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JNC
JNC
Johnnic - Unaudited results for the six months ended 30 September 2006
Johnnic Holdings Limited
("Johnnic" or "the Company")
Incorporated in the Republic of South Africa
Registration number 1889/000429/06
Share code: JNC & ISIN: ZAE000024352
Unaudited results for the six months ended 30 September 2006
Consolidated income statement
Unaudited Reviewed Audited
6 months 6 months 12 months
ended ended ended
30 September 30 September 31 March
2006 2005 2006
For the period Rm Rm Rm
Revenue 69 72 175
Cost of sales (14) (14) (54)
Gross profit 55 58 121
Fair value adjustment on
investment properties - - 62
Other operating expenses (44) (47) (62)
Profit from operations before
exceptional items 11 11 121
Rationalisation and
restructuring costs - - 6
Profit from operations 11 11 127
Finance costs (2) (2) (2)
Finance income 20 45 82
Share of profits of associated
companies 51 28 85
Profit before taxation 80 82 292
Taxation (11) (15) (116)
Group profit 69 67 176
Attributable to:
Equity holders of the parent 59 59 159
Minority interest 10 8 17
69 67 176
Profit attributable to equity
holders of the parent 59 59 159
Fair value adjustment of
investment properties - - (44)
Fair value adjustment of
property, plant and equipment - - (18)
Profit on sale of assets (1) - -
Exceptional items after
taxation and minority - - (6)
interests
Headline profit 58 59 91
STATISTICS
Earnings per share (cents)
- Basic 35 35 96
- Headline 35 35 55
Weighted average number of
shares in issue ("000) 166 470 166 470 166 470
Actual number of shares in
issue at end of period ("000) 166 470 166 470 166 470
Balance sheet
Unaudited Reviewed Audited
6 months 6 months 12 months
ended ended ended
30 September 30 September 31 March
2006 2005 2006
As at Rm Rm Rm
Assets
Non-current assets 1 066 498 785
Property, plant and equipment 176 225 179
Investment properties 128 - 129
Goodwill 6 6 6
Interests in associated
companies 706 211 416
Available for sale investments 24 25 24
Deferred tax assets 20 31 26
Operating lease equalisation
asset 4 - 3
Long-term receivables 2 - 2
Current assets 428 1 289 581
Other current assets 14 47 16
Bank balances, deposits and
cash 414 1 242 565
Total assets 1 494 1 787 1 366
Equity and liabilities
Capital and reserves
Share capital and premium 17 17 17
Accumulated profits 1 209 1 526 1 150
Other reserves 104 124 104
Equity attributable to equity
holders of the parent 1 330 1 667 1 271
Minority interests 84 9 16
Total equity 1 414 1 676 1 287
Non-current liabilities 40 30 40
Long-term borrowings - 7 -
Deferred tax liability 18 - 18
Operating leases equalisation
liability 22 23 22
Current liabilities 40 81 39
Payables and other current
liabilities 40 79 34
Bank overdrafts - 2 5
Total equity and liabilities 1 494 1 787 1 366
Net asset carrying value per
share (rand) 8 10 8
Cash flow statement
Unaudited Reviewed Audited
6 months 6 months 12 months
ended ended ended
30 September 30 September 31 March
2006 2005 2006
For the period Rm Rm Rm
Net cash inflow/(outflow) from
operating activities 33 (257) (280)
Net cash (outflow)/inflow from
investing activities (241) 2 (149)
Net cash inflow/(outflow) from
financing activities 57 (8) (511)
(151) (263) (940)
Cash and cash equivalents at
beginning of period 565 1 505 1 505
Cash and cash equivalents at
end of period 414 1 242 565
Statement of changes of equity
Non-
distri- Accu-
Share butable mulated Minority
capital reserves profits interest Total
Rm Rm Rm Rm Rm
Balance at 1 April 2005 17 99 1 490 2 1 608
Profit for the year - - 159 16 175
Dividend paid - - (499) - (499)
Dividends paid to
minorities - - - (2) (2)
Revaluation of
financial instrument - 5 - - 5
Balance at 31 March
2006 17 104 1 150 16 1 287
Profit for the period - - 59 10 69
Dividends paid to
minorities - - - (1) (1)
Effects of changes in
holding - - - 59 59
17 104 1 209 84 1 414
Group segmental analysis
Unaudited Reviewed Audited
6 months 6 months 12 months
ended ended ended
30 September 30 September 31 March
2006 2005 2006
Rm Rm Rm
Revenue
Gaming 6 6 11
Gallagher Estate 56 48 92
Johnnic Properties 7 18 72
Total 69 72 175
Profit/(loss) from operations
before exceptional items
Gaming 5 4 9
Gallagher Estate 18 14 109
Johnnic Properties (1) 6 27
Other (11) (13) (24)
Total 11 11 121
Notes
1. Basis of accounting
These summarised consolidated financial statements have been prepared using
accounting policies compliant with IAS 34: Interim Financial Reporting,
International Financial Reporting Standards ("IFRS"), the requirements of
the Companies Act and the Listing Requirements of the JSE. The accounting
policies of the group have been consistently applied with those of the
previous financial year.
2. Earnings per ordinary share
The calculation of basic and headline earnings per share is based on basic
earnings of R 59 million (2005: R59 million) and headline earnings of R58
million (2005: R59 million) and a weighted average of 166 470 398 (2005:
166 470 398) shares in issue. No fully diluted earnings per share have been
disclosed as the potential dilution is not considered to be material.
Unaudited Reviewed Audited
6 months 6 months 12 months
ended ended ended
30 September 30 September 31 March
2006 2005 2006
Rm Rm Rm
3. Contingent liabilities
Guarantees
Suncoast Casino
- Equity guarantee secured by
cash deposits - 192 192
- Corporate guarantee - 300 300
Total - 492 492
4. Commitments
Second Tranche FIH - 148 -
5. Lease commitments
Operating leases
- within one year 5 4 5
- more than one year 59 65 62
Total 64 69 67
Commentary
Overview
Johnnic"s major assets comprise the following:
* 30% effective interest in Suncoast Casino and Entertainment World
("Suncoast");
* 9,7% effective interest in Tsogo Sun Holdings ("Tsogo Sun");
* 100% of Gallagher Estate Holdings Limited ("Gallagher Estate"); and
* Cash resources of R414 million.
Financial results
The overall group profit does not differ materially from that reported in
the comparative prior period with a decrease in finance income being off-
set by an increase in the share of profits of associated companies. The
share of profits from associates comprises the group"s proportionate share
of profits after tax in Suncoast and Tsogo Sun. The decrease in finance
income is due to the lower levels of cash held following the payment of a
dividend to shareholders of R499 million in February 2006. The share of
profits from associated companies has increased due to the equity
accounting of Johnnic"s effective 9,7% interest in Tsogo Sun for the full
period under review together with improved results from Suncoast Casino.
Divisional review
Gaming
Suncoast Casino
The group had increased its effective interest in Durban Add-Ventures
Limited ("DAV") to 75% via a capitalisation and rights offer resulting in
the injection of R191,7 million into DAV to fund DAV"s commitments in
respect of its 40% interest in the Suncoast Casino and Entertainment World
("Suncoast"). This has resulted in Johnnic now owing an effective 30%
interest in Suncoast, after accounting for minorities in DAV.
Suncoast Casino continues to perform well in a competitive market. The new
hotel is scheduled for opening in December 2006.
The groups equity accounted share of Suncoast"s profit (before accounting
for minorities) for the period under review amounted to R29,9 million.
Tsogo Sun
Johnnic"s equity accounted share of Tsogo Sun"s holding company"s profit
for the period under review amounted to R20,5 million..
Exhibition
Gallagher Estates
The process of the disposal of the group"s interest in Gallagher Estate in
accordance with the ruling of the Competition Tribunal when HCI acquired
control of Johnnic is continuing. Various bids have been received from
interested parties and the group is presently evaluating them.
The exhibition business has benefited from increased demand with a 17%
growth in revenue and a 29% increase in operating profit.
Private equity
Blue Wolf Capital Management LLC ("Blue Wolf")
As previously reported Johnnic has acquired a 51% interest in Blue Wolf, a
Delaware Limited Liability Company. Blue Wolf has been established to
conduct business as a private equity management company in the United
States, 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 greater, but limited
to R240 million. These transactions remain subject to the approval of the
South African Reserve Bank.
Shareholders will be kept informed of material developments with regard to
these transactions.
Management changes
During the period under review Mr MA Jacobson resigned as Chief Executive
Officer and was replaced by Mr JA Copelyn with Mr MJA Golding assuming the
role of Chairman vacated by Mr Copelyn.
Adam Blumenthal, CEO of Blue Wolf, was appointed as executive director of
the Company on 13 November 2006.
Mr L Maasdorp and Miss S Zwane were appointed as non-executive directors of
the Company on 13 November 2006.
On 21 November 2006 Mr A van der Veen was appointed as Chief Executive
Officer of the Company to replace Mr JA Copelyn, who had resigned that
position. Mr Copelyn retains his position as a director of the Company, in
a non-executive capacity.
Fabcos Investment holding company (Pty) Limited ("FIH") tax facility
The investment in Tsogo Sun is held via a 50% interest in FIH.
FIH has received a tax assessment from SARS claiming approximately R155
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.
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).
The Company has entered into a facility agreement with FIH on commercial
terms pursuant to which FIH will be able to draw up to R156 million to
enable it to discharge any obligations that it might owe to SARS. Fabvest
has furnished the Company with adequate security to discharge the
indebtedness should FIH draw on the facility.
Fabvest have advised the Company that they have agreed to enter in to a
settlement agreement with SARS in respect of the potential tax claim and
that the amount likely to be drawn on the facility will be substantially
less than the facility that has been made available.
Post-balance sheet events
The Company had historically entered into funding structures with a
financing bank in respect of certain property transactions.
The financing bank has advised the Company that SARS has challenged these
structures and that this may result in a liability, the amount of which
cannot be quantified at this stage, to the Company. Management is presently
taking advice on this matter.
Dividend
Due to the need to retain funds for the acquisitions of the group the
directors have decided not to declare any dividends for the period under
review.
For and on behalf of the Board
A van der Veen MJA Golding
Chief Executive Officer Chairman
22 November 2006
Directors: MJA Golding* (Chairman), A van der Veen (Chief Executive
Officer), A Blumenthal, JA Copelyn*, RK Jackson, L Maasdorp*, VE Mphande*,
S Zwane*
* non-executive
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: 22/11/2006 10:19:31 AM Produced by the JSE SENS Department
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