| Mon 22 Sep 2008, 16:30 | | KGM - Kagiso Media - Audited results for the year ended 30 June 2008 |
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KGM
KGM
KGM - Kagiso Media - Audited results for the year ended 30 June 2008
Kagiso Media Limited (Registration number 1957/000036/06)
("Kagiso Media" or "the group" or "the company")
Share code: KGM ISIN: ZAE000014007
AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2008
Revenue up 14%
Headline earnings up 23%
Cash generated from operating activities up 23%
Final dividend 24 cents per share
CONSOLIDATED INCOME STATEMENTS FOR THE YEAR ENDED
30 June 30 June
2008 2007
(Audited) (Audited) Change
R`000 R`000 %
Continuing operations
Revenue 841 597 738 307 14
Other income 10 266 28 934
Raw material and consumables (152 214) (154 222)
Commission and levies (118 372) (105 409)
Employee costs (118 920) (107 959)
Marketing and programming (22 717) (19 003)
expenses*
Professional and consulting fees* (14 752) (14 575)
Rental and management fees* (46 526) (24 825)
Depreciation (11 697) (8 163)
Amortisation (28 754) (20 953)
Other expenses (70 262) (75 874)
Operating profit 267 649 236 258 13
Finance income 15 126 10 333
Finance expenses (23 245) (20 150)
Share of results of associates 12 055 9 992 21
Profit before income tax 271 585 236 433 15
Income tax expense (96 835) (93 612) 3
Profit for the year from 174 750 142 821 22
continuing operations
Discontinued operations
Loss after tax for the year from (630) (162)
discontinued operations
Profit for the year 174 120 142 659 22
Attributable to:
- Equity holders of the company 159 025 129 810 23
- Minority interest 15 095 12 849 17
174 120 142 659 22
*Comparative numbers have been reallocated from "other expenses" where it was
disclosed in 2007.
CONSOLIDATED CASH FLOW STATEMENTS
30 June 30 June
2008 2007
(Audited) (Audited)
R`000 R`000
Cash flows from operating activities
Cash generated from operations 270 529 257 335
Finance expenses paid (496) (5 784)
Income tax paid (106 614) (97 079)
Dividends paid to shareholders (70 743) (85 137)
Dividends paid to minorities (14 736) (13 000)
Dividends paid to preference shareholders (22 115) (11 033)
Net cash generated from operating activities 55 825 45 302
Cash flows from investing activities
Acquisition of subsidiaries, net of cash - (127 023)
acquired
Acquisition of joint ventures, net of cash (15 682) (47 459)
acquired
Purchases of property, plant and equipment (13 838) (10 790)
("PPE")
Proceeds from sale of PPE 269 167
Purchases of intangible assets (2 440) (2 475)
Investment in preference shares (15 750) -
Preference shares redeemed 1 050 -
(Repayment of loans)/loans from associates (5 226) 1 442
Finance income received 13 547 10 333
Preference dividend received 1 579 -
Dividends received from associates 8 619 6 731
Net cash used in investing activities (27 872) (169 074)
Cash flows from financing activities
Proceeds from issue of ordinary shares 1 488 2 052
Proceeds from the issue of preference shares - 244 498
Proceeds from borrowings 2 125 14 653
Repayment of borrowings (49) -
Repayment of preference shares (25 423) (109 994)
Movement in loans receivable 14 175 4 801
Net cash (used in)/generated from financing (7 684) 156 010
activities
Net increase in cash and cash equivalents 20 269 32 238
Cash and cash equivalents at the beginning of 117 574 85 336
year
Cash and cash equivalents at the end of the year 137 843 117 574
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR YEAR ENDED
30 June 30 June
2008 2007
(Audited) (Audited)
R`000 R`000
Equity at the beginning of the year 365 163 365 735
Ordinary shares issued in terms of the share 1 488 2 052
option scheme
Profit for the year 174 120 142 659
Employee costs: share option scheme 295 905
Reversal of share based payment liability - 813
Acquisition of minority interests - (48 864)
Dividends paid (85 479) (98 137)
455 587 365 163
CONSOLIDATED BALANCE SHEET AS AT
30 June 30 June
2008 2007
(Audited) (Audited)
R`000 R`000
Assets
Non-current assets 612 741 595 400
Property, plant and equipment 30 937 29 284
Intangible assets 327 529 351 570
Goodwill 147 777 124 999
Investment in associates 55 734 48 893
Deferred income tax assets 36 064 26 479
Loans receivable 14 700 14 175
Current assets 369 990 304 915
Inventories 13 849 17 094
Trade and other receivables 215 230 168 182
Loans receivable 3 068 2 065
Cash and cash equivalents 137 843 117 574
Assets classified as held for sale 2 672 -
Total assets 985 403 900 315
Equity
Capital and reserves attributable to equity
holders of the group
Ordinary share capital 1 335 1 331
Share premium 13 334 11 850
Revaluation and other reserves 88 335 88 040
Retained earnings 307 150 218 868
Total shareholders` equity 410 154 320 089
Minority interest 45 433 45 074
Total equity 455 587 365 163
Liabilities
Non-current liabilities 311 465 338 716
Borrowings 209 222 234 259
Deferred income tax liabilities 102 243 104 457
Current liabilities 218 226 196 436
Trade and other payables 178 368 164 985
Borrowings 23 963 16 189
Income tax liabilities 15 895 15 262
Liabilities directly associated with assets
classified as
held for sale 125 -
Total liabilities 529 816 535 152
Total equity and liabilities 985 403 900 315
RECONCILIATION OF HEADLINE EARNINGS
30 June 30 June
2008 2007
(Audited) (Audited) Change
R`000 R`000 %
Profit for the year attributable 159 025 129 810 23
to equity holders
Impairment of goodwill 670 252
(Profit)/loss on sale of (87) 102
property, plant and equipment
Headline earnings 159 608 130 164 23
Headline earnings per share 119,7 97,9 22
Diluted headline earnings per 119,3 97,6 22
share
Earnings per share - continuing
operations
Earnings per share (cents) 119,7 97,8 22
Diluted earnings per share 119,4 97,5 22
(cents)
Loss per share - discontinuing
operations
Loss per share (cents) (0,5) (0,1) -
Diluted loss per share (cents) (0,5) (0,1) -
Shares used in calculations
Number of shares in issue (`000s) 133 507 133 136 -
Weighted average number of shares 133 389 132 954 -
in issue (`000s)
Weighted average number of shares 133 756 133 366 -
in issue for diluted earnings per
share (`000s)
Dividend per share (cents)
Final dividend in respect of the 24 18 33
year under review
Interim dividend 35 31 13
Total dividend 59 49 20
SEGMENTAL ANALYSIS
Revenue
(R`000) 2008 2007
Central services 2 315 2 174
Broadcasting 476 234 411 830
Information services 187 618 153 868
and solutions
Outdoor 44 250 14 314
Exhibitions and events 131 180 156 121
Total 841 597 738 307
*Attributable to equity holders of the company
SEGMENTAL ANALYSIS
Operating profit/ Profit/(loss)*
(loss)
(R`000) 2008 2007 2008 2007
Central services (22 954) (22 514) (52 542) (58 090)
Broadcasting 242 397 211 738 176 524 152 566
Information services
and solutions 58 372 47 761 44 659 35 438
Outdoor 4 774 780 2 205 433
Exhibitions and events (14 940) (1 507) (11 821) (537)
Total 267 649 236 258 159 025 129 810
*Attributable to equity holders of the company
COMMENTARY
1. Income statement
1.1 Introduction - Kagiso Media achieved an increase in revenue and operating
profit of 14% and 13% respectively. The profit for the year, attributable to the
company`s equity owners, increased by 23%.
The high quality of the group`s earnings contributed to the healthy cash balance
of R137,8m as at 30 June 2008. A final dividend of 24 cents per share has been
declared and together with the interim dividend amounts to 59 cents for the full
year.
1.2 Revenue - Revenue grew by 14% over the comparative period. Broadcasting
increased by 16%, driven by revenue growth from both East Coast Radio and
Jacaranda FM of 14% and 16% respectively. Revenue from LexisNexis improved by
22%, while the Kagiso Exhibitions and Events group`s ("KEE") revenue decreased
by 16%. The biennial show, namely Auto Africa which contributed R35,5m in 2007
was not staged during 2008. Revenue for Clear Channel Merafe (Proprietary)
Limited ("CCM") has been included in the results from the effective date of 1
April 2007 and contributed R44,2m (2007 - R14,3m) to the revenue for the group
(twelve and three months respectively).
1.3 Operating profit - The operating profit margin for the broadcasting division
remained stable at 51%, which is deemed to be highly competitive for stations
with a similar footprint and functioning in comparable market sectors.
At LexisNexis the operating profit margins was maintained at 31% despite
investments made in staff and new business development areas.
KEE was not able to realise its potential and reported an 11% operating margin
loss. Included in these results were the write-off of the trade names for Auto
Africa and Saitex, the goodwill allocated to Auto Africa as well the impairment
of stand building equipment in the wholly owned subsidiary, Kagiso Exhibitions
and Events Solutions (Proprietary) Limited. All of the above totalled R4,8m.
CCM contributed R4,8m (2007 - R593 000) to the group`s operating profit. This
reflects income for twelve months compared to three in 2007.
1.4 Finance income and expenses - Interest was earned on the surplus cash
resources as well as on the investment in preference shares in MSG Afrika Media
(Proprietary) Limited. The terms of the preference structure mirrors that of
Kagiso Media and preference dividends of R1,6m were included in finance income.
No new preference shares were issued by Kagiso Media during 2008. The increase
in the interest rates during the reporting period as well as interest being
recorded for a full 12 month period on the total issued preference shares,
contributed to the increase from R20,1m to R23,2m.
1.5 Income tax expense - The income tax charge decreased from 39,6% of profit
before tax to 35,7%. The decrease was attributable to the decrease in the normal
tax rate as well as a decrease in the Secondary Tax on Companies ("STC") charge
from R20,1m in 2007 to R13,5m in 2008. The latter is due to the decrease in the
rate as well as the decrease in dividends paid to shareholders.
1.6 Minorities` share of profits - Minorities` profits increased by 17% based on
the increased performance at Jacaranda 94.2 and Kagiso Outdoor.
2. Balance sheet and cash flow - At the commencement of the financial year, the
group`s cash resources amounted to R117,6m. During the year, the operations
generated R163,4m after finance expenses and tax. No new funding was required
during the year. Of the available cash resources, R13,8m was applied towards the
replacement of fixed assets, R15,7m towards investments in joint ventures while
R107,6m was distributed to the group`s ordinary and preference shareholders by
means of dividends. As at 30 June 2008, the cash reserves stood at R137,8m. Cash
flow remains strong which enables the group to raise further debt to fund future
acquisition opportunities that may arise.
Working capital requirements, excluding cash and cash equivalents, increased by
R38m, mainly due to increased activities at KEE over year-end. An exhibition is
being staged in Zaragoza, Spain, which contributed R18,0m revenue to the group
in 2008; R9,9m of this was outstanding at the end of the reporting period.
Activities around JIMS, the Johannesburg International Motor Show, a biennial
show to be staged on October 2008 in partnership with NAAMSA, the National
Association of Automobile Manufacturers of South Africa, was also starting to
increase. Increased operational activities at all other entities resulted in the
corresponding increase in normal working capital requirements.
Kagiso Media elected to redeem preferences shares during the year to the value
of R25,4m. The remaining preference shares are redeemable in the 2012 financial
year.
3. Review of operations
3.1 Central services - The cost of the preference shares and the group`s share
of STC in all the subsidiaries, joint ventures and associates are allocated to
the central services segment so as not to distort the performance of individual
business segments. The central services segment made a loss after tax of R52,5m
(2007: R58,2m). STC decreased by R6,6m on the base of the decreased dividend
payment to ordinary shareholders. Finance income received increased by R2,8m.
This benefit was offset by an increase in resources at head office and a R1,5m
investment in Kagiso Interactive ("KI"), an initiative to grow the new media
component of the group. Kagiso Media is in the process of recruiting a
specialist human resource advisor to assist with employee related strategies
including training, development and retention programmes for all of the entities
in the group.
3.2 Broadcasting - Over the past year, considerable progress has been made
towards achieving the set strategic objective of broadening and deepening Kagiso
Media`s ability to develop content. Key achievements in this regard were the
acquisition of Urban Brew Studios (the group is awaiting Competition
Commission`s approval) and the launch of Kagiso Media`s first stand alone
`social media` driven online property namely www.skit.co.za.
The radio stations significantly improved their ability to leverage their brands
and content on other media platforms with specific content available via mobile
phones and online. The joint acquisition of Acceleration Media with Lagardere
Active Radio International, the French media company which has a considerable
presence in traditional and digital media in key markets internationally, helps
position Kagiso Media in internet advertising, the fastest growing advertising
segment in the world.
In the past year Jacaranda 94.2 has been considerably strengthened through new
programming and initiatives. Kaya, iGagasi and OFM all experienced growth in
this period. East Coast Radio pioneered the group`s efforts to show how radio
complements and benefits from creative concepts deployed across multiple
platforms. Heart 104.9 had a tumultuous year, however the year ended with the
station reaching its highest ever audience over 7 days.
The Radio Audience Measurement Survey (RAMS) for March to June 2008 shows that
Kagiso Media`s portfolio of radio stations provide advertisers with access to
8,3m listeners a week across the country, providing the largest reach of any of
the private radio groups in South Africa. This high reach across desirable
audience segments has once again seen Kagiso Media radio stations attract the
largest share of commercial radio adspend (Adex: July 2007-30 June 2008).
East Coast Radio 94-95fm: Durban`s No.1 Hit Music Station: has been at the
forefront of Kagiso Media`s multimedia approach to the radio business. Apart
from winning in five categories at the South African Blog Awards, the station
launched a Valentine`s Day project that is a seminal example of how radio
stations should operate in an environment with multiple distribution channels
and where audiences increasingly expect access to content on multiple devices
and at their convenience. The success of this promotion on air and on other
media confirmed how effectively radio complements new and traditional platforms.
Revenue at the station improved by 14% and its operating margin was maintained
at 56,6%, on a comparative basis.
Jacaranda 94.2: Life`s Greatest Hits is South Africa`s largest privately held
radio station in terms of audience, with a footprint covering parts of Gauteng,
Limpopo, Mpumalanga and the North West provinces. The station`s audiences have
grown 8% year-on-year, with 20% growth in Gauteng which is the station`s core
market category. In the period, three new radio stations began operating in
markets where Jacaranda operates off a transmitter split under the Jacaranda
RMfm brand name. None of these new stations had a negative impact on Jacaranda
or Jacaranda RMfm either in terms of listenership or revenue. Except in
Nelspruit, the remaining stations are sufficiently differentiated from
Jacaranda`s format to have a minimal impact on station audiences and revenues.
The station`s revenue increased by 16% and the operating profit margin was 44,3%
for the year under review, on a comparative basis.
OFM: The sound of your life: Its audiences stabilised around 537 000 on a weekly
basis. The core market audience remains loyal. National revenue came under
pressure, however local direct sales continued to grow as a proportion of total
revenue and remained robust over the year. As a result of the successes at the
local level, the station aggressively pursued transmitter splits to two other
markets (Northern Cape and North West/Vaal) and intends pursuing new
opportunities in listenership and revenue in those markets hoping to replicate
its direct sales success elsewhere in its footprint. The station`s local print
platforms will have a new schools` sports newspaper added to the portfolio. A
distinct dedicated sales team sells the print media offerings.
Kagiso Media has a 25,1% indirect economic interest in Kaya FM: Good music, good
friends, a Gauteng based radio station. This strategic stake positions the group
in the most lucrative advertising market in the country and provides it with
exposure to the rapidly expanding black middle class.
Heart 104.9: Cape Town Soul has had its most challenging year since Kagiso Media
acquired its 33% economic interest in the business. The station was defrauded of
about R9,5m and also had a run of poor audience numbers, resulting in national
sales becoming a challenge. The good news from the station was the reversal of
the declining audience trend in June 2008 when Heart 104.9 registered its
highest ever listenership of 646 000, a gain of 24% on the previous year. Even
though the audience trend has been reversed, the lag time between the improved
RAMS resulting in advertising support and new revenue could be further
lengthened by the challenging economic climate. The message to the market is
that for the first time in its history Heart is No.1 with LSM 6-10, 25-49 year
olds in Cape Town.
iGagasi 99.5: The new sound of the city was South Africa`s fastest growing radio
station over the year and audiences are now at 1,6m having grown 55% in a year.
There is further room for growth after ICASA, the industry regulator, approved
the station`s expansion of footprint along the north and south coastal belt of
KwaZulu Natal. The station has also grown revenue by 67% with contributions from
both a national and local perspective, although demand will come under pressure
at a national level should discretionary income continue to be pressured by
further interest rate hikes and rising costs. There is a perception that the
station`s audience is more vulnerable in such an economic context.
PrimetimeKagiso trading as RadioMinds is a 50/50 joint venture between Kagiso
Media and Primetime International, a large media entity in India.
PrimetimeKagiso`s intention remains to provide training and consultancy services
to the many new and inexperienced media owners while assessing the opportunity
for equity participation where possible. To this end, RadioMinds hosted its
first training workshop in Mumbai in April 2008. The workshop themed the "3 Day
Thrill" attracted 16 delegates from six major radio brands and the event made a
small profit. It was a major learning curve for RadioMinds resulting in the
reformatting of its future training offering to be shorter and more specialised.
More training workshops are planned for October and November 2008.
Acceleration Media is a specialist online buying agency which has deep
experience in all forms of internet marketing and has been considered the market
leader in this space. The internet as a channel for advertising has outstripped
other traditional media forms in the US and the UK. Acceleration Media`s primary
opportunity is in being able to attract new marketers to the medium. They are
able to assist their clients through demonstrating the use of technology,
experience in the environment and ability to develop campaigns that deliver
effective return on investment. The online marketing environment is considered
to be the most measurable and accountable. In time it is expected to become
highly prized in South Africa as it is in developed economies for its
efficiency. In the US, for example, internet advertising spend has been the most
resilient through that country`s economic woes and is expected to grow by 20% in
2008.
RadMark faced some unusual challenges this year seeing sales drop off in
December 2007 but recovering strongly for the larger stations in March and April
2008. Traditionally, April is a difficult trading month because of the Easter
festive period and the extra vacation days, resulting in a near shut down of the
advertising industry. In 2008, the Easter weekend was in March resulting in an
even spread of vacation days over the two months. As a result, East Coast Radio
and Jacaranda recorded their best April ever, growing net revenue between 25%
and 35% over the previous April. In the same month, the stations represented by
RadMark, published their rate card for the next 12 months. The larger stations
(East Coast Radio and Jacaranda) increased rates by an average of 9,7% across
day-parts, while Kaya, iGagasi and Heart went up 29%, 50% and 17% respectively.
RadMark has now taken the lead in the industry in terms of initiatives that are
aimed at educating media buyers on the benefits of advertising on radio and on
the latest innovation in packaging radio and other media. Its regular `Sound
Safaris` are a highly anticipated industry event and always over-subscribed. It
was therefore no surprise when RadMark benefitted from research commissioned
independently of it, confirming that it is the leading sales agency in the
country in its category.
Kagiso Interactive ("KI") housed at the central office, will help shape Kagiso
Media`s future endeavours on current and emerging distribution platforms, as it
starts up and acquires businesses that use the internet and mobile phones to
access audiences. Successes for the division over the year include `Buzz`, a
celebrity and entertainment news portal built by KI to plug into radio station
websites to give those sites more content depth. In terms of the ground breaking
hosted video sharing comedy portal, www.skit.co.za, KI is currently in the
process of investigating the transfer of the website offshore, enabling the
active marketing of the product. Skit has grown organically through referrals
and posted videos routinely attract 500 downloads. KI is also entering the
hugely lucrative affiliate business with the dating website, www.liefie.co.za.
As Kagiso Media favours entering into specialist areas of internet commerce
through partnerships with market leaders with strong track records, other
affiliate opportunities in property and careers are currently being developed.
3.3 Information services and solutions - LexisNexis again delivered another
strong performance, with revenue up 22% to R375m and operating profit up 22% to
R117m. Kagiso Media accounts for 50% of these results on a line-by-line basis.
LexisNexis serves professional, business, student and government customers and
is now a business which has truly transformed itself from a publisher to an
information solution provider. So what was previously its print publishing
business under the Butterworths imprint is now very much an information research
business with content delivered via print, CD and online mediums. LexisNexis has
developed a further three solution lines - compliance and training, risk
management and document assembly solutions. The company now boasts a very fast
growing compliance and training business focusing in the areas of safety,
health, environment and labour. Compliance offers solutions from information, to
consulting, training and electronic workflow solutions making this a section of
the business where LexisNexis offer its customers a total solution. The risk
management division has two specific solutions lines: background screening via
Refcheck and an online public records business DeedSearch. The company has
recently moved into the software space with the launch of a very exciting
document assembly solution, Hot Docs. The LexisNexis SA operation has the
responsibility for the entire African continent with established partners in
Nigeria, Ghana, Kenya and Mauritius. LexisNexis SA is a member of the LexisNexis
Group ("LNG") a division of Reed Elsevier plc. LNG operates in 100 countries and
has over 13,000 employees worldwide.
3.4 Outdoor - Kagiso Outdoor`s 50,1% investment in Clear Channel Merafe
contributed 5% to Kagiso Media`s revenue. The operating margin at this entity
was 22%, but the impact of the amortisation on the intangible assets identified
at the time of the purchase decreased this to 11%. Including the impact of the
cost of funding, the investment contribution to the group results is a loss of
R620 000.
3.5. The general consumer environment had a negative impact on Kagiso Exhibition
and Events` ("KEE") both from a customer and supplier perspective. Excluding the
impact of the revenue from the biennial show Auto Africa in the 2007 base year,
the revenue for the entity increased by 9%. Using a comparative base, the
operating loss for the group increased by R7.9m, which included R4.8m towards
the impairment of the Auto Africa ("AA") and Saitex trade names, the goodwill in
AA and stand building equipment in the stand building entity.
The acquisition of a fifty percent share in Mobil Alliance Media and Technology
(Proprietary) Limited, a company specialising in sport sponsorship and digital
technology advertising, positions KEE well to take advantage of the significant
business opportunities in the lucrative sporting events arena. Details of the
acquisition are discussed in more details below.
A rigorous review of the exhibitions and events business model, costs and growth
drivers is underway to enable management to take a fully informed strategic view
of the business going forward.
4. Business combinations - The acquisition of 50% of Mobil Alliance Media and
Technology (Proprietary) Limited ("Mobil Alliance") and of Acceleration Media
(Proprietary) Limited ("Acceleration Media")
On 1 November 2007 Kagiso Exhibitions and Events (Proprietary) Limited purchased
50% of Mobil Alliance, an entity specialising in sport sponsorship and digital
technology advertising. KEE made an initial cash payment of R6,4m with the final
payment deferred to 2012. This payment will be based on market conditions and
the company`s performance. If the acquisition had occurred on 1 July 2007, the
contributions to the group`s revenue would have been approximately R1,1m and the
contributions to the profits would have been approximately a loss after tax of
R740 000. These amounts have been calculated using the group`s accounting
policies and by adjusting the results of the joint venture to reflect the
additional amortisation that would have been charged assuming the fair value
adjustments to intangible assets had applied from 1 July 2007, together with the
consequential tax effects. The revenue contributed in 2008 from the entity
totalled R747 000 and the loss after tax R493 000.
The goodwill is attributable to the future benefits of increased advertising
platforms available to the Kagiso Media customer base as well as the
diversification into the sports arena.
Acceleration Media is a leader in the local online media strategy, planning,
buying and paid-search environment. Kagiso Media and Lagardere Active Radio
International jointly took control on a 50/50 basis of this entity on 1 February
2008. The purchase price for 100% of the entity was R25m plus acquisition costs.
If the acquisition had occurred on 1 July 2007, the contributions to the group`s
revenue would have been approximately R3,6m and the contributions to the profits
would have been a profit after tax of approximately R155 000. These amounts have
been calculated using the group`s accounting policies and by adjusting the
results of the joint venture to reflect the additional amortisation that would
have been charged assuming the fair value adjustments to intangible assets had
applied from 1 July 2007, together with the consequential tax effects. The
revenue contributed in 2008 from the entity was R1,5m and the profit after tax
of R65 000.
The goodwill is attributable to the future benefits of Kagiso Media`s
diversification into digital media and into the South African online media and
advertising environment.
Details of the net assets acquired and goodwill are as follows:
Acceleration Media Mobile Alliance
Acquiree`s Acquiree`s
carrying carrying
Fair value amount on Fair value amount on
on acquisition on acquisition
acquisition acquisition
R`000) date date date date
Property, plant and 2 2 846 846
equipment
Intangible assets 2 944 - 1 701 -
Deferred tax on (854) (493)
intangible assets
Deferred income tax 115 115 - -
assets
Cash and cash 7 385 7 385 124 124
equivalents
Trade and other 4 958 4 958 23 23
receivables
Trade and other (12 432) (12 432) (352) (352)
payables
Borrowings - - (790) (790)
Income tax liabilities (243) (243) - -
Net assets acquired 1 875 (215) 1 059 (149)
Kagiso Media group`s 938 530
share in the fair
value of net assets
acquired
Cash purchase 13 028 6 408
consideration
Cash and cash (3 692) (62)
equivalents in
business acquired
Cash outflow on 9 336 6 346
acquisition
Total purchase 13 028 12 065
consideration
Interest on deferred - (170)
purchase price
Fair value of net (938) (530)
assets acquired
Goodwill 12 090 11 365
5. Accounting policies - The condensed financial information ("financial
information") announcement is based on the audited financial statements of the
group for the year ended 30 June 2008 which have been prepared in accordance
with International Financial Reporting Standards ("IFRS"), the Listing
Requirements of the JSE Limited and the South Africa Companies Act 61 of 1973 as
amended, on a consistent basis with that of the prior period. The financial
information is presented in accordance with IAS 34.
6. Capital expenditure
(R`000) Tangible assets Intangible assets
12 months ended 30 June 2008
Opening net carrying amount 29 284 351 570
Additions 13 838 2 440
Acquired in joint ventures 423 2 323
Reclassification (2) 2
Disposals/write-off (100) (47)
Discontinued operations (809) (5)
Depreciation, amortisation and other (11 697) (28 754)
movements
Closing net carrying amount 30 937 327 529
12 months ended 30 June 2007
Opening net carrying amount 19 948 343 678
Additions 10 790 2 475
Acquired in joint venture 7 073 26 316
Reclassification (54) 54
Disposals/write-off (310) -
Depreciation, amortisation and other (8 163) (20 953)
movements
Closing net carrying amount 29 284 351 570
7. Share capital
Number of Ordinary Share Total
shares shares premium
(`000s) (R`000) (R`000) (R`000)
1 July 2007 133 136 1 331 11 850 13 181
Shares issued -
employee share option
scheme
371 4 1 489 1 493*
Share issue expenses - - (5) (5)
30 June 2008 133 507 1 335 13 334 14 669
1 July 2006 132 540 1 325 9 804 11 129
Shares issued -
employee share option
scheme
596 6 2 056 2 062
Share issue expenses (10) (10)
30 June 2007 133 136 1 331 11 850 13 181
*weighted average price: 402 cents (2007: 346 cents).
8. Non-current liabilities - borrowings
(R`000) 30 June 2008 30 June 2007
Preference shares
Opening balance 234 046 99 542
Shares issued net of share issue expense - 244 498
Share issue expense written off and 39 -
redemption costs
Redeemed (25 423) (190 994)
Closing balance 208 662 234 046
Other borrowings
Instalment sale agreements 560 213
209 222 234 259
9. Contingent liabilities
(R`000) 30 June 2008 30 June 2007
Amount outstanding under bank facilities 700 1 944
Kagiso Media Limited guarantees the overdraft banking facilities of Systems
Publishers (Proprietary) Limited. The group holds, as collateral for this
guarantee, a pledge of all the shares in Systems Publishers (Proprietary)
Limited and cessions of a key-man life insurance policy and short term insurance
policy. It is unlikely that Kagiso Media would be required to effect payment
under this arrangement. The company did therefore not provide for any liability
in the financial statements.
Kagiso Media Limited, Kagiso Broadcasting (Proprietary) Limited and Kagiso
Exhibitions and Events (Proprietary) Limited guarantees the commitments of
Kagiso Media Investments (Proprietary) Limited ("KMI"), a wholly-owned and
fellow subsidiary, in respect of the preference shares issued by KMI. This is
in place via a put option and guarantee agreement; should KMI default on any of
the terms and conditions of the preference shares, and is not able to rectify
this position within a specific time, the preference shareholders could exercise
this put option against any of the guarantors for the full amount of the
preference shares issued at the time. KMI will be able to fulfil all of the
conditions attributable to the preference shares.
The Copyright Act was amended on 25 June 2002 and the Collecting Society
Regulations were promulgated with effect from 1 June 2006. The amendment allows
registered collecting agencies such as SAMPRA, SAMRO, Airco, SARRAL etc. to
collect a levy from each licensed radio station based on an agreed levy that
takes into account music usage. SAMPRA is currently claiming a levy on behalf of
recording companies and performers. The National Association of Broadcasters
("NAB") is representing the broadcasting industry in negotiations. Negotiations
came to a standstill and the NAB is preparing to take the matter to the
Copyright Tribunal. The matter could take as long as three years to be resolved.
Since both the base as well as the percentage of the payment have not been
agreed upon, the costs attributable to this levy were not provided in the annual
financial results. This is however deemed a contingent liability as at 30 June
2008.
10. Related party transactions
(R`000)
Payments made to Kagiso Trust Investments (Proprietary) Limited ("KTI) in
terms of the sub-lease:
Costs in Costs for
Operating respect of other
Rent costs common area services
30 June 2008 1 489 109 32 346
30 June 2007 768 212 42 506
Outstanding balances owing to KTI in terms of the sub-lease:
30 June 2008 496 - - 1 044
30 June 2007 95 - - 73
Loans
repaid/
(advanced)
Opening during the Interest Closing
balance Year charged balance
Loans to/(from)
related parties
Seyalemoya
Communications
(Proprietary Limited
("OFM")
30 June 2008 - - - -
30 June 2007 (2 504) 2 541 (37) -
Thebe Convergent
Technologies
(Proprietary Limited
("Thebe")
30 June 2008 (4 861) 4 861 - -
30 June 2007 (1 129) (3 732) - (4 861)
Makana Radio
Communications
(Proprietary) Limited
("Makana")
30 June 2008 1 348 367 - 1 715
30 June 2007 1 600 (252) - 1 348
Loans from OFM are unsecured, carry interest at 8% and are payable on demand.
The loan was repaid during 2007. The loans from Thebe and to Makana are
unsecured, interest free and are payable on demand.
Loans to directors (Unrestricted Share Purchase Scheme)
30 June 2008 3 869 4 708 907 9 484
30 June 2007 3 492 (216) 593 3 869
Loans to directors are granted in terms of the "Unrestricted Share Purchase
Scheme". These loans are repayable within six years from date of grant and carry
interest at prime less two percentage points. These loans are deemed current and
risk-free albeit a possible fluctuations in the share price.
Preference share investment in minority shareholder
MSG Afrika Media (Proprietary) Limited
30 June 2008 16 240 (1 540) - 14 700
30 June 2007 - 15 750 490 16 240
The loan as reported at the end of June 2007 was converted into preference
shares, on the same terms and conditions as those available to the Kagiso Media
Group. This includes dividends payable every six months, at 70% of prime and
payments into a sinking fund, equal to 5% of the issued value.
Loans from minority shareholder
MSG Afrika Media (Proprietary) Limited
30 June 2008 (15 750) - - (15 750)
30 June 2007 - (15 750) - (15 750)
The loan is unsecured, interest free and are payable on demand.
11. Annual financial statements - The annual financial statements for the year
to 30 June 2008, including a notice of the annual general meeting, will be
posted to shareholders by no later than 30 October 2008.
12. Independent review by auditors - These condensed consolidated financial
information have been audited by our auditors PricewaterhouseCoopers Inc., who
have performed their audit in accordance with the International Standards on
Auditing.
A copy of their unqualified audit report is available for inspection at the
registered office of the company.
13. Dividend - In the year under review 53 cents per share was distributed to
shareholders by way of dividends. Notice is hereby given that a final dividend
of 24 cents (2007: 18 cents) per share has been declared in respect of the year
ended 30 June 2008 and is payable to holders of ordinary shares recorded in the
register of the company on Friday, 17 October 2008.
The following salient dates apply to this dividend:
Last date to trade cum-dividend Friday 10 October 2008
Shares commence trading ex-dividend Monday 13 October 2008
Record date Friday 17 October 2008
Payment of the dividend Monday 20 October 2008
Share certificates may not be dematerialised or rematerialised between Monday,
13 October 2008 and Friday, 17 October 2008, both days inclusive.
In terms of the Companies Act, the directors confirm that, after the payment of
the above dividend, the company will be able to meet its commitments and settle
its liabilities as these fall due in the ordinary course of business and that
its consolidated assets, fairly valued, exceed its consolidated liabilities.
14. Events after balance sheet date
Kagiso Outdoor (Proprietary) Limited
Subsequent to 30 June 2008 Kagiso Media has decided not to take advantage of an
opportunity to purchase shares in Clear Channel Independent (Pty) Ltd ("CCI")
through Kagiso Outdoor (Proprietary) Limited ("KO") as provided for in a
Memorandum of Agreement ("MOA") signed by KO, MSG Afrika Media (Proprietary)
Limited ("MSG"), Clear Channel Independent (Pty) Ltd ("CCI") and Clear Channel
Independent Media (Pty) Ltd ("CCIM").
The result of this decision is that CCI is in a position to exercise a call
on Kagiso Media`s interest in Clear Channel Merafe (Proprietary) Limited held by
KO at a price equal to the original amount paid plus interest at prime less two
percentage points. Kagiso Media has agreed to sell its interest in KO to KO`s
minority shareholder MSG at a price equivalent to that which Kagiso Media would
receive if CCI exercises its call option.
This transaction is deemed a related party transaction in terms of the JSE rules
and is also notifiable to the Competition Commission. The sale of Kagiso Media`s
shares in Kagiso Outdoor (Proprietary) Limited should be concluded before end of
November 2008.
Urban Brew Studios (Proprietary) Limited ("Urban Brew")
On 25 June 2008 the board of directors announced the agreement between the
current shareholders of Urban Brew and Kagiso Media in terms of which it will
acquire a controlling interest in Urban Brew. The initial purchase consideration
is R75,1m to be settled in cash with the final payment, capped at R125m payable
upon the completion of the 31 December 2010 financial results. The final payment
will be based on certain agreed upon growth requirements.
The acquisition is subject to the certain conditions precedent including the
approval of the acquisition by the Competition Tribunal. This approval remains
outstanding.
15. While established assets are set to maintain their performance, the long
term potential of the group will be unlocked through a broadened base which will
include the acquisitions of new media opportunities.
Overall the group is expected to continue to deliver good growth.
Certain statements in this announcement that are neither reported financial
results nor other historical information are forward-looking statements,
relating to matters such as future earnings, savings, synergies, events, trends,
plans or objectives. Undue reliance should not be placed on such statements
because they are inherently subject to known and unknown risks and uncertainties
and can be affected by other factors that could cause actual results and company
plans and objectives to differ materially from those expressed or implied in the
forward-looking statements (or from past results). Unfortunately, the company
cannot undertake to publicly update or revise any of these forward-looking
statements, whether to reflect new information of future events or circumstances
or otherwise.
On behalf of the board
W R Jardine M Morobe
Chairman Chief executive officer
22 September 2008
Registered Office: 1st Floor, Kagiso House, 16 Fricker Road, Illovo, 2196. (P O
Box 724, Northlands, 2116)
Transfer Secretaries: Link Market Services South Africa (Proprietary) Limited,
5th Floor, 11 Diagonal Street, Johannesburg, 2001. (P O Box 4844, Johannesburg,
2000)
Directors: W R Jardine (Chairman), M J N Njeke (Deputy chairman),
M Morobe* (Chief executive) O C Essack*, S Pienaar*, H I Appelbaum,
W C Ross#, R M Motanyane#
* Executive # Independent
Sponsor: Investec Bank Limited
Date: 22/09/2008 16:30:01 Produced by the JSE SENS Department.
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