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CAXTON CTP PUBLISHERS & PRINTERS LD - Reviewed Results for the year ended 30 June 2016

Release Date: 31/08/2016 16:59
Code(s): CAT CATP     PDF:  
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Reviewed Results for the year ended 30 June 2016

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

PROVISIONAL CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME                     Reviewed            Audited   
Reviewed results for the year ended 30 June 2016                                      for the year       for the year   
                                                                                  %     to 30 June         to 30 June   
R'000                                                                        change           2016               2015   
Revenue                                                                        2.3%      6 404 995          6 261 388   
Other operating income                                                                     136 430            111 906   
                                                                                         6 541 425          6 373 294   
Changes in inventories of finished goods and work in progress                               44 276             83 038   
Raw materials and consumables used                                                       2 814 092          2 614 891   
Staff costs                                                                              1 434 239          1 407 389   
IFRS 2 share based payment expense - equity settled                                              -             43 188   
Other operating expenses                                                                 1 486 481          1 466 873   
Total operating expenses                                                       2.9%      5 779 088          5 615 379   
PROFIT FROM OPERATING ACTIVITIES                                               0.6%        762 337            757 915   
Depreciation                                                                               289 150            280 727   
PROFIT FROM OPERATING ACTIVITIES AFTER DEPRECIATION                           -0.8%        473 187            477 188   
Impairment of plant and goodwill                                                            27 583             22 174   
NET PROFIT FROM OPERATING ACTIVITIES                                                       445 604            455 014   
Net finance income                                                                         126 899            111 510   
- dividends                                                                                 79 265             63 773   
- interest                                                                                  48 428             50 981   
- IFRS 2 interest on unwinding of transaction                                                3 571              2 200   
- net (loss)/profit on currency hedges                                                     (4 365)            (5 444)   
Net income from associates                                                                  17 636             30 168   
PROFIT BEFORE TAXATION                                                                     590 139            596 692   
Income tax expense                                                                         134 085            162 810   
PROFIT FOR THE YEAR                                                            5.1%        456 054            433 882   
Other comprehensive income:                                                                 93 286            (3 984)   
Items that will be not be reclassified subsequently to profit or loss                                                   
Fair value adjustment - land & buildings                                                    44 954                  -   
Items that will be reclassified subsequently to profit or loss                                                          
Fair value adjustment - investment & preference shares                                      48 332            (3 984)   
TOTAL COMPREHENSIVE INCOME FOR THE YEAR                                                    549 340            429 898   
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:                                                                             
Non-controlling interests                                                                    8 445             10 608   
Owners of the parent                                                                       540 895            419 290   
                                                                                           549 340            429 898   
PROFIT ATTRIBUTABLE TO:                                                                                                 
Non-controlling interests                                                                    8 445             10 608   
Owners of the parent                                                                       447 609            423 274   
                                                                                           456 054            433 882   
Earnings per share (cents)                                                     5.3%          112.5              106.8     
Headline earnings per share (cents)                                            7.0%          116.4              108.8      
Preference dividend paid per share in respect of the previous year (cents)                     530                490   
Ordinary dividends paid per share in respect of the previous year (cents)                       65                 60   
WANOS in issue (Weighted average number of shares)                                     397 982 185        391 632 132   
WANOS shares allocated not issued                                                                -          4 830 685   
Earnings per share based on                                                            397 982 185        396 462 817   

Reconciliation of headline earnings:                                                                                    
Earnings attributable to owners of company                                                 447 609            423 274   
Adjusted for non-trading items                                                              15 618              8 013   
Impairment of plant and goodwill                                                            27 583             22 174   
Net profit on disposal of assets                                                           (5 892)           (11 045)   
Tax effect on above adjustments                                                            (6 073)            (3 116)   
Headline earnings                                                                          463 227            431 289   

Condensed segmental analysis                                                                      
Revenue:                                                                                                                       
                                                                                                        %                  %   
Publishing, printing and distribution                                                    4 976 694     78   4 953 458     79   
Packaging                                                                                1 987 843     31   1 933 608     31   
Other                                                                                      281 433      4     307 109      5   
Inter-group sales - publishing, printing and distribution                                (786 572)   (12)   (862 779)   (14)   
Inter-group sales - packaging                                                             (49 532)    (1)    (61 698)    (1)   
Inter-group sales - other                                                                  (4 871)    (0)     (8 310)    (0)   
                                                                                         6 404 995    100   6 261 388    100   
Profit from operating activities after depreciation                                                                            
Publishing, printing and distribution                                                      307 956     65     348 622     73   
Packaging                                                                                  151 492     32     165 589     35   
Other                                                                                       13 739      3    (37 023)    (8)   
                                                                                           473 187    100     477 188    100   

PROVISIONAL CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                               Reviewed            Audited   
                                                                                      for the year       for the year   
                                                                                        to 30 June         to 30 June   
R'000                                                                                         2016               2015   
CASH FLOW FROM OPERATING ACTIVITIES                                                        399 292            515 149   
Cash generated by operations                                                               758 050            766 688   
Changes in working capital                                                               (111 052)             50 847   
Cash generated by operating activities                                                     646 998            817 535   
Taxation paid                                                                            (109 446)          (175 547)   
Net interest received                                                                       48 428             50 981   
Dividends received                                                                          79 265             63 773   
Net cash generated from operating activities                                               665 245            756 742   
Dividends paid                                                                           (265 953)          (241 593)   
CASH  FLOW FROM INVESTING ACTIVITIES                                                     (370 632)          (710 567)   
Property, plant & equipment                                                                                             
- additions to maintain and expand operations                                            (353 043)          (453 624)   
- proceeds from disposals                                                                   12 334             69 573   
                                                                                         (340 709)          (384 051)   
- minority interest acquired                                                               (1 867)                  -   
-subsidiary businesses (net of cash acquired)                                             (19 198)          (337 342)   
Associates, other investments and loans                                                    (8 858)             10 826   

CASH FLOWS FROM FINANCING ACTIVITIES                                                         1 114           (32 825)   
Shares allocated in prior year now issued                                                    6 000                  -   
Own shares acquired                                                                        (4 886)           (32 825)   
Net increase/(decrease) in cash and cash equivalents                                        29 774          (228 243)   
Cash and cash equivalents at the beginning of the year                                   2 000 412          2 228 655   
Cash and cash equivalents at the end of the year                                         2 030 186          2 000 412   
Fair value adjustment of preference shares                                                (11 861)           (11 480)   
Fair value of cash and cash equivalents at the end of the year                           2 018 325          1 988 932   
Note :                                                                                                                  
Cash                                                                                       908 020            878 247   
Bank preference shares at fair value                                                     1 110 305          1 110 685   
Fair value of cash and cash equivalents at the end of the year                           2 018 325          1 988 932   

PROVISIONAL CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION                                     
                                                                                          Reviewed            Audited   
                                                                                           30 June            30 June   
R'000                                                                                         2016               2015   
Assets                                                                                                                  
Non-current assets                                                                                                      
Property, plant and equipment                                                            2 594 389          2 484 914   
Associated companies                                                                       272 156            240 030   
Other investments at fair value                                                             86 155             29 026   
- Listed                                                                                        34                 34   
- Unlisted                                                                                  86 121             28 992   
Deferred taxation                                                                           19 299              2 142   
Loans to directors                                                                          74 987             71 416   
Total non-current assets                                                                 3 046 986          2 827 528   
Current assets                                                                                                          
Inventories                                                                                806 228            811 659   
Accounts receivable                                                                      1 160 063          1 052 058   
Taxation                                                                                    17 961             10 226   
Cash                                                                                       908 020            878 247   
Listed bank preference shares at fair value                                                 60 305             60 685   
Unlisted bank preference shares                                                          1 050 000          1 050 000   
Total current assets                                                                     4 002 577          3 862 875   
Total assets                                                                             7 049 563          6 690 403   
Equity and Liabilities                                                                                                  
Equity                                                                                   5 579 393          5 296 760   
Equity attributable to owners of the parent                                              5 522 682          5 239 661   
Preference shareholders                                                                        100                100   
Non-controlling interest                                                                    56 611             56 999   
Non-current liabilities                                                                                                 
Deferred taxation                                                                          354 634            283 431   
Current liabilities                                                                                                     
Trade and other payables                                                                   883 677            885 312   
Taxation                                                                                     5 354                  -   
Provisions                                                                                 226 505            224 900   
Total current liabilities                                                                1 115 536          1 110 212   
Total equity and liabilities                                                             7 049 563          6 690 403   
Net asset value per share (cents)                                                            1 406              1 352   
Directors' valuation of unlisted investments and associated companies                      358 276            269 022   
Capital expenditure                                                                        353 043            453 624   
Capital expenditure committed                                                               90 000            144 000   

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY                                    Reviewed            Audited   
                                                                                           30 June            30 June   
R'000                                                                                         2016               2015   
Balance at beginning of the year                                                         5 296 760          5 028 876   
Total comprehensive profit for the period                                                  549 340            429 897   
Share buy backs                                                                              1 114           (32 825)   
Shares allotted not issued                                                                       -            112 404   
Dividends paid - ordinary  & preference shareholders                                     (258 985)          (235 341)   
Minority interest acquired                                                                 (1 867)                  -   
Dividends paid - minority shareholders                                                     (6 969)            (6 251)   
Balance at end of the year                                                               5 579 393          5 296 760
   
Note:                                                                                           
Business combination                                                                                            R'000   

The group acquired the following business, which has been accounted for as business combinations, during the year as follows:

Compact Disc Technologies a division of Times Media Group Limited was acquired with an effective date of 1 April 2016 which has 
been accounted for as a business combination for the current period.

The acquired business contributed revenue of R9,4 million and a net loss after tax of R2,3 million. Had this business been
acquired for the full reporting period the revenue would have been R40,6 million and the net loss after tax would be R9,2 million.

These amounts have been calculated using the group's accounting policies.

Details of the assets and liabilities from the acquisition are as follows: 
                          
R'000                                                                                            Acquires fair values   
Plant and equipment                                                                                            21 676   
Inventory                                                                                                       7 969   
Other payables                                                                                               (10 447)   
Fair value of net assets acquired                                                                              19 198   
Total cash purchase consideration                                                                              19 198   
                                                                                                                    -   
Note: Investments listed - available for sale

Equity price risk refers to the risk that the fair value of the future cash flows of the listed investments will fluctuate because of changes in
the market prices. The Group's available for sale financial assets are valued using the fair market value at 30 June 2016.

Fair value estimation

IFRS 13 requires disclosures of fair value measurements by level of the following fair value measurement hierarchy:
Level 1 - Quoted prices available in active markets for identical assets or liabilities.
Level 2 - Inputs used, other than quoted prices, included within Level 1, that are observable for the asset or liability, either directly or indirectly .
Level 3 - Fair value determined by valuation that uses inputs that are not based on observable market data.

The level of each investment is determined as follows:
- Old Mutual is Level 1
- Thebe Convergent Technology and Stanlib are Level 2


Commentary

Basis of Preparation

The accounting policies adopted in the preparation of the Provisional condensed consolidated 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 IAS34 on interim reporting, the
JSE Listings Requirements, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee,
financial reporting pronouncements as issued by the Financial Reporting Standards Council and the Companies
Act of South Africa.

Earnings

The previously predicted difficult trading conditions prevailed in the second half of the financial year, led by
declining economic growth and increasing raw material costs on the back of a deteriorating exchange rate. The
group has managed to limit the impact of these factors on profitability, resulting in net profit from operating
activities declining by 2, 1 % to R 445, 6 million from R 455, 0 million.

Revenue growth continues to be hampered by the prevailing low growth environment and showed a marginal
growth of 2, 3% to R 6, 405 billion. The newspaper division has shown resilience and has reflected encouraging
revenue growth which is a reversal of the trend in the national newspaper environment. This, however, was offset
by continued decline in magazine revenue both from declining circulations and advertising revenue.

Raw material input costs, as predicted, increased in the second half of the financial year as a result of the
significant depreciating rand exchange rate. This put pressure on margins in a number of our divisions as there is
typically a lag period to recover such large cost movements from the customer base.

Staff costs and other operating expenses continue to be well controlled, increasing marginally year on year.

Profit from operating activities amounted to R 762, 3 million similar to that achieved in the prior period. However
if the once off IFRS 2 share based expense of R 43, 2 million reflected in the prior period is excluded then profit
from operating activities would have declined by 4,8%. Depreciation increased from R 280, 7 million to 
R 289, 2 million while impairment of plant accounted for R 27, 6 million which included the impact from the reorganization
of the Gauteng packaging operations that is currently underway.

Net finance income increased by 13, 8% to R 126, 9 million reflective of the increasing interest rate environment.

Net income from associates has declined from R 30, 2 million to R 17, 6 million as a result of a once off profit from
a property sale in the prior period and declining performance from Cognition Holdings.

Profit before taxation of R 590, 1 million is similar to that of the prior year. Taxation at an effective rate of 22,7%
absorbed R134,1 million which resulted in profit after taxation of R 456,1 million , an increase of 5,1%.

The weighted number of shares in issue of 397 982 185 resulted in earnings per share of 112,5 cents , an increase
of 5,3% and headline earnings per share of 116,4 cents , an increase of 7,0%. Excluding non-recurring items, being
the once off IFRS 2 share based expense and business interruption insurance claim, adjusted earnings per share
declined by 6, 8% and adjusted headline earnings per share declined by 5, 1%.

Cash Flow

Fair value of cash and cash equivalents amounted to R 2, 018 billion, an increase of R 29,4 million over the prior
year. Cash generated by operations of R 758, 0 million is similar to that achieved in the prior year and is reflective
of the resilience of the group's cash generating ability. Working capital absorbed R 111,1 million mainly as a result
of extended settlement terms given to certain large blue chip customers to combat offers by competitors and a
certain large customer paid late over the financial year. In addition the group increased its dividend payment by
10% to R 266, 0 million.

Capital expenditure amounted to R 353,0 million and was mainly applied to the packaging operations to replace
and upgrade old technology and also investment in infrastructure to facilitate the reorganization of the Gauteng
packaging operations. The benefits of this investment will be felt once the restructure is completed and significant
cost savings realized. This also includes the expenditure made on the new web offset press in the book printing
division that is showing large improvements in efficiencies. Capital expenditure for the forthcoming financial year
is expected to show a marked decrease as all facilities have reached the end of their investment program.

A limited amount of investments were made in the financial year and include the following:

-   The purchase of Times Media's CD/DVD replication business for R 19, 2 million.
-   The acquisition of a 25% stake in Octotel (Pty) Ltd, a fibre to home operation.

DIVISIONAL PERFORMANCE
Publishing, printing and distribution
Newspaper Publishing and Printing

The group's local newspaper business performed admirably in difficult trading conditions and is testament to
the resilience of local media and the solution these media products present to advertisers. National
advertising revenue performed exceptionally well and this has meant that profitability has been maintained. If
it were not for the weak economies in some regions, profitability would have improved.

The pleasing factor of this performance is that the key Gauteng local newspapers grew turnover and
profitability, which is a turnaround from the performance reported on in the last financial year. However in
contrast, our regional papers were impacted by the declining local economies especially in those areas
dominated by mining and steel manufacture. As these economies stabilise, we expect a reversal of this
performance.

The previously reported digital developments have been formally launched across all of the local media
platforms with the focus now shifting to develop the sales strategies that complement both the physical and
digital format. There is an expectation that in the next financial year, the monetising of these digital platforms
will show some growth.

The market for national newspaper publications continues to decline and shows no sign of stabilisation. The
group is fortunate that in its stable of media assets there is only one national newspaper, The Citizen. Having
said this, The Citizen performed in line with expectations. The decline in daily and weekly newspapers is
however felt at our newspaper printing division where significant reductions in copies and paginations is
evident. This decline in volumes would have had a more pronounced effect on profitability had the division
not done well to partly substitute the lost revenue with other commercial work, albeit at lower margins.

Magazine Publishing and Distribution

The magazine division continues to face challenges with the lack of growth in the general economy.
Consumers have less disposable income for discretionary items like magazines and are more selective in the
number of copies bought, whether in physical or digital format. At the same time advertising budgets remain
constrained resulting in advertising revenue decline and the outlook remains unchanged.

In these conditions, the focus is on providing strong, relevant editorial content while containing costs and
ensuring we can offer our audience and advertisers, multiple platforms to ensure any revenue opportunities
are effectively capitalised on.

The group's distribution business, RNA, has had a successful year in further diversifying its revenue stream.
The business is now the leading distribution partner for CD's and DVD's, as a result of the increase in its
customer base. In addition, it has created a merchandising capability to provide merchandising services to its
growing customer base. The continued success of this business will be determined by its ability to grow alternative 
revenue streams that can leverage off its current infrastructure. Currently, the division has started with book 
distribution and has other opportunities that are being evaluated.

Commercial Printing
Web and Gravure

There has been an extremely pleasing improvement in profitability, where the benefits of the restructured
operations were felt in the first half of the financial year while the second half faced a tougher environment.
Increasing raw material input costs and a lag period to pass those on, combined with subdued demand from
key customers, meant that the second half of the year showed no growth.

Book Printing

This division performed well and produced an improved financial result compared to the previous year, even
though revenue declined as the uncertainty in the educational market and reduced text book expenditure by
Government continues. Education publishers face enormous challenges as a result of the reduction in spend
and the unpredictable purchasing from Government. The commissioning of the new web offset press has
contributed to this improved performance by improving efficiencies, reducing waste and creating a more
flexible print environment in which this division can capitalise on in the short run book market and magazine
market.

Packaging

The second half of the financial year proved to be a difficult period which resulted in an annual decline in
earnings, a reversal of the position at the half year reporting period. This period was characterised by declining
demand as well as margin pressure as a result of increasing raw material input costs.

The group's gravure packaging divisions have performed well, benefiting from increased demand from our
major customers. However, this was offset by the performance of the other divisions that felt the full impact of
the declining demand in those markets, lost business due to competitor activity and margin pressure.

The necessary investments in plant and infrastructure have been made to facilitate the restructure of the
Gauteng packaging operations that is currently underway, with a proposed completion date towards the end
of June 2017. This restructure will streamline operations, and will remove excess capacity and significant 
costs as the process unfolds.

Other

The stationery business has performed well, growing revenue and profitability. During the year, the group
concluded the purchase of the Times Media CD/DVD replication plant and is in the process of integrating the
operation with our facility, which will be concluded by the end of January 2017. This will create the only long
run replication facility in the country and the necessary economies of scale to ensure sustainability in the
medium term.

Prospects

The current low growth economic environment is expected to continue for the next reporting period and will
hamper any meaningful growth in revenue for the group .The focus will therefore continue to be cost
containment, improving underperforming divisions and taking advantage of any acquisitions.

Review by the Independent Auditors
The company's auditors, Grant Thornton, have reviewed these results. Their unqualified review is available
for inspection at the registered office of the company. The auditor's report does not necessarily report on all
of the information contained in this announcement/financial results. Shareholders are therefore advised that
in order to obtain a full understanding of the nature of the auditor's engagement they should obtain a copy of
the auditor's report together with the accompanying financial information from the issuer's registered office.

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

Dividends

The board has declared a dividend of 70,0 cents (2015: 65,0 cents) per ordinary share (gross) and a
preference dividend of 570,0 cents per share (gross) for the year ending 30 June 2016.

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 70,0 cents per ordinary share and 570,0 cents per preference
     share for shareholders exempt from Dividends Tax
 -   the nett dividend amount is 59,5 cents per ordinary share and 484,5 cents per preference
 -   for shareholders liable for Dividend Tax
 -   the company has 397 678 122 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 Tuesday 15th November 2016.

Shares will be traded ex-dividend from Wednesday 16th November 2016.

The record date will be Friday 18th November 2016 and payment will be made on Monday 21st November 2016

Share Certificates may not be dematerialised or materialised between Wednesday 16th November and 
Friday 18th November 2016, both days inclusive.

31 August 2016



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