| Fri 28 Sep 2001, 0:00 | | Primedia Limited - Year End Results Announcement |
|
ISIN CODE : ZAE000031159
SHARE CODE : PRI
1. INTRODUCTION
The group has emerged from a challenging but constructive year with a
sharpened strategic and operational focus. Notwithstanding the difficult
trading conditions experienced across most sectors during the year, this
focus has resulted in the implementation of a number of key strategies,
which has placed the group on a sound financial footing for the future.
Highlights for the past financial year include the following:
the recommendation to split the group into two distinct operating divisions
which may be listed separately;
the recommendation to convert the debenture portion of the combined units
into share capital;
the realisation of R194,0 million from the disposal of non-core assets;
a significant reduction in the group's gearing from peak borrowings;
good cash flow generation from operations;
strong performances by most of the advertising businesses;
decisive scaling down of Primecom's digital communications businesses
following the severe contraction in e-services spending; and
significant cost savings achieved from the ongoing turnaround strategies at
Ster-Kinekor.
It is also noteworthy that the group is now a significantly black empowered
media group which has made substantial progress across all critical areas
including black shareholder control, board representation and executive
management. These achievements will strengthen the position of the group in
the South African market going forward.
2. FINANCIAL RESULTS
2.1 Income Statement
Group turnover of R1,745 million was virtually unchanged year on year.
However, EBITDA was down by 12% to R244,9 million.
The group's results were once again underpinned by the resilience of the
advertising businesses, which increased EBITDA to R156,6 million (2000:
R152,4 million).
Primecom experienced exceptionally difficult trading conditions in its
digital communications business, which resulted in a deline in EBITDA to
R55,1 million (2000: R65,9 million).
EBITDA from the filmed entertainment division declined to R58,2 million
(2000: R79,4 million). This decline was limited by solid results achieved at
Ster-Kinekor Home Entertainment, which increased EBITDA by 26% to R15,9
million. In addition, rigorous cost control and efficiency improvements at
Ster-Kinekor Theatres to a large extent negated the impact of an 8% decline
in attendances (1,3 million attendances).
Net interest paid increased to R16,0 million (2000: R3,0 million)
principally as a result of a further R180 million investment in Ster Century
Europe. Nevertheless, net interest paid was well below earlier
expectations, due to good cash flow from operations and proceeds realised
from the disposal of non-core assets.
Losses from associates increased to R67,4 million (2000: R41,3 million)
mainly as a result of the increased share of development costs of Ster
Century Europe and Ster Century Middle East, which increased to R60,0
million (2000: R21,8 million). The overall losses were offset to an extent
by the reduction in the level of losses at Metropolis* and 567 Cape Talk.
The net exceptional loss of R31,7 million, which includes the restructuring
charge of R34,0 million in respect of Primecom, is measured against the
written down value of assets disposed of during the current financial year.
In accordance with internationally accepted accounting standards, the income
statement reflects the amount in respect of intangibles of R237,6 million
previously written off directly against share capital and reserves. A
detailed breakdown of the exceptional items is presented in the notes to the
results.
Notwithstanding the net exceptional loss, the group's balance sheet was
significantly strengthened through the cash proceeds realised from the
disposal of non-core assets namely, Mailcom, Alpha Mail, Virtutel,
DunnHumby, Primedia Music and Velocity Film Africa. Other than for the
Primecom restructuring costs, minimal cash outflows were associated with the
exceptional loss in the current financial year . The exceptional items
relating to Ster Century Europe fixed asset impairment and Ster-Kinekor
Theatres closure costs will result in reduced depreciation as well as, in
the case of Ster-Kinekor Theatres, reduced rental costs, in the future.
2.2 Reconciliation of HEPU
The group's headline earnings per combined unit (HEPU) declined to 18 cents
(before Primecom restructuring costs) from 46 cents in the prior year. The
decline resulted from the reduced contribution from the group's filmed
entertainment division (Filmco) which accounted for a 32 cent reduction in
HEPU. This was largely due to the increased development costs of Ster
Century Europe (18 cents HEPU effect), Ster Century Middle East (2 cents
HEPU effect), and the financing costs relating to the further investment of
R180 million made into Ster Century Europe (9 cents HEPU effect).
2.3 Cash Flow and Balance Sheet
Good cash flow from operations continues to be a hallmark of the group. A
material reduction in the level of capital expenditure to R63,0 million
(2000: R99,1 million) impacted favourably on the group's cashflows. Working
capital increased due to timing differences at Ster-Kinekor Home
Entertainment, which have reversed subsequent to the year-end.
The group's balance sheet remains sound, with net debt of R99,5 million
(2000: R75,3 million).
3. DIVISIONAL REVIEW
As announced previously the group has split its operations into two
entities, each with its own focus:
Adco will comprise the group's existing advertising-based businesses and the
one-to-one marketing services currently housed under Primecom; and
Filmco will comprise the group's filmed entertainment businesses.
3.1 Adco
Advertising
The group's market-leading advertising businesses performed well during the
period under review. EBITDA margins were maintained at a healthy 27%. The
other units posted good growth in EBITDA as follows:
Broadcasting's EBITDA was up 15% to R73,9 million;
Outdoor's EBITDA was up 31% to R34,2 million;
Cinema advertising's EBITDA was up 23% to R13,1 million;
Direct marketing's EBITDA was up 16% to R16,8 million; and
Publishing's EBITDA improved by R5,1 million from a loss of R2,6 million to
positive contribution of R2,5 million.
Only the Specialist Marketing Division performed poorly with EBITDA down 60%
to R16,0 million.
One-to-one
Primecom's results were severely impacted in the second half by the drop in
turnover experienced by the digital communications businesses mainly Wheel.
As a consequence, headcount in these businesses was reduced by 46% which
resulted in once-off restructuring costs of R34,0 million. The HEPU effect
of this restructuring charge was 9 cents after accounting for tax and
minorities. Mixed results were achieved from the
balance of Primecom's businesses, which include the results of businesses
disposed of during the year. Despite difficult trading conditions Primecom
generated positive cash flow.
3.2 Filmco
Filmco comprises Ster-Kinekor Theatres, Ster-Kinekor Pictures and Ster-
Kinekor Home Entertainment in South Africa, together with the group's
international filmed entertainment interests being 50% of Ster Century
Europe and 45% of Ster Century Middle East.
The results of Ster Century Europe and Ster Century Middle East are equity
accounted. In order to reflect more fully the operating results of Ster
Century Europe and Ster Century Middle East, the segmental analysis
presented elsewhere in this announcement include pro forma proportionately
consolidated operating results of these entities.
Ster-Kinekor Theatres
Ster-Kinekor Theatres experienced an 8% decline in attendances for the full
year, which was marginally better than anticipated. As a result, turnover
declined to R313,1 million (2000: R333,0 million). The decline in EBITDA was
mitigated by ongoing efficiency improvements in average ticket prices,
concession spend per patron as well as concession margins, staff cost per
attendant and overheads.
Renegotiations with landlords have resulted in significant cost savings that
should impact positively on Ster-Kinekor Theatres' future earnings.
Ster-Kinekor Pictures
Ster-Kinekor Pictures reported lower results due to lower commission
payments in respect of film rights unsold to TV broadcasters.
Ster-Kinekor Home Entertainment
Ster-Kinekor Home Entertainment once again turned in a good performance,
with turnover up 28% to R201,4 million (2000: R157,5 million) and EBITDA
increasing by 26% to R15,9 million (2000: R12,6 million).
Ster Century Europe
Ster Century Europe achieved 8,9 million attendances (2000: 6,2 million) for
the full year, which was in line with forecast. This resulted in turnover
increasing from R107,3 million (US$16,9 million) to R320,2 million (US$42,1
million), an increase of 149%.
Ster Century Europe now operates 171 screens at 15 sites (2000: 83 screens
at 7 sites) across the UK, Ireland and Europe. All existing sites, with
exception of one site in Poland, improved year on year attendances and gross
box office receipts.
Ster Century Europe reported cinema EBITDA of R12,9 million (US$1,7 million)
(2000: R7,0 million (US$1,1 million)). The operating loss before financing
costs (and after central overhead costs) increased to R89,0 million (US$11,7
million) (2000: R52,0 million (US$8,2 million)), due to an increase of R31,2
million (US$4,1 million) in the depreciation charge from new sites opened.
Overhead costs were in line with the prior year, but will decline as the
company moves out of its development phase.
Primedia's share of Ster Century Europe's losses widened from R15,9 million
to R50,7 million, due to the increased trading loss as well as Primedia's
increased shareholding which increased from 30% to 50% during the year. In
addition, the equity accounted loss includes R7,0 million (US$0,9 million)
being the group's attributable share of once-off exceptional costs relating
mainly to unrecoverable VAT, which accounts for the increased loss relative
to expectations.
On 19 July 2001, Primedia, jointly with Kersaf, announced a US$80 million
refinancing package including a US$20 million injection by a new investor.
Ster Century Europe's funding will now be more than adequate to meet its
needs and reach its full potential. Primedia retains joint shareholder
control despite a reduction in its shareholding to 40,6%.
Ster Century Middle East
Primedia's share of Ster Century Middle East's losses was in line with
expectations which increased from R5,9 million to R9,3 million. Ster Century
Middle East opened its first site (6 screens) in Abu Dhabi during April
2001.
4. BLACK EMPOWERMENT
Over the last five years Primedia has evolved into a leading black empowered
media company in South Africa through the development of an authentic and
sustainable empowerment model. The broadly based and self-funded
Mineworkers Investment Company holds joint control of Primedia.
Approximately 50% of the group's board of directors and executive management
are black. In addition, the group has previously invested R225 million to
fund black empowerment media investments.
These credentials are beginning to serve the group well in the regulated
media environment.
5. PROPOSED SPLIT AND CONVERSION OF DEBENTURES
5.1 Split
On 19 July 2001, Primedia announced its intention to split the company into
two separately listed entities, each with its own distinctive growth
prospects and industry focus.
The split between Adco and Filmco has already been effected internally. The
appointment of the CEO of Filmco has been made and management of Adco has
been restructured to achieve its growth objectives.
A central aspect of the separate listings is the restructuring of Primedia's
debt and contingent liabilities such that each company is appropriately
capitalised to achieve its own objectives. Due to the turbulence in world
equity and debt markets, the Board of Primedia has decided to delay the
separate listings of Adco and Filmco until market conditions are more
conducive to the delivery of shareholder value. In the interim, Primedia
will continue to report to unitholders in accordance with this intention.
In the light of the decision to defer the separate listings, Primedia
unitholders are advised that caution is no longer required in dealing in
their units.
5.2 Conversion of debentures
In order to simplify Primedia's capital structure, the Board of Primedia has
resolved to propose to unitholders that the debenture portion of both
ordinary and N Primedia units be redeemed by the issue of N shares to
debenture holders. It is intended that the conversion of the debentures
will take place with effect on 1 January 2002 until which date debenture
interest will continue to accrue.
Detailed information in this regard, including announcements and
documentation covering the required procedures to give effect thereto, will
be provided in due course.
Primedia will adopt a suitable dividend policy in due course.
6. PROSPECTS
The prospects for the group are influenced by local as well as international
factors. The recent events in New York have already started to affect world
economies negatively and South Africa will not emerge unscathed.
6.1 Adco
The group expects its advertising businesses to achieve earnings
substantially similar to those of the previous financial year. Remedial
action has already been instituted in the businesses that performed poorly
in the Specialist Marketing division.
Within Primecom, difficult trading conditions are anticipated for the
digital businesses but the group's non-digital businesses, in particular The
Database Group and Spark, are expected to perform satisfactorily.
Primecom does not form part of the group's long-term strategy and the board
will continually evaluate alternatives to maximise shareholder value in this
regard.
6.2 Filmco
Ster-Kinekor Theatres and Ster Century Europe will be the major drivers of
Filmco's results in the next financial year.
Ster-Kinekor Theatres has now completed the two year rationalisation
programme in respect of its operations and sites. These actions should
deliver sustainable benefits into the future.
Ster-Kinekor Theatres' primary focus is now on attendance growth
initiatives. The group's attendances are marginally ahead of those of last
year despite a reduced number of screens. A recently concluded exclusive
arrangement will introduce Discovery Health's 700 000 vitality members to
Ster Kinekor and its movie club benefits.
Ster Century Europe's increased depreciation and interest charge should be
offset by the contribution from the 71 screens (6 sites) to be opened in the
current fiscal, as well as from the continued build in attendances from
existing sites and an increased operational focus. Primedia's share of
losses is however expected to decline due to an expected improvement in
trading results and its reduced ownership.
6.3 Group Prospects
On the assumption that Adco and Filmco are not separately listed before the
end of the financial year and barring adverse change in trading conditions,
Primedia as a whole expects continued strong cash generation, no further
operational restructuring costs, the implementation of its strategic plans
and improved earnings for the period.
On behalf of the board
AP Nkuna
Chairman
W Kirsh
CEO
28 September 2001
Other Directors:
I Kirsh, J A Treger* (Alt. B A Myerson*), M A Barnes*, K Pillay, P S Ratlou*
(Alt. C O Elk*), M M Mbebe*, B J T Shongwe*, C S Seabrooke*, F A Gazendam, P
Maw, O Ighodaro.
(* non-executive director)
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2001 2000 % CHANGE
R'000 RESTATED
Revenue 1,745,043 1,714,383 2%
Operating profit before depreciation 244,819 276,876 -12%
(EBITDA)
EBITDA Margin 14% 16%
Depreciation (84,540) (78,170)
Operating profit (PBIT) 160,279 198,706 -19%
PBIT Margin 9% 12%
Net interest paid (15,968) (3,078)
Profit before debenture interest 144,311 195,628 -26%
Debenture interest paid (69,661) (70,309)
Profit before associated companies 74,650 125,319
Share of associated companies' losses (67,435) (41,279)
Profit before exceptional items and 7,215 84,040
amortisation of goodwill
Amortisation of goodwill (10,723) (2,000)
Exceptional items (31,682) (53,779)
Loss before intangibles previously (235,267) (53,779)
written off against reserves
Intangibles previously written off 237,584 -
against reserves
Restructuring costs (33,999) -
(Loss) / profit before taxation (35,190) 28,261
Taxation (11,644) (38,777)
Loss after taxation (46,834) (10,516)
Attributable to outside shareholders 5,240 (11,246)
Intangibles previously written off (237,584) -
against reserves
Attributable loss for the year (279,178) (21,762)
Realisation of intangibles previously 237,584 -
written off against reserves
Accumulated loss for the year (41,594) (21,762)
Number of units ('000)
Issued 204,734 201,693
Weighted average 201,918 203,881
Diluted weighted average 204,207 206,491
Basic headline earnings per combined 18 46
unit excluding restructuring costs
(cents)
Basic headline earnings per combined 9 46
unit (cents)
Diluted headline earnings per combined 18 45
unit excluding restructuring costs
(cents)
Diluted headline earnings per combined 9 45
unit (cents)
Basic earnings per combined unit
(cents):
Based on exceptional items per the 14 24
income statement
Based on exceptional items after (104) 24
deduction of intangibles previously
written off
Diluted earnings per combined unit
(cents):
Based on exceptional items per the 14 24
income statement
Based on exceptional items after (103) 24
deduction of intangibles previously
written off
CONSOLIDATED BALANCE SHEET
30 JUNE 2001 2000
R'000 RESTATED
ASSETS
Property, plant and equipment 278,993 378,981
Goodwill 18,114 -
Associated companies 236,995 280,342
Other investments 57,652 54,263
Deferred taxation asset 345,532 325,504
Current assets 457,633 476,018
Inventory 38,747 24,149
Accounts receivable 368,522 411,224
Cash resources 50,364 40,645
Total assets 1,394,919 1,515,108
EQUITY AND LIABILITIES
Share capital and reserves 254,090 291,940
Debentures 380,294 374,645
Debenture interest to be reinvested by 20,573 -
unitholders
Total unitholders' funds 654,957 666,585
Outside shareholders' interest 127,121 185,774
Total shareholders' funds 782,078 852,359
Long term borrowings 17,367 44,845
Current liabilities 595,474 617,904
Accounts payable 385,317 427,637
Amounts due to vendors 39,634 49,617
Debenture interest payable 15,171 35,165
Short term loans 10,883 12,748
Taxation 22,825 34,425
Bank borrowings 121,644 58,312
Total equity and liabilities 1,394,919 1,515,108
Net asset value per combined unit - 320 330
cents
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2001 2000
R'000 Restated
Operating profit before depreciation 244,819 276,876
Non cash flow items 5,687 -
Net cash outflow to restructuring costs (43,506) -
and exceptional items
Increase in working capital (69,423) (28,804)
Net interest paid (15,968) (3,078)
Debenture interest paid (69,082) (73,497)
Taxation paid (13,079) (20,525)
Cash inflow from operating activities 39,448 150,972
Net capital expenditure on property, (63,007) (99,070)
plant and equipment
- to expand operations (41,723) (72,868)
- to maintain operations (21,284) (26,202)
Acquisitions net of outside (247,018) (144,011)
shareholders' interest and vendor
financing (1)
Net proceeds received on disposal of 176,343 -
businesses
Other investments (5,210) (40,864)
Net funds utilised (99,444) (132,973)
Net proceeds from issue of combined 22,430 80,037
units
Repurchase of units - (98,271)
Net increase in borrowings 86,733 10,610
Net cash inflow / (outflow) 9,719 (140,597)
Operating free cash flow % (2) 70% 75%
(1) Includes further investment in Ster Century Europe of R180
million (2000:R124 million)
(2) Operating profit before depreciation plus increase in
working capital plus net capital expenditure on property plant
and equipment, divided by PBIT
Consolidated Statement of
Changes in Equity
R'000 Share Non Distribut Total
capital distribut able unit-
and able reserves holders'
debenture reserves funds
s
Balance at 1 July 1999 380,757 354,560 33,370 768,687
Change in accounting policy 1,376 (42,068) (40,692)
Development costs written off (23,464) (23,464)
Amortisation of goodwill in (18,604) (18,604)
investment in associates
Translation reserve movement 1,376 1,376
Restated balance at 1 July 1999 380,757 355,936 (8,698) 727,995
Units held in The Primedia (5,372) (15,147) (20,519)
Trust
Units issued (net of 2,285 2,285
repurchase)
18,117 (60,118) (42,001)
Write off of intangibles (60,118) (60,118)
Taxation relief on intangibles 18,117 18,117
Accumulated loss for the year (21,762) (21,762)
Translation reserve movement 20,279 20,279
Transfer to non distributable 1,421 (1,421) -
reserves
Other 308 308
Balance at 30 June 2000 377,670 380,914 (91,999) 666,585
Units held in The Primedia (3,939) (18,237) (22,176)
Trust
Units issued 28,232 28,232
Taxation relief on intangibles 21,889 21,889
Accumulated loss for the year (41,594) (41,594)
Translation reserve movement (17,774) (17,774)
Transfer to non distributable 1,081 (1,081) -
reserves
Other (778) (778)
Debenture interest to be 20,573 20,573
reinvested by unitholders
Balance at 30 June 2001 422,536 367,095 (134,674) 654,957
Segmental
analysis
Revenue EBITDA EBITDA
Margin
FOR THE YEAR 2001 2000 2001 2000 2001 2000
ENDED 30 JUNE Restated Restated
R' 000
Advertising 571,064 571,366 156,565 152,425 27% 27%
Broadcasting 147,989 133,807 73,895 64,101 50% 48%
Outdoor 115,997 98,937 34,155 26,004 29% 26%
Cinema 53,243 47,338 13,126 10,622 25% 22%
Direct 92,580 85,402 16,804 14,502 18% 17%
Marketing
Specialist 120,406 132,873 16,032 39,839 13% 30%
Marketing
Publishing 40,849 73,009 2,553 (2,643) 6% -4%
One-to-one 633,710 609,272 55,140 65,912 9% 11%
marketing
Digital 258,759 224,769 18,635 39,853 7% 18%
communications
Non-digital 322,396 331,837 40,689 22,436 13% 7%
communications
Database 52,555 52,666 7,285 9,663 14% 18%
marketing
Central - - (11,469 (6,040) nm nm
)
Total Adco 1,204,77 1,180,6 211,705 218,337 18% 18%
4 38
Filmco (SA) 531,667 506,533 58,187 79,407 11% 16%
Ster-Kinekor 313,075 333,038 41,835 62,744 13% 19%
Theatres
Ster-Kinekor 17,151 15,964 477 4,048 3% 25%
Pictures
Ster-Kinekor 201,441 157,531 15,875 12,615 8% 8%
Home
Entertainment
Central 480 7,926 (18,459 (19,215) nm nm
)
Primedia Music 8,122 19,286 (6,614) (1,653) -81% -9%
Total 1,745,04 1,714,3 244,819 276,876 14% 16%
consolidated 3 83
Pro forma
proportionately
consolidated:
Filmco (SA and 651,332 538,729 33,180 62,118 5% 12%
International)
South Africa 531,667 506,533 58,187 79,407 11% 16%
Ster Century 118,683 32,196 (16,999 (11,529) -14% -36%
Europe (3) )
Ster Century 982 - (8,008) (5,760) nm nm
Middle East
Total pro forma 1,864,70 1,746,5 219,812 259,587 12% 15%
proportionately 8 79
consolidated
(3) Includes 30% to 28 February 2001 and 50% thereafter.
Segmental
analysis
Capex * Deprecia Capex /
tion Depreci
ation
FOR THE YEAR 2001 2000 2001 2000 2001 2000
ENDED 30 JUNE
R'000
Advertising 29,975 46,577 31,002 26,805 97% 174%
Broadcasting 1,518 6,673 4,166 4,091 36% 163%
Outdoor 17,184 27,496 14,092 12,578 122% 219%
Cinema 190 459 582 508 33% 90%
Direct 3,907 3,635 3,418 2,647 114% 137%
Marketing
Specialist 6,524 7,503 7,947 6,284 82% 119%
Marketing
Publishing 652 811 797 697 82% 116%
One-to-one 18,037 29,029 24,925 23,504 72% 124%
marketing
Digital 6,204 11,886 6,634 6,108 94% 195%
communications
Non-digital 8,864 15,333 16,260 15,699 55% 98%
communications
Database 2,925 1,227 1,523 1,060 192% 116%
marketing
Central 44 583 508 637 9% 92%
Total Adco 48,012 75,606 55,927 50,309 86% 150%
Filmco (SA 18,922 34,966 26,341 25,035 72% 140%
only)
Ster-Kinekor 16,976 30,778 23,675 22,255 72% 138%
Theatres
Ster-Kinekor 267 3,485 863 792 31% 440%
Pictures
Ster-Kinekor 1,679 703 1,803 1,988 93% 35%
Home
Entertainment
Central 756 2,207 1,760 1,828 43% 121%
Primedia Music 243 485 512 998 47% 49%
Operational 67,933 113,264 84,540 78,170 80% 145%
capex
Capex relating 11,400 - - - nm nm
to move of new
studios and
head office
79,333 113,264 84,540 78,170 94% 145%
Capex * -
Before
disposals
NOTES
FOR THE YEAR ENDED 30 JUNE 2001 2000
R'000 RESTATED
1 Net interest paid
Interest paid (34,191) (20,720)
Interest received 18,223 17,642
(15,968) (3,078)
2 Exceptional items
Provision for closure of cinema (32,008) (27,258)
complexes and onerous leases
Net profit / (loss) on disposal 106,801 (4,968)
and writedown of businesses,
investments and loans
Net loss on disposal of (70,036) -
businesses
Net loss on writedown of (60,747) (4,968)
businesses, investments and
loans
Intangibles previously written 237,584 -
off against reserves
Ster Century Europe fixed (60,472) -
assets impaired
Other fixed assets impaired (9,582) -
Restraint of trade payments (1,365) (1,882)
Cost of acquisitions not (826) -
completed
Retrenchment costs (231) -
Restructuring costs (33,999) -
Discontinuing operation - (19,671)
Exceptional loss as disclosed (31,682) (53,779)
in income statement
Taxation 15,893 8,687
(15,789) (45,092)
Attributable to outside 8,968 -
shareholders
Net effect of exceptional items (6,821) (45,092)
3 Taxation
Current taxation (12,455) (14,816)
Foreign taxation 4,482 (12,753)
Secondary taxation on companies (869) (1,899)
Deferred taxation (2,730) (7,632)
(11,572) (37,100)
Associated companies (72) (1,677)
(11,644) (38,777)
Companies in the group have
trademarks totalling R1 641
million (2000: R1 691 million),
which are being amortised for
taxation purposes over defined
periods. Discussions are in
progress with the South African
Revenue Service relating to the
taxation treatment of those
trademarks which have not yet
been approved.
R'000 R'000
4 Determination of headline
earnings
Attributable loss per the (279,178) (21,762)
income statement
Add back of intangibles 237,584 -
previously written off now
disposed
Debenture interest 69,661 70,309
Amortisation of goodwill 10,723 2,000
38,790 50,547
Headline earnings adjustments: (4,789) -
Loss on disposal of property, 779 -
plant and equipment
Lease cost incurred in 2001 (5,568) -
Exceptional items: 24,689 51,389
Provision for closure of cinema 31,508 27,258
complexes and onerous leases
Net (profit) / loss on disposal (112,237) 4,968
and writedown of businesses,
investments and loans
Net loss on disposal and 125,347 4,968
writedown of businesses,
investments and loans
Intangibles previously written (237,584) -
off against reserves
Assets impaired 70,054 -
Restraint of trade payments 1,365 1,882
Restructuring costs 33,999 -
Discontinuing operations - 17,281
58,690 101,936
Taxation effect (13,254) (8,687)
Attributable to outside (8,968) -
shareholders
Headline earnings excluding 36,468 93,249
restructuring costs
5 Associated companies
Listed company 22,954 28,918
Unlisted companies 214,041 251,424
236,995 280,342
Market value of listed company 21,772 59,377
at 30 June
6 Borrowings
Actual borrowings comprise:
Secured liabilities 20,752 54,445
Unsecured liabilities 7,498 3,148
Interest-free liabilities 39,634 49,617
Bank borrowings 121,644 58,312
Total third party borrowings 189,528 165,522
Debentures owned by 380,294 374,645
shareholders
569,822 540,167
7 Future lease payments
The minimum lease payments
under non-cancellable operating
leases for the holding and
subsidiary companies are as
follows:
Within one year 49,362 56,595
Thereafter 292,926 346,890
342,288 403,485
8 Commitments
8.1 Capital expenditure
Contracted 18,101 15,718
Authorised, but not yet 68,370 95,739
contracted
86,471 111,457
8.2 Financial commitments
Other commitments 50,758 43,457
Investment commitments in - 156,605
respect of Ster Century Europe
50,758 200,062
Although the group had no
obligation or commitments to
invest further funds into Ster
Century Europe as at 30 June
2001, in terms of the
refinancing package concluded
subsequent to the year end, the
group has committed to invest a
further US$10 million
(approximately R86 million)
into Ster Century Europe
The commitments will be
financed by cash flows from
operations and the utilisation
of cash and borrowings within
acceptable gearing levels.
9 Associated companies' lease
guarantee commitments
Primedia and Royale Resorts
have issued joint and several
guarantees in respect of future
lease commitments of Ster
Century Europe and Ster Century
Middle East. Primedia and
Royale have indemnified each
other so as to limit each
party's exposure to its pro
rata portion of the guarantees
based on shareholding.
9.1 Ster Century Europe
Primedia's 50% (2000: 30%)
share of the guarantees issued
in respect of future lease
commitments amounts to R174
million (US$22 million)
(2000:R125 million (US$18
million)). Primedia and Royale
will be released from their
guarantee commitments based on
Ster Century Europe achieving
certain financial milestones,
being principally the extent of
the paid-up capital of Ster
Century Europe. The financial
milestones in respect of R96
million of the guarantee
exposure (2000: R24 million)
have already been met and, in
respect of these, release of
the guarantee will take place
purely through the effluxion of
time. Based on the paid-up
capital which is to be invested
by Primedia and Royale in terms
of the Ster Century Europe
business plan, the anticipated
commitments in respect of
Primedia's guarantee exposure
are as follows:
R'000 R'000
Expected release within one 25,866 23,264
year
Expected release thereafter 148,520 101,469
Total guarantee exposure 174,386 124,733
Less: Commitments in respect of (95,901) (23,647)
which financial milestones have
already been achieved
Guarantee exposure in respect 78,485 101,086
of which financial milestones
have still to be achieved
9.2 Ster Century Middle East
Primedia and Royale have 35,776 -
guaranteed the future rentals
in terms of one lease for Ster
Century Middle East. Primedia's
50% share of the guarantee
issued in respect of this lease
is (US$4 million)
10 Contingent liabilities
Bank guarantee i.r.o. Ster 116,914 -
Century Europe
Other 8,574 17,317
125,488 17,317
11 Change in accounting policy:
The year end results have been
prepared in accordance with
South African Statements of
Generally Accepted Accounting
Practice. There have been no
changes effected to any
accounting policies during the
year, other than as stated
below:
11.1 Intangible assets
In accordance with the South
African Statements of Generally
Accepted Accounting Practice AC
129 (Intangible Assets) and AC
131 (Business Combinations) the
group has changed its
accounting policy for goodwill,
development costs and other
intangible assets.
Accordingly, with effect from 1
July 2000, trademarks and any
goodwill arising on the
acquisition of investments in
subsidiaries, businesses, joint
ventures or associates are
stated at cost less accumulated
amortisation. Trademarks and
goodwill are amortised through
the income statement over their
estimated useful lives or a
maximum period of 20 years.
Development costs were
previously capitalised and
amortised over the expected
future lives. With effect from
1 July 2000, all development
costs are written off in the
period in which they are
incurred.
Where necessary, comparative
figures have been restated to
conform with the change in the
accounting policy.
12 Diluted number of shares in
issue
The weighted number of combined
units outstanding has been
increased by the weighted
average number of share options
granted, but not yet exercised.
The assumed proceeds from these
options are based on the issue
of the options at fair value.
The differences between the
number of combined units issued
and the number of combined
units that would have been
issued at fair value to raise
the assumed proceeds are
treated as an issue of combined
units for no consideration.
13 Strate
Primedia has been notified by
the JSE Securities Exchange
that it has been selected to
transfer the company's share
capital to the electronic
STRATE (Share Transactions
Totally Electronic) environment
as from 8 October 2001. This is
the date from which investors'
shares can be converted into an
electronic record in order to
become eligible to settle in
the STRATE environment. Trading
for electronic settlement
begins on 29 October 2001 and
from this date there is a legal
requirement for investors to
deposit their shares with
Central Securities Depository
Participant (CSDP) or a
qualifying stockbroker prior to
selling them in order for the
trade to settle in STRATE.
This means that with effect
from 29 October 2001 investors
will not be able to sell their
Primedia shares unless they
exist in electronic form in the
STRATE environment. Electronic
settlement of trades in
Primedia shares will take place
for the first time on 5
November 2001.
