| Thu 23 Jun 2005, 10:04 | | Audited results for the year ended 31 March 2005 |
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Johncom - Audited results for the year ended 31 March 2005
Johnnic Communications Limited
Registration number 1889/000352/06ISIN code: ZAE000024584
Share code: JCM
American Depositary Receipt (`ADR`) Program
CUSIP number: 47805P102ADR to ordinary share: 1:1
www.johncom.co.za
AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2005
COMMENTARYOverview
The financial year ended 31 March 2005 delivered a remarkable third successive
year of improved margins and earnings growth from the integrated media and
entertainment businesses. The outstanding contribution, year-on-year, from ourassociates continued.
M-Net/SuperSport`s pay television business, proportionately consolidated for
the first time, made a solid contribution to the overall results.
FINANCIAL ResultsRevenue for the year under review increased by 52% to R4 113 million (2004:
R2 698 million). Profit from operations before exceptional items rose 246% to
R394 million (2004: R114 million), with headline earnings rising 129% from R177
million in 2004 to R406 million.As advised at the interim stage, a further 12,53% interest in
M-Net/SuperSport was aquired in April 2004, and M-Net/SuperSport is now
proportionately consolidated as a jointly-controlled entity. For purposes of
comparison, the group`s income statement is shown below on a pro-forma basiswith M-Net/SuperSport being equity accounted.
In July 2004, 90,5% of New Africa Publications, owner of the Sowetan and 50% of
SundayWorld, was acquired. On 1 April 2005, Johncom increased its interest in
New Africa Publications to 100%.OPERATIONAL REVIEW
MEDIA
The group`s media division had a stellar year, increasing advertising market
share, and enjoying strong circulation revenue growth. Whilst all titlesbenefited from an upswing in the advertising market, the Sunday Times had an
exceptional year, following a successful redesign which included the addition of
Travel and Food and New York Times sections to the package.
The Eastern Cape titles, Daily Dispatch and The Herald, continued to benefitfrom extensive restructuring in the previous financial year and enjoyed strong
growth under the direction of new editors and restructured sales teams.
The Sowetan and SundayWorld titles were successfully integrated into the Johncom
media division with the Sowetan enjoying a robust circulation increase andcontributing positively to profits. SundayWorld continued to entrench itself in
the challenging Sunday market and can look forward to improved results under the
new management team. The digital businesses enjoyed phenomenal growth enabling
them to contribute to profit from operations.BDFM had a good year with BusinessDay and Financial Mail showing increased
advertising volume year on year.
RETAIL
The group`s retail operations enjoyed improved retail trading conditions and astronger operational focus on quality of earnings, in addition to an R8 million
benefit in respect of a reduced post-retirement medical aid liability.
Exclusive Books delivered growth in sales on last year, despite a deflationary
book environment locally and a flat book market worldwide. New shops were openedat Bedford Centre, Somerset Mall, the new Clearwater Mall, Woodlands Boulevard
and Montecasino. The Exclusive Books `Homebru` promotion, which focuses on South
African writing and reading, continues to grow and has become a major book and
cultural event on the local calendar.Attendances at Nu Metro Theatres increased over last year, mainly due to the
Bollywood initiative and the strong growth of Living Standards Measurement (LSM)
7 and 8 cinema-goers through the Edgars programme. Nu Metro Theatres
consistently gained market share over the past year and had a 37% share of themarket in March 2005. A new eight-screen complex was opened at the Clearwater
Mall. Certain unprofitable sites were closed and other sites were revamped as
part of the ongoing site restructuring initiative.
BOOKS AND MAPSThe Books and Maps division reported excellent results in a generally sluggish
book market.
Overall, the South African operations performed well. The Struik Christian Books
business grew dramatically over the year after securing the Zondervan agency.Map Studio showed solid growth with the launch of the new Gauteng Street Guide
range and by increasing its tourism range. MAPIT, the division`s electronic
mapping unit, continued its strong growth, driven largely by the uptake of
PDA/navigation devices. Booksite Afrika, the warehousing and distribution unitbenefited from the strong performance of its publishing partners.
Offshore book publishing units in the UK, Australia and New Zealand delivered
good performances.
HOME ENTERTAIMENTNu Metro Home Entertainment continues to be the leading home entertainment
business in Africa, representing prestigious film studios and gaming licensors.
The division recorded impressive growth year on year in DVD units sold.
Nu Metro Home Entertainment has renewed all key studio licences and is proud tocontinue to represent Disney, Warner, 20th Century Fox, MGM, Paramount and the
BBC in the home entertainment market.
MUSIC
The Gallo Music Group had a good year with a turnaround in the local businessand continued growth from international labels.
Although the music industry is going through major changes in the digital
environment, the group is well placed to take advantage of new technology
formats.The group performed exceptionally well at the South African Music Awards, with
Gallo artists winning 10 out of the 26 categories. Gallo continues to sign
promising South African talent.
Ladysmith Black Mambazo achieved their second Grammy Award with their album`Wenyunela - Raise Your Spirits Higher`.
AFRICA
The Africa division continued its roll-out of projects in Nigeria, Ghana and
Kenya during the year under review amid challenging conditions.A two-screen Nu Metro cinema was opened and is trading successfully in Nairobi,
Kenya. Two more cinema sites are planned to open in Nigeria. A Nu Metro media
store opened in Lagos, Nigeria on 14 June 2005.
The BusinessDay newspaper in Nigeria was successfully relaunched and has seengratifying improvements in copy sales and advertising revenues.
A site for the establishment of a CD, DVD and VCD replication plant has been
identified in Lagos.
The division is confident that the entry-level obstacles have been largelyovercome and that the businesses can look forward to healthy trading.
DISTRIBUTION, MANUFACTURING AND SUPPORT SERVICES
Nu Metro Distribution has met the challenges posed to its business model and
profitability and continues to supply product to all exhibitors on equivalentterms.
Compact Disc Technologies (CDT) had an outstanding year. Increased demand for
DVD and CD product drove increased output. New DVD and CD lines were acquired
during March 2005 and will further improve yields and capacities.Entertainment Logistics Services (ELS), South Africa`s leading distribution
platform for music, VHS and DVD product, enjoyed a successful year as a result
of increased volumes in the various industries it represents.
PAY TELEVISION (M-Net/SuperSport)A higher subscriber base in South Africa, supported by a strong programme line-
up, resulted in increased subscription revenue. Advertising revenue profited
from the positive consumer spending environment.
In terms of AC133, the transitional adjustment for fair value in respect ofprior years was charged to the equity of M-Net/SuperSport on 1 April 2003. As
the adjustment exceeded the shareholders` interest of M-Net/SuperSport, the
carrying value of Johncom`s investment was written down fully, with an
unrecognised loss of R42 million remaining. Consequently, as shown in note 5below, R21 milion of earnings from M-Net/SuperSport were not recognised in each
of the current and prior years.
ASSOCIATED COMPANY
Caxton and CTP Publishers and Printers Limited (CTP) achieved good results,enjoying increased advertising spend by retailers and packaged goods
manufacturers in newspapers and magazines.
DIVIDEND AND ODD LOT OFFER
No dividend has been declared by the board for the year ended 31 March 2005.This decision is primarily an issue of timing and will be reviewed at the half-
year. In the interim, given the increase in Johncom`s shareholder base to more
than 23 000 following the Johnnic Holdings Limited unbundling in March 2005, the
board has resolved to undertake an odd lot offer, and a further announcement inthis regard will be made to shareholders shortly.
PROSPECTS
The sale of non-performing businesses has been addressed and the corporate
restructuring has been completed. The organisation is now positioned with aplatform to deliver sustainable earnings into the future.
The board is currently working with professional advisors to ensure that an
appropriate black economic empowerment shareholding is achieved in the short
term.Mashudu Ramano Connie Molusi
Chairman Group Chief Executive Officer
Prakash Desai Deputy Group Chief Executive Officer
23 June 2005INCOME STATEMENT
31 March 31 March %
2005 2004 change
Rm Rmfor the year ended Notes
Revenue 4 113 2 698 52
Cost of sales and services (2 456) (1 645)
Gross profit 1 657 1 053 57Operating expenses - net (1 161) (845)
Depreciation (80) (77)
Amortisation of intangibles (18) (8)
Goodwill amortisation - (9)Goodwill impairment (4) -
Profit from operations before 394 114 246
exceptional items
Exceptional items 4 85 (29)Profit from operations 479 85 464
Net finance (costs) income (8) 14
Finance costs (37) (19)
Finance income 29 33Share of profits of associates (after 123 123
taxation and minority interests) 5
Profit before taxation 594 222 168
Taxation 6 (127) (30)Profit after taxation 467 192 145
Minority interests (5) (5)
Attributable earnings 462 187 147
RECONCILIATION BETWEEN ATTRIBUTABLE ANDHEADLINE EARNINGS
Attributable earnings 462 187 147
Reconciling items (after taxation and
minority interests, where applicable)Profit on sale of listed equities (53) (58)
(Profit) loss on disposal of operations (5) 6
Impairment of leases and assets at
certainNu Metro Theatres sites - 29
Goodwill amortisation - 9
Goodwill impairment 4 -
Profit on disposal of property, plant (1) -and equipment
Other (1) 4
Headline Earnings 406 177 129
Basic earnings per ordinary share cents) Attributable 444 179 147
Headline 390 170 129
Number of ordinary shares in issue
At beginning and end of year (`000) 104 189 104 189REVIEWED PRO-FORMA INCOME STATEMENT WITH
M-NET/SUPERSPORT EQUITY ACCOUNTED
Revenue 3 069 2 698 14
Profit from operations before 199 114 75exceptional items
Exceptional items 66 (29)
Profit from operations 265 85 212
Net finance income 5 14Finance costs (22) (19)
Finance income 27 33
Share of profits of associates (after 252 123
taxation and minority interests)Profit before taxation 522 222 135
Taxation (55) (30)
Profit after taxation 467 192 143
Minority interests (5) (5)Attributable earnings 462 187 147
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 31 March
2005 2004 Rm Rm
Balance at 1 April 1 706 1 480
Attributable earnings 462 187
Variation of interests in associates - 15Dividend paid (41) (31)
Exchange differences arising on (3) -
translation of foreign entities
Write down of investment (8) -Movement on revaluation reserve (53) 55
arising on revaluation of listed
equities
Ordinary shareholders` interest 2 063 1 706SEGMENTAL
for the year ended 31 March 31 March %
2005 2004 change
Rm RmRevenue
Continuing operations
Media 1 376 1 091 26
Retail 716 666 8 Books and Maps 286 267 7
Home Entertainment 319 282 13
Music 196 184 7
Africa 15 2 650 Distribution, manufacturing and 160 190 (16)
support services
Pay television 1 044 - -
4 112 2 682 53Disposed operations 1 16
4 113 2 698 52
Profit (loss) from operations before
exceptional itemsContinuing operations
Media 139 90 54
Retail 40 13 208
Books and Maps 19 11 73 Home Entertainment 33 31 6
Music 13 11 18
Africa (19) (6) (217)
Distribution,manufacturing and support 26 8 225 services
Pay television 195 - -
Corporate (40) (26) (54)
406 132 208Disposed operations (12) (18)
394 114 246
BALANCE SHEET
as at Notes 31 March 31 March 2005 2004
Rm Rm
ASSETS
Non-current assetsProperty, plant and equipment 318 203
Goodwill and intangible assets 366 48
Investments and loans 7 973 890
Deferred taxation 99 113Embedded derivatives 20 -
1 776 1 254
Current assets 2 017 1 466
Inventories, receivables and other 1 458 925current assets
Listed equities 8 105 125
Bank balances, deposits and cash 454 416
Total assets 3 793 2 720EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders` interest 2 063 1 706
Minority interests 38 28Total equity 2 101 1 734
Non-current liabilities 207 143
Long term liabilities 32 17
Provision for post-retirement benefits 123 121Deferred taxation 52 5
Current liabilities 1 485 843
Non-interest bearing liabilities 1 318 743
Interest bearing liabilities 167 100Total equity and liabilities 3 793 2 720
Net asset value per ordinary share
Book value (rand) 20 16
CASH FLOW STATEMENTfor the year ended Note 31 March 31 March
2005 2004
Rm Rm
Cash inflows from operating activities 305 113Cash (outflows) inflows from investing (292) 265
activities
Cash outflows from financing activities (28) (164)
Net (decrease) increase in cash and cash (15) 214equivalents
Cash and cash equivalents at beginning 332 116
of year
Foreign entities translation adjustment - 2Cash and cash equivalents at end of 317 332
year 9
NOTES
1.Basis of accounting These summarised consolidated annual financial statements have been
prepared using accounting policies that comply with South African
Statements of Generally Accepted Accounting Practice and the
requirements of the South African Companies Act. The principal accounting policies are consistent with those used in the annual
financial statements for the year ended 31 March 2004, except for
the adoption of the following accounting statements:
AC140: Business Combinations, AC128 (Revised): Impairment of Assets and AC129 (Revised): Intangible Assets
The major impacts arising from the adoption of these statements is
that the costs of business combinations are allocated to the assets
aquired and liabilities and contingent liabilities assumed, and that goodwill is not amortised, but is subject to impairment
testing.
AC501: Accounting for Secondary Tax on Companies (STC)
To the extent that it is probable that dividends will be declared against which STC credits could be used, a deferred tax asset is
recognised. The adoption of this statement has no effect on these
financial statements.
2.Earnings per ordinary share The calculation of basic attributable earnings and headline
earnings per ordinary share is based on attributable earnings of
R462 million (2004: R187 million) and headline earnings of R406
million (2004: R177 million) respectively, and 104 189 314 (2004: 104 189 314) ordinary shares in issue.
3.Audited results
These summarised financial statements have been derived from the
group annual financial statements and are consistent in all material respects with the group annual financial statements. Our
auditors, Deloitte & Touche, have issued their unqualified opinion
on the group annual financial statements. A copy of their audit
report is available for inspection at the registered office of the company.
The `pro-forma income statement with M-Net/SuperSport equity
accounted` does not form part of the annual financial statements
and is presented as additional information. Deloitte & Touche have not audited the pro-forma information and accordingly do not
express an audit opinion on it, but have issued a reporting
accountant`s report on the pro-forma information, and this report
is available for inspection at the company`s registered office. Their report concludes as follows: `based on our review, nothing
has come to our attention that causes us to believe that the
pro-forma financial information has not been properly compiled on
the basis stated.`for the year ended 31 March 31 March
2005 2004
Rm Rm
4. Exceptional items Profit on sale of listed equities 51 58
Profit (loss) on disposal of operations 5 (6)
Impairment of leases and assets at certain
Nu Metro Theatres sites - (79) Adjustment in respect of leases previously 10 -
impaired
Fair value adjustment of investment 21 -
available for sale Other (2) (2)
85 (29)
5. Share of profits of associates (after
taxation and minority interests) Current year share of profits of associates 144 144
Recognition of M-Net/SuperSport AC133 (21) (21)
impact
123 1236. Tax rate reconciliation % %
Standard rate 30 30
Deferred taxation not raised on assessed 3 5
losses Expenses not deductible for tax purposes 3 1
Exempt and capital profits (5) (6)
Attributable to associates (6) (16)
Other (4) - 21 14
7. Investments and loans Rm Rm
Interest in associates 947 883
Listed shares at carrying value 464 438 Unlisted shares at carrying value 483 445
Other investments and loans 26 7
973 890
Market value of listed shares 917 731 Directors` valuation of unlisted shares 851 1 218
8. Listed equities (at market value)
Investment in MTN Group Limited 48 125
Investment in Naspers Limited 57 - 105 125
9. Cash and cash equivalents
Bank balances, deposits and cash 454 416
Call borrowings (137) (84) 317 332
10.Net cash
Cash and cash equivalents 317 332
Long term liabilities (32) (17) Short term borrowings (30) (16)
255 299
11.Capital expenditure incurred 126 59
12.Contingent liabilities and commitments Guarantees 29 21
Unconditional purchase obligations - 675 -
program and film rights
Contingent liabilities 68 39 Operating leases 782 784
- due within one year 114 99
- due after one year 668 685
13.Capital expenditure commitments Contracted 3 -
Approved but not contracted 6 23
9 23
The capital expenditure will be funded from future cash flows and borrowings.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: 1:1Johncom House, 4 Biermann Ave, Rosebank 2196, Johannesburg
PO Box 1746, Saxonwold, 2132, Gauteng. www.johncom.co.za
Directors: M E Ramano (Chairman), A C G Molusi# (Group Chief Executive Officer),
P C Desai# (Deputy Group Chief Executive Officer), H Benatar#, C B Brayshaw, P MJenkins#, D M Mashabela, W S Moutloatse, T R A Oliphant, K C Ramon, T A Wixley
#Executive director
Company secretary: J R Matisonn
These results may be viewed on the internet at http://www.johncom.co.zaE-mail: matisonnj@johncom.co.zaDate: 23/06/2005 10:00:33 AM Produced by the JSE SENS Department
