| Wed 29 Feb 2012, 17:00 | | KGM - Kagiso Media Limited - Interim results for the six month period ended 31 |
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KGM
KGM
KGM - Kagiso Media Limited - Interim results for the six month period ended 31
December 2011
Kagiso Media Limited
("Kagiso Media", "the group" or "the company")
Registration number: 1957/000036/06
Share code: KGM
ISIN: ZAE000014007
Interim results for the six month period ended 31 December 2011
- Revenue 15% increase in group revenue to R455,3m (2010: R395,2m)
- Profit before tax 13% increase in profit to R165,6m (2010: R146,0m)
Commentary
1. Financial review
General
Group revenue (restated to exclude LexisNexis) for the six-month period to 31
December 2011, grew by 15% from R395,2 million to R455,3 million. Profit before
income tax increased by 13% from R146,1 million to R165,7 million. The adjusted
interim earnings per share (EPS) and headline earnings per share (HEPS) were
higher than the comparable period at 82,3 cents per share (2011: 76,8 cps),
mainly due to the significant trading improvement of the Broadcasting Division.
The Broadcasting Division has posted excellent results on the back of focused
customer initiatives and new content investment.
For the period under review, operating margins declined from 34,2% to 32,7%. The
operating margin for the group decreased due to lower margins achieved in the
Content division. Urban Brew was affected by production delivery phasing from
major broadcasting customers delaying projects to 2012. There is continued focus
in the Group on cost initiatives with the benefits of the recent restructures
anticipated to be reflected in the next six months` results.
During the period under review the company settled the remaining preference
share debt, leading to a reduction in financing costs.
Associates
The after-tax share of results of associates is 58% better than the prior period
at R12,8 million. This is due mainly to an increase in the Group`s effective
economic interest holding in Kaya FM from 22,5% in 2010 to 47,4% in 2011 and a
decrease in the Group`s holding in Heart 104.9 from 33,3% to 20%. The Kaya FM
contribution to the Group`s results of R10,2 million, which is 124% up on 2010,
is particularly pleasing.
Disposal of LexisNexis
KML disposed of its 50% interest in LexisNexis to Reed Elsevier on 15 December
2011 for a consideration of R565 million with an additional final dividend of
R24,5 million being paid on that date. The results of LexisNexis are reflected
as a discontinued operations in the interim income statement.
Acquisition of Juta
Subsequent to the interim period, the shareholders of Juta & Company Limited
("Juta & Co"), accepted Kagiso Media`s offer to acquire 100% of the shares in
Juta & Co. The transaction is subject to regulatory approval, including approval
by the Competition Tribunal.
Minorities share of profits
Minorities owned 20% of Jacaranda 94.2 and 49,9% of Gloo, MediaMark and Urban
Brew Studios respectively. Minorities also own 35% of Knowledge Factory. 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 were
as follows:
Segmental analysis of the six months ended 31 December
Revenue Operating Profit/(loss)*
profit/(loss)
2011 2010 2011 2010 2011 2010
R000 R000 R000 R000 R000 R000
Corporate 997 (2 002) (12 400) (12 364) (11 185) (15
796)
Broadcasting 305 217 251 877 155 577 120 846 120 817 109
070
Information and other** 17 034 9 985 (5 413) (1 505) 446 426 28
648
New Media 38 072 37 504 5 871 6 830 3 008 2 744
Content 93 985 97 886 5 076 21 288 1 680 7 420
Total 455 305 395 250 148 711 135 095 560 746 132
086
* Attributable to equity holders of the company
** Restated, including profit after tax arising on discontinuance of operations
The Broadcasting Division delivered operating profit of R155,6 million (2010:
R120,8 million). This was largely driven by the 21% increase in revenue. The
Broadcasting business unit experienced a welcome return to spend from the
financial services sector in the radio advertising industry. The Information and
Other segment now excludes LexisNexis, and includes Mobil Alliance and Knowledge
Factory, with the bulk of the latter companies` revenue and profit delivery
planned for the next six months. The net profit on the disposal of LexisNexis is
R450,7 million and is reflected under the Information and Other division. The
effective acquisition date for Juta is expected to be April/May 2012, subject to
the final approval of the Competition authorities.
The New Media Division has had a tough start to the year. The ban imposed by
government on online-gambling advertising affected the MSN business severely, as
did the loss of an important account at Gloo. Replacement customers have been
sourced and the benefit of this will be reflected in future results.
Notwithstanding this, we are cautious about achieving the revenue targets for
Gloo in 2012. In the Content division results for Urban Brew Studios have been
disappointing for the six months trading. The content production market is
expected to be challenging with major customers postponing content commitments
for the remainder of 2012.
3. Financial position
Working capital
The Group reported cash of R716 million at 31 December 2011 which is up from
R233,3 million at June 2011. While the cash conversion continues to meet
targets, the bulk of the increased cash arises from the LexisNexis transaction.
To meet our commitments relating to the Juta acquisition R300 million has been
set aside to provide a guarantee to the Juta shareholders in terms of the
purchase and sales agreement. Trade receivables increased to R216,6 million (a
17% increase on the prior year), largely driven by the improved performance of
the Broadcasting Division. One of the group companies has a dispute with a major
broadcaster for an unpaid debt of which KML`s share is R8 million. The matter is
set down for arbitration in July this year.
Income tax accruals have increased significantly with the provision for the
capital gain on the LexisNexis sale amounting to R57 million.
Cash Flow
The cash flow from operating activities for the six months is R41,3 million and
together with the cash for LexisNexis, placed the Group in a very positive cash
position. Immediate major cash outflows are R300 million for Juta, once
approved, CGT in respect of the LexisNexis disposal of R57 million and the
settlement of the "agterskot" payment of R11 million in respect of Mobil
Alliance.
4. Regulatory matters
New Primary Market Radios Licences have been allocated and the consortiums that
Kagiso Media participated in were not awarded any of the new licenses in Cape
Town and Pretoria.
The copyright Tribunal hearings regarding Needletime are anticipated to be
concluded within the next six months.
5. Black economic empowerment
Kagiso Media is rated at a level 3 contributor by the National Empowerment
Rating Agency (NERA). The company is in the process of reviewing its status with
a view to obtaining a new and better rating. We anticipate this to be completed
by September 2012.
6. Interim dividend & special dividend declaration
It is the group`s policy to return 50% of its headline earnings for the year to
shareholders. As a consequence of this, it was decided that given the consistent
cash conversion ability of the group, the company would pay a dividend of
41cents per share (40 cents in the prior year). Notice is hereby given that an
interim dividend of 41cents (2010: 40 cents) per share has been declared in
respect of the six months ending 31 December 2011 and is payable to holders of
ordinary shares recorded on the register of the company on Friday, 23 March
2012. In addition as a result of the cash flow generated by the LexisNexis
disposal the company will pay a further special dividend of 20 cents per share
to all holders of ordinary shares as per the dates reflected below.
The following salient dates apply to this dividend:
Last day of trade cum-dividend Thursday 15 March 2012
Shares commence trading ex-dividend Friday 16 March 2012
Record date Friday 23 March 2012
Payment of dividend Monday 26 March 2012
Share certificates may not be dematerialised or rematerialised between Friday 16
March 2012 and Friday 23 March 2012, 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.
7. Basis of preparation
The Group, under the direction of the finance director Mervyn van Zyl (FCMA,
CGMA, ACIS), have prepared condensed consolidated interim financial statements
for the six months ended 31 December 2011 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. The unaudited condensed interim
financial report should be read in conjunction with the annual financial
statements for the year ended 30 June 2011. The interim results have not been
audited or reviewed by the Group`s auditors.
8. Accounting policies
The accounting policies and methods of computation are consistent with those of
the annual financial statements for the year ended 30 June 2011, as described
therein.
9. Contingent liabilities
The contingent liabilities, as reported in the 2011 annual financial statements,
remain applicable.
10. Prospects
The six months under review has seen an exceptional performance from the
Broadcasting Division. Our radio stations should continue to perform strongly
and we are particularly pleased with the strong showing of Jacaranda 94.2 in the
Gauteng market and expect this performance to continue in the next six months.
The acquisition of Juta, which is conditional on the Competition authorities
approval would strengthen our Information segment and provide us with scope to
participate fully in the opportunities provided by the rich content and
information solutions market going forward. Mobil Alliance tendered for, and was
awarded, the stadium advertising contract for Western Province Rugby Union (the
group already has the contract for the Sharks). The contract commences with
Super 15 in 2012. Our New Media business has won some excellent new contracts
which will improve their results for the next six months. Notwithstanding this,
our forecasts are tempered for the New Media division. Urban Brew Studios
trading conditions for 2012 are still uncertain.
KML is evaluating key strategic investments to further strengthen our media and
information portfolio, and a portion of the proceeds from LexisNexis have been
set aside for this purpose.
The group will experience a degree of earnings leakage in 2012 with the disposal
of LexisNexis, as the Juta deal once approved will only meaningfully impact the
2013 results.
On behalf of the board
RM Motanyane M Morobe
Chairperson Chief Executive
29 February 2012
Consolidated statement of comprehensive income
for the period ended 31 December 2011
Dec 2011 Dec 2010 June 2011
(Unaudited) (Restated) Change (Audited)
R000 R000 % R000
Continuing operations
Revenue 455 305 395 250 15 789 171
Operating profit 148 711 135 095 10 252 014
Profit before income tax 165 662 146 096 13 271 160
Income tax expense (42 315) (27 450) 54 (82 287)
Profit for the period from 123 347 118 646 4 188 873
continuing operations
Discontinued operations
Profit after tax for the period 450 695 29 292 45 327
from discontinued operations
Profit arising from discontinuance - - -
of operations
Profit for the period 574 042 147 938 288 234 200
Profit attributable to:
Equity holders 560 746 132 086 325 203 586
Non-controlling interest 13 296 15 852 (16) 30 614
574 042 147 938 234 200
Earnings per share attributable to equity holders of the company during the year
(expressed in cents):
Basic earnings per share
From continuing operations 82,3 88,7 (7) 118,3
From discontinuing operations 336,9 21,9 1 438 33,9
Total earnings per share 419,2 110,6 152,2
Diluted earnings per share
From continuing operations 82,1 76,7 7 118,1
From discontinuing operations 336,4 21,9 1 436 33,8
Total diluted earnings per share 418,5 98,6 151,9
Consolidated statement of financial position
Dec 2011 Dec 2010 June 2011
(Unaudited) (Restated) (Audited)
R000 R000 R000
Assets
Non-current assets 638 454 563 088 615 684
Current assets 949 516 469 780 465 170
Assets classified as held-for-sale - 174 205 143 561
Total assets 1 587 970 1 207 073 1 224 415
Equity
Total equity 1 299 379 792 129 785 399
Liabilities
Non-current liabilities 77 432 205 260 83 083
Current liabilities 211 159 133 756 294 127
Liabilities directly associated with assets - 75 928 61 806
classified as held-for-sale
Total liabilities 288 591 414 944 439 016
Total equity and liabilities 1 587 970 1 207 073 1 224 415
Consolidated statement of cash flows
for the period ended 31 December 2011
Dec 2011 Dec 2010 June 2011
(Unaudited) (Restated) (Audited)
R000 R000 R000
Cash flow from operating activities 41 256 68 813 106 059
Cash flow from investing activities 558 614 (28 155) (87 523)
Cash flow from financing activities (117 100) (12 382) (36 619)
Total cash movement for the year 482 770 28 276 (18 083)
Cash and cash equivalents at the end of the 715 995 302 495 233 225
period
Reconciliation of headline earnings
Six months Six months Twelve
months
ended ended ended
31 Dec 31 Dec 30 June
2011 2010 2011
(Unaudited) (Restated) Change (Audited)
R000 R000 % R000
Profit for the period attributable 560 746 132 086 325 203 586
to equity holders
Profit arising from discontinuance (450 695) (29 292) -
of operations
Loss on disposal of investments - - 1 128
Loss on disposal of property, plant - - 79
and equipment
Headline earnings 110 051 102 794 7 204 793
Headline earnings per share 82,3 76,8 7 153,1
Diluted headline earnings per share 82,1 76,7 7 152,8
Earnings per share - continuing
operations
Earnings per share (cents) 82,3 88,7 (7) 118,3
Diluted earnings per share (cents) 82,1 76,7 7 118,1
Earnings per share - discontinuing
operations
Earnings per share (cents) 336,9 21,9 1 438 33,9
Diluted earnings per share (cents) 336,4 21,9 1 436 33,8
Shares used in calculations
Number of shares in issue (`000s) 133 792 133 792 - 133 792
Weighted average number of shares 133 726 133 726 - 133 726
in issue (`000s)
Weighted average number of shares 133 983 133 983 - 133 983
in issue for diluted earnings per
share (`000s)
Condensed consolidated statement of changes in equity
Six months Six months Twelve
months
ended ended ended
31 Dec 31 Dec 30 June
2011 2010 2011
(Unaudited) (Restated) (Audited)
R000 R000 R000
Equity at the beginning of the period 785 399 715 207 715 207
Total comprehensive income for the period 574 042 147 938 234 200
Employee costs: share option scheme - 8 (542)
Non-controlling interests` share of net - - 5 580
assets acquired
Dividends paid (60 061) (71 024) (169 046)
1 299 380 792 129 785 399
Business combinations
1) Disposal of LexisNexis (Proprietary) Limited, an asset previously held- for-
sale
The sale of LexisNexis (Proprietary) Limited, a 50% owned joint venture of
Kagiso Media Limited was concluded on 15 December 2011.
The fair value of assets and liabilities of the subsidiary at the date of
disposal were as follows:
Total
R000
Property, plant and equipment 6 883
Intangible assets 19 556
Goodwill 8 166
Deferred income tax assets 10 796
Inventories 9 729
Trade and other receivables 65 520
Cash and cash equivalents 22 911
Deferred income tax liabilities (59)
Trade and other payables (58 795)
Income tax liabilities (2 952)
Total value of assets and liabilities disposed 81 755
Sale proceeds 565 000
Less: Total value of assets and liabilities disposed (81 755)
Less: Capital Gains Tax arising from disposal (57 050)
Add: Dividend received 24 500
Profit on disposal in group`s accounts 450 695
2) Subsequent to the interim period, the shareholders of Juta Group Company
Limited ("Juta & Co"), Juta Investments (Proprietary) Limited accepted Kagiso
Media`s offer to acquire 100% of the shares in Juta &("Juta Investments") and
Imfundo Investments (Proprietary) Limited("Imfundo") (collectively the "Juta
Group"). The transaction is subject to the remaining conditions precedent being
Takeover Regulation Panel (in terms of a compliance certificate to be issued in
terms of the Companies Act); and the Competition Commission, Competition
Tribunal and/or Competition Appeal Court, as the case may be and only to the
extent required, in terms of the Competition Act 89 of 1998, as amended.
Share capital
Ordinary Share
Number shares premium Total
of shares R000 R000 R000
1 July 2011 133 791 854 1 338 14 510 15 848
Shares issued - employee share - - - -
option scheme
Share issue expenses - - - -
31 December 2011 133 791 854 1 338 14 510 15 848
1 July 2011 133 791 854 1 338 14 510 15 848
Shares issued - employee share - - - -
option scheme
Share issue expenses - - - -
30 June 2011 133 791 854 1 338 14 510 15 848
Registered office
1st Floor, Kagiso Tiso House, 100 West Street, Wierda Valley, Sandton, 2196 (PO
Box 724, Northlands, 2116)
Transfer secretaries
Link Market Services South Africa (Proprietary) Limited, 13th Floor, Rennie
House, 19 Ameshoff Street, Braamfontein, 2001 (PO Box 4844, Johannesburg, 2000)
Sponsor
Investec Bank Limited
Directors
RM Motanyane (Chairperson)#, M Morobe* (Chief Executive), MR van Zyl* (Financial
Director), OC Essack*, HI Appelbaum, WB Cosby (Alternate), FF Gillion, RL
Hiemstra#, JB Hinson, ZJ Matlala, AA Paruk#, A Patel, WC Ross#, M Vilakazi#
*Executive #Independent
Company Secretary
DS Mtshali
Also available at: www.kagisomedia.co.za
Date: 29/02/2012 17:00:01 Produced by the JSE SENS Department.
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