Wrap Text
Unaudited interim results for the period ended 31 December 2012
Kagiso Media Limited
Registration number: 1957/000036/06
Share code: KGM
ISIN: ZAE000014007
(“Kagiso Media”, “the group” or “the company”)
Unaudited interim results for the period ended 31 December 2012
- Revenue 56% increase in group revenue to R709,0m (2011: R455,3m)
- Core headline earnings 9% increase to R126,0m (2011: R115,3m)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Dec 2012 Dec 2011 June 2012
(Unaudited) (Unaudited) Change (Audited)
R000 R000 % R000
Continuing operations
Revenue 708 992 455 305 56 956 944
Operating profit 140 193 148 711 (6) 258 628
Profit before income tax 168 559 165 662 2 301 521
Income tax expense (44 283) (42 315) 5 (88 694)
Profit for the period from continuing operations 124 276 123 347 1 212 827
Discontinued operations
Profit after tax for the period from discontinued operations – 450 695 448 663
Profit arising from discontinuance of operations – – –
Profit for the period 124 276 574 042 (78) 661 490
Profit attributable to:
Equity holders 107 890 560 746 (81) 634 905
Non-controlling interest 16 386 13 296 23 26 585
124 276 574 042 661 490
Earnings per share attributable to equity holders of the company
during the period (expressed in cents):
Basic earnings per share
From continuing operations 80,6 82,3 (2) 139,2
From discontinued operations – 336,9 (100) 335,3
Total earnings per share 80,6 419,2 474,5
Diluted earnings per share
From continuing operations 80,5 82,1 (2) 139,0
From discontinued operations – 336,4 (100) 334,8
Total diluted earnings per share 80,5 418,5 473,8
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Dec 2012 Dec 2011 June 2012
(Unaudited) (Unaudited) (Audited)
R000 R000 R000
ASSETS
Non-current assets 953 368 638 454 916 595
Current assets 815 454 949 516 839 035
Total assets 1 768 822 1 587 970 1 755 630
EQUITY
Total equity 1 328 454 1 299 379 1 290 128
Liabilities
Non-current liabilities 122 259 77 432 124 379
Current liabilities 318 109 211 159 341 123
Total liabilities 440 368 288 591 465 502
Total equity and liabilities 1 768 822 1 587 970 1 755 630
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dec 2012 Dec 2011 June 2012
(Unaudited) (Unaudited) (Audited)
R000 R000 R000
Cash flow from operating activities 30 805 41 256 28 767
Cash flow from investing activities (72 738) 558 614 305 547
Cash flow from financing activities (14 390) (117 100) (117 251)
Total cash movement for the year (56 323) 482 770 217 063
Cash and cash equivalents at the end of the period 416 876 715 995 473 199
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months Six months Twelve months
ended ended ended
31 Dec 31 Dec 30 June
2012 2011 2012
(Unaudited) (Unaudited) (Audited)
R000 R000 R000
Equity at the beginning of the period 1 290 128 785 399 785 399
Total comprehensive income for the period 124 276 574 042 661 490
Transactions with non-controlling interests (10 115) – –
Non-controlling interests’ share of net assets acquired 61 – 1 693
Dividends paid (75 896) (60 062) (158 454)
1 328 454 1 299 379 1 290 128
RECONCILIATION OF HEADLINE EARNINGS
Six months Six months Twelve months
ended ended ended
31 Dec 31 Dec 30 June
2012 2011 2012
(Unaudited) (Unaudited) Change (Audited)
R000 R000 % R000
Profit for the period attributable
to equity holders 107 890 560 746 (81) 634 905
Adjusted for:
Profit arising from discontinuance
of operations – (450 695) –
Gain on disposal of investments – – (448 663)
Reversal of loan impairment – – (2 927)
Deemed gain on disposal of Kagiso Exhibitions and Events – – (2 443)
Headline earnings adjustment included in equity-accounted
earnings – – 81
Loss on disposal of property, plant and equipment – – 390
Headline earnings 107 890 110 051 (2) 181 343
Headline earnings per share
Headline earnings per share (cents) 80,6 82,3 (2) 135,5
Diluted headline earnings per share (cents) 80,5 82,1 (2) 135,3
Earnings per share – continuing operations
Earnings per share (cents) 80,6 82,3 (2) 139,2
Diluted earnings per share (cents) 80,5 82,1 (2) 139,0
Earnings per share – discontinued operations
Earnings per share (cents) – 336,9 (100) 335,3
Diluted earnings per share (cents) – 336,4 (100) 334,8
Shares used in calculations
Number of shares in issue ('000s) 133 792 133 792 133 792
Weighted average number of shares in issue ('000s) 133 792 133 792 133 792
Weighted average number of shares in issue for diluted
earnings per share ('000s) 134 008 133 983 134 008
SHARE CAPITAL
Share Share
Number capital premium Total
of shares R000 R000 R000
At the beginning and end of the period 133 791 854 1 338 14 510 15 848
CORE HEADLINE EARNINGS
Core headline earnings exclude once-off and non-operating items, after taxation and non-controlling interests’ share of profits. We believe that it
is a useful measure for shareholders of the group’s sustainable operating performance. However, this is not a defined term under IFRS and may not
be comparable with similarly titled measures reported by other companies.
Reconciliation of core headline earnings
Six months Six months Twelve months
ended ended ended
31 Dec 2012 31 Dec 2011 30 June 2012
(Unaudited) (Unaudited) Change (Unaudited)
R000 R000 % R000
Headline earnings 107 890 110 051 (2) 181 343
Adjusted for:
Amortisation of intangible assets acquired in business
combinations 5 713 5 236 8 298
Business combination related cost 3 385 56 889
Ex gratia payment 9 000 – –
Core headline earnings 125 988 115 343 9 190 530
Core headline earnings per share
Core headline earnings per share (cents) 94,2 86,2 9 142,4
Diluted core headline earnings per share (cents) 94,0 86,1 9 142,2
Segmental analysis of the six months ended 31 December
Contribution to core Percentage contribution to
headline earnings core headline earnings
2012 2011 2012 2011
R000 R000 % %
Corporate (15 622) (11 129) (12) (10)
Broadcasting 129 007 125 296 102 109
Information and Other 6 380 (4 246) 5 (4)
New Media 1 598 3 217 1 3
Content 4 625 2 205 4 2
Total 125 988 115 343 100 100
BUSINESS COMBINATIONS
Acquisition of Kaufman Levin Associates Proprietary Limited (“KLA”)
During the current financial period the group acquired an economic interest of 90% and an effective interest of 97,5% in KLA for a total purchase
price of R26 million. The purchase consideration was settled in cash from the group cash reserves.
On 5 September 2012, the acquisition date for financial reporting and consolidation purposes, the group obtained control over KLA, a market research
company located in Johannesburg that provides qualitative and quantitative initiatives on behalf of leading local and international clients.
Total
R000
Purchase consideration 26 008
Book value of net identifiable assets acquired* (2 422)
Non-controlling interest share of net assets acquired above on consolidation (2,5%) 61
Notional goodwill 23 647
* Relates to the book value of the net identifiable assets acquired in KLA. The fair value will be
determined upon finalisation of the purchase price allocation exercise.
Total purchase consideration 26 008
Cash and cash equivalents in the business acquired (3 078)
Cash outflow on acquisition of KLA 22 930
COMMENTARY
FINANCIAL REVIEW
General
The group delivered a satisfactory trading performance for the six months ended 31 December 2012, with revenue showing significant growth at
R709 million mainly due to the inclusion of Juta's results for the first time this period. Profit before tax for the period from continuing
operations grew by 2% to R168,6 million. The seasonality of Juta‘s operations is expected to have a positive impact on profits in the next
six months. The interim earnings per share (EPS) of 80,6 cents (2011: 82,3 cents) and headline earnings per share (HEPS) of 80,6 cents
(2011: 82,3 cents) were both 2% down on the comparable period, largely due to once-off expenses as detailed hereunder.
Core earnings per share were 94,2 cents for the interim period, an improvement of 9% against the comparable period (2011: 86,2 cents).
Associates
Associates delivered an after-tax share of results of R18,5 million, an increase of 30% as compared to the prior period (2011: R14,2 million).
The associates’ results were boosted by the strong performance of Kaya FM, which showed a 29% increase in profits compared to the prior year.
Acquisition of Kaufman Levin Associates
The acquisition of Kaufman Levin Associates (KLA) was concluded on 5 September 2012, resulting in the group acquiring a 90% interest in KLA for
a total purchase price of R26 million. The purchase consideration was settled in cash from the group cash reserves.
Non-controlling interests’ share of profits
Minorities owned 20% of Jacaranda 94.2 and 49,9% of Urban Brew Studios (UBS). During the period, the group increased its shareholding in Gloo
Digital Design and Knowledge Factory to 60% and 70%, respectively. The movement in the non-controlling interests’ share of profits reflects the
changes in the results of these business units.
OPERATIONAL REVIEW
During the period under review and in the comparative preceding period, revenue, operating profit/(loss) and profit/(loss) contribution per business
segment was as follows:
Segmental analysis for the six months ended 31 December
Revenue Operating profit/(loss) Profit/(loss)*
2012 2011 2012 2011 2012 2011
R000 R000 R000 R000 R000 R000
Corporate 491 997 (37 570) (12 400) (31 307) (11 185)
Broadcasting 346 973 305 217 161 261 155 577 129 490 120 817
Information and Other 174 845 17 034 528 (5 413) 3 765 446 426
New Media 54 479 38 072 5 364 5 871 1 527 3 008
Content 132 204 93 985 10 610 5 076 4 415 1 680
Total 708 922 455 305 140 193 148 711 107 890 560 746
* Attributable to equity holders of the company
The Broadcasting division saw revenue increasing by 14%. Overall, Kagiso Media stations grew at a faster rate than the industry and increased their
market share between July 2012 and September 2012. Industry performance for October to December will only be released in March 2013, therefore an
assessment of that period is not available at present. Operating profit growth was affected by a less favourable performance in December at Jacaranda,
as well as brand and investment costs, some of which were once-off costs. The measurement of audiences at both Jacaranda and East Coast Radio was
affected by changes in the population derived from projected census outcome, although both stations grew their core target markets in terms of market
share and volume.
UBS’s revenue grew 41% on the prior period (R94 million to R132,2 million) and operating profits doubled (R5,1 million to R10,6 million). Although
the operating margin increased it is still significantly below expectations. Revenue has been boosted by a steady flow of new productions, even though
delays in the renewal of certain contracts have had a negative impact on profitability margins. Investments were made towards servicing the management
agreements with two newly established Community TV stations. Furthermore, UBS developed its first telenovela, a venture that required new investment in
infrastructure and talent.
The focus for the remainder of the year for UBS is on securing a substantial pipeline to sustain significant revenue growth, while paying specific
attention to internal efficiencies and increasing facilities utilisation to grow operating margins. The appointment of a new UBS CEO towards the end
of 2012 will result in the strengthening of relationships with key customers and, over time, the development of owned content to create new revenue
streams from broadcast and licensing. This initiative will require an investment in the short term and anticipates new demand for content in the drama
genre in the coming three years.
The New Media division continues to enjoy exceptional revenue growth, up 43% from R38 million (2011) to R54,5 million (2012); however, operating profit
remains flat. This is due to ongoing investment in people, systems and marketing, to support the operations as they move from the early start-up stages
to the next stage of growth.
Revenue delivery of the Information and Other division is in line with expectations at R174,8 million, with Juta accounting for the bulk of this growth.
This business is a highly seasonal business and consequently profit delivery forecasted for the second half of the 2013 financial year is expected to be
higher than the profit for the first half of the financial year.
Corporate costs include an accrual for an ex gratia payment, as well as costs for the unsuccessful acquisition of Marc Group.
FINANCIAL POSITION
Working capital
The Juta acquisition has markedly influenced the December working capital levels of the group, making year-on-year comparisons difficult. Our accounts
receivable ageing is well within target ranges, and a dispute with a large broadcaster was resolved and settled in the last quarter of 2012.
Cash flow
The cash generated from operations increased by 15% to R167,5 million (2011: R145,7 million), largely driven by the Broadcasting division. The group maintains
a healthy cash balance of R416,9 million.
REGULATORY MATTERS
In May 2012, the Copyright Tribunal ruled that the Needletime levy will amount to 7% of net broadcasting revenue and that individual station contributions will be
determined by a pre-determined formula. While all broadcasters support the principle of the levy, there is a difference of opinion between collection agencies and
the broadcasters on how this levy should be calculated (the formula). The radio industry unanimously agreed to appeal against the ruling of the tribunal.
RESIGNATION OF CHIEF EXECUTIVE
Murphy Morobe will be stepping down as the Chief Executive of the group. He will work with the board of directors of the company to find a suitable successor
and will continue to act in the capacity of Chief Executive until the earlier of 30 June 2013 or the appointment of his successor.
INTERIM DIVIDEND DECLARATION
It is the group’s policy to return 50% of its headline earnings for the year to shareholders. Given the consistent cash conversion ability of the group,
the company would pay a dividend of 45 cents per share (41 cents in the prior year).
Notice is hereby given that a gross interim dividend of 45 cents (2011: 41 cents) per share has been declared in respect of the six months ended 31 December 2012
and is payable to holders of ordinary shares recorded on the register of the company on Friday 22 March 2013. The number of shares in issue at the date of this
declaration is 133 791 854. There are no STC credits to be utilised and the net interim dividend after 15% withholding tax for shareholders who are not exempt
from the dividend tax will be 38,25 cents.
Kagiso Media Limited's tax reference number is 9638003716.
The following salient dates apply to this dividend:
Last day of trade cum dividend Thursday 14 March 2013
Shares commence trading ex dividend Friday 15 March 2013
Record date Friday 22 March 2013
Payment of dividend Monday 25 March 2013
Share certificates may not be dematerialised or rematerialised between Friday 15 March 2013 and Friday 22 March 2013, 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.
BASIS OF PREPARATION
The group, under the direction of the Finance Director Mervyn van Zyl (CGMA, FCMA, ACIS), has prepared condensed consolidated interim financial statements for
the six months ended 31 December 2012 in accordance with IAS 34 “Interim Financial Reporting” and in compliance with the Listing Requirements of the JSE Limited
and the South African Companies Act. The unaudited condensed interim financial report should be read in conjunction with the annual financial statements for the
year ended 30 June 2012. The interim results have not been audited or reviewed by the group’s auditors.
SEASONALITY OF INTERIM RESULTS
The Information and Other segment is subject to seasonal fluctuations, where revenue is higher in the second half of the financial year, which positively influence
the profit delivery of this division in the second half of the year.
ACCOUNTING POLICIES
The accounting policies and methods of computation are consistent with those of the annual financial statements for the year ended 30 June 2012, as described therein.
COMMITMENTS AND CONTINGENT LIABILITIES
The commitments and contingent liabilities, as reported in the 2012 annual financial statements, remain applicable.
PROSPECTS
The South African economy remains in a low growth cycle, and we are anticipating a continued slowdown in economic growth in the coming months. Notwithstanding this,
trading conditions for the group should prove resilient in the coming months, given that most of our operations trade in relatively mature markets.
The group’s profit will benefit significantly from the inclusion of Juta for the remaining six months of the 2013 financial year. We anticipate a consistent
performance from the Broadcasting division, with consumer spend holding firm.
The outlook for New Media is in line with expectations and remains positive. Our partner, Microsoft, has approved expansion plans to East and West Africa, and the MSN
Africa portals are planned to go live in July 2013.
EVENTS AFTER THE REPORTING DATE
The directors are not aware of any matter of circumstance arising since the end of the financial period that would affect the operations of the group or the results
of those operations significantly.
On behalf of the board
RM Motanyane M Morobe
Chairperson Chief Executive
Johannesburg
28 February 2013
Registered office: 1st Floor, Kagiso Tiso House, 100 West Street, Wierda Valley, Sandton, 2196 (PO Box 653160, Benmore Gardens, 2010)
Transfer secretaries: Link Market Services South Africa Proprietary Limited, 13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein, 2001 (PO Box 4844, Johannesburg, 2000)
Sponsor: Investec Bank Limited Directors: RM Motanyane (Chairperson)#, M Morobe (Chief Executive)*, MR van Zyl (Financial Director)*, HI Appelbaum, WB Cosby, OC Essack*,
FF Gillion, JB Hinson, AA Paruk#, WC Ross#, M Vilakazi# * Executive # Independent Company secretary: DS Mtshali
Also available at: www.kagisomedia.co.za
Date: 28/02/2013 07:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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