| Tue 22 Sep 2009, 17:30 | | KGM - Kagiso Media Limited - Audited results for the year ended 30 June 2009 |
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KGM
KGM
KGM - Kagiso Media Limited - Audited results for the year ended 30 June 2009
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 2009
HIGHLIGHTS
REVENUE UP 19%
HEADLINE EARNINGS UP 6%
CASH GENERATED FROM OPERATING ACTIVITIES UP 23%
FINAL DIVIDEND 27 CENTS PER SHARE
CONSOLIDATED INCOME STATEMENTS FOR THE YEAR ENDED
30 June 30 June
2009 2008
(Audited) (Audited) Change
R`000 R`000 %
Continuing operations
Revenue 854 886 715 991 19
Other income 16 452 8 948
Raw material and consumables (146 955) (90 612)
Commission and levies (105 223) (113 437)
Employee costs (125 950) (107 743)
Marketing and programming expenses (25 255) (22 089)
Professional and consulting fees (16 853) (12 000)
Rental and management fees (25 101) (15 508)
Depreciation (10 913) (5 523)
Amortisation (22 924) (23 592)
Other expenses (97 886) (65 130)
Operating profit 294 278 269 305 9
Finance income 15 855 14 349
Finance expenses (23 905) (22 922)
Share of results of associates 12 381 12 055
Profit before income tax 298 609 272 787 9
Income tax expense (108 084) (95 344) 13
Profit for the year from continuing 190 525 177 443 7
operations
Discontinued operations
Loss after tax for the year from (5 054) (3 323)
discontinued operations
Profit after tax for the year from 8 993 -
discontinuance of operations
Profit for the year 194 464 174 120 12
Attributable to:
Equity holders 168 929 159 025 6
Minority interests 25 535 15 095 69
194 464 174 120 12
Earnings per share for equity holders
during the year (expressed in cents):
Basic 123 122 1
Diluted 123 121 2
Dividends per share 59 53 11
CONSOLIDATED CASH FLOW STATEMENTS FOR THE YEAR ENDED
30 June 30 June
2009 2008
(Audited) (Audited)
R`000 R`000
Cash flows from operating activities
Cash generated from operations 324 466 270 529
Finance expenses paid (2 940) (496)
Income tax paid (106 323) (106 614)
Dividends paid to equity holders (78 869) (70 743)
Dividends paid to minorities (17 990) (14 736)
Dividends paid to preference shareholders (21 998) (22 115)
Total net cash generated from operating activities 96 346 55 825
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired (68 570) -
Acquisition by joint ventures, net of cash (2 125) -
Acquisition of joint ventures, net of cash acquired (145) (15 682)
Purchases of property, plant and equipment ("PPE") (10 637) (13 838)
Proceeds from disposal of PPE 745 269
Purchases of intangible assets (4 757) (2 440)
Proceeds from disposal of intangible assets 14 350 -
Proceeds from disposal of investments, net of cash 10 456 -
Proceeds from sale of assets held for sale 2 546 -
Investment in preference shares - (15 750)
Preference shares redeemed 1 050 1 050
Advances of loans to associates (1 351) (5 226)
Repayment of loans by associates 3 498 -
Finance income received 15 529 13 547
Preference dividends received 5 413 1 579
Dividends received from associates 2 651 8 619
Total net cash used in investing activities (31 347) (27 872)
Cash flow from financing activities
Proceeds from issue of ordinary shares 1 179 1 488
Proceeds from borrowings - 2 125
Repayment of borrowings (987) (49)
Preference shares redeemed (23 988) (25 423)
Movement in loans receivable - 14 175
Total net cash used in financing activities (23 796) (7 684)
Total cash flows 41 203 20 269
Cash and cash equivalents at the beginning of the 137 843 117 574
year
Cash and cash equivalents at 30 June 2009 179 046 137 843
Included in assets held for sale (5 619) -
Included in the cash and cash equivalents per 173 427 137 843
balance sheet
RECONCILIATION OF HEADLINE EARNINGS
30 June 30 June
2009 2008
(Audited) (Audited) Change
R`000 R`000 %
Profit for the period attributable to 168 929 159 025 6
equity holders
Impairment of goodwill 8 226 670
Impairment of property, plant and 332 -
equipment
Profit arising from discontinuance of (8 993) -
operations
(Profit)/loss on disposal of property, 892 (129)
plant and equipment
Headline earnings 169 386 159 566 6
Headline earnings per share 126,7 119,6 6
Diluted headline earnings per share 126,5 119,3 6
Earnings per share - continuing
operations
Earnings per share (cents) 123,4 121,7 1
Diluted earnings per share (cents) 123,2 121,4 2
Earnings/(loss) per share -
discontinuing operations
Earnings/(loss) per share (cents) 2,9 (2,5) -
Diluted earnings/(loss) per share 2,9 (2,5) -
(cents)
Shares used in calculations
Number of shares in issue (`000s) 133 792 133 507 -
Weighted average number of shares in 133 726 133 389 -
issue (`000s)
Weighted average number of shares in 133 870 133 756 -
issue for diluted earnings per share
(`000s)
Dividends per share
Final dividend in respect of the year 27 24 13
under review (cents)
Interim dividend (cents) 35 35 -
Total dividend (cents) 62 59 5
CONSOLIDATED BALANCE SHEET AS AT
30 June 30 June
2009 2008
(Audited) (Audited)
R`000 R`000
Assets
Non-current assets 630 056 612 741
Property, plant and equipment 42 731 30 937
Intangible assets 322 123 327 529
Goodwill 172 264 147 777
Investment in associates 58 750 55 734
Deferred income tax assets 20 538 36 064
Loans receivable 13 650 14 700
Current assets 448 044 369 990
Inventories 19 050 13 849
Trade and other receivables 253 238 215 230
Loans receivable 2 329 3 068
Cash and cash equivalents 173 427 137 843
Assets classified as held for sale 58 372 2 672
Total assets 1 136 472 985 403
Equity
Capital and reserves attributable to equity holders
Ordinary share capital 1 338 1 335
Share premium 14 510 13 334
Revaluation and other reserves 88 515 88 335
Retained earnings 397 210 307 150
Total shareholders` equity 501 573 410 154
Minority interest 73 165 45 433
Total equity 574 738 455 587
Liabilities
Non-current liabilities 313 053 311 465
Borrowings 219 069 209 222
Deferred income tax liabilities 93 984 102 243
Current liabilities 227 175 218 226
Trade and other payables 188 162 178 368
Borrowings 20 969 23 963
Income tax liabilities 18 044 15 895
Liabilities directly associated with assets 21 506 125
classified as held for sale
Total liabilities 561 734 529 816
Total equity and liabilities 1 136 472 985 403
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED
30 June 30 June
2009 2008
(Audited) (Audited)
R`000 R`000
Equity at the beginning of the year 455 587 365 163
Ordinary shares issued in terms of the share option 1 179 1 488
scheme
Profit for the year 194 464 174 120
Employee costs: share option scheme 180 295
Acquisition of minority interests 20 187 -
Dividends paid (96 859) (85 479)
574 738 455 587
SEGMENTAL ANALYSIS
Revenue Operating Profit/(loss)*
profit/(loss)
2009 2008 2009 2008 2009 2008
R`000 R`000 R`000 R`000 R`000 R`000
Central 1 434 2 315 (29 651) (22 954) (53 626) (52 542)
services
Broadcasting 481 580 476 234 238 564 242 397 173 529 176 524
Information 202 807 187 618 66 568 58 372 49 100 44 659
services and
solutions
Outdoor 39 538 49 824 (7 163) (8 510) (8 962) (9 616)
exhibitions
and events
Content 129 527 - 25 960 - 8 888 -
854 886 715 991 294 278 269 305 168 929 159 025
*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 19% and 9% respectively. Profit for the year, attributable to the
company`s equity owners, increased by 6%.
The high quality of the group`s earnings contributed to the healthy cash balance
of R173,4m as at 30 June 2009. A final dividend of 27 cents per share has been
declared and together with the interim dividend amounts to 62 cents for the full
year.
1.2 Revenue - Revenue grew by 19% over the comparative period last year. Urban
Brew and Gloo contributed R129,5m and R8,5m, respectively, to the group revenue
(16,2%). Broadcasting increased by 1% despite the economic downturn. Revenue
from LexisNexis improved by 8%, while the Kagiso Exhibitions and Events group`s
("KEE") revenue decreased by 21%. Revenue for Urban Brew Studios (Proprietary)
Limited ("Urban Brew") and Gloo Digital Design (Proprietary Limited ("Gloo") has
been included in the results from the effective dates of 1 November 2008 and 1
January 2009 respectively.
1.3 Operating profit - The operating profit margin for the broadcasting division
remained stable at 50%, 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 increased to 32% largely as a result
of product mix changes towards electronic products that contribute higher
margins.
The additional costs incurred in restructuring the KEE resulted in the decrease
in margins from minus 16% to minus 25%. Kagiso Exhibitions and Events Solutions
(Proprietary) Limited ("KEES") and Johannesburg International Motor Show
(Proprietary) Limited ("JIMS") were sold during the year and the operating loss
for the relevant trading periods are disclosed as discontinued operations.
As noted in the 2008 post balance sheet events, Kagiso Media has agreed to sell
its interest in Kagiso Outdoor (Proprietary) Limited ("KO"), the holding company
of Merafe Outdoor (Proprietary) Limited ("MO") (formerly Clear Channel Merafe
(Proprietary) Limited). The results of MO are therefore not included in
operating profit but are included in discontinued operations.
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 R1,0m were included in finance income.
No new preference shares were issued by Kagiso Media during 2009. R23,9m of the
preference shares were redeemed during the year. Borrowings of R9,5m were
acquired with the acquisition of subsidiaries and this contributed to the
increase in finance expenses from R22,9 to R23,9m.
1.5 Income tax expense - The income tax charge increased from 34,9% of profit
before tax to 36,2%. The increased tax rate was due in the main to a write back
of a deferred tax asset of R4,8m which is no longer considered recoverable. The
tax charge for the year included a charge for Secondary Tax on Companies ("STC")
of R6,5m (2008 - R13,5m). Excluding the impact of the STC charge, the effective
tax rate for the year is 34,1% versus the 30,0% in 2008.
1.6 Discontinued operations - KEES, a subsidiary of KEE, and JIMS, a joint
venture within KEE were sold during the year. The operating results of these
entities as well as the operating results of MO are included in the loss after
tax from discontinued operations of R5,1m.
All of the KEE trade names were sold during the year resulting a profit after
tax from discontinuance of operations of R9m.
1.7 Minorities` share of profits - Minorities` share of profits increased by 69%
due to the minorities in Urban Brew and Gloo.
2. Balance sheet and cash flow
At the commencement of the financial year, the group`s cash resources amounted
to R137,8m. During the year, the operations generated R96,4m after finance
expenses and tax. No new funding was required during the year. Of the available
cash resources, R68,7m was applied in the acquisition of subsidiaries, R10,7m in
the replacement of fixed assets while R118,9m was distributed to the group`s
ordinary and preference shareholders by means of dividends. As at 30 June 2009,
the cash reserves stood at R173,4m. 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, decreased by
R19,8m, mainly due to decreased activities at KEE during the year.
Kagiso Media elected to redeem preferences shares during the year to the value
of R23,9m. 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 to avoid distortion of the individual business
segments` performance. The central services segment made a loss after tax of
R53,6m (2008: R52,5m). STC decreased by R6,6m due to the utilisation of STC
credits. Finance income received increased by R1,5m.
3.2 Broadcasting - Kagiso Media`s broadcasting assets continued to show
resilience despite the adverse economic backdrop, with revenue increasing by 1%
to R481,6m while operating profit declined marginally to R238,6m.
A key challenge for the management teams at the radio stations was to maintain
their EBITDA margins despite the adverse business environment. Both Jacaranda
94.2 and East Coast Radio successfully improved efficiencies in their operations
as a result of cost management initiatives which were introduced during the
period. The radio stations reported operating profit margins of 42,8% and 54,9%
for Jacaranda 94.2 and East Coast Radio respectively.
Although East Coast Radio`s revenue declined slightly to R214,2m, it showed a
marginal operating margin improvement to 54,9%, reflecting operating profit of
R117,7m. Audience numbers for the station have been relatively stable with
significant increases in market share of LSM 6-10 audiences from 25,1% in 2008
to 34,6% in 2009. East Coast Radio received a number of awards during the year
and also made progress with entrenching several key events.
During the year, Jacaranda 94.2`s recorded stable revenue of R247,4m with
operating profit showing a slight decline of 0,6% to R105,9m. Its core audience
remained stable, despite its cumulative past seven day audience being down. The
station`s Gauteng listenership however was relatively unaffected and the station
has maintained its market leadership in Pretoria and environs. The radio station
enjoyed strong industry recognition during the year, receiving accolades for its
presenters as well as new show concepts.
The Broadcast division made good progress with regard to its stated objective of
increasing revenue generation from new media applications. This has been
heightened by the establishment of a new division, Kagiso Media Convergence,
during the year, to add value to the existing assets and to act as an in-house
incubator for the Group`s new media capabilities. The revenue attributable to
the division (adjusted for minorities) grew to almost R15m from R3m in 2008.
Although RadMark encountered a challenging media sales market, especially in the
second half of the financial year, the division delivered a 5,2% increase in
revenue to R64,8m. Certain advertising categories were worse affected by the
downturn, as advertising budgets were significantly reduced. Operating profit
increased marginally to R25,9m as RadMark responded to the market contraction.
The stations represented by RadMark increased their rates by an average of 11%
with Jacaranda 94.2, East Coast Radio and Heart 104.9 going up by 9% while
iGagasi and Kaya FM`s rates rising 14% and 15%, respectively after financial
year end. OFM will publish its new rate card in October 2009.
3.2.1 Associates - OFM maintained revenues of R67,1m while operating profit
showed a 4,3% increase to R21,5m. OFM maintained its positive station audience
growth trend during the year, reflecting a 4% growth year-on-year over a seven-
day period to weekly audience of 0,6 million in June 2009.
iGagasi 99.5 recorded strong growth of 41% with revenue climbing to R75,3m as
its advertising revenues increased. The station grew its audiences 15% year-on-
year over 7-days and strengthened its core audiences in the LSM 5 to 8 and age
16 to 35 age group in KwaZulu Natal. This as a result of a broadcast footprint
extension which improved reception along the entire KwaZulu Natal coastline.
Heart`s 104.9`s total audience has declined year on year, from 687 000 in 2008
to 556 000 in 2009 with the station recording a 35,5% decline in revenue to
R37,3m. However market share for its core audience (LSM 6 to10, 25 to 49) only
decreased by 2%. It still has the second largest share of audience, at 23%,
after KFM. The station has appointed new sales management and launched new
initiatives in local sales that should start to benefit the bottom line in 2010.
3.2.2 Kagiso Media Convergence - During the year, the Kagiso Interactive
division was restructured into a media convergence unit which is mandated to
grow Kagiso Media`s new media assets. Kagiso Media Convergence is focused on
accelerating new media investments and creating a structure to unlock the
inherent synergies between the operating businesses.
Despite doubling its revenue base to R6,1m, Acceleration Media`s results for the
year under review were below expectations with an operating loss of R1,1m
despite careful cost management to protect profitability. However, it embarked
on a number of initiatives to enhance revenue and operating profit including
appointing a new Managing Director and launching a number of new products and
services.
Gloo Digital performed ahead of expectation for the six months since its
acquisition with revenue of R8,5m and operating profit of R2,6m. Although it is
still small relative to the Group, the acquisition is viewed as strategic
because it will enable the growth of new media properties across Kagiso Media.
3.3 Information Management and Solutions - LexisNexis, did not escape the
challenges of the economic downturn in 2009, but despite these difficulties, the
business still posted good results. Revenue increased by 8,1% to R405,6m and
operating profit growth by 14,0% to R133,1m. The quality of earnings is
reflected in the operating margin which improved to 32,8% from 31,1%, defying
the downward pull of the market. LexisNexis continued to extend its products and
services in the online environment and also focused on building its content
capability across the African continent, a positive attitude which we believe
will hold them in good stead when the market eventually turns.
3.4 Content - Kagiso Media acquired a controlling interest in Urban Brew Studios
in November 2008.
Urban Brew Studios delivered results which exceeded expectations despite revenue
being under severe pressure. It contributed revenue of R129,5m and operating
profit amounting to R26,0m. With immense pressure exerted on the industry by a
recessionary economic environment, and alongside the challenge of dealing with
unpredictable circumstances primarily occasioned by the financial challenges at
the SABC, Urban Brew Studios was nevertheless able to present credible profit
margins. During 2009, Urban Brew Studios continued to entrench its position as
one of South Africa`s foremost television studios and content providers, and
focused on building its capacity to be able to take on new opportunities on the
African continent.
3.5 Exhibitions and events - A strategic review of the exhibitions and events
business prompted Kagiso Media`s decision to wind down the business by disposing
of assets. In May 2009, the Group disposed of its 50% shareholding in the
Johannesburg International Motor Show to the National Association of Automobile
Manufacturers of South Africa (NAAMSA). The division has also divested of its
other exhibition related assets, with the exception, by arrangement, of a
contract with South African Tourism which expires in 2010. Mobil Alliance on the
other hand, delivered revenue of R5,0m (2008: R0,7m) and returned to
profitability, contributing profits of R1,0m to the Group. It is still
positioned to extract some benefits related to the FIFA 2010 Soccer World Cup.
3.6 Outdoor - Kagiso Media`s disposal of its 65% stake in Kagiso Outdoor is
still in progress (As detailed in Note 15).
4. Business combinations
4.1 The acquisition of 50,1% of Urban Brew Studios (Proprietary) Limited ("Urban
Brew") and 50,1% of Gloo Digital Design (Proprietary) Limited ("Gloo")Kagiso
Media Limited purchased 50,1% of the issued share capital of Urban Brew for an
initial consideration of R78m. Urban Brew is involved in, inter alia, the
creation and distribution of audio-visual content on any platform, trading in
television content, conducting of community television, and in the creation,
development and trading of music content. R20,0m of the purchase price was
settled via a six-month loan from a banking institution and the remaining amount
from available cash resources.
The acquisition date for financial reporting and consolidation purposes is the
date on which control is obtained. The acquisition date of this transaction was
1 November 2008. The purchase price allocation and fair values of the assets and
liabilities in Urban Brew were determined at this date.
The revenue, operating profit as well as the profit after tax for the eight
month period to 30 June 2009 are reflected in the segmental analysis under
"Content". If the acquisition had occurred on 1 July 2008, the contribution to
the group`s revenue would have been approximately R176,0m and the contribution
to the profits would have been a net profit after tax of approximately R10,9m*.
In terms of the purchase agreement, R75,1m is an initial consideration and
Kagiso Media will pay the remaining purchase price balance on 31 December 2010.
The amount will be determined as the sale percentage of the amount by which the
sustainable profit after tax ("PAT") for financial year ("FY") 2010 financial
year exceeds the target PAT for FY2010 multiple by the agterskot multiple. The
price of the stake will be agreed to by both parties, on the base of a valuation
performed by an external independent valuator. The total purchase consideration
shall not in any event exceed R125,0m. As at 30 June 2009, the deferred
consideration liability was determined as R18,0m.
Kagiso Media Limited through its wholly owned subsidiary, Kagiso New Media
(Proprietary) Limited purchased 50,1% of the issued share capital of Gloo
Digital Design for a consideration of R6m. Gloo Digital Design is a creative
design agency that specialises in the creation of digital campaign solutions for
all sectors of business. Services include strategy, design and the technical
development of solution across the relevant digital media space.
The acquisition date of this transaction was 1 January 2009 and the purchase
price allocation and fair values of the assets and liabilities in Gloo were
determined at this date.
If the acquisition had occurred on 1 July 2008, the contribution to the group`s
revenue would have been approximately R12,7m and the contribution to the profits
would have been a net profit after tax of approximately R1,7m*. The revenue
recorded in 2009 from the entity since acquisition totalled R8,5m and profit
after tax R1,1m. The results of Gloo are included in the segmental analysis
under "Broadcasting".
The goodwill is attributable to the future benefits of Kagiso Media`s
diversification into production services in new media and knowledge and
expertise attached thereto.
*These amounts have been calculated using the group`s accounting policies and by
adjusting the results of the subsidiary to reflect the additional amortisation
that would have been charged assuming fair value adjustments to intangible
assets had applied from 1 July 2008, together with the consequential tax
effects.
Details of the net assets acquired and goodwill are as follows:
Urban Brew Studios Gloo Digital Design
Acquiree`s Acquiree`s
carrying Fair value carrying Fair value
amount on on amount on on
acquisition acquisition acquisition acquisition
(R`000) date date date date
Property, plant and 27 996 27 996 361 361
equipment
Intangible assets 677 33 977 121 4 767
Goodwill 1 905 1 905 1 074 1 074
Net deferred income tax 2 226 2 226 163 163
assets
Income tax asset 168 168 - -
Cash and cash 13 960 13 960 1 764 1 764
equivalents
Trade and other 28 375 28 375 4 129 4 129
receivables
Trade and other (26 309) (26 309) (1 681) (1 681)
payables
Borrowings (14 050) (14 050) - -
Deferred income tax - (9 324) - (1 301)
liabilities on
intangible assets
Income tax liabilities - - (374) (374)
Net identifiable assets 34 948 58 924 5 557 8 902
acquired
Minority interest (17 408) (2 773)
(49,9%)
Kagiso Media group`s 41 516 6 129
share in the fair
values of net assets
acquired
Purchase consideration:
- cash paid 75 137 5 974
- direct costs relating 2 864 319
to the acquisition
Initial purchase 78 001 6 293
consideration
Contingent 17 995 -
consideration liability
Total purchase 95 996 6 293
consideration
Fair value of net (41 516) (6 129)
assets acquired
Goodwill acquired from 1 905 1 074
the business
Total goodwill 56 385 1 238
Total initial 78 001 6 293
consideration
Cash and cash (13 960) (1 764)
equivalents in the
business acquired
Cash outflow on 64 041 4 529
acquisition
4.2 Ergosaf Environmental Occupational Health Services ("Ergosaf") - LexisNexis
(Proprietary) Limited, a 50% owned joint venture purchased 100% of the operating
assets of Ergosaf, an entity that provides a comprehensive range of services,
including evaluation of physical, chemical and biological stressors, health risk
assessments, environmental management programmes and training.
The acquisition date of this transaction was 1 June 2009. The purchase price
allocation and fair values of the assets and liabilities in Ergosaf were
determined at this date.
The assets and liabilities arising from the acquisition are as follows:
Acquiree`s
carrying Fair value
amount on on
acquisition acquisition
(R`000) date date
Property, plant and equipment 35 139
Intangible assets - 428
Trade and other payables (44) (44)
Cash and cash equivalents - -
Kagiso Media`s share in the fair value of net 523
assets acquired
Total purchase consideration as determined at 30 2 500
June 2009
Deferred consideration purchase price (375)
Total initial consideration including the direct 2 125
costs settled in cash
Cash and cash equivalents in business acquired -
Cash outflow on acquisition 2 125
Total initial consideration 2 500
Cash and cash equivalents in the business (523)
acquired
Goodwill 1 977
5. Discontinued operations
5.1 Kagiso Media`s decision to close all unprofitable and unsustainable business
units, resulted in the disposal of shows and exhibitions owned by KEE following
the continuing underperformance in relation to other group assets.
30 June 30 June
2009 2008
(R`000) (R`000)
Revenue 91 296 152 292
Expenses (93 680) (154 628)
Loss before income tax (2 384) (2 336)
Income tax expense (2 670) (984)
Loss for the year (5 054) (3 320)
Pre-tax loss recognised on the measurement of - (4)
assets of disposal group
Income tax expense - 1
After-tax loss recognised on the measurement of - (3)
assets of the disposal group
Loss after tax from discontinued operations (5 054) (3 323)
The net cash flows incurred by the discontinued
operations are as follows:
Operating cash flow 5 320 119
Investing cash flow 1 130 175
Investing cash flow (4 253) -
Net decrease in cash and cash equivalents from 2 197 294
discontinued operations
Earnings/(loss) per share:
Basic from discontinued operations (cents) 2,9 (2,5)
Diluted earnings/(loss) per share (cents) 2,9 (2,5)
Profit after tax arising from discontinuance of
operations
Disposal of rights to operating the exhibition 10 049 -
shows
Disposal of a subsidiary - Kagiso Exhibitions (6 960) -
and Events Solutions (Proprietary) Limited
Disposal of a joint venture - Johannesburg 5 904 -
International Motor Show (Proprietary) Limited
8 993 -
The results of the discontinued operations for the year are presented below: 5.2
The exercise of the call option, detailed in 15 below, in a joint venture Merafe
Outdoor has resulted in the entity qualifying to be held as an asset for sale at
balance sheet date as well as a discontinued operation.
The major classes of assets and liabilities of Merafe Outdoor classified as held
for sale at 30 June 2009 and that of Media Management at 30 June 2008 are as
follows:
Assets
Property, plant and equipment 4 693 809
Intangible assets 41 300 5
Inventories - 1 858
Trade and other receivables 6 760 -
Cash and cash equivalents 5 619 -
Assets classified as held for sale 58 372 2 672
Liabilities
Trade and other payables 18 932 125
Deferred tax assets 1 075 -
Income tax liabilities 1 499 -
Liabilities directly associated with assets 21 506 125
classified as held for sale
Net assets directly associated with discontinued 36 866 2 547
operations
6. 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 2009 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.
A discontinued operation results from the sale or abandonment of an operation
that represents a separate, major line of business and for which the assets, net
profits or losses and activities can be distinguished physically, operationally
and for reporting purposes.
The results of discontinued operations are presented separately in the income
statement and the assets and liabilities associated with these operations are
included with non-current assets (or disposal groups) held for sale in the
balance sheet.
As a result of the discontinued operations in the current year, the comparative
information in the income statement has been re-presented.
7. Capital expenditure
Tangible Intangible
(R`000) assets assets Goodwill
Year ended 30 June 2009
Opening net carrying amount 30 937 327 529 147 777
Additions 10 637 4 757 18 017
Acquired and arising from business 28 496 39 171 41 606
combinations
Reclassification - (2 695) 2 695
Disposals (1 805) (1) -
Discontinued operations (9 596) (6 433) (5 586)
Classified as held for sale (4 693) (17 281) (24 019)
Depreciation, amortisation and other (11 245) (22 924) (8 226)
movements
Closing net carrying amount 42 731 322 123 172 264
Year ended 30 June 2008
Opening net carrying amount 29 284 351 570 124 999
Additions 13 838 2 440 -
Acquired and arising from business 423 2 323 23 448
combinations
Reclassification (2) 2 -
Disposals (100) (47) -
Discontinued operations (809) (5) -
Depreciation, amortisation and other (11 697) (28 754) (670)
movements
Closing net carrying amount 30 937 327 529 147 777
8. Share capital
Number of Ordinary Share Total
shares shares premium
(`000s) (R`000) (R`000) (R`000)
1 July 2008 133 507 611 1 335 13 334 14 669
Shares issued - employee 284 243 3 1 180 1 183*
share option scheme
Share issue expenses - - (4) (4)
30 June 2009 133 791 854 1 338 14 510 15 848
1 July 2007 133 136 477 1 331 11 850 13 181
Shares issued - employee 371 134 4 1 489 1 493
share option scheme
Share issue expenses - - (5) (5)
30 June 2008 133 507 611 1 335 13 334 14 669
*weighted average price: 565 cents (2008:402 cents)
9. Non-current liabilities - borrowings
30 June 30 June
(R`000) 2009 2008
Borrowings
Preference shares
Opening balance 209 010 234 433
Other 458 -
Redeemed (23 989) (25 423)
At end of year 185 479 209 010
Share issue expenses (309) (348)
Closing balance 185 170 208 662
Other borrowings
Installment sale agreements 9 738 560
Contingent consideration liabilities 24 161 -
219 069 209 222
10. Contingent liabilities
30 June 30 June
(R`000) 2009 2008
Amount outstanding under bank facilities of a 474 700
previous subsidiary, System Publishers (Proprietary)
Limited.
Kagiso Media Limited guarantees the overdraft banking facilities of Systems
Publishers (Proprietary) Limited. Kagiso Media Limited 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. The outstanding amount as at the end of the financial year relates to an
overdraft and letter of guarantee facilities. A second bond has been registered
over the fixed property of a director of System Publishers (Proprietary)
Limited. This bond ensures that Kagiso Media would suffer no financial loss
should Kagiso Media be called on to honour the guarantee. The company therefore
did 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 fulfill 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
2009.
11. Related party transactions
(R`000)
Payments made to Kagiso Trust Investments (Proprietary) Limited ("KTI") in terms
of the sub-lease:
Costs for Costs for
Rent Operating common other
costs area services
30 June 2009 1 052 - 364 46
30 June 2008 1 489 109 32 346
Outstanding balances owing to
KTI in terms of the sub-
lease:
30 June 2009 93 - - 124
30 June 2008 496 - - 1 044
Loans
repaid/
(advanced)
Opening during the Interest Closing
balance period charged balance
Loans to/(from) related
parties
Loans to directors and key
management (Unrestricted
Share Purchase Scheme)
30 June 2009 9 484 1 692 1 459 12 635
30 June 2008 3 869 4 708 907 9 484
Loans to directors and key management 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 fluctuation in the share price.
The scheme shares serve as security for the loans.
Thebe Convergent Technologies (Proprietary) Limited ("Thebe")
30 June 2009 - - - -
30 June 2008 (4 861) 4 861 - -
Makana Radio Communications (Proprietary) Limited ("Makana")
30 June 2009 46 55 - 101
30 June 2008 - 46 - 46
Radio Heart 104.9 (Proprietary) Limited ("Heart")
30 June 2009 9 719 750 - 10 469
30 June 2008 10 219 (500) - 9 719
Radio iGagasi 99.5 (Proprietary) Limited ("iGagasi")
30 June 2009 9 662 (2 997) - 6 665
30 June 2008 8 795 867 - 9 662
The loans from Thebe and to Makana, Heart and iGagasi are unsecured,
interest free and may however be payable on demand.
Loans from minority shareholder: MSG Afrika Media (Proprietary) Limited
30 June 2009 (15 750) - - (15 750)
30 June 2008 (15 750) - - (15 750)
The loan is unsecured, interest free and may however be payable on demand.
Preference share investment in minority shareholder
MSG Afrika Media (Proprietary) Limited
30 June 2009 14 700 (1 050) 299 13 949
30 June 2008 16 240 (1 540) - 14 700
The loan is in the form of preference shares with the same terms as the
preference share terms and conditions of those available to the Kagiso Media
Group. The dividends on preference shares are payable every six months, at 70%
of prime rate and payments into a sinking fund, equal to 5% of the issue value.
12. Annual financial statements
The annual financial statements for the year to 30 June 2009, including a notice
of the annual general meeting, will be posted to shareholders by no later than
30 October 2009.
13. 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.
14. Dividend
In the year under review 59 cents per share was distributed to shareholders by
way of dividends. Notice is hereby given that a final dividend of 27 cents
(2008: 24 cents) per share has been declared in respect of the year ended 30
June 2009 and is payable to holders of ordinary shares recorded in the register
of the company on Friday, 16 October 2009.
The following salient dates apply to this dividend
Last date to trade cum-dividend Friday 9 October 2009
Shares commence trading ex-dividend Monday 12 October 2009
Record date Friday 16 October 2009
Payment of the dividend Monday 19 October 2009
Share certificates may not be dematerialised or rematerialised between Monday,
12 October 2009 and Friday, 16 October 2009, 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.
15. 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 INM Outdoor (Proprietary) Limited ("INMO")
(formerly Clear Channel Independent (Proprietary) Limited) through Kagiso
Outdoor (Proprietary) Limited ("KO") as provided for in a Memorandum of
Agreement ("MOA") signed by KO, MSG Afrika Media (Proprietary) Limited ("MSG"),
INMO and INM Outdoor Media (Proprietary) Ltd (formerly Clear Channel Independent
Media (Proprietary) Limited).
The result of this decision is that INMO is in a position to exercise a call on
Kagiso Media`s interest in Merafe Outdoor (Proprietary) Limited (formerly 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 INMO 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. As the sale had not been
concluded by 30 June 2009, Kagiso Media subsequently granted MSG a further six-
month extension, ending 27 December 2009, for MSG to purchase the shares.
16. Board of Directors
Ms Sandra Pienaar resigned as Financial Director and Company Secretary of Kagiso
Media with effect from 5 June 2009 to pursue an opportunity offshore. While a
replacement is still being sought, Mr Patrick Kane has been temporarily
appointed as Chief Financial Officer and Company Secretary of the Group from 5
June 2009.
17. Prospects
While the short term outlook remains uncertain, the Group is confident that in
the first quarter of 2010, business conditions will start to improve. The 2010
Soccer World Cup is expected to precipitate an uptick in advertising revenue,
while in the longer term, government`s public infrastructure investment
programme should catalyse economic growth.
Kagiso Media is actively recalibrating and refining its businesses to ensure its
optimal positioning for the economic recovery. The management team continues to
evaluate the market to grow its base of products and services and to enhance its
competitiveness. At the same time it is managing costs and continually
eliminating inefficiencies to maximise profitability.
The Group will continue to seek investments to ensure its leadership in both the
traditional and the new media environments.
On behalf of the board
R M Motanyane M Morobe
Chairman Chief executive officer
22 September 2009
Registered office: 1st Floor, Kagiso House, 16 Fricker Road, Illovo, 2196.
(PO Box 724, Northlands, 2116)
Transfer secretaries: Link Market Services South Africa (Proprietary) Limited,
5th Floor, 11 Diagonal Street, Johannesburg, 2001. (PO Box 4844, Johannesburg,
2000)
Directors: R M Motanyane# (Chairman), M J N Njeke (Deputy chairman),
M Morobe* (Chief executive), O C Essack*, H I Appelbaum, W C Ross#,
T Hiemstra#, A Patel, Z J Matlala, A A Paruk#
* Executive # Independent
Also available at www.kagisomedia.co.za
Sponsor: Investec Bank Limited
Date: 22/09/2009 17:30:01 Produced by the JSE SENS Department.
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