| Mon 30 Jun 2003, 9:02 | | Johnnic holdings - Audited Preliminary Results for |
|
Johnnic holdings - Audited Preliminary Results for the year ended 31 March 2003
Johnnic Holdings Limited
Incorporated in the Republic of South Africa
Registration number 1889/000429/06
("Johnnic" or "the Company")
Share code: JNC ISIN: ZAE000024352
Audited Preliminary Results for the year ended 31 March 2003
Highlights
- Revenue 44% to R12 142,5 million
- Ebitda 69% to R2 902,4 million
- Basic headline earnings 91% to R991,4 million
Audited Preliminary Results
for the year ended 31 March 2003 (continued)
Consolidated INCOME STATEMENT
Pro
forma*
31 March 31 March 31 March*
2003 2002 2002
Audited Unaudited Change Audited
For the years ended Note Rm Rm % Rm
Revenue 12 142,5 8 404,8 44 15 666,6
Cost of sales (5 778,5) (4 150,0) (7 164,8)
Gross profit 6 364,0 4 254,8 8 501,8
Operating expenses (3 461,6) (2 538,3) (4 663,7)
- net
Earnings before
interest, taxation,
depreciation and 2 902,4 1 716,5 69 3 838,1
amortisation
("Ebitda")
Depreciation (867,2) (567,8) (1 194,1)
Amortisation (148,4) (63,8) (188,3)
Profit from
operations before
goodwill 1 886,8 1 084,9 74 2 455,7
amortisation
Goodwill (274,3) (260,4) (525,7)
amortisation
Profit from 1 612,5 824,5 96 1 930,0
operations
Finance costs (456,7) (354,9) (580,1)
Finance income 112,6 127,0 192,2
Share of profits of 918,7 578,0 199,6
associates
Profit before
taxation and
exceptional items 2 187,1 1 174,6 86 1 741,7
Exceptional items 11 77,9 (86,8) (86,8)
Profit before 2 265,0 1 087,8 108 1 654,9
taxation
Taxation (649,7) (616,6) (978,6)
Profit after 1 615,3 471,2 243 676,3
taxation
Minority interests (653,6) (190,0) (395,1)
Attributable 961,7 281,2 242 281,2
earnings
Contribution to
attributable
earnings
Core operations 58,5 36,0 63 36,0
Entertainment and 98,2 91,1 8 91,1
media
Interest and (39,7) (55,1) 28 (55,1)
corporate head
office
Non-core operations 886,2 484,1 83 484,1
Telecommunications 868,2 444,5 95 444,5
Gallagher Estate (3,3) (1,7) (94) (1,7)
Holdings
Johnnic Properties 21,3 16,7 28 16,7
The Premier Group - 22,9 22,9
Limited
SABMiller plc - 1,7 1,7
Adjusted headline 944,7 520,1 82 520,1
earnings
Add: Adjustment
Reversal of 46,7 - -
deferred tax credit
(note 4)
Basic headline 991,4 520,1 91 520,1
earnings
Goodwill
amortisation after
taxation and (157,3) (158,3) (158,3)
minority interests
Exceptional items
after taxation
and minority 127,6 (80,6) (80,6)
interests
Attributable 961,7 281,2 242 281,2
earnings
Summarised consolidated BALANCE SHEET
31 March 31 March*
2003 2002
Audited Audited
As at Note Rm Rm
Assets
Non-current assets 6 534,5 23 911,8
Property, plant and equipment 491,0 8 952,4
Goodwill (105,9) 9 523,8
Intangible assets 25,6 3 729,9
Interests in associated companies 13 5 954,1 972,0
Investments 14 41,6 188,5
Loans 46,7 363,0
Deferred taxation 81,4 138,4
Non-current prepaid taxation - 43,8
Current assets 1 287,9 5 553,3
Bank balances, deposits and cash 16 302,6 1 473,8
Securitised cash deposits 16 - 354,1
Equities held as current assets 15 30,2 65,1
Other current assets 955,1 3 660,3
Total assets 7 822,4 29 465,1
Equity and liabilities
Capital and reserves
Ordinary shareholders" interest 5 817,3 5 336,0
Minority interests 576,7 11 332,5
Total equity 6 394,0 16 668,5
Non-current liabilities 282,7 6 455,7
Long-term liabilities 12 167,5 5 442,1
Provision for post-retirement medical 113,5 108,0
costs
Deferred taxation 1,7 905,6
Current liabilities 1 145,7 6 340,9
Non-interest-bearing liabilities 750,2 4 796,7
Interest-bearing liabilities 12 395,5 1 544,2
Total equity and liabilities 7 822,4 29 465,1
* Restated for change in accounting
policy for cellphone connection
incentives (note 2).
Summarised consolidated
CASH FLOW STATEMENT
Pro
forma*
31 March 31 March 31 March*
2003 2002 2002
Audited Unaudited Audited
For the years ended Note Rm Rm Rm
Cash inflows from 2 308,9 1 000,9 3 253,4
operating activities
Cash outflows from (3 798,8) (2 192,5) (4 006,7)
investing activities
Cash inflows from 977,1 260,3 553,0
financing activities
Net decrease in cash and (512,8) (931,3) (200,3)
cash equivalents
Cash and cash
equivalents at beginning
of year 594,2 321,7 321,7
Foreign entities (22,6) (26,5) 118,7
translation adjustment
Reclassification from - - 354,1
other current assets
Cash and cash 16 58,8 (636,1) 594,2
equivalents at end of
year
Summarised group STATEMENT OF CHANGES IN EQUITY
31 March 31 March*
2003 2002
Audited Audited
For the years ended Rm Rm
Balance at 1 April as reported 5 348,4 4 607,5
Change in accounting policies in respect of
- cellphone connection incentives (note 2) (12,4) (19,6)
- dividends (note 1) - 77,2
- depreciation (note 1) - (15,9)
Restated balance at 1 April 5 336,0 4 649,2
Attributable earnings 961,7 281,2
Adjustment on changes in composition of - (45,4)
Group
Dividends - (83,4)
Share capital issued at a premium less
share
issue expenses 4,8 1,1
Movement on unrealised gains arising on
revaluation
of listed equities (4,2) (126,0)
Exchange differences arising on translation (162,6) 215,2
of foreign entities
Goodwill and variation of interests (316,0) 445,0
Other (2,4) (0,9)
Ordinary shareholders" interest 5 817,3 5 336,0
Group SEGMENTAL ANALYSIS
Pro
forma*
31 March 31 March 31 March*
2003 2002 2002
Audited Unaudited Change Audited
For the years ended Rm Rm % Rm
Business grouping
Revenue
Core operations 3 331,8 3 032,0 10 3 032,0
Entertainment 2 021,5 1 871,2 8 1 871,2
Media 1 182,0 1 065,5 11 1 065,5
Digital 128,3 95,3 35 95,3
Non-core operations 8 810,7 5 372,8 64 12 634,6
Telecommunications 8 683,5 5 170,2 68 12 432,0
Gallagher Estate Holdings 44,9 37,9 18 37,9
Johnnic Properties 82,3 164,7 (50) 164,7
Total 12 142,5 8 404,8 44 15 666,6
Ebitda
Core operations 179,9 173,9 3 173,9
Entertainment 85,5 97,5 (12) 97,5
Media 114,3 119,6 (4) 119,6
Digital 2,0 (18,9) 111 (18,9)
Head office (21,9) (24,3) 10 (24,3)
Non-core operations 2 722,5 1 542,6 76 3 664,2
Telecommunications 2 687,1 1 504,6 79 3 626,2
Gallagher Estate Holdings 8,7 10,4 (16) 10,4
Johnnic Properties and 26,7 27,6 (3) 27,6
other
Total 2 902,4 1 716,5 69 3 838,1
Geographic
Revenue
South Africa 8 323,2 7 186,6 16 12 548,1
Rest of Africa 2 974,2 449,0 562 2 349,3
Other overseas operations 845,1 769,2 10 769,2
Total 12 142,5 8 404,8 44 15 666,6
Ebitda
South Africa 1 842,7 1 615,4 14 3 350,2
Rest of Africa 1 056,3 52,6 1 908 439,4
Other overseas operations 3,4 48,5 (93) 48,5
Total 2 902,4 1 716,5 69 3 838,1
GROUP STATISTICS
31 March 31 March*
2003 2002
Audited Audited
Rm Rm
Performance per ordinary share
Headline earnings (cents)
- core operations 36 22
- non-core operations 567 295
Total basic headline earnings (cents) 603 317
Total adjusted headline earnings (cents) 575 317
Attributable earnings (cents) 585 172
Net asset value (rand)
- book value 35,37 32,48
- based on directors" valuation of 53,82 57,97
underlying investments
Ratios
Profitability
Ebitda margin (%) 23,9 24,5
Enterprise value/Ebitda multiple (times) 2,4 0,5
Effective taxation rate (%) 28,7 59,1
Solvency and liquidity
Gearing (%) 4,1 30,9
Long-term borrowings to total assets 2,1 18,5
Current ratio 1,1:1 0,9:1
Interest cover (times) 3,5 3,3
Share performance
Number of ordinary shares in issue ("000)
- at year end 164 448 164 285
- weighted average 164 325 163 702
Closing price (cents per share) 4 410 4 400
Market capitalisation (Rm) 7 252,1 7 228,5
Number of employees
Telecommunications n/a 4 107
Entertainment 2 671 2 838
Media 2 018 2 092
Digital 396 300
Exhibitions and other 63 62
Corporate head office 8 9
5 156 9 408
NOTES
1. Basis of accounting
These summarised consolidated annual 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 year ended 31 March 2003, 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:
31 March 31 March
2003 2002
Audited Audited
For the years ended Rm Rm
(Decrease)/increase in attributable (23,1) 7,2
earnings
(Decrease)/increase in profit before (48,5) 27,5
taxation
Taxation 14,6 (8,2)
Minority interests 10,8 (12,1)
Decrease in opening accumulated profits (12,4) (19,6)
Gross (47,6) (75,1)
Taxation 14,3 22,5
Effect on minority interests 20,9 33,0
3. Pro forma results
The results of MTN Group Limited ("MTN") have been consolidated for the period 1
April 2002 until 30 September 2002 and equity accounted for the period 1 October
2002 until 31 March 2003. This is because Johnnic agreed:
i) to terminate the voting pool agreement it had with Transnet Limited
("Transnet") that covered their respective shareholding in MTN; and
ii) to waive the pre-emptive rights it had against Transnet with regard to
Transnet"s shareholding in MTN in order to allow Transnet to dispose of its
shareholding in MTN to the management of MTN.
The voting pool agreement entered into with MTN management was allowed to lapse,
through the non-fulfilment of conditions precedent, following Johnnic"s decision
to unbundle its stake in MTN.
As a result, Johnnic effectively ceased to have control of MTN when the Transnet
voting pool agreement was terminated on 27 December 2002.
The results for the period 1 October 2002 to 27 December 2002 should have been
consolidated but due to certain practical limitations involved, Johnnic"s share
of the results of MTN with effect from 1 October 2002 have been equity accounted
to 31 March 2003.
In order to provide meaningful comparisons, pro forma results for the year ended
31 March 2002 have been provided to reflect the results of MTN consolidated for
the six months to 30 September 2001 and equity accounted for the period 1
October 2001 to 31 March 2002.
4. Recognition of deferred tax asset
MTN"s subsidiary in Nigeria has been granted a five-year tax holiday from
commencement of operations. Furthermore, all capital allowances arising during
this five-year period may be carried forward and claimed as deductions against
taxable income from its sixth year of operations onwards. A deferred tax asset
in MTN of R128 million relating to these deductible temporary differences has
been recognised in the results to 31 March 2003 in terms of the strict
interpretation of AC102, which requires a deferred tax asset to be raised where
it is probable that future profits will be generated in order to utilise the
deductible temporary differences.
The directors of MTN have reservations about whether this prescribed accounting
treatment supports the fair presentation of MTN results. As with any enterprise,
MTN faces inherent uncertainties in the markets in which it operates and over
which it has little or no control, the effects of which could negatively impact
the future utilisation/realisation of the deferred tax asset in question. AC102
does not permit deferred tax balances to be discounted. Therefore, neither the
time value of money, nor any future currency movements may be factored into
measuring the deferred tax asset in question. The directors of MTN question the
appropriateness of this prohibition given the considerable amount of time
between recognition and realisation of this deferred tax asset. The effect of
raising this deferred tax asset is to enhance earnings in the first five years
of operation, against an asset which only realises in periods beyond the
foreseeable future.
The directors of MTN have therefore excluded the effect of this deferred tax
asset in calculating adjusted headline earnings, in order to aid the fair
presentation and interpretation of the results to 31 March 2003. The directors
of MTN intend to make representations to the International Accounting Standards
Board in the near future in an effort to address this perceived anomaly in
accounting standards, and intend to re-visit this accounting treatment, pending
the outcome of those representations.
5. Comparatives
Where necessary, comparative figures have been adjusted to conform with changes
in presentation in the current year.
6. Headline earnings per ordinary share
The calculation of basic and adjusted headline earnings per ordinary share is
based on basic headline earnings of R991,4 million (2002: R520,1 million) and
adjusted headline earnings of R944,7 million (2002: R520,1 million)
respectively, and a weighted average of 164 325 097 (2002: 163 701 873) ordinary
shares in issue. No fully diluted earnings per ordinary share have been
disclosed as the potential dilution is not considered to be material.
7. Audited results
The auditors, Deloitte & Touche, have issued their opinion on the Group"s annual
financial statements for the year ended 31 March 2003. The audit was conducted
in accordance with South African Auditing Standards.
The auditors have issued an unqualified audit opinion.
A copy of their audit report is available for inspection at the Company"s
registered office.
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.
The pro forma financial results do not form part of the annual financial
statements and are presented as additional information. The auditors have not
audited the pro forma financial results and accordingly do not express an
opinion on it.
Our reporting Accounts, Deloitte & Touche, have issued a report on the proforma
information which is available at the company"s registered office for
inspection. This report concludes as follows:
"based of on our review, nothing has come to our attention that causes us to
believe that:
- the proforma financial information has not been probably compiled on the
basis stated;
- such basis is inconsistent with the accounting policies of Johnnic; and
- the adjustments are not appropriate for the purposes of the unaudited
proforma income statement as disclosed in the preliminary announcement."
8. Listings requirements
This preliminary announcement has been prepared in compliance with the Listings
Requirements of the JSE Securities Exchange South Africa ("the JSE").
9. 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 2003.
10. Post-balance sheet events
MTN unbundling
- With effect from 23 June 2003 Johnnic unbundled substantially all of its
interest in MTN, amounting to 526 743 001 shares. The unbundling has unlocked
most of the discount at which Johnnic shares traded to their underlying net
asset value and enable Johnnic shareholders to hold shares directly in MTN. The
unbundling will have the effect of reducing the net asset value and earnings of
the Group as well as the price at which the Johnnic shares will trade on the
JSE. The financial effects have been set out in a Circular to shareholders
issued on 16 May 2003.
Transfer of sector
- With effect from 13 June 2003, Johnnic"s listing was transferred from the
Telecommunications Services "Wireless Telecommunications Services" sector to the
Media and Photography - "Publishing and Printing" sector of the JSE list.
Disposals
- 32,6 million MTN shares were sold realising cash proceeds of R394,5 million.
- Subsequent to year-end, Hammicks Bookstores Limited ("Hammicks") disposed of
its chain of local bookstores, with effect from 1 April 2003 to Ottakars plc. In
a further transaction, Hammicks thereafter disposed of its legal bookstores and
subscriptions business to John Smith & Son (Glasgow) Limited. It retained
residual assets and liabilities which will be disposed of or settled, as the
case may be, by the end of September 2003, when the Hammicks head office lease
terminates. The net proceeds from the above two transactions, the additional
disposals of residual assets and settlement of costs and liabilities is
anticipated to yield between GBP6,5 million and GBP6,8 million.
Guarantees
- The collateral in respect of Suncoast Casino and Entertainment World
("Suncoast Casino") obligations was substituted from MTN shares to cash in the
amount of R192,0 million.
- Johnnic has retained 40 million MTN shares to cover the corporate guarantee in
favour of Tsogo Sun KwaZulu-Natal (Proprietary) Limited ("Tsogo") of an amount
of R300,0 million, including interest, Johnnic"s ongoing working capital
requirements and potential funding requirements for Suncoast Casino.
31 March 31 March
2003 2002
Rm Rm
11. Exceptional items
Realisation of foreign currency 140,8 -
translation reserve
Surplus on unwinding of SPVs 95,4 -
Surplus on disposal of investments 93,1 1,2
Loan written back - 25,4
Costs associated with (61,1) (9,2)
rationalisation and restructuring
Investments, goodwill and property, (136,0) (113,4)
plant and equipment written down
Associated companies" exceptional (54,3) 9,2
items
Total 77,9 (86,8)
12. Interest-bearing debt
Long-term liabilities 167,5 5 442,1
Current liabilities 395,5 1 544,2
- call borrowings 243,8 1 233,7
- short-term borrowings 151,7 310,5
Total 563,0 6 986,3
13. Interests in associated companies
- Listed 5 565,0 470,0
- Unlisted 389,1 502,0
Book value of interests in 5 954,1 972,0
associated companies
Market value of listed shares 7 721,4 519,8
Directors" valuation of unlisted 536,4 697,2
shares
14. Investments
Listed ordinary shares at carrying - 0,1
value
Unlisted investments at cost less 41,6 188,4
amounts written off
Total 41,6 188,5
Directors" valuation of unlisted 41,6 188,4
shares
15. Equities held as current assets
Naspers Limited 30,2 -
SABMiller plc - 0,1
MIH Limited - 65,0
Total 30,2 65,1
16. Cash and cash equivalents
Bank balances, deposits and cash 302,6 1 473,8
Securitised cash deposits - 354,1
Call borrowings (243,8) (1 233,7)
Total 58,8 594,2
17. Capital expenditure incurred 72,8 3 725,1
18. Contingent liabilities
Guarantees 520,9 747,5
- Suncoast Casino and Entertainment 492,0 480,0
World
- Other 28,9 267,5
Contingent liabilities and other 2,2 59,5
Total guarantees and contingent 523,1 807,0
liabilities
Suncoast Casino and Entertainment World
As detailed in the 2002 annual report, Investec Bank Limited ("Investec") has
agreed to provide certain facilities to 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 for a period of up to four years. This
facility is guaranteed by SABSA 60% (R360,0 million), Investage 95 (Pty) Limited
"Investage" 8% (R48,0 million) and Johnnic 32% (R192,0 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 providing a cash
collateral of R192,0 million.
- R600,0 million as a senior debt facility to fund various assets of Suncoast
Casino. SABSA 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. Johnnic
has retained 40 million MTN shares to cover the corporate guarantee in favour of
Tsogo of an amount of R300,0 million, including interest, Johnnic"s ongoing
working capital requirements and potential funding requirements for Suncoast
Casino.
31 March 31 March
2003 2002
Rm Rm
19. Capital commitments
Commitments for capital expenditure
- contracted for 0,3 878,3
- authorised but not contracted for 61,3 5 844,2
Total 61,6 6 722,5
The capital expenditure will be
funded from operating cash flows and
borrowings. Adequate facilities have
been put in place to finance
. future capital commitments
20. Lease commitments
Operating leases
- within one year 108,3 271,6
- more than one year 849,0 1 529,0
Total 957,3 1 800,6
Directors: MC Ramaphosa (Chairman), JRD Modise# (Chief Operating Officer), PM
Jenkins#, KC Ramon#, CB Brayshaw, PE Burton, I Charnley, SW Moutloatse, PF
Nhleko, TRA Oliphant, ME Ramano.
Alternate directors: ZNA Cindi, RK Jackson#, CM Moni, IP Smith, TH Zuma.
#Group executives
Company Secretary: MRD Boyns (British)
Head office and registered office
Level 3 (West Wing), Gallagher House, Gallagher Estate, 19 Richards Drive,
Midrand, 1685.
PO Box 231, Johannesburg, 2000.
SOUTH AFRICAN REGISTRARS
Computershare Investor Services Limited, 70 Marshall Street, Johannesburg, 2001.
PO Box 61051, Marshalltown, 2107.
London registrars
Capita Registrars plc, The Registry, 34 Beckenham Road, Beckenham, Kent, BR34JU,
England.
Auditors
Deloitte & Touche, The Woodlands, Woodmead.
Private Bag X6, Gallo Manor, 2052.
LEGAL ADVISORS
Webber Wentzel Bowens, 10 Fricker Road, Illovo Boulevard, Sandton, 2196.
PO Box 61771, Marshalltown, 2107.
Sponsor
Merrill Lynch South Africa (Pty) Limited, 138 West Street, Sandown, Sandton,
2196.
PO Box 651987 Benmore, 2010.
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. PO Box 652000, Benmore, 2010.
Telephone number 0800 117472/(+27 11) 775 3433
COMMENTARY
OVERVIEW
Johnnic is pleased to announce excellent results with attributable earnings per
share growing 242% to 585 cents per share (2002: 172 cents per share) and basic
headline earnings per share growing 90% to 603 cents per share (2002: 317 cents
per share).
Pro forma results
As described in more detail in note 3 to the summarised financial statements
above, Johnnic agreed to terminate its voting pool agreement with Transnet, as
well as waive its pre-emptive rights over Transnet"s MTN shares, in favour of
the management of MTN. As a result Johnnic relinquished control over MTN in
December 2002 and therefore ceased to consolidate the MTN results from 1 October
2002.
The pro forma results for the year ended 31 March 2002 have been presented in
order to provide meaningful comparison to the current year results.
Strategy and unbundling
Subsequent to year end Johnnic has unbundled substantially all of its
shareholding in MTN. This followed the Johnnic board"s decision to support the
management of MTN in acquiring Transnet"s stake in MTN, thereby enhancing
empowerment within MTN, as well as unlock the discount at which Johnnic shares
have traded to its underlying net asset value.
The convergence strategy that underpinned Johnnic"s focus of telecommunications,
media and entertainment had matured and no longer required a central control
structure.
Disposals
The following disposals were undertaken during the year and subsequent to year
end:
- The special purpose vehicles ("SPVs") created to fund empowerment groupings
that had invested in MTN were unwound during the period under review and cash
proceeds in excess of R220,0 million was realised, primarily from the disposal
of Sedgebrooke Investments (Proprietary) Limited;
- The remaining 1,6 million MIH Limited shares were disposed of in the first
quarter of this year realising cash proceeds of R65,0 million;
- Property disposals amounting to R82,3 million were undertaken during the year
with sales pending transfer totalling R32,0 million; and
- Prior to the MTN unbundling 32,6 million MTN shares were sold realising cash
proceeds of R394,5 million.
The proceeds from the disposals above were used to reduce the holding company"s
debt to R64,9 million at year end and to zero subsequent to year end; settle
part of Gallagher and Johnnic Properties year end long-term and short-term debt
of R140,5 million; as well as change the collateral in respect of Suncoast
Casino"s obligations from MTN shares to cash in the amount of R192,0 million.
Core and non-core operations
To enable better appreciation of the businesses that remain following the
unbundling of the MTN shares, the results of MTN has been grouped under non-core
operations in the segmental analysis.
RESULTS
Johnnic has produced excellent results for the review period, driven primarily
by continued strong performance in the telecommunications businesses.
Revenue grew 44% to R12 142,5 million (2002: R8 404,8 million) and Ebitda grew
69% to R2 902,4 million (2002: R1 716,5 million). Basic headline earnings grew
91% to R991,4 million (2002: R520,1 million) and attributable earnings grew 242%
to R961,7 million (2002: R281,2 million). The bulk of the contribution to
adjusted headline earnings occurred in the telecommunications division, where
headline earnings grew 95% on the prior year to R868,2 million. Headline
earnings from the entertainment and media businesses were 8% up on last year.
Finance costs increased 29% on last year to R456,7 million, largely as a result
of increased borrowings in MTN Nigeria.
Exceptional profits of R77,9 million mainly arose as a result of the realisation
of the foreign currency translation reserve on the dissolution of Johnnic (IOM)
Limited amounting to R140,8 million, surplus from the unwinding of the SPVs of
R95,4 million, surplus arising on the disposal of investments of R93,1 million,
reduced by Johnnic"s share of investments and goodwill written down of R136,0
million, costs associated with rationalisation and restructuring of R61,1
million and associated companies" exceptional losses of R54,3 million.
DIVISIONAL REVIEW
Core operations
Entertainment
Johnnic Entertainment - embracing interests in filmed entertainment, music, book
retailing and entertainment services - has continued on its growth trend,
yielding good revenue growth for the period under review. Filmed entertainment
achieved a creditable 23% increase in revenue, with Nu Metro Home Entertainment
performing strongly as a result of increased market share, the retention of key
licences, and exceptional growth in revenue from DVD sales to top video for the
first time ever.
However, this improvement failed to translate at the Ebitda line, due in part to
continuing pressure at Nu Metro Theatres and Imax. The strong operational
performance was in part offset by foreign exchange losses of R11 million due to
the appreciating rand.
Contrary to the widely reported decline in the music industry worldwide, Gallo
Record Company achieved turnover growth both locally and abroad.
With regard to book retailing, Exclusive Books expanded its store network in
Southern Africa to 32 stores and made an increased contribution to Group
results.
Entertainment services business Compact Disc Technologies ("CDT") has benefited
financially and operationally from the 40% investment made in the company by
RTG. Warehouse and distribution business unit Entertainment Logistics Services
("ELS") returned to profitability during the review period, reflecting the
benefits of initiatives to enhance infrastructure, information technology and
control systems.
Associate: Electronic Media Network Limited ("M-Net")
M-Net has posted satisfactory results, achieved through a focus on operating
efficiencies and cost management, supported by improved advertising revenues on
the back of the M-Net programming line-up. Revenue grew by 7,7% to R1,4 billion,
contributing to headline earnings of R127 million and headline earnings per
share of 50,2 cents.
Associate: SuperSport International Holdings Limited ("SuperSport")
SuperSport has reported revenue growth of 15% year-on-year to R961 million
(2002: R839 million), yielding headline earnings per share of 34,8 cents.
Media
Johnnic Publishing - comprising newspaper, magazine, book and map publishing -
has once again delivered commendable results. An independent circulation audit,
conducted between July and December 2002, confirmed Sunday Times" status as the
largest circulating title in South Africa and helped grow the newspaper"s share
of the Sunday advertising market.
BDFM Publishers recorded an exceptionally strong performance in the face of
difficult trading conditions, leveraging new revenue opportunities and cutting
costs to produce an excellent result overall.
The consolidation of Johnnic Publishing Eastern Cape and Dispatch Media
continued, with a similar process in the magazine division enabling a 22% growth
in revenue.
The book publishing division achieved solid sales growth, both domestically and
abroad. Pleasing results were also reported by the businesses in the map
publishing division, with particularly good growth from Map Studio.
Associate: Caxton and CTP Publishers and Printers Limited ("CTP")
CTP"s most recent six-month results, to 31 December 2002, reflect a 19,7%
increase in revenue and a 33% improvement in diluted headline earnings. Having
acquired the minority shareholders" shares in Caxton Limited during the year
under review, the company changed its name to Caxton and CTP Publishers and
Printers Limited.
Digital
Improved results from Johnnic Digital, which comprises the Group"s electronic
interests held mainly through Johnnic
e-Ventures, confirmed the appropriateness of management"s decision to focus on
the business-to-business and learning markets. Revenue grew by 35%, with Ebitda
111% higher than the prior year; together confirming the digital division"s
potential to contribute to Group profits on a meaningful and sustained basis.
Non-core operations
Telecommunications
After a period of muted earnings growth in the previous year, as a result of
international expansion activities, MTN has resumed its positive growth trend,
reporting adjusted headline earnings per share growth of 97% to 142,8 cents per
share (2002: 72,5 cents per share). Revenue grew 56% to R19 405 million (2002:
R12 432 million) with the Africa operations contributing 36% at R6 972 million.
Ebitda improved 71% to R6 217 million (2002: R3 626 million) and attributable
earnings grew 226% to R1 929 million
(2002: R592 million). The MTN subscriber base has reached 6,7 million, an
increase of 41% since April 2002.
Gallagher Estate Holdings Limited ("Gallagher")
Gallagher had a good year, reflected in an 18% increase in revenue to R44,9
million (2002: R37,9 million). Higher operating costs yielded a 16% decline in
Ebitda to R8,7 million (2002: R10,4 million).
Johnnic Properties
Most of the remaining property portfolio was sold during the year under review,
most notably The Glen Shopping Centre, the Milpark complex and the remaining
bulk township properties.
Revenue declined to R82,3 million (2002: R164,7 million), reflecting the reduced
portfolio. This also yielded a drop in operating expenses, which translated into
a marginal improvement in Ebitda to R26,7 million (2002: R25,2 million).
The sale of the major remaining property, the Grace Hotel, was concluded during
March 2003 and will result in a post balance sheet profit of R5,0 million.
Suncoast Casino and Entertainment World
Suncoast Casino, in which Johnnic has an effective 25% share through Durban Add-
Ventures Limited ("Durban Add-Ventures""), opened the first phase of its
development on 27 November 2002. This phase comprised the casino, six
restaurants and a children"s entertainment area. Trading performance for the
four months of operation, although slightly below budget, has been satisfactory,
although teething problems are still being experienced. The second phase of the
development - comprising ten cinemas, additional restaurants, fast food outlets
and a beach boardwalk, was officially opened on 25 June 2003. 20% of Johnnic"s
interest in Durban Add-Ventures was sold to Investage during the year.
DIVIDENDS
Due to the major restructuring that has taken place within the Group and the
unbundling by the Company to its shareholders of substantially all of its
shareholding in MTN by way of a distribution in specie amounting to
approximately R8,2 billion as detailed in a Circular to shareholders issued on
16 May 2003, the directors have resolved not to declare a dividend for the year
ended 31 March 2003.
A new dividend policy that takes into account the changed nature of the Group
will be communicated to shareholders in due course.
PROSPECTS
Johnnic is in the process of redefining its strategy following the unbundling of
its shareholding in MTN. This process will include the finalisation of the
various options open to Johnnic to eliminate the pyramid structure created by
the unbundling. In terms of the JSE Listings Requirements, steps to eliminate
the structure must be taken within a period of six months from the effective
date of the unbundling or such further period as the JSE may allow.
The entertainment and media businesses will begin the new financial year with
debt reduced to a nominal level. Reduced costs and increased efficiencies will
result from the integration of the publishing and entertainment operations.
Added to this, African expansion plans in several business units promise
exciting new markets, with sales of new format products such as DVD continuing
to show good growth potential. Piracy of entertainment products and weak
consumer spending remain issues. The business operations will have to deal with
the challenges of market volatility, exchange rate fluctuations and industry
consolidation in the coming year.
The completion of the second phase of the Suncoast Casino is expected to improve
revenues and add to improved financial performance.
For and on behalf of the board
MC Ramaphosa JRD Modise
Chairman Chief Operating Officer
27 June 2003
DISCLAIMER
Certain statements in this announcement that are neither reported financial
results nor other historical information are forward-looking statements,
relating to matters such as future earnings, savings, synergies, events, trends,
plans or objectives.
Undue reliance should not be placed on such statements because they are
inherently subject to known and unknown risks and uncertainties and can be
affected by other factors, that could cause actual results and Company plans and
objectives to differ materially from those expressed or implied in the forward-
looking statements (or from past results).
Unfortunately the Company cannot undertake to publicly update or revise any of
these forward-looking statements, whether to reflect new information or future
events or circumstances or otherwise.
These results may be viewed on the Internet at http://www.johnnic.com
E-mail: investor_relations@johnnic.co.za
Telecommunications
MTN Group Limited logo
mtn service provider logo
orbicom logo
airborn wired & wireless logo
Entertainment
gallo music group logo
mnet we call it magic logo
supersport logo
nu metro logo
exlusive books logo
route 66 productions (pty) limited logo
hammics bookshops logo
els entertainment logistics services logo
imax bethere logo
Media
nh new holland logo
businessday news worth knowing logo
the herald logo
sunday times logo
struik logo
daily dispatch logo
financial mail logo
mapstudio logo
digital
johnnic eventures logo
ctp logo
caxton printers logo
i-net bridge logo
johnnic learning logo
