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CAT CATP
CAT
CAT / CATP - Caxton and CTP Publishers and Printers - Unaudited
Results For The Six Months Ended 31 December 2007
Caxton and CTP Publishers and Printers Limited
Incorporated in the Republic of South Africa
Registration number 1947/026616/06
Share code: CAT ISIN: ZAE000043345
Preference share: CATP ISIN: ZAE000043352
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2007
Highlights
- Turnover up by 10,9%
- Headline earnings up by 9,9%
CONSOLIDATED INCOME STATEMENTS
Unaudited Unaudited Audited
6 months to 6 months to for the year
31 December 31 December to 30 June
R`000 2007 2006 2007
Turnover 2 297 710 2 071 215 4 006 416
Other operating income 30 929 32 060 80 205
2 328 639 2 103 275 4 086 621
Changes in inventories (187) (3 164) (22 167)
Raw materials and 763 852 652 356 1 334 044
consumables used
Staff costs 403 867 357 946 748 861
Other operating expenses 663 862 624 313 1 168 949
Total operating expenses 1 831 394 1 631 451 3 229 687
PROFIT FROM OPERATING 497 245 471 824 856 934
ACTIVITIES
Depreciation and 81 483 69 496 194 586
impairment
NET PROFIT FROM OPERATING 415 762 402 328 662 348
ACTIVITIES
Finance income 79 490 61 489 148 779
- dividends 42 208 26 180 51 655
- net surplus on 18 781 23 900 65 926
realisation of
investments
- interest 18 501 11 409 31 198
Income from associates 12 976 10 313 19 123
PROFIT BEFORE TAXATION 508 228 474 130 830 250
Taxation 151 058 142 239 210 837
PROFIT AFTER TAXATION 357 170 331 891 619 413
Attributable to minority 5 336 3 461 8 325
interest
Attributable to ordinary 351 834 328 430 611 088
shareholders before
providing for preference
dividends
357 170 331 891 619 413
Earnings per share 73,7 68,3 127,2
(cents)
Diluted earnings per 73,7 68,2 127,0
share (cents)
Headline earnings per 70,3 64,0 121,7
share (cents)
Diluted headline earnings 70,3 63,9 121,6
per share (cents)
Preference dividend paid 228 207 207
(cents)
Reconciliation of
headline earnings:
Earnings attributable to 351 834 328 430 611 088
ordinary shareholders
Adjusted for non-trading (16 048) (20 972) (26 212)
items
Surplus on realisation of (18 781) (23 900) (65 926)
investments
Net impairment in value - - 42 989
of property, plant and
trade marks
Net loss/(profit) on 14 (538) (518)
disposal of assets
Tax effect of above 2 719 3 466 (2 757)
adjustments
Headline earnings 335 786 307 458 584 876
Number of shares in issue 494 939 628 494 939 628 494 939 628
Weighted average number 494 939 628 494 939 628 494 939 628
of shares
Treasury shares (17 291 269) (14 412 326) (14 611 141)
Earnings per share based 477 648 359 480 527 302 480 328 487
on
Add: Share options 700 000 700 000 700 000
outstanding
Diluted earnings per 478 348 359 481 227 302 481 028 487
share based on
Abridged segmental analysis
Unaudited Unaudited
6 months to 6 months to
31 December 31 December
2007 % 2006 %
Revenue
Publishing, printing and 2 069 431 90 1 792 394 87
distribution
Other 635 065 28 693 089 33
Inter-group sales (406 786) (18) (414 268) (20)
2 297 710 100 2 071 215 100
Operating income
Publishing, printing and 291 428 70 266 999 66
distribution
Other 124 334 30 135 329 34
415 762 100 402 328 100
Audited
for the year
to 30 June
2007 %
Revenue
Publishing, printing and 3 604 023 90
distribution
Other 1 147 609 29
Inter-group sales (745 216) (19)
4 006 416 100
Operating income
Publishing, printing and 480 265 73
distribution
Other 182 083 27
662 348 100
CONSOLIDATED BALANCE SHEETS
Unaudited Unaudited Audited
31 December 31 December 30 June
R`000 2007 2006 2007
ASSETS
NON-CURRENT ASSETS
PROPERTY, PLANT AND EQUIPMENT 1 910 739 1 673 962 1 801 710
INTANGIBLE ASSETS - 5 649 -
ASSOCIATED COMPANIES 92 932 94 161 83 691
OTHER INVESTMENTS AT FAIR VALUE 523 319 728 199 670 178
- LISTED 111 580 315 785 259 275
- UNLISTED 411 739 412 414 410 903
CURRENT ASSETS
INVENTORIES 493 146 504 650 588 133
ACCOUNTS RECEIVABLE 986 654 957 529 721 427
TAXATION 2 075 911 1 732
BANK BALANCES 161 446 211 489 454 229
BANK PREFERENCE SHARES AND 617 994 291 996 533 279
OTHER INSTRUMENTS AT FAIR VALUE
- LISTED 317 994 291 996 333 279
- UNLISTED 300 000 - 200 000
TOTAL ASSETS 4 788 305 4 468 546 4 854 379
EQUITY AND LIABILITIES
EQUITY 3 756 971 3 441 061 3 782 582
ORDINARY SHAREHOLDERS` EQUITY 3 732 144 3 426 956 3 765 779
PREFERENCE SHAREHOLDERS 100 100 100
MINORITY INTEREST 24 727 14 005 16 703
NON-CURRENT LIABILITIES
DEFERRED TAXATION 283 112 200 249 272 477
CURRENT LIABILITIES
ACCOUNTS PAYABLE 578 279 580 358 637 816
PROVISIONS 89 580 84 163 108 734
TAXATION 80 363 162 715 52 770
TOTAL EQUITY AND LIABILITIES 4 788 305 4 468 546 4 854 379
Net asset value per share 759 695 787
(cents)
Directors` valuation of 504 671 506 575 494 594
unlisted investments and
associated companies
Capital expenditure 192 538 157 515 305 495
Capital expenditure committed 300 000 40 000 250 000
Cash and cash equivalents at 779 440 503 485 987 508
fair value
CONSOLIDATED CASH FLOW STATEMENTS
Unaudited Unaudited Audited
6 months to 6 months to for the year
31 December 31 December to 30 June
R`000 2007 2006 2007
CASH FLOW FROM OPERATING (27 521) (202 834) 302 102
ACTIVITIES
Cash generated by operations 481 637 449 310 850 786
Changes in working capital (229 779) (443 146) (224 844)
Cash generated by operating 251 858 6 164 625 942
activities
Less: Taxation paid (97 410) (27 997) (186 583)
Net interest received 18 501 11 409 31 198
Dividends received 42 208 26 180 51 655
Net cash inflow from 215 157 15 756 522 212
operating activities
Dividends paid (242 678) (218 590) (220 110)
CASH FLOW FROM INVESTMENT (117 670) (93 179) (104 511)
ACTIVITIES
Property, plant and equipment
- additions to expand (192 537) (157 514) (305 495)
operations
- proceeds from disposals 2 017 2 894 29 429
(190 521) (154 620) (276 066)
Investments
- associates, other 72 851 61 441 171 555
investments and loans
CASH FLOWS FROM FINANCING (47 592) (34 965) (35 828)
ACTIVITIES
Own shares acquired (47 592) (34 965) (35 828)
Net (decrease)/increase in (192 783) (330 978) 161 763
cash and cash equivalents
Cash and cash equivalents at 984 265 822 502 822 502
beginning of the year
Cash and cash equivalents at 791 482 491 524 984 265
end of the period
Fair value adjustment of (12 042) 11 961 3 243
preference shares and other
investments
Fair value of cash and cash 779 440 503 485 987 508
equivalents at end of the
period
Note:
Cash 161 446 211 489 454 229
Preference shares and other 617 994 291 996 533 279
investments at fair value
Fair value of cash and cash 779 440 503 485 987 508
equivalents at end of the
period
STATEMENTS OF CHANGES IN EQUITY
Unaudited Unaudited Audited
31 December 31 December 30 June
R`000 2007 2006 2007
Balance at beginning of the 3 782 582 3 296 007 3 296 007
year
Attributable earnings 357 170 331 891 619 413
Minority interest acquired - - (461)
Share trust consolidation 8 - 369
Treasury shares (47 592) (34 965) (36 197)
Realisation of land and (1 183) - -
buildings revaluation reserve
Revaluation of properties - net - - 92 539
of deferred taxation
Fair value adjustment - listed (78 267) 91 711 65 202
investments
Fair value adjustment - (13 069) (24 993) (34 180)
preference shares and
instruments
Dividends paid - ordinary and (241 178) (218 590) (217 423)
preference shareholders
Dividends paid - minority (1 500) - (2 687)
shareholders
Balance at end of the period 3 756 971 3 441 061 3 782 582
COMMENTARY
Basis of preparation
The accounting policies adopted in the preparation of the interim financial
statements are in accordance with the requirements of International Financial
Reporting Standards (IFRS), which are consistent with the prior year, and IAS
34 on Interim Financial Reporting.
Comments
It is gratifying to report that the company has continued its unbroken
history of recording an improvement in profitability. This period has however
witnessed slightly subdued results during a time where, particularly in the
latter half, South Africa entered a completely different trading and economic
environment, brought on mainly as a consequence of the substantial increase
in interest rates and the introduction of the National Credit Act, which has
led to a sharp reduction in the spending ability of consumers.
The vast majority of the company`s revenue is obtained through providing
advertising space for its multitude of customers who too in turn were unable
to maintain previous spending patterns, and whilst growth in revenues were
achieved they were more modest than over the last few years. Business
generally has been negatively impacted by the increase in the cost of money.
Whilst it can be argued that inflation is public enemy number one, this is
true of a developed or mature economy and it is dubious, to say the least,
that in a developing economy, which has witnessed a dramatic increase in the
number of "first time" spenders, the action taken by the Reserve Bank could
be found to be inappropriate. Increases in interest rates are by their very
nature inflationary, and whilst it can be understood that by committing the
country to maintaining a band of inflation of between 3% and 6%, steps had to
be taken to support this commitment. However, time has shown that it has not
been possible to hold down inflation which has in fact been influenced by
factors beyond the control of the Reserve Bank, such as the prices of oil and
food.
More current events, which will be referred to later, have further negatively
influenced the mood of the consumer and the release of recent statistics show
that spending by consumers is subsiding.
Another important factor which has led to these results is that the spending
by the Education Authorities is substantially down on the previous year,
which saw the introduction and concomitant spending on the publishing for
three new grades. This year by virtue of only one remaining year of the
curriculum requiring introduction, spending will be a lot lower. This not
only impacts on the results of Maskew Miller Longman, but also on our book
printing operations who service not only the requirements of Maskew Miller
Longman, but in addition, a large number of other educational publishers.
Earnings
Turnover increased by 10,9% from R2 071,2 million, to R2 297,7 million
marginally ahead of inflation during the period. With the exception of the
Packaging Division where margins were under pressure, market share growth was
once again achieved by all divisions. The sale of magazines declined, which
resulted in no growth being recorded in the magazine distribution division.
Import costs were relatively stable due primarily to the strength of the
South African currency at that time.
Profit from operating activities was up by 5,4%, rising from R471,8 million
to R497,2 million.
Depreciation increased from R69,5 million to R81,5 million which reflects the
additional depreciation on the capital expended on plant and equipment in
recent times.
Net Finance Income, which includes the surplus on the realisation of
investments, rose to R79,5 million which is partly due to the increase in
interest rates where more favourable returns were earned on the company`s
cash and cash equivalents. Associated Companies, where a number of
investments have been made in recent years, showed further gains and amounted
to R12,9 million.
Profit before taxation therefore was R508,2 million and, after providing for
taxation, of R151,1 million, profit after taxation amounted to R357,2 million
which was a 7,6% improvement.
Minority Shareholders absorbed R5.3 million, a similar figure to that in the
comparable period. Earnings attributable to shareholders were R351,8 million
which is 7,1% up on those earned in the comparative period.
There was no change in the number of shares in issue during the period. 2 878
943 shares in the capital of the company were re-purchased and are held as
Treasury Shares which now total 17 291 269 shares.
Earnings per share were 73,7 cents, an improvement of 7,8% and diluted
earnings increased by the same percentage.
Headline earnings and diluted headline earnings amounted to 70,3 cents per
share, up by 9,9%.
Capital expenditure
The amount spent by the company over the last few years has been extensive
and was necessary to cater for the ever increasing needs of our customers and
to keep abreast of a number of technical enhancements. Whilst in most
divisions, the plant presently installed is sufficient to cater for demand,
on review it has been decided to further increase capacity in the newspaper
and web printing divisions.
The major newspaper factory, located in Industria, Johannesburg, has been
fortunate in acquiring property adjoining the present facility and a new
building is presently under construction wherein modern presses will be
installed and should be operational by the end of the calendar year.
Both the Web Off Set commercial printing operations in Johannesburg and Cape
Town are to be expanded, and a number of new presses and pre and post
production equipment have been purchased. Cape Town should be operational at
the end of March 2008 and Johannesburg in time for the increase in demand
over the busy Christmas trading period.
The company is committed to the future of the Print Media Industry and will
continue to invest therein to keep abreast of technological improvements and
the expanding and evolving requirements of our customers.
Cash flow
Cash and cash equivalents at 31 December 2007 amounted to R779 million,
substantially up on the equivalent holding at 31 December 2006 of R503
million. This resulted from the company`s profitable trading, and the sale of
certain investments. This notwithstanding additional shares in the company
which were repurchased at a cost of R48 million. Cash generated by operating
activities was substantially better at R251,8 million compared with only R6,2
million in the comparable period.
Dividends
In line with the company`s policy of only declaring a final dividend, no
interim dividend has been declared.
DIVISIONAL PERFORMANCE
Publishing, printing and distribution
Newspaper publishing and printing
There has been a sharp reversal in the fortunes of the daily and weekly
newspapers insofar as advertising revenues are concerned which is most
noticeable in the decrease in spend by national advertisers.
The positioning of the company in being predominantly involved in the
publishing of community papers, both free and paid for, has once again proved
to be invaluable whilst growth is not at the same level as in the past,
reasonable growth in advertising revenue has still been achieved.
Caxton Urban Newspapers experienced good growth and the roll out of these
papers into previously disadvantaged areas continues apace and large
circulation increases occurred.
All the regional printing factories have done better than anticipated and the
publishing opportunities surrounding their new printing facilities have
benefited from the installation of modern equipment and additional products
have been launched.
Whilst, as previously indicated daily papers are not having an easy time it
is most heartening to report further progress at "The Citizen", the regional
daily of the company where an enthusiastic and well led team are successfully
implementing new strategies with success.
Magazine publishing and distribution
As alluded to earlier this is not a bright spot at this point in time. Future
profitability remains of concern due to escalating competition in an
environment where advertising revenues are not growing and where the consumer
is under non-relenting economic pressure. The result is that circulations are
not growing, and in fact in many publications are falling.
The recent reduction in the value of the South African currency will mean
that printing costs will be increased, with a knock on effect on the shelf
price of magazines, thereby placing an even bigger burden on an embattled
consumer. It is anticipated that a number of marginal titles will have to be
closed.
RNA, which distributes magazines, has done well to hold profitability where
circulation revenues are not growing and a variety of cost increases,
particularly transport costs, due to the higher cost of fuel, have had to be
contended with.
All their major facilities have been extensively upgraded and the new
computer system is on track with testing having already commenced.
Commercial printing
Web printing
The extensive investment over the past few years is starting to pay off. New
efficient plant is operational which is resulting not only in operational
efficiencies, but also in the reduction of the cost base, and capacity has
become available especially during peak demand periods.
Turnover has increased, as has the trading margin notwithstanding the fierce
competition which still prevails. Returns are therefore, not at the level
that they should be at, but the improvement is rewarding.
As mentioned earlier, further presses are to be installed in Johannesburg and
Cape Town during the 2008 calendar year, which will place this division in an
even stronger position to cope with the requirements of a competitive and
demanding market.
Book printing
The nature of the customers` needs have changed quite dramatically over the
past period, mainly insofar as academic publishers are concerned, placing
further emphasis on the need to improve flexibility. This well run division
has responded to these challenges and the modifications required to handle
these changes will include the making available of additional factory and
warehousing space. With this in mind adjacent land has been acquired and
extensive new buildings and renovations will shortly commence.
Other
Academic publishing
Reference has already been made to the fall in profits of Maskew Miller
Longman, in which company 50% of the equity is held and the reasons therefor.
This extremely well run and profitable publisher continues to perform
according to budget expectations and has been successful in maintaining its
position as the foremost educational publisher in South Africa.
Packaging
In the previous year it was reported that this division did not trade up to
expectations. Whilst in certain areas better results have been achieved, the
unrelenting pressure on margins has resulted in lower volumes being
processed.
The new investment at S.A. Litho in Cape Town is proceeding according to plan
and good progress has already been made. An enthusiastic and competent
management team have produced results ahead of budget with further
improvements being anticipated once all the new equipment becomes
operational.
Stationery
Whilst this division continues to trade in a fiercely competitive
environment, good progress has been made in a growing market share and an
improvement in profitability was achieved. The joint venture in Impala Vuwa
Stationers in Ladysmith is already bearing fruit and further advancements are
anticipated.
Prospects
It is an awkward moment in time to predict future profitability. South Africa
appears to be entering into a new and difficult period in its history both
politically and economically. The "load shedding" of electricity by Eskom has
caused extensive damage to the customers and staff of the company and has
badly affected morale going forward, especially when one realises just how
long it is going to take to provide sufficient power to resume normal
production.
Generators are already installed in certain key areas and further generators
will shortly be installed at all facilities to ensure minimum disruption to
our customers.
It is now evident that trading by national retailers and wholesalers over the
festive season did not meet expectations and this in all likelihood will
result in a paring of advertising budgets going forward.
Consumers have not for many years been as pressurised as they are at the
moment in having to meet their obligations on repayments for their mortgages
and other debts and inflation is now up to 8%.
South Africa is not an island and with the "sub-prime" contagion spreading
internationally, emerging markets are again under the spotlight and the Rand
has dropped in value. This has resulted in economists and analysts
forecasting that the growth rate for the country originally predicted at 6%,
is now a pipe dream. This will further impact on employment and the level of
crime which is already out of control.
Whilst all steps will be taken to ensure that the company trades as well as
possible during this turbulent period, it would be irresponsible to attempt
to project what all the aforegoing will mean over the next six months.
By order of the Board
Dr F van Zyl Slabbert (Chairman)
G M Utian (Managing Director)
T D Moolman (Chief Executive Officer)
Johannesburg
19 February 2007
Dr F van Zyl Slabbert* (Chairman), T D Moolman (Chief Executive Officer), G M
Utian (Managing Director), A C G Molusi*, F T Gatefield*, P G Greyling, T J W
Holden, P M Jenkins*, P Vallet*, A N Nemukula* (* Non-executive directors)
Registered office:
28 Wright Street, Industria West Johannesburg, 2093
sponsor
Sasfin Capital
Date: 19/02/2008 15:39:01 Produced by the JSE SENS Department.
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