| Thu 19 Jun 2008, 7:05 | | ELE - ElementOne Limited - Audited condensed group financial results for the |
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ELE
ELE
ELE - ElementOne Limited - Audited condensed group financial results for the
year ended 31 March 2008
Audited condensed group financial results for the year ended 31 March 2008
ElementOne Limited(formerly Avusa Limited, formerly Johnnic Communications
Limited)
Incorporated in the Republic of South Africa
Registration number: 1889/000352/06
Share code: ELE ISIN code: ZAE000115887
American Depositary Receipt (ADR) programme CUSIP no: 47805P102 ADR to ordinary
share: 1:1
Interest in M-Net/SuperSport disposed of with R3,5 billion worth of proceeds
unbundled to shareholders
Operating media and entertainment assets listed separately and then unbundled to
shareholders in a R3,2 billion distribution
Income statement
for the year ended 31 March 31 March
2008 2007*
Rm Rm
Continuing operations
Loss from operations before exceptional items (9) (7)
Exceptional items 1 156 40
Profit from operations 1 147 33
Net finance income 133 31
Finance income 134 32
Finance costs (1) (1)
Share of profits of associate - 201
Profit before taxation 1 280 265
Taxation (139) (15)
Profit after taxation 1 141 250
Discontinued operations
Profit from discontinued operations 2 903 373
Profit for the year 4 044 623
Attributable to:
Shareholders of ElementOne 4 032 613
Minority interest 12 10
4 044 623
Attributable earnings per ordinary share (cents)
Basic 3 883 590
Diluted 3 883 589
Attributable earnings per ordinary share from
continuing operations (cents)
Basic 1 099 241
Diluted 1 099 240
Attributable earnings per ordinary share from
discontinued operations (cents)
Basic 2 784 349
Diluted 2 784 349
Number of ordinary shares in issue (`000)
At beginning and end of year 103 821 103 821
Weighted average for year (diluted) 103 821 104 004
*Re-stated for the treatment of Pay Television and the operating media and
entertainment assets as discontinued operations.
Cash flow statement
for the year ended 31 March 31 March
2008 2007
Rm Rm
Cash generated by operations 426 800
Taxation paid (432) (309)
Net interest received 60 44
Net cash from operating activities 54 535
Net cash used in investing activities (641) (176)
Net cash used in financing activities (123) (104)
Net (decrease) increase in cash and cash (710) 255
equivalents
Cash and cash equivalents at beginning of year 881 622
Foreign operations translation adjustment (5) 4
Cash and cash equivalents at end of year 166 881
Segmental
for the year ended 31 March 31 March
2008 2007
Rm Rm
Revenue from external customers
Discontinued operations
Media 2 099 1 884
Retail 1 045 735
Entertainment 1 040 932
Books and Maps 487 426
Operating media and entertainment assets 4 671 3 977
Pay Television 1 100 1 382
5 771 5 359
Profit from operations before exceptional items
Discontinued operations
Media 283 300
Retail 33 (14)
Entertainment 60 62
Books and Maps 73 78
449 426
Corporate costs (28) (42)
Operating media and entertainment assets 421 384
Pay Television 338 424
759 808
Share-based payments (89) (157)
670 651
Statement of changes in equity
Share Accum-
Share premium Other ulated
capital Rm reserves profits
Rm Rm Rm
Balance at 31 March 2006 10 796 17 1 517
Total income and expense recognised 50 537
Income and expense recognised 48 (76)
directly in equity
Attributable earnings 2 613
Effect of acquisitions and disposals
Dividends on ordinary shares (104)
Balance at 31 March 2007 10 796 67 1 950
Total income and expense recognised 3 4 032
Income and expense recognised (22)
directly in equity
Attributable earnings 25 4 032
Effect of acquisitions and disposals (70) 45
Dividends in specie (796) (3 901)
Dividends on ordinary shares (125)
Balance at 31 March 2008 10 - - 2 001
Statement of changes in equity
Share-
holder Minority Total
interest interest equity
Rm Rm Rm
Balance at 31 March 2006 2 340 53 2 393
Total income and expense recognised 587 10 597
Income and expense recognised directly in (28) (28)
equity
Attributable earnings 615 10 625
Effect of acquisitions and disposals (24) (24)
Dividends on ordinary shares (104) (104)
Balance at 31 March 2007 2 823 39 2 862
Total income and expense recognised 4 035 12 4 047
Income and expense recognised directly in (22) (22)
equity
Attributable earnings 4 057 12 4 069
Effect of acquisitions and disposals (25) (51) (76)
Dividends in specie (4 697) (4 697)
Dividends on ordinary shares (125) (125)
Balance at 31 March 2008 2 011 - 2 011
Balance sheet
as at 31 March 31 March
2008 2007
Rm Rm
ASSETS
Non-current assets 2 163 2 133
Tangible and intangible assets - 850
Investments and loans 2 163 1 094
Deferred taxation assets - 188
Embedded derivatives - 1
Current assets 301 2 921
Inventories, receivables and other current assets - 1 801
Investments 135 150
Bank balances, deposits and cash 166 970
Total assets 2 464 5 054
EQUITY AND LIABILITIES
Capital and reserves
Interest of ElementOne shareholders 2 011 2 823
Minority interest - 39
Total equity 2 011 2 862
Non-current liabilities 134 506
Long-term borrowings - 36
Post-retirement benefits liabilities - 161
Operating leases equalisation liabilities - 96
Share-based payments liabilities - 190
Deferred taxation liabilities 134 23
Current liabilities 319 1 686
Payables and other current liabilities 17 1 356
Taxation 302 52
Share-based payments liabilities - 115
Short-term borrowings - 74
Bank overdrafts - 89
Total equity and liabilities 2 464 5 054
Net asset value per ordinary share (cents) 1 937 2 757
COMMENTARY
OVERVIEW
During the year, ElementOne undertook two major corporate restructurings to
unlock shareholder value.
The company`s interests in Electronic Media Network Limited ("M-Net") and
SuperSport International Holdings Limited ("SuperSport") were sold to Naspers
Limited ("Naspers") on 30 November 2007 for 20 886 667 Naspers N shares and R250
million cash. On 21 December 2007, the Naspers shares were all unbundled to
shareholders in a distribution with a market value of R3,5 billion.
The company in general meeting, on 18 March 2008, approved the listing on the
JSE Limited ("JSE") and subsequent unbundling to shareholders, of Avusa Limited
("Avusa"), a company comprising ElementOne`s operating media and entertainment
assets. This distribution in specie had a value of R3,2 billion based on Avusa`s
closing share price at the end of its first day of trading on the JSE.
The disposal by ElementOne of its interests in M-Net/SuperSport and of its
operating media and entertainment assets are accounted for in these audited
condensed group financial results as discontinued operations.
These actions meant that at year-end the company consisted of a 33,6% direct and
indirect investment in Caxton and CTP Publishers and Printers Limited
("Caxton"), 1 093 210 MTN Group Limited ("MTN") shares and cash on hand of R166
milion against which are taxation (excluding deferred taxation) and other
liabilities of R319 million.
As advised in the interim announcement, ElementOne`s investment in Caxton has
been accounted for, effective 1 April 2007, as a financial asset at fair value
through profit or loss, and no longer as an associate. Accordingly, an
exceptional profit of R1,129 billion and a deferred capital gains tax charge of
R122 million have been recognised in profit and loss.
OPERATIONAL REVIEW (DISCONTINUED OPERATIONS)
The review of operations is in respect of operations that formed part of
ElementOne during the year under review, but that are now part of Avusa and will
in future be reported on by Avusa. As of 31 March 2008, the company ceased to
hold any operational assets.
Changes were made to the segmental structure. These changes are detailed at the
beginning of the review of each segment. Comparatives have been restated
accordingly.
The traditional businesses continued to grow, and digital initiatives comprised
15% of the operating profit generated by the media and entertainment assets.
Media
The media business unit included the group`s interests in newspapers, magazines,
Career Junction and I-Net Bridge.
Revenue grew 11% with the development of new revenue streams, while operating
profit increased by 8% excluding the development costs of The Times and The
Weekender.
Since its launch in June 2007, the new daily product, The Times, attracted 38
000 new subscribers for the Sunday Times. The Times delivered an operating loss
of R39 million net of advertising revenue.
The Sowetan maintained steady circulation growth but, along with the Eastern
Cape dailies, The Herald and Daily Dispatch, lagged the record profit levels
achieved in the previous financial year.
The Sunday World achieved exceptional circulation growth, passing the 200 000
level for the first time, to end the year at 203 400 copies per week. It also
enjoyed robust advertising revenue growth, entrenching its growing position in
the Sunday newspaper market.
The Financial Mail continued to increase both readership and profitability
following its redesign. The Home Channel was re-launched as a 24/7 offering,
with its audience subsequently almost doubling. Operating loss contribution from
The Weekender totalled R6 million, with circulation reaching a pleasing 12 600.
The magazine division was also impacted by the advertising downturn but
nevertheless produced solid results. Elle Decor was voted Consumer Magazine and
also Decor magazine of the year at the industry`s annual PICA awards.
Career Junction, 100% held since 1 November 2007, had another remarkable
business year, growing both revenue and profits strongly. New business ventures
included online talent management services for South Africa`s growing film and
commercials business and an expansion into Dubai.
I-Net Bridge continued to produce solid results and enlarge its footprint in the
local financial and corporate communities. Innovative and enhanced products
continue to be developed and launched in tandem with changing market
requirements.
During the year majority stakes in Amorphous New Media and Amorphous Corporate
were acquired. The businesses serviced the demand for digital marketing and
communications solutions, with both businesses having performed well in their
respective markets.
A 60% stake in Airport Media, a specialist airport advertising business with a
strong reputation for innovation in the competitive outdoor market, was acquired
at the end of March 2008 as part of a strategy to enter the expanding out-of-
home market.
Retail
Retail comprised Exclusive Books, Van Schaik Bookstore (acquired 1 October 2007)
and the Africa business.
Exclusive Books opened six new stores during the year, while two shops were
moved within their respective shopping centres and fully refurbished. Revenue
grew by 15%, with same-store revenue up by 13%.
Van Schaik Bookstore delivered above the expectation benchmarked for the
investment proposal.
In Nigeria, operating losses were incurred by the media stores, cinemas, and
compact disc plant, while the Business Day Nigeria newspaper operated
profitably. The political turmoil in Kenya subsequent to the December 2007
elections materially affected the business. Tremendous credit must go to the
team in Kenya who worked tirelessly to keep the business running throughout the
unrest. Revenues from the Africa business grew by 35% to R159 million from R118
million last year, while the loss from operations narrowed to R54 million from
R70 million in the prior year.
Entertainment
The Nu Metro businesses (Film Distribution, Home Entertainment, Interactive,
Cinemas and Popcorn Cinema Advertising), combined with Music and Compact Disc
Technologies ("CDT"), formed the entertainment business unit. Nu Metro`s brand
look and feel was revitalised to support the fresh vision of a dynamic African
entertainment company.
Nu Metro Film Distribution retained its leading share in the local film
distribution market.
Home Entertainment delivered excellent results. Growth came from continued
initiatives in the emerging market, new supermarket distribution channels and
excellent product management. The division delivered growth for its studios and
again won Licensee of the Year from Walt Disney Pictures for excellence in
innovation, marketing, sales and reporting. Home Entertainment continued to work
closely with SAFACT to fight piracy and protect intellectual property rights in
Southern Africa.
Nu Metro Interactive, which distributed interactive games into the South African
market, continued to expand its operations, and represented Eidos, Sega, Square
Enix, and various independent publishers.
Nu Metro Cinemas experienced a tough trading year, with significant pressure
from poor content and flat attendances exacerbated by the ongoing pressure of
deflated pricing in the South African cinema industry. 3D was introduced at the
Montecasino site in February 2007, with excellent results and a very positive
consumer reaction.
Popcorn Cinema Advertising delivered solid results with growth in advertising
sales.
The rights management business, which was closed during the year, incurred
losses of R6 million.
The music business struggled in line with the world-wide trends of diminishing
physical sales and small revenues generated by digital format.
CDT performed strongly.
Books and Maps
Books and Maps incorporated Struik, Struik Christian Books, New Holland, Map
Studio, MapIT, Booksite Afrika and Entertainment Logistics Services ("ELS").
The Books and Maps results included a foreign exchange gain of R1 million
compared to R6 million in the prior year, as well as R5 million in mobile
development costs.
The South African operations again formed the backbone of the business unit`s
performance off a very high base, with Booksite Afrika posting excellent
results. The poor economic environment offshore resulted in weak results from
the overseas businesses.
MapIT had an exceptional year, growing revenues and earnings in excess of 100%.
Growth was powered by increased sales of satellite navigation devices. The
business invested to ensure that it remained the proprietor of the "richest"
mapping data in the country.
ELS results were flat year-on-year.
Pay Television
As noted in the overview above, with ElementOne`s interests in M-Net/SuperSport
having been sold, the segmental results for the year under review only included
the pay television results for the eight months to November 2007.
Board changes
Ms LM Machaba-Abiodun and messrs ME Ramano, PC Desai, H Benatar, MD Brand, TRA
Oliphant and TA Wixley resigned from the board on 28 March 2008 to take up their
new positions on the Avusa board. We would like to thank them for their highly
valued contributions to the company during their tenures as board members.
After year-end, Mr DM Mashabela resigned as director and we thank him too for
his contribution. Mr D Vlok was appointed a director in place of Mr Mashabela.
ELEMENTONE GOING FORWARD
As was recently announced, the company sold its MTN shares on 29 and 30 May 2008
for a net amount of R164 million which will, together with cash held at year-
end, be applied to meet a provisional tax payment at 30 September 2008 which
includes an as yet unassessed capital gains taxation liability of R302 million
in respect of the sale of M-Net/SuperSport shares. Once the provisional tax
payment has been made, the company may have a small positive cash balance.
As reflected by its name, the company is now a single asset investment holding
company with a 33,6% direct and indirect stake in Caxton held as follows:
Number of shares held by:
ElementOne in Caxton (listed): 80 065 330 (issued: 494 939 628)
ElementOne in Afmed (Pty) Ltd: 150 015 (issued: 300 032)
ElementOne in Caxton Ltd: 3 569 220 (issued: 27 946 024)
Afmed in Caxton (listed): 752 470
Afmed in Caxton Ltd: 19 217 095
Caxton Ltd in Caxton (listed): 182 479 476
The company is not represented on the boards of directors of Caxton, Afmed (Pty)
Ltd or Caxton Ltd and is not by agreement entitled to such representation. As
far as can be ascertained, and therefore to the best of the directors` belief
and knowledge, there are no written agreements that govern the company`s
shareholdings in Afmed (Pty) Ltd or Caxton Ltd.
In placing a fair value on the Caxton holding for accounting purposes at the
balance sheet date, the directors have used the market value of the directly
held Caxton shares and have applied a 20% discount to the see-through market
value of the indirectly held Caxton interest. This discount is consistent with
that applied in the past.
The JSE has notified the company that, in terms of the JSE Listings
Requirements, the company will, as a non-controlling investment holding company,
only be allowed to maintain its listing for a period of 12 months from 1 April
2008. The board is therefore committed to actively seeking ways of ensuring that
shareholders receive value and are not prejudiced through the JSE`s possible
termination of the company`s listing. As soon as this is possible, details of
the board`s proposed actions in this regard will be announced.
The board has resolved to keep operating costs to a minimum by maintaining the
board at its current size of four directors and by, for the time being, not
appointing any executive staff. All secretarial, administrative and operating
functions have or will be contracted out.
In light of the restructuring of the company and extensive distributions to
shareholders, no dividend will be declared and paid at this stage.
Francois van der Merwe
Director
Colin Brayshaw
Director
For and on behalf of the board
Johannesburg
17 June 2008
Notes
1. Accounting policies and basis of preparation
These condensed group annual financial statements have been prepared using
accounting policies compliant with International Financial Reporting Standards
(IFRS), and are in compliance with IAS 34 Interim Financial Reporting, the JSE
Limited`s Listings Requirements and the South African Companies Act.
The accounting policies and basis of preparation used are consistent with those
applied in the preparation of the annual financial statements for the year ended
31 March 2007 except for the following:
- the updated IAS 1 Presentation of Financial Statements was adopted on 1 April
2007. The statement imposes additional disclosures regarding capital and
capital management. These additional disclosures, which have no impact on
reported results, will be detailed in the 2008 annual report;
- IFRS 7 Financial Instruments: Disclosures was adopted on 1 April 2007. The
statement introduces new disclosures about financial instruments, including
the exposure to risks arising from financial instruments. These new
disclosures, which have no impact on reported results, will be included in
the 2008 annual report;
- IFRIC 10 Interim Financial Reporting and Impairment was adopted on 1 April
2007, with no impact on the group financial statements. This interpretation
rules that impairment losses recognised in an interim period in respect of
goodwill or investments in equity instruments and financial assets carried
at cost shall not be reversed;
- the revised formula for the calculation of headline earnings which was
released by the South African Institute of Chartered Accountants on 31 July
2007 in the form of Circular 8/2007 Headline Earnings, was adopted on 31
July 2007, and has no impact on the group`s reported headline earnings. The
formula was revised to align it with changes in IFRS; and
- as detailed in the commentary above, Caxton has been accounted for as a
financial asset at fair value through profit or loss, and not as an
associate.
for the year ended 31 March 31 March
2008 2007
Rm Rm
2. Exceptional items
Continuing operations
Fair value adjustment of investments 1 156 40
Discontinued operations 11 (58)
Pension fund surplus apportionment 8 -
Fair value adjustment of investments (1) 3
Reversal of loan impairments - 5
Impairment of net assets in Africa business - (68)
Other 4 2
3. Reconciliation between attributable and headline
earnings
Attributable earnings 4 032 613
Profit on disposal of discontinued operations (2 968) -
Loss on disposal of tangible and intangible 1 2
assets
Impairment of net assets in Africa business - 68
Impairment of goodwill - 5
Other (3) (4)
Total tax effect of adjustments 517 -
Total minority interest of adjustments - -
Headline earnings 1 579 684
Headline earnings per ordinary share (cents)
Basic 1 521 659
Diluted 1 521 658
4. Earnings per ordinary share
The calculation of basic attributable and headline earnings per
ordinary share is based on attributable earnings of R4 032 million
(2007: R613 million) and headline earnings of R1 579 million (2007:
R684 million) respectively, and on 103 821 159 (2007: 103 821 159)
ordinary shares in issue.
The calculation of diluted attributable and headline earnings per
ordinary share is based on attributable earnings of R4 032 million
(2007: R613 million) and headline earnings of R1 579 million (2007:
R684 million) respectively, and on a weighted average of 103 821 159
(2007: 104 004 056) ordinary shares in issue.
as at 31 March 31 March
2008 2007
Rm Rm
5. Contingent liabilities and commitments
Contingent liabilities - 24
Operating leases - 715
- due within one year - 128
- due after one year - 587
6. Capital expenditure commitments
Contracted but not provided for - 7
Approved but not yet contracted for - 66
- 73
for the year ended
7. Discontinued operations
Revenue 5 771 5 359
Profit from operations before exceptional items 670 651
Exceptional items 11 (58)
Profit from operations 681 593
Net finance income 11 14
Share of profits of associates 9 8
Profit before taxation 701 615
Taxation (242) (242)
Profit after taxation before profit on disposals 459 373
Disposal of Pay Television and Naspers N shares 2 451 -
Net profit on disposal 2 968 -
Capital gains taxation (302) -
Secondary tax on companies (215) -
Disposal of operating media and entertainment
assets
Loss on disposal (listing and unbundling costs) (7) -
Profit from discontinued operations per income 2 903 373
statement
Cash generated by operations 441 807
Taxation paid (204) (301)
Net interest received 11 13
Net cash from operating activities 248 519
Net cash used in investing activities (358) (251)
Net cash from financing activities 2 3
Foreign operations translation adjustment (5) 4
Cash flows from discontinued operations (113) 275
Disposals of assets and liabilities on
discontinuation
Non-current assets 1 280 -
Current assets 3 008 -
Non-current liabilities 402 -
Current liabilities 2 606 -
8. Audited results
The auditors, Deloitte & Touche, have issued an unmodified audit opinion on the
group`s annual financial statements for the year ended 31 March 2008. A copy of
their audit report is available for inspection at the company`s registered
office. These condensed group 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.
Directors: CB Brayshaw, WS Moutloatse, FJ van der Merwe, D Vlok
Company secretary: Probity Business Services (Proprietary) Limited
(011) 327 7146
Address: 3rd Floor, JHI House, 11 Cradock Avenue, Rosebank, Johannesburg
Investor enquiries: Mr FJ van der Merwe (027) 341 2807 or 082 557 3849
Date: 19/06/2008 07:05:02 Produced by the JSE SENS Department.
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