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Johnnic Communications Limited -
Johnnic Communications Limited
Registration number 1889/000352/06
ISIN number: ZAE000024584
Share code: JCM
American Depositary Receipt ("ADR") Program
Cusip number: 47805P102
ADR to ordinary share: 1:1
www.johncom.co.za
JOHNNIC COMMUNICATIONS REVIEWED RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER
2003
Consolidated Income Statement
6 months 6 months % 12 months
ended ended change ended
30 Sept 30 Sept 31 March
2003 2002 2003
Reviewed Reviewed Audited
Rm Rm Rm
Revenue 1 284 1 587 (19) 3 332
Cost of sales (804) (1 010) (2 128)
Gross profit 480 577 (17) 1 204
Operating expenses - net (426) (508) (1 004)
Earnings before interest, 54 69 (22) 200
taxation, depreciation and
amortisation ("Ebitda")
Depreciation (39) (49) (95)
Amortisation of intangibles (3) (6) (10)
Profit from operations before 12 14 (14) 95
goodwill amortisation
Goodwill amortisation (5) (8) (15)
Profit from operations 7 6 17 80
Finance costs (20) (35) 43 (60)
Finance income 21 13 62 27
Share of profits of associates 68 113 (40) 264
Profit before taxation and 76 97 (22) 311
exceptional items
Exceptional items 44 (69) (67)
Profit before taxation 120 28 329 244
Taxation (48) (50) (139)
Profit (loss) after taxation 72 (22) 427 105
Minority interests (1) (5) (15)
Attributable earnings (loss) 71 (27) 363 90
CONTRIBUTION TO
ATTRIBUTABLE EARNINGS:
Ongoing operations 26 68 (62) 186
Disposed operations (11) (22) 50 (29)
Total basic headline earnings 15 46 (67) 157
Goodwill amortisation after (4) (8) 50 (15)
minority interests
Exceptional items after 60 (65) 192 (52)
taxation and minority interests
Attributable earnings (loss) 71 (27) 363 90
Basic earnings (loss) per
ordinary share (cents)
Headline 14 45 (69) 151
Attributable 68 (26) 362 87
Ongoing operations
Basic earnings (loss) per
ordinary share (cents)
Headline 25 65 (62) 179
Attributable 89 (5) 1 880 114
Disposed operations
Basic loss per ordinary share
(cents)
Headline (11) (20) 45 (28)
Attributable (21) (21) - (27)
Number of ordinary shares in
issue
weighted average (`000) 104 189 104 189 104 189
at period end (`000) 104 189 104 189 104 189
Summarised Statement of Changes in Equity
6 months 6 months 12 months
ended ended ended
30 Sept 30 Sept 31 March
2003 2002 2003
Reviewed Reviewed Audited
Rm Rm Rm
Balance at 1 April 1 567 1 601 1 601
AC133 adjustment - subsidiaries (14) - -
AC133 adjustment - associates (66) - -
Restated balance at 1 April 1 487 1 601 1 601
Attributable earnings (loss) 71 (27) 90
Variation of interests in associates (9) 8 24
Dividend paid (31) - -
Exchange differences arising on 3 2 (35)
translation of foreign entities
Movement on revaluation reserve 6 (132) (110)
arising on revaluation of listed equities
Other - - (3)
Ordinary shareholders" interest 1 527 1 452 1 567
Segmental Analysis
6 months 6 months % 12 months
ended ended change ended
30 Sept 2003 30 Sept 2002 31 March 2003
Reviewed Reviewed Audited
Rm Rm Rm
BUSINESS GROUPING
Revenue
Ongoing operations
Media 530 503 5 1 017
Retail 307 279 10 608
Books & Maps 140 146 (4) 293
Home Entertainment 132 135 (2) 268
Music 80 67 19 170
Africa 1 - - -
Distribution, 78 100 (22) 240
manufacturing &
support
services
1 268 1 230 3 2 596
Disposed operations
Hammicks UK, Music 16 357 (96) 736
for Pleasure,
VCR/Trutone &
Universal
Partnership
1 284 1 587 (19) 3 332
Ebitda
Ongoing operations
Media 42 46 (9) 101
Retail 3 3 - 22
Books & Maps 11 10 10 15
Home Entertainment 16 20 (20) 37
Music (1) (3) 67 10
Africa (4) (1) (300) (4)
Distribution, (3) 8 (138) 14
manufacturing &
support
services
64 83 (23) 195
Disposed operations
Hammicks UK, Music (10) (14) 29 5
for Pleasure,
VCR/Trutone &
Universal
Partnership
54 69 (22) 200
Summarised Consolidated Balance Sheet
As at 30 Sept 2003 30 Sept 2002 31 March 2003
Reviewed Reviewed Audited
Rm Rm Rm
ASSETS
Non-current assets
Property, plant and 245 372 327
equipment
Goodwill 16 49 19
Intangible assets 21 37 26
Investments and loans 871 988 913
Deferred taxation 83 103 81
1 236 1 549 1 366
Current assets 1 201 1 333 1 333
Bank balances, deposits and 246 172 291
cash
Listed equities 75 214 160
Other current assets 880 947 882
Total assets 2 437 2 882 2 699
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders" 1 527 1 452 1 567
interest
Minority interests 9 18 8
Total equity 1 536 1 470 1 575
Non-current liabilities 143 130 143
Long term liabilities 25 20 28
Provision for post- 113 109 113
retirement medical costs
Deferred taxation 5 1 2
Current liabilities 758 1 282 981
Non-interest bearing 676 680 664
liabilities
Interest bearing liabilities 82 602 317
Total equity and liabilities 2 437 2 882 2 699
Net asset value per ordinary
share (rand)
book value 15 14 15
Summarised Consolidated Cash Flow Statement
6 months 6 months 12 months
ended ended ended
30 Sept 2003 30 Sept 2002 31 March 2003
Reviewed Reviewed Audited
Rm Rm Rm
Cash (outflows) inflows from (25) (4) 135
operating activities
Cash inflows (outflows) from 244 (45) 230
investing activities
Cash outflows from financing (171) (17) (21)
activities
Net increase (decrease) in 48 (66) 344
cash and cash equivalents
Cash and cash equivalents at 116 (216) (216)
beginning of period
Foreign entities translation 6 - (12)
adjustment
Cash and cash equivalents at 170 (282) 116
end of period
Notes
1. Basis of accounting
These summarised consolidated 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 2003, except for the adoption of AC133
Financial Instruments: Recognition and Measurement.
2. Earnings per ordinary share
The calculation of basic headline earnings per ordinary share is based on
headline earnings of R15 million (2002: R46 million) and a weighted average of
104 189 314 (2002: 104 189 314) ordinary shares in issue. No fully diluted
earnings per ordinary share has been disclosed as the dilution is not material.
3. Reviewed results
These interim results have been reviewed by our auditors, Deloitte &
Touche, who noted, "Based on our review nothing has come to our attention that
causes us to believe that the accompanying interim financial information is not
fairly presented, in all material respects, in accordance with South African
Statements of Generally Accepted Accounting Practice applicable to Interim
Financial Reporting, and the Companies Act in South Africa." A copy of their
complete unqualified review report is available for inspection at the registered
office of the company.
6 months 6 months 12 months
ended ended ended
30 Sept 2003 30 Sept 2002 31 March 2003
Reviewed Reviewed Audited
Rm Rm Rm
4. Exceptional items
Surplus realised on sale 69 3 92
of listed equities
Share of associated 3 (54) (54)
company exceptional items
Provision for non-trading (9) - -
theatres
Net loss on disposal of (11) - -
Hammicks UK
Impairment of goodwill, - (17) (89)
investments, loans and
intellectual capital
Other (8) (1) (16)
44 (69) (67)
% % %
5. Tax rate reconciliation
Standard rate 30 30 30
Deferred taxation not 16 60 9
raised on assessed losses
Expenses not deductible - - 6
for tax purposes
Exceptional items (11) 69 6
Difference in rate of 3 27 3
taxation of associated
companies
Other 2 (7) 3
40 179 57
Rm Rm Rm
6. Net cash (debt)
Long term liabilities (25) (20) (28)
Current liabilities (82) (602) (317)
- call borrowings (76) (454) (175)
- short term borrowings (6) (148) (142)
Total interest bearing (107) (622) (345)
liabilities
Bank balances, deposits 246 172 291
and cash
139 (450) (54)
7. Investments and loans -
Carrying value
Loans 5 26 26
Listed investments 533 490 497
Unlisted investments 333 472 390
871 988 913
8. Investments in
associated companies
Listed investments at 701 523 577
market value
Unlisted investments at 669 551 536
directors" valuation
9. Listed equities at
market value
Investment in MTN Group 75 214 130
Limited
Investment in Naspers - - 30
Limited
75 214 160
10. Cash and cash
equivalents
Bank balances, deposits 246 172 291
and cash
Call borrowings (76) (454) (175)
170 (282) 116
11. Capital expenditure 31 37 71
incurred
12. Contingent liabilities
and commitments
Guarantees 35 33 27
Contingent liabilities 1 1 2
Operating leases 883 929 957
- within one year 105 88 108
- more than one year 778 841 849
Commitments for capital
expenditure
- contracted 4 13 -
- approved but not 63 10 60
contracted
Total 67 23 60
The capital expenditure
will be funded
from future cash flows and
borrowings.
Commentary
OVERVIEW
In keeping with the corporate vision to build a single, integrated media and
entertainment group, the executive and operational management of Johncom was
restructured with effect from 1 July 2003. Johncom"s three former divisions
(entertainment, publishing and digital) have been disbanded and the group"s
operations have been clustered into six logical business units, namely Media,
Retail, Books & Maps, Home Entertainment, Music and Africa, each with its own
chief executive officer. All these units are supported by the Distribution,
Manufacturing & Support services division.
The new structure is designed to create maximum value for our shareholders. The
alignment of the group"s legal structure with the operational structure is
underway to address inefficiencies of duplication, funding and taxation.
RESULTS
Traditionally, the second half of the year delivers most of the group"s revenue
and earnings. The group"s overall performance for the first six months is mixed,
with revenue from ongoing operations up by 3% to
R1 268 million (2002: R1 230 million) and Ebitda from ongoing operations
dropping by 23% to R64 million (2002: R83 million). The net finance cost of
prior years has been reversed with net debt being eliminated and the group"s
effective tax rate has been reduced to align more closely with the standard tax
rate.
Major causes of the decline in Ebitda were the lower advertising revenues earned
in the first quarter of the year at Sunday Times, Business Day and Financial
Mail, and timing of product releases through the Home Entertainment and Nu Metro
Distribution units. In the endeavour to deliver on the group"s African strategy,
costs have been incurred in pursuing approved ventures.
The net exceptional profit amounting to R44 million arose through the surplus
realised on the sale of MTN and Naspers shares and is offset by the closure
costs of Hammicks Bookstores Limited and the provision for certain non-trading
Nu Metro cinema theatre complexes. Exceptional items in the prior interim period
largely consist of our share of the exceptional loss in our associated companies
of R54 million.
IMPACT OF AC133
The adoption of accounting statement AC133 has not had a material impact on
Johncom"s earnings from wholly owned subsidiaries or on the cash flows from
these operations.
However, the impact of AC133 on Johncom"s share of profits from M-Net and
SuperSport has been material. Johncom"s share of the current period charge to
the income statement by M-Net and SuperSport on the adoption of AC133 is R88
million offset by a tax benefit of R26 million.
OPERATIONAL REVIEW
MEDIA
The benefits of the extensive restructuring of our Eastern Cape division flowed
through this year with Daily Dispatch and The Herald showing strong revenue and
profit growth. The Weekend Post was re-launched as a Saturday paper with sharply
increased copy sales and advertising revenue. While Sunday Times retained its
status as the country"s leading newspaper, its performance showed no growth. The
Sunday World continued to enjoy good copy sale growth.
The new management team has begun an extensive restructuring of the Magazine
division to improve its profitability. The benefits of this process should
become evident by year-end.
Businesses that were formerly housed in the Digital division are trading
profitably at Ebitda level compared to a loss in the same period last year.
As mentioned above, a tough advertising market has impacted on Business Day and
Financial Mail.
RETAIL
Exclusive Books traded strongly, with a "same store" revenue growth of 12%. The
new airport shops and the latest Harry Potter novel contributed measurably to
increased sales volumes. The retail price of books has decreased as a result of
the strengthening of the rand against other major international currencies.
This, combined with improved macro economic conditions in South Africa, is
expected to drive further growth in the second half of the year.
Nu Metro Theatres benefited from good product releases during the first quarter
of the year and has retained market share. A very strong product line-up during
the remaining six months should ensure improved performance for the full-year.
In the meantime, ongoing monitoring of cinema sites to identify under-performing
complexes has provided valuable input into the leasing strategy to be adopted.
A strategic review of the Imax Theatres business has been completed and the
management team is in the process of finalising the details of a possible exit
strategy.
BOOKS & MAPS
The Books and Maps business unit delivered a positive performance despite the
negative impact of the strengthening rand on offshore operations. The Australian
book division and UK-based cartographic service divisions experienced difficult
trading conditions.
The South African operations performed well, yielding turnover growth of 14% and
lifting Ebitda by 29% compared to the prior year.
HOME ENTERTAINMENT
Home Entertainment experienced softer trading than expected during the six
months under review, attributable to escalating piracy levels, increased
pressure from the retail market and a marked shift from VHS to DVD in the rental
market.
Trading in the first weeks of the second half of the year has been stronger,
reflecting improved conditions in the retail sector with the release of
products, such as The Lion King, Matrix Reloaded, and X-Men. An improved
performance is therefore anticipated in the second six months of the year.
MUSIC
Contrary to global trends where market dynamics continue to yield lower sales
revenues, turnover grew by 19%. Operating profits remained under pressure due to
increased investment in local music productions, artist development costs and
higher operating expenses. Operating expenses will be reduced in the latter half
of the year following the relocation of the business unit from Gallo House to
Johncom House.
AFRICA
Johncom Africa, a wholly owned subsidiary, has made good progress in exploring
opportunities for the group in new markets and territories within sub-Saharan
Africa. Key opportunities have been identified in home entertainment, book
publishing, newspaper publishing, cinemas and retail in several countries north
of the SADC region. The investment committee has approved capital expenditure on
a number of projects, for this purpose.
DISTRIBUTION, MANUFACTURING &
SUPPORT SERVICES
Nu Metro Film Distribution benefited from good product released via the Warner
Bros and 20th Century Fox licences during the period. However, the first six
months of the previous year had a much stronger line up of independent product
than the past six months. However, Lord of the Rings - The Return of the King,
is scheduled for release in December 2003, heralding good prospects for the year
as a whole.
Compact Disc Technologies (CDT) secured an increased load of DVD product from
local and international sources. The business has applied for IRMA anti-piracy
membership, which will make CDT the only such accredited facility in Africa.
Entertainment Logistic Services produced steady growth and will benefit further
in the second half of the year as a result of increased volumes over the
Christmas period.
ASSOCIATED COMPANIES
The contribution to Johncom"s attributable earnings per ordinary share from
associated companies, M-Net, SuperSport and CTP for the six months, is 46 cents.
ELECTRONIC MEDIA NETWORK LIMITED
(M-NET) (26,03% interest)
M-Net experienced mixed fortunes for the six months under review. The total
subscriber base in South Africa has stabilised at just more than one million,
with ongoing migration from the analogue to the digital platform. Advertising
revenues remained under pressure, mainly as a result of the declining analogue
subscriber base.
The strong rand has had a negative impact on the reported results.
M-Net earns substantial revenues in US dollars from channel services provided to
countries elsewhere in Africa. The weaker dollar has resulted in reduced rand
revenues.
The benefit of the stronger rand was passed onto subscribers as no fee increases
were implemented for the analogue base and only a nominal increase for digital
subscribers.
The adoption of accounting statement AC133 with effect from 1 April 2003 has led
to reduced earnings for the period and may continue to cause volatility in
reported earnings in the future.
SUPERSPORT INTERNATIONAL HOLDINGS LIMITED (SUPERSPORT) (26,03% interest)
Subjected to the same pressures as M-Net, SuperSport"s advertising revenues have
remained firm. Elsewhere on the African continent, the subscriber base to which
SuperSport provides channels, continues to grow steadily.
If the rand continues to hold its own against the US dollar over the long-term,
this will result in reduced costs as SuperSport has substantial dollar-based
input costs.
Continued good sports programming, including exclusive rights to provide live
coverage of several international tournaments, will ensure SuperSport"s status
as the preferred television channel for sports viewing in the region.
CAXTON AND CTP PUBLISHERS AND PRINTERS LIMITED (CTP) (36,2% interest)
CTP achieved excellent results for the reporting period, driven largely by
continuing investment in the company"s physical and intangible assets. Turnover
increased by 17% and attributable earnings by 41%.
DIVIDENDS
After considering the cash inflows from operating activities and the net
dividend receipts from associated companies, no dividend is proposed at the
interim period
PROSPECTS
The second half of the year traditionally delivers most of the group"s revenue
and earnings, benefiting in particular from increased trading levels over the
Christmas season. Lower interest rates together with declining inflation are
already yielding improved consumer confidence levels, as evidenced by stronger
trading since the start of the second half of the year.
Accordingly, the group is optimistic that performance will improve in the second
six months, yielding growth in revenue and earnings that will compensate for the
lower than expected performance produced so far this year. In anticipation of
the upsurge, the group"s businesses have geared themselves for increased demand
in their respective areas - notably advertising in the Media unit, and good
product line-up in the Retail, Books & Maps and Home Entertainment units.
The board is confident that the group remains on track to achieve its long-term
growth plan and remains optimistic that the full year results, excluding
adjustments arising from the adoption of accounting statement AC133 in the
current year, will continue the year-on-year positive trend.
Mashudu Ramano
Chairman
Connie Molusi
Chief Executive Officer
Prakash Desai
Group Finance & Operations Director
24 November 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), C B
Brayshaw, P C Desai*, N Jacobsohn*, P M Jenkins*,
D M Mashabela, J R D Modise, W S Moutloatse, T R A Oliphant,
K C Ramon, T A Wixley
* Executive Director
Company Secretary: JR Matisonn
Date: 25/11/2003 05:00:27 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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