| Mon 21 Feb 2011, 17:02 | | KGM - Kagiso Media Limited - Unaudited Financial Statements for the period |
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KGM
KGM
KGM - Kagiso Media Limited - Unaudited Financial Statements for the period
ending 31 December 2010
Kagiso Media Limited
(Incorporated in the Republic of South Africa)
(Reg. No 1957/000036/06)
Share Code: KGM
ISIN: ZAE000014007
("Kagiso Media" or "the Company")
Unaudited Financial Statements for the period ending 31 December 2010
Commentary
1. Financial review
General
The interim Earnings per share (EPS) were higher than the comparable period at
98.8 cents per share (72.4 cps) with Headline earnings per share (HEPS) higher
at 98.8cps (75.7cps), for the six months of trading to 31 December 2010. The
interim EPS was higher than the comparative mainly due to the impact of the
group reorganisation, which happened in July 2010 The reorganisation was
undertaken to centralise services reduce the groups cost structure and
resulted in a reduced group tax charge. The benefits of this will reflect in
the results going forward. Post the 2010 FIFA World Cup, trading conditions
were very difficult for most of our business units, indeed the economic
environment remains challenging.
Revenue
Group revenue for the period under review, grew by 12.4%, from R458.4m to
R515.3m. This is a particularly rewarding achievement against a backdrop of
increasing price competition, and additional low yielding advertising
inventory released into the market by the TV sector.
The Broadcasting division has had to weather this price play and competition
from the other media sectors, and consequently reflected a modest revenue
increase of 4.5%. The Content (TV) segment posted a pleasing 17.7% growth on
the prior year, with the benefit of mitigation strategies which reduced over
reliance on one customer now being reflected in the results. Gloo had another
strong start to the year delivering the extra R25.5m of revenue for the New
Media segment. The Information and Other division grew by 8%, with LexisNexis
delivering positive growth for the six months trading in 2010.
Operating Margin
The operating margin for the group improved as a direct result of revenue
growth and focus on cost management. For the six months under review operating
margins improved from 33.9% (R155.6m) to 34.9% (R179.9m). Broadcasting margins
of 48% were 2% adrift of the December 2009 margin of 50%, with inventory
discounting contributing to the reduction in the Broadcasting margin. The
Information and Other segment delivered a very healthy margin of 34%. This is
a 5% improvement on the prior year, LexisNexis had a record December which
contributed significantly to the improved margin. The New Media operating
margins have improved by 62% from R4.2m to R6.8m.This increase was driven by
strong revenue growth, with the acquisition of several new large customers.
The Content segment margin was 21.7% a vastly improved performance against the
prior period.
Finance income increased to R8.3m as a result of an increase in cash on hand.
Finance expenses were well down at R5m, R2.6m down on the prior year. Debt was
reduced and interest rates decreased, leading to a reduction in financing
costs.
Associates
The after-tax share of results of Associates of R8.1 million is made up of
Kagiso Media holdings in OFM of 24.9%, a 33.3% economic interest in Heart
104.9 and iGagasi 99.5 respectively and 22.5% in Kaya FM. This composition has
not changed since the previous reporting period.
Business Combinations
During the period under review KML acquired 65% of Kagiso EProps. The balance
of the shares (35%) are held by Mint (Pty) Ltd, which in turn is controlled by
Simeka. The company was acquired on 1 November 2010 and included in the half
year results.
Taxation
The effective tax rate decreased from 32.5% to 22.7%. The effective tax rate
excluding STC is 20.8%, compared to 29.8% in the previous reporting period.
The difference in tax rate can largely be attributed to the group
reorganisation implemented in the current financial reporting period.
Minorities share of Profits
Minorities owned 20% of Jacaranda 94.2 and 49.9% of both Gloo and Urban Brew
Studios respectively. Minorities also own 35% of Kagiso EProps. The movement
in the minorities` share of profits reflects the changes in the results of
these units.
2. Operational Review
During the period under review and in the comparative preceding period,
revenue, operating profit/(loss) and profit/(loss) contribution per business
segment was as follows:
Segmental analysis of the six months ended 31 December
Segment Revenue
2010 2009
(R`000) (R`000)
Corporate (2 002) 1 360
Broadcasting 251 876 241 131
Information and other 130 017 120 833
New Media 37 504 11 981
Content 97 886 83 142
Total 515 281 458 447
Segment Operating profit/(loss)
2010 2009
(R`000) (R`000)
Corporate (12 364) (15 419)
Broadcasting 120 846 122 325
Information and other 43 263 34 933
New Media 6 830 4 206
Content 21 288 9 518
Total 179 863 155 563
Segment Profit/(loss)*
2010 2009
(R`000) (R`000)
Corporate (15 795) (1 521)
Broadcasting 109 070 90 815
Information and other 28 647 25 643
New Media 2 744 1 410
Content 7 420 3 218
Total 132 086 119 565
* Attributable to equity holders of the company.
Corporate
Preference dividend costs declined by R2.9 million year on year, which lead to
the reduced costs of Corporate. The group`s share of STC payments in all the
subsidiaries, joint ventures and associates are included in this segment.
Broadcasting
The environment during the first half of the fiscal year and subsequent to the
2010 FIFA World CupTM, was very challenging and somewhat inconsistent,
negatively impacting the wholly owned radio stations` revenue. Healthy local
domestic sales were strong contributors, however national sales are still
below 2008 levels. The segment`s significant focus on cost management
facilitated in the delivery of an acceptable operating profit amounting to
R120,8 million for the period under review.
The radio stations in which Kagiso Media Limited holds minority interest all
showed a relatively flat performance compared to the prior year.
Information and other
The information segment revenue was 7.76% better then prior year at R130m
(R120.8m), with LexisNexis deliverying positive growth for the period under
review. Profit for the period of R43.3m, represented a 11.7% improvement on
the prior year, this included a favourable reversal of R3m doubtful debt
provision where the debt was fully recovered in the period under review.
Mobil Alliance had a good start to the year with the balance of the SABC World
Cup contract to provide PVA`s (Public viewing areas) being completed in July.
New Media
Gloo continued to broaden its client base, which accounted for strong growth
for the business unit and on the back of that once again delivered good
margins. At MSN the sales ramp-up is on track with good progress being made in
the October - December quarter. The division is breaking even in the first few
months of trading.
Content
The performance of Urban Brew Studios has been excellent, after being somewhat
disappointing in 2009. Revenue at the company is 18% up on the 2009 interims,
delivering revenue of R97.9 million against the prior year of R83.1million.
New content opportunities with some key channel owners , and better deal flow
prospects from traditional customer base has provided the stimulus for revenue
growth.
3. Financial Position
Working Capital
The group reported cash of R302.95million at 31 December 2010 up from R274.2
million at June 2010. The improved cash position continues to reflect the
group`s renowned cash conversion abilities. Trade receivables increased to
R274.3m, an 8.4% increase on the prior year. Inventory levels have improved to
R14.3m, which is a 26% reduction on the prior year. Loans receivable have
increased to R10.2m with funding being provided to Expo Solution`s management
to enable KML to exit the business. The balance has been advanced to a JV
partner to finance working capital requirements for the SA Tourism contract.
Cash Flow
The cash flow from operating activities for the six months, increased by R27.2
million to R194,5 million. This is a direct result of the trading operations`
excellent cash management and the resolution of two large overdue debtors.
The company purchased the assets and liabilities of Knowledge Factory for R20
million and formed Kagiso EProps with Mint Management Technologies (35%
shareholder). A further R10.4 million will be used to settle another tranche
of the preference share debt in March 2011.
Although the cash balance reflects R302.5m accessible cash is R156.9m, with
shareholder agreements regulating cash management where we have joint venture
arrangements and minority shareholders.
4. Regulatory matters
New Primary Market Radios Licences: Kagiso Media participated in consortia
bidding for the new primary licenses in Cape Town and Pretoria. Hearings were
held in the last quarter of 2010. We anticipate the awarding of the licence
during the first half of 2011.
Needletime: The National Association of Broadcasters has reached consensus on
a proposal to calculate the Needletime levy. The NAB will table its proposal
at the copyright tribunal.
5. Interim dividend declaration
It is the group`s policy to return 50% of its headline earnings for the year
to shareholders. It was decided that given the improved cash position of the
company it would pay a dividend of 50 cents per share (35 cents in the prior
year).
Notice is hereby given that an interim dividend of 50 cents (2010: 35 cents)
per share has been declared in respect of the six months ending 31 December
2010 and is payable to holders of ordinary shares recorded on the register of
the company on Friday, 18th March 2011.
The following salient dates apply to this dividend
Last day of trade cum-dividend Friday 11th March 2011
Shares commence trading ex-dividend Monday 14th March 2011
Record date Friday 18th March 2011
Payment of dividend Tuesday 22nd March 2011
Share certificates may not be dematerialised or rematerialised between Monday
14th March 2011 and Friday 18th March 2011, 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.
6. Basis of preparation
The group has prepared condensed consolidated interim financial statements for
the six months ended 31 December 2010 in accordance with IAS 34 "Interim
Financial Reporting" and in compliance with the listing requirements of the
JSE Limited and the South African Companies Act 61 of 1973 as amended. The
interim condensed financial report should be read in conjunction the annual
financial statements for the year ended 30 June 2010.
7. Accounting Policies
The accounting policies and methods of computation are consistent with those
of the annual financial statements for the year ended 30 June 2010, as
described therein.
8. Contingent Liabilities
The contingent liabilities, as reported in the 2010 annual financial
statements, remain applicable.
9. Prospects
The six months under review has seen a steady return to revenue growth of
virtually all our assets. It is pleasing to see the strong growth in both Gloo
and Urban Brew and this we believe will continue into the second half of the
2011 financial year. The prior year results were positively affected by the
World Cup, hence we anticipate profit for the next six months trading will be
marginally down on the R96.5m (January to June profit after tax) delivered in
2010. Notwithstanding the seasonality impact we anticipate profits for the
current financial year will be better than 2010.These forecasts have not been
reviewed or reported on by the Company`s auditors.
KAGISO MEDIA LIMITED
Consolidated statements of financial position
Dec-10 Dec-09 Jun-10
(Unaudited) (Unaudited) (Audited)
R`000
Assets
Non-current assets 612 609 606 948 591 842
Property, plant and equipment 53 993 43 952 42 136
Intangible assets 303 876 313 322 299 605
Goodwill 175 110 184 951 170 077
Investment in associates 58 749 59 995 59 169
Deferred income tax assets 10 668 4 728 20 855
Loans receivable 10 213 - -
Current assets 594 464 545 983 540 585
Inventories 14 352 19 391 18 373
Trade and other receivables 274 284 252 945 237 208
Loans receivable 2 080 2 270 2 119
Income tax assets 1 252 786 1 284
Available-for-sale financial assets - - 7 382
Cash and cash equivalents 302 496 270 591 274 219
Total assets 1 207 073 1 152 931 1 132 427
Equity
Capital and reserves attributable to
equity holders
Ordinary share capital 1 338 1 338 1 338
Share premium 14 510 14 510 14 510
Revaluation and other reserves 88 593 88 566 88 585
Retained earnings 585 831 480 651 513 953
Total shareholders` equity 690 272 585 065 618 386
Non-controlling interest 101 856 88 331 96 821
Total equity 792 129 673 396 715 207
Liabilities
Non-current liabilities 205 260 282 729 210 610
Borrowings 135 531 208 169 128 118
Deferred income tax liabilities 69 729 74 560 82 492
Current liabilities 209 684 196 806 206 610
Trade and other payables 189 759 179 203 168 290
Borrowings 10 756 5 576 30 897
Income tax liabilities 9 169 12 027 7 423
Total liabilities 414 944 479 535 417 220
Total equity and liabilities 1 207 073 1 152 931 1 132 427
Consolidated statements of comprehensive income
for the period ended 31 December 2010
Dec-10 Dec-09 Change Jun-10
R`000 (Unaudited) (Unaudited) % (Audited)
Continuing operations
Revenue 515,281 458,447 12% 906,271
Other income 6,239 4,370 18,636
Raw material and
consumables (71,514) (65,444) 9% (163,789)
Commission and levies (64,505) (59,115) (119,085)
Employee costs (105,622) (83,449) 27% (147,709)
Marketing and programming
expenses (9,859) (7,825) (17,118)
Professional and
consulting fees (9,629) (9,945) (15,237)
Rental and management fees (14,466) (15,340) (30,880)
Depreciation (6,489) (7,123) (14,985)
Amortisation (13,144) (13,048) (26,034)
Other expenses (46,429) (45,965) (86,577)
Operating profit 179,863 155,563 16% 303,493
Finance income 8,310 6,452 14,695
Finance expenses (4,977) (7,568) (15,498)
Share of results of
associates 8,106 7,898 3% 10,988
Profit before income tax 191,302 162,345 18% 313,678
Income tax expense (43,364) (52,682) -18% (107,472)
Profit for the period
from continuing
operations 147,938 109,663 35% 206,206
Discontinued operations
Profit after tax for the
period from discontinued
operations - 4,420 4,268
Profit arising from
discontinuance of
operations - 18,382 17,521
147,938 132,465 12% 227,995
Profit for the period
Profit attributable to:
Equity holders 132,086 119,565 10% 199,695
Non-controlling interest 15,852 12,900 23% 28,300
147,938 132,465 227,995
Consolidated statements of cash flows
for the period ended 31 December 2010
Dec-10 Dec-09 Jun-10
(Unaudited) (Unaudited) (Audited)
Cash flow from operating activities
Cash generated from operations 194 485 167,240 340,381
Finance expenses paid (704) (701) (1,792)
Income tax paid (44 137) (63,099) (131,216)
Dividends paid to equity holders (60 206) (36,124) (82,952)
Dividends paid to non-controlling
interest of disposed
investments - (1,561) (1,560)
Dividends paid to non-controlling
interest (10 818) (9,954) (16,864)
Dividends paid to preference
shareholders (4 586) (7,532) (13,959)
Total net cash generated from
operating activities 74 034 48,269 92,038
Cash flow from investing activities
Acquisition of subsidiaries, net of
cash acquired (20 000) - -
Purchases of property, plant and
equipment (17 443) (9,470) (15,994)
Proceeds from disposal of PPE (128) 1,061 1,396
Purchases of intangible assets (2 018) (4,247) (4,287)
Proceeds from disposal of
investments, net of cash - 40,592 35,057
Dividends received from assets
held-for-sale - 4,760 -
Preference shares redeemed - 13,650 13,650
Repayment of loans by associates 3 800 917 3,217
Finance income received 8 310 5,971 12,081
Preference dividends received 3 535 481 2,614
Dividends received from associates 1 192 5,737 7,353
Total net cash used in investing
activities (22 752) 59,452 55,087
Cash flow from financing activities
Proceeds from borrowings - - 4,036
Repayment of borrowings (3 211) 2,003 -
Preference shares redeemed (9 581) (12,560) (55,988)
Movement in loans receivable (10 213) - -
Total net cash used in financing
activities (23 005) (10,557) (51,952)
Total net cash flow 28 277 97,164 95,173
Cash and cash equivalents at the
beginning of the period 274 219 179,046 179,046
Cash and cash equivalents at the end
of the period 302 496 276,210 274,219
Included in assets held-for-sale - (5,619) -
Included in cash and cash
equivalents per the statement of
financial position 302 496 270,591 274,219
Condensed consolidated statement of changes in equity
Six Six Twelve
months months months
ended ended ended
31 December 31 December 30 June
2010 2009 2010
(Unaudited) (Unaudited) (Audited)
(R`000) (R`000) (R`000)
Equity at the beginning of the period 715,207 588,370 588,370
Total comprehensive income for the
period 147,938 132,465 227,995
Employee costs: share option scheme 8 51 70
Non-controlling interest transferred
on disposal of net assets - (1,412) (1,412)
Dividends paid (71,024) (46,078) (99,816)
792,129 673,396 715,207
Reconciliation of headline earnings
Six Six Twelve
months months months
ended ended ended
31 December 31 December 30 June
2010 2009 2010
(Unaudited) (Unaudited) (Audited)
Change
(R`000) (R`000) % (R`000)
Profit for the period
attributable to equity
holders 132,086 119,565 10 199,695
Profit arising from
discontinuance of
operations - (18,382) (17,521)
Loss on disposal of
intangible assets - - 767
Loss on disposal of
property, plant and
equipment - - 85
Headline earnings 132,086 101,183 31 183,026
Headline earnings per
share 98.8 75.7 31 136.9
Diluted headline earnings
per share 98.6 75.5 31 136.6
Earnings per share -
continuing operations
Earnings per share (cents) 98.8 72.4 37 133.0
Diluted earnings per
share (cents) 98.6 72.2 37 132.8
Earnings per share -
discontinuing operations
Earnings per share (cents) - 3.3 -100 3.2
Diluted earnings per
share (cents) - 3.3 -100 3.2
Shares used in
calculations
Number of shares in issue
(`000s) 133,792 133,792 - 133,792
Weighted average number
of shares in issue
(`000s) 133,726 133,726 - 133,726
Weighted average number
of shares in issue for
diluted
earnings per share (`000s) 133,983 133,983 - 133,983
KAGISO MEDIA LIMITED
Segmental analysis of the six months ended 31 December
Revenue
(R`000) 2010 2009
Corporate (2,002) 1,360
Broadcasting 251,876 241,131
Information and other 130,017 120,833
New Media 37,504 11,981
Content 97,886 83,142
Total 515,281 458,447
Operating profit/(loss)
(R`000) 2010 2009
Corporate (12,364) (15,419)
Broadcasting 120,846 122,325
Information and other 43,263 34,933
New Media 6,830 4,206
Content 21,288 9,518
Total 179,863 155,563
Profit/(loss)*
(R`000) 2010 20009
Corporate (15,795) (1,521)
Broadcasting 109,070 90,815
Information and other 28,647 25,643
New Media 2,744 1,410
Content 7,420 3,218
Total 132,086 119,565
*Attributable to equity holders of the company
The group has re-organised its reporting structure which has necessitated a
change in the reportable segments in order to comply with IFRS 8, Operating
Segments. This change has resulted in the restatement of the prior year
figures.
Business Combination
Kagiso Media Limited, through its wholly owned subsidiary, Kagiso EProps
(Proprietary) Limited, purchased 100% of the operating assets and liabilities
of Knowledge Factory (Proprietary) Limited for a consideration of R19 469 539.
Kagiso EProps also acquired 50% of the operating assets and liabilities of
Property Dot Go (Proprietary) Limited for a consideration of R530 461. In
exchange for a 35% share in the equity of Knowledge Factory, Mint Pty (Ltd)
sold their software, systems and customers in their property division to
Kagiso Eprops. The acquisition date of both transactions was 1 November 2010.
The purchase price allocation and fair values of the assets and liabilities in
Knowledge Factory and Property Dot Go will be completed before July 2011.
Details of the fair values of assets and liabilities acquired during the year
at the date of sale are as follows:
Kagiso Eprops Total
R`000
Purchase Consideration
Total purchase consideration 20,000 10,000 30,000
Cost of net identifiable assets
acquired (see below) 14,966 5,000 (19,966)
Goodwill 5,034 5,000 10,034
-
Fair value on
Kagiso EProps acquisition
(65%) Mint (35%) date
(R`000)
Cost on acquisition date
Customer Contracts 2,000 2,575 4,575
Systems and software 8,620 2,425 11,045
Database 4,467 - 4,467
Operating Assets 2,807 - 2,807
Operating Liabilities (2,928) - -2,928
Cash and cash equivalents - - -
Net Assets Acquired 14,966 5,000 19,966
Kagiso Media Investments share
in the fair value of net assets
acquired
Total purchase consideration as
determined at 1 November 2010 (20,000) (20,000)
Cash and cash equivalents in
business acquired -
Cash outflow on acquisition (20,000) (20,000)
21 February 2011
Sponsor: Investec Bank Limited
Date: 21/02/2011 17:02:01 Produced by the JSE SENS Department.
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