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PMA PMAP PMN
PMA
PMA/PMN/PMAP - Primedia - Unaudited interim results for the six months
ended 31 December 2006
Primedia Limited
Incorporated in the Republic of South Africa
Registration number 1993/003355/06
Share code PMA & ISIN ZAE000035119
Share code PMN & ISIN ZAE000035127
Share code PMAP & ISIN ZAE000080529
("Primedia" or "the company" or "the group")
UNAUDITED INTERIM RESULTS
for the six months ended 31 December 2006
HIGHLIGHTS
Turnover up 10% to R1 410,0 million
EBITDA up 19% to R329,0 million*
EBITDA margin of 23,3% (2005: 21,6%)*
PBIT up 18% to R285,8 million*
PBIT margin of 20,3% (2005: 19,0%)*
Normalised HEPS up 16% to 73 cents
Cash generated by operations up by 54,4% to R148,1 million
Distribution per share up 25% to 50 cents**
* Before share option expense
** Subject to certain conditions
CONDENSED CONSOLIDATED INCOME STATEMENT
Restated Audited
6 months 6 months 12 months
Dec 2006 Dec 2005 % June 2006
R`000 R`000 change R`000
Revenue from 1 409 1 278 10 2 387 210
continuing operations 589 838
Operating profit 329 001 275 624 19 531 449
before depreciation
("EBITDA")
Depreciation and (43 164) (32 611) (70 412)
amortisation of
software
Operating profit 285 837 243 013 18 461 037
before amortisation of
other intangibles,
unrealised foreign
exchange and
exceptional items
("PBIT")
Share option expense (6 083) (4 353) (7 570)
Amortisation of other (2 698) (891) (4 045)
intangible assets
Net unrealised foreign (529) (7 734) (5 200)
exchange losses
Exceptional items (557) (96 330) (87 863)
Operating profit 275 970 133 705 106 356 359
Investment income 9 912 6 165 12 821
Finance costs (32 061) (30 204) (60 344)
Profit before tax 253 821 109 666 131 308 836
Income tax expense (76 590) (59 766) (102 055)
Profit from continuing 177 231 49 900 255 206 781
operations
(Loss)/profit from (123) (128) 204
discontinued operation
Net profit 177 108 49 772 256 206 985
Attributable to:
- Primedia Limited`s 166 946 36 211 182 177
ordinary shareholders
- Primedia Limited`s 6 619 - 1 629
preference
shareholders
- Minority interests 3 543 13 561 23 179
177 108 49 772 206 985
Earnings per share
attributable to
ordinary shareholders
(cents)
- Basic 73 16 81
- Diluted basic 71 16 78
Additional information
Determination of
headline earnings
Net profit 166 946 36 211 182 177
attributable to
ordinary shareholders
Net loss/(profit) on 27 (304) 105
disposal of property,
plant and equipment
Exceptional items: 557 (3 940) (10 594)
- Net profit on
disposal of assets
and investments (5 201) (4 483) (13 902)
- Impairment of assets 5 758 - 3 308
and investments
- Other - 543 -
Tax effect of non- - 36 1 688
headline earnings
items
Headline earnings 167 530 32 003 423 173 376
Number of shares
(`000)
- Issued 234 244 229 539 225 995
- Weighted average 229 020 223 316 225 891
- Diluted weighted 234 402 227 533 232 299
average
Earnings per share
attributable to
ordinary shareholders
(cents)
- Normalised basic* 73 65 12 129
- Normalised headline 73 63 16 125
earnings*
- Headline 73 14 421 77
- Diluted headline 71 14 407 75
Net asset value per 329 219 50 259
share (cents)
Distribution per share
(cents)
- Distribution to 45 34 32 74
ordinary shareholders
- Distribution to 317 - - -
preference
shareholders
Exceptional items
Headline reconciling (557) 3 940 10 594
items above
IFRS 2 expense - (108 (108 398)
relating to BEE 398)
ownership transaction
Reversal of loan - 5 513 4 700
impairments
Profit on disposal of - 2 615 4 430
listed investment and
intellectual property
Other - - 811
Gross exceptional (557) (96 330) (87 863)
items
* Adjusted for IFRS 2 costs of 49 cents per share relating to the group`s
BEE transaction in prior year
CONDENSED CONSOLIDATED BALANCE SHEET
Restated Audited
31 Dec 2006 31 Dec 2005 30 June 2006
R`000 R`000 R`000
Assets
Non-current assets 1 199 392 1 018 620 1 098 355
Property, plant and 342 125 311 116 315 724
equipment
Goodwill and 751 536 556 172 653 326
intangible assets
Investments and loans 6 671 24 196 12 361
Deferred tax asset 99 060 127 136 116 944
Current assets 812 209 716 889 579 085
Inventories 88 525 83 394 59 307
Trade and other 642 253 578 017 443 967
receivables
Bank balances and cash 81 431 44 820 60 740
Assets associated with - 10 658 15 071
discontinued operation
Total assets 2 011 601 1 735 509 1 677 440
Equity and liabilities
Shareholders` funds 769 567 502 117 584 841
Non-current 197 407 276 607 236 749
liabilities
Long-term borrowings 105 800 182 526 138 961
Long-term provisions 15 169 25 110 20 099
Deferred tax liability 76 438 68 971 77 689
Current liabilities 1 044 627 956 785 855 850
Trade, other payables 559 113 505 379 612 347
and provisions
Bank overdraft and 485 514 445 257 233 624
short-term borrowings
Liabilities associated - 6 149 9 879
with discontinued
operation
Total equity and 2 011 601 1 735 509 1 677 440
liabilities
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Audited
6 months 6 months 12 months
Dec 2006 Dec 2005 June 2006
R`000 R`000 R`000
OPERATING ACTIVITIES 54 664 25 205 363 092
Cash generated from 148 139 95 919 480 373
operations
Net interest paid (23 186) (23 074) (43 422)
Dividends paid to (830) - (94)
minorities
Tax paid (69 459) (47 640) (73 765)
INVESTING ACTIVITIES (139 619) (150 165) (189 401)
Net acquisition of (78 793) (113 448) (118 626)
subsidiaries and
investments
Net additions to (60 826) (36 717) (70 775)
property, plant,
equipment and software
FINANCING ACTIVITIES (113 847) (94 590) (233 706)
Distribution to (104 466) (75 387) (166 878)
ordinary shareholders
Preference dividend (4 755) - -
paid
Net proceeds from (11) (4 485) 138 762
share issues
Net 10 862 (31 650) (105 727)
disposal/(acquisition)
of shares by The
Primedia Share Trust
Net borrowings (15 477) 16 932 (99 863)
(repaid)/raised
Net decrease in cash (198 802) (219 550) (60 015)
and cash equivalents
Exchange rate (1 586) (2 075) 2 390
adjustments
Cash and cash (64 036) (6 411) (6 411)
equivalents at
beginning of period
Cash and cash (264 424) (228 036) (64 036)
equivalents at end of
period
GROUP STATEMENT OF CHANGES IN SHAREHOLDERS` EQUITY
Share Non- Share
capital distribut- based
and able payment
premium reserve reserve
R`000 R`000 R`000
Balance at 30 June 2005 274 717 256 784 8 034
Net (loss)/income (11 240) (1 965) -
recognised directly in
equity
Share issue expenses (11 240) - -
Recovery of share - (4 449) -
premium previously
written off
Increase in tax value - 555 -
of trademarks
previously written off
against share premium
Translation reserve - 1 929 -
movement
Net profit for the year - - -
Shares issued during 150 002 - -
the year
Distribution to (172 378) - -
shareholders
Distribution received 5 500 - -
by the Primedia Trust
Movement in treasury (35 679) (47 789) -
shares
Share option expense 4 031 - 3 335
BEE Ownership - - 108 398
Transaction
Acquisition of - - -
subsidiaries and
businesses
Minority interest - - -
acquired
Dividends declared to - - -
minorities
Balance at 30 June 2006 214 953 207 030 119 767
Net loss recognised (11) (6 527) -
directly in equity
Share issue expenses (11) - -
Translation reserve - (6 527) -
movement
Net profit for the - - -
period
Shares issued during 97 781 - -
the period
Distribution to (109 167) - -
shareholders
Distribution received 4 701 - -
by the Primedia Trust
Movement in treasury 40 161 (1 107) -
shares
Share option expense 5 552 - 496
Acquisition of - - -
subsidiaries and
businesses
Sale of minority - - -
interest
NDR transfer - 339 -
Dividends declared to - - -
preference shareholders
Balance at 31 December 253 970 199 735 120 263
2006
GROUP STATEMENT OF CHANGES IN SHAREHOLDERS` EQUITY
Accumu-
lated
(loss)/ Minority
profit interest Total
R`000 R`000 R`000
Balance at 30 June 2005 (128 093) 30 780 442 222
Net (loss)/income - 4 449 (8 756)
recognised directly in
equity
Share issue expenses - - (11 240)
Recovery of share premium - 4 449 -
previously written off
Increase in tax value of - - 555
trademarks previously
written off against share
premium
Translation reserve - - 1 929
movement
Net profit for the year 183 806 23 179 206 985
Shares issued during the - - 150 002
year
Distribution to - - (172 378)
shareholders
Distribution received by - - 5 500
the Primedia Trust
Movement in treasury (22 259) - (105 727)
shares
Share option expense - 204 7 570
BEE Ownership Transaction - - 108 398
Acquisition of - 3 755 3 755
subsidiaries and
businesses
Minority interest acquired - (51 836) (51 836)
Dividends declared to - (894) (894)
minorities
Balance at 30 June 2006 33 454 9 637 584 841
Net loss recognised - - (6 538)
directly in equity
Share issue expenses - - (11)
Translation reserve - - (6 527)
movement
Net profit for the period 173 565 3 543 177 108
Shares issued during the - - 97 781
period
Distribution to - - (109 167)
shareholders
Distribution received by - - 4 701
the Primedia Trust
Movement in treasury (28 192) - 10 862
shares
Share option expense - 35 6 083
Acquisition of - 9 144 9 144
subsidiaries and
businesses
Sale of minority interest - (493) (493)
NDR transfer - (339) -
Dividends declared to (4 755) - (4 755)
preference shareholders
Balance at 31 December 174 072 21 527 769 567
2006
Notes to the financial statements
Restated Restated
6 months 6 months 12
months
Dec 2006 Dec 2005 % June
2006
R`000 R`000 change R`000
SEGMENTAL ANALYSIS
REVENUE
Advertising 707 726 615 045 15 1 211
578
Content 701 701 663 474 6 1 175
433
Central 162 319 NM 199
Total from continuing 1 409 1 278 10 2 387
operations 589 838 210
EBITDA
Advertising 268 594 232 272 16 445 254
Content 74 531 60 022 24 115 544
Central (14 124) (16 670) 15 (29 348)
Total from continuing 329 001 275 624 19 531 449
operations
PBIT
Advertising 245 791 214 361 15 405 965
Content 54 624 46 059 19 85 310
Central (14 578) (17 407) 16 (30 238)
Total from continuing 285 837 243 013 18 461 037
operations
Audited
6 months 6 months 12
months
Dec 2006 Dec 2005 June
2006
R`000 R`000 R`000
CAPITAL EXPENDITURE,
COMMITMENTS AND
CONTINGENCIES
Future capital 70 875 49 291 108 104
commitments
Financial commitments 49 264 35 540 50 941
Future lease payments 354 242 311 293 343 040
472 536 396 124 502 085
Unindemnified 6 932 22 463 7 953
contingent liabilities
- Contingent 156 369 162 595 210 211
liabilities
- Indemnities received (149 437) (140 132) (202
258)
481 313 418 587 510 038
BASIS OF PRESENTATION
The condensed unaudited interim results have been prepared in accordance
with IAS 34 - Interim financial reporting. The accounting policies used in
preparation of these statements are consistent with those applied in the
annual financial statements for the year ended 30 June 2006, which are in
accordance with International Financial Reporting Standards ("IFRS"). For
segmental reporting purposes Primedia Unlimited and One to One, which were
previously disclosed separately, have now been included in the Advertising
and Content segments and as a result comparative figures have been
restated.
During the interim period the group disposed of The Database Group, which
is classified as a discontinued operation under IFRS 5, and accordingly
comparative figures have been restated.
COMMENTARY
1. OVERVIEW
Primedia is a leading diversified media group that owns some of the finest
media assets in South Africa. The group`s strategy, which has been
diligently implemented over the last six years, remains benchmarked against
the best media companies in the world and continues to serve shareholders
well.
2. STRATEGY
The board of Primedia continues to believe that the group`s strategy is
appropriate given the current structure and future prospects of the media
industry in South Africa. The key themes of this strategy include:
* Being the leading media owner in the "out of home" category;
* Capitalising on the opportunities created by digital technology;
* Securing a greater proportion of income from content-based media; and
* Enhancing the group`s prospects through collaboration between its
various media types.
In addition to the aforementioned, for the 2007 fiscal, the group codified
the following strategic priorities:
* Continued expansion through the Primedia Unlimited division;
* Proactive positioning for the 2010 FIFA World Cup;
* Unlocking the benefits from Ster-Kinekor Theatres` price reduction
strategy and efficiencies from its technology spend; and
* Building greater scale across selected business units.
Primedia Unlimited
During the period under review, Primedia Unlimited Advertising increased
its shareholding in Xprocure and Primall Media and concluded the purchase
of a 60% stake in Mamba Media. Mamba Media specialises in comic and
animation media through branded entertainment.
Primedia also announced the launch of Prime360Media intended to create one
of South Africa`s foremost digital media networks through the installation
of 650 eye catching digital formats at key points of presence across the
country, including airports and retailers. The first phase of this rollout
plan has now been completed following the installation of 150 units, and
the take-up by advertisers is gathering momentum.
Primedia Unlimited Content also made progress during the six months, with
the fulfilment of the conditions precedent in relation to Primedia`s
purchase of a 50,1% stake in eXactmobile, a leading mobile content operator
in South Africa.
Primedia Education has made outstanding progress during the period by
successfully establishing itself as a leading provider of DVD-based
educational content to major universities in South Africa.
Primedia Unlimited Content also launched the first Ster-Kinekor Movie Stop,
a 24-hour DVD store within store franchise concept which is in the process,
subject to further successful piloting, of being rolled out in one of the
major national service station chains. Initial results have been
encouraging.
Both Primedia Unlimited Advertising and Primedia Unlimited Content remain
active in pursuing additional acquisition opportunities.
2010 FIFA World Cup
Through Primedia Sport`s more recent acquisitions, namely Powerview
(renamed Megaview), which supplies digital advertising display boards at
sports stadia, and Warwick Sport & Media, a leading corporate hospitality
service provider, Primedia Sport is well positioned to benefit from this
event. Primedia Sport remains actively involved with global sponsors to
enhance their sponsorship activities within South Africa.
Ster-Kinekor Theatres
In line with the trends achieved in the latter half of the 2006 fiscal,
Ster-Kinekor Junction cinemas increased their revenue by 30,2% to R97,5
million in the six months to 31 December 2006. Overall revenue at Ster-
Kinekor Theatres was however only up 11% to R244,6 million due to negative
growth experienced by the higher priced Ster-Kinekor Classic chain.
Ster-Kinekor Theatres` profit before interest and tax (PBIT) was up 26% for
the six months, benefiting not only from the low cost ticket pricing
strategy but also from cost containment and efficiencies.
Building scale
Although the group has made strategic progress over the years, selected
businesses lack the scale to enable them to reap the rewards of operational
leverage. The group continues to focus on its six pronged growth strategy
to fulfil this objective.
3. RESULTS
Group revenue increased by 10% to R1,4 billion (2005: R1,3 billon). Given
the operating leverage inherent in the group, earnings before interest,
tax, depreciation and software amortisation (EBITDA) growth almost doubled
that of the growth in revenue, rising 19% to R329,0 million with EBITDA
margins rising from 21,6% to 23,3%.
PBIT before share option expenses was up 18% to R285,8 million (2005:
R243,0 million), with PBIT margins increasing from 19,0% to 20,3%.
Operating profit increased by 106% to R276,0 million (2005: R133,7 million)
due to the increase in PBIT as well as the IFRS 2 charge in 2005 of R108,4
million relating to the group`s BEE transaction.
Due to the group`s continued strong cash flow, net interest expense of
R22,1 million was marginally lower than the prior year of R24,0 million.
Interest cover remained a very high 12,9 times (2005: 10,1 times).
Profit before tax increased by 131% to R253,8 million (2005: R109,7
million).
Profit from continuing operations increased by 255% to R177,2 million
(2005: R49,9 million) due to the aforementioned, offset in part by a higher
tax rate and tax charge in the current year.
Normalised headline earnings per share was up 16% to 73 cents.
Headline earnings per share was up by 421% to 73 cents, due largely to the
once-off BEE charge (49 cents) expensed in the prior year.
Cash generated from operations increased by 54,4% to R148,1 million (2005:
R95,9 million). The group generates most of its cash flow in the second
half, and it is anticipated that, in line with prior periods, free cash
flow will approximate earnings for the full year.
Net borrowings over the six months increased from R282,6 million to R478,3
million. Following the seasonal peak in December, net debt has been reduced
in line with expectations. The group remains well within its debt
covenants.
Advertising
The advertising division recorded a 15% increase in revenue to R707,7
million (2005: R615,0 million) and a 15% increase in PBIT to R245,8 million
(2005: R214,4 million). PBIT margins remained essentially unchanged.
Primedia Broadcasting was once again the stellar performer with revenue
rising 22% to R280,8 million, PBIT increasing 28% to R169,8 million, and
PBIT margins increasing from 57,5% to 60,5%. Within the non-broadcasting
segment Primedia Outdoor and Primedia Sport fared well. The results of the
non-broadcasting businesses were however negatively impacted by the loss of
certain rights which had a PBIT impact of approximately R15 million in the
six months. Primedia Unlimited Advertising improved its contribution to the
division`s results with revenue increasing by 69% to R56,6 million (2005:
R33,4 million) and PBIT rising 22% from R6,4 million to R7,8 million.
Content
The content division posted a 6% increase in revenue to R701,7 million
(2005: R663,5 million) and a 19% increase in PBIT to R54,6 million (2005:
R46,0 million). PBIT margins increased from 7% to 8%. The filmed
entertainment division posted a 20% increase in PBIT to R36,0 million
(2005: R29,9 million) on the back of a very good performance by Ster-
Kinekor Theatres and a solid performance by Ster-Kinekor Home
Entertainment.
Facing increased competition, Ster-Kinekor Games posted a 31% decline in
PBIT to R13,0 million. Primedia Unlimited Content had a R13,3 million
positive swing in operating profits following the discontinuance of certain
businesses in the prior period as well as the first time inclusion of
Primedia Education and to a lesser extent eXactmobile.
4. PROSPECTS
Consistent with prior reporting periods, the group is likely to generate a
lower level of earnings in the second six months relative to the first six
months, although real earnings growth is anticipated for the full year.
5. PROPOSAL BY MIC/KIRSH CONSORTIUM
Shareholders are referred to the further cautionary announcement made on 8
February 2007, which advised that a consortium of investors, led by the
Mineworkers Investment Company (MIC) (Proprietary) Limited, Issie Kirsh and
William Kirsh (the MIC/Kirsh consortium) had submitted an in-principle
proposal to Primedia Limited`s board of directors to acquire the entire
issued share capital of Primedia based on a price of R25,50 for Primedia`s
ordinary shares and R24,50 for Primedia`s N ordinary shares. As contained
therein, it is anticipated that the submission of a firm intention to make
an offer that may arise from the proposal, if made, will be forthcoming by
the end of April 2007.
6. PERPETUAL PREFERENCE SHARES
Notice is hereby given that preference dividend No 2 of 459 cents for the
period ending 2 April 2007 (2006: Nil), has been declared and will be
payable to holders of non-redeemable, cumulative, non-participating
preference shares recorded in the books of the company on Friday, 30 March
2007 as follows:
* Last day to trade "cum" the dividend Friday, 23 March 2007
* Shares to commence trading "ex" the dividend Monday, 26 March 2007
* Record date Friday, 30 March 2007
* Payment will be made on Monday, 2 April 2007
Preference share certificates may not be rematerialised or dematerialised
during the period Monday, 26 March 2007 to Friday, 30 March 2007, both days
inclusive.
7. SHAREHOLDER DISTRIBUTIONS
In light of the anticipated offer from the MIC/Kirsh consortium, an interim
cash distribution for the six months ended 31 December 2006 will be made
only in the event that the MIC/Kirsh consortium does not submit a firm
intention to make an offer as referred to in paragraph 5 above.
Consequently, should Primedia be notified by the MIC/Kirsh consortium that
it does not intend to submit a firm intention to make an offer, it is
anticipated that an interim cash distribution out of share premium for the
six months ended 31 December 2006 of 50 cents per share (2005: 40 cents per
share), in lieu of dividends, will be awarded to ordinary and N ordinary
shareholders. The relevant authority to pay cash distributions out of share
premium had been obtained from the shareholders at the annual general
meeting held on 1 December 2006.
It is anticipated that the relevant dates regarding such distribution will
be announced within seven days of receipt of notification from the
MIC/Kirsh consortium that it does not intend to submit a firm intention to
make an offer.
8. DIRECTORATE
Primedia is very saddened to report that Mr Humphrey Khoza, an independent
non-executive director, passed away on 27 October 2006.
AP Nkuna W Kirsh O Ighodaro
Chairman Chief Chief Financial Officer
Executive
Sandton
7 March 2007
Directorate
Executive: W Kirsh (CE), O Ighodaro (CFO), FA Gazendam, M Lekota, K Pillay
Non-Executive: AP Nkuna (Chairman), I Kirsh, HM Madima, P Maw
Independent Non-Executive: MJ Bosman, N Canca, CS Seabrooke, BJT Shongwe,
SV Zilwa
Alternate: Keshan Pillay (alternate to AP Nkuna)
Company secretary: SE Sather
Registered office Transfer secretaries
6th Floor, Primedia Computershare Investor Services
Place, 5 Gwen Lane 2004 (Pty) Limited
Sandown 2196 70 Marshall Street, Johannesburg
2001
www.primedia.co.za
Date: 07/03/2007 07:14:56 Produced by the JSE SENS Department.
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