| Wed 27 Aug 2008, 16:46 | | CAT - Caxton and CTP Publishers and Printers Limited - Reviewed abridged results |
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CAT CATP
CAT
CAT - Caxton and CTP Publishers and Printers Limited - Reviewed abridged results
for the year ended 30 June 2008
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
REVIEWED ABRIDGED RESULTS FOR THE YEAR ENDED 30 JUNE 2008
Highlights
Turnover up by 8,4%
Headline earnings up by 11,1%
Cash resources R1 035 million
CONSOLIDATED INCOME STATEMENTS
Reviewed Audited
abridged
for the year for the year
R`000 to 30 June to 30 June
2008 2007
Turnover 4 342 732 4 006 416
Other operating income 95 801 80 205
4 438 533 4 086 621
Changes in inventories (23 106) (22 167)
Raw materials and consumables used 1 508 192 1 334 044
Staff costs 809 340 748 861
Other operating expenses 1 250 117 1 168 949
Total operating expenses 3 544 543 3 229 687
PROFIT FROM OPERATING ACTIVITIES 893 990 856 934
Depreciation 167 012 151 597
PROFIT FROM OPERATING ACTIVITIES AFTER 726 978 705 337
DEPRECIATION
Impairment 75 128 42 989
NET PROFIT FROM OPERATING ACTIVITIES 651 850 662 348
Finance income 201 706 148 779
- dividends 85 906 51 655
- interest 32 890 31 198
- surplus on realisation of 82 910 65 926
investments
Income from associates 22 798 19 123
PROFIT BEFORE TAXATION 876 354 830 250
Taxation 212 036 210 837
PROFIT AFTER TAXATION 664 318 619 413
Attributable to minority interest 9 330 8 325
Attributable to equity holders of 654 988 611 088
parent
Earnings per share (cents) 139.1 127.2
Diluted earnings per share (cents) 139.1 127.0
Headline earnings per share (cents) 135.2 121.7
Diluted headline earnings per share 135.2 121.6
(cents)
Preference dividend paid 229 206
Reconciliation of headline earnings:
Earnings attributable to equity 654 988 611 088
holders of parent
Adjusted for non-trading items (18 266) (26 212)
Surplus on realisation of investments (82 910) (65 926)
Net impairment in value of property, 75 128 42 989
plant and trade marks
Net profit on disposal of property, (1 466) (518)
plant and equipment
Tax effect on above adjustments (9 018) (2 757)
Headline earnings 636 722 584 876
Number of shares in issue 495 639 628 494 939 628
Weighted average number of shares 495 172 961 494 939 628
Treasury shares (24 183 157) (14 611 141)
Earnings per share based on 470 989 804 480 328 487
Add: Share options outstanding - 700 000
Diluted earnings per share based on 470 989 804 481 028 487
Reviewed Audited
abridged
Abridged segmental for the year % for the year %
analysis
to 30 June 2008 to 30 June 2007
Revenue
Publishing, printing 4 002 034 92 3 604 023 90
and distribution
Other 1 106 406 25 1 147 609 29
Inter-group sales (765 708) (17) (745 216) (19)
4 342 732 100 4 006 416 100
Operating income
Publishing, printing 471 373 72 480 265 73
and distribution
Other 180 477 28 182 083 27
651 850 100 662 348 100
CONSOLIDATED BALANCE SHEETS
Reviewed Audited
abridged
R`000 30 June 2008 30 June
2007
ASSETS
NON-CURRENT ASSETS
PROPERTY, PLANT AND EQUIPMENT 1 955 742 1 801 710
ASSOCIATED COMPANIES 98 193 83 691
OTHER INVESTMENTS AT FAIR VALUE 461 493 670 178
- LISTED 50 590 259 275
- UNLISTED 410 903 410 903
CURRENT ASSETS
INVENTORIES 694 512 588 133
ACCOUNTS RECEIVABLE 770 579 721 427
TAXATION 1 215 1 732
CASH 222 473 454 229
BANK PREFERENCE SHARES AND OTHER
INSTRUMENTS
AT FAIR VALUE 812 538 533 279
- LISTED 302 538 333 279
- UNLISTED 510 000 200 000
TOTAL ASSETS 5 016 745 4 854 379
EQUITY AND LIABILITIES
EQUITY 3 930 666 3 782 582
ORDINARY SHAREHOLDERS` EQUITY 3 911 039 3 765 779
PREFERENCE SHAREHOLDERS 100 100
MINORITY INTEREST 19 527 16 703
NON-CURRENT LIABILITIES
DEFERRED TAXATION 246 931 272 477
CURRENT LIABILITIES
ACCOUNTS PAYABLE 641 280 637 816
PROVISIONS 122 557 108 734
TAXATION 75 311 52 770
TOTAL EQUITY AND LIABILITIES 5 016 745 4 854 379
Net asset value per share (cents) 835 787
Directors` valuation of unlisted 509 096 494 594
investments and associated companies
Capital expenditure 407 737 305 495
Capital expenditure committed 201 000 250 000
Cash and cash equivalents at fair value 1 035 011 987 508
CONSOLIDATED CASH FLOW STATEMENTS
Reviewed Audited
abridged
for the year for the year
R`000 to 30 June 2008 to 30 June 2007
CASH FLOW FROM OPERATING 445 925 302 102
ACTIVITIES
Cash generated by operations 883 354 850 786
Changes in working capital (125 662) (224 844)
Cash generated by operating 757 692 625 942
activities
Less: Taxation paid (184 506) (186 583)
Net interest received 32 890 31 198
Dividends received 85 906 51 655
Net cash inflow from operating 691 982 522 212
activities
Dividends paid (246 057) (220 110)
CASH FLOW FROM INVESTMENT (233 874) (104 511)
ACTIVITIES
Property, plant and equipment
- additions to expand operations (407 737) (305 495)
- proceeds from disposals 12 380 29 429
(395 357) (276 066)
Investments
- disposal/(acquisitions) at cost 18 755 (6 979)
- proceeds from disposals 142 728 178 534
CASH FLOWS FROM FINANCING (133 808) (35 828)
ACTIVITIES
Shares issued 3 507 -
Own shares acquired (137 315) (35 828)
Net increase in cash and cash 78 243 161 763
equivalents
Cash and cash equivalents at 984 265 822 502
beginning of the year
Cash and cash equivalents at end 1 062 508 984 265
of the year
Fair value adjustment of (27 497) 3 243
preference shares and other
instruments
Fair value of cash and cash 1 035 011 987 508
equivalents at end of the year
Note:
Cash 222 473 454 229
Preference shares and other 812 538 533 279
investments at fair value
Fair value of cash and cash 1 035 011 987 508
equivalents at end of the year
STATEMENTS OF CHANGES IN EQUITY
Reviewed Audited
abridged
R`000 30 June 30 June
2008 2007
Balance at beginning of the year 3 782 582 3 296 007
Attributable earnings 664 318 619 413
Minority interest acquired - (461)
Foreign currency translation reserve 3 414 -
Shares issued 3 507 -
Share trust consolidation - 369
NDR realised on disposal of land and (652) -
buildings
Treasury shares (137 315) (36 197)
Revaluation of properties - net of deferred - 92 539
taxation
Fair value adjustment - listed investments (112 711) 65 202
Fair value adjustment - preference shares and (26 420) (34 180)
instruments
Dividends paid - ordinary and preference (239 550) (217 423)
shareholders
Dividends paid - minority shareholders (6 507) (2 687)
Balance at end of the year 3 930 666 3 782 582
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) and IAS 34 on Interim
Financial Reporting, save for the adoption of IFRS 7 (Financial Instruments -
Disclosure), which are consistent with the prior year. This is a disclosure
standard which has no impact on the recognition or measurement of financial
instruments and consequently has no impact on profit or loss for the year.
Comments
The company has produced satisfactory results during a period that has been one
of the most turbulent and difficult, economically and politically, that has ever
been experienced. So much has been written and discussed on these subjects that
little purpose would be served by dwelling or expanding thereon. It is
sufficient to state that this has been a testing time for management who have
performed remarkably well.
Consumers, particularly in the middle to lower income groups, are literally
"punch drunk" and continuing bad news appears to be the order of day. Inflation
and interest rates are running at extremely high levels and this has had the
effect of consumer spending being reduced in a major way. This has the knock on
effect of reducing advertising expenditure on which the company is heavily
reliant.
What has been heartening over this period is to observe how wasteful expenditure
on advertising has been minimised with advertisers relying more and more on
trusted media products which work for them by delivering expectations. It is in
this development that the company has achieved success due to the strength of
its products and the loyal following that has been built up over many years.
A number of factors are appearing for the first time in quite a while which seem
to indicate that the worst of the problems are waning and that conditions could
start improving. It will however be a slow journey back and it is anticipated
that difficult trading conditions could endure for the next 18 months.
Fortunately the company is reaching the end of its substantial capital
expenditure programme which has been in place for many years. With the exception
of the completion of a new newspaper factory, which is being equipped with
highly efficient equipment in Industria, and the installation of a modern and
highly developed web offset press in Isando, the level of future capital
investment over the foreseeable future will be minimal.
Earnings
Turnover has grown from R4 006,4 million to R4 342,7 million which is an
increase of 8,4%. Margins have remained under pressure for the entire period
which resulted in profit from operating activities increasing by the lower
percentage of 4,3% from R856,9 million to R893,9 million.
Depreciation has risen in line with the investment in capital equipment from
R151,6 million to R167 million. Resulting from the installation of new equipment
and in line with our policy of reviewing the value and remaining life of
installed equipment, R75,1 million has been written off by way of impairment
which compares to R42,9 million in the previous year.
The pressure on margins has resulted in the profit from operating activities
after depreciation, but before impairments as a percentage of turnover having
marginally decreased from 17,6% to 16,7% which is still considered a highly
satisfactory result.
Net finance income which includes an R83 million surplus on the realisation of
investments - last year R66 million - rose to R201,7 million, up on the R148,8
million earned in the previous year. This was primarily due to the increase in
the rate of interest earned on the company`s liquid cash investments.
The company`s many associates all had a good year and the company`s share of
their profits improved from R19,1 million to R22,8 million.
Profit before taxation was R876,3 million, up 5,6% on that achieved last year of
R830,3 million.
Taxation was up from R210,8 million to R212,0 million which equated to an
effective rate of 24,2%, down from last year of 25,3% primarily as a result of
the decrease in the rate of company taxation in the latest budget.
After providing for profits attributable to minority shareholders, earnings were
R654,9 million compared to R611,1 million, a satisfactory improvement of 7,2%.
During the year 9 634 516 additional shares in the company were repurchased at a
cost of R137,3 million and are held as Treasury Shares, bringing the total
number of Treasury Shares presently held to 24 183 157.
Earnings per share amounted to 139,1 cents compared to 127,2 cents, up by 9,3%
and Headline Earnings per share rose from 121,7 cents to 135,2 cents, an
increase of 11,1%.
Capital expenditure
This year saw the considerable sum of R407,7 million having been expended on a
variety of new buildings and plant. As mentioned earlier the level of spending
in future years will be considerably lower with the exception of the
finalisation of the two major projects currently under construction, both of
which will become operational in 2009 and where a further R201 million will
still be spent. There is now more than sufficient efficient capacity in all of
the company`s operations throughout the majority of divisions to cope with
expansion which will inevitably take place.
Cash flow
Cash and cash equivalents amounted to R1 035,0 million notwithstanding the
investment in new capital assets and treasury shares during the year. This
figure is very much in line with cash and cash equivalents at the end of the
previous year of R987,5 million.
R883,3 million was generated in cash from operations and working capital
increased by R125,6 million. The proceeds on the disposal of investments
amounted to R142,7 million.
Divisional performance
In a tough trading environment, particularly during the latter part of the
financial year, all divisions traded relatively well having regard to the change
in circumstances which have occurred.
PUBLISHING, PRINTING AND DISTRIBUTION
Newspaper publishing and printing
The company remains in a fortunate position in that the majority of the revenue
which it earns in this division is derived through investment in free community
and regional newspapers. Whilst expenditure on advertising has decreased, the
extent of the decrease has not been as noticeable as that which has taken place
in daily and weekly sold newspapers.
Relevant editorial content coupled with effective distribution has enabled these
newspapers to improve their standing and continue to provide good value to
advertisers.
Despite the absence of growth, further progress has been made in new products
and there are a number of exciting opportunities presently being investigated.
The property and motoring sections of the newspapers have borne a
disproportionate brunt of the pull-back in advertising as these two areas have
been massively and negatively influenced by the large rise in interest rates and
inflation in general.
Further launches have taken place with good success in the Protea Urban
Newspaper division.
"Get It", which is a monthly glossy magazine, has made good progress and has
established itself as a firm favourite among readers and advertisers alike.
There are now a total number of 27 editions with a circulation in excess of 400
000 and as this product is still in a development phase, further additions and
circulation growth can be anticipated.
Progress is also being made in creating alternative platforms such as digital
and internet initiatives, to support and leverage the newspapers in the
communities in which they operate.
The major newspaper facility, located in Industria in Johannesburg, had a
reasonable year and as alluded to earlier, is in the process of erecting a new
building to house a state-of-the-art new press and ancillary equipment purchased
to provide additional capacity for its customers. This facility will provide
customers with new alternatives and will substantially improve efficiencies. It
is estimated that the new press will be commissioned early in the new calendar
year.
A number of new newspapers have been published and despite the present economic
climate, opportunities for launching new products will continue into areas where
such expansion is warranted.
"The Citizen", the company`s daily newspaper, has done well during the year and
has established a firm niche position in what is an overtraded market. Despite
the launch of new opposition products it traded well and increased its share of
the advertising market.
A joint venture in Port Elizabeth has experienced a number of teething problems,
mainly of a technical nature, which has resulted in a disappointing result well
below budget.
Magazine Publishing and Distribution
Driven primarily by the pressure placed on the consumer in a highly inflationary
environment and the massive increase in the price of fuel, it was inevitable
that resistance would be encountered from readers who are unfortunately buying
fewer magazines. As a direct result of the fall in the value of the Rand,
coupled with the high level of local inflation which is now in excess of 10%,
printing prices of magazines and other printed material have increased resulting
in publishers having to increase their newsstand price to maintain viability.
This has obviously been an aggravating factor in the reduction in magazine
sales.
The company`s share of the advertising market has been increased but advertising
spend is anything but buoyant.
All this has impacted negatively on the profits of this division where budgeted
expectations were not achieved.
Competition continues to be fierce but given the present position it is
anticipated that the number of new entrants to this arena will reduce and in
fact a number of opposition products have already closed down their operations
and more could follow.
One of the major problems still facing the industry remains the effectiveness of
the distribution channel. Over the past number of years retail supermarkets have
been the main sellers of magazines and yet they still do not devote enough time
and attention to understanding the importance of the sales of magazines for
them. Consequently too little selling space is devoted to magazines within the
individual stores and merchandising is poor. There continue to be far too many
titles competing for an insufficient amount of retail selling space. Previous
reference has been made to this problem, but it is urgent that the problem be
addressed.
RNA, the magazine distribution arm, produced reasonable results in an
environment of falling sales exacerbated by having to cope with increased costs.
As a major distributor they have had to contend with the impact of higher fuel
costs which affects their entire operation, which is heavily dependent on
transport.
Nevertheless this well managed and efficient operation delivers consistent
results, thereby benefiting its various publishing customers. The physical
development phase of their branches is now complete and the new facilities are
impressive. Further investments continue to be made on the management and
administration front in an endeavour to assist customers in a challenging
environment.
Commercial Printing
Web and Gravure Printing
The year witnessed a period of consolidation with only the Cape Town web offset
facility being substantially upgraded and modernised. At present an additional
and very advanced large format press is being installed in the Johannesburg web
factory and will be operational at the end of the calendar year together with
new pre and post press equipment which is also being installed. This will bring
to an end the major capital programme that this division had embarked upon some
years ago.
Resulting from this expenditure, the company has superb web offset and gravure
operations in all the major centres, namely Johannesburg, Cape Town and Durban
and has the capacity to fulfil its customers` requirements especially during
peak periods. Furthermore, with the network of facilities, transport costs,
which have become more and more important as the cost of fuel increases, can be
minimised for customers.
Whilst margins continue to be extremely competitive it is pleasing to report
that this division improved its volumes and profitability to a more acceptable
level albeit not at a level which would be commensurate with the investment
which has been made.
Book Printing
The major portion of the activities of this extremely efficient and well run
division relates to the printing of books for academic education publishers and
the printing of diaries. Now that the change in the curriculum for schools has
been implemented, the requirements of educational publishers have somewhat
altered. Whereas in the past there was a requirement for a substantial number of
books to be printed, what now happens is that publishers only require small
quantities to be printed. In anticipation and reaction to this change, major
expenditure has been incurred on the upgrading and installation of more
versatile presses and supporting equipment which was completed during the year
under review. The vast and versatile array of equipment that is installed allows
CTP Books, situated in Cape Town, to provide a unique service to its many
clients coupled with excellent products. Additional warehouses are presently
being built to alleviate congestion and provide for growth opportunities and
should shortly be completed.
Good results were achieved and budgets were met. Future profitability will be
very much dependent on the quantum of spend allocated by the Provinces to
educational books.
OTHER
Academic Publishing
There was a significant reduction in the profits of Maskew Miller Longman due to
the introduction of the final two grades of the curriculum compared to three
grades that were introduced during the previous year which resulted in lower
levels of spending by the various Provincial education departments. The company
nevertheless continues to make good strides into all other areas in which it
operates and had a particularly successful year in its Southern African division
which operates as "Longman". It remains the foremost educational publisher in
Southern Africa.
Packaging
It is gratifying to be able to report that this previously troubled area of the
company`s overall operations has settled down and results are improving. During
the year under review a number of competitors sold products at unrealistic
prices which resulted in volumes decreasing in a number of business units.
However, there is evidence of a more pragmatic view coming through from
opposition companies as selling prices are now increasing, being driven by
substantially higher input costs.
SA Litho, the label division situated in Cape Town, installed a number of new
items of equipment and produced excellent results well in excess of budget.
Stationery
Competitive conditions in this area of operations have not altered during the
year but despite the pressure on margins, the profits which were achieved were
very much in line with budgets. Market share was again improved and the new
Joint Venture in Ladysmith in Impala Vuwa Stationers had a reasonable inaugural
year.
Review by Independent Auditors
The company`s auditors, PKF (JHB) Inc. have reviewed these results. Their
unqualified review is available for inspection at the registered office of the
company.
Dividends
The board has declared a dividend of 52 cents (2007 - 50 cents) per share
payable to ordinary shareholders and a preference dividend of 464 cents (2007 -
445 cents) per preference share to preference shareholders. To comply with the
procedures of STRATE the following dates are applicable.
Date dividend declared: Wednesday, 27 August 2008
Last date to trade "cum" dividend: Friday, 17 October 2008
Date to commence trading "ex" Monday, 20 October
dividend:
2008Record date: Friday, 24 October 2008
Date of payment: Monday, 27 October 2008
Share certificates may not be dematerialised or rematerialised between Monday,
20 October 2008 and Friday, 24 October 2008, both days inclusive.
Prospects
The current economic environment is not conducive for consumers to increase
their spending. In fact, the opposite is much more evident. This is also very
much in line with the strategy being adopted by the Reserve Bank who are
determined to dampen consumer demand, thereby taking pressure off inflation
which is at an extremely high level. It is also not anticipated that interest
rates, which may have peaked, will reduce much before the middle of 2009.
Regrettably it is not possible for the company to trade up to its level of
capability when external economic conditions are so poor. The company has an
extremely competent and loyal staff and excellent facilities which, together
with its impressive titles, positions it well to improve profitability as and
when conditions ease. It is however not anticipated that the present economic
crunch will ease up much before the end of 2009.
In the circumstances it would be imprudent to attempt to make any projections
for the future as there is a strong possibility that the company will be hard
pressed to achieve similar results to those that have just been reported on.
By order of the Board
Dr F van Zyl Slabbert (Chairman)
G M Utian (Managing Director)
T D Moolman (Chief Executive Officer)
Johannesburg
27 August 2008
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: 27/08/2008 16:46:01 Produced by the JSE SENS Department.
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