| Thu 24 Jun 2004, 10:34 | | RESULTS FOR THE YEAR ENDED 31 MARCH 2004 |
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JOHNNIC COMMUNICATIONS AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2004
Johnnic Communications Limited
Registration number 1889/000352/06
ISIN code: ZAE000024584
Share ode: JCM
American Depositary 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 2004
* Attributable earnings up by 108%
* Headline earnings up by 13%
* Debt eliminated
* Dividend payment sustained
Consolidated Income Statement
For the year ended Notes 31 March 31 March %
2004 2003 change
Rm Rm
Revenue 2 698 3 277 (18)
Ongoing 2 682 2 541 6
Disposed 16 736 (98)
Cost of sales (1 645) (2 073)
Gross profit 1 053 1 204 (13)
Operating expenses - net (845) (1 004)
Depreciation (77) (95)
Amortisation of intangibles (8) (10)
Goodwill amortisation (9) (15)
Profit from operations before 114 80 43
exceptional items
Ongoing 132 90 47
Disposed (18) (10) (80)
Exceptional items 4 (29) (13)
Profit from operations 85 67 27
Finance costs (19) (60)
Finance income 33 27
Share of profits of associates 5 189 210
Profit before taxation 288 244 18
Taxation 6 (95) (139)
Profit after taxation 193 105 84
Minority interests (6) (15)
Attributable earnings 187 90 108
RECONCILIATION OF ATTRIBUTABLE
EARNINGS
TO HEADLINE EARNINGS
Attributable earnings 187 90 108
Goodwill amortisation 9 15 (40)
Exceptional items after taxation and
minority interests (19) 52 (137)
Headline earnings 177 157 13
Basic earnings per ordinary share
(cents)
Headline 170 151 13
Attributable 179 87 106
Ongoing operations
Basic earnings per ordinary share
(cents)
Headline 188 179 5
Attributable 203 114 78
Disposed operations
Basic loss per ordinary share (cents)
Headline (18) (28) 36
Attributable (24) (27) 11
Diluted earnings per ordinary share
(cents)
Headline 168 151 11
Attributable 178 87 105
Number of ordinary shares in issue
weighted average (`000) 104 189 104 189
diluted weighted average (`000) 105 246 104 189
at year end (`000) 104 189 104 189
Summarised Statement of Changes in Equity
For the year ended 31 March 31 March
2004 2003
Rm Rm
Balance at 1 April 1 567 1 601
AC133 adjustment - subsidiaries (14) -
AC133 adjustment - associates (73) -
Restated balance at 1 April 1 480 1 601
Attributable earnings 187 90
Variation of interests in associates 15 24
Dividend paid (31) -
Exchange differences arising on - (35)
translation of foreign entities
Movement on revaluation reserve 55 (110)
arising on revaluation of listed equities
Other - (3)
Ordinary shareholders` interest 1 706 1 567
Segmental Analysis
For the year ended 31 March 31 March %
2004 2003 change
BUSINESS GROUPING Rm Rm
Revenue
Ongoing operations
Media 1 091 1 017 7
Retail 666 608 10
Books & Maps 267 293 (9)
Home Entertainment 282 268 5
Music 184 170 8
Africa 2 - 100
Distribution, manufacturing & support 190 240 (21)
services
Reclassification of inter-group revenue - (55) 100
2 682 2 541 6
Disposed operations
Hammicks & Music for Pleasure 16 736 (98)
2 698 3 277 (18)
Profit (loss) from operations before
exceptional items
Ongoing operations
Media 77 60 28
Retail 13 (11) 218
Books & Maps 11 2 450
Home Entertainment 31 36 (14)
Music 11 9 22
Africa (6) (4) (50)
Distribution, manufacturing
& support services (5) (2) (150)
132 90 47
Disposed operations
Hammicks & Music for Pleasure (18) (10) (80)
114 80 43
Summarised Consolidated Balance Sheet
As at Notes 31 March 31 March
2004 2003
Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 203 327
Goodwill 14 19
Intangible assets 34 26
Investments and loans 7 890 913
Deferred taxation 113 81
1 254 1 366
Current assets 1 466 1 333
Other current assets 925 882
Listed equities 9 125 160
Bank balances, deposits and cash 10 416 291
Total assets 2 720 2 699
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders` interest 1 706 1 567
Minority interests 28 8
Total equity 1 734 1 575
Non-current liabilities 143 143
Long term liabilities 10 17 28
Provision for post-retirement medical 121 113
costs
Deferred taxation 5 2
Current liabilities 843 981
Non-interest bearing liabilities 743 664
Interest bearing liabilities 10 100 317
Total equity and liabilities 2 720 2 699
Net asset value per ordinary share
including
investments at:
Book value (rand) 16 15
Directors` valuation (rand) 28 18
Summarised Consolidated Cash Flow Statement
For the year ended Notes 31 March 31 March
2004 2003
Rm Rm
Cash inflows from operating activities 113 135
Cash inflows from investing activities 265 230
Cash outflows from financing (164) (21)
activities
Net increase in cash and cash 214 344
equivalents
Cash and cash equivalents at beginning 116 (216)
of year
Foreign entities translation 2 (12)
adjustment
Cash and cash equivalents at end of 11 332 116
year
Notes
1. Basis of accounting
This preliminary report is prepared in accordance with South African
Statement of Generally Accepted Accounting Practice (GAAP) AC127. These
summarised consolidated annual financial statements have been prepared
using accounting policies that comply with the South African Statements of
Generally Accepted Accounting Practice and the requirements of the South
African Companies Act and the disclosure requirements of the JSE Securities
Exchange South Africa`s Listings Requirements. 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 attributable earnings per ordinary share and basic
headline earnings per ordinary share is based on attributable earnings of
R187 million (2003: R90 million) and headline earnings of R177 million
(2003: R157 million) respectively, and a weighted average of 104 189 314
(2003: 104 189 314) ordinary shares in issue. The calculation of diluted
attributable earnings per ordinary share and diluted headline earnings per
ordinary share is based on attributable earnings of R187 million (2003: R90
million) and headline earnings of R177 million (2003: R157 million)
respectively, and a weighted average of 105 246 312 (2003: 104 189 314)
ordinary shares in issue.
3. Audited results
The auditors, Deloitte & Touche, have issued their opinion on the group`s
annual financial statements, for the year ended 31 March 2004. 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 registered office of the company. These
summarised annual financial statements have been derived from the audited
group annual financial statements and are consistent in all material
respects, with the audited group annual financial statements.
For the year ended 31 March 31 March
2004 2003
Rm Rm
4. Exceptional items
Net loss on disposal of Hammicks (6) -
Impairment of leases and assets at various Nu (79) -
Metro Theatres sites
Net loss on closure of IMAX Theatres (4) -
Surplus realised on sale of listed equities 58 92
Impairment of goodwill, investments, loans and 2 (105)
intellectual capital & other
(29) (13)
Share of associated company exceptional items (3) (54)
(included in share of profits of associates)
(32) (67)
5. Share of profits of associates
Share of profits earned by associated companies 221 210
Reduction for unrecognised losses in respect of (32) -
the prior period adjustment arising from the
adoption of AC133
189 210
6. Tax rate reconciliation % %
Standard rate 30 30
Deferred taxation not raised on assessed losses 5 9
Expenses not deductible for tax purposes 1 24
Exempt and capital profits (6) (12)
Difference in rate of taxation of associated 3 3
companies
Other - 3
33 57
7. Investments and loans - Carrying value Rm Rm
Loans 7 26
Listed investments 438 398
Unlisted investments 445 489
890 913
8. Investments in associated companies
Listed investments at market value 731 448
Unlisted investments at directors` valuation 1 218 640
1 949 1 088
9. Listed equities at market value
Investment in MTN Group Limited 125 130
Investment in Naspers Limited - 30
125 160
10.Net cash (debt)
Long term liabilities (17) (28)
Current liabilities (100) (317)
- call borrowings (84) (175)
- short term borrowings (16) (142)
Total interest bearing liabilities (117) (345)
Bank balances, deposits and cash 416 291
299 (54)
11.Cash and cash equivalents
Bank balances, deposits and cash 416 291
Call borrowings (84) (175)
332 116
12.Capital expenditure incurred 59 71
13.Contingent liabilities and commitments
Guarantees 21 27
Contingent liabilities 12 2
Operating leases 784 957
- within one year 99 108
- more than one year 685 849
14.Commitments for capital expenditure
- contracted - -
- approved but not contracted 23 60
The capital expenditure will be funded from
future cash flows and borrowings.
Commentary
OVERVIEW
The positive trend established in recent years of an annual improvement in
revenue, gross profit and profit from ongoing operations has continued in the
current year.
Our interim report for the six months ended 30 September 2003 indicated that,
with effect from 1 July 2003, the executive and operational management had been
restructured and group operations clustered into six core logical business units
in a single integrated media and entertainment group. The format of this
announcement reflects the new group structure.
RESULTS
Revenue from ongoing operations increased by 6% to R2 682 million (2003: R2 541
million) while profit from operations before exceptional items from the same
businesses rose by 47% to R132 million (2003: R90 million). Our continuing
strategy to `fix, sell or close` under-performing businesses has contributed to
the improvement in operating profit being significantly above the increase in
revenue.
In the first quarter of the 2004 financial year, Hammicks Bookstores Limited
(Hammicks), based in the United Kingdom, disposed of its chain of local
bookstores and subscription business. The results of Hammicks have been reported
as disposed operations in the segmental analysis and the net loss on disposal of
Hammicks is separately shown under exceptional items.
A comprehensive, long-term review by theatre site of revenue against fixed lease
and operating costs was completed during the year for Nu Metro and IMAX
Theatres. This resulted in the closure of some theatres, the impairment of
leases and assets at a number of Nu Metro Theatre sites, and the review of the
IMAX Theatres business with a possible eventual exit. These impairment and
closure costs are separately identified as exceptional costs. The impairment was
effected at the financial year-end date, with the current year`s full cost being
included in the operating results.
A surplus of R58 million on the disposal of listed equities was realised on the
sale of MTN and Naspers shares.
Group debt at the beginning of the financial year, largely at the holding
company level, has been eliminated with contributions from the sale of non-core
listed equities and cash inflows from operating activities. This has resulted in
net finance income for the financial year and an accompanying improvement in the
taxation charge due to the elimination of unproductive interest at the holding
company level.
Having dealt with the loss-making businesses, the effective tax rate has reduced
from 57% to 33%.
OPERATIONAL REVIEW
MEDIA
The businesses which make up the Media division - newspapers, magazines and
digital media - delivered strong growth, lifting profit from operations before
exceptional items by 28%.
Our flagship title, the Sunday Times, benefited from editorial re-focus and
robust advertising in the last quarter and maintained its position as South
Africa`s leading newspaper. Our Eastern Cape titles performed particularly well,
with the Daily Dispatch in East London delivering record growth. Sunday World
continued to improve its performance.
Extensive restructuring of the magazine division is bearing fruit and these
operations are showing solid improvement.
Digital operations, which were merged into the Media division in July 2003, have
been streamlined, with non-performing businesses closed or sold. The core
remaining operations - I-Net Bridge, CareerJunction and joint venture MTN
Network Solutions - are all making positive contributions.
Operations within BDFM (of which Johncom holds 50%) benefited from stronger
final-quarter advertising. The Summit TV business performed well and is
contributing positively.
RETAIL
The division, consisting of book retail and theatres, delivered strongly, with
profit from operations before exceptional items growing 218%.
Improved retail conditions benefited Exclusive Books, which achieved a
creditable 12% `same store` growth in revenue. Exclusive`s innovative marketing
approach was recognised with several industry awards, including Advertiser of
the Year and Best Campaign of the Year.
Conditions in the theatrical exhibition market remained tough, with overall
attendances largely static and increased competition from other forms of
entertainment and piracy. It is thus pleasing to report that Nu Metro Theatres
steadily gained market share. Confectionery revenues also improved after the
implementation of an improved point-of-sales system.
A number of theatres have been closed and leases and fixed assets at several
other sites have been impaired. These leases were entered into during the period
1989 to 1999 with durations ranging from five to 25 years. The IMAX Theatre
businesses are being rationalised and our exposure to ongoing losses will be
curtailed.
BOOKS AND MAPS
Currency fluctuation is a key factor in this business, and the strengthening
Rand negatively affected foreign currency-denominated earnings.
The prior year results, however carried a substantial charge arising from the
revaluation of long-term inter-group loans with foreign subsidiaries.
The division delivered a year-on-year growth in profit from operations before
exceptional items by 450%, due in part to active cost containment and improved
margins, as well as the currency gains.
Strong performances came from the UK book publishing operation, the book
distribution business, Booksite Afrika, and the electronic mapping business,
MAPIT. South African book and map publishing operations experienced a reasonable
year while international mapping (cartographic service Lovell Johns in the UK)
delivered a loss for the current financial period. A significant restructuring
of the UK operation has been completed and an improved performance is forecast.
HOME ENTERTAINMENT
Exciting product, including the Disney/Pixar title `Finding Nemo`, boosted Home
Entertainment`s performance in the last quarter, after a softer-than-expected
first half. Piracy continues to bite into this market and it is now estimated
that more than 40% of DVDs sold in SA are illegal copies.
This, plus increased pressure from the retail market, and a continued shift in
product mix from VHS to DVD in the rental market, led to profit from operations
before exceptional items declining by 14%. Management has responded by tight
control of overheads and is strongly supporting industry initiatives to fight
piracy.
MUSIC
Sales of music units internationally fell by an average 8,6% in 2003, and the SA
music industry recorded negative real growth. Nonetheless, the Gallo group was
able to buck the trend and grow its market share (including distributed labels)
from 22,6% to 23,3%. Gallo`s operating profit before exceptional items grew by
a highly creditable 22%.
The Warner Music International division delivered particularly pleasing results,
and Johncom`s investment into local content started to show positive returns,
with an increase in domestic turnover. This is expected to continue in the year
ahead.
AFRICA
Johncom Africa has made progress in the strategy to exploit media and
entertainment opportunities, particularly in East and West Africa, with one Nu
Metro theatre complex currently operating and more planned in the current year.
Nu Metro also distributes filmed entertainment product to nine African countries
outside South Africa.
The board has approved capital expenditure for a number of projects in media,
retail, entertainment and manufacturing.
DISTRIBUTION, MANUFACTURING AND SUPPORT SERVICES
Revenue is not strictly comparable as all inter-group sales were not eliminated
in the previous financial year. The year-on-year revenue has decreased by 5%
after reclassification of prior year inter-group sales.
Nu Metro Distribution benefited from tremendous product line-up including `Lord
of the Rings - Return of the King`, `Matrix Reloaded` and, of course, `Monster`
featuring our own Charlize Theron in her Oscar-winning performance.
Subsequent to year-end, the release of `The Passion of the Christ` has shaken
the global film industry and the title has become the third highest box office-
grossing film in SA.
Compact Disc Technologies (CDT) performed well, increasing output of DVDs and CD
Rom discs.
Entertainment Logistic Services, SA`s leading distribution platform for CD, VHS
and DVD product, enjoyed a successful year with increased volumes.
ASSOCIATED COMPANIES
The contribution to Johncom`s attributable earnings per ordinary share from
associated companies, M-Net, SuperSport and CTP for the year, is 115 cents
(2003: 98 cents).
In terms of AC133, the transitional adjustment for fair value in respect of
prior years is charged to equity on 1 April 2003. As this adjustment exceeded
the shareholder equity at M-Net, the carrying value of Johncom`s investment was
written down fully, with an unrecognised loss of R42 million remaining.
Consequently, as outlined in note 5 above, the share of profits from associates
has not recognised current year earnings from M-Net in the amount of R21 million
(net of taxation of R11 million).
ELECTRONIC MEDIA NETWORK LIMITED (M-NET) (26,03%) & SUPERSPORT INTERNATIONAL
HOLDINGS LIMITED (SUPERSPORT) (26,03%)
M-Net/SuperSport achieved good operating results through cost containment,
despite a strengthening rand and the adoption of Accounting Standard AC133 which
depressed earnings. The delisting will result in further cost savings.
CAXTON AND CTP PUBLISHERS AND PRINTERS LIMITED (CTP) (36,2%)
CTP continues to achieve commendable growth and operating efficiencies. The
closer working relationship with Johncom promises further upside and cost
savings for both groups.
DIVIDENDS
The board has approved the continuance of dividends that were resumed with the
announcement of last year`s results.
Notice is hereby given that a dividend of 40 cents per ordinary share for the
year ended 31 March 2004 has been declared and is payable to shareholders
recorded in the register of the company at the close of business on Friday, 16
July 2004.
In compliance with the requirements of Strate, the electronic settlement and
custody system used by the JSE Securities Exchange South Africa (JSE), Johncom
has determined the following salient dates for the payment of the dividend:
Last day to trade cum-dividend Friday, 9 July 2004
Shares commence trading ex-dividend Monday, 12 July 2004
Record date Friday, 16 July 2004
Payment of dividend Monday, 19 July 2004
Share certificates may not be dematerialised/rematerialised between Monday, 12
July 2004 and Friday, 16 July 2004, both days inclusive.
On Monday, 19 July 2004, the dividend will be electronically transferred to the
bank accounts of certificated shareholders who utilise this facility. In respect
of those who do not, cheques dated Monday, 19 July 2004, will be posted on or
about that date. Shareholders who have dematerialised their shares will have
their accounts, held at their central securities depository participant or
broker, credited on Monday, 19 July 2004.
PROSPECTS
Johncom is positioned to continue its solid growth. During the year, all core
businesses in the group were contributing positively, with the exception of
Africa (still in the investment phase) and Nu Metro Theatres, where a long-term
review of sites and leases was completed, and improving results are now
forecast.
From a media perspective, a global revival in advertising and stable newsprint
prices bodes well for the future. The favourable retail conditions experienced
in the last six months look set to continue, and will benefit both Johncom`s
media and entertainment operations.
Piracy continues to be a serious threat to the entertainment industry and
Johncom will increase its role in combating this criminal activity in every way
possible. The continuing digitization of content poses both threats and
opportunities, and management is proactively addressing these.
Having integrated the business into a single media and entertainment structure,
Johncom expects to continue to deliver on the year-on-year positive trend.
SUBSEQUENT EVENTS
Subsequent to year-end, M-Net/SuperSport terminated its listing on the JSE and
Johncom simultaneously increased its shareholding in this associate to 38,6% at
a cost of R287 million. This is a strategic long term investment and will be
value accretive for Johncom.
During the second half of the financial year, Johncom announced the conclusion
of an agreement with New Africa Media to acquire 90,5% of New Africa
Publications, owner of 50% of Sunday World and 100% of The Sowetan. This is
subject to approval by the competition authorities and the results of this
aquisition will only be accounted for once the approval is received.
Mashudu Ramano Connie Molusi
Chairman Chief Executive Officer
Prakash Desai
Group Finance & Operations Director
23 June 2004
Registered and physical address: 4 Biermann Avenue, Rosebank, 2196
Transfer secretaries: Computershare Investor Services 2004 (Pty) 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: 24/06/2004 10:00:25 AM
Produced by the JSE SENS Department
