Wrap Text
Unaudited results for the period ended 31 December 2017
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 PERIOD ENDED
31 DECEMBER 2017
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF PROFIT AND LOSS
AND COMPREHENSIVE INCOME
Unaudited Unaudited Audited
six months to six months to for the year
31 December 31 December to 30 June
R'000 % change 2017 2016 2017
Revenue (4,0%) 3 353 930 3 493 161 6 407 172
Other operating income 59 423 51 009 127 446
3 413 353 3 544 170 6 534 618
Changes in inventories of finished goods and
work in progress (48 600) (48 217) 58 318
Raw materials and consumables used 1 540 169 1 611 340 2 820 487
Staff costs 758 728 730 966 1 495 088
Other operating expenses 766 415 827 643 1 412 025
Total operating expenses 3 016 712 3 121 732 5 785 918
PROFIT FROM OPERATING ACTIVITIES BEFORE
DEPRECIATION (6,1%) 396 641 422 438 748 700
Depreciation 147 827 142 287 285 744
PROFIT FROM OPERATING ACTIVITIES AFTER
DEPRECIATION (11,2%) 248 814 280 151 462 956
Impairment of investments - - 19 875
Impairment of loans 3 300 - -
Loss on disposal of subsidiary 6 619 - -
Impairment of plant and goodwill - - 5 399
NET PROFIT FROM OPERATING ACTIVITIES (14,7%) 238 895 280 151 437 682
Net finance income 58 039 73 099 147 799
- dividends 36 974 44 023 85 485
- interest 19 097 27 201 53 717
- IFRS 2 deemed interest receivable on
unwinding of transaction 1 968 1 875 3 749
- (loss) on currency hedges - - 4 848
Net income from associates 12 569 12 252 24 667
PROFIT BEFORE TAXATION (15,3%) 309 503 365 502 610 148
Income tax expense 79 584 96 175 155 146
PROFIT FOR THE PERIOD (14,6%) 229 919 269 327 455 002
Other comprehensive income:
Items that will not be reclassified subsequently
to profit or loss - - (1 050)
Items that will be reclassified subsequently to
profit or loss (16 295) (292) 18 309
TOTAL COMPREHENSIVE INCOME FOR THE
PERIOD 213 625 269 035 472 261
TOTAL COMPREHENSIVE INCOME
ATTRIBUTABLE TO:
Non-controlling interests 10 668 4 365 10 346
Owners of the parent 202 957 264 670 461 915
213 625 269 035 472 261
PROFIT ATTRIBUTABLE TO:
Non-controlling interests 10 668 4 365 10 346
Owners of the parent 219 251 264 962 444 656
229 919 269 327 455 002
Earnings per share (cents) (16,5%) 55,7 66,7 112,2
Headline earnings per share (cents) (14,0%) 57,3 66,6 115,6
Preference dividend paid per share in respect
of the previous year (cents) 570 570 570
Ordinary dividend paid per share in respect
of the previous year (cents) 70 70 70
Earnings per share based on WANOS in issue 393 590 937 396 990 567 396 219 497
Reconciliation of headline earnings:
Earnings attributable to owners of company 219 251 264 962 461 915
6 399 (661) 13 474
Impairment of plant and goodwill - - 5 399
Net profit on disposal of assets (306) (918) (14 289)
Loss on sale of subsidiary 6 619 - -
Impairment of investments - - 19 875
Tax effect on above adjustments 86 257 2 489
Headline earnings 225 650 264 301 475 389
Unaudited Unaudited Audited
6 months to 6 months to for the year
31 December 31 December to 30 June
Condensed segmental analysis 2017 % 2016 % 2017 %
Revenue
Publishing, printing and distribution 2 072 893 62 2 205 966 63 4 139 261 64
Packaging & stationery 1 225 967 37 1 215 007 35 2 156 114 34
Other 55 070 2 72 188 2 111 797 2
3 353 930 100 3 493 161 100 6 407 172 100
Profit from operating activities before
depreciation
Publishing, printing and distribution 264 086 67 272 571 65 468 523 63
Packaging & stationery 147 314 37 164 672 39 256 791 34
Other (14 759) (4) (14 805) (4) 23 386 3
396 641 100 422 438 100 748 700 100
Profit from operating activities after
depreciation
Publishing, printing and distribution 175 126 70 177 168 63 280 632 61
Packaging & stationery 98 460 40 126 711 45 176 705 38
Other (24 772) (10) (23 728) (8) 5 619 1
248 814 100 280 151 100 462 956 100
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited Unaudited Audited
6 months to 6 months to for the year
31 December 31 December to 30 June
R'000 2017 2016 2017
CASH FLOW FROM OPERATING ACTIVITIES (304 065) (203 189) 527 669
Cash generated by operations 363 228 386 737 724 826
Changes in working capital (355 384) (338 023) 57 466
Cash generated by operating activities 7 844 48 714 782 292
Less: Taxation paid (72 265) (42 755) (94 233)
Net interest received 19 097 27 201 53 717
Dividends received 36 974 44 023 85 485
Net cash inflow from operating activities (8 350) 77 183 827 261
Dividends paid (295 715) (280 372) (299 592)
CASH FLOW FROM INVESTING ACTIVITIES (465 175) (271 390) (574 588)
Property, plant & equipment
- additions to maintain & expand operations (122 172) (161 221) (355 966)
- proceeds from disposals 3 561 8 148 24 459
(118 611) (153 073) (331 507)
Investments
- subsidiary and business acquired (net of cash
acquired) (134 032) (104 047) (157 779)
- Associates, other investments and loans (212 532) (14 270) (85 302)
(346 564) (118 317) (243 081)
CASH FLOWS FROM FINANCING ACTIVITIES (67 221) (13 724) (22 939)
Non-controlling interest disposed of - - 1 527
Own shares acquired (67 221) (13 724) (24 466)
Net decrease in cash and cash equivalents (836 461) (488 303) (69 858)
Cash acquired 36 290 - (380)
Cash and cash equivalents at the beginning of the
year 1 959 948 2 030 186 2 030 186
Cash and cash equivalents at the end of the period 1 159 777 1 541 883 1 959 948
Fair value adjustment of preference shares and other
investments (20 154) (12 237) (14 110)
Fair value of cash and cash equivalents at the end of
the period 1 139 623 1 529 646 1 945 838
INTERIM CONDENSED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
Unaudited Unaudited Audited
31 December 31 December 30 June
R'000 2017 2016 2017
ASSETS
Non-current assets
Property, plant and equipment 2 681 102 2 634 749 2 703 216
Goodwill 186 345 64 700 78 167
Interest in associates 437 188 286 558 354 926
Other investments 219 629 92 854 108 019
- Listed 119 698 8 128 8 088
- Unlisted 99 931 84 726 99 931
Deferred taxation - - 11 363
Loans to directors 82 300 76 862 80 332
Total non-current assets 3 606 564 3 155 723 3 336 023
Current assets
Inventories 817 758 881 456 833 410
Accounts receivable 1 526 827 1 553 566 1 093 663
Taxation - - 1 512
Bank and cash resources 287 612 419 337 835 725
Listed bank preference shares 52 011 59 929 58 056
Unlisted bank preference shares 800 000 1 050 000 1 050 000
Total assets held for sale - - 20 358
Total current assets 3 484 208 3 964 288 3 892 724
Total assets 7 090 772 7 120 011 7 228 747
EQUITY AND LIABILITIES
Equity 5 602 116 5 554 332 5 729 123
Equity attributable to owners of the parent 5 537 122 5 493 257 5 681 978
Preference shareholders 100 100 100
Non-controlling interest 64 894 60 975 47 045
Non-current liabilities
Deferred taxation 375 486 353 097 377 390
Current liabilities
Accounts payable 907 281 1 005 152 873 461
Provisions 187 804 187 529 219 088
Taxation 18 085 19 901 24 043
Total liabilities held for sale - - 5 642
Total current liabilities 1 113 170 1 212 583 1 122 234
Total equity and liabilities 7 090 772 7 120 011 7 228 747
Net asset value per share (cents) 1 407 1 384 1 436
Directors' valuation of unlisted investments and
associated companies 517 825 371 284 454 857
Capital expenditure 122 172 161 221 355 966
Capital expenditure committed 98 000 112 500 90 000
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
31 December 31 December 30 June
R'000 2017 2016 2016
Balance at beginning of the year 5 729 123 5 579 393 5 579 393
Total comprehensive income for the period 213 625 269 035 472 261
Non-controlling interest acquired 18 135 - 1 527
Loss on sale of subsidiary 15 418 - -
Non-controlling interest disposed of (11 250) - -
Own shares acquired (67 221) (13 724) (24 466)
Dividends paid - ordinary and preference
shareholders (295 715) (280 372) (299 592)
Balance at end of the year 5 602 116 5 554 332 5 729 123
Note:
Business combinations
The group acquired the following businesses, which have been accounted for as business combinations during the year
as follows:
Private Property (Pty) Ltd was acquired with an effective date of 1 July 2017 for a purchase price of R122,9 million
and the business of Tricolor was acquired with an effective date of 1 August 2017 for a purchase price of
R11,1 million.
The acquired businesses contributed revenue of R73,0 million and a net profit after tax of R13.3 million.
The final purchase price accounting has not yet been completed at the end of the interim reporting period and will
be completed within the 12 months allowed by the standard. The amounts below are therefore provision.
Acquiree's
R'000 fair value
Goodwill 107 176
Non-controlling interest (18 135)
Property, plant and equipment 8 161
Inventory 1 360
Investments in associates 4 320
Accounts receivable 3 734
Accounts payable (8 874)
Cash acquired 36 290
Fair value of net assets acquired 134 032
Total cash purchase consideration 134 032
Goodwill
Goodwill relates to expected synergies, the bulking up of service offerings and an expansion of product
offerings in the Caxton Group.
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 31December 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 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:
- MPact is Level 1
- Thebe Convergent Technology is Level 3
Commentary
Basis of preparation
The unaudited interim financial statements for the six months ended 31 December 2017 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 Pronouncements 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 2017. These interim financial statements
have not been reviewed or reported on by the Caxton Group auditors, Grant Thornton.
Earnings
Caxton has shown remarkable resilience in the face of a sluggish economy, over - extended consumers and a
dip in business confidence, all of which have had a direct effect on the Group's performance. The difficult trading
conditions experienced in the second half of the previous financial year intensified into the current reporting
period resulting in a decline in revenue of 4% and resultant decline in profit from operating activities before
depreciation of 6.1%.
Revenues in all key operational markets were under pressure and faced declining volumes as well as continued
pricing pressures. The declining economic environment even impacted national advertising revenues which
have declined, for the first time since 2010, as retailers cut back on expenditure. This obviously had a knock on
impact on volumes in our commercial printing operation and combined with the loss of the Independent Media
newspaper printing in Gauteng meant revenue in these operations declined materially. The group continues to be
faced with declining local and magazine advertising revenues that show no signs of stabilising. The packaging
divisions also experienced subdued demand in its key markets while our book printing operation was faced with
inconsistent educational demand which impacted revenues negatively.
The decline in revenues was mitigated to a certain extent by focused control on raw material inputs, staff
costs and other operating expenses. Raw material costs were managed well while staff costs increased below
inflation. Other operating costs declined by 7.4% and this meant that the decline in profit from operations before
depreciation was contained to R25,8 million over the prior period including the positive contribution from the
recently acquired business Private Property ( Pty) Ltd.
Depreciation increased to R147,8 million as the new investments in the packaging divisions were commissioned.
During the period, the group disposed of two subsidiaries being a 51% share of the loss making magazine
business Ramsay Media (Pty) Ltd to Highbury Media for a nominal amount and 100% of Moneyweb Holdings
Limited to African Media Entertainment Limited for an exchange of shares. The net loss on disposal of these
subsidiaries amounted to R6,6 million.
Net finance income declined by R15,1 million to R58,0 million as a result of reduced dividends from our
investment in Thebe Convergent Technology Holdings (Pty) Ltd and reduced interest due to lower cash balances
during the period.
Net income from associates grew marginally to R12,6 million which resulted in a decline of 15,3% in profit
before taxation to R309, 5 million. Income tax absorbed R79,6 million resulting in profit for the period declining
by 14, 6% to R229,9million.
The weighted number of shares in issue declined to 393 590 937 resulting in earnings per share of 55,7 cents
and headline earnings per share of 57,3 cents, a decline of 16,5% and 14,0% respectively.
Cash flow
The fair value of cash and cash equivalents amounted to R1,139 billion, a decline of R390,0 million over the
corresponding prior period mainly as a result of reduced cash flow from operating activities and an increase in
investing activities.
Cash generated by operations declined by 6.1% to R363.2 million which is in line with the reduced trading
performance, whilst increased working capital requirements and taxation paid along with reduced interest and
dividend income meant a net cash outflow from operating activities of R7,8 million.
Dividends paid accounted for R295,7 million while the group invested in property, plant and equipment totaling
R122,2 million. The investment in plant was mainly focused on the packaging division to recapitalise certain
operations and facilitate the Gauteng operations restructure and a new web offset press in the Johannesburg
commercial printing operation. It is expected that the level of capital expenditure will taper off in the short to
medium term.
The group has made two acquisitions during the period which accounted for R134,0 million. This included a
52,6% share of Private Property (Pty) Ltd for R122,9 million. Private Property is the second largest property portal
and will be used to leverage our property offering at a local level. A further acquisition was made of a small
narrow web self-adhesive operation for R11.1 million.
Further investments were made in Novus Limited where we currently hold close on 5% of the equity and we
increased our non-controlling stake in Shumani Printers. The group has also continued to support its associate
Octotel (Pty) Ltd in its roll out of the fibre to the home network in Cape Town through advancing further shareholder
loans. There is a need for further capital raising which is in the process of being finalised. The group replaced
certain bank funding in its associate Universal Labelling (Pty) Ltd at commercial terms.
At the date of reporting, outstanding loans to these associates totalled R126,5 million and have been made on commercial
terms. Taking these loans into account the fair value of cash and cash equivalents amounts to R1,265 billion.
During the period, the group acquired its own shares at a cost of R67,2 million. At the time of writing cash
balances have increased to R1,431 billion and inclusive of loans to associates the fair value of cash and cash
equivalents is R1,567 billion.
DIVISIONAL PERFORMANCE
Publishing, printing and distribution
Newspaper Publishing and Printing
The group's newspaper business was materially affected by a decline in both national and local revenues and
this impacted profits significantly due to the fixed cost nature of the branch infrastructure. For the first time since
2010 national advertising declined as retailers adjusted their budgets in line with operating conditions. Local
advertising revenues continued the declining trend as many local businesses simply cannot afford to continue the
frequency of advertising as they have in the past. This necessitated a review of our strategy at a local level in an
attempt to stimulate revenue which resulted in a certain amount of discounting. Management is in the process of
reviewing the costs in the infrastructure to realign to the declining revenues.
The Citizen has again showed a year-on-year improvement in performance with increased advertising income,
both in print and digitally, and stable circulation which is in contrast to the overall daily market.
The group continues to make great strides in its digital strategy and the local news platforms have seen a 42%
growth in unique visitors which has contributed to increased digital revenues. With the acquisition of Private
Property (Pty) Ltd there is an opportunity to leverage our local sites in growing the reach of this portal.
As reported previously the group's newspaper printing facility lost the Gauteng printing for Independent Media
which necessitated a restructure of the business and job losses. The management has done a tremendous
job in mitigating the lost turnover which meant the operation achieved similar results to the the prior period.
Negotiations with Media 24 for newspaper printing are at an advanced stage and look positive which will have
an improved outlook from April 2018.
Magazine Publishing and Distribution
Despite advertising and circulating revenues remaining depressed in line with the softer market trends, the
magazine division has recorded an improved performance over the corresponding period.
This improvement combines the ongoing focus on cost containment initiatives, especially in printing, distribution
and externally sourced content, with good growth in digital revenue.
The division continues to focus on ways of growing and diversifying its overall print and digital reach so as to
provide advertisers with better and broader audiences.
In the current period, the group disposed of 51% of its loss making subsidiary Ramsay Media to Highbury Media
in an attempt to extract back office synergies that could contribute to a turnaround in performance. The group
has committed to fund the operation and any retrenchments to January 2019.
The challenges facing the magazine industry continues to impact the profitability of the group's distribution
network. Costs have been contained and the development of new revenue streams continues but cannot mitigate
the decline in traditional revenues. With declining magazine circulations there is a need to consolidate the
industry into a single network that would be sustainable for the foreseeable future and can service publishers
effectively.
Commercial Printing
Web and Gravure
These operations were impacted by the decline in national advertising which meant they were faced with reduced
throughputs and ultimately a reduction in profitability. In order to limit the impact of the reduced throughput the
gravure plant was optimised which limited the impact only to the Johannesburg operation. These well-equipped
plants are well positioned for when the demand returns.
Book Printing
The division was successful in maintaining profitability similar to the corresponding period even in the face of
declining revenues. Education and text book printing is still marred by unpredictability and is very dependent
on government spending. In the current period, there was no repeat of the unexpected spend undertaken by the
Eastern Cape, in the corresponding period, and this contributed significantly to the revenue shortfall.
The division, however, was successful in curtailing costs as well as consolidating its position in other printing
markets. In the period under review, the division received a welcome boost in the general book market where
several political publications proved popular. In addition some unexpected gains were made in the diary market
which also contributed to the performance.
The division continues to grow in the periodical publication market and has been in negotiations with Media 24
with regard to their monthly consumer titles which would be a significant addition to the operation.
Packaging and Stationery
Packaging
The single biggest contributor to the reduced profitability, over the corresponding period, has been the subdued
demand in key market segments that the group is heavily invested in. The division is a significant supplier to both
the fast food and frozen fish markets which both experienced reduced demand as a result of constrained consumer
spending and reduced fish quotas respectively. In addition the division is a large supplier to the cigarette market
and the challenges facing this industry with respect to illicit product is impacting our customers demand negatively.
The loss of a significant portion of the ABInbev beer label tender meant our dedicated operation had to be
restructured to realign costs but this could not prevent a decline in profitability.
The division also had to contend with increased operational costs associated with the closure of the Denver
operation and the integration of the volumes into the other two Gauteng sites. Although complete the disruption
resulted in additional costs to ensure customer requirements were met. In the Western Cape the previously reported
upon acquisitions of two narrow web self-adhesive businesses have been successfully integrated into our existing
site but also encountered increased costs associated with retrenchments and moving costs.
The bulk of the capital investment in plant and machinery has been completed and with the commissioning of this
equipment the depreciation charge has increased substantially.
All divisions remain profitable and the focus continues to be on cost containment and these well-equipped sites are
now well positioned for when demand returns in our key markets.
Stationery
This division has successfully integrated the two acquisitions previously reported upon and with this increased
product range has shown revenue growth and increased market share which has impacted positively on
profitability.
Other
The replication operation faced reduced demand for both CDs and DVDs that was expected but the rate of
decline was far more significant . This operation remains profitable and there will be a continual assessment of
its viability.
Prospects
South Africa has lagged the world in terms of growth, with political uncertainty having a profound effect on
business and consumers alike. It is anticipated that the new optimism from the recent changes will spark a
recovery in our economy. The effects of this will, however, not be felt immediately. In light of this environment
the group will take all the necessary steps to contain costs and effect restructures where deemed necessary. In
certain markets there has to be consolidation and should these opportunities arise the group is well positioned
to act accordingly.
Events after the reporting period
The group has recently settled a dispute with the Competition Commission that has been ongoing since 2011.
The matter related to a structural mechanism between the advertising and media industries that have been in
existence for over one hundred years internationally. It relates to the custom of media owners paying a net
commission for services rendered, based on the value of advertising placed.
The practice has since ceased and the media and advertising industry now largely negotiate commissions
individually. Whilst the matter was contestable, the decision was made to pay an administrative penalty rather
than enter into lengthy legal proceedings. The settlement of approximately R5,8 million as well as contributions
of R0,7 million per year for three years towards a bursary and development fund for previously disadvantaged
persons in the media industry, was confirmed by the Competition Tribunal on the 16 February 2018.
Statement of responsibility
The preparation of the group's consolidated results was supervised by Mr TJW Holden, BCom, CA (SA).
22 February 2018
Sponsor
Arbor Capital Sponsors (Pty) Ltd
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
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
Date: 22/02/2018 04:59:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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