| Tue 28 Aug 2007, 13:48 | | Caxton and CTP Publishers - Reviewed Results For T |
|
CAT CATP
CAT
Caxton and CTP Publishers - Reviewed Results For The Year Ended 30 June 2007
Caxton and CTP Publishers
and Printers Limited
Incorporated in the Republic of South Africa
Registration number 1947/026616/06
Share code: CAT ISIN code: ZAE000043345
Preference share code: CATP
ISIN code: ZAE000043352
("Caxton" or "the Company")
REVIEWED RESULTS FOR THE YEAR ENDED 30 June 2007
Highlights
- Turnover up 15,5%
- Earnings up 17,6%
- Cash resources R987,5 million
CONSOLIDATED INCOME STATEMENTS
Reviewed Audited
for the year for the year
to 30 June to 30 June
R`000 2007 2006
Turnover 4 006 416 3 468 498
Other operating income 80 205 80 511
4 086 621 3 549 009
Changes in inventories of finished (22 167) 11 817
goods and work in progress
Raw materials and consumables used 1 334 044 1 098 353
Staff costs 748 861 674 929
Other operating expenses 1 168 952 1 031 160
Total operating expenses 3 229 690 2 816 259
PROFIT FROM OPERATING ACTIVITIES 856 931 732 750
Depreciation and impairment 194 583 126 818
NET PROFIT FROM OPERATING ACTIVITIES 662 348 605 932
Finance income 148 779 108 970
- dividends 51 655 48 617
- net surplus on realisation of 65 926 25 037
investments
- interest 31 198 35 316
Income from associates 19 123 19 032
PROFIT BEFORE TAXATION 830 250 733 934
Taxation 210 837 208 136
PROFIT AFTER TAXATION 619 413 525 798
Attributable to minority interest 8 325 6 277
Attributable to ordinary shareholders
before
providing for preference dividends 611 088 519 521
619 413 525 798
Earnings per share (cents) 127,2 111,8
Diluted earnings per share (cents) 127,0 111,6
Headline earnings per share (cents) 121,7 109,0
Diluted headline earnings per share 121,6 108,8
(cents)
Preference dividend paid 206 163
Reconciliation of headline earnings:
Earnings attributable to ordinary 611 088 519 521
shareholders
Adjusted for non-trading items (26 207) (12 945)
Surplus on realisation of investments (65 926) (23 373)
Net impairment in value of property, 42 996 8 477
plant and trade marks
Net profit on disposal of assets (518) (515)
Tax effect on above adjustments (2 759) 1 443
Loss on disposal of subsidiaries - 1 023
Headline earnings 584 881 506 576
Number of shares in issue 494 939 628 494 939 628
Weighted average number of shares 494 939 628 477 155 923
Treasury shares (14 412 326) (12 422 855)
Earnings per share based on 480 527 302 464 733 068
Add: Share options outstanding 700 000 700 000
Diluted earnings per share based on 481 227 302 465 433 068
Abridged segmental analysis
% %
Revenue
Publishing, printing and 3 604 023 90 3 213 592 93
distribution
Other 1 147 609 29 979 149 28
Inter-group sales (745 216) (19) (724 243) (21)
4 006 416 100 3 468 498 100
Operating income
Publishing, printing and 480 265 73 462 315 76
distribution
Other 182 083 27 143 617 24
662 348 100 605 932 100
CONSOLIDATED BALANCE SHEETS
Reviewed Audited
30 June 30 June
R`000 2007 2006
ASSETS
NON-CURRENT ASSETS
PROPERTY, PLANT AND EQUIPMENT 1 801 710 1 587 766
INTANGIBLE ASSETS - 6 182
ASSOCIATED COMPANIES 83 691 94 021
OTHER INVESTMENTS AT FAIR VALUE 670 178 666 845
- LISTED 259 275 252 203
- UNLISTED 410 903 414 641
CURRENT ASSETS
INVENTORIES 588 133 461 936
ACCOUNTS RECEIVABLE 721 427 669 593
TAXATION 1 732 1 281
CASH 454 229 307 466
BANK PREFERENCE SHARES AND OTHER
INSTRUMENTS AT FAIR VALUE 533 279 551 989
- LISTED 333 279 316 989
- UNLISTED 200 000 235 000
TOTAL ASSETS 4 854 379 4 347 079
EQUITY AND LIABILITIES
EQUITY 3 782 582 3 296 007
ORDINARY SHAREHOLDERS` EQUITY 3 763 092 3 284 381
PREFERENCE SHAREHOLDERS 100 100
MINORITY INTEREST 19 390 11 526
NON-CURRENT LIABILITIES
DEFERRED TAXATION 272 477 178 349
CURRENT LIABILITIES
ACCOUNTS PAYABLE 637 816 692 852
PROVISIONS 108 734 106 138
TAXATION 52 770 73 733
TOTAL EQUITY AND LIABILITIES 4 854 379 4 347 079
Net asset value per share (cents) 764 683
Directors` valuation of unlisted investments 494 594 508 662
and associated companies
Capital expenditure 305 495 508 399
Capital expenditure committed 250 000 70 000
Cash and cash equivalents at fair value 987 508 859 455
CONSOLIDATED CASH FLOW STATEMENTS
Reviewed Audited
for the year for the year
to 30 June to 30 June
R`000 2007 2006
CASH FLOW FROM OPERATING ACTIVITIES 302 100 470 082
Cash generated by operations 850 785 717 491
Changes in working capital (224 845) 16 986
Cash generated by operating activities 625 940 734 477
Less: Taxation paid (186 583) (164 079)
Net interest received 31 198 35 316
Dividends received 51 655 48 617
Net cash inflow from operating activities 522 210 654 331
Dividends paid (220 110) (184 249)
CASH FLOW FROM INVESTMENT ACTIVITIES (104 511) (1 019 214)
Property, plant and equipment
- additions to expand operations (305 495) (508 399)
- proceeds from disposals 29 429 5 127
(276 066) (503 272)
Investments
- acquisitions at cost (6 979) (554 221)
- proceeds from disposals 178 534 38 279
CASH FLOWS FROM FINANCING ACTIVITIES (35 828) 278 011
Shares issued - 405 229
Own shares acquired (35 828) (127 218)
Net increase/(decrease) in cash and cash 161 761 (271 121)
equivalents
Cash and cash equivalents at the 822 502 1 093 623
beginning of the year
Cash and cash equivalents at the end of 984 263 822 502
the year
Fair value adjustment of preference 3 245 36 953
shares and other investments
Fair value of cash and cash equivalents 987 508 859 455
at the end of the year
Note:
Cash 454 229 307 466
Preference shares and other investments 533 279 551 989
at fair value
Fair value of cash and cash equivalents 987 508 859 455
at the end of the year
STATEMENTS OF CHANGES IN EQUITY
Reviewed Audited
30 June 30 June
R`000 2007 2006
Balance at beginning of the year 3 296 007 2 642 641
Attributable earnings 619 413 525 798
Minority interest acquired (461) -
Shares issued - 406 255
Share trust consolidation 369 1 164
Costs relating to issue of shares - (1 026)
Treasury shares (36 197) (127 218)
Revaluation of properties net of deferred 92 539 -
taxation
Fair value adjustment - listed investments 65 202 21 359
Fair value adjustment - preference shares (34 180) 11 283
and instruments
Dividends paid - ordinary and preference (217 423) (179 789)
shareholders
Dividends paid - minority shareholders (2 687) (4 460)
Balance at end of the year 3 782 582 3 296 007
COMMENTARY
Basis of preparation
The accounting policies adopted in the preparation of the financial statements
for the year under review are in accordance with the requirements of
International Financial Reporting Standards ("IFRS"), which are consistent with
the prior year.
Comments
Pleasing results have been achieved by the company notwithstanding a difficult
period in the commercial printing division, where major plants were installed
and successfully commissioned, and where the packaging division was a drain on
profitability. Fortunately all publishing activities across the company
performed well. The economy also proved to be of benefit and continuing growth
in retail spending benefited advertising where volumes were up.
The South African currency remained fairly stable after a substantial decrease
at the commencement of the financial year which proved to be beneficial to input
costs. Mainly as a result of higher levels of inflation, the Reserve Bank has
increased lending rates by 3% which is starting to negatively impact on spending
patterns particularly where large ticket items such as houses, motor vehicles
and white and brown goods are concerned. The recent introduction of the National
Credit Act, which is welcomed, has also slowed up consumer spending.
There can be no doubt whatsoever that the consumer boom which has benefited the
country as a whole for some time will be more muted going forward.
However the large infrastructural spend by Government and the Provinces should
mitigate against any major swing in overall growth patterns. In these
circumstances the Rand could be negatively affected with the substantial flow of
funds offshore necessary to support these developments and the concomitant
deficits in the current account. Recent events seem to indicate that Rand
volatility is a fact of life and will remain as such.
World markets appear to be entering a turbulent phase driven primarily by the
"sub prime mortgage" housing markets faltering in the United States of America,
and the over exuberance of investors. In time this could worsen inflation and if
investment support for local bonds and equities is reduced, the currency could
find itself under further pressure. Whilst this will be good for exporters it
will, however, have a dramatic influence on the company`s input costs and the
prices of products and services would have to be increased to offset this event.
Furthermore additional inflationary pressure will be felt as a result of union
demands for large increases in salaries and wages, and where unfortunately the
government recently relented during the national strike and acceded to these
irrational demands. The country is presently witnessing major strike actions and
excessive demands for increases in salaries and wages above the rate of
inflation which augurs badly for future economic growth.
The year under review could be categorised as one of investment in most of our
factories in new plant and technology, which places the company in a strong
position to capitalise on additional efficiency and of course much larger
capacity for existing and innovative new products.
Earnings
Turnover inceased by 15,5% which is some 9% above inflation during a year where
raw materials prices have remained relatively stable which translated into a
positive growth in volumes.
Accordingly turnover went up from R3 468,5 million to R4 006,4 million.
Depreciation and impairment amounted to R194,6 million compared to R126,8
million last year. This large increase is due to depreciation having been
provided on the new equipment which was installed. In line with the company`s
policy of annually revisiting the useful life and value of all items of
equipment and having regard to the new installations where technology has
advanced, the aforementioned figure includes an amount of R43 million written
off by way of impairment.
It is gratifying to note that the trading margin, which was at 17,5% last year,
fell to just 16,5% and would have increased to 17,6% had the impairment on plant
not occurred.
Net Finance Income, which includes an amount of R65,9 million relating to the
net surplus on realisation of investments, totalled R148,8 million.
Income from Associates rose slightly from R19,0 million to R19,1 million. The
majority of the company`s associates performed to expectation and the
aforementioned increase has to be read in conjunction with the sale of the
shares in one associate.
Profit before taxation increased from R733,9 million to R830,3 million, an
increase of 13,1%.
Taxation, which includes Secondary Tax on Companies and Deferred Taxation, was
marginally up at R210,8 million. This is an effective tax rate of 25,4% and is
somewhat down on the previous year due to a number of non-recurring factors.
The cash taxation rate is lower having regard to the vast expenditure on capital
items and the taxation allowances thereon.
After providing for profits attributable to minority shareholders, earnings
attributable to ordinary shareholders amounted to R611,1 million which is a
17,6% increase on the previous financial year.
Ordinary shares in issue at the close of the financial year amounted to 494 939
628. A further 1 989 471 ordinary shares were purchased during the year which,
when added to Treasury Shares held at the commencement of the year of 12 422
855, now totals 14 412 326 ordinary shares. Earnings per share are therefore
based on 480 527 302 ordinary shares in issue and diluted earnings, after
adjusting for outstanding share options, are based on 481 227 302 ordinary
shares in issue.
Earnings per share amounted to 127,2 cents which is an improvement of 13,8% and
diluted earnings improved by the same percentage.
Headline earnings and diluted headline earnings were 121,7 cents per share, up
by 11,7%.
Cash flow
Cash and Cash Equivalents at 30 June 2007 amounted to R984,3 million. The
company`s ability to generate cash from operations remains a major feature of
the company`s overall performance and R850,8 million was generated for the year.
Capital of R305,5 million was expended during the year to expand operations and
working capital increased by R224,8 million mainly from higher levels of
inventory being carried due to the additional volumes being produced by the
various manufacturing divisions. The proceeds on the disposal of investments
amounted to R178,5 million.
Revaluation of property
In line with the company`s policy of revaluing its property every five years a
revaluation exercise was carried out by independent valuators. This valuation
has resulted in the value of the company`s property being increased by an amount
of R126 million with the commensurate credit going into non-distributable
reserves and deferred taxation.
Divisional performance
As indicated earlier in this commentary the publishing divisions of the company
produced good results whilst the commercial printing and the packaging divisions
had to contend with continued margin pressure and a number of unusual
circumstances and events.
Publishing, printing and distribution
Newspaper publishing and printing
The company is fortunate in that its investment in newspaper publishing is
mainly through free community and regional newspapers. This publishing sector
has grown annually and has been relatively unaffected by the move to digital
publishing and other media which has had a negative consequence on the majority
of daily and weekly newspapers.
Good performances were once again achieved in a market where advertising
expenditure remained vibrant.
The continuing investments in new products have been maintained with good
returns being achieved. Auto Dealer in particular produced very good profits and
has been a major player in the second hand car market and is being recognised
and treated as such.
The property supplements did well despite an onslaught of opposition products.
The launch of the Protea Urban papers has progressed and over 300 000 papers are
now circulating weekly throughout Soweto. Further launches in new localities
will follow as an enabling advertising environment presents itself.
The monthly Get It community magazine published by this division, which is
distributed for no charge, is also producing results in line with budget and
there are now 23 publications throughout South Africa with more in the planning
process. This publication has been extremely well received by readers and
advertisers alike.
Good results ahead of expectation were achieved by the majority of the company`s
regional operations in the various Provinces and the investment in the prior
year into new presses is already bearing fruit.
Our daily newspaper The Citizen produced better revenue and profitability and
increased its share of the daily newspaper advertising spend. It has recently
revamped the paper and this redesign has drawn praise from a number of quarters
and circulation growth has resumed in a crowded market.
Major newspaper printing for the company, which is located in Industria,
experienced an above average year. Enhancements to production and inserting
facilities worked well and record volumes were processed. This extremely modern
and well run printing facility has been and will continue to be an important
driver in the success of the newspaper division as a whole. To ensure that this
position is maintained and to cope with the anticipated growth in volumes it has
been decided to purchase additional land and to erect new buildings and install
further printing presses. The expenditure involved is estimated at R200 million
and will be incurred during the 2008 and 2009 financial years, with the bulk of
the expenditure taking place during the 2009 financial year.
A number of new strategic alliances with partners were entered into and new
products established, all of which have worked well and are producing good
results. Further new products are in the planning stage.
The joint venture in Port Elizabeth in a newspaper factory is progressing
according to plan and the equipment was commissioned during the latter part of
the financial year.
Magazine publishing
Further progress has been achieved in this division despite the competitive
environment which exists. Literally hundreds of new publications are finding
their way onto the shelves of magazine outlets and there is no doubt whatsoever
that it is going to be a battle for survival. This the more so where
unfortunately the number of magazine readers in South Africa is diminishing
rather than increasing.
Statistics recently released by the Audit Bureau of Circulations reveal that
overall magazine circulation is on the decrease. This will be exacerbated with
the recent rise in interest rates and the general tightening of the economy.
Furthermore, with the Rand having lost ground to overseas currencies, it is
inevitable that printing prices are about to escalate to compensate for the
increase in the cost of paper and ink. This in all likelihood will lead to
publishers having to increase their selling prices, leading to a probable
further decline in circulation sales.
Advertising revenue spend as a whole has not kept up with the growth in the
number of publications and in fact revenue per publication has in a number of
instances dropped.
In May 2007 a new publication Cleo was launched under licence to ACP in
Australia with whom a licensing agreement has been concluded and could allow for
new launches into an appropriate segment when favourable conditions present
themselves.
RNA, the efficient and well run distributor of magazines, enjoyed a good year
which saw the finalisation of their expenditure on a number of new facilities
and the remodelling and improvement of existing facilities.
New computer assisted technical enhancements are presently being installed which
should result in an even better service for its customers.
The retail environment remains a major challenge for improved magazine sales.
Many publications are competing for limited shelf space and retailers have not
increased the amount of selling space available for magazines. A complete
overhaul of how magazines are merchandised, particularly in supermarkets, who
have become the major seller of magazines, is urgent as is obtaining their
support for increased shelf space and recognising the importance of the sale of
magazines in their overall offering to their customers.
Commercial printing
Web and Gravure printing
The substantial additions to this division have all been completed and
commissioned. The result is a very much larger and efficient Gravure printing
facility in Durban and a new Gravure printing factory in Johannesburg which
effectively doubles the capacity.
A number of technical advancements and equipment have also been installed and
this major capital expenditure places the commercial Gravure printing division,
together with the three web offset factories in Johannesburg and Cape Town, in
an ideal position to cope with volume increases and to service their customer
base with innovative new products.
The year witnessed a large growth in volumes which were well handled even though
the accent was on new equipment installations. Margins continue to be extremely
competitive and this division reduced its contribution to the overall profits of
the company.
As mentioned earlier the installation of the new equipment necessitated a review
of existing carrying values of plant and equipment and in terms of our
accounting policy a number of impairments of plant were made.
Book printing
This well operated and managed and highly efficient book printing factory had a
very good year and improved its profitability. Equipment continues to be
continually reassessed to keep up with the demands of its many customers
particularly those involved in the publishing of educational books. This
resulted in new presses and ancillary equipment being installed. Its base of
customers has been extended and this division is building on its reputation for
the high quality product that it produces.
Other
Academic publishing
Maskew Miller Longman, in which company 50% of the equity is owned, the other
50% being held by Pearson, the largest educational publisher in the world, had
an excellent year and achieved record profitability. The year just ended saw the
introduction of three grades of the new schools curriculum leaving only one
final grade to be introduced in the following year for the curriculum to be
completed.
This organisation has over the past few years become a major contributor to the
company`s profits and has become the pre-eminent and largest publisher of school
books in the country.
Their Southern African divisions reported further improvements in profits and
new territories and opportunities are being worked on.
Local Higher Education, which is a separate division, also enjoyed good success
not only in the tertiary and professional markets but also in the general book
trade.
The introduction of a new "Further Education and Training" syllabus by the
government to redress the lack of a number of technical skills required in the
economy presents new challenges, and success is possible as good market share
has been achieved in the first year of the introduction even though current
volumes are small. Government has stated that it would like to see the number of
students undergoing this form of training increasing to one million over time.
A Trust which Maskew Miller Longman has funded has been established for
charitable and educational purposes and a number of interesting initiatives are
under investigation. The intention is to benefit all aspects of education and
training, including the poor and needy, by improving and assisting general South
African education and training standards.
Packaging
An area of the company`s activities which resulted in a poor performance for the
year.
Certain divisions such as those involved in the printing of labels for the
cigarette, beer, spirits and music industry, recorded reasonable profit growth
in a competitive environment and achieved results very much in line with
budgets.
However, the division producing folded cartons and other packaging products
experienced a difficult year. An investment into a folded carton business was
made and the decision taken to move this division and the existing facility from
Industria to new facilities in Elandsfontein and to combine their activities.
The disruption caused by this move proved to be greater than originally
contemplated and it took some eight months to resume efficient and profitable
production. Consequently losses were incurred during the period.
The Cape Town operations, where labels and flexible plastic packaging products
are produced, also experienced a difficult trading year. The increase in the oil
price and the fall in value of the Rand increased input costs which could not be
sufficiently recovered from customers.
A decision has been taken to extensively upgrade the equipment of S A Litho, the
quality label manufacturer, and new items of equipment amounting to some R50
million will be installed in the next 12 months. This expenditure will allow
efficiency in production and the division is expected to return to profitability
once the equipment has been installed.
Stationery
A much better year for the stationery division, which produces products for the
tender and retail markets. This improvement resulted from higher volumes of
sales and a rationalisation of products sold. The environment continues to be
highly competitive and here too input costs will play a major part in future
profitability.
With effect from 1 July 2007, 50% of the equity of Impala Stationers, situated
in Ladysmith, and which produces stationery products for the educational
departments in the various provinces, has been sold to Vuwa Investments (Pty)
Limited, an upcoming black economic empowerment company headed by Bulelani
Ngcuka. It is the intention to grow this new initiative into a major force
manufacturing and supplying stationery products to all outlets.
Directors
We are pleased to advise that Mr Connie Molusi and Mr Albert Nemukula have been
appointed to the board of directors with immediate effect. Mr P C Desai has
resigned from the board.
Review by Independent Auditors
The company`s auditors, PKF (JHB) have reviewed these results. Their unqualified
review is available for inspection at the registered offices of the company.
Dividends
In view of the impending changes to the legislation regarding Secondary Tax on
Companies (STC) being changed to a withholding tax, it has been decided to hold
over the declaration of a dividend until it is clear what the consequences of
such a change will be. A dividend will be declared immediately this information
becomes available.
Prospects
At the time of writing this commentary world markets are in turmoil and
volatility has become a norm. In addition the Reserve Bank has further increased
its lending rates by 50 basis points. Whilst the South African economy, with the
proviso of inflation having reared its ugly head, was going well, it is now
impossible to predict what could happen.
The company is dependent on the supply of paper, ink and other consumables from
overseas sources and the stability of the currency plays an important role in
setting prices.
However, the investments made over the past few years and the stability of the
company should result in earnings enhancement going forward.
Provided that these new developments do not extensively alter the economic
environment, further earnings growth in line with that just reported upon can be
anticipated.
By order of the Board
Dr F van Zyl Slabbert (Chairman)
G M Utian (Managing Director)
T D Moolman (Chief Executive Officer)
Johannesburg
28 August 2007
Dr F van Zyl Slabbert* (Chairman), T D Moolman (Chief Executive Officer), G M
Utian (Managing Director), F T Gatefield*, P G Greyling, T J W Holden, P M
Jenkins*, A C G Molusi*, A N Nemukula*, P Vallet* (*Non-executive directors)
Registered office:
28 Wright Street, Industria West Johannesburg, 2093
Sponsor
Sasfin Capital
A Division of Sasfin Bank Limited
Date: 28/08/2007 13:48:33 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
