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KGM - Kagiso Media Limited - Audited results and dividend declaration for the
year ended 30 June 2011 and further Cautionary announcement.
Kagiso Media Limited
(Registration number 1957/000036/06)
("Kagiso Media" "the group" or "the company")
Share code: KGM ISIN: ZAE000014007
AUDITED RESULTS AND DIVIDEND DECLARATION FOR THE YEAR ENDED 30 JUNE 2011
Revenue with LexisNexis deconsolidated up 12.1%
Headline earnings per share up 11.9%
Final dividend of 38 cents per share
Condensed consolidated statement of comprehensive income
Year ended Year ended
30 June 30 June
2011 2010
(Audited) (Audited) Chang
e
(R`000) (R`000) %
Continuing operations
Revenue 789 171 703 699 12%
Other income 20 829 18 636
Raw material and consumables (98 494) (103 658)
Commission and levies (123 652) (119 085)
Employee costs (169 283) (103 387)
Depreciation and amortisation (34 756) (33 925)
Operating and other expenses (131 801) (116 172)
Operating profit 252 014 246 108 2%
Net finance income/(expenses) 7 093 (2 407)
Share of results of associates 12 053 10 988
Profit before income tax 271 160 254 689 6%
Income tax expense (82 287) (86 371)
Profit for the year from 188 873 168 318 12%
continuing operations
Discontinued operations
Profit for the year from 45 327 59 677
discontinued operations
Profit for the year 234 200 227 995 3%
Other comprehensive income - -
Total comprehensive income for 234 200 227 995 3%
the year
Profit attributable to:
Equity holders 203 586 199 695 2%
Non-controlling interest 30 614 28 300 8%
234 200 227 995 3%
Total comprehensive income
attributable to:
Equity holders 203 586 199 695 2%
Non-controlling interest 30 614 28 300 8%
234 200 227 995 3%
Earnings per share from
continuing and discontinued
operations attributable to the
equity holders during the year
(expressed in cents):
Basic earnings per share
From continuing operations 118.3 104.7 13%
From discontinued operations 33.9 44.6 -24%
152.2 149.3 2%
Diluted earnings per share
From continuing operations 118.1 104.5 13%
From discontinued operations 33.8 44.5 -24%
151.9 149.0 2%
Condensed consolidated statement of financial position
as at 30 June
2011 2010
(Audited) (Audited)
R`000 R`000
Assets
Non-current assets 615 684 591 842
Property, plant and equipment, 497 275 511 818
intangible assets and goodwill
Investment in associates 104 462 59 169
Other non-current assets 13 947 20 855
Current assets 465 170 540 585
Cash and cash equivalents 233 225 274 219
Other current assets 231 945 266 366
Assets classified as held-for-sale 143 561 -
Total assets 1 224 415 1 132 427
Total equity 785 399 715 207
Non-current liabilities 83 083 210 610
Borrowings 4 558 128 118
Other non-current liabilities 78 525 82 492
Current liabilities 294 127 206 610
Borrowings 123 450 30 897
Other current liabilities 170 677 175 713
Liabilities directly associated with 61 806 -
assets classified as held-for-sale
Total equity and liabilities 1 224 415 1 132 427
Condensed consolidated statement of changes in equity
Year ended Year ended
30 June 30 June
2011 2010
(Audited) (Audited)
(R`000) (R`000)
Equity at the beginning of the year 715 207 588 370
Total comprehensive income for the year 234 200 227 995
Employee share option scheme: value of (542) 70
services provided
Non-controlling interest share of 5 580 -
acquisition net assets
Non controlling interest transferred on - (1 412)
disposal of net assets
Dividends paid (169 046) (99 816)
Equity at end of the year 785 399 715 207
Condensed consolidated statement of cash flows
Year ended Year ended
30 June 30 June
2011 2010
(Audited) (Audited)
(R`000) (R`000)
Net cash generated from operating 106 059 119 870
activities
Net cash used/generated in investing (87 523) 43 006
activities
Net cash used in financing activities (36 619) (67 703)
Net movement in cash and cash (18 083) 95 173
equivalents
Cash and cash equivalents at the 274 219 173 427
beginning of the year
Cash and cash equivalents classified as (22 911) 5 619
asset held-for-sale
Cash and cash equivalents at end of the 233 225 274 219
year
CAPITAL EXPENDITURE
Tangible Intangible Goodwill*
(R`000) assets assets
Year ended 30 June 2011
Opening net carrying amount 42 136 299 605 170 077
Additions 23 944 2 888 -
Acquired from business 6 776 21 949 9 635
combinations
Reclassified as held-for-sale (6 883) (19 556) (8 166)
Disposals (411) - -
Discontinued operations (2 133) (4 709) -
Depreciation and amortisation (11 897) (22 859) -
Other movements (62) 62 (3 121)
Closing net carrying amount 51 470 277 380 168 425
Year ended 30 June 2010
Opening net carrying amount 42 731 322 123 185 896
Additions 15 994 4 287 -
Disposals (1 482) (767) (944)
Discontinued operations (2 491) (4 729) -
Depreciation and amortisation (12 620) (21 305) -
Other movements 4 (4) (14 875)
Closing net carrying amount 42 136 299 605 170 077
* - Includes an accumulated impairment balance of R9.3 million as
at 30 June 2011 (2010 - R9.3 million).
Capital expenditure commitments
The future minimum capital commitments within the following 12 months which have
been approved by the board of directors, but not contracted for as at the
balance sheet date and not recognised in the financial statements are as
follows:
Year ended 30 June 2011 63 000 7 000
Year ended 30 June 2010 21 365 2 558
These commitments will be funded from internal sources.
Other commitments
The future aggregate minimum lease payments
under non-cancellable operating leases are as
follows:
- not later than one year 20 351 20 223
- later than one year and not later than five 26 311 30 444
years
- later than five years 1 009 109
Total future cash flow 47 671 50 776
Contingent Liabilities
Amount outstanding under bank facilities of a - 700
previous subsidiary, System Publishers
(Proprietary) Limited.
COMMENTARY
Financial review
LexisNexis - see detail in paragraph 10 below
Subsequent to year-end the Board accepted an offer for the disposal of its 50%
interest in LexisNexis (Proprietary) Limited. This investment was previously
treated as a joint venture and proportionately consolidated. In the current
year, it is accounted for as a non-current asset held for sale. This adjustment
has affected a number of the line items reported in the statement of
comprehensive income and needs to be considered when making comparisons to the
previous financial year. Refer to Section 4 - Discontinued Operations for
further information.
General
Headline earnings per share increased by 11.9% for the year ended 30 June 2011
to 153.1 cents (2010: 136.8 cents,). Dividends declared to equity shareholders
grew by 10.0 % to 88 cents (2010: 80 cents).
Revenue
Total revenue (excluding LexisNexis R 212.2 million) increased by 12 % to R789.2
million for the year ended 30 June 2011, this growth being driven primarily by
the New Media and Content segments.
Operational review
During the year under review and in the comparative year, the results of
operations, revenue and profit/ (loss) per business segment were as follows:
Segmental analysis of the year ended 30 June
Revenue Operating
profit/(loss)*
(R`000) 2011 2010 2011 2010
Broadcasting 486 103 472 430 226 071 235 634
Information and other 27 223 37 675 4 714 10 821
New Media 84 142 37 689 19 450 9 663
Content 189 815 153 650 33 899 25 007
Corporate 1 888 2 255 (32 120) (35 017)
Total 789 171 703 699 252 014 246 108
*Attributable to equity holders of the company
**Excludes income tax and deferred income tax assets
Segmental analysis of the year ended 30 June
Profit/(loss)* Total Assets **
(R`000) 2011 2010 2011 2010
Broadcasting 157 855 171 140 671 597 622 438
Information and other 50 882 51 747 247 641 221 284
New Media 10 587 3 460 45 925 37 514
Content 9 636 9 482 167 500 181 849
Corporate (25 (36 56 630 47 203
374) 134)
Total 203 586 199 695 1 189 1 110
293 288
*Attributable to equity holders of the company
**Excludes income tax and deferred income tax assets
Broadcasting revenue of R486.1 million although higher than the previous year
was below management`s expectations. The Broadcasting segment experienced a very
slow start to the year post the 2010 FIFA World Cup. Customers delayed their
advertising spend for several reasons with the most common being overspending
during the FIFA World Cup tournament and the consequent repositioning of their
media spend. Fortunately the segments fourth quarter revenues were instrumental
in delivering the marginal positive growth for the year.
The results of the Information and Other segment were disappointing. This was
largely due to tough market conditions which persisted, particularly in the Risk
division of the business. In addition, the Africa business has scaled back,
substantially as a result of the more stringent payment conditions imposed by
the group to manage its credit exposure to clients in the region.
The Content segment which includes Urban Brew Studios (UBS) performed well,
delivering revenue of R189.8 million which is up 23.5% on the prior year. The
growth in revenue at UBS was driven largely by new production commissions from
Mnet channels. The flow of production commissions from SABC has positively
influenced the results.
The New Media segment delivered outstanding results for the year under review
with revenue amounting to R84.1 million which represents an increase of 123%
from the 2010 financial year. Gloo was awarded a large parastatal contract which
contributed significantly to the growth. The results also include the first
year`s revenue for Howzit.msn portal which was launched in August 2010.
The group reported an increase of 2.4 % in operating profit to R252.0 million
(2010: R246.1 million). The two big profit contributing segments Broadcasting
and Information had challenging years, the return to positive profit growth for
Broadcasting is anticipated for 2012.
The trading environment remained extremely challenging for the Broadcasting
segment, characterised by heightened competition to secure revenue which
resulted in increased discounting in the market. The Group maintained its policy
of implementing wide-ranging cost management initiatives particularly in this
segment to protect its operating margins.
Operating profit for the Information and Other segment including LexisNexis SA
increased by 5.2% to R71.7 million (2010: R68.2 million). The results were
positively impacted by LexisNexis with 16.3 % profit growth, which included a
write back of R3 million for Government debt which was collected in the year
under review. Mobil Alliance results were on target but down on 2010 where the
business benefited significantly from the FIFA 2010 World Cup. The acquisition
of Knowledge Factory in November 2010 negatively impacted results with once-off
integration costs incurred in the 2011 financial year.
The New Media segment delivered sound operating profit growth of R19.5 million
(2010: R9.7 million) which was well ahead of expectation. Gloo recorded yet
another year of excellent profit delivery, whilst our investment in the msn
portal which was forecast to be earnings dilutive, broke even for the year.
The Content segment reported a 35.6% increase in operating profit to R33.9
million largely due to the additional commissions won by the business from new
customers. As mentioned earlier in the report UBS was also able to report that
the deal flow from SABC improved significantly against the 2010 year, which
improved the productivity recovery rates.
Reconciliation of headline earnings
Year ended Year ended
30 June 30 June
2011 2010
(Audited) (Audited)
(R`000) (R`000)
Profit for the period attributable to 203 586 199 695
equity holders
Loss on disposal of investment 1 128 -
Profit arising from discontinuance of - (17 521)
operations
Loss on disposal of intangible assets - 767
Loss on disposal of property, plant and 79 85
equipment
Headline earnings 204 793 183 026
Headline earnings per share 153.1 136.8
Diluted headline earnings per share 152.8 136.6
Earnings per share - continuing
operations
Earnings per share (cents) 118.3 104.7
Diluted earnings per share (cents) 118.1 104.5
Earnings per share - discontinued
operations
Earnings per share (cents) 33.9 44.6
Diluted earnings per share (cents) 33.8 44.5
Shares used in calculations
Number of shares in issue (`000s) 133 792 133 792
Weighted average number of shares in 133 792 133 792
issue (`000s)
Weighted average number of shares in 134 000 133 983
issue for diluted earnings per share
(`000s)
Finance income and expenses
In the year under review the group earned interest of R15 million (2010: R13
million) on its surplus cash. A dividend of R8.5 million (2010: R14 million) was
paid by Kagiso Media Investments (Proprietary) Limited on the preference shares
in issue during the year.
Associates
The group`s after tax share of results of associates amounted to R12.1 million
(2010: R10.9 million). This consists of Kagiso Media`s holdings in OFM, Heart
104.9, Gagasi 99.5 and Kaya FM.
Taxation
The effective tax rate decreased from 33.9% to 30.4% for the year under review.
Cash flow
Cash generated from operations increased by R37.2 million or 10.9% from R340.4
million in 2010 to R377.6 million in the year under review. Trade receivables
reduced from R237.2 million to R205.5 million, due partly to the non-current
assets held for sale. This also impacted accounts payable which decreased to
R149.9 million for 2011 from R168.3 million in the prior year.
Borrowings
At 30 June 2011, the group`s long-term borrowings were settled down to R4.6
million (2010: R128.1 million) in respect of the preference shares maturing in
November 2011. During the year under review the group used internal cash
resources to redeem preference shares valued at R19.9 million.
3. Business Combinations
Information and Other
Kagiso Media, through its wholly owned subsidiary Kagiso Media Investments,
purchased the assets and liabilities of Knowledge Factory from Primedia for a
purchase consideration of R20.0 million, and formed a company Kagiso E-props to
house this business. Concurrent with this acquisition, Kagiso E-Props acquired
certain assets, liabilities and intellectual property relating to the Mint owned
property business for 35% of the equity of Kagiso E-Props. The effective date of
the transaction was 1 November 2010.
Details of net assets acquired and goodwill are:
2011
R`000
Purchase consideration 20 001
Fair value of net identifiable assets acquired (see (10
below) 362)
Goodwill 9 639
The goodwill is attributable to the future benefits of Kagiso Media`s
diversification into information services attached thereto.
The net assets arising from the acquisition are:
R`000 Knowledge PDG Total
Factory
Net assets acquired 11 293 4 649 15 942
Minorities share of net assets (5 580)
acquired above on consolidation
(35%)
Kagiso Media`s interest in the fair 10 362
value of net assets acquired
Broadcasting
Kagiso Media, through its wholly owned subsidiary, Kagiso Broadcasting purchased
a 49.9% stake in Shanike Investments No.42 (Proprietary) Limited for a total
cash consideration of R62.5 million. Shanike has a direct shareholding of 24.9%
in Kaya FM, a popular radio broadcaster in the Gauteng region. This transaction
enabled Kagiso Media to acquire the total 24.9% economic interest in Kaya FM
held by Shanike. The effective date of this transaction was 3 June 2011.
The details of the net assets acquired and notional goodwill are:
2011
R`000
Purchase consideration 62 500
Carrying amount of net identifiable assets acquired* (3 863)
Notional goodwill recognised in investments in 58 637
associates
* Relates to the carrying amount of the net identifiable assets
acquired in Kaya FM. The fair value will be determined upon
finalisation of the fair value exercise.
Kagiso Media Investments, a wholly owned subsidiary of Kagiso Media, disposed of
13.33% of its interest in MRC Media, consisting of investments held in Radio
Heart 104.9 and Radio Gagasi 99.5. This diluted Kagiso Media`s interest from
33.33% to 20.02%. The effective date of the sale was 3 June 2011.
Details of the net assets disposed of and group loss recognised are as follows:
2011
R`000
Carrying value on date of disposal 30 753
Carrying value of portion disposed of 12 264
Group loss on disposal (1 128)
Proceeds on disposal of investment 11 136
4. Discontinued Operations
Subsequent to year end the Board accepted an offer for the disposal of its 50%
interest in LexisNexis. The net assets of LexisNexis held for sale at 30 June
2011 were R81.8 million.
30 June 2011 30 June 2010
(Audited) (Restated)
(R`000) (R`000)
The results of the discontinued
operations for the year are as
follows:
Revenue and other income 212 167 207 695
Profit before income tax 67 671 80 793
Income tax expense (22 344) (21 116)
Profit for the year from discontinued 45 327 59 677
operations
The results of the discontinued operations for the year are as follows:
The net cash flows incurred by the discontinued operations are as follows:
Operating cash flow 15 572 1 789
Investing cash flow (5 661) (1 112)
Financing cash flow - 37
Net increase in cash and cash 9 911 714
equivalents from discontinued
operations
5. Black economic empowerment
Kagiso Media is rated a Level 2 contributor by the National Empowerment Rating
Agency, the company`s highest rating in terms of the Department of Trade and
Industry BBBEE Codes. Work in the next year will be focused on further improving
the BBBEE rating of Kagiso Media and its associates and joint ventures. The
annual verification is currently underway.
6. Dividend declaration
During October 2010, the company paid a final dividend of 35 cents amounting to
R46.8 million which together with an interim dividend of 35 cents and a special
dividend of 10 cents per share totalled 80 cents for 2010. In March 2011 the
company paid an interim dividend of 50 cents per share. A final dividend in
respect of the year to 30 June 2011 of 38 cents per share amounting to R50.84
million has been declared by the board, payable on 17 October 2011.
The following salient dates apply to this dividend:
Last date to trade cum-dividend Friday, 7 October 2011
Shares commence trading ex-dividend Monday, 10 October 2011
Record date Friday, 14 October 2011
Payment of the dividend Monday, 17 October 2011
Share certificates may not be dematerialised or rematerialised between Monday,
10 October 2011 and Friday, 14 October 2011, 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.
7. Basis of preparation
The condensed consolidated financial information was prepared in accordance with
International Financial Reporting Standards ("IFRS"), the presentation and
disclosure requirements of IAS 34 - Interim Financial Reporting, the AC 500
standards as issued by the Accounting Practice Board and its successors, the
listings requirements of the JSE Limited and the requirements of the South
African Companies Act, 71 of 2008, on a basis consistent with the prior year.
8. Accounting policies
The accounting policies adopted are consistent with those of the annual
financial statements as at 30 June 2011, as described in the annual financial
statements. During the year under review, the group adopted all the IFRS and
Interpretations that were effective and deemed applicable to the group. None of
these had a material impact on the results of the group.
As a result of the discontinued operations in the current year, the comparative
information in the statement of comprehensive income has been re-presented.
9. Independent audit by the auditors
The condensed consolidated results have been audited by our auditors,
PricewaterhouseCoopers Inc. who have performed their audit in accordance with
International Standards on Auditing. A copy of their unqualified audit report is
available for inspection at the registered office of the company.
10. Post balance sheet events - Further cautionary
Kagiso Media, as detailed in a further cautionary announcement released on SENS
on 22 September 2011 and to be published in the press on 23 September 2011, has
accepted an offer to sell its shares and claims in LexisNexis (Proprietary)
Limited for the sum of R 565 million. The transaction is subject to the
completion of a due diligence exercise, regulatory approvals and the
finalisation of the sale of shares agreement. It is intended that prior to 30
September 2011, LexisNexis (Proprietary) Limited would declare and pay a
dividend to its current shareholders of R53.9 million, from the company`s
current distributable reserves.
The completion date for the transaction is anticipated to be the 30th October
2011.
11. Prospects
The group is seeing signs of improving trading conditions and recent trends in
advertising spend indicate a return to normal, and should deliver growth on 2011
provided the current economic trends prevail. The New Media segment remains well
positioned to show good growth once again for 2012. Production commissions are
returning to 2009 levels and together with the additional new business the
Content segment should deliver growth in 2012. With the cash from the LexisNexis
disposal the company is considering acquisitions which will deliver the
company`s revenue diversification strategy and meet the profit and cash
objectives of Kagiso Media.
On behalf of the board
RM Motanyane M Morobe
Chairperson Chief executive
22 September 2011
Registered office: 1st Floor, Kagiso House, 16 Fricker Road, Illovo Boulevard,
Illovo, 2196
Transfer secretaries: Link Market Services South Africa (Proprietary) Limited,
13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein, 2001 (PO Box 4844,
Marshalltown, 2000)
Sponsor: Investec Bank Limited
Directors: RM Motanyane (Chairperson)#, M Morobe* (Chief Executive), MR van
Zyl*(Financial Director), HI Appelbaum,
OC Essack*, FF Gillion, RL Hiemstra#, ZJ Matlala, KL Matseke,
AA Paruk#, A Patel, WC Ross#, M Vilakazi#,
*Executive #Independent
Company secretary: DS Mtshali
Also available at: www.kagisomedia.co.za
Date: 22/09/2011 16:42:01 Supplied by www.sharenet.co.za
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