| Fri 14 Sep 2012, 7:22 | | KAGISO MEDIA LIMITED - Audited financial results dividend declaration and renewal of cautionary |
|
KGM 201209140003A
Audited financial results, dividend declaration and renewal of cautionary
Kagiso Media Limited
(Registration number 1957/000036/06)
(“Kagiso Media”, “the group” or “the company”)
Share code: KGM
ISIN: ZAE000014007
Audited results and dividend declaration for the year ended 30 June 2012
and further cautionary announcement. 13 September 2012
Audited results* and dividend declaration for the year ended 30 June 2012
*Audited in terms of the Companies Act 71 of 2008
Revenue with LexisNexis deconsolidated up 21.3%
Headline earnings 135.5 cents per share
Final dividend inclusive of special dividend 50 cents per share
Profit from continuing operations up 12.7%
Condensed consolidated statement of comprehensive income
Year ended Year ended
30 June 30 June
2012 2011
(Audited) (Audited) Change
(R’000) (R’000) %
Continuing operations
Revenue 956 944 789 171 21.3
Operating profit 258 628 252 014 2.6
Profit before income tax 301 521 271 160 11.2
Income tax expense (88 694) (82 287) 7.8
Profit for the year from continuing
operations 212 827 188 873 12.7
Profit for the year from discontinued
operations 448 663 45 327 889.8
Profit for the year 661 490 234 200 182.4
Total comprehensive income for the year 661 490 234 200 182.4
Profit attributable to:
Equity holders 634 905 203 586 211.9
Non-controlling interest 26 585 30 614 (13.2)
661 490 234 200 182.4
Earnings per share for equity holders during
the year (expressed in cents):
Basic earnings per share
From continuing operations 139,2 118,3 17.7
From discontinued operations 335,3 33,9 889.1
474,5 152,2 211.8
Diluted earnings per share
From continuing operations 139,0 118,1 17.7
From discontinued operations 334,8 33,8 890.5
473,8 151,9 211.9
Condensed consolidated statement of financial position as at 30 June
2012 2011
(Audited) (Audited)
R’000 R’000
Assets
Non-current assets 916 595 615 684
Current assets 839 035 465 170
Assets classified as held-for-sale - 143 561
Total assets 1 755 630 1 224 415
Total equity 1 290 128 785 399
Non-current liabilities 124 379 83 083
Current liabilities 341 123 294 127
Liabilities directly associated with assets classified
as held-for-sale - 61 806
Total equity and liabilities 1 755 630 1 224 415
Condensed consolidated statement of changes in equity
Year ended Year ended
30 June 30 June
2012 2011
(Audited) (Audited)
(R’000) (R’000)
Equity at the beginning of the year 785 399 715 207
Total comprehensive income for the year 661 490 234 200
Employee share option scheme: value of services
provided - (542)
Non-controlling interest share of acquisition net
assets 1 693 5 580
Dividends paid (158 454) (169 046)
Equity at end of the year 1 290 128 785 399
Condensed consolidated statement of cash flows
Year ended Year ended
30 June 30 June
2012 2011
(Audited) (Audited)
(R’000) (R’000)
Net cash generated from operating activities 28 767 106 059
Net cash generated from/(used) in investing
activities 305 547 (87 523)
Net cash used in financing activities (117 251) (36 619)
Net movement in cash and cash equivalents 217 063 (18 083)
Cash and cash equivalents at the beginning of the
year 233 225 274 219
Cash and cash equivalents classified as held-for-
sale at the beginning of the period 22 911 -
Cash and cash equivalents classified as held for - (22 911)
sale at the end of the period
Cash and cash equivalents at end of the year 473 199 233 225
Capital investments
Tangible Intangible
assets assets Goodwill*
(R’000)
Year ended 30 June 2012
Opening net carrying amount 51 470 277 380 168 425
Additions 36 441 3 464 -
Acquired from business combinations 79 228 198 481 3 967
Disposals (807) (39) -
Depreciation and amortisation (17 641) (25 002) -
Contingent consideration adjustment - - 4 835
Transfers (56) 56 -
Closing net carrying amount 148 635 454 340 177 227
Year ended 30 June 2011
Opening net carrying amount 42 136 299 605 170 077
Additions 23 944 2 888 -
Acquired from business combinations 6 776 21 949 9 635
Reclassified as held-for-sale (6 883) (19 556) (8 166)
Disposals (411) - -
Discontinued operations (2 133) (4 709) -
Depreciation and amortisation (11 897) (22 859) -
Contingent consideration adjustment - - (3 121)
Transfers (62) 62 -
Closing net carrying amount 51 470 277 380 168 425
* - Includes an accumulated impairment balance of R9.3 million as at 30
June 2012 (2011 - R9.3 million).
Reconciliation of headline earnings
Year Year
ended 30 ended 30
June 2012 June 2011
(Audited) (Audited)
(R'000) (R'000)
Profit for the period attributable to equity holders 634 905 203 586
(Gain)/loss on disposal of investment (448 663) 1 128
Reversal of loan impairment (2 927) -
Deemed gain on disposal of Kagiso Exhibitions and
Events (2 443) -
Headline earnings adjustment included in equity-
accounted earnings 81 -
Loss on disposal of property, plant and equipment 390 79
Headline earnings 181 343 204 793
Headline earnings per share 135.5 153.1
Diluted headline earnings per share 135.3 152.8
Earnings per share – continuing operations
Earnings per share (cents) 139.2 118.3
Diluted earnings per share (cents) 139.0 118.1
Earnings per share – discontinued operations
Earnings per share (cents) 335.3 33.9
Diluted earnings per share (cents) 334.8 33.8
Shares used in calculations
Number of shares in issue ('000s) 133 792 133 792
Weighted average number of shares in issue ('000s) 133 792 133 792
Weighted average number of shares in issue for diluted
earnings per share ('000s) 134 008 134 000
Capital expenditure commitments
The future minimum capital commitments within the following 12 months
which have been approved by the board of directors, but not contracted for
as at the reporting date and not recognised in the financial statements
are as follows:
2012 2011
(Audited) (Audited)
R’000 R’000
Property, plant and equipment 36 301 63 000
Intangible assets 11 178 7 000
These commitments will be funded from internal sources.
2012 2011
(Audited) (Audited)
R'000 R'000
Other commitments
The future aggregate minimum lease payments under non-
cancellable operating leases are as follows:
- not later than one year 23 296 20 351
- later than one year and not later than five years 48 329 26 311
- later than five years 47 314 1 009
Total future cash flow 118 939 47 671
Contingent liabilities
Music usage levy
In terms of the amendments to the Copyright Act 98 of 1987, a royalty is
payable by broadcasters for the use of musical content. As at year end,
the effective date of this amendment and the rate on which the royalties
will be based remain uncertain, and as such the contingent liability is
not currently quantifiable. The group has raised a provision based on
management’s best estimate of the potential future cash outflow.
Commentary
Financial review
Kagiso Media has benefited from a continuation of improved market
conditions, particularly in the Broadcasting segment. This has largely
contributed to improvements in profit before tax of 11.2% and group assets
continue to reflect excellent cash generative abilities. During the past
year, Kagiso Media disinvested its 50% share in LexisNexis and acquired a
100% stake in Juta and Company (“Juta Group”). This transaction was
effective on the 29th May 2012. Earnings per share in the prior period
include R45.3 million of LexisNexis earnings. In the current period the
consolidated results included earnings of the Juta Group from 1st June 2012
amounting to R13.3 million.
Results
Revenue
Total revenue increased by 21.3% to R956.9 million for the year ended 30
June 2012, this growth being driven primarily by the Broadcasting,
Content, Information and Other segments.
Operational review
During the year under review and in the comparative year, the results of
operations, revenue, operating profit/(loss), net profit/(loss) and total
assets per business segment were as follows:
Segmental analysis of the year ended 30 June
Revenue Operating profit/(loss)
(R’000) 2012 2011 2012 2011
Broadcasting 575 234 486 103 267 659 226 071
Information and Other 78 984 27 223 11 126 4 714
New Media 87 142 84 142 14 633 19 450
Content 211 778 189 815 16 693 33 899
Corporate 3 806 1 888 (51 483) (32 120)
Total 956 944 789 171 258 628 252 014
Segmental analysis for the year ended 30 June
Net profit/(loss)* Total assets**
(R’000) 2012 2011 2012 2011
Broadcasting 200 797 157 855 644 593 671 597
Information and Other*** 460 242 50 882 496 756 247 641
New Media 7 069 10 587 60 826 45 925
Content 6 359 9 636 182 900 167 500
Corporate (39 562) (25 374) 346 753 56 630
Total 634 905 203 586 1 731 828 1 189 293
* Attributable to equity holders of the company
** Excludes income tax and deferred income tax assets
***Includes profit on disposal of LexisNexis
Strong growth in the radio advertising sector in South Africa enabled our
broadcasting division to deliver revenue of R575.2 million, an 18.3%
increase on the previous year. The sector grew at 14.1% (RAB report),
highlighting an exceptional performance from the Kagiso Media Radio
stations.
The restructuring of the business units in the Information and Other
segment will positively impact revenue in 2013. Juta’s results were only
included for one month and Knowledge Factory invested significantly in
data development and structure, for new products in 2013. New products are
on schedule to be launched in 2013. Kagiso Vantage (previously Mobil
Alliance) secured the advertising rights for the Stormers in January 2012.
This is a significant coup for the company. Five months of this new
business is included in the 2012 results.
The Content segment, which includes Urban Brew Studios (UBS) performed
well in a difficult environment, delivering revenue of R211.8 million.
This is an increase of 11.6% on 2011. The growth in revenue at UBS was
driven largely by new production commissions from the MNet channels.
Results were negatively influenced by operational costs of R14 million due
to the launch of community TV stations in KwaZulu Natal and the Eastern
Cape. Capital expenditure of R24.5 million was incurred with the launch of
the aforementioned stations. The R14 million operational costs combined
with pricing pressure from the SABC, resulted in UBS delivering an
operating profit of R16.7 million, a reduction of R17.2 million from the
prior year.
The New Media segment required the repositioning of Gloo which impacted
negatively on the results. The company exited a major account which
accounted for 50% of its revenue. This was offset by winning two major new
customers: one in the financial sector and the other in electronics.
Costs, particularly in human resources, have been incurred in 2012 to
ensure that we are resourced with the necessary skills to meet the needs
of customers in 2013. This negatively impacted on Gloo’s profitability in
2012. In addition, the MSN business had to recalibrate itself after the
loss of the online gambling advertising spend (our share of gambling
advertising spend is estimated at R12 million) and is now well positioned
to grow in 2013.
The board expressed its satisfaction with the performance of the group
during 2012. Revenue from continuing operations increased to R956.9
million (21.3%). Profit before tax increased by 11.2% to R301.5 million
resulting in earnings per share from continuing operations of 139.2 cents
(2011: 118.3 cents).
Finance income and expenses
In the year under review the group earned interest of R25.1 million
(2011: R15 million) on its surplus cash. A dividend of R2.7 million (2011:
R8.5 million) was paid by Kagiso Media Investments Proprietary Limited on
the preference shares in issue during the year.
Associates
The group`s after tax share of results of associates amounted to R22.2
million (2011: R12.1 million). This consists of Kagiso Media`s holdings in
OFM, Heart 104.9, Gagasi 99.5 and Kaya FM.
Taxation
The effective tax rate decreased from 30.4% to 29.4% for the year under
review.
Cash flow
Cash generated from operations delivered R276.6 million in the year under
review (2011: R377.6m). As part of the acquisition of the Juta Group,
additional working capital had been consolidated which had a significant
impact on the operating cashflow of the group. The full current assets and
liabilities of the Juta Group were consolidated although only one month’s
earnings have been included in the consolidated statement of comprehensive
income. Cash reserves remain substantial which are augmented by the
remaining LexisNexis proceeds.
Borrowings
At 30 June 2012, the group’s current borrowings were reduced to R8 million
(2011: R123.5 million) in respect of the preference shares that matured in
November 2011. The group used internal cash resources to redeem preference
shares valued at R109.5 million.
3. Business combinations
Information and Other
1. Investment in Juta and Company Limited, Juta Investments Proprietary
Limited and Imfundo Investments Proprietary Limited, collectively the Juta
Group
During the current financial year, Kagiso Media acquired 100% of the
shares in the Juta Group for a total purchase price of R300 million. The
purchase consideration was settled in cash from the group cash reserves.
The acquisition date for financial reporting and consolidation purposes is
the date on which control is obtained. The acquisition date of this
transaction was 29 May 2012, which is the date when all the conditions
precedent to the transactions were fulfilled. The purchase price
allocation and fair values of the assets and liabilities of the Juta Group
were determined at this date.
The revenue, operating profit as well as the profit after tax for the one
month period till 30 June 2012 are reflected in the segmental analysis
under "Information and Other". If the acquisition had occurred on 1 July
2011, the contribution to the group's revenue would have been
approximately R317.8 million and the contribution to the profits would
have been a net profit after tax of approximately R27.8 million. These
amounts have been calculated using the group's accounting policies and by
adjusting the results of the subsidiaries to reflect the additional
amortisation that would have been charged assuming a fair value adjustment
to intangible assets had applied from 1 July 2011, together with the
consequential tax effects.
Details of net assets acquired and goodwill are:
2012
R’000
Purchase consideration 300 000
Fair value of net identifiable assets acquired (see below) (299 814)
Goodwill 186
With this acquisition, Kagiso Media benefits to be the leading provider of
information solutions to the justice and legal market in Southern Africa.
There are substantial synergies with other existing business units within
Kagiso Media, particularly with Knowledge Factory and the digital
business.
2. Investment in Tivvit Solutions Proprietary Limited
During the current financial year, Knowledge Factory Proprietary Limited,
previously known as Kagiso EProps Proprietary Limited, a 65% owned
subsidiary of the group, acquired 60% of the voting rights of Tivvit
Solutions Proprietary Limited for a purchase consideration of R6.3
million. The acquisition date of this transaction was 1 November 2011. The
purchase price allocation and fair values of the assets and liabilities of
Tivvit Solutions Proprietary Limited were determined at this date and the
purchase consideration was settled in cash.
Tivvit Solutions Proprietary Limited is principally involved in the
property industry with its main business being the provision of internet
services and website design. This acquisition will contribute largely to
Knowledge Factory's operational strategy of being the leading provider of
internet property products and services in the property markets.
The revenue, operating profit as well as the profit after tax for the
eight months period till 30 June 2012 are reflected in the segmental
analysis under: "Information and Other".
If the acquisition had occurred on 1 July 2011, the contribution to the
group's revenue would have been approximately R7.8 million and the
contribution to the profits would have been a net profit after tax of
approximately R0.5 million. 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 a fair value adjustment to intangible assets had applied from 1
July 2011, together with the consequential tax effects.
Details of net assets acquired and goodwill are:
2012
R’000
Purchase consideration 6 321
Fair value of net identifiable assets acquired (see below) (2 540)
Goodwill 3 781
The goodwill is attributable to the future benefits of Kagiso Media's
diversification into information and other services attached thereto.
The net assets arising from the acquisitions are:
Tivvit
R’000 Juta Group Solutions Total
Net assets acquired* 299 814 4 234 304 048
Non-controlling interest’s share of net
assets acquired above on consolidation
(40%)** - (1 694) (1 694)
Kagiso Media’s interest in the fair value
of net assets acquired 299 814 2 540 302 354
* Net assets acquired include gross receivables amounting to R75 553 000
and a provision for impairment of R2 183 000.
** The non-controlling interest above has been measured at the
proportionate share of the net assets acquired.
Broadcasting
During the previous financial year, Kagiso Media Limited through its
wholly owned subsidiary, Kagiso Broadcasting Proprietary Limited purchased
100% of the voting rights in Shanike Investments No.42 Proprietary Limited
for a total cash consideration of R62.5 million. Shanike has direct
shareholding of 24.9% in Kaya FM, a popular radio broadcaster in the
Gauteng region. The effective date of this transaction was 3 June 2011. As
of this date, Kagiso Media's aggregate indirect economic interest in Kaya
FM increased from 22.59% to 47.49% and the results of the associate
therefore continue to be equity accounted in the group results.
The purchase price allocation relating to this acquisition was finalised
in the current year and the results are as follows:
2012
R’000
Purchase consideration 62 500
Carrying amount of net identifiable assets acquired (3 863)
Excess of the purchase price over net identifiable assets
acquired 58 637
Intangible assets acquired net of deferred tax 51 388
Goodwill recognised in the investment in associates 7 249
4. Discontinued Operations
The results of the discontinued operations for the year are presented
below:
30 June 30 June
2012 2011
(Audited) (Restated)
(R’000) (R’000)
The results of the discontinued operations for the year
are as follows:
Revenue and other income - 212 167
Profit before income tax - 67 671
Income tax expense - (22 344)
Profit for the year from discontinued operations 448 663 45 327
There were no other discontinued operations in the current year, other
than LexisNexis Proprietary Limited which had been classified as an asset
held-for-sale in the previous financial year and sold in the current year.
The net cash flows incurred by the discontinued operations are as follows:
30 June 30 June
2012 2011
(Audited) (Restated)
(R’000) (R’000)
Operating cash flow - 15 572
Investing cash flow - (5 661)
Financing cash flow - -
Net increase in cash and cash equivalents from
discontinued operations - 9 911
5. Related party transactions
30 June 30 June
2012 2011
(Audited) (Audited)
(R’000) (R’000)
Directors and prescribed officers’ remuneration
For services as non-executive directors 2 415 1 441
For services as executive directors
- Basic salary 6 204 5 459
- Bonuses and performance-related payments 4 270 4 794
- Other 114 182
- Pension costs – defined contribution plans 702 630
Director and prescribed officers’ remuneration 13 705 12 506
Transactions with associates 3 729 -
Year-end balances with related parties
Associates 4 521 29
Kagiso Securities Limited - 108
4 521 137
6. Dividend declaration
A final dividend of 30 cents (2011: 35 cents) per share in respect of the
year to 30 June 2012 was declared by the directors on 13 September 2012
and will be reflected in the results for the financial year 30 June 2013.
The dividend was declared out of income reserves. The dividend will be
subject to a maximum local dividend tax rate of 15% which will result in a
net dividend to those shareholders that bear the maximum rate of dividend
withholding tax of 25.5 cents per share after withholding tax of 4.5 cents
per share. No STC credits are available to be utilised.
Over and above the final dividend declared above, the directors declared a
special dividend of 20 cents (2011: 10 cents) per share on 13 September
2012 and will be reflected in the results for the financial year 30 June
2013. The dividend was declared out of income reserves. The dividend will
be subject to a maximum local dividend tax rate of 15% which will result
in a net dividend to those shareholders that bear the maximum rate of
dividend withholding tax of 17 cents per share after withholding tax of 3
cents per share. No STC credits are available to be utilised.
The following salient dates apply to this dividend:
Last date to trade cum-dividend Friday, 28 September 2012
Shares commence trading ex-dividend Monday, 1 October 2012
Record date Friday, 5 October 2012
Payment of the dividend Monday, 8 October 2012
Share certificates may not be dematerialised or re-materialised between
Monday, 1 October 2012 and Friday, 5 October 2012, both days inclusive.
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 condensed consolidated financial information is a summary of the
audited consolidated financial statements and was prepared in accordance
with International Financial Reporting Standards (“IFRS”), the
presentation and disclosure requirements of IAS 34 – Interim Financial
Reporting, the AC 500 standards as issued by the Accounting Practice Board
and its successors, the listings requirements of the JSE Limited and the
requirements of the South African Companies Act, 71 of 2008, on a basis
consistent with the prior year.
8. Accounting policies
The accounting policies adopted are consistent with those of the annual
financial statements as at 30 June 2012, as described in the annual
financial statements. During the year under review, the group adopted all
the IFRS and Interpretations that were effective and deemed applicable to
the group. None of these had a material impact on the results of the
group.
9. Independent audit by the auditors
The condensed consolidated results have been audited by our auditors,
PricewaterhouseCoopers Inc., who have performed their audit in accordance
with International Standards on Auditing. A copy of their unqualified
audit report is available for inspection at the registered office of the
company.
10. Post balance sheet events – Further cautionary
On 3 September 2012 KML concluded the acquisition of 90% of Kaufman Levin
Associates (“KLA”) for R25 million. KLA is a marketing research company,
which is the single largest proponent of qualitative research in South
Africa.
On 3 September 2012 Kagiso made an offer to acquire EXP Group of Companies
(“EXP”), Trinergy Brand Connectors (“Trinergy”) and 100% of the shares in
Bulls Rugby Holdings (“Blue Bulls”), which owns 50% of the shares in Blue
Bulls Company, for R335 million with a R10 million loan, as detailed in a
cautionary announcement released on SENS on 5 September 2012. In this
transaction KML will acquire leading brands in the marketing services
category; EXP has operations in eleven African states. These acquisitions
will further complement our communications, information and content assets
and complete our value chain. Shareholders are advised to continue to use
caution while trading in the Company’s shares until a further announcement
has been made.
Except for the above, the directors are not aware of any matter or
circumstance arising since the end of the financial year that would affect
the operation of the group or the results of those operations
significantly.
11. Prospects
Market conditions in the advertising sector continue to reflect positive
trends, particularly for the Radio assets, and we therefore expect the
radio assets to deliver growth in 2013 based on current trading. The New
Media segment is now positioned to show growth for 2013. The Information
and Other segment will now include a full year’s profit for Juta, which
will deliver earnings growth in 2013. The planned acquisition when
completed, will also be earnings accretive in 2013.
On behalf of the board
RM Motanyane M Morobe
Chairperson Chief executive
13 September 2012
Registered office: 1st Floor, Kagiso Tiso House, 100 West Street, Wierda
Valley, Sandton, 2196
Number of shares in issue is 133 791 854
Tax number is 9638003716.
Transfer secretaries: Link Market Services South Africa Proprietary
Limited, 13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein, 2001
(PO Box 4844, Marshalltown, 2000)
Sponsor: Investec Bank Limited
Directors:
RM Motanyane (Chairperson)#, M Morobe (Chief Executive)*, MR van Zyl
(Financial Director)*, HI Appelbaum, WB Cosby, OC Essack*, FF Gillion, RL
Hiemstra#, JB Hinson, AA Paruk#, WC Ross#, M Vilakazi#,
#
*Executive Independent
Company secretary: DS Mtshali
Also available at: www.kagisomedia.co.za
Date: 14/09/2012 07:22:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
