| Tue 2 Mar 2004, 12:17 | | Results for the six months ended 31 Dec 03 |
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Primedia Limited - Interim Unaudited Results For The Six Months Ended 31
Release Date: 02/03/2004 11:00:01 Code(s): PMA
PRIMEDIA LIMITED - INTERIM UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31
DECEMBER 2003
Primedia Limited
Interim unaudited results
for the six months ended 31 December 2003
- Operating profit up 39,4% to R132,7 million
- Headline earnings per share up 396,3% to 32,1 cents
Cash distribution to shareholders up 20,8% to 15,7 cents
- Strategic acquisition concluded
- Proforma headline earnings per share of 35,5 cents
- Increased empowerment shareholding
CONSOLIDATED INCOME STATEMENT
6 months 6 months 12 months
ended ended ended
31 Dec 03 31 Dec 02 30 Jun 03
Unaudited Unaudited % Audited
R 000"s R 000"s change R 000"s
Revenue
- Continuing operations 898 583 780 880 15,1% 1 549 024
- Disposed entities 24 608 148 376 224 406
923 191 929 256 (0,7%) 1 773 430
Operating profit
before depreciation 164 667 137 018 20,2% 277 327
Depreciation (32 015) (41 833) (78 796)
Operating profit ("PBIT") 132 652 95 185 39,4% 198 531
- Continuing operations 136 356 100 868 35,2% 207 854
- Disposed entities (3 704) (5 683) (9 323)
Net finance costs (11 176) (7 826) (14 659)
Unrealised foreign
exchange gains/(losses) 5 773 (11 614) (9 978)
Profit before exceptional
items and amortisation 127 249 75 745 68,0% 173 894
Amortisation of
intangible assets (1 030) (1 996) (4 393)
Exceptional items (note 1) 16 369 (1 771) (13 357)
Share of associated
company losses (297) (24 650) (46 464)
Profit before tax 142 291 47 328 109 680
Taxation (38 199) (19 062) (63 889)
Profit after tax 104 092 28 266 45 791
Minority interest (18 380) (13 403) (24 587)
Net profit for the period 85 712 14 863 476,7% 21 204
Reconciliation of headline earnings
Net profit for the period 85 712 14 863 21 204
Goodwill amortisation 1 025 1 996 4 380
Capital items (17 319) 801 24 542
Headline earnings per share 69 418 17 660 293,1% 50 126
Number of shares ("000)
- Issued 216 364 218 021 216 364
- Weighted average 216 364 218 475 218 229
- Diluted weighted average 220 317 218 898 218 724
Earnings per share (cents)
- Headline 32,1 8,1 396,3% 23,0
- Basic 39,6 6,8 9,7
- Diluted headline 31,5 8,1 22,9
- Diluted basic 38,9 6,8 9,7
CONSOLIDATED BALANCE SHEET
31 Dec 03 31 Dec 02 30 Jun 03
Unaudited Unaudited Audited
R 000"s R 000"s R 000"s
ASSETS
Non-current assets 489 175 755 531 506 617
Property, plant and equipment 269 967 282 612 284 381
Goodwill and intangible assets 27 821 12 386 6 161
Investment in associates 8 829 93 867 24 217
Other investments (at cost
and directors" valuation) 14 915 2 804 12 122
Deferred tax asset 167 643 363 862 179 736
Current assets 500 114 600 028 425 014
Inventory 56 078 69 634 38 446
Trade and other receivables 422 175 443 359 355 856
Bank balances and cash 21 861 87 035 30 712
Total assets 989 289 1 355 559 931 631
EQUITY & LIABILITIES
Share capital and reserves 340 394 427 283 302 692
Minority interest 16 434 143 061 20 246
Total shareholders" funds 356 828 570 344 322 938
Non-current liabilities 167 714 157 352 164 339
Long-term borrowings 66 422 49 587 68 350
Landlord inducement premium 19 265 19 942 19 512
Long-term provisions 82 027 87 823 76 477
Current liabilities 464 747 627 863 444 354
Bank borrowings and overdrafts 55 444 160 452 43 360
Short-term portion of
long-term borrowings 3 441 4 610 4 538
Other current liabilities 405 862 462 801 396 456
Total equity and liabilities 989 289 1 355 559 931 631
Net asset value per share 157 196 140
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
31 Dec 03 31 Dec 02 30 Jun 03
Unaudited Unaudited Audited
R 000"s R 000"s R 000"s
Cash generated from operations 94 854 77 919 194 558
Cash flow relating to
exceptional items 6 296 (2 810) 828
Net interest paid (11 789) (9 036) (13 092)
Tax (paid)/received * (35 464) 12 791 11 014
Dividends paid to minorities (537) - (863)
Net cash inflow from
operating activities 53 360 78 864 192 445
Net acquisition of operations
and investments (16 269) (11 199) (3 937)
Loans advanced to
associates and minorities (3 731) (9 930) (10 282)
Net acquisition of fixed assets(22 680) (30 515) (45 563)
Net cash outflow from
investing activities (42 680) (51 644) (59 782)
Cash distribution out
of share premium (28 560) - (28 336)
Share buy back in the company - (7 345) (7 347)
Other financing activities (3 493) (928) (15 805)
Net cash (outflow)/inflow
from financing activities (32 053) (8 273) (51 488)
Net movement in cash and
cash equivalents (21 373) 18 947 81 175
Effect of foreign exchange
rate changes 438 3 423 1 964
Cash and cash equivalents at
beginning of period (12 648) (95 787) (95 787)
Cash and cash equivalents
at end of period (33 583) (73 417) (12 648)
* Settlement of R27,0 million paid to SARS included in the period under
review.
CONTRIBUTION TO CORE HEADLINE EARNINGS PER SHARE
31 Dec 03 31 Dec 02 % 30 Jun 03
cents cents change cents
Core operations - South Africa (*) 30,7 24,6 24,8% 52,2
Non-core operations
- international (*) 0,6 (11,8) 105,0% (21,5)
Headline earnings per share before
adjusting items 31,3 12,8 144,5% 30,7
Disposed entities (0,7) (2,2) (3,4)
Headline earnings impact of
capital items, foreign exchange
gains or losses, exceptional
items and the taxation differential 1,5 (2,5) (4,3)
Headline earnings per share 32,1 8,1 296,3% 23,0
* PBIT adjusted for net interest, taxed at the standard rate of 30% and
adjusted for minority interests.
SEGMENT REPORT
2003 2002 2003 2002
R 000"s R 000"s R 000"s R 000"s
Revenue PBIT
Advertising 374 632 316 612 112 039 77 086
Filmed Entertainment 490 429 424 415 32 871 36 042
One to One 33 522 39 853 2 765 (3 032)
Disposed entities 24 608 148 376 (3 704) (5 683)
Central - - (11 319) (9 228)
923 191 929 256 132 652 95 185
STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
31 Dec 03 31 Dec 02 30 Jun 03
Unaudited Unaudited Audited
R 000"s R 000"s R 000"s
Opening balance 302 692 420 801 420 801
Prior year adjustment - (2 040) (3 288)
Distribution to shareholders (29 121) - (29 029)
Distribution received by
the Primedia Trust 561 - 693
Minority share of intangibles
previously written-off
against share premium 16 440 - 127 011
Adjustment to tax value of
trademarks previously
written-off against share premium 569 11 484 (165 086)
Translation reserve realised
on disposal of
subsidiaries" business (5 946) - (3 867)
Translation reserve realised
on disposal of
associate"s business (31 044) - -
Translation reserve movement 531 (18 504) (58 984)
Disposal of treasury shares - - 2 200
Net profit for the period 85 712 14 863 21 204
Shares issued
- Issue of shares during the period - 7 619 10 813
- Share issue expenses - - (34)
Share buy back - (7 345) (7 347)
Shares held in the Primedia Trust - - (12 801)
Other movements - 405 406
Closing balance 340 394 427 283 302 692
SUPPLEMENTARY INFORMATION
Basis of preparation
The financial information has been prepared in accordance with South
African Statements of Generally Accepted Accounting Practice. They have
been prepared on a basis consistent with the prior year under the
historical cost convention, modified by the restatement of financial
instruments to fair value. Certain comparative figures have been
reclassified so as to provide more meaningful information.
6 months 6 months 12 months
ended ended ended
31 Dec 03 31 Dec 02 30 Jun 03
Unaudited Unaudited Audited
R 000"s R 000"s R 000"s
1. Exceptional items
Net profit on disposal
and write down of
assets and investments 9 161 7 194 8 383
Reversal of onerous
lease provision 3 562 - -
Reversal of provision against sale
proceeds of subsidiary 5 786 - -
Assets and goodwill impaired (1 734) (7 994) (18 909)
Loss on write-off of
investment in associate (702) - -
- Release of foreign
currency translation reserve
on disposal of associate 31 044 - -
- Write-off of investment
in associate (16 062) - -
- Provision for lease
guarantees (15 684) - -
Interest due to Receiver
of Revenue - - (11 468)
Release of post retirement medical
benefits provision - - 9 035
Other 296 (971) (398)
16 369 (1 771) (13 357)
Taxation 70 291 (2 965)
Net effect of
exceptional items 16 439 (1 480) (16 322)
2. Capital expenditure and commitments
Net capital expenditure
for the period 22 680 30 515 44 753
Future capital commitments 33 133 61 279 61 971
Financial commitments 52 816 17 711 40 128
Operating lease commitments 340 565 573 876 383 353
- Due within one year 48 983 77 756 89 598
- Thereafter 291 582 496 120 293 755
3. Contingent liabilities 164 838 194 475 192 394
Less: Indemnities obtained from the
purchasers of Ster Century Europe"s
underlying operations (121 577) (141 461) (142 146)
Unindemnified
contingent liabilities 43 261 53 014 50 248
3. Subsequent events
Primedia has reached agreement to acquire an additional 30,49%
economic interest in Africa on Air, which would increase Primedia"s
total economic interest in the company to 85,83%.
1. Introduction
The group"s results reflect an excellent performance from the South
African businesses and the continued disposal of the group"s loss-making
international operations. Good strategic progress was made on all fronts
in the reporting period.
2. Strategic Review
The group has codified four strategic priorities for 2004 namely:
* Enhancing the breadth of its South African media portfolio;
* Acceleration of group synergy;
* Increased penetration of cinema and home entertainment into the
black consumer segment; and
* Disposal of international assets.
Enhancing South African media portfolio
Following undertakings given by members of the Tiso Consortium as well as
Phaphama Holdings (Pty) Limited, which currently controls New Africa
Investments Limited ("Nail"), Primedia is close to finalizing the
acquisition of certain of Nail"s media assets. These assets include KFM
(the #1 regional radio station in the Western Cape), Nail Outdoor and a
minority stake in Gauteng-based Kaya FM ("the Nail media assets").The
purchase price for the Nail media assets will be approximately R218,5
million. In addition to their strategic value, the financial contribution
from these assets will materially improve the group"s earnings and free
cash flow profile and further diversify the group"s portfolio of media
assets.
Group synergy
In the six months to 31 December 2003, the group"s advertising business
increased their revenue by 18,3% to R374,6 million. This was influenced
by the group"s turnover-based synergy initiatives where group companies
work collaboratively to secure incremental spend from major South African
companies, working with them to achieve their strategic objectives.
Black consumer market strategy
The group"s filmed entertainment initiatives are longer term in nature
and the investment made in the six months under review into growing black
consumer cinema attendances has not yet started to deliver returns,
though we remain optimistic about the future potential of this market.
The results of Ster-Kinekor Home Entertainment"s pilot video store in
Meadowlands, Soweto, has however been very encouraging.
International disposals
The group continued to exit its non-core international businesses. In
this regard, Ster Century Europe"s remaining site in Slovakia was
disposed of in October 2003. Loss making Wheel (one to one) was also
disposed of in November 2003. The remaining international assets are The
Database Group in the UK (one to one) and the group"s interest in Ster
Century Middle East.
3. Financial Results
3.1 Income Statement
While total group revenue declined by 0,7%, revenue from continuing
operations increased by 15,1% to R898,6 million. The group"s South
African businesses increased their revenue by 16,4% to R873,4 million.
Group operating profit increased by 39,4% to R132,7 million boosted by
the results of the South African businesses, which increased their
contribution by 30,7% to R134,5 million. Group operating profit margin
increased to 14,4% from 10,2%.
Net finance costs of R11,2 million (2002: R7,8 million) were higher than
last year, due to finance leases recognised as at 30 June 2003. In
addition, high working capital associated with significant revenue growth
experienced by Ster-Kinekor Home Entertainment"s Sony PlayStation was
also a factor. Interest cover was 11,9 times (2002: 12,2 times).
Minorities" share of profit increased from R13,4 million to R18,4 million
mainly due to the ongoing repayment of 94.7 Highveld Stereo"s empowerment
financing structure as well as Highveld"s strong growth in operating
profits. As set out in the accompanying announcement, agreement has been
reached whereby Primedia and Mineworkers Investment Company have
increased their economic interest in 94.7 Highveld Stereo. Primedia will
now account for 85,8% of Highveld"s profits with effect from January
2004.
Headline earnings per share increased from 8,1 cents to 32,1. Excluding
the impact of disposed entities, capital items, foreign exchange gains
and losses and exceptional items and assuming a standard tax rate of 30%,
headline earnings per share was 31,3 cents (2002: 12,8 cents).
3.2 Balance Sheet
The group"s balance sheet continues to remain sound with net short-term
debt at R37,0 million (June 2003: R17,2 million) and long-term debt of
R66,4 million excluding the landlord inducement premium (June 2003: R68,4
million).
3.3 Cash Flow
For the six months under review cash generated from operations was up
21,8% to R94,9 million (2002: R77,9 million) reflecting the improved
trading performance. The increase was also after the effect of the cash
outflow from higher levels of working capital following the extraordinary
demand for Sony Playstation products in November and December 2003. This
peak funding cycle has reversed subsequent to the reporting period.
Capital expenditure of R22,7 million (2002: R30,5 million) remains well
controlled and lower than the depreciation charge for the period.
Free cash flow* of R52,0 million (2002: R51,2 million) was slightly
higher than last year due to the improved trading performance and after
accounting for cash tax payments in the six months relative to tax
refunds received in the prior six months.
The group"s free cash flow was mainly deployed to settle outstanding tax
due to the South African Revenue Services (SARS) following resolution of
the Ster-Kinekor Theatres and Cinemark trademark issue (R27,0 million),
cash distributions to shareholders out of share premium (R28,6 million)
and earnings enhancing acquisitions of minorities in underlying
subsidiaries (R13,5 million).
* Free cash flow is defined as cash generated from operations less net
interest paid, cash tax (paid)/received (excluding the aforementioned
SARS settlement) and net acquisition of fixed assets.
4. Divisional Review
4.1 Advertising
The advertising businesses produced an exceptional result growing revenue
by 18,3% from R316,6 million to R374,6 million, which translated into a
45,3% increase in operating profits to R112,0 million (2002: R77,1
million). Operating margins also increased from 24,3% to 29,9%. All
divisions contributed to the increase, which was a function of not only
good market conditions but also the ongoing benefit of innovations
launched in prior periods, synergies and tight cost management.
4.2 Filmed Entertainment
Revenue increased 15,6% from R424,4 million to R490,4 million. This was
mainly influenced by Ster-Kinekor Home Entertainment, which grew revenue
by 27,8% to R251,2 million. Overall however, operating profit for the
filmed entertainment division declined by 8,8% to R32,9 million (2002:
R36,0 million) due to lower than expected attendances at Ster-Kinekor
Theatres and increased marketing costs aimed at the black consumer
market. In addition, relative to last year, reduced levels of TV
commission received dampened the performance of Ster-Kinekor Pictures.
4.3 One to One
The continuing operations in the one to one marketing division
contributed positively to Primedia"s results, recording an operating
profit of R2,8 million for the six months relative to last year"s loss of
R3,0 million.
5. Strategic Acquisition
As set out in the accompanying announcement, Primedia has significantly
increased its financial interest in 94.7 Highveld Stereo, which will
improve the earnings and cash flow prospects of Primedia. Importantly as
well, the Mineworkers Investment Company will be substantially increasing
its voting and economic interest in Primedia. The detailed rationale and
financial effects of this acquisition are set out in the said
announcement.
As stated earlier, Primedia is close to finalising another equally
important strategic transaction, being the Nail media assets, and
shareholders are advised to continue to exercise caution until a further
detailed announcement is made.
6. Prospects
Positive macro economic conditions as well as the group"s good mix of
traditional and non-traditional advertising businesses should continue to
positively influence the group"s advertising businesses.
Attendances at Ster-Kinekor Theaters are currently meeting expectations
and this together with cost reduction initiatives and the improved
commercial terms pertaining to the company"s loyalty programmes (only
concluded in November 2003), will result in an improved second half
performance.
Ster-Kinekor Home Entertainment experienced its peak trading in the
November/December period and the company is not expected to grow at the
same rate in the second half.
The group"s remaining one to one business is expected to continue to make
a positive contribution for the full year.
Free cash flow for the second half of the year should improve relative to
the first half due to the significant reduction of working capital levels
subsequent to the reporting period. The group intends to use this cash
flow to fund the stated acquisitions and to return cash to shareholders.
7. Deregulation of the Broadcasting Industry
Recently the Independent Broadcasting Authority of South Africa announced
that it was to deregulate further the commercial sector of the radio
broadcasting industry. Primedia welcomes these changes, which it believes
will create significantly greater opportunities for radio broadcasters to
develop and grow the industry. Based on the proposed 35% threshold of the
number of licenses that could potentially be owned by any one operator
under these new rules, the opportunity for Primedia to materially
increase the number of licenses it controls is considered very positive
for the group in the medium to long term.
8. Cash Distribution
Primedia"s dividend and distribution policy is to declare and pay an
interim and annual distribution representing 50% of its headline earnings
per share before adjusting items, unless circumstances dictate otherwise.
In terms of the authority granted by shareholders at the last annual
general meeting, notice is hereby given that the company will distribute
out of share premium, in lieu of dividends, an amount of 15,7 cents per
share. This amount will be payable to the holders of ordinary and N
shares recorded in the books of the company on
26 March 2004. The last date to trade "cum" the distribution will be 18
March 2004 and Primedia shares will trade "ex" the distribution from 19
March 2004. Payment of the distribution will be made on 29 March 2004.
Share certificates may not be dematerialised or rematerialised between 19
March 2004 and 26 March 2004, both days inclusive.
In terms of the requirements of the Companies Act, the directors confirm
that after the payment of the distribution, Primedia will be able to pay
its debts as they become due in the ordinary course of the business, and
its consolidated assets, fairly valued, will exceed its consolidated
liabilities.
For and behalf of the board
AP NKUNA W KIRSH O IGHODARO
Chairman Chief Executive Chief Financial Officer
Johannesburg
2 March 2004
Directorate: AP Nkuna (Chairman), W Kirsh* (Chief Executive), MJ Bosman,
NJM Canca, FA Gazendam*, O Ighodaro* (Chief Financial Officer), HM Khoza,
I Kirsh, HM Madima, P Maw, K Pillay*, CS Seabrooke, BJT Shongwe, SV
Zilwa, K Pillay (alternate).
Company secretary: O Ighodaro
(*Executive directors)
Registered office transfer secretaries
6th Floor, Primedia Place, Computershare Limited
5 Gwen Lane, Sandown 2196 70 Marshall Street, Johannesburg 2001
Date: 02/03/2004 11:00:13 AM Produced by the JSE SENS Department
