| Fri 30 Nov 2001, 0:00 | | Johnnic Holdings Limited - Interim Results For The |
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JOHNNIC HOLDINGS LIMITED
Incorporated in the Republic of South Africa
Registration number: 1889/000429/06
Share code: JNC
ISIN: ZAE000024352
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2001
Revenue up 28%
Ebitda up 27%
CONSOLIDATED INCOME STATEMENT
6 months 6 months Change 12 months
ended ended % ended
30 Sept 30 Sept 31 March
2001 2000 2001
Reviewed Reviewed Audited
Rm Rm Rm
Revenue 6 543,8 5 118,1 28 11 060,3
Cost of sales (2 944,3) (2 437,0) (5 135,6)
Gross profit 3 599,5 2 681,1 34 5 924,7
Operating expenses - net (1 931,7) (1 367,2) (2 897,8)
Earnings before interest, 1 667,8 1 313,9 27 3 026,9
taxation, depreciation and
amortisation ("Ebitda")
Depreciation (509,7) (363,3) (793,9)
Amortisation (140,1) (82,5) (163,2)
Profit from operations 1 018,0 868,1 17 2 069,8
before goodwill
amortisation
Goodwill amortisation (255,0) (101,3) (321,3)
Profit from operations 763,0 766,8 1 748,5
Finance costs (287,5) (154,0) 87 (311,5)
Finance income 88,4 121,7 (27) 166,9
Share of profits of 87,5 61,3 173,6
associates
Profit before taxation and 651,4 795,8 (18) 1 777,5
exceptional items
Exceptional items 4,2 511,5 470,5
Profit before taxation 655,6 1 307,3 (50) 2 248,0
Taxation (355,5) (267,9) (639,3)
Profit after taxation 300,1 1 039,4 (71) 1 608,7
Minority interests (164,4) (254,2) (525,8)
Attributable earnings 135,7 785,2 (83) 1 082,9
Contribution to
attributable earnings:
Continuing operations 193,3 298,2 (35) 672,5
Telecommunications 205,5 169,6 21 423,4
Entertainment 5,2 3,6 44 (2,1)
Media 36,2 21,2 71 65,1
Digital Media (12,8) (5,1) (22,6)
Interest and other (30,6) 108,2 104,9
Continuing operations 203,5 297,5 (32) 568,7
excluding foreign exchange
(losses)/gains
Foreign exchange (10,2) 0,7 103,8
(losses)/gains - net
Discontinuing operations 10,5 11,4 (8) 10,1
South African Breweries 1,7 3,0 4,9
plc
Johnnic Properties 8,8 8,4 5,2
Basic headline earnings 203,8 309,6 (34) 682,6
Goodwill amortisation (77,0) (35,7) (88,6)
after minority interests
Exceptional items after 8,9 511,3 488,9
taxation and minority
interests
Attributable earnings 135,7 785,2 (83) 1 082,9
Basic earnings per
ordinary share (cents)
Headline
- continuing operations 125 183 350
excluding foreign exchange
(losses)/gains
- continuing operations 119 184 (35) 414
- discontinuing operations 6 7 (14) 6
Total basic headline 125 191 (35) 420
Attributable 83 484 (83) 667
Dividend per ordinary
share (cents)
- final n/a n/a 95
Dividend cover on basic - - 4,4
headline earnings
(times)
Number of ordinary shares
in issue:
- weighted average (`000) 163 104 162 338 162 414
- at period end (`000) 164 277 162 446 162 620
SUMMARISED CONSOLIDATED BALANCE SHEET
30 Sept 30 Sept 31 March
2001 2000 2001
Reviewed Reviewed Audited
Rm Rm Rm
ASSETS
Non-current assets 21 457,7 15 451,3 19 675,7
Property, plant and equipment 7 036,8 4 937,7 6 232,1
Goodwill 9 654,7 8 637,5 8 656,5
Intangible assets 3 223,2 514,6 2 901,7
Marketable properties 0,3 0,3 0,3
Investments
- listed 457,3 405,9 435,3
- unlisted 641,6 739,0 624,1
Loans 317,9 162,0 736,9
Deferred taxation 125,9 54,3 88,8
Current assets 4 837,4 4 557,6 4 065,2
Bank balances, deposits and cash 904,7 810,1 951,7
Equities held as current assets 593,0 594,0 325,9
Other current assets 3 339,7 3 153,5 2 787,6
Total assets 26 295,1 20 008,9 23 740,9
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders' interest 5 250,5 4 655,3 4 668,8
Minority interests 10 907,8 8 806,5 9 110,9
Total equity 16 158,3 13 461,8 13 779,7
Non-current liabilities 4 944,5 2 850,7 4 982,9
Long term liabilities 4 040,8 2 028,6 4 179,4
Provision for post-retirement 100,2 90,2 96,1
medical costs
Deferred taxation 803,5 731,9 707,4
Current liabilities 5 192,3 3 696,4 4 978,3
Non-interest bearing liabilities 2 994,8 2 483,2 3 776,7
Interest bearing liabilities 2 197,5 1 213,2 1 201,6
Total equity and liabilities 26 295,1 20 008,9 23 740,9
Net asset value per ordinary share
(rand)
- book value 31,96 28,66 28,71
- based on market value or 48,76 120,04 85,79
directors' valuation of underlying
investments
SUMMARISED CONSOLIDATED CASH FLOW STATEMENT
6 months 6 months 12 months
ended ended ended
30 Sept 30 Sept 31 March
2001 2000 2001
Reviewed Reviewed Audited
Rm Rm Rm
Cash inflows from operating 804,1 905,1 3 178,8
activities
Cash outflows from investing (1 763,0) (2 783,8) (6 750,2)
activities
Cash inflows from financing 170,7 721,0 2 918,9
activities
Net decrease in cash and cash (788,2) (1 157,7) (652,5)
equivalents
Cash and cash equivalents at 321,7 985,3 985,3
beginning of period
Foreign entities translation (28,5) (30,6) (11,1)
adjustment
Cash and cash equivalents at end of (495,0) (203,0) 321,7
period
SUMMARISED GROUP STATEMENT OF CHANGES IN EQUITY
30 Sept 30 Sept 31 March
2001 2000 2001
Reviewed Reviewed Audited
Rm Rm Rm
Balance at 1 April as reported 4 607,5 3 548,9 3 548,9
Change in accounting policy in
respect of
- dividend 77,2 - -
- depreciation (15,9) (11,8) (11,8)
Restated balance at 1 April 4 668,9 3 537,1 3 537,1
Attributable earnings 135,7 785,2 1 082,9
Dividends (83,4) - -
Share capital issued at a premium (5,3) 39,3 11,3
less share issue expenses
Movement on unrealised gains 27,6 297,8 33,1
arising on revaluation of equities
held as current assets
Exchange differences arising on 106,6 40,6 44,1
translation of foreign entities
Goodwill and variation of interests 390,6 (21,9) (32,7)
Other 9,9 (22,8) (7,0)
Ordinary shareholders' interest 5 250,5 4 655,3 4 668,8
SEGMENTAL ANALYSIS
6 months 6 months Change 12 months
ended ended % ended
30 Sept 30 Sept 31 March
2001 2000 2001
Reviewed Reviewed Audited
Rm Rm Rm
Geographic
Revenue
South Africa 5 673,9 4 813,2 18 10 195,2
Rest of Africa 609,0 149,2 308 377,1
Other overseas operations 260,9 155,7 68 488,0
6 543,8 5 118,1 28 11 060,3
Ebitda
South Africa 1 589,3 1 294,0 23 2 907,2
Rest of Africa 89,3 25,8 246 107,8
Other overseas operations (10,8) (5,9) (83) 11,9
1 667,8 1 313,9 27 3 026,9
BUSINESS GROUPING
Revenue
Continuing operations 6 502,8 5 042,9 29 10 927,9
Telecommunications 5 170,2 3 844,6 34 8 337,3
Entertainment 750,9 707,8 6 1 539,7
Media 518,9 461,7 12 947,0
Digital Media 39,1 3,2 1 122 51,7
Other 23,7 25,6 52,2
Discontinuing operations
Johnnic Properties 41,0 75,2 132,4
Total 6 543,8 5 118,1 28 11 060,3
Ebitda
Continuing operations 1 658,5 1 304,0 27 3 003,3
Telecommunications 1 612,0 1 222,4 32 2 791,5
Entertainment 19,7 20,5 (4) 53,8
Media 47,3 38,9 22 72,1
Digital Media (10,7) (7,4) (45) (24,4)
Other (9,8) 29,6 110,3
Discontinuing operations
Johnnic Properties and other 9,3 9,9 23,6
Total 1 667,8 1 313,9 27 3 026,9
NOTES
1. Basis of accounting
These consolidated condensed 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 2001, except for revised accounting
statements that were implemented in the current period, being the
recognition of dividends when paid and depreciation of properties previously
classified as investment properties. The prior year figures have been
restated to comply with revised accounting policies.
2. Comparatives
Where necessary, comparative figures have been adjusted to conform with
changes in presentation in the current period.
3. Earnings per ordinary share
The calculation of basic headline earnings per ordinary share is based on
attributable earnings before goodwill amortisation and exceptional items of
R203,8 million (2000: R309,6 million) and a weighted average of
163 104 430 (2000: 162 337 930) ordinary shares in issue.
No fully diluted earnings per ordinary share have been disclosed as the
potential dilution is not material.
4. Independent review by the auditors
This interim report has been the subject of a review by our auditors
Deloitte & Touche, who have performed this review in accordance with the
guideline entitled "Guidance for Auditors on Review of Interim Financial
Information" issued by the South African Institute of Chartered Accountants.
A copy of their unqualified review report is available for inspection at the
registered office of the company.
5. Listings requirements
This interim announcement has been prepared in compliance with the Listings
Requirements of the JSE Securities Exchange South Africa.
6. Corporate governance
The Board affirms its commitment to principles of good corporate governance,
details of which have been included in the annual financial statements for
the year ended 31 March 2001.
30 Sept 30 Sept 31 March
2001 2000 2001
Reviewed Reviewed Audited
Rm Rm Rm
7.Interest bearing debt
Long term liabilities 4 040,8 2 028,6 4 179,4
Current liabilities 2 197,5 1 213,2 1 201,6
- call borrowings 1 399,7 1 013,1 630,0
- short term borrowings 797,8 200,1 571,6
Total 6 238,3 3 241,8 5 381,0
8.Capital expenditure incurred 1 535,8 693,1 2 398,1
9.Contingent liabilities and
commitments
Guarantees (Rand) 587,8 1 272,2 630,9
Contingent liabilities 0,2 - 134,0
Operating leases
- within one year 193,4 239,2 258,3
- more than one year 1 924,9 1 534,7 1 624,2
Total 2 118,3 1 773,9 1 882,5
Commitments for capital expenditure
- contracted 482,3 485,5 268,1
- approved but not contracted 2 276,3 1 045,4 2 000,2
Total 2 758,6 1 530,9 2 268,3
The capital expenditure will be
funded from future cash flows and
borrowings.
10.Investments
Listed investments at market value 532,3 1 130,5 830,4
Unlisted investments at directors' 971,3 1 381,5 942,3
valuation
11.Equities held as current assets
Beverage and Consumer Industry 0,3 1,2 0,3
Holdings Limited
M-Cell Limited 374,3 - -
MIH Limited 131,4 476,9 217,1
The Premier Group Limited 22,9 28,6 22,9
South African Breweries plc 64,1 87,3 85,6
Total 593,0 594,0 325,9
12.Cash and cash equivalents
Bank balances, deposits and cash 904,7 810,1 951,7
Call borrowings (1 399,7) (1 013,1) (630,0)
(495,0) (203,0) 321,7
OVERVIEW
The extensive restructuring process initiated three years ago at Johnnic
Holdings Limited ("Johnnic") has continued during the six months under
review with the unbundling by Johnnic Communications Limited ("Johncom") of
its 34,1% shareholding in M-Cell Limited ("M-Cell") on 9 July 2001. The
exercise resulted in a measurable increase in the free-float of M-Cell, an
increase in Johnnic's direct stake in M-Cell to 36,6% and a separate listing
of our media and entertainment interests.
Johnnic is in the process of converting a letter of intent with Transnet
Limited ("Transnet") into a full voting pool agreement. This will ensure
continued control of the M-Cell group by Johnnic. As a result, the group
continues to consolidate the results of M-Cell.
The disposal of non-core assets continued during the half year with a
further R85,6 million liquidated, bringing the total disposals since the
start of the restructuring process to R9,1 billion. The transactions
concluded in this interim period include:
The sale of 325 000 shares in MIH Limited ("MIH") for a consideration of
R30,8 million;
The sale of 474 160 shares in South African Breweries plc ("SAB plc") for
R27,8 million; and
Property disposals totalling R27 million. Exceptional profit earned on these
disposals totalled R24,2 million.
A settlement has been reached with Tsogo Sun KwaZulu-Natal (Proprietary)
Limited (Tsogo Sun) and the KwaZulu-Natal Gambling Board with regards to the
casino development in Durban. A joint venture licence application is being
finalised in which Johnnic and its partners will own 40% of the development.
Johnnic currently comprises four divisions:
Telecommunications - comprising M-Cell, which is the holding company of
Mobile Telephone Network Holdings (Proprietary) Limited ("MTN") and Orbicom
(Proprietary) Limited ("Orbicom");
Entertainment - comprising interests in music, filmed entertainment and book
retailing, trading as Johnnic Entertainment Limited ("Johnnic
Entertainment");
Media - comprising the group's newspaper and publishing interests, trading
as Johnnic Publishing Limited ("Johnnic Publishing"); and
Digital media - comprising Johnnic e-Ventures ("JeV"), a start-up business
dedicated to co-ordinating the group's thrust into e-business.
The group also holds interests in a number of non-core assets including:
Gallagher Estate Holdings Limited ("Gallagher Estate");
Johnnic Properties ("JohnProp");
Durban Add-Ventures Limited ("Durban Add-Ventures"); and
Steenberg Vineyards ("Steenberg").
RESULTS
Revenue increased by 28% to R6 543,8 million (2000: R5 118,1 million), while
earnings before interest, taxation, depreciation and amortisation ("Ebitda")
rose by 27% to R1 667,8 million (2000: R1 313,9 million).
Finance costs increased 87% on last year to R287,5 million as a result of
increased borrowings in the group mainly relating to the MTN Nigeria
operation.
Finance income declined by 27% due to the absence of interest income which
the group earned on cash holdings of R3 billion that the holding company had
during the comparable period last year.
Headline earnings, therefore, declined 34% on last year to R203,8 million.
Goodwill arising out of acquisitions undertaken by M-Cell in the second
quarter of the previous year resulted in an amortisation charge of R255
million during the half year. The goodwill charge for three months of last
year amounted to R101,3 million.
Profit from operations before goodwill amortisation increased by 17% to R1
018 million. Profit from operations after goodwill amortisation decreased by
0,5% to R763 million (2000: R766,8 million) as a result of the increased
goodwill write-off.
Basic headline earnings from continuing operations amounted to R193,3
million, while that from discontinuing operations totalled R10,5 million.
Basic headline earnings per share decreased by 35% to 125 cents (2000: 191
cents) and attributable earnings per share declined 83% to 83 cents (2000:
484 cents), reflecting the impact of goodwill amortisation and finance
costs.
Exceptional items of R4,2 million mainly comprised the profit on sale of SAB
plc and MIH amounting to R24,2 million reduced by the write-down of
investments in Durban Add-Ventures, Johnnic Entertainment and JeV.
DIVISIONAL REVIEW
TELECOMMUNICATIONS
The M-Cell group continued to record good growth, driven by a strong
performance from MTN where the revenue-generating subscriber base has topped
4 million, 3,54 million of whom are served by MTN South Africa. Revenue grew
34,5% to R5 170,2 million, while Ebitda rose by 31% to R1 605,1 million over
the same period last year.
In keeping with the company's strategy of diversifying its
telecommunications business into selected African countries, MTN Nigeria
Communications Limited ("MTN Nigeria") was launched in August 2001 and is
already exceeding expectations with a subscriber base approaching
100 000. MTN now operates in five African countries outside of South Africa
and is regarded as the leading Africa-wide cellular operator.
Notwithstanding the significant growth in finance charges and expenses
arising from MTN's start-up operations in Nigeria and Cameroon, overall
basic headline earnings per share grew by 5,5% to 32,6 cents.
Orbicom has made its first move into banking, networking and service
provision in African countries by launching an innovative wireless-based
network for electronic payments and inter-bank settlements in Ghana. The
business achieved revenue growth of 7,5% over the prior interim period. A
total loss of R0,6 million was recorded for the period, reflecting the start-
up expenditure of the electronic payments project (2000: R4,1 million loss).
ENTERTAINMENT
Despite continued tough trading conditions in the filmed entertainment
industry, NuMetro recorded a 20% increase in revenue to R212 million.
Increased adoption of the DVD format continued to benefit the home
entertainment sector, while depressed consumer spending had a negative
impact on the video rental and video sell-through markets.
Associate companies Electronic Media Network Limited ("M-Net") and
SuperSport Holdings Limited ("SuperSport") continue to perform well, with a
subscriber base of 1,25 million households across 45 countries in Africa and
the adjacent islands.
Reflecting trading difficulties in the global music industry, Johncom's
music interests performed below expectations, recording a decline in revenue
and profits.
Book retailers Exclusive Books and Hammicks Bookshops benefited from
increased market share and roll-out of new stores. The appreciating value of
the pound sterling against the rand produced strong growth in revenue and
Ebitda in Hammicks.
MEDIA
Johnnic Publishing - embracing newspaper, magazine, book and map publishing
- performed strongly despite a very tough trading environment. Revenue rose
12,4%, with Ebitda 21,6% higher than the prior comparable period.
The Sunday Times remains the main contributor to these results, reflecting
the combined impact of continued growth in print advertising and cost-
containment. Sowetan Sunday World continues to grow circulation levels, with
current copy sales exceeding 140 000.
Associate business CTP Holdings Limited ("CTP") reported marginal growth in
turnover, indicative of the difficult trading conditions in consumer goods
during the period.
DIGITAL MEDIA
The Digital Media Division showed strong revenue growth by continuing to
focus on the business-to-business market.
The business has diversified its activities by venturing into e-learning
with the launch of Johnnic Learning, a move which has helped minimise the
division's exposure to the consumer Internet market. Revenue rose to R39,1
million, with losses at Ebitda and headline earnings level of R10,7 million
and R20,5 million, reflecting the evolutionary stage of the start-up
business.
NON-CORE ASSETS
Gallagher Estate
The depressed economic climate has impacted negatively on the exhibition
business. In consequence, Gallagher Estate posted a 9% decline in turnover
to R20,4 million and an 8% drop in Ebitda, compared to the prior interim
period, to R6,2 million.
JohnProp
Disposals totalling R27 million were made during the half year.
Township sales, mainly comprising Dainfern, declined significantly compared
to the prior period due to reduced stock levels. Negotiations are currently
underway for the disposal of Atlantic Beach and Steenberg.
Steenberg
Turnover - derived primarily from wine sales, hotel and restaurant revenue -
remained flat. Demand for Steenberg wines, however, remains strong
stimulated by the receipt of several awards during the review period. This
operation operates on a break-even basis.
Durban Add-Ventures
Application for a licence for a joint venture with Tsogo Sun is in the
process of being finalised. The casino is not expected to begin operations
until the 2002/3 financial year. Favourable funding arrangements are in the
process of being put in place, which may obviate the need to inject cash in
the development during the first four years of operation.
PROSPECTS
MTN South Africa has noted some slow down in the growth of prepaid
subscribers over recent months. However, the entry of the third cellular
operator, Cell C, may further stimulate the market.
Efforts will be focused on growing revenues from high end subscribers
through improved retention management and the introduction of more value
added services. Focus will also be placed on improved capital efficiency
and productivity. While MTN Nigeria is performing ahead of expectations, the
start-up costs associated with this and other African ventures, will impact
headline earnings in the balance of the financial year.
The prospects for the entertainment division are positive for the second
half of the year. An array of very good product for the 2001/2002 Christmas
trading period bodes well for the filmed entertainment and book retailing
sectors.
The Australian book operation has started to contribute positively to
profits following the restructuring exercise undertaken last year and is
expected to continue into the future.
The Media division will continue to perform well despite the tough trading
conditions, mainly as a result of the market positioning of the group's
major titles. The continued consolidation in the Magazine division is
expected to yield significant cost savings and this will improve
profitability in the future. The prospects for the Map division look quite
promising following the creation of a new venture, Map Information
Solutions, in partnership with the M-Net group. Development losses within
the Digital Media division's JeV are anticipated to continue, although the
business promises to move closer towards profitability.
Should the licence application with Tsogo Sun be successful, the group
expects the investment in the Durban casino to yield good returns in the
future.
Headline earnings for the next six months will be adversely impacted by the
start-up costs of MTN Nigeria. MTN/M-Cell is, however, poised for excellent
growth in the future.
Johnnic continues to explore opportunities to unlock value for its
shareholders.
MANAGEMENT CHANGES
Reflecting Johnnic's devolution of focus onto underlying operations, several
management changes came into effect at group company level during August
2001. They include Mashudu Ramano succeeding Paul Edwards as chairman of
Johncom and Phuthuma Nhleko replacing Irene Charnley as chairman of M-Cell.
Paul Edwards has taken up the position of chief executive at M-Cell vacated
by Bob Chaphe while Irene Charnley has assumed the role of commercial
director at M-Cell. Jacob Modise has been appointed chief operating officer
of Johnnic.
SHAREHOLDER MATTERS
The National Empowerment Consortium ("NEC") has been the controlling
shareholder of Johnnic since 1996. Since that date the NEC has played a
crucial role in driving not only the restructuring of Johnnic from a
diversified investment company into a focused company with interests in
telecommunications, media and technology, but also the transformation of
companies in the Johnnic group with regard to issues such as skills
development of persons from previously disadvantaged backgrounds, creating
opportunities for black controlled entities by implementing progressive
procurement policies, and attracting high quality black and female
management to the group.
Funding arrangements for the NEC have been finalised. This will ensure that
Johnnic will remain a black empowerment group in the future.
DIVIDEND
Johnnic's businesses operate in high growth sectors. The group has adopted a
dividend policy that will allow the businesses to retain and reinvest the
bulk of the cash generated to fund future growth. A long term target
dividend cover ratio of between five to six times headline earnings has been
adopted.
As a result of the increased funding requirement for MTN/M-Cell's expansion
into Africa, the directors believe that it is in the best interest of
shareholders to utilise retained earnings to reduce current borrowings.
The subsidiaries M-Cell and Johncom have not declared a dividend for the
interim period. As a result the Johnnic directors have resolved not to
declare an interim dividend for the six-month period ended 30 September
2001.
STRATE
The share capital of Johnnic was transferred to Share Transactions Totally
Electronic ("STRATE") on 5 November 2001. The move to STRATE will ensure
Johnnic's participation in a sophisticated settlement process in line with
international best practices.
Shareholders requiring further information in this regard should contact
Georgeson Shareholder Communications, the company's information agent
service provider, on 0800 117 472 or +27 11 775 3433 if calling from outside
South Africa.
For and on behalf of the board
M C Ramaphosa J R D Modise
Chairman Chief Operating Officer
29 November 2001
