Wrap Text
Reviewed Results for the year ended 30 June 2014
CAXTON&CTP Publishers & Printers Limited
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 2014
PROVISIONAL CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Reviewed Audited
for the year for the year
% to 30 June to 30 June
R'000 change 2014 2013
Turnover 4,5 5 389 551 5 156 911
Other operating income 94 191 95 561
5 483 742 5 252 472
Changes in inventories of finished goods and
work in progress 36 440 73 447
Raw materials and consumables used 2 181 323 1 881 947
Staff costs 1 227 915 1 120 841
Other operating expenses 1 347 889 1 338 780
Total operating expenses 8,6 4 793 567 4 415 015
PROFIT FROM OPERATING ACTIVITIES (17,6) 690 175 837 458
Depreciation 259 728 241 592
PROFIT FROM OPERATING ACTIVITIES
AFTER DEPRECIATION (27,8) 430 447 595 865
Impairment of plant and goodwill 459 548 37 003
NET (LOSS)/PROFIT FROM OPERATING ACTIVITIES (29 101) 558 862
Dividends 48 899 59 445
Interest 54 178 44 778
Net profit on currency hedges 1 431 1 024
Net finance income 104 508 105 247
Profit/(loss) on realisation of investments 470 067 (668)
Net income from associates 19 500 22 410
PROFIT BEFORE TAXATION 564 974 685 850
Income tax expense 129 115 183 043
PROFIT FOR THE YEAR (13,3) 435 859 502 807
Other comprehensive income: (119 122) 122 734
Items that will not be reclassified subsequently
to profit or loss
Fair value adjustment – land and buildings (3 866) –
Items that will be reclassified subsequently
to profit or loss
Fair value adjustment – investment and
preference shares (115 256) 122 734
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 316 737 625 541
PROFIT ATTRIBUTABLE TO:
Non-controlling interests 9 043 11 836
Owners of the Company 426 816 490 971
435 859 502 807
Earnings per share (cents) (9,6) 105,0 116,2
Headline earnings per share (cents) (19,8) 98,4 122,6
Preference dividend paid per share (cents) 490 410
Ordinary dividends paid per share (cents) 60 50
Shares in issue 467 052 949 467 052 949
WANOS shares cancelled/treasury shares (60 558 862) (44 395 861)
Earnings per share based on 406 494 087 422 657 088
Reconciliation of headline earnings:
Earnings attributable to owners of company 426 816 490 971
Adjusted for non-trading items (26 988) 27 111
Net (profit)/loss on realisation of investments (470 067) 668
Impairment of plant and goodwill 459 548 37 003
Net profit on disposal of assets 1 600 (8 498)
Tax effect on above adjustments (18 069) (2 062)
Headline earnings 399 828 518 082
Abridged segmental analysis % %
Revenue:
Publishing, printing and distribution 5 007 795 93 4 952 963 96
Other 1 243 168 23 1 031 207 20
Inter-group sales – publishing,
printing and distribution (745 027) (14) (692 473) (13)
Inter-group sales – other (116 385) (2) (134 786) (3)
5 389 551 100 5 156 911 100
Profit from operating activities
after depreciation
Publishing, printing and distribution 313 752 73 494 582 83
Other 116 695 27 101 283 17
430 447 100 595 865 100
PROVISIONAL CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Reviewed Audited
30 June 30 June
R'000 2014 2013
ASSETS
NON-CURRENT ASSETS
PROPERTY, PLANT AND EQUIPMENT 2 208 608 2 485 993
ASSOCIATED COMPANIES 221 695 267 961
OTHER INVESTMENTS AT FAIR VALUE 28 022 1 033 836
– LISTED 31 280 694
– UNLISTED 27 991 753 142
TOTAL NON-CURRENT ASSETS 2 458 325 3 787 790
CURRENT ASSETS
INVENTORIES 638 750 648 777
ACCOUNTS RECEIVABLE 982 193 809 696
TAXATION – 11 692
CASH 1 306 489 750 230
BANK PREFERENCE SHARES AND OTHER INSTRUMENTS
AT FAIR VALUE 915 582 667 754
TOTAL CURRENT ASSETS 3 843 014 2 888 149
TOTAL ASSETS 6 301 339 6 675 939
EQUITY AND LIABILITIES
EQUITY 5 028 875 5 396 969
EQUITY ATTRIBUTABLE TO OWNERS OF COMPANY 4 970 191 5 347 328
PREFERENCE SHAREHOLDERS 100 100
NON-CONTROLLING INTEREST 58 584 49 541
NON-CURRENT LIABILITIES
DEFERRED TAXATION 262 778 465 378
CURRENT LIABILITIES
TRADE AND OTHER PAYABLES 739 031 636 193
TAXATION 21 936 –
PROVISIONS 248 719 177 399
TOTAL CURRENT LIABILITIES 1 009 686 813 592
TOTAL EQUITY AND LIABILITIES 6 301 339 6 675 939
Net asset value per share (cents) 1 283 1 277
Directors' valuation of unlisted investments and
associated companies 249 685 1 021 104
Capital expenditure 401 396 356 572
Capital expenditure committed 150 000 170 000
ABRIDGED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Reviewed Audited
30 June 30 June
R'000 2014 2013
Balance at beginning of the year 5 396 969 4 899 040
Total comprehensive profit for the period 316 737 625 542
Share buy-backs (444 505) (12 186)
Shares issued – 101 760
Dividends paid – ordinary and preference shareholders (234 386) (211 572)
Dividends paid – minority shareholders (5 940) (5 615)
Balance at end of the year 5 028 875 5 396 969
Note:
Business combination
The group acquired the following businesses, which have been accounted for as business combinations,
during the year as follows:
Habari Media (Pty) Limited – 100%
Ramsay Media (Pty) Limited – acquired the remaining 70% (previously owned 30%).
Mega Digital (Pty) Limited – 51%
The acquired business contributed revenues of R62,0 million and net loss after tax of R14,2 million to the
group for the year to 30 June 2014. Had these businesses been acquired for the full financial period the
revenue would have been R232,6 million and the net loss after tax would be R16,4 million.
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 from the acquisition are as follows:
Acquirees Carrying
R'000 fair value amounts
Fixed assets 10 841 10 841
Net working capital (9 400) (9 400)
Taxation acquired 5 122 5 122
Cash and cash equivalents 11 145 11 145
Fair value of net asset value acquired 17 708 17 708
Initial investment amount (30 075) (30 075)
Loss in change of holding 12 538 12 538
Goodwill to maintain the groups position in the media market 74 873 74 873
Total purchase consideration paid in cash 75 044 75 044
Total purchase consideration 75 044
Less: cash and cash equivalents on acquisition (11 145)
63 899
PROVISIONAL CONSOLIDATED STATEMENTS OF CASH FLOWS
Reviewed Audited
for the year for the year
to 30 June to 30 June
R'000 2014 2013
CASH FLOW FROM OPERATING ACTIVITIES 300 136 448 522
Cash generated by operations 749 509 846 762
Changes in working capital (52 996) (122 636)
Cash generated by operating activities 696 513 724 126
Taxation paid (259 128) (162 640)
Net interest received 54 178 44 778
Dividends received 48 899 59 445
Net cash generated from operating activities 540 462 665 709
Dividends paid (240 326) (217 187)
CASH FLOW FROM INVESTING ACTIVITIES 566 631 (826 609)
Property, plant and equipment
– additions to expand operations (401 396) (356 572)
– proceeds from disposals 38 077 16 769
(363 319) (339 803)
– business and subsidiary net of cash acquired (63 899) (34 599)
– disposal/(acquisition) of investments 993 849 (452 207)
CASH FLOWS FROM FINANCING ACTIVITIES (56 096) (12 186)
Own shares acquired (56 096) (12 186)
Net increase/(decrease) in cash and cash equivalents 810 671 (390 273)
Cash and cash equivalents at the beginning of the year 1 417 984 1 815 256
Cash and cash equivalents at the end of the year 2 228 655 1 424 983
Fair value adjustment of preference shares (6 584) (6 999)
Fair value of cash and cash equivalents
at the end of the year 2 222 071 1 417 984
Note:
Cash 1 306 489 750 230
Preference shares at fair value 915 582 667 754
Fair value of cash and cash equivalents
at the end of the year 2 222 071 1 417 984
COMMENTARY
Basis of preparation
The accounting policies adopted in the preparation of the financial statements for the
twelve months 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, the SAICA Financial Reporting Guides
as issued by the Accounting Practices Committee and the Companies Act of South Africa.
Earnings
The company remains in a strong financial position with cash and cash equivalents
amounting to R2,222 billion compared with R1,418 billion in the prior period. Particularly
pleasing was that cash generated by operating activities of R696,5 million is marginally
down on the prior year notwithstanding the decline in profit from operating activities.
The trading environment has been difficult. The large drop in the Rand resulted in the cost
of raw materials and consumables increasing substantially by 15.9% and this, combined
with limited revenue growth of 4.5%, led to a decline in earnings per share of 9.6%.
Staff costs that increased by 9.6% were impacted with once-off costs associated with the
restructure of the commercial printing divisions and provision for the costs associated for
the re-instatement of previously dismissed employees. Operating expenses have been well
controlled and have remained at similar levels to the previous reporting period.
Operating profit was lower at R690,2 million, a decrease of 17.6%. Depreciation
increased from R241,6 million to R259,7 million. The re-assessment of the value of
the company's plant and equipment in light of recent events and trends resulted in an
impairment of R384,7 million with a goodwill impairment amounting to R74,9 million.
The sale of the shares in Pearson Southern Africa and Times Media Group Limited resulted
in a profit of R470,1 million. Net finance income of R104,5 million was slightly lower.
Income from associates shows a slight decline to R19,5 million from R22,4 million.
Profit before taxation decreased from R685,8 million to R564,9 million, a decline of
17.6%. Taxation, at a rate of 22.9% (26.7% in the previous year) mainly as a result
of capital gains, absorbed R129,1 million, which resulted in profit after taxation
amounting to R435,9 million – a decrease of 13.3%.
The number of shares in issue reduced from 422 657 088 to 391 827 651 ordinary
shares, a decline of 7.3%, (on a weighted average basis the number of shares in issue
are 406 494 088, a decline of 3.8%), mainly as a result of the sale of the company's
Element One Limited shares in consideration for cash and shares in the company, which
were subsequently cancelled. Earnings per share were 105.0 cents, down by 9.6% and
headline earnings were 98.4 cents per share, down by 19.8%.
Capital expenditure and investments
The company has commissioned a gravure press in Durban and is busy with another new
gravure press installation that is likely to be completed by the end of the calendar year
at the same site.
During the financial year the following investments have been made:
- The acquisition of 51% of the equity of Mega Digital (Pty) Limited a short run digital
printer based in Cape Town.
- The acquisition of 100% of Habari Media (Pty) Limited a digital advertising sales
agency.
- The Competition Authorities have approved the acquisition of the remaining 70% of
the shares in Ramsay Media (Pty) Limited a magazine publisher in which the company
holds an existing 30% of the equity.
- The company has concluded the acquisition of the Carton and Label division of
Nampak with effect from 1 August 2014. The Competition Commission approved
the transaction subject to certain conditions with regard to job losses. The expected
purchase price is in the region of R308 million with an adjustment depending on the
Net Asset Value of the effective date accounts.
DIVISIONAL PERFORMANCE
PUBLISHING, PRINTING AND DISTRIBUTION
Newspaper Publishing and Printing
Worldwide, the biggest challenge for newspapers is to remain relevant in today's
volatile media environment. Circulation and readership in the daily newspaper industry
in particular has dropped precipitously in most western countries. Following the global
trend, daily newspapers' circulation in South Africa has shown an average decline of
15.9% since 2010. This in turn has led to a declining trend in both revenue from copy
sales and advertising. We are fortunate that the these circumstances have not had the
same effect on the local newspaper market in which the company mainly operates.
For the local newspapers in the group, the past year was one of two distinct halves –
a relatively buoyant first half but an increasingly sluggish second one which took its toll
as the contraction of the economy gathered steam. The net result was a small decline
in the division‘s profit compared to a year ago. Towards the end of the financial year we
have fortunately seen some signs that might suggest that on the advertising and ad-spend
front, the worst may be over.
The Citizen, the only daily in the Caxton stable, is no exception, and its circulation has
decreased by 13.4%, doing slightly better than the average trend. The good news is
that subsequent to the redesign in August 2013, its copy sales stabilised from October
onwards. The redesign included all digital platforms, and the latter showed a very healthy
growth of almost 500% in unique visitors since January 2014. The Citizen also managed
to buck the trend in the declining advertising performance of daily newspapers by gaining
market share. Looking ahead the challenge will be to translate online readership into
advertising revenue but the progress already made in this area is reason for optimism.
Albeit impacting negatively on our bottom line at the moment, our accelerating investment
in digital is deepening and expanding our relationships with our communities. Excellent
progress was made over the past year and the more than 70 news‘ brands now up and
running on the various digital platforms are showing very promising growth in unique visits
and page-views. More sites, and verticals in shopping, cars, property and classifieds will
be rolled out in the year ahead as our local newspaper hubs move more decisively from
being print only, to multi-media players.
The newspaper print factories have performed relatively well, notwithstanding a decline in
the throughput mainly as a result of a decline in the number of copies and pages printed
under contract for third parties. In the light of this decline, which is forecast to continue,
a decision was taken to impair the investment in the equipment of mainly the Johannesburg and
Parow print factories which undertake the bulk of the contracted printing for outside publishers.
Magazine Publishing and Distribution
The magazine industry continues to be affected by tough trading conditions. The difficult
economic climate has left consumers with less disposable income and this, together with
the growth of digital platforms and free online content, has impacted on print circulations.
Printing costs have increased largely due to the weak Rand. Investment in a digital
strategy, including strong editorial content, has ensured a growth in the availability of
the magazine brands across multiple platforms and an increase in digital subscriptions.
While advertising spend in print has declined overall, the division's growing online
audience is helping to provide advertisers with a 360 degree ability to reach consumers.
The company's magazine distribution company, RNA, has had a difficult year in which
the combination of volume decline and margin pressure combined with increasing
transport costs has meant a decline in profitability. This has partly been offset by the fact
that additional customers have been secured in the CD and DVD distribution division and
with a new large customer being secured for the upcoming trading year, this division will
improve profitability.
COMMERCIAL PRINTING
Web and Gravure
The past year has been a very tough one for this division. An oversupply of print capacity
in the country coupled with a general decline in the economy which affected consumer
spend and retailers' advertising budgets has led to a substantial decline in throughput
volumes on the presses operated in both the web and gravure business units of the group.
In addition to this, this division also had to deal with higher than inflation escalations in
operating costs, and increases in raw material costs due to the decline in the value of the
Rand which could not be fully recovered from the customers. The result of all this was a
substantial decrease in the profits of the division. In the light of this a decision was taken
to rationalise the print facilities and factories owned by the division.
The litho printing factory in Denver operating under the banner of Kagiso BM Litho is in
the process of being merged with CTP Web Printers in Isando and on completion, the
Kagiso factory will be closed down. Following the additional gravure printing capacity
created through the investment in additional gravure presses (which have been and are
in the process of being installed at the CTP Gravure factory in Prospecton), the gravure
division in Johannesburg will also be closed down. This rationalisation will be completed
towards the end of December 2014 and it is anticipated that substantial savings will
be made by reducing overhead costs and profitability will be improved through better
capacity utilisation.
Book Printing
This division produced another good result for the year, although the timescales for
delivery demanded from the various provincial education departments and, in turn, from
education publishers, placed capacity under enormous pressure during the first quarter
of the financial period.
Subsequently, the division has seen a reduction in volumes and, as a direct result,
increased margin pressure due to excess market capacity.
The implementation of the new curriculum was completed during this period and the lack
of predictability in the education market for the forthcoming year creates a number of
challenges.
The division is focused on a process of continuous improvement, which together with
planned investments in new technology, will result in improved efficiencies and productivity
and ensure that the division remains a leader in this market sector.
OTHER
Packaging and Stationery
Excellent results were achieved by the Packaging division where the benefits of past
acquisitions have been fully realised. This area has shown growth and, with the Nampak
Carton and Label division acquisition, will be an area of focus and growth into the future.
The company will be on the continual lookout for other opportunities to expand these
operations.
Although these divisions have been faced with continued margin pressure, due to rising
input costs on the back of a weak currency, this has been offset by securing increased
volumes. This is testament to the service and quality these divisions have provided.
Stationery manufacturing has continued to be a difficult and unprofitable operation for
the company and the decision has been made to close the manufacturing operation in
Ladysmith.
Review of the Independent Auditors
The company's auditors, Grant Thornton (Jhb) Inc., have reviewed these results. Their
unqualified review 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).
DIVIDEND
The board has declared a dividend of 60.0 cents (2013: 55.0 cents) per ordinary share
(gross) and a preference dividend of 490.0 cents per share (gross) for the year ended
30 June 2014.
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 60.0 cents per ordinary share and 490.0 cents per
preference share for shareholders exempt from Dividends Tax
- Secondary Tax on companies (STC) credits available amount to 14.87753 cents per
ordinary share and preference share
- the net dividend amount is 53.23163 cents per ordinary share and 418.73163 cents
per preference share for shareholders liable for Dividends Tax
- the company has 391,827,651 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 17 October 2014.
Shares will be traded ex-dividend from Monday 20 October 2014.
The record date will be Friday 24 October 2014 and payment will be made on Monday
27 October 2014.
Share Certificates may not be dematerialised or materialised between Monday 20 October
and Friday 24 October 2014, both days inclusive.
Management and Directorate
Mr Tim Holden, the current Financial Director, has been appointed as Caxton
Group Managing Director. He brings a wealth of experience and knowledge of the Caxton
business to his new role. In due course, Caxton will identify and appoint a Financial
Director and Mr Holden will then relinquish that position. Mr Phil Vallet has retired
from the board, having made a significant contribution to Caxton. We wish to thank him
for his guidance over the years. His replacement will be announced shortly.
PROSPECTS
In the volatile business climate which prevails currently, the company is subject to
many factors outside its control. Furthermore, the reported woes of the newspaper industry,
with declining circulations of paid for daily newspapers, affect printing revenue negatively.
The company is fortunate that the local and community newspaper publishing environment has
not experienced the same decline. Every effort is being made to remedy the decline of the
current year. The company has diversified operations, substantial cash reserves and is well
positioned for the future. The packaging division, with the Nampak acquisition, holds future
opportunities, after the integration process has been completed.
26 August 2014
Executive Directors: TD Moolman, PG Greyling, TJW Holden
Non-Executive Directors: PM Jenkins, ACG Molusi, NA Nemukula, T Slabbert, GM Utian, P Vallet
Transfer Secretaries: Computershare Investor Services (Pty) Limited
Registered office: 28 Wright Street, Industria West, Johannesburg
Sponsor
ARCAY MOELA
Date: 26/08/2014 04:10:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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