| Wed 18 Feb 2009, 15:14 | | CAT / CATP - Caxton and CTP Publishers and Printers - Unaudited Results For The |
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CAT CATP
CAT
CAT / CATP - Caxton and CTP Publishers and Printers - Unaudited Results For The
Six Months Ended 31 December 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
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2008
CONSOLIDATED INCOME STATEMENTS
Unaudited Unaudited Audited
6 months to 6 months to for the year
31 December 31 December to 30 June
R`000 2008 2007 2008
Turnover 2 164 454 2 142 097 4 038 352
Other operating income 33 402 30 973 93 844
2 197 856 2 173 070 4 132 196
Changes in inventories 14 939 (759) (10 129)
Raw materials and 776 233 699 977 1 402 648
consumables used
Staff costs 404 251 387 208 769 373
Other operating 653 994 640 450 1 159 341
expenses
Total operating 1 849 417 1 726 876 3 321 233
expenses
PROFIT FROM OPERATING 348 439 446 194 810 963
ACTIVITIES
Depreciation 79 549 80 384 164 762
PROFIT FROM OPERATING 268 890 365 810 646 201
ACTIVITIES AFTER
DEPRECIATION
Impairment - - 75 128
NET PROFIT FROM 268 890 365 810 571 073
OPERATING ACTIVITIES
Finance income 56 434 75 054 194 127
- dividends 39 500 42 208 85 906
- interest 18 834 14 065 25 311
- net (loss)/surplus on (1 900) 18 781 42 548
realisation of
investments
- dividend distribution - - 40 362
on investments
Income from associates 11 220 12 976 22 798
PROFIT BEFORE TAXATION 336 544 453 840 787 998
Taxation 88 585 129 840 178 080
PROFIT FOR THE PERIOD 247 959 324 000 609 918
FROM CONTINUING
OPERATIONS
PROFIT FROM 38 038 33 170 54 400
DISCONTINUED OPERATIONS
(HELD FOR SALE)
PROFIT FOR THE PERIOD 285 997 357 170 664 318
Attributable to 4 924 5 337 9 330
minority interest
Attributable to 281 073 351 833 654 988
ordinary shareholders
before providing for
preference dividends
285 997 357 170 664 318
Earnings per share 60,3 73,7 139,1
(cents)
Diluted earnings per 60,3 73,7 139,1
share (cents)
Headline earnings per 60,6 70,3 135,2
share (cents)
Diluted headline 60,6 70,3 135,2
earnings per share
(cents)
Preference dividend 238 229 229
paid (cents)
Reconciliation of
headline earnings:
Earnings attributable 281 073 351 833 654 988
to ordinary
shareholders
Adjusted for non- 1 428 (16 004) (18 203)
trading items
(Loss)/surplus on 1 900 (18 781) (42 548)
realisation of
investments
- dividend distribution - - (40 362)
on investments
Net impairment in value - - 75 128
of property, plant and
trade marks
Net profit (loss) on (286) 58 (1 403)
disposal of assets
Tax effect of above (186) 2 719 (9 018)
adjustments
Headline earnings 282 501 335 829 636 785
Number of shares in 495 639 628 495 639 628 495 639 628
issue
Weighted average number 495 639 628 494 939 628 495 172 961
of shares
Treasury shares (29 644 397) (17 291 269) (24 183 157)
Earnings per share 465 995 231 477 648 359 470 989 804
based on
Add: Share options - 700 000 -
outstanding
Diluted earnings per 465 995 231 478 348 359 470 989 804
share based on
Abridged segmental analysis
Unaudited
6 months to
31 December
R`000 2008 %
Revenue
Publishing, printing and distribution 2 085 060 96
Other 500 977 23
Inter-group sales (421 583) (19)
2 164 454 100
Operating income
Publishing, printing and distribution 203 912 76
Other 64 978 24
268 890 100
Unaudited
6 months to
31 December
R`000 2007 %
Revenue
Publishing, printing and distribution 2 069 431 97
Other 479 452 22
Inter-group sales (406 786) (19)
2 142 097 100
Operating income
Publishing, printing and distribution 291 428 80
Other 74 382 20
365 810 100
Audited
for the year
to 30 June
R`000 2008 %
Revenue
Publishing, printing and distribution 4 002 034 99
Other 802 026 20
Inter-group sales (765 708) (19)
4 038 352 100
Operating income
Publishing, printing and distribution 471 374 83
Other 99 699 17
571 073 100
CONSOLIDATED BALANCE SHEETS
Unaudited Unaudited Audited
31 31 30 June
December December
R`000 2008 2007 2008
ASSETS
NON-CURRENT ASSETS
PROPERTY, PLANT AND EQUIPMENT 2 109 257 1 910 739 1 955 742
ASSOCIATED COMPANIES 114 872 92 932 98 193
OTHER INVESTMENTS AT FAIR VALUE 468 621 523 318 461 493
- LISTED 54 550 111 580 50 590
- UNLISTED 414 071 411 738 410 903
NON-CURRENT ASSETS OF 231 058 - -
DISCONTINUED OPERATIONS (HELD
FOR SALE)
CURRENT ASSETS
INVENTORIES 664 500 493 146 694 512
ACCOUNTS RECEIVABLE 898 983 986 654 770 579
TAXATION 1 702 2 075 1 215
CASH 251 314 161 446 222 473
BANK PREFERENCE SHARES AND 236 143 617 994 812 538
OTHER INSTRUMENTS AT FAIR VALUE
- LISTED 236 143 317 994 302 538
- UNLISTED - 300 000 510 000
TOTAL ASSETS 4 976 450 4 788 304 5 016 745
EQUITY AND LIABILITIES
EQUITY 3 909 490 3 756 970 3 930 666
ORDINARY SHAREHOLDERS` EQUITY 3 884 940 3 732 143 3 911 040
PREFERENCE SHAREHOLDERS 100 100 100
MINORITY INTEREST 24 450 24 727 19 526
NON-CURRENT LIABILITIES
DEFERRED TAXATION 267 293 283 112 246 931
NON-CURRENT LIABILITIES OF 153 398 - -
DISCONTINUED OPERATIONS (HELD
FOR SALE)
CURRENT LIABILITIES
ACCOUNTS PAYABLE 563 306 578 279 641 280
PROVISIONS 72 144 89 580 122 557
TAXATION 10 819 80 363 75 311
TOTAL EQUITY AND LIABILITIES 4 976 450 4 788 304 5 016 745
Net asset value per share 839 787 835
(cents)
Directors` valuation of 528 943 504 670 509 096
unlisted investments and
associated companies
Capital expenditure 238 871 192 538 407 737
Capital expenditure committed 40 000 300 000 201 000
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 2008 2007 2008
CASH FLOW FROM OPERATING (187 688) (27 521) 445 926
ACTIVITIES
Cash generated by 401 317 481 637 883 358
operations
Changes in working (260 495) (229 779) (125 664)
capital
Cash generated by 140 822 251 858 757 694
operating activities
Less: Taxation paid (140 756) (97 410) (184 507)
Net interest received 18 834 18 501 32 890
Dividends received 39 500 42 208 85 906
Net cash inflow from 58 400 215 157 691 983
operating activities
Dividends paid (246 088) (242 678) (246 057)
CASH FLOW FROM INVESTMENT (259 662) (117 669) (233 875)
ACTIVITIES
Property, plant and
equipment
- additions to expand (238 871) (192 537) (407 737)
operations
- proceeds from disposals 651 2 017 12 380
(238 220) (190 520) (395 357)
Investments
- (acquisitions of (21 442) 72 851 161 482
investments)/proceeds
from disposals
CASH FLOWS FROM FINANCING (66 527) (47 592) (133 808)
ACTIVITIES
Shares issued - - 3 507
Own shares acquired (66 527) (47 592) (137 315)
Net (decrease)/increase (513 877) (192 782) 78 243
in cash and cash
equivalents
Cash and cash equivalents 1 062 508 984 265 984 265
at the beginning of the
year
Cash and cash equivalents 548 631 791 483 1 062 508
at the end of the period
Fair value adjustment of (19 803) (12 042) (27 497)
preference shares and
other investments
Fair value of cash and 528 828 779 441 1 035 011
cash equivalents at the
end of the period
Note:
Cash and cash equivalents 41 371 70 574 98 398
of discontinued
operations (held for
sale)
Cash of continuing 251 314 90 872 124 075
operations
Preference shares and 236 143 617 995 812 538
other investments of
continuing operations at
fair value
Fair value of cash and 528 828 779 441 1 035 011
cash equivalents at the
end of the period
Fair value of cash and 41 371 70 574 98 398
cash equivalents from
discontinued operations
(held for sale)
Comprising of:
Cash flows from operating (55 110) (44 073) (15 181)
activities
Cash flows from investing (1 916) (1 107) (2 175)
activities
Cash and cash equivalents 98 397 115 754 115 754
at the beginning of the
year
STATEMENTS OF CHANGES IN EQUITY
Unaudited Unaudited Audited
31 December 31 December 30 June
R`000 2008 2007 2008
Balance at beginning of the 3 930 666 3 782 582 3 782 582
period
Attributable earnings 285 997 357 169 664 318
Foreign currency translation 3 044 - 3 414
reserve
Shares issued - - 3 507
Share trust consolidation - 8 -
NDR realised on disposal of - (1 183) (652)
land and buildings
Treasury shares (66 526) (47 592) (137 315)
Fair value adjustment - (4 222) (78 267) (112 711)
listed investments
Fair value adjustment - 6 619 (13 069) (26 420)
preference shares and
instruments
Dividends paid - ordinary (245 421) (241 178) (239 550)
and preference shareholders
Dividends paid - minority (667) (1 500) (6 507)
shareholders
Balance at end of the period 3 909 490 3 756 970 3 930 666
COMMENTARY
Basis of preparation
The accounting policies adopted in the preparation of the financial statements
for the six months under review are in accordance with the requirements of
International Financial Reporting Standards (IFRS) which are consistent with the
prior period and IAS34 on financial interim reporting.
Comments
This period has undoubtedly been one of the most difficult in many years. No
purpose would be served by detailing the financial crises that the world is
currently experiencing nor the nervousness which is now embedded in consumers
which is in stark contrast to the exuberances of fairly recent times. The speed
of events and the deterioration that accompanied the bad news has resulted in an
abrupt turn which began to be felt at the start of 2008 and which then gathered
momentum as the year progressed.
South African consumers had already been feeling the effects of the high level
of inflation and interest rates and when the devastating news of the "Sub Prime"
crisis broke, which resulted in a dramatic fall in world financial markets,
consumers literally stopped spending. This has led to a substantial fall in
equity markets but more importantly started the loss of jobs as organisations
struggled to deal with this very different and unfriendly environment.
This in turn resulted in commodity prices, on which South Africa is heavily
dependent, drastically reducing.
At this point in time, world markets are still in disarray and analysts are not
expecting any improvement in the short to medium term.
This translated into a vastly different landscape in which the company has had
to operate. Consumer spending patterns determine the level of activity of
advertisers and spending in most areas, particularly the Property and Motoring
segments of the economy, has fallen drastically.
In addition, South Africa, which is considered as a developing country, has had
to contend with the large drop in the value of the Rand as confidence in those
markets evaporated from international players as the "Fear" syndrome
intensified.
This resulted in a major increase in the raw materials costs of the company
where such items as paper, ink and machinery spares are all imported. With a
market already feeling the pinch of reduced consumer demand, competition has
intensified and it has not been possible to recover additional input costs from
customers.
Commitments for capital expenditure had previously been made but it is important
to accentuate that this was the last of the spend which the company had planned
and there are no further areas which require capital investment. For a number of
years into the future only minimal expenditure will be required. The company is
in the fortunate position of having excellent equipment in all its various
divisions purchased at a time when the Rand was very much stronger. The cost of
replacement at the current value of the Rand would be prohibitive.
Earnings
Flowing from these comments the company has not been able to improve its
profitability.
Turnover marginally increased from R2,142 million to R2,164 million with most
divisions being down on budgets. At this moment in time, expenditure by
Government on educational products has fortunately not been reduced, which is
reflected in the results of Maskew Millar Longman (MML), where the group has a
50% shareholding in partnership with Pearson plc.
It was announced in the press on 23 October 2008 that the company and Pearson
had agreed to form Pearson Southern Africa Education Group to consolidate
Pearson`s and the company`s Southern Africa education businesses. In terms
thereof the company sold 70% of its 50% shareholding in MML to Pearson for GBP45
496 000 and retained a 15% shareholding in MML which is being expanded to house
all the economic interest of the company and Pearson`s Southern Africa
Educational interests including Heinemann Publishers, Heinemann Education
Botswana Publishers and Edexel S.A.
The rationale behind this change was that Pearson had requested a revision to
the manner in which the joint venture had been conducted. Pearson during 2007
acquired Harcourt Education International. As part of this purchase it acquired
Heinemann which conducts a similar business to that of MML. They then expressed
the desire to combine all their educational interests in Southern Africa into
one organisation, and approached the company to purchase its interest in MML
which led to the transaction referred to above.
Under the agreement which was concluded, the company will provide printing
services to the enlarged businesses.
This transaction is subject to a number of conditions precedent, the most
important of which is the approval of the Competition Authorities. The
Competition Commission has recently advised that the transaction has been
unconditionally approved.
A meeting of shareholders of the company is in the process of being convened to
obtain approval to the extent necessary and simultaneously permission of the
South African Reserve Bank to approve the transaction is being sought.
Accordingly where appropriate, it has been necessary to restate the previous
year`s financial figures to give effect to the transaction and the company`s
revenue and profits are now separately reflected from those of MML, whose
figures are stated individually. The effect on earnings, diluted earnings and
headline earnings per share is 8,16 cents in the current period and 6,94 cents
in the prior period.
Profit from operating activities was down from R446,2 million to R348,4 million.
Depreciation was almost unchanged at R79,5 million.
The intense pressure on margins has resulted in the profit from operating
activities after depreciation, as a percentage of turnover, declining from 17%
to 12,4%.
Net Finance income fell from R75 million to R56,4 million mainly as a result of
the surplus on realisation of investments in the comparable six months of R18,8
million being compared in the current six months to a loss on the realisation of
investments of R1,9 million.
Associated companies, operating in almost identical businesses to that of the
company, also witnessed difficult trading conditions and lower revenues and
profits were experienced which resulted in Income from Associates decreasing
from R13 million to R11,2 million.
Profit before taxation amounted to R337 million, and after providing for
taxation at an effective rate of 26%, profit after taxation reduced to R247,9
million which compares to R324 million in the six months ended 31 December 2007.
Profit from discontinued operations held for sale, which relates to the
company`s share of the profits after tax of Maskew Millar Longman, amounted to
R38 million.
Minority Shareholders absorbed R4,9 million which left earnings attributable to
ordinary shareholders of R281,1 million, a decline of some R70 million on the
earnings of R351,8 million achieved in the comparable six months last year.
During the period being reported on, an additional 5 523 740 shares in the
company were repurchased at a cost of R66,5 million and are held as Treasury
Shares which now total 29 644 397 shares.
Earnings per share amounted to 60,3 cents per share compared to 73,7 cents per
share and Headline Earnings per share fell from 70,3 cents per share to 60,6
cents per share, a decrease of 13,8%.
Capital expenditure
Two major projects have been under construction during the period, both of which
will be finished and commissioned at the end of February 2009. The projects are
a new factory, printing press and ancillary plant for the newspaper division and
a new wide format press and pre and post press equipment for the web printing
operation in Isando.
This then concludes all major expenditure programmes and no further major
capital projects are envisaged.
There is sufficient efficient capacity in all the company`s manufacturing
divisions to cope with demand for many years to come and only replacement
capital expenditure will be incurred which is expected to involve only a minimal
outlay.
Cash flow
Cash and Cash equivalents at 31 December 2008 amounted to R528,8 million,
substantially down on those at 31 December 2007 of R779,4 million. This was due
to capital expenditure paid for during the period of R238,8 million and the
additional shares in the company repurchased at a cost of R66,5 million. In
addition working capital increased by R260,5 million.
Cash and Cash equivalents at the time of publication of this report has however
recovered to some R800 million.
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
The decrease in the quantum of advertising carried by the daily and weekly
newspapers has continued. Expenditure by advertisers in free community and
regional newspapers has not been as badly affected. The worst sectors have
undoubtedly been Property followed closely by Motoring and to a lesser degree
Display and Classified.
In overall terms advertising revenues are down on those previously achieved with
a concomitant decrease in profits.
Caxton Urban newspapers continued to grow albeit at a slower pace but further
new launches have been put on hold.
"Get It", the free community monthly glossy magazine has grown in stature and
demand and is progressing according to plan. Here too, in view of the severity
of the economic downturn, further new launches have been delayed and a degree of
consolidation has taken place.
Progress continued to be made in the creation of new platforms to support the
various products of the newspaper division via the internet and mobile telephony
with some in the development and testing mode.
The newspaper printing facility located in Industria in Johannesburg continued
to operate extremely efficiently despite a large decrease in the volume of
printing undertaken. This new and extremely modern and "state of the art"
facility will shortly come into production and will be a major boost to the
quality, innovation and efficiency of its products, providing its customers with
a number of new alternatives.
"The Citizen", the company`s daily newspaper, has held its own in a highly
competitive environment which, together with harsher economic conditions, has
seen a decrease in the circulation numbers of all daily newspapers.
Disappointing results, well below budget, continued at the joint venture
printing plant in Port Elizabeth.
Magazine publishing and distribution
Discretionary consumer spending has been radically affected during recent times
driven primarily by higher interest rates, the massive increase in the price of
fuel and related products and general inflation. All of this has meant that
spending by the public on magazines has decreased as is evidenced by the fall in
the circulation of most magazines. Publishers have during this period had to
contend with increased printing costs, resulting from the fall in the value of
the Rand, and have had to increase cover prices to partly offset additional
costs.
Advertising has also been on the decrease as many major advertisers trim budgets
in a cluttered market where too many titles are competing for their share of
advertising.
It follows that this division fell short of achieving its targets.
RNA, the magazine distribution division, has continued to operate efficiently
despite the pressure on increased costs, particularly transport, and renders an
excellent service to its numerous customers both locally and internationally.
As a consequence of the fall off in the volume of magazines distributed and
sold, it has also not met its targets and profits are down.
Various new products requiring an identical distribution channel have been
launched with good sales being made on behalf of new customers.
Commercial printing
Web and Gravure printing
A large format press and its ancillary equipment has been installed in the
Johannesburg Web offset factory and will be in operation from March 2009.
This concludes the major capital expenditure programme which has been running
for several years and which places this division in an excellent position to
provide for its numerous customers situated throughout South Africa through
modern facilities in Johannesburg, Cape Town and Durban. These customers can be
serviced in a cost efficient manner having regard to the high costs involved in
transporting paper.
Excess capacity in printing in South Africa has resulted in a highly competitive
environment where margins have been slashed. Added to this has been the
increases in costs of both raw materials and other production costs driven by
the fall in the value of the Rand and the increase in Producer Price Inflation
which at one point in time nearly reached 20% and which costs have not been
passed on in selling prices.
Volumes thus far have been maintained but recent trends show that such volumes
are more than likely to drop as both national advertisers and publishers adjust
downwards their requirements in line with the reduction in their own demand.
Book printing
The publishing and printing of school books has not decreased which has assisted
this division in producing reasonable results. As it is not anticipated that
there will be major reductions in the spending by the nine Provinces on
education, a new warehouse has been built and occupied to cope with increased
demand. Site renovations have also taken place, all of which adds to the ability
of this highly efficient and modern facility to cater for the ever expanding
requirements of its customers.
Other
Packaging
Further progress has been made in restoring this division to an adequate level
of profitability which saw the installation and commissioning of new presses in
two of the production units. Here too it has not been possible to pass on
increased input costs to customers and price cutting continues with a number of
competitors selling products at unrealistic prices. Coupled with this has been a
fall in volumes resulting from consumer demand dropping.
Stationery
A relatively bright spot in that further market share gain was achieved and
volumes held up relatively well which resulted in budgets being met. Aggressive
competition continues and margins are not adequate to compensate for the high
level of capital required in the process of the manufacture of stationery and in
particular, working capital.
Prospects
Future business conditions are unknown and trading profitably under current
circumstances is becoming more and more difficult. In an effort to reduce costs
as volumes decline, jobs both internationally and locally are continuing to be
shed. Until such time that this trend reverses itself, consumers will not be
confident in resuming spending. South Africa is not an island and despite a
number of commentators trying to reassure the public that conditions should soon
start improving and that South Africa is better off economically than other
parts of the world, business and consumer confidence levels are continuing to
plunge.
It is anticipated that these circumstances will not materially change for at
least the next year and could only start improving during the build up to the
World Soccer Cup in 2010 at which stage interest rates and inflation should be
down and hopefully job losses would have ended.
The company is dependent on consumer spending and therefore it is predicted that
no improvement will take place in the foreseeable future and that the company
will continue to perform at a lower level than that achieved in the previous
financial year.
By order of the Board
Dr F van Zyl Slabbert (Chairman)
T D Moolman (Chief Executive Officer)
G M Utian (Managing Director)
Johannesburg
18 February 2009
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
A Division of Sasfin Bank Limited
Date: 18/02/2009 15:14:01 Produced by the JSE SENS Department.
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