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JCM
JCM
Johnnic Communications - Reviewed interim results for the six months ended 30
September 2006
Johnnic Communications
the future of media and entertainment
Reviewed interim results for the six months ended 30 September 2006
Revenue +17%
Profit from operations +62%
Headline EPS +69%
Attributable EPS +53%
Overview
The review period, which continues the growth of the past five years, is
characterised by strong divisional performances across the group, with year-on-
year comparisons highlighting the exceptional results of Johncom"s major
business units.
Financial results
Revenue for the six months grew by 17% to R2,591 billion. Profit from operations
increased 62% totalling R330 million, while headline earnings per share rose by
69% to 300 cents.
Operational review
Media
The Media division enjoyed another period of record growth on the back of a
buoyant advertising market.
The Sunday Times continued to outstrip the market in terms of advertising
revenue growth on its existing products, while new products such as the highly
successful supplement It"s My Business were immediately profitable.
Restructuring of the Sowetan and SundayWorld continues, with both products
showing steady circulation and advertising growth.
In the Eastern Cape, The Herald and Weekend Post based in Port Elizabeth joined
the Daily Dispatch of East London in producing solid results.
The digital and education businesses, in particular CareerJunction, enjoyed
spectacular growth.
BDFM redesigned the Financial Mail during the period, and the rejuvenated
publication has been well received in the market. BDFM has continued to
diversify earnings with the acquisition in October 2006 of a controlling stake
in the monthly small business tabloid Big News.
Retail
Exclusive Books enjoyed a successful trading period, again winning the Best
Trade Bookseller of the Year category at the Safika awards. The Claremont,
Killarney and OR Tambo International Airport stores were revamped. Exclusive
Books took three silver awards at the recent 2006 Loeries, reflecting the impact
of its creative advertising.
Nu Metro Theatres expanded its footprint by opening a new five-screen cineplex
in Worcester, and the North Park site in Pretoria. A digital circuit has been
installed, with digital projectors and servers rolled out to 26 sites. Nu
Metro"s exciting cinema advertising sales arm, Popcorn Cinema Advertising, is
establishing itself with advertisers and in the market through its innovative
approach.
Books and Maps
The South African operations performed extremely well, with excellent results
reported by Struik Publishers, Struik Christian Books, Map Studio and MAPIT.
Booksite Afrika, the division"s warehousing arm, relocated successfully to
expanded premises whilst managing increased volumes.
The offshore operations showed a dramatic improvement over the prior year, with
a turnaround to profitability driven primarily by the United Kingdom business.
Home Entertainment
Home Entertainment"s improved sales reflect the provision of excellent content,
aided by growth in the emerging retail market and the performance of Red Star,
Nu Metro Home Entertainment"s new sale brand.
The division received 20th Century Fox"s marketing award for 2005/6 at a recent
conference in Istanbul.
Africa
The Africa business unit opened a cineplex and media store in July and August
respectively in Abuja, the Nigerian capital. A cineplex was opened in Lagos in
June, with an adjoining media store scheduled to open soon.
A second moulding line for the manufacture of VCD and CD product was
commissioned at the CDT Nigeria plant to meet local and export demand.
While regulatory issues, logistical problems and delays in opening retail
trading sites continue to prevent the businesses from reaching optimal
performance, progress is being made in addressing these obstacles. Losses,
however, continue to be reported at this developmental stage.
Music
The Warner Music licence, in terms of an agreement with Warner Music
International, is now housed in a newly incorporated associate, Warner Music
Gallo Africa. Consequently, the Music division"s segmental results for the
review period do not include the Warner Music licence. Warner Music Gallo
Africa"s results are equity accounted, and contribute to Johncom"s share of
profits of associates.
Gallo Music traded below expectations due to a lack of hit material, both local
and international. A marked improvement is expected in the second half, with
good product lined up for the holiday season.
Distribution, Manufacturing and Support Services
Effective 31 July 2006, Johncom acquired the minority 40% of Compact Disc
Technologies (CDT), giving it full ownership of Africa"s largest CD and DVD
manufacturing plant.
Pay Television
The subscription revenue stream grew on the back of an increased digital
subscriber base. Advertising revenues also expanded as a result of good content
acquisitions, including increased local production.
Associate
Caxton and CTP Publishers and Printers (Caxton) again produced good results,
contributing R89 million to attributable earnings (2005: R71 million). Newspaper
publishing and printing was the major contributor, while Caxton"s investment in
academic publishing via its 50% share in Maskew Miller Longman produced
excellent returns.
Financial position
The balance sheet remains strong and practically ungeared. Net cash resources
amounted to R611 million at 30 September 2006.
Post balance sheet event
As announced on SENS on 14 November 2006, Johncom has, subject to certain
conditions precedent, agreed to dispose of its interest in Electronic Media
Network Limited (M-Net) and SuperSport International Holdings Limited
(SuperSport) to Naspers Limited (Naspers) and to unbundle to Johncom"s
shareholders the Naspers N shares received as consideration. The effective date
of the transaction will be the third business day following the day on which the
last of the conditions precedent is fulfilled. A circular containing the final
terms of the transaction and details of the unbundling will be posted to Johncom
shareholders for their approval in due course.
Prospects
The board is confident that the group is on track to deliver second-half revenue
and earnings which traditionally exceed those of the first six months due to
festive season trading.
Mashudu Ramano
Chairperson
Prakash Desai
Acting Group Chief Executive Officer
Howard Benatar
Chief Financial Officer
22 November 2006
Income statement
Restated
Reviewed reviewed Audited
6 months 6 months 12 months
ended ended ended
30 Sept 30 Sept 31 March
% 2006 2005 2006
change Rm Rm Rm
Revenue 17 2 591 2 214 4 651
Cost of sales (1 493) (1 362) (2 819)
Gross profit 29 1 098 852 1 832
Operating expenses (772) (695) (1 389)
Operating costs (690) (574) (1 148)
Depreciation and amortisation (52) (50) (103)
Goodwill impairment (5) (2) (2)
Share-based payments (25) (69) (136)
Profit from operations before 108 326 157 443
exeptional items
Exceptional items 4 47 49
Profit from operations 62 330 204 492
Net finance income 17 9 27
Finance income 31 21 52
Finance costs (14) (12) (25)
Share of profits of associates 92 73 184
Profit before taxation 53 439 286 703
Taxation (121) (75) (177)
Profit for the period 51 318 211 526
Attributable to:
Shareholders 312 205 512
Minority interest 6 6 14
318 211 526
Basic attributable earnings per 53 301 197 492
ordinary share (cents)
Dividend per ordinary share 100 - 75
(cents)
Number of ordinary shares in issue
("000)
At beginning of period 103 821 104 189 104 189
At end of period 103 821 104 189 103 821
Weighted average for period 103 821 104 189 104 015
Balance sheet
Restated
Reviewed reviewed Audited
30 Sept 30 Sept 31 March
2006 2005 2006
Rm Rm Rm
ASSETS
Non-current assets 2 093 1 890 1 964
Tangible and intangible assets 834 725 738
Investments and loans 1 112 999 1 058
Deferred taxation assets 147 148 147
Embedded derivatives - 18 21
Current assets 2 474 2 183 2 295
Inventories, receivables and other current 1 704 1 596 1 533
assets
Listed equities 108 95 109
Bank balances, deposits and cash 662 492 653
Total assets 4 567 4 073 4 259
EQUITY AND LIABILITIES
Capital and reserves
Shareholder interest 2 560 2 154 2 340
Minority interest 38 45 53
Total equity 2 598 2 199 2 393
Non-current liabilities 390 377 405
Long-term borrowings 32 28 19
Post-retirement benefits liabilities 135 126 134
Operating leases equalisation liabilities 98 108 105
Share-based payments liabilities 102 70 122
Deferred taxation liabilities 23 45 25
Current liabilities 1 579 1 497 1 461
Payables and other current liabilities 1 440 1 396 1 357
Short-term borrowings 88 68 73
Bank overdrafts 51 33 31
Total equity and liabilities 4 567 4 073 4 259
Net asset value per ordinary share (rand) 25 21 23
Cash flow statement
Restated
Reviewed reviewed Audited
6 months 6 months 12 months
ended ended ended
30 Sept 30 Sept 31 March
2006 2005 2006
Rm Rm Rm
Net cash from operating activities 203 79 368
Net cash (used in) from investing (135) 42 (8)
activities
Net cash (used in) from financing (83) 3 (72)
activities
Net (decrease) increase in cash and cash (15) 124 288
equivalents
Cash and cash equivalents at beginning of 622 335 335
period
Foreign operations translation adjustment 4 - (1)
Cash and cash equivalents at end of period 611 459 622
Segmental
Restated
Reviewed reviewed Audited
6 months 6 months 12 months
ended ended ended
30 Sept 30 Sept 31 March
% 2006 2005 2006
change Rm Rm Rm
Revenue
Continuing operations
Media 18 904 767 1 565
Retail 13 404 356 768
Books and Maps 23 185 150 312
Home Entertainment 20 178 148 308
Africa 147 47 19 47
Music (46) 55 102 218
Distribution, Manufacturing and 12 111 99 208
Support Services
Pay Television 23 707 573 1 225
17 2 591 2 214 4 651
Profit (loss) from operations
before share-based
payments and exceptional items
Continuing operations
Media 17 140 120 244
Retail 9 (2) 38
Books and Maps 173 30 11 25
Home Entertainment 320 21 5 33
Africa (88) (32) (17) (48)
Music (2) 6 20
Distribution, Manufacturing and 31 17 13 39
Support Services
Pay Television 56 198 127 281
45 381 263 632
Corporate (27) (33) (50)
Disposed operations (3) (4) (3)
55 351 226 579
Profit (loss) from operations
before exceptional items
Continuing operations
Media 31 127 97 200
Retail 6 (5) 35
Books and Maps 420 26 5 12
Home Entertainment 567 20 3 29
Africa (83) (33) (18) (50)
Music (5) 3 12
Distribution, Manufacturing and 29 9 7 23
Support Services
Pay Television 70 197 116 259
67 347 208 520
Corporate (18) (47) (74)
Disposed operations (3) (4) (3)
108 326 157 443
Statement of changes in equity
Share Share Other Accumulated
capital premium reserves profits
Rm Rm Rm Rm
Balance at 31 March 2005 10 814 8 1 118
Total income and expense 4 200
recognised
Income and expense recognised 4 (5)
directly in equity
Attributable earnings 205
Balance at 30 September 2005 10 814 12 1 318
Total income and expense 5 277
recognised
Income and expense recognised 5 (30)
directly in equity
Attributable earnings 307
Implementation of odd-lot (18)
offer
Dividends on ordinary shares (78)
Balance at 31 March 2006 10 796 17 1 517
Total income and expense 46 278
recognised
Income and expense recognised 46 (34)
directly in equity
Attributable earnings 312
Effect of acquisitions and
disposals
Dividends on ordinary shares (104)
Balance at 30 September 2006 10 796 63 1 691
Shareholder Minority Total
interest interest equity
Rm Rm Rm
Balance at 31 March 2005 1 950 42 1 992
Total income and expense 204 3 207
recognised
Income and expense recognised (1) (3) (4)
directly in equity
Attributable earnings 205 6 211
Balance at 30 September 2005 2 154 45 2 199
Total income and expense 282 8 290
recognised
Income and expense recognised (25) (25)
directly in equity
Attributable earnings 307 8 315
Implementation of odd-lot (18) (18)
offer
Dividends on ordinary shares (78) (78)
Balance at 31 March 2006 2 340 53 2 393
Total income and expense 324 6 330
recognised
Income and expense recognised 12 12
directly in equity
Attributable earnings 312 6 318
Effect of acquisitions and (21) (21)
disposals
Dividends on ordinary shares (104) (104)
Balance at 30 September 2006 2 560 38 2 598
Notes
1. Basis of accounting
These condensed consolidated interim financial statements have been
prepared using accounting policies compliant with International
Financial Reporting Standards (IFRS), and are in compliance with IAS
34: Interim Financial Reporting, the JSE Limited"s Listing
Requirements and the South African Companies Act. The accounting
policies used are consistent with those applied in the preparation of
the annual financial statements for the year ended 31 March 2006.
Restated
Reviewed reviewed Audited
6 months 6 months 12 months
ended ended ended
30 Sept 30 Sept 31 March
2006 2005 2006
Rm Rm Rm
2. Exceptional items
Reversal of impairments 5 - -
Fair value adjustment of listed (1) 22 36
equities
Profit on disposal of operations - 25 14
Other - - (1)
4 47 49
3. Reconciliation between attributable
and headline earnings
Attributable earnings 312 205 512
Reconciling items (after taxation and
minority interests, where applicable)
Goodwill impairment 5 2 2
Reversal of impairments (5) - -
(Profit) loss on disposal of tangible (1) - 1
and intangible assets
Profit on disposal of operations - (22) (13)
Property, plant and equipment - - 3
impairment
Other - - 1
Headline earnings 311 185 506
Basic headline earnings per ordinary 300 178 486
share (cents)
4. Earnings per ordinary share
The calculation of basic attributable and headline earnings per
ordinary share is based on attributable earnings of R312 million
(2005: R205 million) and headline earnings of R311 million (2005:
R185 million) respectively, and 103 821 159 (2005: 104 189 314)
ordinary shares in issue.
Reviewed
Reviewed 6 months
cumulative ended
to 31 30 Sept
March
2005 2005
Rm Rm
5. The group"s results as at 31 March
and 30 September 2005 have been
restated in line with final March
2006 year-end adjustments. The
changes in respect of 31 March and 30
September 2005 are set out below:
Profit for the period previously 213
reported
IFRS restatements (2) (2)
Share-based payments 7 -
Adjustments to provisions 1 -
Depreciation and amortisation (13) (2)
Adjustment in respect of associate 3 -
Other restatements (6) -
Operating leases accounted for on 4 -
straight-line basis
Revenue recognition (3) -
Taxation (7) -
Profit for the period restated 211
Basic attributable earnings per
ordinary share have been restated to
197 cents from 199 cents as
previously reported.
Total equity previously reported 2 227
IFRS restatements (4)
Other restatements (6)
Adjustment in respect of Caxton (18)
shareholding in Johncom
Total equity restated 2 199
Restated
Reviewed reviewed Audited
30 Sept 30 Sept 31 March
2006 2005 2006
Rm Rm Rm
6. Contingent liabilities and
commitments
Guarantees 1 31 1
Contingent liabilities 18 18 16
Unconditional programme and film 693 682 585
rights purchase obligations
Operating leases 679 690 683
- due within one year 102 118 110
- due after one year 577 572 573
7. Capital expenditure commitments
Contracted but not provided for 14 24 12
Authorised but not yet contracted for 23 6 53
37 30 65
The capital expenditure will be
financed from cash resources.
8. Reviewed results
These interim financial statements have been reviewed by our
auditors, Deloitte & Touche. A copy of their unmodified review report
is available for inspection at the company"s registered office.
JOHNNIC COMMUNICATIONS LIMITED (Johncom)
Incorporated in the Republic of South Africa
Registration number: 1889/000352/06
Share code: JCM
ISIN Code: ZAE000024584
American Depositary Receipt (ADR) programme
CUSIP No: 47805P102
ADR to ordinary share: 1:1
Johncom House, 4 Biermann Avenue
Rosebank, 2196, Johannesburg
PO Box 1746, Saxonwold, 2132
Directors: M E Ramano (Chairperson), P C Desai# (Acting Group Chief Executive
Officer), H Benatar# (Chief Financial Officer), M D Brand, C B Brayshaw, P M
Jenkins, D M Mashabela, W S Moutloatse, T R A Oliphant, F J van der Merwe, T A
Wixley #Executive director
Company secretary: J R Matisonn
E-mail: matisonnj@johncom.co.za
These results may be viewed on the internet at http://www.johncom.co.za
Date: 22/11/2006 05:05:35 PM Produced by the JSE SENS Department
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