| Thu 8 Sep 2011, 7:15 | | CAT/CATP - Caxton & CTP Publishers & Printers Limited - Reviewed results for the |
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CAT CATP
CAT
CAT/CATP - Caxton & CTP Publishers & Printers Limited - Reviewed results for the
year ended 30 June 2011
CAXTON & CTP PUBLISHERS & PRINTERS LIMITED
Incorporated in the Republic of South Africa
Registration number 1947/026616/06
Share code: CAT
ISIN: ZAE000043345
Preference share code: CATP
ISIN: ZAE000043352
REVIEWED RESULTS FOR THE YEAR ENDED 30 JUNE 2011
Highlights
Operating profit UP 14%
Adjusted headline earnings UP 6%
ABRIDGED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Reviewed Audited
for the year to for the year to
30 June 2011 30 June 2010
R`000
Turnover 4 340 422 4 087 277
Other operating income 81 390 84 760
4 421 812 4 172 037
Changes in inventories
of finished goods
and work in progress 14 091 (9 405)
Raw materials and
consumables used 1 530 826 1 539 151
Staff costs 897 599 809 358
Other operating expenses 1 244 465 1 190 587
Total operating expenses 3 686 981 3 529 691
PROFIT FROM OPERATING
ACTIVITIES 734 831 642 346
Depreciation 188 724 171 268
PROFIT FROM OPERATING
ACTIVITIES
AFTER DEPRECIATION 546 107 471 078
Impairment of plant and goodwill 23 462 12 702
NET PROFIT FROM
OPERATING ACTIVITIES 522 645 458 376
Net finance income/(expense) 131 109 (3 466)
- dividends 27 437 33 801
- interest 106 000 112 445
- net (loss)/profit on
realisation of investments (157) 7 506
- loss on currency hedges (2 171) (157 218)
Income from associates 17 957 55 045
671 711 509 955
Income tax expense 203 669 148 775
PROFIT FOR THE YEAR 468 042 361 180
Other comprehensive income (31 972) (23 665)
Fair value adjustment -
investments and preference
shares (31 972) (23 665)
TOTAL COMPREHENSIVE INCOME
FOR THE YEAR 436 070 337 515
PROFIT ATTRIBUTABLE TO:
Non-controlling interests 5 042 7 085
Owners of the company 463 000 354 095
468 042 361 180
Earnings per share (cents) 101.3 76.0
Adjusted earnings per
share (cents) 101.6 99.9
Headline earnings per
share (cents) 106.2 76.1
Adjusted headline earnings
per share (cents) 106.6 100.0
Preference dividend paid (cents) 357 357
Dividends per share paid
(cents) 40 40
Shares in issue 495 639 628 495 639 628
Treasury shares (38 387 235) (29 652 397)
Earnings per share based on 457 252 393 465 987 231
Reconciliation of
headline earnings
Earnings attributable to
owners of the company 463 000 354 095
Adjusted for non-trading items 22 720 537
Net loss/(surplus) on
realisation of investments 157 (7 506)
Impairment of plant and goodwill 23 462 12 702
Net loss/(profit) on
disposal of assets 2 364 (2 990)
Tax effect on above adjustments (3 263) (1 669)
Headline earnings 485 720 354 632
Reconciliation of adjusted
earnings
Earnings attributable to
owners of the company 463 000 354 095
Non-recurring items
- Loss on currency
hedges (net of tax) 1 513 111 310
Adjusted earnings 464 513 465 405
Adjusted for non-trading items 22 720 537
Adjusted headline earnings 487 233 465 942
Abridged segmental analysis % %
Revenue
Publishing, printing and
distribution 4 132 146 95 3 926 753 96
Other 924 122 21 844 542 21
Inter-group sales -
publishing, printing
and distribution (695 191) (16) (671 419) (17)
Inter-group sales - other (20 655) - (12 599) -
4 340 422 100 4 087 277 100
Operating income
Publishing, printing and
distribution 392 620 75 369 711 81
Other 130 025 25 88 665 19
522 645 100 458 376 100
ABRIDGED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Reviewed Audited
R`000 30 June 2011 30 June 2010
ASSETS
NON-CURRENT ASSETS
PROPERTY, PLANT AND EQUIPMENT 2 287 722 2 147 242
ASSOCIATED COMPANIES 159 628 402 180
INVESTMENTS AT FAIR VALUE 743 974 483 589
- LISTED 6 651 7 870
- UNLISTED 737 323 475 719
CURRENT ASSETS
INVENTORIES 633 863 511 293
ACCOUNTS RECEIVABLE 707 954 770 497
TAXATION 7 965 17 207
CASH 1 519 332 1 757 265
LISTED BANK PREFERENCE SHARES AT FAIR VALUE 81 371 87 947
TOTAL ASSETS 6 141 809 6 177 220
EQUITY AND LIABILITIES
EQUITY 5 063 876 4 941 536
EQUITY ATTRIBUTABLE TO OWNERS OF
THE COMPANY 5 030 538 4 917 384
PREFERENCE SHAREHOLDERS 100 100
NON-CONTROLLING INTEREST 33 238 24 052
NON-CURRENT LIABILITIES
DEFERRED TAXATION 390 145 359 946
CURRENT LIABILITIES
TRADE AND OTHER PAYABLES 561 905 762 316
PROVISIONS 125 883 113 422
TOTAL EQUITY AND LIABILITIES 6 141 809 6 177 220
Net asset value per share (cents) 1 107 1 060
Directors` valuation of unlisted investments
and associated companies 896 951 877 899
Capital expenditure 342 792 269 061
Capital expenditure committed 20 000 250 000
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Reviewed Audited
R`000 30 June 2011 30 June 2010
Balance at beginning of the year 4 941 536 4 795 841
Total comprehensive profit for the period 436 070 337 515
Non-controlling interest acquired 9 823 -
Own shares acquired (131 392) (120)
Dividends paid - ordinary and preference
shareholders (186 481) (186 584)
Dividends paid - minority shareholders (5 680) (5 116)
Balance at end of the year 5 063 876 4 941 536
ABRIDGED CONSOLIDATED STATEMENT OF CASH FLOWS
Reviewed Audited
for the year to for the year to
R`000 30 June 2011 30 June 2010
CASH FLOW FROM OPERATING ACTIVITIES 275 756 572 888
Cash generated by operations 748 941 625 168
Changes in working capital (256 387) 86 811
Cash generated by operating activities 492 554 711 979
Taxation paid (158 074) (93 637)
Net interest received 106 000 112 445
Dividends received 27 437 33 801
Net cash generated from operating activities 467 917 764 588
Dividends paid (192 161) (191 700)
CASH FLOW FROM INVESTING ACTIVITIES (395 506) (263 274)
Property, plant and equipment
- additions to expand operations (342 792) (269 061)
- proceeds from disposals 27 009 5 298
(315 783) (263 763)
- subsidiary companies acquired (36 242) -
- (acquisition)/disposals of investments (43 481) 489
CASH FLOWS FROM FINANCING ACTIVITIES (131 392) (120)
Own shares acquired (131 392) (120)
Net (decrease)/increase in cash and cash
equivalents (251 142) 309 494
Subsidiary company cash acquired 6 129 -
Cash and cash equivalents at the beginning
of the year 1 851 196 1 541 702
Cash and cash equivalents at the end of
the year 1 606 183 1 851 196
Fair value adjustment of preference shares (5 480) (5 984)
Fair value of cash and cash equivalents at
the end of the year 1 600 703 1 845 212
Note:
Cash 1 519 332 1 757 265
Preference shares at fair value 81 371 87 947
Fair value of cash and cash equivalents at
the end of the year 1 600 703 1 845 212
COMMENTARY
Basis of preparation
The accounting policies adopted in the preparation of the financial statements
for the year under review are in accordance with the requirements of
International Financial Reporting Standards ("IFRS"), and are consistent with
the prior year and IAS 34 on interim reporting, JSE Listings Requirements, the
AC 500 standards and the Companies Act of South Africa.
Comments
Whilst retail and wholesale sales continued to grow throughout the year,
unemployment remained extremely high in spite of the many efforts by government
to create additional jobs. More recently volatile international economic
conditions have created greater uncertainty and at this moment in time it
appears that difficult trading conditions, with minimal growth occurring
worldwide, can be expected to continue for some time.
Advertising spend has increased but print advertising as a percentage of total
spend has declined.
Against this background the company performed reasonably and increased its
market share in the major areas in which it operates notwithstanding the
increased levels of competition.
The financial position remains strong with cash and cash equivalents amounting
to R1.6 billion at the year-end which is lower than the corresponding amount at
the previous year-end of R1.8 billion due to extensive investments in the
purchase of new capital equipment, working capital and the repurchase of shares
in the company.
Earnings
Turnover grew slightly ahead of inflation by 6.2%. Profit from operating
activities was up by 14.4%. Depreciation, reflecting the additional capital
investment in equipment, increased from R171.3 million to R188.7 million. In
addition, impairment of plant and goodwill was almost double that of the prior
year at R23.5 million compared with R12.7 million. This resulted in net profit
from operating activities amounting to R522.6 million - 14% ahead of last year
and 12% as a percentage of turnover which is marginally ahead of the prior year
of 11.2%.
The major change in the results of the company are reflected under the heading
of net finance income. In the previous year a loss on currency hedges of R157.2
million was incurred with the corresponding figure for the year under review
being R2.2 million.
Flowing from this major variance, net finance income has improved from a loss of
R3.5 million to income of R131.1 million.
It will be observed from the figures under review that there is a substantial
change in the income from associates of a decline to R18 million from R55
million. The reason for this is that in view of the fact that the company no
longer participates in and has a say in the manner in which the Pearson Southern
Africa Group of Companies is managed, as the company holds only 15% of the
equity of Pearson, it was necessary, that with effect from 1 July 2010, the
shareholding in that company be reflected as an investment and not an associate.
Accordingly, the figure of earnings from associates is not comparable as the
income from this investment is now reflected as dividends received as and when
they are declared by Pearson.
Taxation at a higher rate than last year of 30.3% absorbed R203.7 million
leaving profit for the year after taxation at R468 million. This is an increase
of 29.6% but in order to put the figures into perspective, the loss on currency
hedges in the previous year should be ignored. This notional adjustment would
increase the previous year`s comprehensive income from R337.5 million to R472
million.
Shares in the company repurchased during the year totalled 8 734 838 at a cost
of R131.4 million.
Earnings per share therefore amounted to 101.3 cents compared with 76 cents per
share in the previous year or 99.9 cents after adjusting for the loss on the
currency hedges.
Headline earnings were 106.2 cents per share compared with 76.1 cents or 100
cents after again adjusting for the loss on the currency hedges - an improvement
of 6%.
Capital expenditure
Substantial expenditure was incurred on the increase in capacity and post press
equipment for the newspaper printing facility in Johannesburg and the
installation of equipment for the newspaper factory in Cape Town. Additional
presses were installed at CTP Printers and Kagiso BM Printing in Johannesburg.
CTP Printers in Cape Town has benefited from the upgrade of finishing equipment
for the book printing division.
In total a net amount of R316 million was expended on capital equipment.
Expenditure of the order of approximately R120 million will be incurred in the
current year in the Johannesburg newspaper facility and various other newspaper
plants to further upgrade equipment and add to capacity. Other than the
aforegoing no major capital projects are presently under consideration.
The investment that the company has made in Money Web Holdings Limited and
previously reported on, represents 47.4% of the equity of that company and has
been made at a total cost of R31.7 million.
A decision at the commencement of the financial year to enter the DVD and CD
replication market by acquiring the optical disc replication business of
Bertelsmann in South Africa conducted through a company trading as Arvato, was
taken at a cost of R31 million. The company has subsequently changed its name to
CTP Digital Services.
During the year the company merged its operations conducted in Artone with those
of the House of Print and as a result of the merger, now holds 67% of the
combined entity.
DIVISIONAL PERFORMANCE
PUBLISHING, PRINTING AND DISTRIBUTION
Newspaper publishing and printing
The publishing of newspapers continues to suffer from the changing attitudes and
behaviour of readers. As a result of the rapid growth in digital technology and
the easy access to television and mobile telephones, readers are no longer
reliant upon newspapers for news and this is reflected particularly in the daily
and Sunday broadsheet newspapers where circulations are falling at an even
faster rate than the previous year.
Most fortunately, the company`s newspapers do not fall into this category as
they are predominantly "paid for" regional newspapers or free community
newspapers. Totally against the trend mentioned for the daily and Sunday
newspapers, the company`s regional newspapers have shown good growth. The reason
is that they are relevant with good editorial content and continue to focus on
community news which is not obtainable through any other source. Coupled with
this growth in circulation there has been growth in advertising revenue and a
resultant increase in market share.
Additional production capacity was created during the year which allows for
improvements in quality and a better product and service for the many
publications which are benefiting from the installation of advanced equipment.
A long-term printing contract with Independent Newspapers was concluded for the
printing of all their Cape Town-based newspapers and printing commenced towards
the end of the current financial year with excellent quality and service being
achieved.
Publishing of daily tabloid newspapers has fared a lot better than the
broadsheets with a number of publishers having achieved improved circulations.
The company`s daily and paid for newspaper "The Citizen" has been one of these
publications, and circulation has not declined.
A number of new partnerships have been entered into with good results and new
successful products have been published.
The new "Look Local" digital platform which supports various publications is
operational and a number of roll outs has already taken place. Advertising spend
in the print market as previously indicated, has taken quite a strain of late
and part of this is reflected in the Property and Classified market where there
has been a major migration to digital equivalents. It is essential that the
company`s share of this market be retained and the new digital platforms under
development will be fundamental to complement existing products and provide new
opportunities for readers of our various publications where over three million
copies are published every week.
Magazine publishing and distribution
Contrary to the fall in circulation of newspapers, magazines have generally held
up better with only certain categories having shown large declines. Competition
remains intense and there has been a move towards new digital publications and
digital innovations are being used to complement existing printed magazines.
This trend is expected to gather momentum as the public becomes more exposed to
digital tablet devices and inevitably these devices will become available at
cheaper prices.
Our magazine division improved its performance during the year under review
particularly when compared to their major competitors, and advertising revenues
grew.
Distribution has become an even more integral part of magazine publishing and
this critical area of operation has its challenges. A large number of new
outlets have been opened which need to be serviced, and the perennial problem of
insufficient retail space to display magazines continues.
It is therefore pleasing to report that RNA, the company`s distribution
operation, has traded well and is giving excellent service to its many and
varied customers as is evident by their growth and the fact that two major
publishers have changed from their traditional distributors and during the
latter part of the year under review awarded their business to RNA.
Improvements in systems and operations have enabled the level of service to be
raised and publishers are being supplied with timeous and critical information
to help in the distribution of their publications.
The new area of activity for DVD and CD distribution for the music industry has
experienced rapid growth with the support of a number of international music
companies. New warehouses and systems have been established and this business is
operated as a self-standing unit within RNA.
COMMERCIAL PRINTING
Web, gravure and book printing
In a highly competitive environment, this division produced reasonable results.
New equipment and additional capacity played a role in achieving greater
efficiencies and costs were well controlled.
Further investment in post press finishing equipment was made at CTP Printers in
the Cape and this facility, which is the largest and most efficient in the
country, is well equipped to handle the requirements of publishers of academic
books.
The education market is presently undergoing substantial change as a new
curriculum is in the process of being introduced. This move away from the
previous "Outcome Based Education" model is scheduled to take three years to
implement. The current methods and criteria utilised by the education department
of awarding publishers with approved adoptions of the various subjects has also
been changed. This has resulted in uncertainty for publishers and printers
alike. Furthermore, there does not appear to be clarity on the role that the
workbooks introduced for the first time in 2011 by Central Government will play.
OTHER
Packaging
There has been a mixed set of results emanating from this division which
operates in niche areas of packaging with a lower contribution to the company`s
profits. Packaging manufacturers have had a difficult year due to the strength
of the Rand which has allowed manufacturers to import cheaper packaging
equivalents from overseas. Wholesalers and retailers have been able to import
products, ready for sale, at cheaper prices than the local equivalent. Both of
these factors have had an effect on the market, which has become more
competitive, and has declined.
Stationery
The highly competitive nature of the stationery manufacturing business requires
the optimisation of production efficiencies and a reduction in the cost of
manufacture. In an endeavour to produce more cost-effectively, the manufacturing
facilities of the stationery division located in Cape Town, and which trades as
Premier Stationery, are to be merged with those of Impala Stationery in
Ladysmith. This move should improve the future contribution of this division
where declining profits have been evident for some time.
Review by independent auditors
The company`s auditors, PKF (JHB) Inc have reviewed these results. Their
unqualified review is available for inspection at the registered office of the
company.
Directors
The directors are pleased to announce that Ms Tania Slabbert, daughter of our
late chairman Dr Frederik van Zyl Slabbert, has joined the board of directors of
the company. She will also assume the position of Chairman of the Audit
Committee. In welcoming Tanya to the board we look forward to her contribution.
Dividends
The board has declared a dividend of 40 cents (2010: 40 cents) per share payable
to ordinary shareholders and a preference dividend of 357 cents (2010: 357
cents) to preference shareholders.
To comply with the procedures of STRATE the following dates are applicable:
Date dividend declared: Wednesday, 7 September 2011
Last date to trade cum dividend: Friday, 18 November 2011
Date to commence trading ex dividend: Monday, 21 November 2011
Record date: Friday, 25 November 2011
Date of payments: Monday, 28 November 2011
Share certificates may not be dematerialised or rematerialised between Monday,
21 November 2011 and Friday, 25 November 2011, both dates inclusive.
Prospects
The economy appears to once again be entering a volatile period with little or
no growth being predicted by a range of economists. The level of employment
continues to decline and there has been a deterioration in consumer confidence.
In addition, the migration to digital products is reducing advertising spent on
print.
In these circumstances, any earnings growth is likely to be modest.
P M Jenkins* (Chairman), T D Moolman (Chief Executive Officer)
G M Utian (Managing Director), A C G Molusi*, P G Greyling
T J W Holden, P Vallet*, A N Nemukula*
(*Non-executive directors)
Registered office: 28 Wright Street, Industria West, Johannesburg, 2093
Sponsor
ARCAY MOELA
Date: 08/09/2011 07:15:01 Produced by the JSE SENS Department.
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