano has been appointed chairman of the group with effect from
1 August 2001, following the transfer of Mr Paul Edwards to the M-Cell
group.
DIVIDEND
In view of the recent distribution in specie of R9,3 billion and the current
levels of gearing in the group, the directors have resolved not to declare a
dividend for the six-month period ended 30 September 2001
A policy for future dividends will be finalised at year end.
M Ramano
Chairman
J R D Modise
Director
27 November 2001
Consolidated Income Statement
6 months 6 months 12 months
ended ended ended
30 Sept 30 Sept 31 March
2001 2000 2001
Reviewed Reviewed Audited
Rm Rm Rm
Revenue 3 752,3 5 017,3 10 875,7
Cost of sales (1 730,8) (2 376,9) (5 034,3)
Gross profit 2 021,5 2 640,4 5 841,4
Operating expenses - net (1 199,8) (1 383,5) (2 953,5)
Earnings before interest,
taxation, depreciation
and amortisation
("Ebitda") 821,7 1 256,9 2 887,9
Depreciation (266,8) (360,1) (782,9)
Amortisation (55,5) (82,5) (163,2)
Profit from operations
before goodwill
amortisation 499,4 814,3 1 941,8
Goodwill amortisation (130,1) (102,8) (352,9)
Profit from operations 369,3 711,5 1 588,9
Finance costs (114,4) (203,0) (368,2)
Finance income 13,8 60,0 103,6
Share of profits of
associates 89,4 61,2 173,6
Profit before taxation
and exceptional items 358,1 629,7 1 497,9
Exceptional items 2 508,4 6,0 (45,4)
Profit before taxation 2 866,5 635,7 1 452,5
Taxation (175,3) (267,9) (641,4)
Profit after taxation 2 691,2 367,8 811,1
Minority interests (86,2) (263,5) (524,2)
Attributable earnings 2 605,0 104,3 286,9
Contribution to attributable earnings:
6 months 6 months 12 months
ended ended ended
30 Sept 30 Sept 31 March
2001 2000 2001
Reviewed Reviewed % Audited
Rm Rm change Rm
Continuing operations
Basic headline earnings 36,1 (43,4) 183 6,9
Entertainment 6,0 6,2 (3) 12,7
Media 58,0 36,3 60 107,7
Interest and corporate
head office costs (7,4) (77,1) 90 (76,6)
Headline earnings from
continuing operations
(excluding developmental
losses) 56,6 (34,6) 262 43,8
Digital media (20,5) (8,8) (133) (36,9)
Unbundled operations
Basic headline earnings 96,8 167,0 (42) 417,3
Telecommunications 96,8 167,0 417,3
Total basic headline
earnings 132,9 123,6 8 424,2
Goodwill amortisation
after minority
interests (36,3) (29,2) (24) (94,7)
Exceptional items after
taxation and minority
interests 2 508,4 9,9 (42,6)
Attributable earnings 2 605,0 104,3 2 398 286,9
Basic earnings per
ordinary share (cents)
Headline 128 148 (14) 452
Headline (excluding
developmental losses) 147 159 (8) 492
Attributable 2 500 125 1 900 306
Continuing operations
Basic earnings per
ordinary share (cents)
Headline 35 (52) 167 7
Headline (excluding
development losses) 54 (41) 232 47
Number of ordinary
shares in issue:
weighted average ('000) 104 189 83 403 93 768
at period end ('000) 104 189 104 189 104 189
Summarised Consolidated Balance Sheet
30 Sept 30 Sept 31 March
2001 2000 2001
Reviewed Reviewed Audited
Rm Rm Rm
ASSETS
Non-current assets 1 538,5 15 947,3 19 541,3
Property, plant and
equipment 390,6 4 546,9 5 880,2
Goodwill 61,3 9 671,3 9 515,7
Intangible assets 62,6 514,6 2 901,7
Investments and loans 947,1 1 162,6 1 154,9
Deferred taxation 76,9 51,9 88,8
Current assets 1 513,0 3 201,4 3 347,8
Bank balances, deposits
and cash 246,5 708,1 912,4
Listed equity 374,3 - -
Other current assets 892,2 2 493,3 2 435,4
Total assets 3 051,5 19 148,7 22 889,1
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders'
interest 1 522,5 4 523,4 4 690,3
Minority interests 23,4 9 169,3 9 629,4
Total equity 1 545,9 13 692,7 14 319,7
Non-current liabilities 136,1 2 826,1 4 858,2
Long term liabilities 34,4 2 004,0 4 054,7
Provision for
post-retirement
medical costs 100,2 90,2 96,1
Deferred taxation 1,5 731,9 707,4
Current liabilities 1 369,5 2 629,9 3 711,2
Non-interest bearing
liabilities 612,2 2 075,2 2 852,0
Interest bearing
liabilities 757,3 554,7 859,2
Total equity and
liabilities 3 051,5 19 148,7 22 889,1
Net asset value per
ordinary share (rand)
- book value 14,61 43,42 45,02
- based on market value
or directors' valuation
of underlying
investments 24,40 185,17 125,31
Notes
1. Basis of accounting
These consolidated condensed interim financial statements are prepared in
accordance with South African Statements of Generally Accepted Accounting
Practice ("GAAP") and Schedule 4 of the South African Companies Act. The
accounting policies are consistent with those used in the annual financial
statements for the year ended 31 March 2001.
2. Comparatives
Where necessary, comparative figures have been adjusted to conform with
changes in presentation in the current period.
3. Earnings per ordinary share
The calculation of basic headline earnings per share is based on
attributable earnings before goodwill amortisation and exceptional items, of
R132,9 million (2000: R123,6 million) and a weighted average of 104189314
(2000:83 403 000) ordinary shares in issue.
No fully diluted earnings per ordinary share have been disclosed as the
potential dilution is not material.
4. Independent review by the auditors
This interim report has been the subject of a review by our auditors
Deloitte & Touche, who have performed this review in accordance with the
guideline entitled "Guidance for Auditors on Review of Interim Financial
Information", issued by the South African Institute of Chartered
Accountants.
A copy of their unqualified review report is available for inspection at the
registered office of the company.
5. Listings requirements
This preliminary announcement has been prepared in compliance with the
Listings Requirements of the JSE Securities Exchange South Africa.
6. Corporate governance
The Board affirms its commitment to the principles of good corporate
governance, details of which have been included in the annual financial
statements.
30 Sept 30 Sept 31 March
2001 2000 2001
Reviewed Reviewed Audited
Rm Rm Rm
7. Interest bearing debt
Long term liabilities 34,4 2 004,0 4 054,7
Current liabilities 757,3 554,7 859,2
- call borrowings 560,8 360,3 265,0
- short term borrowings 196,5 194,4 594,2
Total 791,7 2 558,7 4 913,9
8. Capital expenditure
incurred 293,4 693,1 2 390,0
9. Contingent liabilities
and commitments
Guarantees 69,9 811,0 174,3
Contingent liabilities 0,2 - 134,0
Operating leases 855,8 1 773,9 1 882,2
- within one year 73,9 239,2 258,1
- more than year 781,9 1 534,7 1 624,1
Commitments for capital
expenditure
- contracted 0,7 485,5 264,8
- approved but not
contracted 12,3 1 042,6 1 999,4
Total 13,0 1 528,1 2 264,2
The capital expenditure
will be funded from
future cash flows and
borrowings.
10. Investments
Listed investments at
market value 532,5 536,7 504,4
Unlisted investments
at directors'
valuation 748,8 1 068,9 710,1
11. Listed equities
Investment in M-Cell
Limited 374,3 - -
12. Cash and cash
equivalents
Bank balances, deposits
and cash 246,5 708,1 912,4
Call borrowings (560,8) (360,3) (265,0)
(314,3) 347,8 647,4
Summarised Consolidated Cash Flow Statement
6 months 6 months 12 months
ended ended ended
30 Sept 30 Sept 31 March
2001 2000 2001
Reviewed Reviewed Audited
Rm Rm Rm
Cash inflows from
operating activities 487,4 869,5 2 820,0
Cash outflows from
investing activities (1 085,2) (3 449,0) (7 474,1)
Cash (outflows) inflows
from financing
activities (296,7) 3 847,8 6 207,0
Net (decrease) increase
in cash and cash
equivalents (894,5) 1 268,3 1 552,9
Cash and cash equivalents
at beginning of period 647,4 (889,9) (889,9)
Foreign entities
translation adjustment (67,2) (30,6) (15,6)
Cash and cash equivalents
at end of period (314,3) 347,8 647,4
Summarised Group Statement of Changes in Equity
6 months 6 months 12 months
ended ended ended
30 Sept 30 Sept 31 March
2001 2000 2001
Reviewed Reviewed Audited
Rm Rm Rm
Balance at 1 April 4 690,3 672,4 672,4
Attributable earnings 2 605,0 104,3 286,9
Distribution in specie (9 277,0) - -
Share election reserve - (38,8) (38,8)
Share capital issued at
a premium less share
issue expenses - 3 836,9 3 835,8
Variation of interests (1,9) (45,5) (59,9)
Goodwill written back on
M-Cell unbundling 3 335,5 - -
Exchange differences
arising on translation
of overseas operations 7,2 (13,6) -
Movement on revaluation
reserve arising on
revaluation of listed
equity 160,7 - -
Other 2,7 7,7 (6,1)
Ordinary shareholders'
interest 1 522,5 4 523,4 4 690,3
Segmental Analysis
6 months 6 months 12 months
ended ended ended
30 Sept 30 Sept 31 March
2001 2000 2001
Reviewed Reviewed % Audited
Rm Rm change Rm
GEOGRAPHIC
Revenue
Continuing operations 1 308,9 1 172,7 12 2 538,4
South Africa 1 048,0 1 017,0 2 050,4
Other overseas
operations 260,9 155,7 488,0
Unbundled operations 2 443,4 3 844,6 (36) 8 337,3
South Africa 2 283,4 3 695,4 7 960,2
Rest of Africa 160,0 149,2 377,1
3 752,3 5 017,3 (25) 10 875,7
Ebitda
Continuing operations 58,7 34,5 70 96,4
South Africa 62,6 40,4 84,5
Other overseas
operations (3,9) (5,9) 11,9
Unbundled operations 763,0 1 222,4 (38) 2 791,5
South Africa 723,8 1 196,7 2 683,7
Rest of Africa 39,2 25,7 107,8
821,7 1 256,9 (35) 2 887,9
BUSINESS GROUPING
Revenue
Continuing operations
Entertainment 750,9 707,8 6 1 539,7
Filmed entertainment 216,0 181,1 19 397,7
Music 203,8 258,9 (21) 469,1
Book retailing 331,1 267,8 24 672,9
Media 518,9 461,7 12 947,0
Newspaper/magazine
publishing 408,7 371,9 10 742,4
Book/maps publishing 110,2 89,8 23 204,6
Digital media 39,1 3,2 51,7
1 308,9 1 172,7 12 2 538,4
Unbundled operations
Telecommunications 2 443,4 3 844,6 (36) 8 337,3
3 752,3 5 017,3 (25) 10 875,7
Ebitda
Continuing operations
Entertainment 19,7 20,5 (4) 53,8
Filmed entertainment 14,1 8,8 60 9,7
Music 7,0 10,1 (31) 10,1
Book retailing 4,8 2,9 66 33,3
Head office (6,2) (1,3) 0,7
Media 47,3 38,9 22 72,1
Newspaper/magazine
publishing 41,3 34,8 19 62,9
Book/maps publishing 6,0 4,1 46 9,2
Digital media (10,7) (7,4) (45) (24,4)
Corporate head office 2,4 (17,5) 114 (5,1)
58,7 34,5 70 96,4
Unbundled operations
Telecommunications 763,0 1 222,4 (38) 2 791,5
821,7 1 256,9 (35) 2 887,9
Pro Forma Results Excluding the Telecommunications Division
6 months 6 months
ended ended
30 Sept 30 Sept
2001 2000 %
Rm Rm change
Revenue 1 308,9 1 172,7 12
Ebitda 58,7 34,5 70
Depreciation and
amortisation (including
goodwill amortisation) (63,9) (44,8) (43)
Loss from operations (5,2) (10,3) 51
Net finance costs (27,6) (45,0) 39
Share of profits of
associates 89,6 63,4 41
Profit before taxation
and exceptional items 56,8 8,1 601
Exceptional items 2 508,4 4,8
Profit before taxation 2 565,2 12,9
Taxation (21,4) (19,9)
Profit after taxation 2 543,8 (7,0)
Minority interests (6,5) (10,2)
Attributable earnings 2 537,3 (17,2)
Directors: M E Ramano, (Chairman), N Jacobsohn#, P M Jenkins#, P E Mabyana,
J R D Modise, ACG Molusi#, M A Mosiuoa, D ASimpson. #Executive Directors.
Company secretary: M R D Boyns (British). Transfer secretaries:
Computershare Services Limited, 1st Floor, Edura, 41 Fox Street,
Johannesburg, 2001. POBox 61051, Marshalltown, 2107.
These results may be viewed on the Internet at http://www.johnnic.com
E-mail: investor-relations@johnnic.co.za
