Listed South African entertainment and media group Johnnic Communications on Thursday announced a 108% improvement in attributable earnings to R187-million for the year ended June 30. Basic headline earnings per share were 13% higher at 170 cents from 151 cents before.
Headline earnings per share (HEPS) from ongoing operations were up 5% at 188 cents from 179 cents before, while attributable earnings per share from ongoing operations were up 78% at 203 cents from 114 cents before.
Total basic headline earnings for the year were up by 13% to R177-million from R157-million in 2003, while profit from operations, before exceptional items, rose 43% from R80-million to R114-million.
With revenue from ongoing operations increasing 6% to R2,682-billion from R2,541-billion, much of the improvement in operating profit could be attributed to management’s strategy to “fix, close or sell” under-performing businesses, said group CEO Connie Molusi.
Because of the strong performance, Johncom was able to increase dividend payments, which it resumed with the announcement of last year’s results, and would pay a dividend of 40c a share said group finance and operations director Prakash Desai.
All core businesses in the group were now contributing positively, with the exception of the Africa division, which is still in the investment phase, and Nu Metro Theatres.
Improved results were forecast for Nu Metro, following a long-term review of sites and leases. This had resulted in a number of cinemas being closed, others earmarked for closure, and leases and fixed assets at several other sites being impaired, said Desai.
Johncom had also reviewed the Imax business and had limited its exposure to ongoing losses.
Desai said the results showed that the recent trend of Johncom improving its performance year-on-year had been maintained. Further, Johncom was well- positioned to continue its solid growth.
The global revival in advertising and stable newsprint prices was good news for the media operations, while current favourable retail conditions would benefit both the media and entertainment operations.
Desai said that Johncom had now eliminated its group net debt of R54-million and had closed the year with net cash of R299-million.
Subsequent to year-end, R287-million had been invested to increase Johncom’s shareholding in pay-TV channel M-Net/SuperSport to 38,6%, which will be value accretive to the group.
Molusi said the restructuring last year of the group into a single head office and six core business units, in keeping with the vision of a single, integrated entertainment and media group, had paid dividends in terms of reduced costs and increased operating efficiencies.
Johncom’s media operations — newspapers, magazines and digital — performed strongly and lifted profit from operations before exceptional items by 28% to R77-million. Revenue grew 7% from R1,017-billion to R1,091-billion.
Robust advertising in the first quarter of 2004 benefited the publications, while the group’s flagship, the Sunday Times, had stablised after editorial refocus.
Eastern Cape titles, in particular East London’s Daily Dispatch, had an excellent year with a record performance.
The streamlining of the digital operations had yielded efficiencies, and the three remaining businesses – I-Net Bridge, CareerJunction and MTN Network Solutions – were all contributing positively.
The retail division — essentially Exclusive Books and Nu Metro Theatres showed a strong turnaround, with profit from operations before exceptional items soaring 218% to R13-million, mainly from improvements at Nu Metro Theatres. Divisional revenue increased 10% from R608-million to R666-million.
Exclusive Books continued its strong run of recent years and delivered a credible “same store” growth in revenue of 12%.
Molusi said that integrating Nu Metro Theatres into the new retail division had shown results. Despite static overall attendances at cinemas in South Africa and increased competition from other forms of entertainment and piracy, Nu Metro had grown its market share.
The closure of some sites and impairment of leases and fixed assets at others had set Nu Metro on a recovery path.
In the books and maps division, profit from operations before exceptional items grew 450% from R2-million last year to R11-million this year, while revenue decreased 9% from R293-million to R267-million.
With operations in the UK, Australia and New Zealand, this business was subject to the influence of currency fluctuations. The overall effect of the strengthening rand was negative on foreign-denominated earnings.
On the home entertainment front, strong titles, such as Finding Nemo, boosted performance in the last quarter. Nevertheless, increasing margin pressure from the retail market and the continued shift from VHS to the lower-margin DVD format saw profit from operations before exceptional items fall 14% from R36-million to R31-million. Revenue grew 5% from R268-million to R282-million.
Piracy is the major challenge facing this business, with the industry anti-piracy body Safact (SA Federation against Copyright Theft) reporting that at least 40% of all DVDs sold in SA are illegal counterfeit copies.
Johncom is working with the industry and government to address this problem. In the music arena, Gallo performed particularly well to grow both market share and profits, in the face of a continued decline in music sales both in SA and internationally. Gallo’s profit from operations before exceptional items rose 22% to R11-million, while revenue grew 8% from R170-million to R184-million.
It was particularly pleasing to see that Gallo’s investment in local South African music was starting to bear fruit, with a good improvement in domestic turnover, said Molusi.
He added that Johncom’s first operations in Africa were now running, with Nu Metro cinemas in Kenya and Ghana. In addition, Nu Metro was now distributing films to nine African countries outside South Africa. The African operations showed their first modest revenue of R2-million for the year.
“We’re continuing our process of caution and prudent investment in Africa, and the board has approved funding for projects in media, retail, entertainment and manufacturing in various African countries,” said Molusi. – I-Net Bridge