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JNC
JNC
Johnnic - Reviewed preliminary results for the year ended 31 March 2006
Johnnic Holdings Limited
Incorporated in the Republic of South Africa
Registration number 1889/000429/06
Share code: JNC - ISIN: ZAE000024352
("Johnnic" or "the Company")
Highlights
* Interim dividend of R3 per share paid in February 2006
* Second tranche of FIH deal concluded
* Revenue up 55%
Reviewed preliminary results for the year ended 31 March 2006
CONSOLIDATED INCOME STATEMENT
Reviewed Restated
31 March 31 March
2006 2005 Change
For the year ended Notes Rm Rm %
Continuing operations
Revenue 175 113 55
Cost of sales (54) (23)
Gross profit 121 90 34
Fair value adjustment on investment
properties 62 -
Other expenses (62) (105)
Profit from operations before
exceptional items 121 (15) 907
Exceptional items 3 6 1 010
Profit from operations 127 995 (87)
Finance costs (2) -
Investment income 82 86
Share of profits of associated
companies 85 28
Profit before taxation 292 1 109 (74)
Taxation (116) (258)
Profit for the year from continuing
operations 176 851 (79)
Discontinued operations
Profit for the year from discontinued
operations - 1 730
Profit for the year 176 2 581 (93)
Attributable to:
Equity holders of the parent 159 2 427 (93)
Minority interest 17 154 (89)
176 2 581 (93)
Attributable earnings per share
(cents) 2 96 1 458 (93)
Continuing operations 96 507 (81)
Discontinued operations - 951 (100)
Dividends per share (cents) 300 - 100
Analysis of earnings
Continuing operations
Gaming 75 28 168
Exhibition and properties 48 43 12
Interest and corporate head office (32) 49 (165)
Discontinued operations
Media and entertainment - 235 (100)
Basic headline earnings 91 355 (74)
Exceptional items after taxation and
minority interests 6 2 072
Adjustment to the fair value of
property, plant and equipment 18 -
Adjustment to the fair value of
investment property 44 -
Attributable earnings to equity
holders of the parent 159 2 427 (93)
Headline earnings per share (cents)
Continuing operations
Gaming 45 17 165
Exhibition and properties 29 26 12
Interest and corporate head office (19) 29 (166)
Discontinued operations
Media and entertainment - 141 (100)
Total headline earnings (cents) 55 213 (74)
Number of ordinary shares in issue
("000)
- at year end 166 470 166 470
- weighted average 166 470 166 470
Closing price (cents per share) 1 045 880
BALANCE SHEET
Reviewed Restated
31 March 31 March
2006 2005
As at Notes Rm Rm
Assets
Non-current assets 784 470
Property, plant and equipment 179 228
Investment properties 129 -
Goodwill 6 6
Interests in associated companies 4 415 180
Investments and loans 5 26 21
Operating lease equalisation asset 3 -
Deferred tax assets 26 35
Current assets 582 1 557
Bank balances, deposits and cash 6 373 1 314
Securitised cash deposits 192 192
Other current assets 17 51
Total assets 1 366 2 027
Equity and liabilities
Capital and reserves
Ordinary shareholders" interest 1 270 1 605
Minority interests 17 2
Total equity 1 287 1 607
Non-current liabilities 45 37
Long-term borrowings 5 15
Deferred tax liability 18 -
Operating leases equalisation liability 22 22
Current liabilities 34 383
Non-interest-bearing liabilities 33 382
Interest-bearing liabilities 1 1
Total equity and liabilities 1 366 2 027
Net asset value per ordinary share (rand)
- book value 8 10
CASH FLOW STATEMENT
Reviewed Restated
31 March 31 March
2006 2005
For the year ended Notes Rm Rm
Net cash (outflow) inflow from operating
activities (280) 392
Net cash (outflow) inflow from investing
activities (149) 519
Net cash used in financing activities (511) (7)
Net (decrease) increase in cash and cash
equivalents (940) 904
Cash and cash equivalents at beginning of
year 1 313 409
Cash and cash equivalents at end of year 6 373 1 313
STATEMENT OF CHANGES IN EQUITY
Non-
distri- Distri- Share-
Share butable butable holders" Minority
capital reserves reserves interest interest Total
Rm Rm Rm Rm Rm Rm
Balance as at
31 March 2004 17 1 465 1 122 2 604 635 3 239
AC140 (IFRS3)
Business
combinations 120 120 - 120
IFRS
adjustments (41) 37 (4) 2 (2)
Balance as at
31 March 2004
(restated) 17 1 424 1 279 2 720 637 3 357
Total
recognised
income and
expense for
the year (1 326) 2 782 1 456 157 1 613
Income and
expense
recognised
directly in
equity (837) (134) (971) 3 (968)
Attributable
earnings for
the year (489) 2 427 2 427 154 2 581
Net transfers
between
reserves (489) 489 - -
Unbundling of
Johncom
minorities (774) (774)
Distribution
in specie (2 571) (2 571) (2 571)
Dividends
paid to (18) (18)
minorities
Balance at 31
March 2005 17 98 1 490 1 605 2 1 607
Total
recognised
income and
expense for
the year 5 159 164 17 181
Income and
expense
recognised
directly in
equity 5 5 5
Attributable
earnings for
the year 159 159 17 176
Dividends (499) (499) (2) (501)
paid
Balance at 31
March 2006 17 103 1 150 1 270 17 1 287
GROUP SEGMENTAL ANALYSIS
Reviewed Restated
31 March 31 March
2006 2005 Change
For the year ended Rm Rm %
Revenue
Gaming and properties
Gaming 11 9 22
Gallagher Estate 92 65 42
Johnnic Properties 72 39 85
Total 175 113 55
Profit (loss) from operations before
exceptional items
Gaming and properties 145 20 625
Gaming 9 7 29
Gallagher Estate 109 13 738
Johnnic Properties 27 - 100
Corporate head office (24) (35) 31
Total 121 (15) 907
NOTES
1. Basis of accounting
These summarised consolidated financial statements have been prepared using
accounting policies compliant with IAS34: Interim Financial Reporting,
International Financial Reporting Standards ("IFRS"), and the requirements of
the South African Companies Act. The date of the group"s transition to IFRS is 1
April 2004, and the year end 2005 financial statements have been restated
accordingly.
As these financial statements are the group"s first IFRS financial statements,
IFRS1 was applied in their preparation.
The following are the significant IFRS1 exemptions which Johnnic elected to
utilise:
* Cumulative transition differences arising on the transaction of foreign
operations were deemed to be zero at the date of transition to IFRS.
* Financial instruments previously designated available-for-sale were
redesignated as financial assets or financial liabilities at fair value through
the income statement.
* The requirements of IFRS3: Business Combinations were not applied
retrospectively for business combinations, which occurred prior to Johnnic"s
transition to IFRS.
The following new accounting policies were applied:
* Share-based payments: Outstanding cash-settled options are valued at each
reporting date with the fair value being provided for, while the fair value of
equity-settled instruments granted in recognised in income on a straightline
basis over the vesting period of the instruments.
* Tangible and intangible assets: Depreciation is based on historical cost, by
component with reference to estimated useful life.
The reconciliation of profit after tax and total equity as previously reported
to profit after tax and total equity as restated in this report is set out
below:
Cumulative 12 months
to ended
31 March 31 March
2004 2005
Rm Rm
Attributable earnings previously reported 2 644
IFRS restatements - (49)
Share-based payments (19) (15)
Adjustments to provisions 1 2
Depreciation and amortisation 18 (2)
Redesignation of financial instruments - (36)
Adjustment in respect of associate - 2
Other restatements (1) 17
Reversal of amortisation of intangible assets
with indefinite useful lives - 2
Operating leases accounted for on straight-
line basis 1 (1)
Revenue recognition (2) -
Taxation - (3)
Change in revaluation on unbundling due to
restatements - 19
Minority interest on restatements (1) (31)
Restated attributable earnings 2 581
Total equity previously reported 3 239 1 608
IFRS restatements - (49)
Other restatement (1) 16
AC140 (IFRS3) Business combinations 120 -
Minority interest of restatements (1) (31)
Change in minority interest unbundled - 6
3 357 1 550
Add back items which do not impact total
equity
Redesignation of financial instruments - 57
Restated total equity 3 357 1 607
2. Earnings per ordinary share
The calculation of attributable earnings per ordinary share and basic headline
earnings per ordinary share is based on attributable earnings of R159 million
(2005: R2 427 million) and headline earnings of R91 million (2005: R355 million)
and a weighted average of 166 470 398 (2005: R166 469 994) ordinary shares in
issue. No fully diluted earnings per ordinary share has been disclosed as the
potential dilution is not considered to be material. Attributable earnings per
ordinary share decreased with 19 cents per share in 2005 due to the
restatements.
Reviewed Restated
31 March 31 March
2006 2005
Rm Rm
3. Exceptional items
Costs associated with rationalisation and
restructuring 6 5
Net surplus on disposal of investments - 949
Adjustment of investments and assets - 56
Total 6 1 010
4. Interests in associated companies
- Unlisted 415 180
Book value of interests in associated companies 415 180
5. Investments and loans
Unlisted investment at cost less amounts
written off 24 19
Loans 2 2
Total 26 21
6. Cash and cash equivalents
Bank balances, deposits and cash 373 1 314
Call borrowings - (1)
Total 373 1 313
Head office cash included in the above 356 1 273
7. Contingent liabilities
Guarantees
Suncoast Casino and Entertainment World
- Equity guarantee secured by cash deposits 192 192
- Corporate guarantee 300 300
Total 492 492
8. Commitments
Second tranche - FIH - 148
Commitments for capital expenditure
- authorised but not contracted for - 51
The capital expenditure will be funded from
operating cash flows and borrowings.
9. Lease commitments
Operating leases
- within one year 5 4
- more than one year 62 67
Total 67 71
10. Reviewed results
These summarised consolidated annual financial statements have been reviewed by
our auditors, Deloitte & Touche. A copy of their unqualified reviewed report is
available for inspection at the company"s registered office
11. Listings requirements
This preliminary announcement has been prepared in compliance with the Listings
Requirements of the JSE.
COMMENTARY
OVERVIEW
The year under review has seen some significant changes in Johnnic. Following
its offer to Johnnic shareholders, Hosken Consolidated Investments Limited
("HCI") acquired over 50% of the entire issued share capital of the Company.
During the last six months of the year in review:
* A settlement agreement was reached with Fabvest Investment Holdings Limited
("Fabvest") resulting in Johnnic receiving the second tranche of 25% in Fabcos
Investment Holding Company Limited ("FIH") and now owning an effective 19% of
Tsogo Investment Holdings (Pty) Limited ("TIH") and 9,7% of Tsogo Sun Holdings
(Pty) Limited ("Tsogo Sun");
* The payment of a R3 dividend per share was made;
* The capitalisation of Durban Add Ventures Limited ("Durban Add-Ventures")
was agreed and now has been implemented. The result is that Johnnic"s
percentage holding in Suncoast Casino and Entertainment World ("Suncoast
Casino") has risen slightly to an effective 75%; and
* The office in Johannesburg has been closed and the administrative and
secretarial functions have been moved to Durban.
At year-end, Johnnic"s major assets comprised the following:
* 28,6% effective interest in Suncoast Casino (increased to 30% subsequent to
year-end);
* 9,7% effective interest in Tsogo Sun;
* 100% of Gallagher Estate Holdings Limited ("Gallagher Estate"); and
* Cash resources.
FINANCIAL RESULTS
Revenue increased by 55% from R113 million to R175 million on the back of
improved performance from the conference and exhibition business, Pan African
Parliament ("PAP") and the remaining properties being disposed of.
Profit from operations before exceptional items increased to R121 million (2005:
R15 million loss), this includes a one-off fair value adjustment to Gallagher"s
investment properties of R62 million.
Basic headline earnings fell to R91 million, this was negatively effected by the
STC paid on the dividend declared in February 2006.
Attributable earnings decreased to R159 million (2005: R2 427 million) as a
result of the profit on the MTN shares sold in 2005 and the unbundling profit on
Johncom not being repeated.
DIVISIONAL REVIEW
Gaming interest
Suncoast Casino
Following the capitalisation of Durban Add-Ventures Johnnic, via Durban Add-
Ventures, has an effective 30% stake in the Suncoast Casino. Suncoast Casino
continued to perform strongly in the year under review and market share
increased marginally notwithstanding the increased competition as a result of
the Sibaya facility opening in December 2004.
Tsogo Sun
Following the settlement of the dispute with Fabvest, Johnnic now owns an
effective 19% of TIH whose sole investment is a 51% interest in Tsogo Sun. Tsogo
Sun continued to perform well as the gaming industry benefited from the strong
consumer spending environment in South Africa.
EXHIBITION AND PROPERTY INTERESTS
Gallagher
The figures for the traditional exhibitions and conferencing business have been
distorted somewhat by the inclusion of the PAP rentals, notwithstanding this,
turnover from the conferencing, exhibition and banqueting business grew by 18%
from R53 million to R62 million. This was very pleasing in an increasingly
competitive market. Operating profit of R109 million includes property
revaluations. Gallagher Estates remains a premier brand in the exhibitions and
conferencing market in Gauteng and management believes that continued growth can
be achieved going forward.
Johnnic Properties
The property division is now fully wound up with the last remaining significant
properties being disposed of during the year under review. Proceeds from the
Main Place properties and our stake in Lakeside Mall amounting to R55 million
were received during the year.
FINANCIAL POSITION
Johnnic"s total assets decreased from R2 207 million to R1 313 million. Cash and
cash equivalents decreased from R1 505 million to R373 million. Subsequent to
year-end the securitised cash deposits has fallen by approximately R192 million
due to the capitalisation of Durban Add-Ventures.
MANAGEMENT CHANGES
MA Jacobson, VE Mphande, MJA Golding, JA Copelyn were appointed to the Johnnic
Board on 12 December 2005 at a general meeting of shareholders. Christine Ramon
resigned on 14 December 2005 as Chief Executive Officer of Johnnic. MC
Ramaphosa, PE Burton, TRA Oliphant and CB Brayshaw also resigned from the
Johnnic Board on 10 January 2006. MA Jacobson has been appointed as Chief
Executive Officer and JA Copelyn as Chairman. RK Jackson was appointed to the
Board on 17 January 2006.
POST-BALANCE SHEET EVENTS
Subsequent to year-end, Durban Add-Ventures was capitalised via an injection of
capital from its major shareholders and a rights offer to certain shareholders
to subscribe for 5 ordinary shares for every 1 share held in lots of 100 for R1
per share. The result of this capitalisation process is that Johnnic currently
owns an effective 75% of Durban Add-Ventures.
FIH has received a tax assessment from SARS claiming approximately R115 million
("Potential Tax Claim"). In terms of the Johnnic share sale agreement under
which Johnnic acquired 50% of FIH, Fabvest will be liable for the payment of any
taxes, penalties and/or interest which may become due and owing by FIH pursuant
to the Potential Tax Claim. Fabvest and its corporate legal advisor are of the
view that no amounts claimed in terms of the SARS assessments are due to SARS
and Fabvest is contesting the matter. Fabvest has informed Johnnic of the
assessment and the current arrangement is that Fabvest shall pursue this dispute
with SARS at Fabvest"s cost. An amount of R20 million is being retained by
Johnnic"s attorneys in a trust account as security for any claims that Johnnic
may have arising from the Johnnic share sale agreement (including the Potential
Tax Claim).
GALLAGHER DISPOSAL
In terms of the competition ruling made when HCI acquired control of Johnnic,
Johnnic is required to sell Gallagher Estate or the business of conferencing and
exhibitions. Johnnic has published a notice inviting interested purchasers to
submit expressions of interest and has compiled an information memorandum
containing salient details of the sale assets. The bidding parties have been
narrowed down and the process of selling Gallagher is continuing.
PRIVATE EQUITY
Johnnic has acquired a 51% interest in Blue Wolf Capital Management LLC, a
Delaware limited liability company ("Blue Wolf"). Blue Wolf has been established
to conduct business as a private equity fund management company in the United
Stated and is based in New York. Johnnic has agreed to commit an amount to a
private equity fund, to be managed by Blue Wolf, in an amount equal to $30
million or 25% of the total fund value, whichever is the greater, but limited to
$40 million. Johnnic"s commitment is conditional on Blue Wolf raising a fund
with a total fund value of not less than $100 million. This transaction is still
subject to the approval of the South African Reserve Bank (exchange control
department).
This transaction affords Johnnic the opportunity of entering the international
private equity fund management arena as both a managing partner and an investor.
Johnnic is of the view that it is opportune for it at this time to diversify its
operations and has identified the off-shore private equity fund management arena
for these purposes.
Shareholders will be kept informed of material developments with regard to this
transaction.
CORPORATE GOVERNANCE
The board endorses and is of the opinion that the company adheres to the Code of
Corporate Practices and Conduct as set out in the King Report on Corporate
Governance for South Africa 2002 ("King II"). The principles contained therein
are reviewed from time to time to take into account appropriate changes and
developments in the field of corporate governance, both locally and
internationally.
DIVIDEND
An interim dividend of R3 per share was declared on 17 January 2006 and paid out
to shareholders on Monday, 13 February 2006. In light of the interim dividend
declared, the Board has resolved not to declare a final dividend for the year
ended 31 March 2006.
For and on behalf of the Board
JA Copelyn MA Jacobson
Chairman Chief Executive Officer
20 June 2006
DIRECTORS: JA Copelyn (Chairman), MA Jacobson (Chief Executive Officer), MJA
Golding, VE Mphande, RK Jackson
COMPANY SECRETARY: HCI Managerial Services (Pty) Limited
HEAD OFFICE AND REGISTERED OFFICE: Suite 624, Office Tower, Overport City,
Durban.
PO Box 70874, Overport City, 4067
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.
REGISTRAR: Computershare Investor Services 2004 (Pty) Limited, 70 Marshall
Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107. Telephone number 0800 117472/(+27 11) 870 8201
INFORMATION AGENT: Symphony Investor Communications (Pty) Limited, 1st Floor, 9
Fricker Road,
Illovo Boulevard, Illovo, 2196.
Postnet Suite #182, Private Bag X31, Saxonwold, 2132. Tollfree number 0800 117
472
These results may be viewed on the internet at http://www.johnnic.co.za
Date: 22/06/2006 05:04:28 PM Produced by the JSE SENS Department
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