| Mon 13 Sep 2004, 14:01 | | RESULTS FOR THE YEAR ENDED 30 JUNE 2004 |
|
KAGISO MEDIA LIMITED - AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2004
KAGISO MEDIA LIMITED
(Registration number 1957/000036/06)
(`Kagiso Media` or `the Company`)
JSE Share code: KGM ISIN: ZAE000014007
AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2004
Final dividend of 42 cents per share
Return on equity of 65%
Solid shareholder returns
HIGHLIGHTS
Headline earnings per share increase by 15,6%
See-through EBITDA increase by 20,2%
Headline earnings from radio division increase by 38%
Revenue at Butterworths up 25%
CONDENSED CONSOLIDATED BALANCE SHEET AS AT
30 June 30 June
2004 2003
(Audited) (Audited)
(R`000) (R`000)
ASSETS
Non current assets 63 736 54 997
- Property, plant and equipment 13 509 12 940
- Intangible assets 17 186 6 009
- Investment in associates 15 272 19 273
- Deferred tax 17 769 16 775
Current assets 207 149 150 154
- Inventory 8 782 6 578
- Trade and other receivables 100 973 64 231
- Deferred expenses 8 558 5 445
- Current tax asset 524 256
- Cash and cash equivalents 88 312 73 644
Total Assets 270 885 205 151
EQUITY AND LIABILITIES
Shareholders` equity 148 813 131 976
Minority interest 38 144
Total equity 148 851 132 120
Current liabilities 122 034 73 031
- Trade and other payables 69 473 36 716
- Current tax liability 15 686 7 311
- Deferred revenue 36 653 28 834
- Amounts due to shareholders 222 170
Total equity and liabilities 270 885 205 151
CONDENSED CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED
30 June 30 June
2004 2003
(Audited) (Audited) CHANGE
(R`000) (R`000) (%)
Revenue 297 503 261 878 13,6
Profit before interest, tax, depreciation 104 649 88 904 17,7
and amortization (`EBITDA`)
Depreciation and amortization (5 709) (4 725) (20,8)
Profit from operations 98 940 84 179 17,5
Net finance income 5 723 10 851 (47,3)
Share of results of associates before tax 37 399 27 400 36,0
Profit before tax 142 062 122 430 16,0
Tax (51 976) (47 152) (10,2)
Profit from ordinary activities 90 086 75 278 19,7
Minority interest 18 38 -
Net profit for the year 90 104 75 316 19,6
RECONCILIATION OF HEADLINE EARNINGS
Net profit for the year 90 104 75 316 19,6
Amortisation of goodwill 1 106 969 -
Profit on sale of property, plant and (251) (120) -
equipment
Impairment of property, plant and equipment - 24 -
Goodwill acquired in subsidiary written off - 2 008 -
Headline earnings 90 959 78 197 16,3
EARNINGS PER SHARE
Headline earnings per share (cents) 70,2 60,7 15,6
Earnings per share (cents) 69,5 58,5 18,8
Fully diluted earnings per share (cents) 68,3 58,0 17,8
Number of shares in issue (`000s) 130 244 129 244 0,8
Weighted average number of shares in issue 129 556 128 752 0,6
(`000s)
Weighted average number of shares in issue 131 894 129 761 1,6
for diluted earnings per share (`000s)
DIVIDEND PER SHARE
Final dividend in respect of previous year 20,0 -
(cents)
Interim dividend (cents) 38,0 60,0
Total dividend paid (cents) 58,0 60,0 (3,3)
As a percentage of Headline earnings per 82,6 98,9
share (%)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR
ENDED
30 June 30 June
2004 2003
(Audited) (Audited)
(R`000) (R`000)
Equity at the beginning of the year 131 976 132 780
- As previously reported - 132 146
- Change in accounting policy and - 634
interpretation
Changes in share capital 2 073 1 427
- New shares issued 2 078 1 431
- Share issue expenses (5) (4)
Net profit for the year 90 104 75 316
Dividend paid (75 340) (77 547)
Equity at the end of the year 148 813 131 976
CONDENSED CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED
30 June 30 June
2004 2003
(Audited) (Audited)
(R`000) (R`000)
Cash flow from operating activities
Cash from operations 104 400 88 452
Working capital changes (1 387) 1 931
Cash generated from operations 103 013 90 383
Net finance income 5 723 10 851
Tax paid (33 681) (35 170)
Dividend received from associates 26 283 16 231
Dividends paid (75 429) (78 037)
Net cash from operating activities 25 909 4 258
Net cash utilised by investing activities (13 317) (2 581)
Additions to property, plant and equipment (4 749) (2 832)
Additions to intangible assets (5 291) (1 707)
Investment in joint venture, net of cash (2 247) -
Other (1 030) 1 958
Net cash from financing activities 2 074 (1 096)
Decrease in bank overdrafts - (2 523)
Proceeds from issue of new shares 2 074 1 427
Net increase in cash and cash equivalents 14 666 581
Cash and cash equivalents at beginning of 73 644 73 063
year
Cash and cash equivalents at end of year 88 310 73 644
Cash flow per share (cents)(1) 69,5 60,7
(1)Cash flow per share is calculated by dividing the amount of cash generated
during the year (being the net increase/(decrease) in cash and cash equivalents,
plus dividends paid) by the weighted average number of shares in issue during
the year.
GROUP STRUCTURE
Head-office Broadcasting Specialist
publishing
East Coast Radio
100% Butterworths
50%
Jacaranda 94.2
42,5%(1)
OFM
24.9%
RadMark
47,47%(2)
SEGMENTAL ANALYSIS
(R`000) 2004 2003 2004 2003 2004 2003
Revenue - - 134 311 100 350 93 031 74 636
EBITDA(3) (7 956) (6 555) 68 358 50 226 29 822 23 312
See-through
EBITDA(4) (7 956) (6 555) 107 025 80 576 29 822 23 312
STC (13 387) (10 220) - - - -
Headline
earnings (15 696) (11 248) 76 037 55 056 19 168 16 414
Exhibitions Strategic Consolidated
marketing
Kagiso
Exhibitions Kagiso Branding
100% & Marketing 100%
SEGMENTAL ANALYSIS
(R`000) 2004 2003 2004 2003 2004 2003
Revenue 65 029 81 760 5 132 5 132 297 503 261 878
EBITDA(3) 11 028 18 362 3 397 3 559 104 649 88 904
See-through
EBITDA(4) 11 028 18 362 3 397 3 559 143 317 119 254
STC - - - - (13 387) (10
220)
Headline
earnings 7 955 13 984 3 495 3 991 90 959 78 197
(1) The group`s interest in Jacaranda 94.2 increased to a controlling 60% stake
with effect from 1 August 2004.
(2) The group exercises joint control over RadMark since 1 April 2004 and
proportionally consolidates this investment.
(3) The cost of the Butterworths Executive Share Scheme had previously been
allocated to `Head-office`, but is now reflected as part of the results of
the `Specialist publishing` segment. An amount of R1,747m was reallocated
for 2003.
(4) The See-through EBITDA represents the Group`s share of EBITDA in its
subsidiaries, joint ventures and associates.
1.COMMENTS ON RESULTS
Kagiso Media is delighted to report an increase of 15,6% in headline earnings
per share (`HEPS`) for the year to 30 June 2004, especially as this comes on the
back of a 38% growth in HEPS in the previous year. HEPS has grown by 19,8%
annually compounded over the past five years. Headline earnings increased by
16,3% to R90,9m. Return on equity for the year under review is 65% and return on
assets 38%.
Revenue increased by 13,6% to R297,5m in the year under review. Earnings before
Interest, Tax, Depreciation and Amortisation (`EBITDA`) increased by 17,7% to
R104,6m for the year. The overall EBITDA margin improved from 33,9% in 2003 to
35,2% in the year under review.
The Group earned R5m less in interest on its surplus cash than in the previous
year, largely because of the softening in interest rates over the past year.
The share of results of associates before tax includes the equity accounted
results of Jacaranda, OFM and RadMark. The results of RadMark were, however,
proportionally consolidated with effect from 1 April 2004, when an additional
15,8% and joint control of the company was acquired.
The effective tax rate in the year under review was high at 36,6% (2003 -
38,5%), reflecting the Secondary Tax on Companies (`STC`) on the relatively high
proportion of earnings paid as dividends. The tax charge for the year includes a
charge for STC of R13,4m (2003 - R10,2m).
It is the Group`s policy to return surplus cash to shareholders in the absence
of investment opportunities. The year under review was no exception, with R75,3m
(or 83%) of the headline earnings of R90,9m being distributed to shareholders.
The contribution of each business segment to revenue, EBITDA, see-through EBITDA
and headline earnings is set out in the Segmental Analysis.
The financial position of the Group as at 30 June 2004 is not strictly
comparable with that at the end of the previous financial year, because the
acquisition of joint control of RadMark, and proportional consolidation of its
results, introduced current assets of R32,2m and current liabilities of R28,5m
which previously did not form part of the Group`s assets and liabilities. The
Group had no debt at 30 June 2004, but has raised approximately R65m of
preference share funding after year-end to finance the acquisition of the
further interests in RadMark (reported on above) and Jacaranda 94.2 (refer Note
2).
2.POST BALANCE SHEET EVENT
In July 2004 the Independent Communications Authority of South Africa (`ICASA`)
approved the acquisition by the Company of a further 17,5% interest in Jacaranda
94.2. Kagiso Media has therefore, with effect from 1 August 2004, increased its
stake in the station to 60%. This acquisition is not only earnings enhancing,
but the fact that this investment will in future be consolidated should have a
marked impact on the Group`s revenue and cash flow. Preference shares to the
value of approximately R60m will be issued to fund this acquisition and R5m to
fund the acquisition of the additional interest acquired in RadMark, which was
previously funded from surplus cash resources.
3.REVIEW OF OPERATIONS
Head-office
The Kagiso Media head-office contributed a loss of R15,7m (2003 - R11,2m) to
group earnings. Interest earned on surplus cash by the center decreased by R2,8m
against the previous year. All the STC incurred in the group, and any deferred
tax charges related to STC credits, are allocated to head-office so as not to
distort the performance of individual business segments.
Broadcasting
In the year to 30 June 2004 total radio revenues in South Africa reportedly grew
by 20,5% over that of the comparative period. Against this, the Group`s
operations achieved very satisfactory revenue growth: East Coast Radio increased
revenue 29,6%, Jacaranda 16,8% and Ofm 18,6%. RadMark, the national radio sales
house, increased its revenue by 21,3% and currently has a 26% (2003 - 25%) share
of the South African radio advertising market.
This strong revenue performance, coupled with stable EBITDA margins at East
Coast Radio and Ofm, and substantial improvements in EBITDA margins at Jacaranda
and RadMark, saw the broadcasting division increase its contribution to Group
headline earnings by 38% to R76m.
Margins at Jacaranda increased from 43,2% to 48,7% after an onerous consulting
agreement came to an end in September 2003. This agreement had been in place
since the station was privatised in 1997. In future, the station should deliver
a sustainable EBITDA margin approaching 50%. At RadMark, EBITDA margins
increased from 30,6% to 39,9% in the year to 30 June 2004, due to additional non
recurring commission the company earned in December 2003 for exceeding its
client stations` budgets for the year.
Specialist publishing
LexisNexis Butterworths recorded particularly strong results for the year under
review. It increased revenue by 25%, EBITDA by 28% and its contribution to Group
headline earnings by 17% to R19,2m. The EBITDA margin improved from 31,2% to
32,1% over the same period, due to tight cost control and the effect of
operational leverage.
The past year also marks the tenth consecutive year of double digit growth for
the business. Online, CD and intranet revenue grew by 41% over last year,
largely as a result of customer migration from print to electronic. Despite
this, revenue from printed product - the cornerstone of the business - increased
20% over the comparative period, driven by strong growth in tertiary academic
and professional markets. Revenue from West and East Africa doubled in the
period under review and now represent almost 5% of total revenue. The highlight
of the past year was the publication of the Laws of the Federation of Nigeria in
both printed and electronic forms.
Exhibitions
The results for the year are down on that of the comparative period, during
which Kagiso Exhibitions recorded once-off revenue from the services rendered to
the World Summit on Sustainable Development. Auto Africa, the company`s
substantial bi-ennial exhibition, also took place in the comparative period, but
not in the period under review. The division contributed EBITDA of R11,0m on
revenue of R65,0m and headline earnings of R8,0m to the Group`s results.
The business has settled down after it barely showed a profit in 2002, its major
exhibitions are indispensable in their respective markets, the cost base is
stable and new business opportunities look promising. A sustainable level of
profit can therefore be expected from this division in future. Results in the
coming financial year will further be buoyed by the staging of the bi-ennial
exhibition.
Strategic marketing
The three-year project management role to the International Marketing Council`s
prestigious `Brand SA` project came to an end on 30 June 2004. This division
contributed R3,5m to headline earnings in the year to 30 June 2004 (2003 -
R4,0m). The costs associated with this tender also ceased with the end of the
company`s tenure, but minor costs will be incurred in the coming year in pursuit
of new assignments in this field.
4.ACCOUNTING POLICIES
The summarised audited results for the year to 30 June 2004 have been prepared
using accounting policies which are in accordance with the historical cost basis
(as modified by any revaluation of financial assets and liabilities), in
conformity with Generally Accepted Accounting Practice in South Africa and
consistent with those adopted in the prior year, except as more fully set out in
Note 5 below.
5.CHANGE IN ACCOUNTING POLICY AND INTERPRETATION
Change in accounting policy
During the year, the Company implemented AC501 `Accounting for Secondary Tax on
Companies`. Previously no deferred tax was recognised on STC credits, but in
order to comply with AC501, deferred tax has been recognised on STC credits
where it is probable that a dividend will be declared against which STC credits
will be utilised. The effect of this change is as follows:
Gross Tax Net
R`000 R`000 R`000
Increase in net profit due to change
in accounting policy
- 2004 - 3 870 3 870
- 2003 - 209 209
Restatement of opening retained
earnings in respect of prior year
adjustments
- 2004 - 1 349 1 349
- 2003 - 1 140 1 140
Change in accounting interpretation
During the year, accounting interpretations with respect to consolidation of
special entities were expanded and now include all share incentive trusts,
namely the Kagiso Media Limited Share Trust, East Coast Radio Share Trust and
RadMark Share Trust. This change in accounting interpretation was applied
retrospectively and comparative amounts have been appropriately restated. The
affect of this change is as follows:
Gross Minorities Net
R`000 R`000 R`000
Increase/(decrease) in net profit
due to change in accounting
interpretation
- 2004 - - -
- 2003 (833) 2 072 1 239
Restatement of opening retained
earnings in respect of prior year
adjustments
- 2004 5 432 4 527 9 959
- affect on opening retained (3 794) 4 527 733
earnings
- reallocation of amounts
previously charged to retained 9 226 - 9 226
earnings in prior periods
- 2003 (2 961) 2 455 (506)
6.AUDITORS` REPORT
PricewaterhouseCoopers Inc. has audited the Group annual financial statements.
Their unqualified audit report is available for inspection at the Company`s
registered office.
7.ANNUAL FINANCIAL STATEMENTS
The annual financial statements for the year to 30 June 2004, including a notice
to the annual general meeting, will be posted to shareholders by no later than
15 October 2004.
DIVIDEND
Notice is hereby given that a dividend of 42 cents (2003 - 20 cents) per share
has been declared in respect of the year ended 30 June 2004 and is payable to
holders of ordinary shares recorded in the register of the Company on Friday, 8
October 2004
The following salient dates apply to this dividend:
Last date to trade cum-dividend Friday, 1 October 2004
Shares commence trading ex-dividend Monday, 4 October 2004
Record date Friday, 8 October 2004
Payment of the dividend Monday, 11 October 2004
Share certificates may not be dematerialised or rematerialised between Monday, 4
October 2004 and Friday, 8 October 2004, both days inclusive.
In terms of the Companies Act, the directors confirm that, after the payment of
the above dividend, the Company will be able to meet its commitments and settle
its liabilities as these fall due in the ordinary course of business, and that
its consolidated assets, fairly valued, exceed its consolidated liabilities.
9.PROSPECTS
The robust consumer environment is expected to prevail for the remainder of 2004
and well into 2005, which bodes well for another strong performance by the
group`s radio operations in the coming financial year. In addition, the
acquisition of control of Jacaranda 94.2 should be earnings enhancing, while the
relaxation of the regulatory environment offers exciting opportunities for
acquisitive growth. The group has raised debt to acquire the further interests
in Jacaranda and RadMark, and has sufficient cash flow and further borrowing
capacity to sustain a relatively high dividend while it pursues further radio
acquisitions.
Butterworths is looking forward to another year of good growth, while the bi-
ennial exhibition staged by Kagiso Exhibitions also takes place in the coming
year.
Overall Kagiso Media is thus poised for another strong showing in the 2005
financial year.
On behalf of the Board
E Molobi W R Jardine
Chairman Chief Executive
13 September 2004
Registered Office:1st Floor Kagiso House, 16 Fricker Road, Illovo, 2196, PO Box
724, Northlands, 2116
Group Company Secretary: PHP Jacobs
Directors: E Molobi (Chairman), MJN Njeke (Deputy Chairman), WR Jardine (Chief
Executive), PHP Jacobs (Financial), OE Essack (Broadcasting), HI Appelbaum, RL
Hiemstra, YI Mahomed, SN Pragjee, AH Singh
Transfer Secretaries: Computershare Investor Services 2004 (Pty) Limited, 70
Marshall Street, Johannesburg, 2001, (PO Box 61051, Marshalltown, 2107)
Sponsor: Investec Bank Limited
Also available on the Internet: www.kagiso.com/kagisomedia
