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

CAXTON CTP PUBLISHERS & PRINTERS LD - Unaudited Results for the Six Months ended 31 December 2016

Release Date: 22/02/2017 14:35
Code(s): CAT CATP     PDF:  
Wrap Text
Unaudited Results for the Six Months ended 31 December 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 

UNAUDITED RESULTS FOR THE SIX MONTHS ENDED
31 DECEMBER 2016

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF PROFIT AND LOSS
AND OTHER COMPREHENSIVE INCOME

                                                                     Unaudited        Unaudited            Audited
                                                                 six months to    six months to       for the year
                                                                   31 December      31 December         to 30 June
R'000                                             % change                2016             2015               2016
Revenue                                                5.8           3 493 161        3 300 927          6 404 995
Other operating income                                                  51 009           48 437            136 430
                                                                     3 544 170        3 349 364          6 541 425
Changes in inventories of finished goods
and work in progress                                                  (48 217)         (74 618)             44 276
Raw materials and consumables used                                   1 611 340        1 493 875          2 814 092
Staff costs                                                            730 966          713 069          1 434 239
Other operating expenses                                               827 643          809 929          1 486 481
Total operating expenses                                             3 121 732        2 942 255          5 779 088
PROFIT FROM OPERATING ACTIVITIES                       3.8             422 438          407 109            762 337
Depreciation                                                           142 287          140 396            289 150
PROFIT FROM OPERATING ACTIVITIES AFTER
DEPRECIATION                                           5.0             280 151          266 713            473 187
Impairment of plant                                                          -                -             27 583
NET PROFIT FROM OPERATING ACTIVITIES                                   280 151          266 713            445 604
Net finance income                                                      73 099           61 534            126 899
-  dividends                                                            44 023           37 637             79 265
-  interest                                                             27 201           22 112             48 428
-  IFRS 2 deemed interest receivable on
   unwinding of transaction                                              1 875            1 785              3 571
-  (loss) on currency hedges                                                 -                -            (4 365)
Net income from associates                                              12 252           10 267             17 636
PROFIT BEFORE TAXATION                                                 365 502          338 514            590 139
Income tax expense                                                      96 175           88 729            134 085
PROFIT FOR THE PERIOD                                  7.8             269 327          249 785            456 054
Other comprehensive income:
Items that will not be reclassified
subsequently to profit or loss                                               -                -             44 954
Items that will be reclassified subsequently to
profit or loss                                                           (292)          (4 729)             48 332
TOTAL COMPREHENSIVE INCOME FOR THE
PERIOD                                                                 269 035          245 056            549 340
TOTAL COMPREHENSIVE INCOME
ATTRIBUTABLE TO:
Non-controlling interests                                                4 365            5 709              8 445
Owners of the parent                                                   264 670          239 347            540 895
                                                                       269 035          245 056            549 340
PROFIT ATTRIBUTABLE TO:
Non-controlling interests                                                4 365            5 709              8 445
Owners of the parent                                                   264 962          244 076            447 609
                                                                       269 327          249 785            456 054
Earnings per share (cents)                             8.8                66.7             61.3              112.5
Headline earnings per share (cents)                    8.8                66.6             61.2              116.4
Preference dividend paid per share in
respect of the previous year (cents)                                       570              530                530
Ordinary dividend paid per share in respect
of the previous year (cents)                                                70               65                 65
Shares in issue/weighted average number of
shares in issue                                                    397 702 340      398 030 651        397 982 185
Weighted average number of treasury shares                           (711 773)          (4 007)                  -
Earnings per share based on                                        396 990 567      398 026 644        397 982 185
Reconciliation of headline earnings:
Earnings attributable to owners of company                             264 962          244 076            447 609
Adjusted for non-trading items                                           (661)            (528)             15 618
Impairment of plant and goodwill                                             -                -             27 583
Net profit on disposal of assets                                         (918)            (733)            (5 892)
Tax effect on above adjustments                                            257              205            (6 073)
Headline earnings                                                      264 301          243 548            463 227


                                           
                                        Unaudited                    Unaudited                    Audited   
                                    six months to                six months to               for the year
                                      31 December                  31 December                 to 30 June
Condensed segmental analysis                 2016              %          2015          %            2016        %
Revenue:
Publishing, printing and
distribution                            2 200 087             63     2 101 299         64       4 190 122       66
Packaging and stationery                1 215 007             35     1 152 073         35       2 125 923       33
Other                                      78 067              2        47 555          1          88 950        1
                                        3 493 161            100     3 300 927        100       6 404 995      100
Profit from operating activities
after depreciation
Publishing, printing and
distribution                              171 704             61       192 782         72         307 956       65
Packaging and stationery                  111 711             40        94 697         36         154 165       33
Other                                     (3 264)            (1)      (20 766)        (8)          11 066        2
                                          280 151            100       266 713        100         473 187      100

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                                                                          2016            2015           2016
CASH FLOW FROM OPERATING ACTIVITIES                                       (203 189)       (118 361)        399 291
Cash generated by operations                                                386 737         410 774        758 050
Changes in working capital                                                (338 023)       (260 475)      (111 053)
Cash generated by operating activities                                       48 714         150 299        646 997
Less: Taxation paid                                                        (42 755)        (65 644)      (109 445)
Net interest received                                                        27 201          22 112         48 428
Dividends received                                                           44 023          37 637         79 265
Net cash inflow from from operating activities                               77 183         144 404        665 245
Dividends paid                                                            (280 372)       (262 765)      (265 954)
CASH FLOW FROM INVESTING ACTIVITIES                                       (271 390)       (166 970)      (368 764)
Property, plant and equipment
- additions to maintain and expand operations                             (161 221)       (176 921)      (353 043)
- proceeds from disposals                                                     8 148           6 348         12 334
                                                                          (153 073)       (170 573)      (340 709)
Investments
- subsidiary and business acquired (net of cash
  acquired)                                                               (104 047)               -       (19 198)
- Associates, other investments and loans (net of
  taxation)                                                                (14 270)           3 603        (8 857)
                                                                          (118 317)           3 603       (28 055)
CASH FLOWS FROM FINANCING ACTIVITIES                                       (13 724)         (1 087)          (753)
Minority interest acquired                                                        -               -        (1 867)
Shares issued                                                                     -               -          6 000
Own shares acquired                                                        (13 724)         (1 087)        (4 886)
Net (decrease)/increase in cash and cash equivalents                      (488 303)       (286 418)         29 774
Cash acquired                                                                 (380)              -               -
Cash and cash equivalents at the beginning of the year                    2 030 186       2 000 412      2 000 412
Cash and cash equivalents at the end of the period                        1 541 503       1 713 994      2 030 186
Fair value adjustment of preference shares and other
investments                                                                (12 237)        (17 297)       (11 861)
Fair value of cash and cash equivalents at the end of
the period                                                               1 529 266        1 696 697      2 018 325

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

                                                                     Unaudited         Unaudited           Audited   
                                                                   31 December       31 December           30 June   
R'000                                                                     2016              2015              2016   
ASSETS                                                                                                               
Non-current assets                                                   3 155 723         2 858 748         3 046 987   
Property, plant and equipment                                        2 634 749         2 515 827         2 594 389   
Goodwill                                                                64 700                 -                 -   
Interest in associates                                                 286 558           251 109           272 157
Other investments                                                       92 854            24 611            86 155   
- Listed                                                                 8 128                34                34   
- Unlisted                                                              84 726            24 577            86 121   
Deferred taxation                                                            -                 -            19 299   
Loans to directors                                                      76 862            67 201            74 987   
Current assets                                                       3 964 288         3 813 434         4 002 578   
Inventories                                                            881 456           795 886           806 229   
Accounts receivable                                                  1 553 566         1 307 129         1 160 063   
Taxation                                                                     -            13 722            17 961   
Bank and cash resources                                                419 337           591 829           908 020   
Listed bank preference shares                                           59 929            54 868            60 305   
Unlisted bank preference shares                                      1 050 000         1 050 000         1 050 000   
Total assets                                                         7 120 011         6 672 182         7 049 565   
EQUITY AND LIABILITIES                                                                                               
Equity                                                               5 554 332         5 277 964         5 579 393   
Equity attributable to owners of the parent                          5 493 257         5 215 156         5 522 685   
Preference shareholders                                                    100               100               100   
Non-controlling interest                                                60 975            62 708            56 608   
Non-current liabilities                                                                                              
Deferred taxation                                                      353 097           306 784           354 636   
Current liabilities                                                  1 212 582         1 087 434         1 115 536   
Accounts payable                                                     1 005 152           858 870           883 677   
Provisions                                                             187 529           228 564           226 505   
Taxation                                                                19 901                 -             5 354   
Total equity and liabilities                                         7 120 011         6 672 182         7 049 565   
Net tangible asset value per share (cents)                               1 399             1 326             1 406   
Directors' valuation of unlisted investments and associated
companies                                                              371 284           275 686           358 278   
Capital expenditure                                                    161 221           176 921           353 043   
Capital expenditure committed                                          112 500           180 000            90 000   

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

                                                                           Unaudited       Unaudited       Audited
                                                                         31 December     31 December       30 June
R'000                                                                           2016            2015          2016
Balance at beginning of the year                                           5 579 393       5 296 760     5 296 760
Total comprehensive profit for the period                                    269 035         245 056       549 340
Shares issued                                                                      -               -         6 000
Own shares acquired                                                         (13 724)         (1 087)       (4 886)
Dividends paid - ordinary and preference
shareholders                                                               (280 372)       (262 765)     (265 954)
Minority interest acquired                                                         -               -       (1 867)
Balance at end of the year                                                 5 554 332       5 277 964     5 579 393

Note:

Business combinations

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

Flip File (Pty) Ltd was acquired with an effective date of 1 September 2016 and the net assets of Boland
Printers were acquired with an effective date of 30 September 2016.

The acquired businesses contributed revenue of R68.7 million and a net profit after tax of R7.8 million. Had
these businesses been acquired for the full reporting period the revenue would have been R75.2 million
and the net profit after tax would be R9.9 million

Details of the assets and liabilities from the acquisitions are as follows:

                                                                                                    Acquirees fair
R'000                                                                                                        value
Goodwill                                                                                                    64 700
Property, plant and equipment                                                                               28 679
Inventory                                                                                                   16 764
Accounts receivable                                                                                         23 650
Accounts payable                                                                                          (29 366)
Cash acquired                                                                                                (380)
Fair value of net assets acquired                                                                          104 047
Total cash purchase consideration                                                                          104 047
                                                                                                                 -
These business combinations are accounted for in these results.

Commentary

Basis of preparation

The unaudited interim financial statements for the six months ended 31 December 2016 have been prepared
in accordance with International Financial Reporting Standards (IFRS) as issued by the International
Accounting Standards Board (IASB), the South African Institute of Chartered Accountants Financial Reporting
Guides as issued by the Accounting Practices Committee, Financial Reporting Pronouncement as issued by
the Financial Reporting Standards Council (FRSC), the requirements of IAS 34 (Interim Financial Reporting)
and the requirements of the South African Companies Act and the JSE Listings Requirements.

The accounting policies applied in preparing these interim financial statements are consistent with those
presented in the annual financial statements for the year ended 30 June 2016. These interim financial
statements have not been reviewed or reported on by the Caxton Group auditors, Grant Thornton.

Earnings

A hallmark of the Caxton group is that it is able to generate consistent earnings, notwithstanding the very
difficult conditions. This is a reflection of its no-frills management approach, its conservative budgeting and
disciplined containment of costs. In the last few years, the group has also diversified its operations and
product ranges, with a significant focus on its packaging operations. Thus, whilst Caxton is rooted in the
media and publishing business, it has grown into a diversified and multi-faceted organisation.

The group has produced a solid set of results. This is testament to the group's resilience as well as the benefits
of the diversification of its business through acquisitions that have taken place over the last few years.

The group will continue its diversification by growing its packaging business through acquisitions, leveraging
its distribution business to service non-media products and supporting the growth of its fibre to the home
(FTTH) and internet service provider (ISP) investments, in partnership with Pembani Remgro Infrastructure Fund.

Revenue grew 5.8% to R3,493 billion, helped by acquisitions, increased demand from government for
educational text books and a significant turnover increase from our flexible packaging operation. This
was partially offset by reduced turnover in the newspaper and magazine divisions, where subdued local
advertising demand and continued decline in magazine circulation and advertising revenues were evident.

Raw material input costs benefited from a more stable exchange rate environment that allowed divisions
to stabilise pricing and margins, although in some markets this was mitigated by continued competitor
pressures. Staff costs and other operating costs continued to be well managed, increasing by 2.5% and
2.2% respectively.

Profit from operating activities after depreciation increased by 5.0% to R280.2 million from R266.7 million in
the prior period. Profits were further enhanced by an 18.8% increase in net finance income from R61.5 million
to R73.1 million as a result of interest rates being comparatively higher in the period under review.

Net income from associates increased to R12.2 million as a result of an improvement in profits from the
group's printing associates. This was partially offset by losses incurred by our investment in the fibre to the
home operator, during the development phase as the roll-out gathers momentum.

Profit before taxation has grown 8% to R365.5 million and taxation at an effective rate similar to last year
absorbed R96.2 million, resulting in profit after taxation of R269.3 million - a growth of 7.8%.

The weighted average number of shares in issue declined by a further 991 618 shares to 396 990 567
shares as the group undertook a share buyback programme. This contributed marginally to enhanced
earnings per share of 66.7 cents and headline earnings per share of 66.6 cents - an increase of 8.8% over
the prior period.

Cash flow

The fair value of cash and cash equivalents amounted to R1.5 billion, a decrease of R167.4 million over the
corresponding prior period. Cash generated by operations of R386.7 million was impacted by cash outflows
associated with the restructure of the Gauteng packaging operations, which will have a further impact in
the second half of the year while the process is completed. Working capital absorbed R338.0 million and
was affected by the way public holidays fell, with large debtor receipts only being received early in January
2017. At the time of preparing this report, cash and cash equivalents have increased to R1.8 billion.

Capital expenditure amounted to R161.2 million, resulting from the reinvestment in new equipment and
infrastructure for the packaging divisions, which is now being completed.

The group made two acquisitions during the period:

-  The purchase of a stationery business (Flip File (Pty) Limited) which will add bulk to our existing stationery 
   business and can fully utilise the group's current operations to supply raw material, distribution and
   merchandising services.

-  The purchase of the net assets of a label manufacturer (Boland Printers) in the Western Cape which
   complements our current label business. The process is under way to re-equip this operation to increase
   its capacity to supply other packaging products in addition to labels.

In the period, a loan was made to the group's fibre to the home associate (Octotel), being our share of the
capital required to roll out the network. There is a commitment to further fund this business, based on certain
milestones being achieved, over the next three years. Octotel is currently the largest open serve fibre to the
home business in the Western Cape and has further municipal permissions to increase its coverage. Currently
all the benchmarks on which the business model was premised are being exceeded.

DIVISIONAL PERFORMANCE

Publishing, printing and distribution

Newspaper Publishing and Printing

The daily and weekly newspapers continue to face difficult trading conditions with circulations continuing to
decline, although the rate of decline has levelled off in comparison to prior periods. Advertising revenues
in this market also remain under pressure and although audiences on digital news platforms continue to
increase, the digital revenue generated does not replace the reduction in print advertising revenues.

Notwithstanding these circumstances, The Citizen has managed to post marginally improved results on the
back of a cover price increase, stable advertising revenue and strict control over costs.

In contrast to the above trend, national advertising revenues in our local newspapers continue to show
consistent year-on-year growth, thanks to their unique positioning and ability to fulfil the retailers' requirements.
The same cannot be said for local advertising revenues which experienced a significant year-on-year decline.
Numerous factors have led to this decline - notably the general state of the microeconomic environment in
the various towns that our publications serve. There has been a considerable drop in consumer spending and
this has had a concomitant effect on local businesses and their ability to spend on advertising. This together
with continued expenditure on the group's digital platforms has meant a decline in this division's profitability.

The group's newspaper printing division profitability continues to be under pressure due to declining
paginations and circulations of the daily and weekly publications. The rate of decline has levelled off but
due to the high fixed-cost nature of this operation any decline has a bottom line impact. The management
has done well to mitigate some of this decline through strict control of variable costs and growing the semi-
commercial work.

Magazine Publishing and Distribution

The magazine division continues to contend with declines in circulations and advertising revenues.
Notwithstanding the difficult environment, our titles have managed to maintain market share. The division
continues to focus on expanding its digital offering, which has seen the revamp of most of the title websites
and has been successful in growing digital audiences. This has provided new opportunities for advertisers
to run campaigns across both a print and digital platform. This having been said, print is still the dominant
portion of such campaigns and the digital revenue cannot compensate for the reduced revenues from the
print offering.

The reduced magazine circulations have meant that there is continued focus on improving operational
efficiencies through optimising print orders and reviewing allocations in order to maximise sales wherever
possible. These measures have had some success in mitigating the overall revenue decline.

The group's distribution business (RNA) has a unique and extensive network that has the capability of
servicing approximately 12 000 retail outlets on a weekly cycle. It is this network that provides the opportunity
to deliver merchandise cost-effectively and consistently. There is a renewed focus on using this network to
deliver non-traditional merchandise and in the period under review, some progress has been made in this
regard. The division has undertaken pilot projects in using its network to deliver stationery products, diaries
and books. These initiatives have proved to be successful and the intention is to roll them out on a larger scale
over the next year. RNA also provides customers with an end-to-end solution involving retailer management,
warehousing, and distribution and merchandising services.

In the period under review RNA's core media products continued to decline but strict cost management
limited the impact on profitability. The roll-out of new product lines is critical to the growth of this division
into the future.

Commercial Printing

Web and Gravure

Despite subdued trading conditions and declining magazine print orders, this division maintained profitability,
which is a commendable achievement as the prior period included major once-off rationalisation benefits.
Although volumes declined slightly, this was offset by a more stable raw material environment resulting in a
slight improvement in margins.

Book Printing

The unexpected increase in government spending on text books for the Eastern Cape was the main driving
force for an excellent first six months. This resulted in a much needed boost to the industry but this lack of
predictability and planning created enormous challenges in managing raw material requirements, capacity
constraints and labour requirements. Despite these constraints, this division has managed to fulfil and exceed
its customer requirements and endorses the benefits of investing in the new web press capability, run by a
highly competent team.

This division has also managed to grow market share in the periodical publication and diary markets, where
our reputation for quality and service combined with a competitive pricing strategy has been successful.

The division has established a digital print department and is now able to provide customers with a full
service offering for short, medium and long run book printing under one management team.

Packaging and Stationery

Packaging

The packaging divisions have performed well and increased profitability. This was assisted by a more stable
exchange rate environment, although continued competitor activity mitigated this to some extent.

The gravure divisions continue to perform well with increased efficiencies from these excellently managed
units. These operations are key to the restructure of the Gauteng packaging operations and the move of
specific work from litho operations to gravure has been successful. Good progress has been made with
the restructuring project and the target of closing our Denver litho operation is on track for the end of the
financial year. The benefits of this project are being felt progressively, with operational costs being reduced
as we near completion.

Another pleasing feature has been the turnaround in performance of our well-equipped Flexibles operation in
the Western Cape. This operation has shown tremendous improvement in operational efficiencies which has
meant that we have been able to service our customers with greater reliability. This has, in turn, contributed
to a significant increase in turnover. There are still further operational improvements that can be achieved
and this will be the focus in the coming months.

The group is on the constant lookout for acquisition opportunities that complement our current operations.
During the period under review, the group acquired the net assets of a label printer, Boland Printers in
the Wellington area. It is the intention to further equip this business to enable it to pursue growth in other
packaging markets that it did not serve in the past.

Stationery

The group's existing stationery division performed well, growing sales and profitability on the back of an
excellent diary season. In the period, the group concluded the acquisition of Flip File which also impacted
positively on the overall divisional profits. This acquisition complements the group well in that all the raw
materials can be sourced from existing operations and in addition the distribution and merchandising can
be supplied by RNA.

Our stationery operations have managed to extend their retail footprint by utilising the RNA distribution
network to access retailers that were not previously serviced. This approach will be expanded over the
coming months.

Other

During the period under review, we have made substantial strides in integrating the CD and DVD replication
business which we acquired last year, with our existing operation. This impacted positively on throughput
and profitability. The last step is the move of the merged operation to self-owned premises, that will be
complete by year-end.

Prospects

The low growth economic environment which currently besets South Africa is expected to continue and this will
hamper meaningful growth in our traditional markets. This having been said, the group remains in a strong
position to take advantage of opportunities that usually arise in difficult times. We will continue to derive
benefits from our diversification strategies, as new markets present themselves.

Statement of responsibility

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

22 February 2017

Executive Directors: TD Moolman, PG Greyling, TJW Holden
Non-Executive Directors: PM Jenkins, ACG Molusi, NA Nemukula, J Phalane, T Slabbert
Transfer Secretaries: Computershare Investor Services (Pty) Limited
Registered office: 28 Wright Street, Industria West, Johannesburg

Sponsor
ARBOR CAPITAL. SPONSORS (PTY) LIMITED

Date: 22/02/2017 02:35:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

Share This Story