| Tue 24 Jun 2003, 17:36 | | JOHNNIC COMMUNICATIONS AUDITED RESULTS FOR THE YEA |
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JOHNNIC COMMUNICATIONS AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2003
Johnnic Communications Ltd
Registration number 1889/000352/06
ISIN number: ZAE000024584
Share code: JCM
American Depository Receipt ("ADR") Program
Cusip number: 47805P102
ADR to ordinary share: 1:1
www.johncom.co.za
JOHNNIC COMMUNICATIONS AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2003
Consolidated Income Statement
31 March 31 March
2003 2002
Rm Rm
Revenue 3 332 5 475
Cost of sales (2 128) (2 837)
Gross profit 1 204 2 638
Operating expenses - net (1 004) (1 683)
Earnings before interest, taxation, 200 955
depreciation and amortisation ("Ebitda")
Depreciation (95) (321)
Amortisation of intangibles (10) (62)
Profit from operations before
goodwill amortisation 95 572
Goodwill amortisation (15) (138)
Profit from operations 80 434
Finance costs (60) (143)
Finance income 27 26
Share of profits of associates 264 205
Profit before taxation and
exceptional items 311 522
Exceptional items (67) 2 513
Profit before taxation 244 3 035
Taxation (139) (224)
Profit after taxation 105 2 811
Minority interests (15) (93)
Attributable earnings 90 2 718
RECONCILIATION OF 31 March 31 March %
HEADLINE EARNINGS TO 2003 2002 change
ATTRIBUTABLE EARNINGS: Rm Rm
Ongoing operations 186 149 25
Disposed operations (29) (2) (1350)
Unbundled operations - 96 (100)
Total basic headline earnings 157 243 (35)
Goodwill amortisation after minority (15) (43) 65
interests
Exceptional items after taxation and (52) 2 518 (102)
minority interests
Attributable earnings 90 2 718 (97)
Basic earnings per ordinary
share (cents)
Headline 151 233 (35)
Attributable 87 2 608 (97)
Ongoing operations
Basic earnings per ordinary share
(cents)
Headline 179 143 25
Attributable 114 126 (10)
Disposed operations
Basic loss per ordinary
share (cents)
Headline (28) (2) (1 300)
Attributable (27) (2) (1 250)
Number of ordinary shares in issue:
weighted average (`000) 104 189 104 189
at year end (`000) 104 189 104 189
Pro Forma Results Excluding the Unbundled
Telecommunications Division
Audited Unaudited %
Consolidated 31 March 31 March change
Income Statement 2003 2002
Rm Rm
Revenue 3 332 3 032 10
Ebitda 200 192 4
Depreciation and amortisation (120) (133) 10
(including
goodwill amortisation)
Profit from operations 80 59 36
Net finance costs (33) (44) 25
Share of profits of associates 264 205 29
Profit before taxation and exceptional 311 220 41
items
Exceptional items (67) (8)
Profit before taxation 244 212 15
Taxation (139) (70)
Profit after taxation 105 142 (26)
Minority interests (15) (13)
Attributable earnings 90 129 (30)
Segmental Analysis
BUSINESS GROUPING 31 March 31 March %
2003 2002 change
Rm Rm
Revenue
Ongoing operations
Filmed entertainment 618 501 23
Music 170 144 18
Book retailing 393 319 23
Entertainment services 105 72 46
Newspaper and magazine publishing 889 807 10
Book and map publishing 293 258 14
Digital 128 95 35
2 596 2 196 18
Disposed operations
Hammicks UK, Music for Pleasure, 736 836
VCR/Trutone & Universal Partnership
Unbundled operations
Telecommunications - 2 443
3 332 5 475
Ebitda
Ongoing operations
Filmed entertainment 24 31 (23)
Music 10 13 (23)
Book retailing 34 22 55
Entertainment services 13 10 30
Newspaper and magazine publishing 99 85 16
Book and map publishing 15 35 (57)
Digital 2 (19) 111
Corporate head office (2) (7) 71
195 170 15
Disposed operations
Hammicks UK, Music for Pleasure, 5 22
VCR/Trutone & Universal Partnership
Unbundled operations
Telecommunications - 763
200 955
Summarised Consolidated Balance Sheet
As at As at
31 March 31 March
2003 2002
Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 327 408
Goodwill 19 64
Intangible assets 26 45
Investments and loans 913 956
Deferred taxation 81 96
1 366 1 569
Current assets 1 333 1 577
Bank balances, deposits and cash 291 244
Listed equities 160 349
Other current assets 882 984
Total assets 2 699 3 146
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders" interest 1 567 1 601
Minority interests 8 27
Total equity 1 575 1 628
Non-current liabilities 143 132
Long term liabilities 28 22
Provision for post-retirement medical costs 113 108
Deferred taxation 2 2
Current liabilities 981 1 386
Non-interest bearing liabilities 664 763
Interest bearing liabilities 317 623
Total equity and liabilities 2 699 3 146
Net asset value per ordinary share (Rand)
- book value 15 15
Summarised Group Statement of Changes in Equity
31 March 31 March
2003 2002
Rm Rm
Balance at 1 April 1 601 4 690
Attributable earnings 90 2 718
Distribution in specie - (9 277)
Variation of interests 24 (41)
Goodwill written back on MTN Group unbundling - 3 336
Exchange differences arising on translation (35) 26
of foreign entities
Movement on revaluation reserve arising on (110) 151
revaluation and disposal of listed equities
Other (3) (2)
Ordinary shareholders" interest 1 567 1 601
Summarised Consolidated Cash Flow Statement
31 March 31 March
2003 2002
Rm Rm
Cash inflows from operating activities 135 604
Cash inflows (outflows) from investing activities 230 (1 126)
Cash outflows from financing activities (21) (276)
Net increase (decrease) in cash and cash 344 (798)
equivalents
Cash and cash equivalents at beginning of the year (216) 647
Foreign entities translation adjustment (12) (65)
Cash and cash equivalents at end of the year 116 (216)
Notes
1.Basis of accounting
These summarised consolidated annual 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 2002.
2.Earnings per ordinary share
The calculation of basic headline earnings per share is based on headline
earnings of R157 million
(2002: R243 million) and a weighted average of 104 189 314 (2002: 104 189 314)
ordinary shares in issue. No diluted earnings per share has been disclosed as
the dilution is not material.
3.Audited results
The auditors, Deloitte & Touche, have issued their opinion on the group"s annual
financial statements, for the year ended 31 March 2003. The audit was conducted
in accordance with South African Auditing Standards.They have issued an
unqualified audit opinion. A copy of their audit report is available for
inspection at the company"s registered office. These summarised annual financial
statements have been derived from the group annual financial statements and are
consistent in all material respects, with the group annual financial statements.
The pro forma income statement does not form part of the annual financial
statements and is presented as additional information. The auditors have not
audited the pro forma income statement for 31 March 2002 and accordingly do not
express an opinion on it.
4. Corporate governance
Johncom is committed to the promotion of good corporate governance
standards and practices throughout the group. The publication of the King Report
on Corporate Governance for South Africa 2002 ("King II"), has resulted in
Johncom reviewing its structures and processes to align itself with best
practice.
31 March 31 March
2003 2002
Rm Rm
5.Exceptional items
Surplus realised on sale of MTN Group and Naspers 92 12
shares
Share of associated companies exceptional items (54) 9
Impairment of goodwill (37) -
Impairment of investments and loans (41) (31)
Surplus on MTN Group unbundling - 2 521
Intellectual property write down (11) -
Other (16) 2
(67) 2 513
6.Tax rate reconciliation % %
Standard rate 30 30
Deferred taxation not raised on assessed losses 9 -
Expenses not deductible for tax purposes 6 3
Exceptional items 6 (25)
Difference in rate of taxation of associated 3 -
companies
Other 3 (1)
57 7
Rm Rm
7.Net debt
Long term liabilities (28) (22)
Current interest bearing liabilities (317) (623)
- call borrowings (175) (460)
- short term borrowings (142) (163)
Total interest bearing liabilities (345) (645)
Bank balances, deposits and cash 291 244
(54) (401)
8.Cash and cash equivalents
Bank balances, deposits and cash 291 244
Call borrowings (175) (460)
116 (216)
9.Investments and loans - carrying value
Loans 26 10
Listed investments 497 470
Unlisted investments 390 476
913 956
10.Investments in associated companies
Listed investments at market value 577 520
Unlisted investments at directors" valuation 536 498
11.Listed equities
Investment in MTN Group Limited 130 349
Investment in Naspers Limited 30 -
160 349
12.Capital expenditure incurred 71 366
13.Contingent liabilities and commitments
Guarantees 27 49
Contingent liabilities 2 60
Operating leases 957 1 076
- within one year 108 103
- more than one year 849 973
Commitments for capital expenditure
- contracted - 2
- approved but not contracted 60 52
Total 60 54
The capital expenditure will be funded from future
cash flows and borrowings.
COMMENTARY
OVERVIEW
Johncom has continued the delivery of solid earnings off a higher base. The
process of reviewing all operating assets, coupled with an integration of key
activities continues. In the future, this is expected to deliver further
benefits.
The financial results of Johncom for the year ended
31 March 2003, are not comparable with the prior financial year as a result of
Johncom"s unbundling of 34,1% of its shareholding in MTN Group Limited ("MTN"),
at the end of the first quarter of the previous financial year.
Pro forma results have been prepared using consistent accounting policies,
assuming the unbundling was effected on 31 March 2001.
The pro forma results also exclude the profit included in the prior year under
exceptional items of R2 521 million comprising of the surplus that arose on the
revaluation of MTN shares to market value on unbundling.
Subsequent to year-end, Hammicks Bookstores Limited ("Hammicks") disposed of its
chain of local bookstores, with effect from 1 April 2003 to Ottakars plc. In a
further transaction, Hammicks thereafter disposed of its legal bookstores and
subscriptions business to John Smith & Son (Glasgow) Limited. It retained
residual assets and liabilities which will be disposed of or settled, as the
case may be, by the end of September 2003, when the Hammicks head office lease
terminates. The net proceeds from the above two transactions, the additional
disposals of residual assets and settlement of costs and liabilities is
anticipated to yield between GBP6,5 million and GBP6,8 million.
The results of Hammicks have been reported as disposed operations per the
segmental analysis. The contribution of Hammicks in the pro forma results and
the Consolidated Income Statement at attributable earnings was a loss of
R29 million (2002: R19 million profit). The segmental analysis also reflects as
disposed, Music for Pleasure ("MFP") which was disposed of at the beginning of
the year. Also reflected in the segmental analysis is the Universal Music
Partnership which terminated in April 2002, and VCR/Trutone which was also
disposed of at the beginning of the year as part of the rationalisation of the
group.
Material to the current year results is the income statement charge arising from
the revaluation of long term inter-group loans with foreign subsidiaries. The
charge is unrealised and the impact is covered below.
RESULTS
Revenue from ongoing operations increased by 18% to
R2 596 million (2002: R2 196 million) whilst Ebitda for the same businesses
increased by 15% to R195 million
(2002: R170 million).
The appreciation of the rand over the reporting period has resulted in non-
operating translation losses of R13 million (excluding Hammicks) being charged
to the Income Statement as a result of the revaluation of long term loans
provided as shareholder funding to foreign subsidiaries at
31 March 2003. This compares to net translation gains in the previous reporting
period of R14 million. This represents a swing of R27 million to the operating
results of the group.
The net debt of the group has reduced from
R401 million to R54 million over the reporting period. The largest contribution
to the reduction arises from the disposal of 15,5 million MTN shares, which
raised proceeds totalling R210 million. Dividend receipts from associates and a
cash and share distribution to shareholders from
M-Net/SuperSport were the other major contributions to the reduction.
The composition of exceptional items and the reconciliation of the effective tax
rate are detailed in notes 5 and 6 respectively.
The adoption of AC133 in the new financial year, in relation to the accounting
of foreign transactions, may lead to volatility in the future reported earnings
of Johncom.
Filmed Entertainment
Whilst overall turnover increased by a creditable 23%, this improvement failed
to translate at the Ebitda line, due in part to continuing pressure at Nu Metro
Theatres and Imax. However, good progress has been made in the operations with
the introduction of a new ticketing system, which will enhance efficiencies in
the coming year. Additionally, management has focused on reducing lease and
operational costs, which are expected to yield positive results in the future.
Nu Metro Home Entertainment performed superbly, growing its market share and
renewing key licences. Service delivery to the rental and retail trade
improved. DVD showed the strongest growth with revenues exceeding those of VHS
for the first time. This strong operational performance was in part offset by
foreign exchange losses of R11 million, due to the appreciating rand.
Nu Metro Film Distribution secured the 20th Century Fox theatrical licence
during the year and recorded strong performances locally for Warner Bros, 20th
Century Fox and independent product.
Johnnic Entertainment Limited and WEA International Inc. ("Warner") have agreed
that Warner will not exercise the option granted in November 1997 and available
until
1 July 2003, to acquire equity in Gallo"s music business.
Music
Despite the widely reported declines in the music industry internationally and
locally, Gallo Record Company increased turnover from both international and
local repertoire. Investments in local product and development costs resulted
in an overall marginal decline in year on year Ebitda. The year"s results
exclude the benefits of the Universal partnership, which terminated at the
beginning of the financial year. These results also exclude MFP, which was
disposed of in July 2002. The effects of these transactions have been included
in disposed operations for the prior year.
Book Retailing
Exclusive Books recorded a stellar performance in a difficult retail trading
sector, expanding its store network to 32, (including a new opening in Botswana)
and making an increased contribution to group results. Aggressive promotional
campaigns maintained the volumes of unit sales in a market characterised by
increasing prices due to the volatile rand exchange rate.
Entertainment Services
Results for the prior year of VCR/Trutone have been included under disposed
operations due to the disposal of those businesses in April 2002. The remaining
platform businesses have shown the benefits of providing industry solutions and
the improvement is expected to continue into the future. Compact Disc
Technologies (CDT) received ISO 9002 accreditation during the year, positioning
it well to secure further international and local manufacturing contracts. RTG,
the purchaser of VCR/Trutone, also acquired a 28,5% stake in CDT in March 2002,
which was increased to 40% in
March 2003. The business has benefited from the new partnership. Entertainment
Logistics Services (ELS) - the warehouse and distribution business unit,
returned to profit during the year, reflecting the benefits of wide ranging
initiatives to enhance infrastructure, information technology and control
systems.
Newspaper and Magazine Publishing
Newspapers remained the largest contributor to group revenue. The newspaper
publishing division recorded commendable results, benefiting from aggressive
initiatives to maintain profitability.
The new team at the Sunday Times, including the new publisher and editor,
successfully faced the year"s challenges, which included a significant increase
in the newsprint price. Circulation for the period July to
December 2002 was recorded by the Audit Bureau of Circulation at 504 295, making
Sunday Times the largest circulating title in the country. Importantly, the
newspaper increased its share of the Sunday advertising market. Increased
circulation and advertising revenue, together with other initiatives, improved
the profitability of the newspaper.
BDFM Publishers recorded a strong performance in difficult trading conditions,
through effective cost-cutting, retaining traditional revenue streams and
pursuing new revenue opportunities. New projects and marketing initiatives are
expected to boost copy sales of both Business Day and Financial Mail.
The consolidation of Johnnic Publishing Eastern Cape and Dispatch Media
continued during the year. Circulation volumes of the major publications showed
a marginal decline. Advertising volumes at Dispatch Media were significantly
ahead of last year while volumes at Johnnic Publishing Eastern Cape were
marginally down.
The consolidation of the magazine division was bedded down during the year. The
magazine division grew revenue by 22% in a very tough and overcrowded market
with increased competition driven by the launch of new international titles.
Book and Map Publishing
The book publishing division achieved solid sales growth, both domestically and
abroad. Struik Publishers achieved solid sales growth, and tight control of
operating expenses and improved stock turn contributed to greater profitability.
Internationally, all divisions delivered strong performances in local
currencies, although the year-end result was affected by exchange rate
revaluations.
Results from the map publishing division were commendable, with excellent
progress made by the new electronic map business, Mapit. Map Studio achieved
good turnover growth, and successfully completed its relocation to Cape Town and
re-branding exercise. Booksite Afrika enjoyed another successful year and
remains the biggest distributor of trade books in the South African market.
Digital
Johnnic Digital, comprising the group"s electronic interests, held mainly
through Johnnic e-Ventures, had an excellent year. Management"s decision to
focus on the business-to-business and learning markets has paid dividends. The
division met its target of achieving positive Ebitda, with revenue up 35% and
Ebitda improved by 111%. All signs are that the division has turned the corner.
Johnnic Digital is ideally positioned to capitalise on the growing use of
Internet-based business solutions. Equally, the Internet has become entrenched
as a powerful and effective delivery mechanism in education.
Associate: Electronic Media Network Limited ("M-Net") (26,03% interest)
M-Net has posted satisfactory results, achieved through a focus on operational
efficiencies and cost management, supported by improved advertising revenues on
the back of the M-Net program line-up.
Total revenue for the year increased to R1,4 billion from
R1,3 billion achieved last year. Headline earnings amounted to R127 million
equivalent to headline earnings per share of 50,2 cents.
On 10 March 2003, M-Net distributed R37,5 million in cash to its shareholders by
way of a reduction in M-Net"s share premium account.
Associate: SuperSport International Holdings Limited ("SuperSport") (26,03%
interest)
SuperSport has also shown satisfactory results with revenue for the year
increasing by 15% from R839 million to
R961 million resulting in a headline earnings per share of 34,8 cents.
On 10 March 2003, SuperSport distributed R37,5 million in cash to its
shareholders by way of a reduction in SuperSport"s share premium account. A
reorganisation of Naspers Limited ("Naspers") led to SuperSport"s investment in
MIH Limited being converted to 11 386 277 Naspers shares. This investment was
not considered to be strategic by SuperSport and, accordingly, these shares were
distributed to shareholders as a reduction in capital.
The company recorded an impairment charge of R124 million against its investment
in MIH Limited.
Associate: Caxton and CTP Publishers and Printers Limited ("CTP") (35,7%
interest)
The year-end of CTP is not co-terminous with Johncom. The most recent six month
results of CTP delivered a 20% increase in revenue and a 33% improvement in
diluted headline earnings to 31 December 2002.
During the year, CTP undertook a scheme of arrangement in terms of which it
acquired the minority shareholders" shares in Caxton Limited, which was then
constituted as a wholly owned subsidiary and has since been delisted.
CTP also subdivided its ordinary shares in the ratio of
10 for 1 and changed its name to Caxton and CTP Publishers and Printers Limited.
Dividends
Concurrently with the approval of the audited results for the year ended 31
March 2003, the board approved the resumption of the payment of dividends.
A dividend of 30 cents per share has been declared. The last day to trade "cum"
the dividend in order to participate in the dividend will be 11 July 2003. The
shares will commence trading "ex" the dividend from the commencement of business
on 14 July 2003 and the record date will be 18 July 2003. The dividend is
payable on 21 July 2003. Share certificates may not be dematerialised or
rematerialised between 14 July 2003 and 18 July 2003, both days inclusive.
Prospects
The group starts the new year with debt reduced to a nominal level. Reduced
costs and increased efficiencies will result from the integration of the
publishing and entertainment operations into a single Johncom headquarters.
Equally, the consolidation of magazine and Eastern Cape publishing operations
will result in enhanced returns.
African expansion plans promise exciting new markets. Sales of new format
products, such as DVD, continue to show growth. The Digital division is
forecasting continued good growth and expects to contribute positively to group
results in the new year.
Piracy of entertainment products and weak consumer spending remain issues. The
business operations will have to deal with the challenges of market volatility,
exchange rate fluctuations and industry consolidation in the coming year.
Nonetheless, Johncom is well positioned for longer-term earnings growth.
M E Ramano A C G Molusi
Chairman Chief Executive Officer
23 June 2003
Registered and physical address: 4 Biermann Avenue, Rosebank, 2196
Transfer secretaries: Computershare Investor Services Ltd
Directors: M E Ramano (Chairman), A C G Molusi* (Chief Executive Officer), P C
Desai*, N Jacobsohn*, P M Jenkins*, D M Mashabela,
J R D Modise, L Morake, K C Ramon, D A Simpson, T A Wixley
* Executive Director
Company Secretary: JR Matisonn
Date: 24/06/2003 05:05:21 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
