Casinos serving Johnnic well
Half-year numbers to September released by Johnnic Holdings yesterday reveal its share in a number of South Africa’s casinos is serving it well.
However, it is difficult to compare the company’s performance to the first half of financial 2004, as the March unbundling of its two-thirds’ stake in Johnnic Communications (which runs the Sunday Times, Business Day and Nu Metro) resulted in the firm being reduced to a thirtieth of its former size (Johnnic Communications accounted for 96% of the Johnnic Holdings).
As such, revenue went from R2bn last year to R72m in 2005, and headline earnings a share were down to 35c from 46c last year.
At present, Johnnic owns 28,7% of KwaZulu-Natal’s Suncoast Entertainment and Casino World though Durban Add-Ventures, all of Gallagher Estate in Midrand and 4,85% of the lucrative Tsogo Sun, whose assets include Montecasino, Champions Casino in Witbank, Hemingway’s Casino in East London, Emnotweni Casino in Nelspruit, and around 82 hotels in the Southern Sun Hotels Group.
This small bite of the Tsogo Sun pie arose through buying out half of Fabcos Investment Holdings’ (FIH’s) 19% stake in Tsogo Investment Holdings (TIH), the 51% controlling parent of Tsogo Sun. SABMiller owns the other 49%.
Johnnic’s claim to the other half of FIH’s stake is being disputed by FIH parent Fabvest, and the matter has gone to arbitration.
While gaming accounted for a mere R3m in revenue this time last year, it brought in R24m in the first half of 2005.
Gallagher Estate’s revenue was up 60% to R48m, with operating profit doubling to R14m from R6m, due to rental income from the Pan-African Parliament and higher business volumes, the company said.
The real Johnnic story, however, is whether the company will emerge unscathed from what it terms “the protracted legal wranglings� between itself and e.tv parent Hosken Consolidated Investments (HCI).
The two companies are fighting for control of TIH, and in the process, HCI has been buying up shares in rival Johnnic in the hope that it will eventually control and silence it.
Despite HCI looking like it is maintaining the upper hand in the battle, Johnnic CEO Christine Ramon says Johnnic is still focused on gaming strategy: “We want this resolved so that we can move forward with our strategy to position the company as a hotel and gaming player.�
HCI – which now has a 44% stake in its rival – has made two offers to Johnnic shareholders, both of which have been rejected by the Johnnic board as too low.
Also, Johnnic shareholders will in December vote on whether to approve the purchase of Nafhold’s 25% stake in TIH. Ramon says she sees no reason why HCI would vote against the purchase: “The acquisition of Nafhold is value-enhancing for all shareholders, including HCI. Although we haven’t had any indication of how HCI will vote, I would find it very difficult for them to vote against the purchase of the stake.�
Johnnic reported net cash outflows of R257m from operating activities, although it still has R1,242bn on the balance sheet.
No dividend has been declared, “in light of the major unbundling by the company and the growth strategy the company ahs embarked on.�
Johnnic shares closed 1,6% higher at R12,40. Should the Nafhold purchase be approved, Johnnic values the company at R14 a share. HCI has offered R10,70 or an HCI share for every 2,57 Johnnic shares.
2005-11-27
