| Tue 10 Dec 2002, 17:13 | | Johnnic Holdings Limited - Reviewed Interim Result |
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Johnnic Holdings Limited - Reviewed Interim Results For The Six Months Ended
Release Date: 10/12/2002 17:03:53 Code(s): JNC
Johnnic Holdings Limited - Reviewed Interim Results for the six months ended
30 September 2002
JOHNNIC HOLDINGS LIMITED
Incorporated in the Republic of South Africa
Registration number: 1889/000429/06
Share code: JNC
ISIN: ZAE000024352
Reviewed interim results for the six months ended 30 September 2002
Consolidated Group Income Statement
6 months 6 months* 12 months*
ended ended ended
30 Sept 30 Sept 31 March
2002 2001 2002
Reviewed Reviewed Change Audited
Notes Rm Rm % Rm
Revenue 10 336,2 6 543,8 58 15 666,6
Cost of sales (4 643,3) (2 944,3) (7 164,8)
Gross profit 5 692,9 3 599,5 8 501,8
Operating expenses - (2 935,4) (2 032,2) (4 663,7)
net
Earnings before 2 757,5 1 567,3 76 3 838,1
interest, taxation,
depreciation and
amortisation
("Ebitda")
Depreciation (818,4) (509,7) (1 194,1)
Amortisation (144,1) (57,4) (188,3)
Profit from operations 1 795,0 1 000,2 79 2 455,7
before goodwill
amortisation
Goodwill amortisation (270,4) (255,0) (525,7)
Profit from operations 1 524,6 745,2 105 1 930,0
Finance costs (413,9) (287,5) (580,1)
Finance income 92,9 88,4 192,2
Share of profits of 114,7 87,5 199,6
associates
Profit before taxation 1 318,3 633,6 108 1 741,7
and exceptional items
Exceptional items 10 25,3 4,2 (86,8)
Profit before taxation 1 343,6 637,8 111 1 654,9
Taxation (459,8) (350,1) (978,6)
Profit after taxation 883,8 287,7 207 676,3
Minority interests (527,7) (156,5) (395,1)
Attributable earnings 356,1 131,2 171 281,2
Contribution to
attributable earnings:
Continuing operations 377,0 188,8 100 478,8
Telecommunications 374,2 190,8 96 444,5
Entertainment 2,6 5,2 (50) 29,2
Media 42,2 36,2 17 94,9
Digital Media (5,6) (12,8) (22,9)
Interest and other (36,4) (30,6) (66,9)
Discontinuing 6,3 10,5 (40) 41,3
operations
SABMiller plc - 1,7 1,7
Johnnic Properties 6,3 8,8 16,7
The Premier Group - - 22,9
Limited
Basic headline 383,3 199,3 92 520,1
earnings
Goodwill amortisation (80,3) (77,0) (158,3)
after minority
interests
Exceptional items 53,1 8,9 (80,6)
after taxation and
minority interests
Attributable earnings 356,1 131,2 171 281,2
Summarised Consolidated Group Balance Sheet
30 Sept 30 Sept 31 March
2002 2001* 2002*
Reviewed Reviewed Audited
Notes Rm Rm Rm
ASSETS
Non-current assets 23 866,5 21 392,4 23 926,1
Property, plant and 9 632,6 7 036,8 8 952,4
equipment
Goodwill 9 325,2 9 654,7 9 523,8
Intangible assets 3 230,8 3 158,2 3 744,2
Investments
- listed 17 393,5 457,3 469,9
- unlisted 17 646,5 641,6 659,7
Loans 462,4 317,9 393,9
Deferred taxation 131,7 125,9 138,4
Non current prepaid 43,8 - 43,8
taxation
Current assets 6 843,8 4 837,7 5 553,3
Bank balances, 19 1 722,8 904,7 1 473,8
deposits and cash
Securitised cash 19 1 248,5 9,6 354,1
deposits
Equities held as 18 0,1 593,0 65,1
current assets
Other current assets 3 872,4 3 330,4 3 660,3
Total assets 30 710,3 26 230,1 29 479,4
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders` 5 580,8 5 226,4 5 336,0
interest
Minority interests 11 811,1 10 866,9 11 332,5
Total equity 17 391,9 16 093,3 16 668,5
Non-current 3 028,9 4 944,5 6 470,0
liabilities
Long term liabilities 11 1 962,2 4 040,8 5 442,1
Provision for post- 109,1 100,2 108,0
retirement medical
costs
Deferred taxation 957,6 803,5 919,9
Current liabilities 10 289,5 5 192,3 6 340,9
Non-interest bearing 4 913,0 2 994,8 4 796,7
liabilities
Interest bearing 11 5 376,5 2 197,5 1 544,2
liabilities
Total equity and 30 710,3 26 230,1 29 479,4
liabilities
*Restated for change in accounting policy for cellphone connection incentives
(note 2).
Group Statistics
6 months 6 months* 12 months*
ended ended ended
30 Sept 30 Sept Change 31 March
2002 2001 % 2002
Performance per
ordinary share
Headline earnings
(cents)
- continuing 230 116 98 292
operations
- discontinuing 4 6 (33) 25
operations
Total basic headline 234 122 92 317
(cents)
Attributable earnings 217 80 171 172
(cents)
Net asset value (rand)
- book value 33,97 31,81 32,48
- based on directors` 39,51 48,36 57,97
valuation of
underlying investments
Ratios
Profitability
Ebitda margin (%) 26,7 24,0 24,5
Enterprise value/ 0,2 1,4 0,5
Ebitda multiple
(times)
Effective taxation 34,2 54,9 59,1
rate (%)
Solvency and liquidity
Gearing (%) 25,1 33,1 30,9
Long term borrowings 6,4 15,4 18,5
to total assets (%)
Current ratio 0,7:1 0,9:1 0,9:1
Interest cover (times) 3,7 2,6 3,3
Share performance
Number of ordinary
shares in issue (`000)
- at period end 164 291 164 277 164 285
- weighted average 164 286 163 104 163 702
Closing price (cents 3 056 4 570 4 400
per share)
Market capitalisation 5 020,7 7 507,5 7 228,5
(Rm)
Number of employees
Telecommunications 3 832 2 805 4 107
Entertainment 2 545 2 710 2 838
Media 1 849 1 873 2 092
Digital Media 347 402 300
Exhibitions and other 65 89 62
Head office and 10 - 9
administration
8 648 7 879 9 408
Summarised Group Statement of Changes in Equity
30 Sept 30 Sept 31 March
2002 2001* 2002*
Reviewed Reviewed Audited
Rm Rm Rm
Balance at 1 April as 5 348,4 4 607,5 4 607,5
reported
Change in accounting
policy in respect of
- treatment of (12,4) (19,6) (19,6)
cellphone connection
incentives (note 2)
- dividend - 77,2 77,2
- depreciation - (15,9) (15,9)
Restated balance at 1 5 336,0 4 649,2 4 649,2
April
Attributable earnings 356,1 131,2 281,2
Adjustment on changes - - (45,4)
in composition of
Group
Dividends - (83,4) (83,4)
Share capital issued 0,2 (5,3) 1,1
at a premium less
share issue expenses
Movement on unrealised - 27,6 (126,0)
gains arising on
revaluation of listed
equities
Exchange differences (111,3) 106,6 215,2
arising on translation
of foreign entities
Goodwill and variation (4,2) 390,6 445,0
of interests
Other 4,0 9,9 (0,9)
Ordinary shareholders` 5 580,8 5 226,4 5 336,0
interest
Summarised Consolidated Group Cash Flow Statement
6 months 6 months* 12 months*
ended ended ended
30 Sept 30 Sept 31 March
2002 2001 2002
Reviewed Reviewed Audited
Notes Rm Rm Rm
Cash inflows from 2 184,6 788,8 3 253,4
operating activities
Cash outflows from (1 594,6) (1 763,0) (4 006,7)
investing activities
Cash inflows from 955,7 170,7 553,0
financing activities
Net increase 1 545,7 (803,5) (200,3)
(decrease) in cash and
cash equivalents
Cash and cash 594,2 321,7 321,7
equivalents at
beginning
of period
Foreign entities (11,1) (28,5) 118,7
translation adjustment
Reclassification from - 24,9 354,1
other current assets
Cash and cash 19 2 128,8 (485,4) 594,2
equivalents at end of
period
Group Segmental Analysis
6 months 6 months* 12 months*
ended ended ended
30 Sept 30 Sept 31 March
2002 2001 2002
Reviewed Reviewed Change Audited
Rm Rm % Rm
BUSINESS GROUPING
Revenue
Continuing operations 10 292,1 6 502,8 58 15 501,9
Telecommunications 8 683,5 5 170,2 68 12 432,0
Entertainment 937,9 750,9 25 1 871,2
Media 585,3 518,9 13 1 065,5
Digital Media 63,9 39,1 63 95,3
Other 21,5 23,7 37,9
Discontinuing
operations
Johnnic Properties 44,1 41,0 164,7
Total 10 336,2 6 543,8 58 15 666,6
Ebitda
Continuing operations 2 747,0 1 558,0 76 3 810,5
Telecommunications 2 687,1 1 504,6 79 3 626,2
Entertainment 13,3 19,7 (32) 97,5
Media 56,5 47,3 19 119,6
Digital Media (1,9) (10,7) 82 (18,9)
Other (8,0) (2,9) (13,9)
Discontinuing
operations
Johnnic Properties and 10,5 9,3 27,6
other
Total 2 757,5 1 567,3 76 3 838,1
GEOGRAPHIC
Revenue
South Africa 6 995,9 5 673,9 23 12 548,1
Rest of Africa 2 968,8 609,0 387 2 349,3
Other overseas 371,5 260,9 42 769,2
operations
Total 10 336,2 6 543,8 58 15 666,6
Ebitda
South Africa 1 712,4 1 488,8 15 3 350,2
Rest of Africa 1 056,2 89,3 1 083 439,4
Other overseas (11,1) (10,8) (3) 48,5
operations
Total 2 757,5 1 567,3 76 3 838,1
Notes
1. Basis of accounting
These consolidated condensed Group 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, 1973, as
amended. The accounting policies are consistent with those used in the annual
financial statements for the year ended 31 March 2002, except for the change
in accounting policy relating to the previous capitalisation and amortisation
of cellphone connection incentives, which are now recognised as costs in the
period incurred.
In the prior year, the Group revised its accounting policies with respect to
the recognition of dividends and the depreciation of properties previously
classified as investment properties.
Consequently, the prior year figures have been restated to comply with these
revised accounting policies.
2. Change in accounting policy - cellphone connection incentives
During the period ended 30 September 2002, the Group changed its accounting
policy with respect to the treatment of capitalisation and amortisation of
cellphone connection incentives. In order to align with international
industry practice, the Group now recognises cellphone connection incentives
as costs in the period incurred rather than capitalising cellphone connection
incentives and amortising the cost over 12 months. The comparative amounts
have been appropriately restated. The effects of the change are as follows:
6 months 6 months 12 months
ended ended ended
30 Sept 2002 30 Sept 2001 31 March 2002
Reviewed Reviewed Audited
Rm Rm Rm
(Decrease) increase (6,4) (4,5) 7,2
in attributable
earnings
(Decrease) increase (24,6) (17,8) 27,5
in profit before
taxation
Taxation 7,4 5,4 (8,2)
Minority interests 10,8 7,9 (12,1)
Decrease in opening (12,4) (19,6) (19,6)
accumulated profits
Gross (47,6) (75,1) (75,1)
Taxation 14,3 22,5 22,5
Effect on minority 20,9 33,0 33,0
interests
3. Comparatives
Where necessary, comparative figures have been restated to conform with
changes in presentation in the current period.
4. 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
R383,3 million (2001: R199,3 million) and a weighted average of 164 286 051
(2001: 163 104 430) ordinary shares in issue.
No fully diluted earnings per ordinary share have been disclosed as the
potential dilution is not material.
5.Independent review by the auditors
These interim results have been reviewed by our auditors, Deloitte & Touche,
who have performed their review in accordance with the guideline "Guidance
for Auditors on Review of Interim Financial Information" issued by the South
African Institute of Chartered Accountants.
The scope of the review was to enable the auditors to report that nothing
came to their attention that caused them 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 unqualified review report is available for inspection at the
registered office of the Company.
6.Listings requirements
This interim announcement has been prepared in compliance with the Listings
Requirements of the JSE Securities Exchange South Africa.
7.Corporate governance
The Board of Directors affirms its commitment to the principles of good
corporate governance and has endorsed the Code of Corporate Practices and
Conduct as issued by the King Committee in 1994. It has further taken
cognisance of the recommendations of the King Report on Corporate Governance
for South Africa 2002 released in March 2002.
8.Changes in shareholding of subsidiaries
Disposal of 30% shareholding in MTN Cameroon
In April 2002, MTN Mauritius sold 30% of its holding in MTN Cameroon, on loan
account, to Broadband Telecom Limited, a company incorporated in Cameroon, in
compliance with licence obligations. The Group`s financial position has not
been significantly affected by this transaction. The results of MTN Cameroon
are consolidated into the Group financial statements. However, in terms of
certain conditions of the disposal agreement, 80% of MTN Cameroon`s economic
risk still vests with the Group and therefore the consolidated financial
statements include 80% of the results of MTN Cameroon.
Increase in shareholding in MTN Nigeria
During the period the Group increased its shareholding in MTN Nigeria from
77,5% to 79,5% as a result of further capital provided to MTN Nigeria.
9.Post balance sheet event
On 26 November 2002 the MTN Group issued a cautionary announcement relating
to a proposed acquisition by Newshelf 664 (Proprietary) Limited ("Newshelf")
of the shares owned by Transnet Limited ("Transnet") through ICE Finance BV.
Johnnic has agreed to waive its pre-emptive rights over the 18,7%
shareholding in the MTN Group in favour of Newshelf. Johnnic has concluded a
voting pool agreement with Newshelf in terms of which Johnnic will continue
to control the MTN Group.
6 months 6 months 12 months
ended ended ended
30 Sept 30 Sept 31 March
2002 2001 2002
Reviewed Reviewed Audited
Rm Rm Rm
10. Exceptional items
Surplus on unwinding of SPVs 95,3 - -
Associated companies` (55,4) (0,2) 9,2
exceptional items
Investments, goodwill and (13,6) (12,8) (113,4)
property, plant and equipment
written down
Surplus on disposal of 0,8 24,2 1,2
investments
Costs associated with (2,2) (4,3) (9,2)
rationalisation and
restructuring
Release of at acquisition 0,3 - -
provision
Loan written back (off) 0,1 (2,7) 25,4
Total 25,3 4,2 (86,8)
11. Interest bearing debt
Long term liabilities 1 962,2 4 040,8 5 442,1
Current liabilities 5 376,5 2 197,5 1 544,2
- call borrowings 842,5 1 399,7 1 233,7
- short term borrowings 4 534,0 797,8 310,5
Total 7 338,7 6 238,3 6 986,3
12. Capital expenditure incurred 1 871,6 1 535,8 3 725,1
13. Contingent liabilities
Guarantees 164,2 587,8 267,5
Contingent liabilities 0,8 0,2 59,5
14. Capital commitments
Commitments for capital
expenditure
- contracted for 1 803,2 482,3 878,3
authorised but not contracted 2 624,6 2 276,3 5 844,2
for
Total 4 427,8 2 758,6 6 722,5
The capital expenditure will be
funded from future cash flows
and borrowings. Adequate
facilities have been put in
place to finance future capital
commitments.
15. Lease commitments
Operating leases
- within one year 237,8 193,4 271,6
- more than one year 1 473,4 1 924,9 1 529,0
Total 1 711,2 2 118,3 1 800,6
16. Related party transactions
Suncoast Casino and Entertainment World
As disclosed in the 2002 Annual Report Investec Bank Limited ("Investec")
has agreed to provide certain facilities to Tsogo Sun KwaZulu-Natal
(Proprietary) Limited ("Tsogo") subject to various levels of support from
SABSA Holdings (Proprietary) Limited ("SABSA") and Johnnic:
R600,0 million as a bridging finance facility to fund the equity
commitments of the shareholders to Suncoast Casino and Entertainment
World, for a period of up to four years. This facility is guaranteed by
SAB 60% (R360,0 million) and Johnnic 40% (R240,0 million), until such
time as the facility is repaid and the equity contributions of the
shareholders are injected into Tsogo. Johnnic has secured this guarantee
by pledging 42,3 million MTN Group Limited shares.
R600,0 million as a senior debt facility to fund various assets of
Suncoast Casino and Entertainment World. SAB and Johnnic have finalised a
"sponsor support agreement" in terms of which they will undertake that
only if the licence is suspended, withdrawn or not renewed as a result of
the conduct of Tsogo, the sponsors will, in the ratio of 60:40, at their
election, either assume the obligations of Tsogo in respect of the senior
debt facility or pay Investec any shortfall in the repayment of the debt
owing by Tsogo to Investec in respect of the senior debt facility that
may arise after realisation of Investec`s security of Tsogo`s assets.
17. Investments
Listed investments at market 406,6 532,3 477,7
Value
Unlisted investments at 746,0 971,3 780,1
directors` valuation
18. Equities held as current assets
SABMiller plc 0,1 64,1 0,1
MTN Group Limited - 374,3 -
MIH Limited - 131,4 65,0
The Premier Group Limited - 22,9 -
Beverage and Consumer Industry - 0,3 -
Holdings Limited
Total 0,1 593,0 65,1
19. Cash and cash equivalents
Bank balances, deposits and 1 722,8 904,7 1 473,8
cash
Securitised cash deposits** 1 248,5 9,6 354,1
Call borrowings (842,5) (1 399,7) (1 233,7)
Total 2 128,8 (485,4) 594,2
**These monies are placed on deposit with banks in Nigeria to secure letters
of credit.
Commentary
OVERVIEW
Johnnic Holdings Limited ("Johnnic") has produced excellent results primarily
due to a strong performance by the telecommunications businesses. The Group
is about to enter a period of consolidation that will see Group earnings
impacted to an increasingly lesser extent by large disposal and restructuring
transactions undertaken by the holding company. This is because the bulk of
the non-core assets has been sold. Johnnic has effectively become a pure
holding company.
The following disposals were undertaken during the half year:
Sedgebrooke Investments (Proprietary) Limited ("Sedgebrooke")
The special purpose vehicles ("SPVs") created to fund empowerment groupings
that had invested in MTN Group Limited ("MTN Group" formerly M-Cell Limited)
were unwound during the period under review. These SPVs were part-funded by
Johnnic and Johnnic had also secured their liabilities with the financial
institutions. This resulted in the Company carrying a R400,0 million
contingent liability on the balance sheet for much of the last three years.
In transactions worth over R600,0 million, Johnnic expunged this contingent
liability and cash in excess of R220,0 million was realised, primarily from
the disposal of Sedgebrooke - the vehicle through which the Johnnic funding
was undertaken - but also from the other SPVs.
MIH Limited ("MIH")
The remaining 1,6 million MIH shares were also disposed of in the first
quarter of this year realising cash of R65,0 million for the Group.
Property disposals
Property sales totalled R145,0 million for the half-year with sales pending
transfer totalling R40,0 million.
RESULTS
Revenue increased by 58% to R10 336,2 million (2001: R6 543,8 million), while
earnings before interest, taxation, depreciation and amortisation ("Ebitda")
rose by 76% to R2 757,5 million (2001: R1 567,3 million).
Net finance costs increased by 61% to R321,0 million in comparison to the
same period last year mainly as a result of increased borrowings in MTN
Cameroon and MTN Nigeria.
In consequence, headline earnings rose 92% on last year to R383,3 million.
Basic headline earnings from continuing operations amounted to R377,0 million
(2001: R188,8 million), while that from discontinuing operations totalled
R6,3 million (2001: R10,5 million). Basic headline earnings per share
increased by 92% to 234 cents (2001: 122 cents) and attributable earnings per
share rose by 171% to 217 cents (2001: 80 cents), reflecting the positive
impact of the MTN Group results.
Exceptional items of R25,3 million mainly relate to the surplus on the
unwinding of the SPVs of R95,3 million and the Group`s share of associated
companies exceptional items amounting to a loss of R55,4 million.
FUNDING
The Group`s total assets have increased by 4% to R30 710,3 million since 31
March 2002. Long term liabilities have reduced to R1 962,2 million while
short term borrowings, including bank overdrafts, increased to
R5 376,5 million. This occurred as a result of the shortening in the debt
maturity profile in the MTN Group due to the reclassification of the current
US$450 million syndicated bridge facility arranged by Standard Bank London
Limited and Sumitomo Mitsui Banking Corporation, which terminates in July
2003. MTN Group is currently renegotiating this facility and firm
underwriting commitments have been received for US$250 million.
It is expected that the refinance will be concluded, thus facilitating a
realignment of the Group`s debt profile by the end of March 2003.
DIVISIONAL REVIEW
TELECOMMUNICATIONS
After a period of muted earnings as a result of international expansion
activities, the MTN Group has resumed its positive growth trend to report
revenue growth of 68% to R8 683,5 million (2001: R5 170,2 million). Ebitda
rose 79% to R2 687,1 million (2001: R1 504,6 million), while headline
earnings per share at 60,9 cents are 91,5% up on last year`s 31,8 cents.
MTN South Africa
Mobile Telephone Networks (Proprietary) Limited ("MTN") and MTN Service
Provider (Proprietary) Limited ("MTN SP") (formerly M-Tel (Proprietary)
Limited) (together "MTN South Africa") continue to face a challenging,
competitive and difficult economic environment.
Revenue increased by 21% to R5 646,7 million, while Ebitda grew by 13% to R1
635,1 million. Trading conditions remain competitive and the Ebidta margin
decreased to 29% from 31% compared to the same period the previous year as a
result of increased subscriber acquisition costs and higher interconnect
costs.
Over the past year, MTN South Africa had embarked on a strategy to balance
value with volume. As a result, Average Revenue per User ("ARPU") per month
for the period has marginally increased to R210 from R208 in March 2002. ARPU
for post-paid increased to R602 while a small decline to R101 occurred in the
pre-paid segment since March 2002. However, overall subscriber growth slowed,
showing an increase of 11% to 4 284 000 since March 2002. The overall base
consists of post-paid subscribers of
891 000, an increase of 5% or 39 000, and pre-paid subscribers of
3 393 000, a 12% increase since March 2002. A higher than expected level of
involuntary churn was experienced during the period under review.
It is pleasing to note that MTN`s share of active subscribers has not been
negatively impacted by the third operator.
In regard to data, MTN was the first South African operator to market in
launching GPRS services, branded as MTNDataLive. During the trial phase,
approximately 30 000 users had tested the GPRS-enabled handsets.
MTN International
The operations of MTN International (Proprietary) Limited ("MTN
International") have performed above expectations. Revenue increased from
R449 million to R2 968,8 million compared to the same period last year, with
EBITDA levels reaching R1 056,2 million. All operations provided a positive
contribution to profit after tax.
MTN Cameroon achieved a turnaround in the period under review. With a new
management team in place, revenue increased to R366,8 million and a 30%
EBITDA margin was achieved. A profit after tax of R21,6 million was recorded
before taking account of minority interests. Subscriber growth continues to
be strong, reaching 316 000 by 30 September 2002, a 41% increase since March
2002. ARPU levels have stabilised at US$21.
MTN Nigeria enjoyed a successful first year. Total revenue of R2 223,1
million was recorded with the EBITDA margin reaching 37%. A strong demand for
our services resulted in a profit after tax of R420,7 million. During the
period under review, significant investments were made in the network
rollout.
Notwithstanding these pleasing results, MTN International`s African
operations face a number of ongoing challenges, which includes managing the
regulatory and political environment, currency volatilities and interconnect
issues. Management, together with its local strategic partners, continues to
address these issues in the respective countries.
Strategic Investments
This division comprises Orbicom (Proprietary) Limited ("Orbicom"), MTN
Network Solutions (Proprietary) Limited ("MTN NS") and Airborn. Orbicom`s
core satellite distribution business remained steady, whilst its Electronic
Funds Transfer ("EFT") operation in Ghana started to generate revenue. MTN NS
continued to grow its revenue base, although market conditions in its sector
remain extremely competitive. Overall, the performance of the entities within
Strategic Investments was below expectations.
The South African government issued an Invitation to Apply ("ITA") for a 51%
interest in the Second Network Operator ("SNO") in May this year. The Group
has thoroughly investigated the opportunity and its potential impact on the
telecommunications environment in South Africa. A decision was taken not to
participate in the bid process. A Memorandum of Understanding was concluded
with one of the bidding consortiums, Goldleaf Trading (Proprietary) Limited,
to leverage the Group`s infrastructure and network and to provide know-how on
a commercial basis. The agreement is non-exclusive.
ENTERTAINMENT
Johnnic Entertainment - embracing interests in filmed entertainment, music,
book retailing and entertainment services - experienced a 25% increase in
revenue to R937,9 million but a 32% decline in Ebitda to R13,3 million.
Headline earnings fell by R19,0 million compared to last year.
These results reflect the general impact of increasing inflationary pressures
on consumer spending during the review period, including marked interest rate
increases and a number of food and fuel increases. Indicative of the
difficult trading conditions was the liquidation of CNA. This did not result
in material losses for the Group owing to the insurance of a significant
portion of our exposure, but did result in a decrease in sales through CNA.
The division`s manufacturing and distribution interests nevertheless
performed well and increased sales handsomely; while the newly formed Johnnic
Entertainment Services Division (a dedicated division supplying group
services) performed better than anticipated for the review period.
Home Entertainment showed exponential growth of DVD sales and Exclusive Books
made a strong showing. The deterioration of the R/$ exchange rate, in
comparison to the first half of the prior year, and difficult conditions in
the UK market have seen bigger than expected first half losses at Hammicks,
whilst at home, Nu Metro Theatres has had to deal with flat attendances and
stagnant movie ticket prices, with upward pressure on costs. On the music
side, MFP has been disposed of, the platform consolidation continues and the
greater investment in local content, whilst negatively affecting first half
results, should reap rewards in subsequent periods.
Associate: Electronic Media Network Limited ("M-Net")
In the face of extremely challenging trading conditions in the media
environment globally, M-Net produced satisfactory results for the review
period. Total revenue, comprising subscriptions and advertising, increased
21% to R748,0 million (2001: R620,0 million). M-Net`s current subscriber base
amounts to more than 1,25 million households across 45 countries in Africa
and the adjacent islands.
Associate: SuperSport International Holdings Limited ("SuperSport")
Revenue reported by SuperSport for the period rose 28% to R476,0 million
(2001: R372,0 million). After-tax profits of R42,0 million (2001: R32,0
million) translate into headline earnings per share of 17,2 cents - a 36%
improvement on the prior comparable period.
MEDIA
Johnnic Publishing - embracing newspaper, magazine, book and map publishing -
performed strongly in an increasingly competitive market, posting a 13%
increase in revenue to R585,3 million (2001: R518,9 million) and 19% growth
in Ebitda to R56,5 million (2001: R47,3 million). Headline earnings rose 85%
to R32,3 million (2001: R17,5 million).
In the face of increasing competition, the group`s newspaper and magazine
titles benefited from the turnaround of BDFM Publishers and performed well.
Stringent cost cutting measures effectively counteracted reduced advertising
revenues, enabling revenue and Ebitda growth from the group`s newspapers in
particular. However, the liquidation of the CNA group in the review period,
together with the introduction of new competitors, made the consumer magazine
titles market fiercely competitive.
Strong sales in Australia and in the UK boosted the performance of the
group`s book publishing interests, although declining co-edition sales in the
USA had a negative impact on overall results. An improved performance from
Map Studio together with contributions from the new MAPIT operation boosted
the results of the map publishing businesses.
Associate: CTP Holdings Limited ("CTP")
Notwithstanding continuing difficulties in its trading environment, CTP
reported turnover growth of 18%.
Digital Media
The Digital Media division, comprising the group`s various electronic media
interests held mainly through Johnnic e-Ventures ("JeV"), continues to
perform pleasingly. Revenue grew 63% to R63,9 million (2001: R39,1 million),
yielding an Ebitda loss of R1,9 million, an 82% improvement on last year`s
R10,7 million loss. Losses at headline level have improved by 56% from R20,5
million to R9,0 million.
Having withdrawn entirely from the consumer market, JeV is focused on the
business-to-business ("B2B"), HR development and learning sectors - all of
which are showing strong growth around the world. JeV`s operating interests
currently comprise:
B2B - I-Net Bridge group (81,8%), TradeWorld (20% direct)
HR Development - HealthInSite (54,5%), LeadTrain (85%), Career Junction
(60%), comPress (50%)
Johnnic Learning - Learning Channel Campus (56,4%) and eDegree (55,1%)
The division also has interests in corporate Internet connectivity provision
through a 40% share in MTN NS, which benefited from project work during the
World Summit on Sustainable Development 2002; and holds a 10% stake in
eBucks.
NON-CORE ASSETS
Gallagher Estate Holdings Limited
The results for the six months reflected the increased competition in the
industry, with turnover increasing 5% over the same period last year, whilst
Ebitda of R4,5 million was less than the comparable period.
Advance bookings for the latter half of the year are encouraging.
Properties
Revenue of R44,1 million, comprising sales of marketable properties and
commercial rentals, was 8% higher than last year. Revenue includes the
disposal of the Glen shopping centre and the Milpark complex. Ebitda was
positively affected by these factors and rose 13% to R10,5 million from R9,3
million.
Durban Add-Ventures
Excellent progress has been made in finalising the funding arrangements and
in developing the R1,4 billion Sun Coast Casino and Entertainment World in
Durban. On 27 November 2002 the first phase of the complex comprising the
casino, six restaurants and a children`s entertainment area was officially
opened. The second phase of the development comprising 10 cinemas, additional
restaurants, fast food outlets and a beach boardwalk is well on track to be
opened by July 2003.
PROSPECTS
Having completed the initial restructuring of the Group during the prior
financial year, Johnnic is now essentially a pure holding company with strong
interests focused in the telecommunications, entertainment, media and digital
media sectors. The board believes that the stage has been set for continued
solid growth going forward. In the telecommunications arena, MTN Group is
confident that its operations will perform soundly against their objectives
in the future. Although the maturing market in which MTN South Africa
operates will place increasing pressure on this business, the growth trend
established within MTN International`s operations is expected to lead to
greater contributions to Group results. Accordingly, the Group will continue
to explore further African opportunities in line with its vision to become
the leading provider of communication services on the continent.
Given that the latter six months of the year generally deliver the majority
of the revenue and earnings generated by the entertainment, media and digital
media sectors, the board of Johnnic Communications Limited ("Johncom")
anticipates that all three of its divisions will perform well in the second
half of this financial year. The digital media division, in particular, is
well-placed to contribute positively in the near-term, with expectations
endorsed by a global report published by JP Morgan indicating that JeV`s
niche focus areas offer vast growth opportunities.
Accordingly, the board of Johnnic is buoyant regarding the Group`s future.
The board will nevertheless continue to explore further opportunities to
unlock additional value for shareholders.
The Group`s investment in the casino and exhibition businesses are
continuously reviewed and will only be realised when their full value can be
attained.
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 ongoing funding requirement for the MTN Group`s expansion
into Africa, the MTN Group directors have resolved to reinvest retained
earnings to restrict borrowing levels and the directors have therefore
decided not to declare an interim dividend.
Because subsidiaries MTN Group and Johncom have not declared a dividend for
the review period, the Johnnic board of directors has resolved not to declare
a dividend for the six months ended 30 September 2002.
MTN GROUP CAUTIONARY ANNOUNCEMENTS
Potential financial exposure following the liquidation of the CNA group
The MTN Group issued a cautionary announcement on 31 July 2002 in respect of
its potential financial exposure following the liquidation of the CNA group.
Based on further legal review of the position, it is now considered unlikely
that the MTN Group will have any additional exposure other than already
anticipated. This cautionary announcement was withdrawn by the MTN Group.
Potential transaction involving the MTN Group`s non-South African assets
The MTN Group also issued a cautionary announcement on 22 November 2002 in
respect of preliminary discussions in relation to a potential transaction
involving its non-South African assets. No further developments have occurred
since this press release.
Purchase of an 18,7% shareholding in the MTN Group by Newshelf 664
(Proprietary) Limited
On 26 November 2002 the MTN Group issued a cautionary announcement relating
to a proposed acquisition by Newshelf MTN Group of the shares owned by
Transnet Limited ("Transnet") through ICE Finance BV. Johnnic has agreed to
waive its pre-emptive rights over the 18,7% shareholding in the MTN Group in
favour of Newshelf. Johnnic has concluded a voting pool agreement with
Newshelf in terms of which Johnnic will continue to control the MTN Group.
The transaction still awaits the fulfilment of the certain conditions,
accordingly, shareholders are still advised to exercise caution when dealing
in MTN Group shares until further announcements are made.
For and on behalf of the board
M C Ramaphosa J R D Modise
Chairman Chief Operating Officer
10 December 2002
Directors: M C Ramaphosa (Chairman), J R D Modise# (Chief Operating Officer),
C B Brayshaw, P E Burton, I Charnley#, P M Jenkins#,
S W Moutloatse, P F Nhleko#, T R A Oliphant, M E Ramano.
Alternate directors: Z N A Cindi, R K Jackson#, C M Moni, I P Smith,
T H Zuma. #Group executives
Company secretary: M R D Boyns (British)
Head office and registered office: Level 3 (West Wing), Gallagher House,
Gallagher Estate, 19 Richards Drive, Midrand, 1685. P O Box 231,
Johannesburg, 2000.
Transfer secretaries: Computershare Investor Services Limited, 70 Marshall
Street, Johannesburg, 2001. P O Box 61051, Marshalltown, 2107.
London registrars: Capita IRG plc, Balfour House, 390D398 High Road, Ilford,
Essex IG1 1NQ, England.
Sponsor: Merrill Lynch South Africa (Pty) Limited, 138 West Street, Sandown,
Sandton, 2196. P O Box 5591, Johannesburg, 2000.
American Depositary Receipt ("ADR") Program: Cusip number 478058100. ADR to
ordinary share 1:1.
Depositary: The Bank of New York, 22nd Floor, 101 Barclay Street, New York,
N.Y. 10286, USA.
Information agent: Georgeson Shareholder Communications SA (Pty) Limited, 108
Johan Avenue, Wierda Valley, Sandton, 2196. P O Box 652000, Benmore, 2010.
These results may be viewed on the Internet at http://www.johnnic.com
E-mail: investor_relations@johnnic.co.za
Johnnic sharecare line: 0800 117472
Date: 10/12/2002 05:03:45 PM Produced by the JSE SENS Department
