Wrap Text
Unaudited Interim Results for the Six Months Ended 31 December 2015
Caxton and CTP Publishers and 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
("the company")
UNAUDITED INTERIM RESULTS
FOR THE SIX MONTHS ENDED
31 DECEMBER 2015
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
Unaudited Unaudited Audited
% Six months to Six months to for the year
change 31 December 31 December to 30 June
R'000 2015 2014 2015
Revenue 0,9 3 300 927 3 272 788 6 261 388
Other operating income 48 437 44 163 111 906
3 349 364 3 316 951 6 373 294
Changes in inventories of
finished goods and work in
progress (74 618) (83 327) 83 038
Raw materials and consumables
used 1 493 875 1 498 962 2 614 891
Staff costs 713 069 700 679 1 407 389
IFRS 2 share-based payment
expense equity settled – – 43 188
Other operating expenses 809 929 772 260 1 466 873
Total operating expenses 2 942 255 2 888 574 5 615 379
PROFIT FROM OPERATING
ACTIVITIES (5,0) 407 109 428 377 757 915
Depreciation 140 396 136 688 280 727
PROFIT FROM OPERATING
ACTIVITIES AFTER DEPRECIATION (8,6) 266 713 291 689 477 188
Impairment of plant – – 22 174
NET PROFIT FROM OPERATING
ACTIVITIES 266 713 291 689 455 014
Net finance income 61 534 55 304 111 510
– dividends 37 637 30 924 63 773
– interest 22 112 24 380 50 981
IFRS 2 deemed interest
receivable on unwinding of
transaction 1 785 – 2 200
– (loss) on currency hedges – – (5 444)
Income from associates 10 267 14 220 30 168
PROFIT BEFORE TAXATION 338 514 361 213 596 692
Income tax expense 88 729 97 158 162 810
PROFIT FOR THE PERIOD (5,4) 249 785 264 055 433 882
Other comprehensive income:
Items that will be reclassified
subsequently to profit or loss (4 729) (4 876) (3 984)
TOTAL COMPREHENSIVE INCOME
FOR THE PERIOD 245 056 259 179 429 898
PROFIT ATTRIBUTABLE TO:
Non-controlling interests 5 709 7 111 10 608
Owners of the parent 244 076 256 944 423 274
249 785 264 055 433 882
TOTAL COMPREHENSIVE INCOME
ATTRIBUTABLE TO:
Non-controlling interests 5 709 7 111 10 608
Owners of the parent 239 347 252 068 419 290
245 046 259 179 429 898
Earnings per share (cents) (6,6) 61,3 65,6 106,8
Adjusted earnings per share
(cents) 61,3 65,6 117,1
Headline earnings per share
(cents) (6,5) 61,2 65,4 108,8
Adjusted headline earnings per
share (cents) 61,2 65,4 119,1
Shares in issue/weighted
average number of shares in
issue 398 030 651 391 827 651 396 462 817
Weighted average number of
treasury shares (4 007) (310 000) –
Earnings per share based on 398 026 644 391 517 651 396 462 817
Reconciliation of adjusted
earnings:
Total comprehensive income
attributable to owners of the
parent 244 076 256 944 423 274
Net IFRS 2 share-based payment
expense – equity settled – – 40 988
244 076 256 944 464 262
Reconciliation of headline
earnings:
Earnings attributable to owners
of company 244 076 256 944 423 274
Adjusted for non-trading items (528) (779) 8 014
Net impairment in value of
property and plant – – 22 175
Net (profit)/loss on disposal
of assets (733) (1 082) (11 045)
Tax effect on above adjustments 205 303 (3 116)
Headline earnings 243 548 256 165 431 288
Net IFRS 2 share based payment
expense – equity settled – – 40 988
Reconciliation of adjusted
headline earnings 243 548 256 165 472 276
Segmental analysis
Revenue: % % %
Publishing, printing and
distribution 2 101 299 64 2 137 371 65 4 090 679 65
Packaging 1 018 347 31 920 236 28 1 871 910 30
Other 181 281 5 215 181 7 298 799 5
3 300 927 100 3 272 788 100 6 261 388 100
Profit from operating
activities after
depreciation
Publishing, printing and
distribution 192 782 72 204 484 70 348 622 73
Packaging 84 666 32 75 006 26 165 589 35
Other (10 735) (4) 12 199 4 (37 023) (8)
266 713 100 291 689 100 477 188 100
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Unaudited Unaudited Audited
31 December 31 December 30 June
R'000 2015 2014 2015
Balance at beginning of the year 5 296 760 5 028 876 5 028 876
Total comprehensive profit for the period 245 056 259 179 429 898
Shares allocated not issued IFRS 2 – – 112 404
Treasury shares and share buy backs (1 087) (4 660) (32 825)
Dividends paid – ordinary and preference
shareholders (262 765) (238 655) (241 593)
Balance at end of the year 5 277 964 5 044 740 5 296 760
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited Unaudited Audited
Six months to Six months to for the year
31 December 31 December to 30 June
R'000 2015 2014 2015
CASH FLOW FROM OPERATING ACTIVITIES (118 361) (125 947) 515 149
Cash generated by operations 410 774 453 261 766 688
Changes in working capital (260 475) (296 862) 50 847
Cash generated by operating activities 150 299 156 398 817 535
Less: Taxation paid (65 644) (98 994) (175 547)
Net interest received 22 112 24 380 50 981
Dividends received 37 637 30 924 63 773
Net cash generated from
operating activities 144 404 112 708 756 742
Dividends paid (262 765) (238 655) (241 593)
CASH FLOW FROM INVESTING ACTIVITIES (166 970) (525 427) (710 567)
Property, plant and equipment
– additions to maintain and expand
operations (176 921) (207 101) (453 624)
– proceeds from disposals 6 348 10 808 69 573
(170 573) (196 293) (384 051)
Investments
– subsidiary businesses acquired (net of
cash) – (328 447) (337 342)
– Associates, other investments and loans
(net of taxation) 3 603 (687) 10 826
3 603 (329 134) (326 516)
CASH FLOWS FROM FINANCING ACTIVITIES (1 087) (4 660) (32 825)
Own shares acquired (1 087) (4 660) (32 825)
Net decrease in cash and cash equivalents (286 418) (656 034) (228 243)
Cash and cash equivalents at the beginning
of the year 2 000 412 2 228 655 2 228 655
Cash and cash equivalents at the end of
the period 1 713 994 1 572 621 2 000 412
Fair value adjustment of preference shares
and other investments (17 297) (12 578) (11 480)
Fair value of cash and cash equivalents at
the end of the period 1 696 697 1 560 043 1 988 932
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION
Unaudited Unaudited Audited
31 December 31 December 30 June
R'000 2015 2014 2015
ASSETS
Non-current assets
Property, plant and equipment 2 515 827 2 445 044 2 484 914
Interest in associates 251 109 236 259 240 030
Other investments 24 611 28 363 29 026
– listed 34 31 34
– unlisted 24 577 28 332 28 992
Deferred taxation – – 2 142
Loans to directors 67 201 – 71 416
Total non-current assets 2 858 748 2 709 666 2 827 528
Current assets
Inventories 795 886 814 006 811 659
Accounts receivable 1 307 129 1 425 112 1 052 058
Taxation 13 722 – 10 226
Cash 591 829 650 455 878 247
Listed bank preference shares 54 868 59 588 60 685
Unlisted bank preference shares 1 050 000 850 000 1 050 000
Total current assets 3 813 434 3 799 161 3 862 875
Total assets 6 672 182 6 508 827 6 690 403
EQUITY AND LIABILITIES
Equity 5 277 964 5 044 740 5 296 760
Equity attributable to owners of the parent 5 215 156 4 988 198 5 239 661
Preference shareholders 100 100 100
Non-controlling interest 62 708 56 442 56 999
Non-current liabilities
Deferred taxation 306 784 270 456 283 431
Current liabilities
Trade and other payables 858 870 909 492 885 312
Provisions 228 564 272 837 224 900
Taxation – 11 302 –
Total current liabilities 1 087 434 1 193 632 1 110 212
Total equity and liabilities 6 672 182 6 508 827 6 690 403
Net asset value per share (cents) 1 326 1 289 1 336
Directors' valuation of unlisted investments
and associated companies 275 686 264 591 269 022
Capital expenditure 176 921 207 101 453 624
Capital expenditure committed 180 000 182 000 144 000
COMMENTARY
Highlights
Basis of Preparation
The accounting policies adopted in the preparation of the financial statement for the six 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 2008.
Earnings
The period under review has been characterised by reduced growth, slowing consumer
spending and recent volatility in the exchange rate. These conditions contributed to difficult
trading conditions that intensified towards the end of the year resulting in a decline in earnings.
Revenue showed marginal growth of 1% to R3,301 billion reflecting the limited growth
environment. Encouraging sales growth was achieved in the newspaper division but this
was offset by a further decline in the book printing division as government spending on text
books continues to be uncertain as well as the continued decline in advertising revenue in the
magazine division.
Raw material input costs have been well controlled but the sudden volatility of the exchange
rate towards the end of the year will have an impact going forward.
Staff costs and other operating expenses have remained an area of focus and increased by
a marginal 3,4% over the corresponding period as the benefits of the prior year restructuring
initiatives are being felt.
Profit from operating activities has declined from R428,4 million to R407,1 million. Depreciation
increased from R136,7 million to R140,4 million resulting in a decline of 8,6% in net profit
from operating activities to R266,7 million. This decline was offset to a certain extent by an
increase in net finance income by 11,3% to R61,5 million as a result of the increasing interest
rate environment and increased dividend flow.
Income from associates declined to R10,3 million from R14,2 million.
Profit before taxation declined from R361,2 million to R338,5 million. Taxation at a rate
of 26,2% absorbed R88,7 million which resulted in a profit after tax for the period of
R249,8 million a decrease of 5,4% over the corresponding period.
The weighted number of shares in issue compared to the corresponding period increased to
398 026 645 as a result of the share allocation to executive directors. The resultant earnings
per share for the period are 61,3 cents per share and the headline earnings per share are 61,2
cents per share, reflecting a decrease of 6,6% and 6,5% respectively.
Cash Flow
Fair value of cash and cash equivalents at 31 December 2015 amounted to R1,697 billion.
Net cash generated from operating activities increased to R144,4 million, up 28,1% from
the previous year due to a reduction in capital gains and provisional taxation paid. This was
offset by the increased dividend paid to shareholders which resulted in cash from operating
activities declining by 6% over the corresponding period.
DIVISIONAL PERFORMANCE
PUBLISHING, PRINTING AND DISTRIBUTION
Newspaper Publishing and Printing
Although the daily and weekly newspaper industry continues to experience declining
circulations and advertising revenues our group is fortunate that the local newspapers have
bucked this trend and managed to show a slight growth in turnover. This has meant that the
newspaper publishing division has managed to maintain profitability.
We are encouraged that the previously reported weakness in the metropolitan local
newspapers has abated with growth in turnover and profitability being achieved especially
in the core Gauteng areas. This is in contrast to the regional newspapers where the slump
in commodity prices has led to mine and steel industry closures which has impacted our
businesses in those areas.
Significant investment is still being made in our digital strategy and in the near future a number
of exciting digital offerings will be launched on the local platforms. We are convinced that our
strategy of focusing on local communities, where we currently have large audiences through
our print offerings, will prove beneficial in driving digital revenues. This is in contrast to many
national digital platforms that have found it difficult to monetise their platforms.
The newspaper printing division continues to be faced with declining turnover from the
traditional newspaper customers although to varying degrees. This decline has however been partially
off-set by securing print from other non-traditional markets. This was however not sufficient to
prevent a substantial decline in profitability.
Magazine Publishing and Distribution
The magazine industry continues the journey to grow digital assets, while still leveraging the
traditional print business. Caxton's ongoing development and investment in digital platforms
and distribution channels will ensure that the magazine brands deliver meaningful growth
across all platforms and formats. A substantial increase in our digital audiences has been a
very positive development and will remain a focus. Although there has been some transition of
consumer magazine advertising from print to digital, the digital revenue is still relatively small.
For now print is a very important part of any campaign and delivers the best results when
included. Magazines continue to play a crucial, but often undervalued, role in brand building,
driving sales and effective consumer reach.
The effects of a weak economy and low consumer confidence have impacted revenues from
both advertising and copy sales in the last quarter. It is difficult to predict when the outlook for
magazine publishers will improve and until this happens our focus will remain on developing
and implementing sustainable structures, curtailing costs and finding vital multi-media revenue
opportunities.
The group's magazine distribution business (RNA) declined in profitability but this was offset
to some extent by the growth in the distribution of entertainment products (CDs and DVDs)
by servicing an increased customer base through the same infrastructure. This division faces
continuing challenges as it adjusts to declining distribution volumes and the impact of the
exchange rate volatility on margins in the imported product portfolio.
COMMERCIAL PRINTING
Web and Gravure
As reported at year end, the expected growth in profitability in the first six months has
materialised. This has been achieved through a combination of improved volumes and
the continued benefits of the rationalisation initiatives. However, the business is facing the
challenges of a declining economy and our limited ability to pass on raw material input cost
increases due to the depreciating rand.
Book Printing
The division produced a satisfactory financial result given the constraints imposed by the major
markets in which the division operates, namely education text books and magazines.
Print revenue continues to be severely affected by the significant decline in spend by education
book publishers, directly attributed to the decreasing spend by Government on text books.
The magazine market is similarly negatively impacted by reduced consumer spend and
competition for advertising which has resulted in declining paginations and print runs, again
affecting print revenues.
The division has made improvements in efficiency and productivity during the period by the
implementation of a formal continuous improvement programme. The initiatives identified by
this programme, together with commissioning of a new web offset press in January 2016 will
ensure that the division is able to meet the challenges of our highly competitive markets during
these difficult economic conditions.
Packaging
The packaging divisions performed reasonably in the face of increasingly difficult trading
conditions led by competitor activity and pressure on margins. The period under review
was positively impacted by some major customers pulling orders forward for operational
reasons and in some cases demand increased as alternative suppliers could not meet customer
requirements.
The second half of the financial year is expected to be increasingly difficult as the full impact
of the weakened exchange rate and also lost business is felt. In the face of this environment
the focus is to complete the restructure of the Gauteng operations which will further reduce the
cost base and improve efficiencies.
Other
The stationery business continues to benefit from the closure of the Ladysmith operation.
Prospects
The current difficult trading conditions are expected to worsen in South Africa and become
increasingly difficult, impacted by the economy's declining growth prospects and a volatile
exchange rate. Against this background it will be difficult to maintain earnings in the medium
term, although the group is in an enviable position relative to the market, with a strong balance
sheet which will enable it to take advantage of any opportunities that may arise in our sectors,
as conditions continue to deteriorate.
Statement of responsibility
The preparation of the group's consolidated results was supervised by the Acting Financial
Director, Mr TJW Holden, BCom, CA(SA).
23 February 2016
Executive Directors: TD Moolman, PG Greyling, TJW Holden
Non-executive Directors: PM Jenkins, ACG Molusi, NA Nemukula, J Phalane, T Slabbert, GM Utian
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
Date: 23/02/2016 03:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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