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Audited results and dividend declaration for the year ended 30 June 2013
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 2013.
*Audited in terms of the Companies Act 71 of 2008
17 September 2013
Revenue up 39.7%
Profit from continuing operations up 19.2%
Headline earnings up 24.6%
Core headline earnings up 30.8%
Final dividend of 40 cents per share
Summary consolidated statement of comprehensive income
Year ended Year ended
30 June 30 June
2013 2012
Audited Audited Change
R'000 R'000* %
Continuing operations
Revenue 1 335 946 956 534 39.7
Operating profit 283 006 259 654 9.0
Profit before income tax 334 604 302 288 10.7
Income tax expense (80 681) (89 330) (9.7)
Profit for the year from continuing operations 253 923 212 958 19.2
(Loss)/profit for the year from discontinued operations (15 996) 448 532 (103.6)
Profit for the year 237 927 661 490 (64.0)
Total comprehensive income for the year 237 927 661 490 (64.0)
Profit and total comprehensive income attributable to:
Owners of the parent 206 427 634 905 (67.5)
Non-controlling interest 31 500 26 585 18.5
237 927 661 490 (64.0)
Earnings per share for equity holders during the year (expressed in cents):
Basic earnings/(loss) per share
From continuing operations 166.3 139.3 19.4
From discontinued operations (12.0) 335.2 (103.6)
154.3 474.5 (67.5)
Diluted earnings/(loss) per share
From continuing operations 165.9 139.1 19.3
From discontinued operations (11.9) 334.7 (103.6)
154.0 473.8 (67.5)
*Restated - please refer to the revenue section for further disclosure.
Summary consolidated statement of financial position as at 30 June
2013 2012
Audited Audited
R'000 R'000
Assets
Non-current assets 956 749 916 595
Current assets 839 722 839 035
Assets classified as held-for-sale 29 677 -
Total assets 1 826 148 1 755 630
Equity and liabilities
Total equity 1 372 465 1 290 128
Non-current liabilities 109 369 124 379
Current liabilities 330 930 341 123
Liabilities directly associated with assets classified as held-for-sale 13 384 -
Total equity and liabilities 1 826 148 1 755 630
Summary consolidated statement of changes in equity
Year ended Year ended
30 June 30 June
2013 2012
Audited Audited
R'000 R'000
Equity at the beginning of the year 1 290 128 785 399
Proceeds from shares issued 600 -
Total comprehensive income for the year 237 927 661 490
Dividends paid (146 263) (158 454)
Non-controlling interests' share of net assets acquired through business combinations 188 1 693
Transactions with non-controlling interests (10 115) -
Equity at the end of the year 1 372 465 1 290 128
Summary consolidated statement of cash flows
Year ended Year ended
30 June 30 June
2013 2012
Audited Audited
R'000 R'000
Net cash inflow from operating activities 54 851 28 767
Net cash (outflow)/inflow from investing activities (54 552) 305 547
Net cash outflow from financing activities (15 253) (117 251)
Total cash movement for the year (14 954) 217 063
Cash and cash equivalents at the beginning of the year 473 199 233 225
Cash and cash equivalents classified as held-for-sale at the beginning of the period - 22 911
Cash and cash equivalents classified as held-for-sale at the end of the period (5 918) -
Cash and cash equivalents at the end of the year 452 327 473 199
Capital investments
Tangible Intangible
assets assets Goodwill*
R'000 R'000 R'000
Balance at 30 June 2011 51 470 277 380 168 425
Additions 36 441 3 464 -
Acquired arising from business combinations 79 228 198 481 3 967
Contingent consideration adjustment - - 4 835
Disposals (807) (39) -
Depreciation and amortisation: continuing operations (17 430) (24 970) -
Transfers (56) 56 -
Depreciation and amortisation: discontinued operations (211) (32) -
Balance at 30 June 2012 148 635 454 340 177 227
Additions 31 984 23 304 -
Acquired arising from business combinations 824 3 580 19 724
Disposals (920) (347) -
Depreciation and amortisation: continuing operations (27 011) (33 485) -
Depreciation and amortisation: discontinued operations (1 556) (14) -
Classified as held-for-sale (5 563) (7) (5 649)
Balance at 30 June 2013 146 393 447 371 191 302
*Includes an accumulated impairment balance of R2.8 million (2012: R9.3 million) as at 30 June.
Reconciliation of headline and core headline earnings
Year ended Year ended
30 June 30 June
2013 2012
Audited Audited
R'000 R'000
Profit attributable to equity holders 206 427 634 905
Adjusted for:
Loss on remeasurement of assets held-for-sale 19 648 -
Gain on disposal of investment (195) (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 (99) 81
Loss on disposal of property, plant and equipment 51 390
Headline earnings 225 832 181 343
Core headline earnings exclude once-off and non-operating items. 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.
Core headline earnings is calculated after adding back the following amounts to headline earnings:
- Amortisation of intangible assets as a consequence of the purchase price allocations completed in terms of
IFRS 3 Business Combinations;
- Costs incurred in relation to potential and completed business combinations;
- Fair value adjustments; and
- Other once-off and non-recurring items, for example:
- Termination benefits to senior managerial employees;
- Litigation settlements.
Year ended Year ended
30 June 30 June
2013 2012
R'000 R'000
Headline earnings 225 832 181 343
Adjusted for:
Amortisation of intangible assets acquired in business combinations 14 779 11 148
Business combination related cost 4 212 889
Fair value adjustments on derivative financial instruments (879) -
Ex gratia payment 9 000 -
Core headline earnings 252 944 193 380
Headline earnings per share
Headline earnings per share (cents) 168.8 135.5
Diluted headline earnings per share (cents) 168.5 135.3
Core headline earnings per share
Core headline earnings per share (cents) 189.0 144.5
Diluted core headline earnings per share (cents) 188.7 144.3
Shares used in calculations
Number of shares in issue ('000s) 133 898 133 792
Weighted average number of shares in issue ('000s) 133 821 133 792
Weighted average number of shares in issue for diluted earnings per share ('000s) 134 034 134 008
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 reporting date and not recognised in the financial statements
are as follows:
2013 2012
Audited Audited
R'000 R'000
Property, plant and equipment 33 301 36 301
Intangible assets 11 783 11 178
Total 45 084 47 479
Capital expenditure will be funded from operating cash or from existing funding facilities and where necessary by
raising additional facilities.
2013 2012
Audited Audited
R'000 R'000
Other commitments
The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
- Not later than one year 36 337 23 296
- Later than one year and not later than five years 113 679 48 329
- Later than five years 44 031 47 314
Total future cash flow 194 047 118 939
Contingent liabilities
Music usage levy
In terms of the amendments to the Copyright Act 98 of 1978, a royalty is payable by broadcasters for the use of musical content. As at year end, the effective date
of the amendment and rate on which the royalties will be based remain uncertain, pending the outcome of the legal process, and as such the contingent liability is
not currently quantifiable. The group has made a provision based on management's best estimates of the potential future cash outflow.
Commentary
Financial review
Concerns over a consumer spending downturn in the fiscal year did not materialise as trading conditions in South Africa, and in our categories, generally improved.
In particular, the radio assets have outperformed the market median in advertising spend. The introduction of Juta into the portfolio has assisted significantly in
driving both top line and bottom line growth.
The group remains focused on cost control, working capital management and generating acceptable returns on funds employed. Significant focus is being directed at
those operations where performance is below the expected levels.
Last year we indicated that Kagiso Media was well positioned to take advantage of "social", "mobile" and "local" media opportunities. On 2 July 2013, together
with our partner Microsoft, we went live with our East and West African MSN platforms. In a very short space of time our metrics are reflecting a very encouraging
market performance for the Kenyan and Nigerian portals.
Once again the media and communications industry relevant to our business segments reflected strong growth in the financial year. The flow through of radio media
campaigns by the financial sector continued, and more recently the telecommunication and automobile sectors positively influenced group results.
Our Information and Other segment, which now includes Juta delivered double digit growth in a mature sector. New products were launched late in the 4th quarter which
will only impact the 2014 results.
Results
1. Revenue
Total revenue increased by 39.7% to R1 335.9 million for the year ended 30 June 2013, this growth being driven primarily by the inclusion of full year results from
Juta and Company Limited ("Juta") as well as the acquisition of Kaufman Levin Associates Proprietary Limited ("KLA") in the Information and Other segment. There has
been a change in the classification of income from events and production of advertisements. This was previously classified as Other Income; however, in the current
financial year this has been included as revenue, as this is considered to form part of the ordinary course of the group's activities.
2. Operational review
During the year under review and in the comparative year, the results of operations, revenue, operating profit/(loss), net profit/(loss) and total assets per
business segment were as follows:
Segmental analysis for the year ended 30 June
Revenue Operating profit/(loss)
2013 2012 2013 2012
R'000 R'000 R'000 R'000
Broadcasting 669 870 586 402 300 621 267 659
Information and Other 310 787 74 828 43 190 12 423
New Media 108 582 79 720 3 899 14 362
Content 244 777 211 778 18 366 16 693
Corporate 1 930 3 806 (83 070) (51 483)
Total 1 335 946 956 534 283 006 259 654
Net profit/(loss)* Total assets**
2013 2012 2013 2012
R'000 R'000 R'000 R'000
Broadcasting 224 847 200 797 640 697 644 593
Information and Other*** 21 674 460 242 531 734 496 756
New Media (2 130) 7 069 52 739 60 826
Content 6 765 6 359 216 881 182 900
Corporate (44 729) (39 562) 325 640 346 753
Total 206 427 634 905 1 767 691 1 731 828
*Attributable to owners of the parent
** Excludes income tax and deferred income tax assets
*** Included profit on disposal of LexisNexis in 2012
Broadcasting
The group's radio assets delivered revenue of R669.9 million, up 14.2% on the prior year amount of R586.4 million, performing better than the industry average of 12%.
Operating margins remain fairly constant which enabled operating profit delivery of R300.6 million (2012: R267.7 million). Key factors supporting this double-digit
growth was a high trade presence with stable audiences. In addition, our investment in the creative division Lab 42 has successfully driven new advertiser spend.
Information and Other
The inclusion of Juta in the 2013 results provided significant impetus to revenue and profit growth, for the Information and Other segment. The decision to dispose
of the retail division was a difficult decision but ultimately the asset was not core to the future growth ambitions of Juta. The law business remains the market
leader in South Africa while the academic division has reflected good growth in a category only growing at 2% in the year under review. Delays in product
development at Knowledge Factory shifted orders to the next fiscal year, while KLA and Kagiso Vantage contributed positively to group results.
New Media
The New Media division had a year of mixed fortunes. On the positive side, the MSN portals in East and West Africa went live on 2 July 2013. We are indebted to the
Microsoft Corporation and the Content team who launched the portals in record time. On the negative side, MSN lost some major sources of revenue early in the
financial year which it is only now recovering from. Gloo, while showing significant revenue growth reflected flat operating profit year on year. This being
attributed to the infrastructure and resource costs we had to absorb pre-revenue as we scaled up for the FNB and Samsung business.
Content
The Content division which includes Urban Brew Studios had a difficult year, in a competitive market, margins have been put under pressure. Investment in owned
content continues with the Home Pictures project, the benefit of which will be seen in future years.
Group
The board expressed its satisfaction with the performance of the group during 2013. Revenue from continuing operations increased to R1 335.9 million (39.7%).
Profit before tax increased by 10.7% to R334.6 million resulting in earnings per share from continuing operations of 166.3 cents (2012: 139.3 cents).
Finance income and expenses
In the year under review the group earned interest of R20.7 million (2012: R24.9 million) on its surplus cash.
Associates
The group's after tax share of results of associates amounted to R32.1 million (2012: R22.2 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 29.6% to 24.1% for the year under review, due to the withdrawal of secondary tax on companies and restructuring adjustments.
Cash generation and position
Cash balances decreased from R473.2 million in 2012 to R452.3 million with a portfolio of group assets that have significant cash-generative abilities, with
operating cash conversion to profit increasing to 125.6% (2012: 106.5%)
Borrowings
At 30 June 2013, the group's current borrowings were reduced to R3.1 million (2012: R8.0 million).
3. Business combinations
3.1 Investment in Kaufman Levin Associates Proprietary Limited ("KLA")
During the current financial year, the group acquired an economic interest of 90% and an effective interest of 97.5% in KLA for a total purchase price of
R27 million. The purchase consideration was settled in cash from the group cash reserves.
On 5 September 2012, the group obtained control over KLA. On this day all the conditions precedent to the transaction were fulfilled and the purchase price
allocation and fair values of the assets and liabilities of KLA were determined.
KLA is a market research company located in Johannesburg that provides qualitative and quantitative initiatives on behalf of leading local and international clients.
With this acquisition, the group benefits through the further diversification into information and other services attached thereto.
Revenue of R33.3 million, operating profit of R3.3 million as well as profit after tax of R2.4 million for the ten-month period till 30 June 2013, are reflected in
the segmental analysis under "Information and Other". If the acquisition had occurred on 1 July 2012, the contribution to the group's revenue would have been
approximately R40 million and the contribution to profits would have been a net profit after tax of approximately R2.4 million. These amounts have been calculated
using the group's accounting policies and by adjusting the results of the subsidiaries to reflect the additional amortisation that would have been charged assuming
a fair value adjustment to intangible assets had applied from 1 July 2012, together with the consequential tax effects.
Details of the net assets acquired are as follows:
2013
R'000
Purchase consideration 27 025
Fair value of net identifiable assets acquired (see below) (7 301)
Goodwill 19 724
The net assets arising from the acquisition are:
Net assets acquired 7 489
Non-controlling interest share of net assets acquired (2.5%)* (188)
Kagiso Media's share of the fair value of net assets acquired 7 301
Total purchase consideration 27 025
Cash and cash equivalents in the business acquired (2 925)
Cash outflow on acquisition of KLA 24 100
*The non-controlling interest above has been measured at the proportionate share of the net assets acquired.
The goodwill is attributable to the future benefits of the group's diversification into information services attached thereto. There are substantial synergies with
other existing business units within the group, particularly with Knowledge Factory.
3.2 Acquisition of additional interest in Gloo Digital Design Proprietary Limited ("Gloo")
On 30 November 2012, the group acquired an additional 10% of the issued shares in Gloo for a purchase consideration of R9.2 million. The group now holds 60.1% of
the equity share capital of Gloo.
The carrying amount of the non-controlling interests in Gloo on the date of acquisition was R7.1 million. The group derecognised non-controlling interests of
R1.4 million and recognised a decrease in equity attributable to owners of the parent of R7.8 million. The effect of changes in the ownership interest in Gloo on
the equity attributable to owners of the parent during the year is summarised as follows:
2013
R'000
Carrying amount of non-controlling interests acquired 1 421
Consideration paid to non-controlling interests (9 200)
Excess of consideration paid recognised in parent's equity (7 779)
4. Discontinued operations and non-current assets held-for-sale
The results of the discontinued operations for the year are presented below:
2013 2012
Audited Audited
R'000 R'000
Revenue 96 175 11 578
Net profit on sale of joint venture - 483 245
Operating (loss)/profit (1 623) 504 687
(Loss)/profit before income tax (1 308) 504 946
Income tax expense 4 960 (56 414)
Profit after tax from discontinued operations 3 652 448 532
Pre-tax loss recognised on the remeasurement of assets of disposal group (19 468) -
Tax - -
After tax loss recognised on the remeasurement of assets of disposal group (19 468) -
(Loss)/profit for the year from discontinued operations (15 996) 448 532
The board took the decision to dispose of the group's interest in Acceleration Media Proprietary Limited ("Acceleration Media") and the retail division of Juta and
Company Limited ("Juta"). These assets have been classified as assets held-for-sale and a discontinued operation. Acceleration Media forms part of the New Media
business segment and Juta forms part of the Information and Other business segment.
The comparative period includes the sale of LexisNexis Proprietary Limited ("LexisNexis"), a 50% owned joint venture company of Kagiso Media Limited and an overseas
partner, Reed Elsevier Plc, which was concluded on 15 December 2011.
The major classes of assets and liabilities classified as held-for-sale at 30 June 2013 were as follows:
2013
R'000
Non-current assets 5 582
Current assets 24 095
Assets classified as held-for-sale 29 677
Non-current liabilities 7
Current liabilities 13 377
Liabilities directly associated with assets classified as held-for-sale 13 384
Net assets directly associated with discontinued operations 16 293
5. Related party transactions (Pre-tax)
30 June 30 June
2013 2012
Audited Audited
R'000 R'000
Directors and prescribed officers' remuneration
For services as non-executive directors 2 844 2 415
For services as executive directors
- Basic salary 6 679 6 204
- Bonuses and performance related payments 4 905 4 270
- Ex gratia payment 12 500 -
- Other 389 114
- Pension costs - defined contribution plans 689 702
Directors and prescribed officers' remuneration 28 006 13 705
Transactions with associates 4 707 3 729
Year-end balances with related parties
Associates 4 527 3 048
6. Dividend declaration
A final dividend of 40 cents (2012: 30 cents) per share in respect of the year to 30 June 2013 was declared by the directors on 17 September 2013 and will be
reflected in the results for the financial year to 30 June 2014. The dividend was declared out of income reserves. The dividend will be subject to a maximum local
dividends tax rate of 15% which will result in a net dividend to those shareholders that bear the maximum rate of dividends withholding tax of 34 cents per share
after withholding tax of 6 cents per share. No secondary tax on companies credits are available to be utilised.
The following salient dates apply to this dividend:
Last date to trade cum dividend 4 October 2013
Shares commence trading ex dividend 7 October 2013
Record date 11 October 2013
Payment of the dividend 14 October 2013
Share certificates may not be dematerialised or re-materialised between 7 October 2013 and 11 October 2013, both days inclusive.
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 summarised consolidated financial information is a summary of the audited consolidated financial statements and was prepared in accordance with International
Financial Reporting Standards ("IFRS"), the presentation and disclosure requirements of IAS 34 - Interim Financial Reporting, the SAICA Financial Reporting Guides
as issued by the Accounting Practices Committee, the Listings Requirements of the JSE Limited and the requirements of the South African Companies Act, 71 of 2008,
and 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 2013, 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.
9. Independent audit by the auditors
The summarised 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. Events after the reporting date
Subsequent to year end, the board of directors received communication of a firm intention to make an offer by Kagiso Tiso Holdings ("KTH"), through its wholly owned
subsidiary KTH Media, to acquire the entire issued ordinary share capital of the company that KTH does not already beneficially own ("firm intention announcement").
If implemented, the offer will result in KTH Media becoming the registered and beneficial owner of all of the issued shares.
Upon implementation of the scheme, the listing of the company shares will be terminated (delisted).
In terms of the offer, the company shareholders will be entitled to receive a cum dividend cash consideration of R28,50 per offer share.
Further details of the scheme will be included in the circular to be sent to the company shareholders, containing, inter alia, a notice of general meeting of the
company shareholders, a form of proxy and a form of surrender and transfer. The circular is expected to be posted to the company shareholders on or about
8 October 2013. The salient dates in relation to the scheme will be published prior to the posting of the circular.
Except for the above, the directors are not aware of any matter or circumstance arising since the end of the financial year that would affect the operation of the
group or the results of those operations significantly.
11. Prospects
The Kagiso Media group, having just delivered a solid set of results will not sit back, as always there is serious focus to deliver growth in the coming year.
The maturity throughout the organisation enables the group to face prevailing market conditions with confidence. Our focus, as always, is to drive sustainable
margins, with particular attention in the year ahead to manage the optimisation of our costs. Digital is and will be core to everything we do, new approaches,
innovation and creativity will enable Kagiso Media to grow and compete. Strategically this may require a longer term view of growth related investments.
The group plans to grow market share in the year ahead, driven by organic initiatives and where appropriate acquisitions.
On behalf of the board
RM Motanyane
Chairperson
17 September 2013
Registered office:
1st Floor, Kagiso Tiso House, 100 West Street, Wierda Valley, Sandton, 2196
Number of shares in issue is 133 898 049
133 898 049 FREE
Tax number is 9638003716.
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)#, MJ Harris (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: 18/09/2013 07:16:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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