To view the PDF file, sign up for a MySharenet subscription.

CAXTON CTP PUBLISHERS & PRINTERS LD - Reviewed Results for the year ended 30 June 2013

Release Date: 28/08/2013 17:06
Code(s): CAT CATP
Wrap Text
Reviewed Results for the year ended 30 June 2013

CAXTON & CTP LIMITED
publishers & printers
Incorporated in the Republic of South Africa
Registration number: 1947/026616/06
Share code: CAT       ISIN: ZAE000043345
Preference share code: CATP       ISIN: ZAE000043352                             

REVIEWED RESULTS FOR THE YEAR ENDED 30 JUNE 2013

PROVISIONAL CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                                                                            Reviewed                   Audited
                                                                        for the year              for the year
                                                            %             to 30 June                to 30 June
R'000                                                   change                  2013                      2012
Turnover                                                   7,0             5 156 911                 4 819 103
Other operating income                                                        95 561                    85 075
                                                                           5 252 472                 4 904 178
Changes in inventories of finished goods and
 work in progress                                                             73 447                    35 260
Raw materials and consumables used                                         1 881 947                 1 743 398
Staff costs                                                                1 120 841                 1 022 402
Other operating expenses                                                   1 338 780                 1 356 490
Total operating expenses                                   6,2             4 415 015                 4 157 550
PROFIT FROM OPERATING ACTIVITIES                          12,2               837 457                   746 628
Depreciation                                                                 241 592                   226 516
PROFIT FROM OPERATING ACTIVITIES
 AFTER DEPRECIATION                                       14,6               595 865                   520 112
Impairment of plant and goodwill                                              37 003                    25 072
NET PROFIT FROM OPERATING ACTIVITIES                      12,9               558 862                   495 040
Net finance income                                         (6,3)             104 579                   111 650
-   dividends                                                                 59 445                   40 363
-   interest                                                                  44 778                   67 912
-   loss on realisation of investments                                          (668)                      (9)
-   net profit on currency hedges                                              1 024                    3 384
Income from associates                                   (14,0)               22 410                   26 073
PROFIT BEFORE TAXATION                                     8,4               685 851                  632 765
Income tax expense                                                           183 043                  190 640
PROFIT FOR THE YEAR                                       13,7               502 808                  442 125
Other comprehensive income:                               20,0               122 734                  102 247
Items that will not be reclassified subsequently
to profit or loss
Fair value adjustment - land and buildings                                         -                   54 294
Items that will be reclassified subsequently
  to profit or loss
Fair value adjustment - investments and preference
  shares net of deferred tax - attributable to owners
  of the company                                                             122 734                   47 953

TOTAL COMPREHENSIVE INCOME FOR THE YEAR                                      625 542                  544 372
PROFIT ATTRIBUTABLE TO:
Non-controlling interests                                                     11 836                    5 249
Owners of the Company                                                        490 972                  436 876
                                                                             502 808                  442 125
Earnings per share (cents)                                10,9                 116,2                    104,8
Headline earnings per share (cents)                       11,7                 122,6                    109,8
Preference dividend paid per share (cents)                                       410                      357
Ordinary dividends paid per share (cents)                                         50                       40
 Shares in issue                                                         467 052 949              461 648 254
 Treasury shares                                                         (44 395 861)             (44 649 502)
 Earnings per share based on                                             422 657 088              416 998 752
Reconciliation of headline earnings:
Earnings attributable to owners of company                                   490 972                  436 876
Adjusted for non-trading items                                                27 111                   20 796
Net loss on realisation of investments                                           668                        9
Impairment of plant and goodwill                                              37 003                   25 073
Net profit on disposal of assets                                              (8 498)                  (3 288)
Tax effect on above adjustments                                               (2 062)                    (998)

Headline earnings                                                            518 083                  457 672
Abridged segmental analysis                                             %                                   %
Revenue:
Publishing, printing and distribution                   4 952 963      96               4 587 597          95
Other                                                   1 031 207      20                 981 187          20
Inter-group sales - publishing,
  printing and distribution                              (692 473)    (13)               (694 717)        (15)
Inter-group sales - other                                (134 786)     (3)                (54 964)          -
                                                        5 156 911     100               4 819 103         100
Operating income:
Publishing, printing and distribution                    472 670       85                 418 590          85
Other                                                     86 192       15                  76 450          15
                                                         558 862      100                 495 040         100

PROVISIONAL CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
                                                                          Reviewed                    Audited
                                                                           30 June                    30 June
R'000                                                                         2013                       2012
ASSETS
NON-CURRENT ASSETS
PROPERTY, PLANT AND EQUIPMENT                                            2 485 993                  2 385 337
ASSOCIATED COMPANIES                                                       267 961                    138 986
OTHER INVESTMENTS AT FAIR VALUE                                          1 033 836                    443 400
- LISTED                                                                   280 694                      9 137
- UNLISTED                                                                 753 142                    434 263
TOTAL NON-CURRENT ASSETS                                                 3 787 790                  2 967 723
CURRENT ASSETS
INVENTORIES                                                                648 777                    529 531
ACCOUNTS RECEIVABLE                                                        809 696                    738 432
TAXATION                                                                    11 692                     24 675
CASH                                                                       750 230                  1 130 471
BANK PREFERENCE SHARES AND OTHER INSTRUMENTS
 AT FAIR VALUE                                                             667 754                    678 736
TOTAL CURRENT ASSETS                                                     2 888 149                  3 101 845

TOTAL ASSETS                                                             6 675 939                  6 069 568
EQUITY AND LIABILITIES
EQUITY                                                                   5 396 969                  4 899 040
EQUITY ATTRIBUTABLE TO OWNERS OF COMPANY                                 5 347 328                  4 855 623
PREFERENCE SHAREHOLDERS                                                        100                        100
NON-CONTROLLING INTEREST                                                    49 541                     43 317
NON-CURRENT LIABILITIES
DEFERRED TAXATION                                                          465 378                    439 801
CURRENT LIABILITIES
TRADE AND OTHER PAYABLES                                                   636 193                    572 907
PROVISIONS                                                                 177 399                    157 820
TOTAL CURRENT LIABILITIES                                                  813 592                    730 727

TOTAL EQUITY AND LIABILITIES                                             6 675 939                  6 069 568
Net asset value per share (cents)                                            1 277                      1 175
Directors' valuation of unlisted investments and
 associated companies                                                    1 021 104                    573 249
Capital expenditure                                                        356 572                    255 026
Capital expenditure committed                                              170 000                    320 000

ABRIDGED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
                                                                          Reviewed                    Audited
                                                                           30 June                    30 June
R'000                                                                         2013                       2012
Balance at the beginning of the year                                     4 899 040                  5 063 879
Total comprehensive profit for the year                                    625 542                    544 372
Minority interest acquired                                                       -                     11 251
Treasury shares acquired and cancelled                                     (12 186)                  (546 963)
Shares issued                                                              101 760                          -
Dividends paid - ordinary and preference shareholders                     (211 572)                  (167 079)
Dividends paid - minority shareholders                                      (5 615)                    (6 420)
Balance at the end of the year                                           5 396 969                  4 899 040

Note:
Business combination
The group acquired 100% of the following businesses, which have been accounted for as business
combinations, during the year as follows:
Cape Printing (Pty) Limited - October 2012 - R22.5 million
Magscene (Pty) Limited - October 2012 - R13 million
The acquired business contributed revenues of R31 173 million and net profits after tax of R3 542 million to
the group for the year to 30 June 2013. These amounts have been calculated using the group's accounting
policies.

Details of the net assets acquired and goodwill are as follows:
The assets and liabilities as at 1 July 2013 arising from the acquisition are as follows:

                                                                            Acquirees          Carrying
R'000                                                                       fair value          amounts
Fixed assets                                                                     9 363            9 363
Net working capital                                                              3 648            3 648
Cash and cash equivalents                                                          901              901
Fair value of net asset value acquired                                          13 912           13 912
Goodwill                                                                        21 588           21 588
Total purchase consideration paid in cash                                       35 500           35 500
Total purchase consideration                                                    35 500
Less: cash and cash equivalents on acquisition                                    (901)
                                                                                34 599
The goodwill arising is attributed to the benefit of expected synergies.

PROVISIONAL CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                              Reviewed         Audited
                                                                          for the year    for the year
                                                                            to 30 June      to 30 June
R'000                                                                             2013            2012
CASH FLOW FROM OPERATING ACTIVITIES                                            448 522         603 425
Cash generated by operations                                                   846 763         787 712
Changes in working capital                                                    (122 637)         75 541
Cash generated by operating activities                                         724 126         863 253
Taxation paid                                                                 (162 642)       (194 606)
Net interest received                                                           44 778          67 913
Dividends received                                                              59 445          40 364
Net cash generated from operating activities                                   665 707         776 924
Dividends paid                                                                (217 185)       (173 499)

CASH FLOW FROM INVESTING ACTIVITIES                                           (826 609)       (247 386)
Property, plant and equipment
- additions to expand operations                                              (356 572)       (255 026)
- proceeds from disposals                                                       16 769           8 514
                                                                              (339 803)       (246 512)
- business and subsidiary net of cash acquired                                 (34 599)          6 593
- acquisition of investments                                                  (452 207)         (7 467)

CASH FLOWS FROM FINANCING ACTIVITIES                                           (12 186)       (146 962)
Own shares acquired                                                            (12 186)       (146 962)
Net (decrease)/increase in cash and cash equivalents                          (390 273)        209 077
Cash and cash equivalents at the beginning of the year                       1 815 256       1 606 179
Cash and cash equivalents at the end of the year                             1 424 983       1 815 256
Fair value adjustment of preference shares                                      (6 999)         (6 049)
Fair value of cash and cash equivalents
 at the end of the year                                                      1 417 984       1 809 207

Note:
Cash                                                                           750 230       1 130 471
Preference shares at fair value                                                667 754         678 736
Fair value of cash and cash equivalents
 at the end of the year                                                      1 417 984       1 809 207

COMMENTARY
Basis of preparation
The accounting policies adopted in the preparation of the financial statements for the year
under review are in accordance with the requirements of International Financial Reporting
Standards ("IFRS"), and are consistent with the prior year and IAS 34 on interim reporting,
the JSE Listings Requirements, SAICA Financial Reporting Guides as issued by the Accounting
Practice Committee and the Companies Act of South Africa.

Comments
Economies of the major industrialised nations in the world still show no definite direction. Latest
statistics available on the American economy indicate a small improvement and it appears that
Quantitative Easing will be in place for the foreseeable future. Europe remains in a poor state
and China is experiencing a retraction in its growth. South Africa, remaining totally reliant on
Portfolio Inflows and the export of commodities, is going through a rough patch. The balance
of payment deficit has ballooned and with the world in "slow down" mode, commodity prices
and the volume of commodity exports have dropped.

All of this has had a serious impact on the South African currency and the result is that over a
relatively short period, the Rand has lost some 25% of its value.

The aforementioned negative conditions have been further exacerbated by the scale of industrial
unrest and the number of strikes by labourers demanding unrealistic increases and in some
instances achieving these, mainly as a result of violence - which has risen to unprecedented
heights.

All of this is reflected in the low growth in the Gross Domestic Product.

Print Media throughout the world has to contend not only with difficult economic conditions but
in addition, the migration of printed products to digital products which is gathering momentum
at pace. Advertising spend on printed products continues to fall and digital devices such as
tablets and telephones are far cheaper than they were, allowing a greater percentage of
the population to become users. This in turn will undoubtedly create further demand for the
conversion of published products to digital.

Earnings
The company remains in a very strong financial position with cash and cash equivalents at the
year-end amounting to R1,418 billion notwithstanding an active year in terms of the acquisition
of a number of investments and capital expenditure amounting to R356 million.

Bearing in mind the difficulties that the aforementioned economic conditions exert upon the
company, and the fundamental shift to digital products, the company has done well to achieve a
growth in earnings per share of 10.9%, in line with that forecasted at the halfway mark.

Turnover grew from R4,819 billion to R5,157 billion, an improvement of 7%. Total increase
in operating expenses was contained to 6.2% despite large increases in power and fuel costs
and the negative consequences of the fall in the South African currency bearing in mind that the
majority of the company's raw material, equipment and spares are imported.

Profit from operating activities was up by 12.2% and Depreciation increased from R226.5 million
to R241.6 million. Impairment of plant and goodwill amounted to R37 million.

Net Profit from operating activities rose to R558.9 million - an improvement of 12.9%. Net
Finance Income decreased slightly to R104.6 million from R111.7 million, predominantly as a
result of the additional investments that took place.

Income from associates reduced from R26 million to R22.4 million. This resulted in Profit before
Taxation increasing from R632.8 million to R685.8 million - up by 8.4%.

Taxation at the rate of 26.7%, which was lower than the rate of 30.1% in the previous year,
absorbed R183 million. The decrease in rate is primarily due to the initial and non-recurring
saving on the conversion of the Secondary Tax on Companies into a tax on dividends which is
payable by shareholders and not the company.

Profit for the year amounted to R502.8 million which is an increase of 13.7% on the previous
year's profit of R442.1 million.

6,360,000 shares in the company were issued during the year in exchange for shares in
Element One Limited which company owns 39.4% of Caxton. Net of Treasury Shares there are
now 422,657,088 shares in issue.

Earnings per share rose 10.9% from 104.8 cents per share to 116.2 cents per share and
Headline Earnings similarly improved by 11.7% from 109.8 cents to 122.6 cents per share.

Capital expenditure and investments
New printing presses, and ancillary equipment, were installed in the Johannesburg newspaper
factory and at SA Litho in Cape Town.

A Gravure printing press and associated pre and post press equipment is currently being
installed for CTP Gravure in Durban and will be in production towards the end of the year.
Several substantial investments were made during the year.

Additional shares were acquired in Element One Limited and the shareholding in that company
is now 18.7%.

The investment held in Times Media Group Limited increased to a 11.6% shareholding in that
company.

In line with the digital strategy which has been adopted and is in the process of implementation,
investments were made in FoneWorx Holdings Limited, which 32.7% of their equity was
purchased, and a 25% investment in RSA Web (Pty) Limited was also made.

DIVISIONAL PERFORMANCE
PUBLISHING, PRINTING AND DISTRIBUTION
Newspaper Publishing and Printing
Time has shown that the viability of newspaper publishing is being severely affected by the
reduction in print circulation due to the popularity of digital products be it on the internet, tablets
or smart phones.

However, digital products have not yielded the same revenues as the traditional products.
The rate of conversion does seem to be abating as both locally and internationally the swing to
digital appears to be slowing down and publishers are finding new opportunities in a changing
environment.

Fortunately the areas within which the company's newspapers operate, remain the community
and regional markets and despite problems in the greater industry, these markets have in fact
flourished and are experiencing growth.

In line with this, it is pleasing to report that the newspaper division produced good results and
increased its overall market share of advertising spend.

The digital strategy referred to is now in the process of implementation and a number of new
sites are being rolled out with excellent initial results. Exciting initiatives are under development
which are being designed and created to bolster the preeminent position that the company's
papers enjoy in the retail advertising environment.

New products and partnerships are producing the intended results.

Steady progress continues to take place at "The Citizen", the company's regional daily
newspaper which is also benefiting from the appointment of a new publisher. Whilst subject
to the same misfortunes that has befallen the daily and weekly paid papers, circulations are
marginally down but fortunately gains have been made in advertising market share.

A new and invigorated redesign of the paper, utilising overseas experts and an experienced
designer, has just taken place and bodes well for the future.

The Johannesburg newspaper factory completed its extensive capital upgrade during the period
under review and is in full production. Good results continued to be achieved notwithstanding
a fall-off in the circulations of a number of products that are printed under contract to outside
publishers.

Magazine Publishing and Distribution
Up until quite recently, magazine circulation appeared to be holding up despite the increased
competition from the growing digital environment. Unfortunately, of late, magazine sales in
the printed format have also suffered. This is partly due to the changes taking place within
the publishing environment, but has been accentuated by the difficult economic times that
readers find themselves in. As magazines can be considered to be an "impulse purchase",
with stretched budgets it is clear that magazine sales are suffering as consumers battle to live
within their means.

The company's magazine division had a difficult year and did not achieve its budget. Whilst
advertising market share was retained, costs increased mainly on printing and circulation
revenues were down.

The company's magazine distribution company, RNA, which continues to operate efficiently,
was affected by the reduction in sales of magazines and also missed budget. Furthermore, the
retail market continues to be a difficult environment to work within. A number of new outlets
have been opened and the concomitant result is that greater distances have to be travelled to
deliver fewer products, all at a time during which transport costs have increased dramatically
due to the increases in the price of fuel, which is a major cost item.

COMMERCIAL PRINTING
Web, Gravure and Book Printing
The difficult economic environment has negatively impacted on this division's major customers
being predominantly retailers and magazine publishers. This has resulted in volumes decreasing
at a time when the cost base has been under immense pressure due to the substantial increase
in raw material costs resulting from the devaluation of the Rand.

Whilst efficiencies have improved, profits have decreased as margins continue to be under
pressure.

An additional gravure press is currently being installed in the Durban factory and will be in
production towards the end of the calendar year. It is anticipated that substantial savings will
be made resulting from the increases in efficiency which this press and the associated post press
installations will bring.

Book Printing
The volume of books printed for the educational publishers increased dramatically during the
year. Not only was it the last year of the introduction of a new curriculum which has been
introduced over a three-year term, but it would appear that the debacle caused by the non-
supply of textbooks to the Limpopo Province has sparked Government to substantially increase
funds available for the provision of textbooks throughout the entire country.

Consequently volumes improved and this division had an exceptional year and was able to
cope with the huge demands being made by publishers to adhere to the strict delivery timetable
laid down by all the Provinces. This was done to ensure that textbooks would be available
at all schools well within the required dates so that learners would not be prejudiced by late
deliveries.

Resulting from the large quantities produced good profits were achieved. This situation is not
expected to be repeated in the short term as the new curriculum has now been installed for
all grades.

OTHER
Packaging
It has been a good year for the packaging division with most of its components having produced
profits in excess of budgets. The activities of SA Litho in Cape Town have been added to by
the purchase of two small operations in the Western Cape which have been combined into
the Parow factory. New presses have been purchased, moved and installed and excellent
efficiencies and quality have been achieved in manufacturing.

Margin pressures have continued and here too the fall in the value of the Rand has necessitated
the increase in selling prices. Major customers have been satisfied with the excellent service
and quality of products and additional contracts have been secured.

A new press has been ordered for CTP Flexibles in Cape Town which will shortly be arriving
and will be in production by the year-end providing additional production capacity.

Stationery
Steps have been taken to rationalise the operations of this area of the company's operations, but
have not as yet had the desired results. Budgets have not been met but production efficiencies
have improved.

Review of the Independent Auditors
The group's auditors, Grant Thornton (Jhb) Inc., have reviewed these results. Their unqualified
review opinion is available for inspection at the registered office of the company.

Statement of responsibility
The preparation of the group's consolidated results was supervised by the Financial Director,
Mr TJW Holden, BCom, CA(SA).

DECLARATION OF DIVIDENDS
The board has declared a dividend of 55.0 cents per ordinary share (gross) and a preference
dividend of 450.0 cents per share (gross) for the year ending 30 June 2013.

The dividends are subject to the Dividends Withholding Tax. In accordance with the provisions
of the JSE Listings Requirements, the following additional information is disclosed:

- the dividend has been declared out of current profits available for distribution

- the Dividend Tax rate is 15%

- the gross dividend amount is 55.0 cents per ordinary share and 450.0 cents per preference
   share for shareholders exempt from Dividends Tax

- Secondary Tax on companies (STC) credits available amount to 8.11530 cents per ordinary
   and preference share

- the net dividend amount is 47.96730 cents per ordinary share and 383.71730 cents per
   preference share for shareholders liable for Dividends Tax

- the company has 467,052,949 ordinary shares in issue

- the company has 50,000 preference shares in issue

- the company's income tax reference number is: 9175/167/71/8

The following dates are applicable to the dividends:
The last date to trade in order to be eligible for the dividend will be Friday, 18 October 2013.
Shares will be traded ex-dividend from Monday, 21 October 2013.

The record date will be Friday, 25 October 2013 and payment will be made on Monday,
28 October 2013.

Share Certificates may not be dematerialised or rematerialised between Monday, 21 October
and Friday, 25 October 2013, both days inclusive.

PROSPECTS
The company has achieved good results in a difficult economic environment which brought
about adverse trading conditions. Whilst the global and local economy is not expected to
improve in the short term, the company is nevertheless budgeting for a modest improvement
in earnings.

28 August 2013

Executive Directors: TD Moolman, GM Utian, PG Greyling, TJW Holden

Non-Executive Directors: PM Jenkins, ACG Molusi, NA Nemukula, T Slabbert, P Vallet

Transfer Secretaries: Computershare Investor Services (Pty) Limited

Registered office: 28 Wright Street, Industria West, Johannesburg

Incorporated in the Republic of South Africa
Registration number: 1947/026616/06
Share code: CAT       ISIN: ZAE000043345
Preference share code: CATP       ISIN: ZAE000043352

Sponsor
ARCAY Moela Sponsors
Date: 28/08/2013 05:06:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

Share This Story