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Voluntary trading update for the six months ended 30 September 2012
TIMES MEDIA GROUP LIMITED
(formerly Richtrau No. 229 Proprietary Limited)
Incorporated in the Republic of South Africa
Registration number: 2008/009392/06
Share code: TMG
ISIN code: ZAE000169272
(Times Media Group or TMG or the Company)
VOLUNTARY TRADING UPDATE
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012
Shareholders are referred to the Avusa Limited (Avusa) finalisation
announcement released on SENS on 7 September 2012 setting out the
final terms of Times Media Groups acquisition of the entire issued
and to be issued ordinary share capital of Avusa (the Transaction).
The Transaction became effective on 25 September 2012, which resulted
in the resignation of the non-executive directors of the Avusa board
with effect from 30 September 2012. Accordingly, Times Media Group
took over operational and management control of Avusa and its
underlying operations from the beginning of October 2012. Times
Media Group constituted a newly-formed board of directors and has
begun the process of restructuring the Companys management team
and underlying businesses.
With Times Media Group, shareholders have the opportunity to invest
in one of South Africas leading integrated media and entertainment
companies and to partner with a strong management team focused on a
turnaround strategy.
Times Media Groups financial year end is 30 June. Accordingly,
the Companys interim financial results will cover the six months
to 31 December 2012. With Avusas final reporting before its
delisting being up to 31 March 2012, in the interest of continuity
of information, Times Media Group is pleased to provide a voluntary
trading update to shareholders on Avusas trading for the six months
ended September 2012.
Overview
Avusas revenue and profit from operations are set out below. Profit
from operations before exceptional items grew by 18% from R73 million
to R86 million compared to the prior year corresponding period. The
composition of some divisions has changed from the prior year. Details
of major operating entities making up the divisions are set out below.
Various exceptional items have been separately disclosed to better
reflect the trading results of the business and its divisions.
Media
The Media division includes the groups interests in newspapers,
magazines, out-of-home advertising and the digital businesses of
I-Net Bridge, Interactive Junction Holdings and Amorphous.
Despite trading conditions remaining difficult and volatile, the
media division reported significantly improved profits due to a
modest recovery in advertising revenues.
Newspapers recorded the strongest growth, with the Sunday Times and
dailies showing significant improvements. During the period under
review, we began moving our Gauteng printing from The Newspaper
Printing Company ("TNPC") to a third party. The transfer is scheduled
to be completed in the first quarter of calendar 2013, at which
point we will benefit from the full cost savings envisaged when we
decided to close down the TNPC printing plant (owned with Independent
News & Media South Africa). Despite market conditions remaining
extremely tough, circulation and readership of our titles remained
steady. The steep rise in fuel prices offset some of the gains made
in addressing our cost of sales, but we remain vigilant and continue
to seek innovations to keep costs under control. The mining strikes
have directly affected our recruitment advertising revenues, and we
expect this to continue in the short term.
Our magazine business benefited from cost-cutting measures introduced
in the previous reporting period. South African Homeowners circulation
returned to prior levels following a change in our distribution partner.
The contribution from the digital businesses was boosted by a greatly
improved performance of the Live websites. These are on the verge
of achieving break-even as a result of strict cost controls and
aggressive growth in advertising and content revenues.
Retail Solutions
The Retail Solutions division comprises Hirt & Carter and Uniprint.
Revenue growth was constrained by continuing weak economic conditions,
with price increases, where achieved, often below the rate of
inflation. Uniprints election-related revenue was disappointing as
a result of postponed elections in Guinea, turnover from Nigeria
being below expectation and other tenders for election work in Africa
not materialising. While pricing pressures, including the effect of
a weaker rand, have reduced operating margins, overheads have been
well contained. The combination of revenue limitations and rising
costs has led to the reduction in the divisions profit from
operations before exceptional items.
Retail Solutions point-of-sale offering has been restructured to
yield a central production unit with two strong selling teams
operating under the Uniprint and Hirt & Carter brands. The
restructuring will improve profits via streamlined selling and
production processes. The impairment of duplicated plant is
included in exceptional items.
Uniprints contract with Trudon to print telephone directories
for South Africa, terminates at the end of December 2012 and has
not been renewed.
Books
The Books division consists of book retail (Van Schaik Bookstore
and Exclusive Books), book and map publishing (Random House Struik,
Struik Christian Media, New Holland Publishers and Map Studio),
digital mapping (MapIT) and book logistics (Booksite Afrika and
Mega Digital).
The book retail businesses of Van Schaik Bookstore and Exclusive
Books performed well in a tough market. Revenue at Van Schaik
Bookstore, the academic book retail business, was boosted by non-
book product sales, increased bursary funding from government and
the continued move towards the use of bursary administrators which
benefits academic book retailers. Turnover at Exclusive Books, the
consumer book retail business, was marginally lower than the prior
year mainly due to the growing shift to e-books in the fiction
category. Exclusive Books increased its gross margin and improved
its operating efficiencies to reduce overheads.
Entertainment
The Entertainment division comprises Nu Metro (Films, Cinemas, Home
Entertainment and Popcorn Cinema Advertising), Gallo Music, Compact
Disc Technologies ("CDT"), Entertainment Logistics Services ("ELS")
and Associated Musical Distributors ("AMD").
The first six months of trading in the Entertainment division were
mixed in respect of results and performance. The business environment
remains volatile, making predictions and forecasting difficult. The
transition effects of format changes, digitisation and consumer
expectations continue to drive the remodelling and rejuvenation of
the business.
The film distribution business performed well on the back of strong
content, increasing video-on-demand ("VOD") revenues and robust cost
controls. Nu Metro Cinemas enjoyed good content and solid growth in
ticket prices and confectionary sales, offsetting reduced attendances.
Significant efforts continue to be made to reduce expenses and
improve operational efficiencies. Over 60 000 Movie Fanatics have
now signed up to the Fanatics loyalty programme run by Exclusive
Books. The Home Entertainment business experienced further margin
shrinkage and rental volume decline. Accordingly, management has
taken significant measures to again contain the shortfalls by
consolidating office space, further cost cuts, renegotiating studio
terms, improved marketing and implementing new channels to market.
The Music business has adopted a turnaround strategy to attract
new artists, drive frontline content and deliver efficiencies.
Exceptional items
The Media division increased its post-retirement medical aid
provisioning by R15 million.
A review of the carrying value of certain Retail Solutions
intangibles and plant indicated impairments of R30 million.
The Exclusives.co.za operating platform was fully impaired following
a review of the online business model.
The Entertainment division sold a non-core property at a R2 million
profit. A review of the customised SAP system developed for ELS and
AMD signalled that its sub-par performance required its carrying
value to be impaired in full. Further to its exit from the gaming
market, the Home Entertainment business wrote down the balance of
its gaming stock assessed as being unrecoverable.
Avusa incurred transaction costs of R10 million in connection with
the Times Media scheme of arrangement. These costs do not include
the costs incurred by Times Media Group in connection with the
transaction. Following implementation of the scheme, the
cancellation of Avusas share incentive plans resulted in an
accounting profit of R14 million.
Apart from the property sale proceeds and scheme of arrangement
costs, the exceptional items had no cash impact.
Directorate
The board is pleased to announce that Kuseni Dlamini has been
appointed as the permanent chairman of the Company, with immediate
effect. Accordingly, Mr Dlaminis status changes from independent
non-executive interim chairman to independent non-executive chairman.
The board has been further strengthened by the appointment of Mark
Basel as a non-executive director with immediate effect.
The board expects to make one further independent non-executive
director appointment in due course.
Outlook
Although the broader operating environment is anticipated to remain
challenging over the next 12 months, the management of Times Media
Group have instituted a number of structural changes. Management is
currently reviewing each business unit within the Group to determine
the most appropriate positioning of each operating company. Management
believe the turnaround will take time given the number of smaller
companies and the complexities involved in these various businesses.
A key area of focus of management will be the companys revenue and
operating margins and the reduction of debt.
The board of directors of Times Media Group believes the business is
appropriately capitalised and efficiently leveraged with sufficient
flexibility to support the Companys turnaround strategy. With a
diverse portfolio of assets, and a strong management team, the board
is confident the business is now well positioned to deliver on its
turnaround strategy.
Segmental analysis
Unaudited six months
ended 30 September
2012 2011
Rm Rm
Revenue 2 898 2 854
Profit from operations before
exceptional items 86 73
Exceptional items (70) 1
Profit from operations 16 74
Segmental revenue from external customers
Media 1 050 1 020
Retail Solutions 652 646
Books 690 659
Entertainment 506 529
2 898 2 854
Segmental profit from operations before
exceptional items
Media 57 47
Retail Solutions 70 89
Books 1 (12)
Entertainment (25) (30)
103 94
Corporate (18) (15)
85 79
Share-based payments 1 (6)
86 73
Segmental exceptional items
Media (15) -
Retail Solutions (30) -
Books (15) 28
Entertainment (19) -
Corporate (5) (21)
Share-based payments 14 (6)
(70) 1
The financial information on which this voluntary trading update is
based has not been reviewed, audited or reported on by the Companys
auditors.
K D Dlamini
Chairman
For and on behalf of the board
Rosebank
16 November 2012
Company secretary: J R Matisonn
E-mail: matisonnj@timesmedia.co.za
Directors: KD Dlamini (Chairman), AD Bonamour*, W Marshall-Smith*
(Financial director), MR Basel, J Hawinkels, HK Mehta, R Naidoo,
MSM Xayiya
*Executive
Address: 4 Biermann Avenue, Rosebank, 2196, Johannesburg
P O Box 1746, Saxonwold, 2132
Sponsor: PSG Capital
These results may be viewed on the internet at www.timesmedia.co.za
Date: 16/11/2012 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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