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Primedia - Unaudited Results For The Six Months Ended 31 December 2004 And
Release Date: 01/03/2005 07:00:24 Code(s): PMA PMN
Primedia - Unaudited results for the six months ended 31 December 2004 and
interim cash distribution
PRIMEDIA LIMITED
Incorporated in the Republic of South Africa
Registration number 1993/003355/06
Share code PMA ISIN ZAE000035119
Share code PMN ISIN ZAE000035127
(`Primedia`)
Unaudited results for the six months ended 31 December 2004 and interim cash
distribution
HIGHLIGHTS
PBIT increased 37,6% to R182,5 million
Headline earnings per share (`HEPS`) increased 34,4% to 43 cents
HEPS before unrealised foreign exchange movements increased 46,7% to 44 cents
Free cash flow per share increased 87,2% to 50 cents
Interim distribution per share increased 40,1% to 22 cents
CONSOLIDATED INCOME STATEMENT
6 months 6 months 12 months
ended ended ended
31 Dec 04 31 Dec 03 30 Jun 04
Unaudited Unaudited % Audited
R000 R000 change R000
Revenue 1 004 194 923 191 8,8 1 752 387
Operating profit
before depreciation 214 773 164 667 30,4 323 454
Depreciation (32 288) (32 015) (64 395)
Operating profit
before amortisation,
foreign exchange and
exceptional
items (PBIT) 182 485 132 652 37,6 259 059
Amortisation of
intangible assets (678) (1 030) (3 887)
Foreign exchange
(losses)/gains (6 134) 5 773 1 030
Exceptional (1 521) 16 369 23 308
Operating profit 174 152 153 764 13,3 279 510
Net finance costs (21 389) (11 176) (16 462)
Share of associated
company profit/(losses) 457 (297) (331)
Profit before tax 153 220 142 291 17,7 262 717
Taxation (46 514) (38 199) (63 619)
Profit after tax 106 706 104 092 2,5 199 098
Minority interests (7 631) (18 380) (24 403)
Net profit for the year 99 075 85 712 15,6 174 695
Reconciliation of
headline earnings
Net profit for the year 99 075 85 712 174 695
Goodwill amortisation - 1 025 3 874
Profit on disposal of
fixed assets
and investments (767) (478) (8)
Exceptional items (2 000) (17 021) (33 235)
Tax effect of non-headline
earnings items - 180 1 217
Headline earnings 96 308 69 418 38,7 146 543
Number of shares (`000)
- Issued 225 226 216 364 216 764
- Weighted average 222 595 216 364 216 520
- Diluted weighted
- average 229 590 220 317 225 648
Earnings per share (cents)
- Headline 43 32 34,4 68
- Basic 45 40 81
- Diluted headline 42 32 65
- Diluted basic 43 39 77
CONSOLIDATED BALANCE SHEET
31 Dec 04 31 Dec 03 30 Jun 04
Unaudited Unaudited Audited
R000 R000 R000
ASSETS
Non-current assets 797 436 489 175 544 730
Property plant and
equipment 265 265 269 967 259 150
Goodwill and intangible
assets 358 113 27 821 105 556
Investments in associated
companies 8 703 8 829 8 062
Other investments (at cost
and directors` valuation) 11 158 14 915 5 524
Deferred tax asset 154 197 167 643 166 438
Current assets 547 824 500 114 438 898
Inventories 40 399 56 078 39 569
Trade and other receivables 445 684 422 175 333 332
Bank balances and cash 61 741 21 861 65 997
Total assets 1 345 260 989 289 983 628
EQUITY & LIABILITIES
Share capital and reserves 412 264 340 394 333 669
Minority interest 31 993 16 434 16 238
Total shareholders` funds 444 257 356 828 349 907
Non-current liabilities 293 426 167 714 104 159
Long-term borrowings 249 183 66 422 61 912
Landlord inducement premium 18 266 19 265 17 047
Long-term provisions 25 355 82 027 24 928
Deferred tax liability 622 - 272
Current liabilities 607 577 464 747 529 562
Bank overdrafts and short-
term borrowings 29 253 55 444 -
Other current liabilities 578 324 409 303 529 562
Total equity and
liabilities 1 345 260 989 289 983 628
Net asset value per share 183 157 154
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
6 months 6 months 12 months
ended ended ended
31 Dec 04 31 Dec 03 30 Jun 04
Unaudited Unaudited Audited
R000 R000 R000
Net cash flow from operating
activities 138 083 53 360 273 358
Net acquisition of subsidiaries
and minorities (360 607) (16 269) (17 352)
Net loans to associates and
minorities 1 049 (3 731) (9 983)
Net acquisition of fixed assets
and intangibles (26 921) (22 680) (43 227)
Net cash flow from investing
activities (386 479) (42 680) (70 562)
Cash distribution out of
share premium (54 996) (28 560) (63 729)
Long-term borrowings
raised/(repaid) 263 817 (3 290) (52 595)
Other financing activities 5 633 (203) (7 540)
Net cash flow from financing
activities 214 454 (32 053) (123 864)
Net movement in cash and cash
equivalents (33 942) (21 373) 78 932
Foreign currency translation 433 438 (287)
Cash balances at beginning
of period 65 997 (12 648) (12 648)
Net cash balances at end
of period 32 488 (33 583) 65 997
ABRIDGED GROUP STATEMENT OF CHANGES IN SHAREHOLDERS` EQUITY
6 months 6 months 12 months
ended ended ended
31 Dec 04 31 Dec 03 30 Jun 04
Unaudited Unaudited Audited
R000 R000 R000
Share capital and premium 325 498 383 178 351 362
Opening balance 351 362 411 738 411 738
Shares issued 29 132 - -
Net distribution to shareholders (55 557) (29 121) (62 043)
Shares held in the
Primedia Trust 561 561 1 667
Non-distributable reserves 313 924 372 539 305 119
Opening balance 305 119 391 989 391 989
Minority share of intangibles
previously written off (909) 16 440 (32 383)
Increase in tax value of
trademarks previously
written off 546 569 1 138
Disposal of subsidiaries and
associates - (36 990) (5 946)
Translation reserve movement (407) 531 (29 247)
Movement in treasury shares 9 575 - (21 281)
Transfer from accumulated loss - - 849
Accumulated loss (227 158) (415 323) (322 812)
Opening balance (322 812) (501 035) (501 035)
Net profit for the period 99 075 85 712 174 695
Transfer to NDR - - (849)
Movement in treasury shares (3 421) - 4 377
Total share capital and
reserves 412 264 340 394 333 669
SEGMENT REPORT
6 months 6 months 12 months
ended ended ended
31 Dec 04 31 Dec 03 30 Jun 04
Unaudited Unaudited Audited
R000 R000 R000
Revenue
Advertising 467 398 374 472 759 555
Filmed Entertainment 506 232 490 429 900 028
One to One Marketing 30 358 33 522 67 850
Disposed entities - 24 608 24 608
Central 206 160 346
1 004 194 923 191 1 752 387
Operating profit before
amortisation, foreign
exchange items and
exceptional items (PBIT)
Advertising 148 259 111 362 211 746
Filmed Entertainment 46 450 32 966 69 838
One to One Marketing 215 2 765 4 033
Disposed entities - (3 609) (3 578)
Central (12 439) (10 832) (22 980)
182 485 132 652 259 059
Operating profit
Advertising 148 366 111 266 211 393
Filmed Entertainment 42 208 36 709 78 387
One to One Marketing 216 6 100 5 021
Disposed entities - 11 804 11 861
Central (16 638) (12 115) (27 152)
174 152 153 764 279 510
NOTES TO THE FINANCIAL STATEMENTS
6 months 6 months 12 months
ended ended ended
31 Dec 04 31 Dec 03 30 Jun 04
Unaudited Unaudited Audited
R000 R000 R000
Capital expenditure,
commitments
and contingencies
Future capital
commitments 38 099 33 133 78 802
Financial commitments 10 402 52 816 30 288
Operating lease
commitments 290 241 340 565 301 665
- Due within one year 43 908 48 983 77 832
- Thereafter 246 333 291 582 223 833
Contingent liabilities 184 358 164 838 167 997
Less: Indemnities received (142 146) (121 577) (142 723)
Unindemnified contingent
liabilities 42 212 43 261 25 274
Subsequent events
Events subsequent to the period end are dealt with in detail in the body of this
announcement.
Basis of preparation
These financial statements are prepared in accordance with South African
Statements of Generally Accepted Accounting Practice applicable to interim
financial reporting on a basis consistent with the prior year.
The financial statements are prepared under the historical cost convention,
modified by the restatement of financial instruments to fair value. Certain
comparative figures in the segment report have been reclassified in line with
changes in the group reporting structure.
1 OVERVIEW
The Primedia group has delivered another good set of results and continues to
grow shareholder value through its primary strategies, which have translated
into improved profits and cash flow and positioned the group for further
success.
2 STRATEGIC REVIEW
2.1 Growth strategy highlights
Organic growth
- PBIT from the South African businesses (excluding acquisitions) grew by 20,9%
to R162,5 million.
Innovation
- Ster-Kinekor Theatres` price-sensitive market strategy;
- Ster-Kinekor Games launched;
- Star Taxi Radio, a new digitally-enabled radio station targeted at the
commuter in taxi ranks, now established;
- 20 additional digital cinema screen projectors to be rolled out by Cinemark
to accelerate the growth of digital cinema advertising.
Geographic expansion into Africa
- New Primedia Outdoor operation successfully launched in Mozambique;
- Dedicated Africa division recently established to focus on delivering
Primedia`s suite of media offerings to those jurisdictions that meet the group`s
required investment criteria.
Acquisitions
- KFM: 92,2% economic interest acquired for R188,3 million with effect from 4
October 2004;
- 94.7 Highveld Stereo: cash payment of R100 million for an additional 30,5%
economic interest on 1 July 2004;
- Minority interests acquired in key operating subsidiaries namely Rank TV,
Rank Branding (now 100% owned by Primedia) and Megapro Marketing (now 80% owned
by Primedia) with effect from 1 July 2004 for R71,5 million;
- On 17 December 2004, Primedia announced its intention to acquire the shares
of New Africa Media Investments Limited (Nail). Nail owns an effective 49%
economic interest in Kaya FM and loans due to it by P4 Durban and Cape Town.
Based on indications from Nail`s shareholders, Primedia is likely to acquire 50%
to 60% of Nail at a cost of between R22,5 million to R27 million. This
transaction is expected to be effected by the financial year-end;
- With effect from 1 January 2005, Primedia Broadcasting increased its economic
interest in 567 Cape Talk by 55%, at a cost of R10 million, bringing its total
economic interest to 100%. Cape Talk generated PBIT of R1,3 million in the six
months under review.
Investment in new media sectors
- Through Primedia Unlimited, four transactions were recently concluded to
position Primedia in new growing sectors of the media industry. These
transactions extend Primedia`s advertising reach into shopping malls and parking
arcades, construction sites and landmark buildings, forecourts of service
stations and cause related marketing opportunities. These transactions will cost
Primedia approximately R31 million, of which R7,7 million was paid in the
reporting period. The transactions largely meet Primedia Unlimited`s investment
criteria of being profitable with a track record, run by entrepreneurs, being
scalable and capable of being integrated with the rest of Primedia`s media.
2.2 2005 strategic priorities
Whilst pursuing its growth strategy, Primedia continues to focus on its three
key strategic priorities for 2005:
Maximising cash flow
Free cash flow generation was up 92,6% to R111,2 million and overall debt levels
were well within bank covenants. Moreover, at 31 December 2004, the group had
headroom of R175 million in its syndicated facilities with its bankers in
addition to R61,7 million cash on hand.
Continued enhancements to the group`s media portfolio
Due to the first time inclusion of KFM`s results, albeit only for three months,
94.7 Highveld Stereo`s contribution to group PBIT dropped from 47% to 41%. This
will decline further in the next six months due, inter alia, to KFM`s inclusion
for the full six months, as well as the first time contribution of the Primedia
Unlimited acquisitions. The group`s objective is for 94.7 Highveld Stereo to
contribute no more than 25% to 30% of group PBIT, which appears to be achievable
in the medium term.
Black consumer filmed entertainment
The group`s strategy to grow black consumer patronage of cinema has been
eclipsed by Ster-Kinekor Theatres` revised strategy, which is referred to in
greater detail below.
Through the opening of 5 home entertainment stores in townships in 2004 (2003:
3), Ster-Kinekor is refining its product offering and gaining knowledge to
accelerate its rollout of home entertainment products (DVD and video) to
township areas. Development costs have not been material.
3 FINANCIAL RESULTS
The group increased revenue by 8,8% to R1 004,2 million (2003: R923,2 million).
Group PBIT was up 37,6% to R182,5 million of which KFM contributed R18,6
million. Operating margins increased from 14,4% to 18,2% due to improvements in
both the advertising and filmed entertainment divisions, as well as the high
margins flowing from KFM.
Profit before exceptional items, amortisation and tax was up 22,4% to R155,4
million relative to last year, mainly due to the group`s increased PBIT. The
increase was offset by a higher net interest charge of R21,4 million (2003:
R11,2 million), in line with the group`s increased borrowings and also a R11,9
million adverse swing in foreign exchange movements. Interest cover remained
good at 8,1 times (2003: 13,8 times).
Group PBIT is stated after:
- An R8,6 million provision for a fair value loss in repect of an interest rate
swap entered into to fix an interest rate of 12,0% on R100 million of borrowings
for five years. In accordance with AC 133, this provision will be released to
income over the five-year period of the interest rate swap; and
- An R8,6 million gain arising from the write-up in the carrying value of Ster
Century Middle East pursuant to the imminent disposal thereof.
Other items that impacted on earnings for the six months included:
- An exceptional loss of R1,5 million versus last year`s exceptional gain of
R16,4 million;
- A higher effective tax rate of 30,4% versus last year`s 26,9%; and
- A significantly reduced level of minority interests following the purchase of
an additional 30,5% economic interest in 94.7 Highveld Stereo.
Group HEPS for the six months increased 34,4% from 32 cents to 43 cents.
Excluding unrealised foreign exchange gains or losses, HEPS increased by 46,7%
from 30 cents to 44 cents.
Free cash flow generation was up 92,6% to R111,2 million and overall debt levels
were well within bank covenants.
4 DIVISIONAL REVIEW
4.1 Advertising
The advertising businesses recorded a 24,8% growth in revenue to R467,4 million
and 33,1% growth in PBIT to R148,4 million. PBIT margins were a healthy 31,7%
(2003: 29,7%). These results include KFM, which contributed R32,0 million and
R18,6 million to revenue and PBIT respectively, at a PBIT margin of 58,3%.
Excluding the impact of KFM and Primedia Unlimited, which are consolidated into
the advertising division`s results, organic growth in revenue and PBIT was up
15,2% and 15,3% respectively and the PBIT margin was 29,7%, marginally up on
last year`s 29,5%.
Excellent results were posted by the broadcasting and internet, cinema and
print, and sports divisions.
4.2 Filmed Entertainment
The division produced very satisfactory results. Whilst revenue grew only by
3,2% to R506,2 million, PBIT grew 40,9% to R46,5 million. PBIT margins also
increased from 6,7% to 9,2%.
Notwithstanding a decline in attendances of 5,4%, Ster-Kinekor Theatres
delivered commendable results due to good operational performance.
In order to stimulate attendance growth, a strategic decision has been taken to
lower the ticket prices at a significant proportion of Ster-Kinekor`s South
African commercial cinemas. This initiative has gathered momentum following the
reduction in ticket prices at seven of Ster-Kinekor`s complexes, which has
demonstrated significant price elasticity with our middle income customers.
Ster-Kinekor Home Entertainment once again excelled due to good growth in all
divisions (rental, retail and Sony Playstation) and gross margin improvements.
The results would have been even better but for a world-wide stock shortage of
Sony Playstation 2 consoles in the peak December trading period. Following the
great success of Sony Playstation (consoles and games) as well as the emergence
of the electronic games industry as a major new global growth sector, it has
been decided to set up a new division, Ster-Kinekor Games, which will
incorporate the existing Sony Playstation business, but importantly focus on the
entire electronic games sector. In this regard, Ster-Kinekor Games has recently
secured the licence for Disney`s PC games, as a prelude to a greater focus on
the PC Games market. This initiative is expected to benefit the group in the
medium term.
A further highlight for this division has been the good inroads made into
fighting piracy following a massive media campaign and more effective policing
by the authorities.
4.3 One to One Marketing
The division`s results were disappointing with both The Database Group (UK) and
Knowledge Factory (SA) posting worse results relative to last year. Overall,
PBIT declined from R2,8 million to R0,2 million. Action plans have been
initiated to improve performance in the second half.
4.4 Central costs
Central costs increased by 14,8% to R12,4 million due to a provision for bonuses
of R2,5 million relating the group`s good performance for the six months. No
bonus provision was made at the interim date last year.
5 PROSPECTS
The group should continue to perform well in the second six months.
6 CASH DISTRIBUTION
The Board has, in terms of the general authority granted to directors at the
annual general meeting held on 26 January 2005, resolved to make a cash
distribution for the six months based on a cover of 2 times HEPS before
unrealised foreign exchange movements. Notice is hereby given that the company
will distribute out of share premium, in lieu of dividends, an amount of 22
cents per share (2003: 15,7 cents per share) for the six months period ended 31
December 2004. This represents an increase of 40,1% relative to the previous
interim period and will be payable to holders of ordinary and N shares recorded
in the books of the company on 24 March 2005.
Last day to trade `cum` the distribution Wednesday, 16 March 2005
Shares to commence trading `ex` the distribution Thursday, 17 March 2005
Record date Thursday, 24 March 2005
Payment date Tuesday, 29 March 2005
Share certificates may not be dematerialised or rematerialised between Thursday,
17 March 2005 and Thursday, 24 March 2005, 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 business, and its consolidated assets,
fairly valued, will exceed its consolidated liabilities.
7 BOARD OF DIRECTORS
The Board is pleased to announce the appointment of Mr Kaizer Motaung, Executive
Chairman of Kaizer Chiefs football club as a non-executive director with effect
from 25 February 2005.
AP NKUNA W KIRSH O IGHODARO
Chairman Chief Executive Chief Financial Officer
Johannesburg
1 March 2005
Directorate: AP Nkuna (Chairman) W Kirsh* (CE) MJ Bosman+ FA Gazendam* O
Ighodaro* (CFO) HM Khoza+ I Kirsh HM Madima P Maw K Motaung K Pillay* CS
Seabrooke+ BJT Shongwe+ SV Zilwa+ N Canca+
(* Executive directors + Independent non-executive directors)
Keshan Pillay (Alternate to AP Nkuna)
Company secretary: SE Sather
Registered office Transfer secretaries
6th Floor Primedia Place Computershare Investor Services 2004
5 Gwen Lane Sandown 2196 (Pty) Limited
70 Marshall Street
Johannesburg 2001
www.primedia.co.za
