| Thu 20 Nov 2003, 17:38 | | INTERIM REPORT AND WITHDRAWAL OF |
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MNET - ELECTRONIC MEDIA NETWORK LIMITED -
MNET
ELECTRONIC MEDIA NETWORK LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1985/002853/06)
Share code MNS
ISIN ZAE000014304
("M-NET" or "the company" or "the group")
INTERIM REPORT AND WITHDRAWAL OF CAUTIONARY
GROUP REVIEWED RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2003
ABRIDGED INCOME STATEMENT
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2003 2002 2003
(reviewed) (reviewed) (audited)
R"million R"million R"million
Revenue 696 723 1 376
Cost of sales and provision of
services (375) (515) (947)
Gross profit 321 208 429
Operating costs (105) (117) (235)
Operating profit 216 91 194
Net finance costs (218) - -
(Loss)/profit before taxation (2) 91 194
Taxation - (29) (67)
Net (loss)/profit for the period (2) 62 127
(Loss)/earnings and headline
(loss)/earnings per share (cents)
- basic (0,97) 24,5 50,2
- diluted (0,97) 24,4 50,0
Dividend per share (cents) - - 26,0
ABRIDGED BALANCE SHEET
30 September 30 September 31 March
2003 2002 2003
(reviewed) (reviewed) (audited)
R"million R"million R"million
ASSETS
Non-current assets
Property, plant and equipment 102 116 105
Current assets 759 947 989
Net cash 157 149 139
Total assets 1 018 1 212 1 233
EQUITY AND LIABILITIES
Capital and reserves (190) 205 156
Non-current liabilities 277 232 206
Accounts payable 39 47 15
Foreign exchange contracts 191 - -
Deferred taxation 47 185 191
Current liabilities
Accounts payable 558 775 871
Foreign exchange contracts 373 - -
Total equity and liabilities 1 018 1 212 1 233
ABRIDGED CASH FLOW STATEMENT
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2003 2002 2003
(reviewed) (reviewed) (audited)
R"million R"million R"million
Cash generated from operating
activities 94 113 236
Finance costs (4) - -
Taxation paid (41) (9) (28)
Cash flow from operations 49 104 208
Utilised for:
Property, plant and equipment (9) (9) (10)
Cash distribution to shareholders - - (35)
Net dividend paid - - (66)
Net cash inflow 40 95 97
Foreign currency translation deficit (22) (1) (13)
Net cash at beginning of period 139 55 55
Net cash at end of period 157 149 139
STATEMENT OF CHANGES IN EQUITY
for the period ended 30 September 2003
Share Retained Fair value
capital earnings/ and other
and share(accumulated reserves/
premium loss) (deficit) Total
R"million R"million R"million R"million
Balance at 1 April 2002 82 52 9 143
Reduction in share premium (35) - - (35)
Foreign currency translation deficit - - (13) (13)
Net profit for the year - 127 - 127
Dividends paid - (66) - (66)
Balance at 31 March 2003 47 113 (4) 156
Balance at 1 April 2002 82 52 9 143
Net profit for the period - 62 - 62
Balance at 30 September 2002 82 114 9 205
Balance at 1 April 2003 47 113 (4) 156
Net effect of adopting AC 133 - (322) - (322)
As restated 47 (209) (4) (166)
Movement in foreign currency
translation deficit - - (8) (8)
Cash flow hedge
- net fair value loss - - (14) (14)
Net loss for the period - (2) - (2)
Balance at 30 September 2003 47 (211) (26) (190)
SUPPLEMENTARY INFORMATION
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2003 2002 2003
(reviewed) (reviewed) (audited)
R"million R"million R"million
Included in operating profit:
Depreciation for the period 12 14 26
Net finance cost: (218) - -
- Interest received 2 2 8
- Interest paid (6) (2) (8)
- Net foreign exchange profits 23 - -
- Fair value losses on forward
transactions not qualifying as hedges (237) - -
Capital expenditure for the period 9 9 10
Capital expenditure committed or
authorised 21 - 30
Programme and film rights commitments 553 542 710
Operating lease commitments 3 2 4
Net cash
Cash 289 149 295
Net interest-bearing debt (132) - (156)
157 149 139
Number of ordinary shares in
issue (million) 256 253 253
Net asset value per share (cents) (75) 76 62
Rand/naira exchange rate at
30 September 2003: R1,00 = N18,7
NOTES
These consolidated condensed interim financial statements for M-Net for the six
months ended 30 September 2003 comply with South African Statements of Generally
Accepted Accounting Practice and are prepared in accordance with AC 127 -
Interim Financial Reporting.
The accounting policies used in the preparation of the interim financial
statements are consistent with those used in the annual financial statements of
the year ended 31 March 2003, except as described below. M-Net adopted AC 133 on
1 April 2003. The impact on shareholders" equity on 1 April 2003 is described
previously. In accordance with AC 133, the comparative financial information for
the year ended 31 March 2003 and for the six months ended 30 September 2002 has
not been restated.
Comparative figures have been adjusted to conform with changes in presentation
in the current year to reclassify R104 million and R51 million from net cash to
accounts payable at 31 March 2003 and 30 September 2002, respectively.
Segmental Information
M-Net is involved in the acquisition, packaging, scheduling and broadcasting of
programming and related advertising activities and has interests in various
operations. The company has no separable operations and, from a geographical
standpoint, although it also broadcasts outside South Africa, its operations are
conducted from South Africa.
INTRODUCTION
M-Net shares are linked to those of SuperSport International Holdings Limited
and trade as indivisible units on the JSE Securities Exchange South Africa (JSE)
and on the Nigerian Stock Exchange.
FINANCIAL REVIEW
M-Net experienced mixed fortunes for the six months under review. In South
Africa the total subscriber base has stabilised at just above the one million
mark, but the company continues to derive benefits from the migration of
analogue subscribers to the digital platform. Advertising revenues remained
under pressure, mainly the result of the declining analogue subscriber base.
The strong rand has had a negative impact on the reported results. M-Net earns
considerable revenues in US dollars from channel services provided to countries
elsewhere in Africa. The stronger rand has resulted in those revenues
translating into fewer rands.
If the rand continues to hold its own against the US dollar over the long term,
this will result in reduced costs as M-Net has considerable dollar-based input
costs. However, this benefit to the income statement will only phase in over
time as the company has a policy to cover forward its dollar commitments up to
two years.
The downturn in advertising revenue and the decline in foreign currency earnings
measured in rand are reflected in the fact that revenues for the period amounted
to R696 million, a decrease of 4% from the same period last year. In addition,
the benefit of the stronger rand was passed to subscribers as no fee increases
were implemented for the analogue base and only a nominal increase for digital
subscribers.
The adoption of accounting standard AC 133 with effect from 1 April 2003, which
deals with the accounting of foreign currency transactions and financial
instruments, has lead to reduced earnings for the period and may continue to
cause severe volatility in reported earnings in future. AC 133 compels M-Net to
value outstanding forward exchange contracts on a mark-to-market basis. This
resulted in a net charge of R322 million, R460 million less deferred income
taxes of R138 million, to retained earnings on 1 April 2003.
AC 133 also requires M-Net to charge the income statement with programming and
other foreign costs based on the actual market rate on the date of acquisition.
Movements in the mark-to-market valuation of foreign exchange contracts are
charged to the income statement. The result is that the income statement for the
six months ended 30 September 2003 reflects a net fair value loss on financial
instruments of R237 million, of which R190 million is unrealised.
The prescribed adoption of AC 133 has also considerably weakened the balance
sheet. At 30 September 2003 the share capital and reserves of the company were a
negative R190 million. Despite this charge, which has no cash effect, the
directors are of the opinion that the company is able to meet its obligations as
and when they fall due. Results for the period show that M-Net made a net loss
of R2 million compared to a net profit of R62 million for the same period last
year. This translates into a loss per share of 0,97 cents for the period (2002:
earnings per share of 24,5 cents). The decline in earnings for the current
period is largely the result of the strong rand, aggrevated by the adoption of
AC 133.
The impact of the strong rand and the adoption of AC 133 led to M-Net issuing a
trading update and cautionary announcement on 26 August 2003.The board notes
that it had no choice regarding the adoption of this accounting standard - it
has to adopt it to comply with South African Statements Of Generally Accepted
Accounting Practice. However, the board believes that the application of AC 133
has the effect of presenting results to shareholders in a format that does not
reflect the underlying commercial reality of the business. Accordingly, the
board is of the view that the relevant authorities should reconsider the
appropriateness of this
standard.
The reduced revenue, higher tax payments (based on prior years" earnings) and
working capital requirements resulted in a decrease in cash flow from
operations. At 30 September 2003, the group had net cash of R157 million.
DIVIDEND
It is M-Net"s policy to pay a single dividend at the end of each financial year.
As a consequence of the adoption of AC 133 and the resultant negative effect on
share capital and reserves, the payment of a dividend in March 2004 may not be
possible.
DEVELOPMENTS AND PROSPECTS
During the period under review M-Net produced the highly successful reality
shows
Big Brother Africa and Idols 2. Big Brother Africa deserves particular mention
in view of the publicity and viewership it generated on the African continent.
The show helped to entrench the M-Net brand and bouquet of channels. M-Net
intends to further capitalise on the reality genre with the introduction of a
new reality show early in 2004.
The Go Channel, aimed at the teen market, was launched earlier in the year and
ratings are climbing as the brand becomes established. In addition, a new
channel comprising content sourced exclusively from Africa is due to launch
soon. Subscription revenues will remain M-Net"s primary source of revenue and
the development of this new channel is in line with the company"s focus on
growing its subscriber base in Africa outside of South Africa. M-Net currently
packages and distributes 14 entertainment channels on both analogue and digital
platforms across the continent and will customise its channels and programming
wherever appropriate.Recently, new and increased local content quotas were
introduced by the Independent Communications Authority of South Africa (ICASA).
The new quotas, while expensive, have been absorbed and should not have an
unduly adverse impact on earnings.
Advertising revenues are expected to remain under pressure as the
analogue subscriber base continues to migrate to the digital bouquet.
However, this is offset by increased margins earned from subscribers to the
digital service.
The outlook for the remainder of the financial year will largely be influenced
by the strength of the rand. As the currency continues to strengthen or weaken
earnings are likely to be considerably impacted. Operating expenditure remains
in line given the stringent focus on cost controls. Management will continue to
focus on attaining operational efficiencies and protecting margins.
CORPORATE GOVERNANCE
M-Net is committed to the principles of openness, integrity and accountability,
as advocated in the King Report on Corporate Governance for South Africa 2002
(King II). The directors recognise the need to conduct the business of the
enterprise with integrity and in accordance with generally accepted corporate
practices. Accordingly, the board continues to evaluate the company"s corporate
governance procedures and policies.The company"s auditors,
PricewaterhouseCoopers Inc., have reviewed the condensed consolidated financial
information contained in this report. The review opinion is available for
inspection at the company"s registered office during normal business hours.
WITHDRAWAL OF CAUTIONARY
Shareholders are referred to the trading update and cautionary announcement
dated 26 August 2003. As a consequence of the publication of the interim results
the cautionary is now withdrawn.
On behalf of the board
Khulu Sibiya Glen Marques
Chairman Chief executive
20 November 2003
Directors:
KB Sibiya (chairman), DDB Band, JP Bekker, JS Craib, S Dakile-Hlongwane,
PC Desai, HR Enslin, PM Jenkins, GP Marques, ACG Molusi, VB Mona, KD Moroka,
SJZ Pacak, CJ Sidego, JJ Volkwyn, T Vosloo
Alternate directors:
JRD Modise, SF Ward (British)
Company secretary:
G Kisbey-Green
Transfer secretaries:
Computershare Limited
70 Marshall Street
Johannesburg 2001
(PO Box 1053, Johannesburg 2000)
Registered office:
11 Grove Street
RANDBURG 2194
(PO Box 2963, Pinegowrie, 2123)
South Africa
Registrars/transfer secretaries in Nigeria:
City Securities Limited
5th Floor, Primrose Tower
17A Tinabu Street
LAGOS, Nigeria
(PO Box 9117, Lagos, Nigeria)
http://www.mnet.co.za
Date: 20/11/2003 05:01:11 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
