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CAXTON AND CTP PUBLISHERS AND PRINTERS LIMITED - Provisional Reviewed Results for the year ended 30 June 2017

Release Date: 31/08/2017 16:40
Code(s): CAT CATP     PDF:  
Wrap Text
Provisional Reviewed Results for the year ended 30 June 2017

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


                                                                                       Reviewed          Audited
                                                                                   for the year     for the year
                                                                                     to 30 June       to 30 June
R'000                                                                  % change            2017             2016
Revenue                                                                    0,0%       6 407 172        6 404 995
Other operating income                                                                  127 446          136 431
                                                                                      6 534 618        6 541 426
Changes in inventories of finished goods and work in progress                            58 318           44 276
Raw materials and consumables used                                                    2 820 487        2 814 092
Staff costs                                                                           1 495 088        1 434 239
Other operating expenses                                                              1 412 025        1 486 481
Total operating expenses                                                   0,1%       5 785 918        5 779 088
PROFIT FROM OPERATING ACTIVITIES BEFORE DEPRECIATION                     (1,8%)         748 700          762 339
Depreciation                                                                            285 748          289 150
PROFIT FROM OPERATING ACTIVITIES AFTER DEPRECIATION                      (2,2%)         462 952          473 189
Impairment of investments                                                                19 875                -
Impairment of plant and goodwill                                                          5 399           27 583
NET PROFIT FROM OPERATING ACTIVITIES                                                    437 678          445 605
Net finance income                                                                      147 800          126 899
-   dividends                                                                            85 486           79 265
-   interest                                                                             53 717           48 428
-   IFRS 2 interest on unwinding of transaction                                           3 749            3 571
-   net profit/(loss )on foreign exchange                                                 4 848          (4 365)
Net income from associates                                                               24 667           17 636
PROFIT BEFORE TAXATION                                                                  610 145          590 141
Income tax expense                                                                      155 146          134 085
PROFIT FOR THE YEAR                                                      (0,2%)         454 999          456 055
Other comprehensive income:                                                              17 259           93 286
Items that will not be reclassified subsequently to profit or loss 
Fair value adjustment - land and buildings                                              (1 050)           44 954
Items that will be reclassified subsequently to profit or loss
Fair value adjustment - available for sale investments                                   18 309           48 332
TOTAL COMPREHENSIVE INCOME FOR THE YEAR                                                 472 258          549 341
Non-controlling interests                                                                10 346            8 445
Owners of the parent                                                                    461 912          540 896
                                                                                        472 258          549 341
Non-controlling interests                                                                10 346            8 445
Owners of the parent                                                                    444 653          447 611
                                                                                        454 999          456 055
Earnings per share (cents)                                               (0,2%)           112,2            112,5
Headline earnings per share (cents)                                      (0,7%)           115,6            116,4
Preference dividend paid per share in respect of the previous
year (cents)                                                                                570              530
Ordinary dividends paid per share in respect of the previous
year (cents)                                                                                 70               65
Earnings per share based on WANOS in issue                                          396 219 497      397 982 185
Reconciliation of headline earnings:
Earnings attributable to owners of company                                              444 653          447 611
Adjusted for non-trading items                                                           13 474           15 618
Impairment of plant and goodwill                                                          5 399           27 583
Net profit on disposal of assets                                                       (14 289)          (5 892)
Impairment investments                                                                   19 875                -
Tax effect on above adjustments                                                           2 489          (6 073)
Headline earnings                                                                       458 127          463 229

                                                                        Reviewed                Audited
                                                                    for the year           for the year
                                                                      to 30 June             to 30 June
                                                                            2017        %          2016        %
Condensed segmental analysis
Publishing, printing and distribution                                  4 881 388       76     4 976 694       78
Packaging and stationery                                               2 292 601       36     2 180 326       34
Other                                                                    111 797        2        88 950        1
Inter-Group sales - publishing, printing and distribution              (742 127)     (12)     (786 572)     (12)
Inter-Group sales - packaging and stationery                           (136 487)      (2)      (54 403)      (1)
                                                                       6 407 172      100     6 404 995      100
Profit from operating activities after depreciation
Publishing, printing and distribution                                    280 632       61       307 956       65
Packaging and stationery                                                 176 705       38       173 474       37
Other                                                                      5 615        1       (8 241)      (2)
                                                                         462 952      100       473 189      100
Note: The segmental analysis for the prior year was adjusted to better reflect the business segments.                                                                         

                                                                                         Reviewed        Audited 
                                                                                     for the year   for the year
                                                                                       to 30 June     to 30 June
R'000                                                                                        2017           2016 
CASH FLOW FROM OPERATING ACTIVITIES                                                       527 672        399 291
Cash generated by operations                                                              724 827        758 050
Changes in working capital                                                                 57 467      (111 053)
Cash generated by operating activities                                                    782 294        646 997
Taxation paid                                                                            (94 233)      (109 445)
Net interest received                                                                      53 717         48 428
Dividends received                                                                         85 486         79 265
Net cash generated from operating activities                                              827 264        665 245
Dividends paid                                                                          (299 592)      (265 954)
CASH FLOW FROM INVESTING ACTIVITIES                                                     (574 594)      (368 764)
Property, plant and equipment
- additions to maintain and expand operations                                           (355 968)      (353 043)
- proceeds from disposals                                                                  24 455         12 334
                                                                                        (331 513)      (340 709)
- subsidiary businesses (net of cash acquired)                                          (157 779)       (19 198)
Associates, other investments and loans                                                  (85 302)        (8 857)
CASH FLOWS FROM FINANCING ACTIVITIES                                                     (22 936)          (753)
Non-controlling interest disposed of/(acquired)                                             1 530        (1 867)
Shares allocated in prior year now issued                                                       -          6 000
Own shares acquired                                                                      (24 466)        (4 886)
Net (decrease)/increase in cash and cash equivalents                                     (69 858)         29 774
Cash acquired                                                                               (380)              -
Cash and cash equivalents at the beginning of the year                                  2 030 186      2 000 412
Cash and cash equivalents at the end of the year                                        1 959 948      2 030 186
Fair value adjustment of preference shares                                               (14 110)       (11 861)
Fair value of cash and cash equivalents at the end of the year                          1 945 838      2 018 325
Cash and bank resources - classified as held for sale                                       2 057              -
Cash and bank resources                                                                   835 725        908 020
Bank preference shares at fair value                                                    1 108 056      1 110 305
Fair value of cash and cash equivalents at the end of the year                          1 945 838      2 018 325

OF FINANCIAL POSITION                                                                                    
                                                                                         Reviewed        Audited
                                                                                          30 June        30 June
R'000                                                                                        2017           2016
Non-current assets
Property, plant and equipment                                                           2 703 213      2 594 389
Goodwill                                                                                   78 167              -
Interest in associates                                                                    354 926        272 157
Other investments at fair value                                                           108 019         86 155
- listed                                                                                    8 088             34
- unlisted                                                                                 99 931         86 121
Deferred taxation                                                                          11 363         19 299
Loans to Directors                                                                         80 332         74 987
Total non-current assets                                                                3 336 020      3 046 987
Current assets
Inventories                                                                               833 410        806 229
Trade and other receivables                                                             1 093 664      1 160 063
Taxation                                                                                    1 512         17 961
Bank and cash resources                                                                   835 725        908 020
Listed bank preference shares at fair value                                                58 056         60 305
Unlisted bank preference shares                                                         1 050 000      1 050 000
Total assets held for sale                                                                 20 358              -
Total current assets                                                                    3 892 725      4 002 578
Total assets                                                                            7 228 745      7 049 565
Equity                                                                                  5 729 123      5 579 393
Equity attributable to owners of the parent                                             5 681 975      5 522 685
Preference shareholders                                                                       100            100
Non-controlling interest                                                                   47 048         56 608
Non-current liabilities
Deferred taxation                                                                         377 387        354 636
Current liabilities
Trade and other payables                                                                  873 463        883 677
Taxation                                                                                   24 043          5 354
Provisions                                                                                219 088        226 505
Total liabilities held for sale                                                             5 641              -
Total current liabilities                                                               1 122 235      1 115 536
Total equity and liabilities                                                            7 228 745      7 049 565
Net asset value per share (cents)                                                           1 436          1 406
Directors' valuation of unlisted investments and associated companies                     454 857        358 277
Capital expenditure                                                                       355 968        353 043
Capital expenditure committed                                                              90 000        144 000

                                                                                         Reviewed          Audited 
                                                                                          30 June          30 June
R'000                                                                                        2017             2016
Balance at beginning of the year                                                        5 579 393        5 296 760
Total comprehensive profit for the period                                                 472 258          549 340
Share buy backs                                                                          (24 466)            1 114
Dividends paid - ordinary and preference shareholders                                   (278 156)        (258 985)
Non-controlling interest disposed of/(acquired)                                             1 530          (1 867)
Dividends paid - non-controlling interest                                                (21 436)          (6 969)
Balance at end of the year                                                              5 729 123        5 579 393


Business combinations

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

- All 4 Women, Grafton Star, Boland Printers, Flip File, HP Labels .
- The acquired businesses contributed revenue of R121,8 million and a net profit after tax of R5,4 million. Had
  these businesses been acquired for the full reporting period the revenue would have been R234,9 million
  and the net profit after tax would be R20,5 million.

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

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

R'000                                                                                                 fair value
Goodwill                                                                                                  78 167
Property, plant and equipment                                                                             56 035
Inventory                                                                                                 26 619
Accounts receivable                                                                                       31 205
Accounts payable                                                                                        (33 867)
Cash acquired                                                                                              (380)
Fair value of net assets acquired                                                                        157 779
Total cash purchase consideration                                                                      (157 779)



Goodwill relates to expected synergies, the bulking up of service offerings and an expansion of 
product offerings in the Caxton Group.

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 2017.

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 and MPact Limited are Level 1.
- Thebe Convergent Technology and Stanlib are Level 2


Basis of Preparation

The accounting policies adopted in the preparation of the Provisional condensed consolidated financial statements
for the 12 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, financial
reporting pronouncements as issued by the Financial Reporting Standards Council and the Companies Act of
South Africa.


The Group has performed creditably in the year under review, and has managed to maintain earnings at the
same level as the previous year, notwithstanding increasingly difficult trading conditions. Regrettably, despite the
growth in profit after tax evident at the interim reporting period, consumer confidence and spending fell markedly
during the second half and the general state of the economy declined further, resulting in flat year-on-year
earnings. The difficult trading conditions meant volume decline and margin pressure became more pronounced
during the second half of the financial year.

Revenue ended flat compared to the prior year and was impacted by declining local advertising revenues and
further declines in magazine circulation and advertising revenue. This was offset by good growth in our book
printing division on the back of increased text book demand and pleasing revenue growth at the Western Cape
flexible packaging operation. The recent acquisitions have also contributed positively both to revenue and profits.

Raw material inputs have been stable helped by a more predictable exchange rate, which has had the impact of
stabilising pricing. Staff and operating expenses have been well-controlled, with staff costs increasing 4,2% and
operating expenses declining by 5,0%. These costs were positively impacted by certain restructuring initiatives,
although the benefit of these initiatives were offset to a certain extent by the acquisitions made during the year.

Net profit from operating activities declined marginally to R437,6 million after taking into account an impairment
of our investment in Cognition Holdings Limited.

Net finance income increased by 16,5% to R147,8 million, driven by both increased dividends and interest.
Increased dividends were earned on our preference share investment where a better rate was negotiated.

Net income from associates increased by 39,9% to R24,7 million as a result of the improved performance from
our printing associates. This was, however, partially offset by our share of the losses in the fibre-to-home business,
during the network development phase.

Profit before taxation of R610,1 million grew by 3,4% over the prior year while profit after taxation ended
similarly to the prior year due to an increased effective taxation rate.

The weighted number of shares in issue declined to 396 219 497, resulting in earnings per share of 112,2 cents
similar to the prior year and headline earnings per share of 115,6 cents, a marginal decrease of 0,7%.

Cash Flow

The fair value of cash and cash equivalents amounted to R1,946 billion, a decrease over the prior year of
R72 million. Cash generated by operations declined by 4,4% to R725 million as a result of the subdued
conditions in the second half of the reporting period. This was compensated for by improved working capital
requirements, which is reflective of the subdued trading during the second half and improved debtor collections,
resulting in cash generated by operating activities increasing by 20,9% to R782,2 million. Dividends paid
accounted for R299,6 million which is an increase of 12,6% over the prior year. Investment in property, plant
and equipment of R356 million were made. A large portion of the capital expenditure was in the packaging
divisions to facilitate the Gauteng restructure, which is now complete, and in certain instances to upgrade to
more efficient equipment.

The Group has been active with acquisitions during the year and has invested R157,8 million in buying the
following businesses:

- HP Labelling self-adhesive operation in the Western Cape
- Boland Printers labelling operation in the Western Cape
- Flip File stationery business
- Star Papers stationery business
- The All 4 Women website as part of the Group's digital strategy

In addition the Group has made acquisitions and loans to associates in the amount of R85,3 million. The more
significant has been a 30% investment in Universal Labelling (Pty) Ltd and the continued support through
shareholder loans of our rapidly growing fibre-to-home associate Octotel (Pty) Limited. Octotel will have passed
over 50 000 homes by the end of the year making it the Western Cape's largest independent Open Access
fibre operator.


Publishing, printing and distribution

Newspaper Publishing and Printing

The depressed consumer environment has had a marked impact on the Group's local newspapers, where revenues
at a local level have declined. This, combined with the move of classified, motoring and property advertising to
digital platforms has resulted in a decline in profitability. In contrast to this trend, national advertising revenues
have continued to show growth in line with inflation. We believe that there is still demand from local businesses
to advertise in our products and, to counter the depressed economic conditions, new solutions have been created
to stimulate this segment of the market.

The first phase of our digital strategy of creating local news platforms in the towns where we have local
newspaper operations has been hugely successful. These platforms are now the fourth largest in South Africa,
measured by unique browsers and have grown by 41% during the reporting period. Digital display advertising
revenue on these platforms are showing steady growth but will not compensate for the loss of print advertising.
The main reasons for this are that the main pillars of local advertising, being classified, motoring and property,
has migrated to digital platforms and thus the second phase of our strategy was focused on creating our own
digital solutions for these categories at a local level. The Group has invested heavily in developing these solutions
and the development is nearing the end and the shift will now be on marketing these platforms and to lure users
by leveraging the current visitors to our local news platforms.

The rate of decline in circulations of daily and weekly newspapers has not changed since the last reporting
period. The Citizen has, however, shown rapid progress with its digital platform and has increased unique
visitors by 61%, proving that there is still a demand for national and international news, albeit that consumption
habits have changed significantly. The challenge remains to monetise the digital environment, as an offset to
declining print circulation revenues.

The Group's newspaper printing facility delivered similar profits to the prior year which, in the face of declining
newspaper circulations and paginations, is an admirable achievement. Having said this, a major third party print
contract at our operation in Industria has been cancelled recently which will require a significant downsizing of
this operation. Management is optimistic that these initiatives will mitigate the lost volume contribution.

Magazine Publishing and Distribution

The magazine division has managed to compensate for continued declining advertising and circulation revenues
through strict cost control measures and tighter management of the distribution of each title in an effort to
maximise copy sales wherever possible. In addition, management continues to seek new revenue opportunities
attached to its various digital offerings and this has gained some traction in the market place.

The Group's distribution network, RNA, declined in profitability on the back of continuing declining magazine
circulations combined with a noticeable decline in CD and DVD distribution revenues. These declines are in
line with the respective overall market conditions and can only be mitigated to a certain extent by strict cost
containment which has been evident. The focus over the reporting period has been on generating new revenue
streams, although this is still in an infancy stage and will require further development before having a meaningful
contribution to profits. These pilot projects include a convenience store delivery mechanism to effectively service
garage forecourts as well as a direct-to-store stationery delivery system.

Commercial Printing

Web and Gravure

Operationally these divisions have performed to expectations and maintained profitability in the face of declining
print volumes which was offset through improved operational efficiencies. The Johannesburg division has recently
installed a semi-commercial web press which will add new capabilities and be able to produce innovative and
unique offerings to the market.

Book Printing

This division has showed a significant improvement over the previous year in both revenue and profitability.
This was driven by the unexpected increased demand from education publishers as a result of a major increased
allocation of funds to purchase text books for the Eastern Cape Province.

During the current year, this division has added a digital print facility which has enhanced the service offering
to customers and is proving advantageous in servicing customers who require both short, medium and long-run
print requirements.

A focus area of this division is to increase its share of the periodical publication market and some success has
been achieved during the reporting period.

Other than the aforementioned increased text book demand, the rest of the market is generally depressed which
has put pressure on margins as capacity outstrips demand. This pressure has been mitigated to a certain extent
by improved manufacturing efficiencies facilitated by the recently installed Manroland Lithoman printing press
and also a continuous improvement programme.

Packaging and Stationery


The Group's packaging divisions have performed to expectations and maintained profitability. This is a
commendable achievement taking into account a depressed consumer environment and the disruptive nature of
the reorganisation of the Gauteng operations that led to increased operational costs in the affected divisions. It is
pleasing to report that the reorganisation is now complete and the focus in the short-term is to settle the affected
Gauteng sites and improve operational efficiencies.

It is also pleasing to report that the Flexibles division in the Western Cape has continued its turnaround that was
reported on at the half year and is well-positioned to build upon the improved performance.

It has been an active year on the acquisition front with a number of acquisitions, detailed below, which have
increased our label presence:

- The purchase of a paper label manufacturer, Boland Printers in the Western Cape, which will provide a
  base for the Group to further penetrate the agriculture market. This business has also undergone a capital
  expansion to enable it to service the short-to-medium run folding carton and litho laminate markets.
- The purchase of the self-adhesive label business of HP Labelling in the Western Cape. This operation has a
  large presence in the agriculture market and will be fully integrated into our existing operation in Parow.
- The purchase of the self-adhesive label business of Tricolor in the Western Cape (effective date 1 August
  2017) which will also be integrated into our Parow operation.
- The purchase of 30% of Universal Labels (Pty) Ltd in Gauteng. This business manufactures self-adhesive,
  shrink and in-mould labels. The intention is for the experienced management team to undertake further
  acquisitions in the Gauteng region.

The packaging markets that we service continue to be highly competitive in nature and requires the continued
focus on being a low cost manufacturer, which the recent acquisitions and reorganisations are aimed to achieve.
The Group is on the continued lookout for further acquisition opportunities that complement our portfolio of products.


The stationery division improved profitability following an excellent diary season and with improved margins in
other products. The recently acquired Flip File business contributed positively to this performance and has been
integrated into our existing operation, allowing for rationalisation of certain costs. During the period, a small
acquisition of Star Papers was concluded and this business has also been integrated into our existing site and
will add to profitability.


The integration of the acquired replication business with our existing business, which we previously reported on,
is now complete. This has meant that three sites have been rationalised into one and this effort has resulted in
improved profitability.


The general state of the economy is not expected to improve in the short-term and this will hamper meaningful
organic growth, but does present interesting acquisition opportunities and the possibility of leveraging off our
established operational capacity, without significant further investment. The focus will be on running our business
with our normal attention to costs and where possible, improving operational efficiencies. The Group is in an
enviable position with a strong balance sheet and ample cash reserves to take advantage of any opportunities
that arise.

Review report of the Independent Auditors

The company's auditors, Grant Thornton, have reviewed these results. Their unmodified review conclusion 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 Mr TJW Holden,
BCom, CA(SA).


The board has declared a dividend of 70,0 cents (2016: 70,0 cents) per ordinary share (gross) and a preference
dividend of 570,0 cents per share (gross) for the year ending 30 June 2017.

The dividends are subject to the Dividend 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 Withholding Tax rate is 20%;
- the gross dividend amount is 70,00 cents per ordinary share and 570,00 cents per preference share for
  shareholders exempt from Dividends Withholding Tax;
- the nett dividend amount is 56,00 cents per ordinary share and 456,00 cents per preference for shareholders
  liable for Dividend Withholding Tax;
- the company has 395 597 460 ordinary shares in issue;
- the company has 50 000 preference shares in issue; and
- 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 14 November 2017.

Shares will be traded ex-dividend from Wednesday 15 November 2017.

The record date will be Friday 17 November 2017 and payment will be made on Monday 20 November 2017.

Share Certificates may not be dematerialised or materialised between Wednesday 15 November 2017 and
Friday 17 November 2017, both days inclusive.

Events After the Reporting Period

- As announced on SENS on 19 June 2017, the company accepted the offer made by African Media Entertainment
  Limited ("AME") to acquire 100% of the issued share capital of Moneyweb Holdings Limited ("Moneyweb") that
  AME did not already own, resulting in the company disposing of its 50.72% interest in Moneyweb in exchange
  for 218 627 ordinary shares in AME at an issue price of 7 000 cents per share. At the year end the directors 
  classified the Moneyweb investment as held for sale.
- The self-adhesive label business of Tricolor in the Western Cape was purchased effective from
  1 August 2017 for R11,1 million.
- On 25 August 2017 the Caxton group, together with other purchasers concluded an agreement to acquire the
  81,5% shareholding held by One African Media Pty Limited in Private Property South Africa Proprietary Limited, 
  one of the leading  digital property  portals in South Africa, subject to regulatory approval. In terms of the 
  transaction, the Caxton group will acquire an effective shareholding of 50% in Private Property with effect
  from 1 July 2017,  for a purchase price of R122,9 million, plus interest calculated from 1 July 2017 to date of payment.
31 August 2017

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


Date: 31/08/2017 04:40:00 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
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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,
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