| Tue 5 Mar 2002, 0:00 | | Kagiso Media Limited - Profit Announcement For The |
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December 2001
KAGISO MEDIA LIMITED
(Registration number 1957/000036/06)
("Kagiso Media" or "the Company")
Share code: KGM
ISIN: ZAE000014007
Profit Announcement
for the six months ended 31 December 2001
including interim dividend announcement
* Normalised EPS up 15%
* R28m returned to shareholders
* Interim dividend of 20 cents per share
Condensed Consolidated Income Statement
6 months ended 12 months
ended
31 December 31 December 30 June
2001 2000 2001
(Restated)
(Unaudited) (Unaudited) Change (Audited)
R'000 R'000 % R'000
Revenue 116 365 112 196 4 215 070
Profit before interest, 35 994 31 248 15 40 480
taxation, depreciation
and amortisation
Depreciation and (2 207) (2 652) (5 647)
amortisation
Interest received 2 112 4 976 7 694
Profit before tax 35 899 33 572 7 42 527
Taxation (15 150) (11 740) (18 384)
Net profit after taxation 20 749 21 832 (5) 24 143
Share of associated 8 140 8 456 13 570
companies' earnings
Attributable to outside (1 644) (715) (1 692)
shareholders
Earnings attributable to 27 245 29 573 (8) 36 021
shareholders
RECONCILIATION OF
HEADLINE EARNINGS
Earnings attributable to 27 245 29 573 (8) 36 021
shareholders
Amortisation of goodwill 653 728 1 456
Loss on closure of - - 4 762
discontinuing operation
Costs incurred in 620 115 1 963
negotiating the disposal
of the group's assets
Other - 190 352
Headline earnings 28 518 30 606 (7) 44 554
EARNINGS PER SHARE
Headline earnings per 22,3 23,9 (7) 34,9
share (cents)
Earnings per share 21,3 23,1 (8) 28,2
(cents)
Number of shares in issue 127 692 127 692 127 692
(`000s)
Weighted average number 127 692 127 692 127 692
of shares in issue
(`000s)
Condensed Consolidated Cash Flow Statement
6 months ended 12 months
ended
30 June
2001
(Audited)
R'000
31 December 31 December
2001 2000
(Unaudited) (Unaudited)
R'000 R'000
Cash retained from operations
Cash generated by operating 30 955 28 578 42 049
activities
(Increase)/decrease in working (10 914) (11 079) 10 140
capital
Cash generated by operations 20 041 17 499 52 189
Interest received 2 136 5 880 8 929
Taxation paid (9 035) (9 958) (16 158)
Dividend received 332 - 949
Dividend paid to minorities (2 291) - -
Net cash inflow from operating 11 183 13 421 45 909
activities
Cash generated/(utilised) by (3 702) 3 182 (341)
investment activities
Investment to maintain (3 702) 8 751 12 153
operations
Investment to expand - (5 569) (12 494)
operations
Cash effect of financing (28 092) (84 858) (83 357)
activities
Decrease in current receivable - - 1 129
Increase in borrowings - 185 141
Share premium reduction (28 092) (85 043) (85 043)
Other - - 416
Net increase/(decrease) in (20 611) (68 255) (37 789)
cash and cash equivalents
Cash and cash equivalents at 68 154 105 943 105 943
beginning of the period
Cash and cash equivalents at 47 543 37 688 68 154
end of the period
Condensed Consolidated Balance Sheet
31 December 31 December 30 June
2001 2000 2001
(Restated)
(Unaudited) (Unaudited) (Audited)
R'000 R'000 R'000
ASSETS
Non-current assets 73 805 75 955 65 602
- Property, plant and 13 148 9 854 7 630
equipment
- Intangible assets 7 267 2 140 7 672
- Investments in associates 26 309 32 122 21 921
- Non-current receivables 3 997 5 696 4 629
- Deferred tax 23 084 26 143 23 750
Current assets 116 570 98 706 130 161
- Inventory 6 107 5 504 4 703
- Deferred expenditure 5 982 3 334 5 548
- Accounts receivable 56 678 49 663 50 976
- Current receivable - 1 229 -
- Taxation - 400 75
- Cash and cash equivalents 47 803 38 576 68 859
Total assets 190 375 174 661 195 763
EQUITY AND LIABILITIES
Shareholders' interest 126 907 127 717 127 754
Minority interest 3 187 1 000 3 834
Total shareholders' funds 130 094 128 717 131 588
Non-current liabilities - 7 318 -
Current liabilities 60 281 38 626 64 175
- Deferred revenue 9 796 2 203 19 382
- Accounts payable 29 247 22 789 25 485
- Provision - - 1 612
- Taxation 13 973 12 747 9 783
- Current portion of 5 692 - 5 895
borrowings
- Amounts due to vendors 1 313 - 1 313
- Bank overdraft 260 887 705
Total equity and liabilities 190 375 174 661 195 763
Net tangible asset value per 93,7 98,3 94,0
share (cents)
Condensed Consolidated Statement of Changes in Shareholders' Interest
6 months ended 12 months ended
31 December 2001 30 June 2001
(Unaudited) (Audited)
R'000 R'000
Shareholders' interest at the 127 754 179 643
beginning of the period
- As previously reported 127 754 184 711
- Change in accounting policy - (5 068)
Changes in share capital (28 092) (87 910)
- Vendor shares - (2 867)
- Return of share premium to (28 092) (85 043)
shareholders
Changes in retained earnings 27 245 36 021
Shareholders' interest at the end 126 907 127 754
of the period
Segmental Analysis for the six months to 31 December
Turnover EBITDA Headline
earnings
R'000 2001 2000 2001 2000 2001 2000
Head Office - - (2 177) (1 409) (2 106) 1 526
Broadcasting 44 416 40 399 23 820 19 750 21 868 20 689
Specialist 37 132 34 493 10 777 9 192 6 328 6 135
Publishing
Exhibitions 20 474 37 304 2 275 6 990 1 974 5 897
Internet - - - (3 275) - (3 641)
Strategic 14 343 - 1 299 - 454 -
Marketing
Total 116 365 112 196 35 994 31 248 28 518 30 606
Notes
COMMENTS ON RESULTS
Normalised earnings showed a period-on-period growth of 15% for the six
months to 31 December 2001, after adjusting for the following items:
* the impact of the company's biennial exhibitions. Auto Africa 2000 and
Africa Aerospace and Defence 2000 together contributed R3,5m in pre-tax
profit in the comparative period. These exhibitions again take place in the
latter part of 2002 and their results will be reflected only in the results
for the year to 30 June 2003;
* the group earned R2,8m less in interest in the six months under review,
against the comparative period in 2000, during which the group held
substantially higher cash balances. Kagiso Media returned R85m of this cash
to shareholders in the six months to 31 December 2000 and a further R28m in
the six months under review;
* the substantially higher tax charge for the period under review. East
Coast Radio paid a dividend to Kagiso Media, on which it paid STC of R3,2m.
This STC charge is included in the tax charge for the period under review,
whereas no such charge applied in the comparative period;
* the R3,64m trading loss of the internet operation in the comparative
period is of a non-recurring nature, as this operation had been
discontinued.
Revenue is up by 4% over the comparative six months. Again, if the revenue
from the two biennial exhibitions is excluded from the results of the
comparative period, revenue would have been up 18%.
The group is particularly delighted with this result, as it was achieved
despite the pursuit of the transaction with New Africa Investments Limited
("NAIL"). Our management teams remained focused on operational performance
during the past six months, despite the fact that the transaction with NAIL,
had it been successful, would have been effective from 1 July 2001.
Cash flow remains strong. The group had R47,5m in net cash reserves at 31
December 2001, after returning R28m to shareholders in October 2001 by way
of a capital reduction.
REVIEW OF OPERATIONS
Broadcasting
Since 11 September overall advertising spend has declined markedly, to the
extent that some analysts and industry bodies are projecting zero growth for
2002. To date, print media and the national broadcaster have borne the brunt
of the downturn. By contrast, the individual media platforms with brand
strength and critical mass that target high-growth market segments, have
generally outperformed.
* East Coast Radio
East Coast Radio's penetration into the KZN market remains solid. The
station has recently moved to new, prominent premises in the north of
Durban, which should give it improved visibility and add considerable brand
equity. Revenue increased by 19%, and the operating margin remained
unchanged at 51%. East Coast Radio's website (www.ecr.co.za) was recently
voted in the top 50 global radio websites.
* Jacaranda 94.2
Turnover at this station showed a nominal increase over that of the
comparative period, which indicates that the station has retained its market
share, as this performance reflects general adspend trends in the Gauteng
market, where competition is much stronger. Operating margins improved from
40% to 42% through stringent cost control and some operational gearing.
* OFM
This station continues to perform satisfactorily. Revenue is up 5% on the
comparative period, while operating margins improved handsomely from 27% to
30% due to tight cost control.
* RadMark
Revenue increased by 29%, reflecting the strength of RadMark as a sales
house and the benefit of having a diversified portfolio of radio station
clients. Operating margins improved from 26% to 30%, as most of last year's
increases in the cost base (research, technology and staff) have now been
absorbed.
Specialist Publishing
* Butterworth Publishers
Turnover is up 17% on the comparative period in 2000. Sales to the tertiary
market during the peak period of the academic cycle, being from November to
January, are, however, lagging behind levels of sales experienced in the
past, as bookstores are ordering smaller batches on a just-in-time basis and
residential universities are starting later in February this year. This
shortfall should be corrected by the end of March. Sales of electronic
product comprised 18% of total sales during the six months (2000 - 15%).
* Systems Publishers
Systems contributed a loss of R745 000 to the headline earnings for the six
months under review (2000 - R1m loss). The business is again generating
modest cash flows after the cost base was cut aggressively.
We expect to shortly conclude negotiations to dispose of this investment.
Exhibitions
It was reported in earlier announcements that a consortium acquired the
National Exhibition Center ("NASREC") from the liquidator of the
Witwatersrand Agricultural Society ("WAS"). NASREC is being jointly managed
by Kagiso Exhibitions until 31 October 2002 or such earlier date when
ownership is transferred to the consortium, in terms of a lease agreement
with the liquidator of the WAS. Both the Rand Show and Auto Africa will
therefore take place at the venue this year.
As explained above, Auto Africa and Africa Aerospace and Defence (a managed
exhibition), took place in the comparative period, but not in the period
under review. These exhibitions will again take place late in 2002 and will
be reflected in the results for the 2003 financial year. Mr Craig Newman was
appointed as CEO of Kagiso Exhibitions on 1 January 2002. We look forward to
a strong showing over the next six months under his guidance.
Strategic Marketing
Kagiso Media is a 51% shareholder in a consortium that was awarded the
tender for the first year of the three-year International Marketing
Council's "Brand SA" campaign. This campaign, overseen by the Presidency,
intends to address South Africa's international communications, particularly
in respect of potential tourists to, and investors in, this country. This
operation was staffed up in the six months under review, and as such only
contributed R454 000 in after tax profit, on turnover of R14,3m. We are at
present working to secure the tender for the next year, during which we will
bed down the operation and improve operating efficiency.
ACCOUNTING POLICIES
The summarised unaudited results for the six months ended 31 December 2001
have been prepared using accounting policies which are in accordance with
AC127 and Schedule 4 of the Companies Act and are consistent with those
adopted in the annual financial statements for the year ended 30 June 2001.
COMPARATIVE FIGURES
The comparative unaudited figures in the income statement for the six months
ended 31 December 2000, represent the group's figures, as previously
reported, adjusted for ease of comparison to reflect the change in
accounting policy regarding the amortisation of goodwill in associates,
introduced at 30 June 2001. Goodwill in associates was previously stated at
cost, but will forthwith be amortised over 10 years.
SEASONALITY
The peak trading period for radio broadcasting, the group's major business
division, is over the first six months of the financial year. Over the next
six months, the group should enjoy relatively high sales from Butterworths
and will stage the Rand Show. Consequently the results from the second six-
month trading period should almost equal that of the period under review.
INTERIM DIVIDEND DECLARATION
Notice is hereby given that an interim dividend of 20,0 cents per share in
respect of the six months to 31 December 2001 has been declared payable to
shareholders of ordinary shares recorded in the books of the company on 28
March 2002. The last date to trade cum-dividend will therefore be 20 March
2002 and Kagiso Media shares will trade ex-dividend from 22 March 2002.
Payment of the dividend will be made on 2 April 2002. Share certificates may
not be dematerialised or rematerialised between 14 March 2002 and 28 March
2002, both days inclusive.
DIVIDEND POLICY
The group has no debt and its assets generate strong cash flows. Although it
is the intention of the board to regularly return cash surpluses to
shareholders, cognisance will have to be taken of growth opportunities in
our companies and in the greater media industry and as such no formal
dividend policy is being proposed.
PROSPECTS
The company announced recently that it will not pursue the transaction with
NAIL, after the Independent Communications Authority of South Africa ruled
against the transaction. However, we remain convinced of consolidation in
the media industry and will continue to pursue this objective, including
participating in a review of the regulatory environment over the next year.
As media owners prepare for a downturn in advertising spend in the short
term, we again look forward to a strong showing by our quality assets. Cash
flow should also remain healthy. This puts us in a position to deliver
sustainable dividends to shareholders in the short-term, while being an
attractive long-term value player.
On behalf of the Board
E Molobi W R Jardine
Chairman Chief Executive
5 March 2002
Registered Office: 2nd Floor Kagiso House, 1/3 Mellis Road, Rivonia, 2128.
Transfer Secretaries: Mercantile Registrars, 11 Diagonal Street,
Johannesburg, 2001, (PO Box 1053, Johannesburg, 2000)
