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KGM
KGM
KGM - Kagiso - Unaudited Interim Results and Dividend Declaration for the Six
Months Ended 31 December 2008
Kagiso Media Limited
(Registration number 1957/000036/06)
("Kagiso Media", "the group" or "the company")
Share code: KGM & ISIN: ZAE000014007
UNAUDITED INTERIM RESULTS AND DIVIDEND DECLARATION FOR THE SIX MONTHS ENDED 31
DECEMBER 2008
- Revenue up 26%
- Headline earnings per share up 20%
- Cash generated from operating activities up 69%
- Dividend maintained at 35c per share
CONSOLIDATED INCOME STATEMENTS
Six months ended Twelve
months ended
31 December 31 December 30 June
2008 2007 Change 2008
R`000 (Unaudited) (Unaudited) % (Audited)
Continuing operations
Revenue 512 770 406 571 26 841 597
Other income 6 365 10 359 10 266
Raw material and (100 038) (57 020) (152 214)
consumables
Commission and levies (60 199) (62 090) (118 372)
Employee costs (62 445) (56 258) (118 920)
Marketing and programming (16 531) (14 262) (22 717)
expenses*
Professional and (10 552) (9 716) (14 752)
consulting fees*
Rental and management (24 561) (22 660) (46 526)
fees*
Depreciation (7 211) (4 875) (11 697)
Amortisation (16 611) (10 810) (28 754)
Other expenses (52 119) (28 866) (70 262)
Operating profit 168 868 150 373 12 267 649
Finance income 9 534 7 304 15 126
Finance expenses (12 594) (11 387) (23 245)
Share of results of 10 777 8 441 28 12 055
associates
Profit before income tax 176 585 154 731 14 271 585
Income tax expense (59 690) (57 504) 4 (96 835)
Profit for the period from 116 895 97 227 20 174 750
continuing operations
Discontinued operations
Loss after tax for the - (644) (630)
period from discontinued
operations
Profit for the period 116 895 96 583 21 174 120
Attributable to:
- Equity holders of the 106 049 88 171 20 159 025
company
- Minority interest 10 846 8 412 29 15 095
116 895 96 583 21 174 120
*Comparative numbers have
been reallocated from
"other expenses" where it
was disclosed in 2007.
Reconciliation of headline
earnings
Profit for the period
attributable to
equity holders 106 049 88 171 20 159 025
Impairment of goodwill - - 670
Loss/(profit) on sale of 202 6 (87)
property, plant and
equipment
Headline earnings 106 251 88 177 20 159 608
Headline earnings per 79,5 66,1 20 119,7
share (cents)
Diluted headline earnings 79,4 65,9 20 119,3
per share (cents)
Earnings per share -
continuing operations
Earnings per share (cents) 79,3 66,6 19 119,7
Diluted earnings per share 79,2 66,4 19 119,4
(cents)
Loss per share -
discontinuing operations
Loss per share (cents) - (0,5) (100) (0,5)
Diluted loss per share - (0,5) (100) (0,5)
(cents)
Shares used in
calculations
Number of shares in issue 133 792 133 421 - 133 507
(`000s)
Weighted average number of 133 726 133 373 - 133 389
shares in issue (`000s)
Weighted average number of 133 876 133 704 - 133 756
shares in issue for
diluted earnings per share
(`000s)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Twelve
months
Six months ended ended
31 December 31 December 30 June
2008 2007 2008
R`000 (Unaudited) (Unaudited) (Audited)
Equity at the beginning of the 455 587 365 163 365 163
period
Ordinary shares issued in terms 1 179 1 179 1 488
of the share option scheme
Profit for the period 116 895 96 583 174 120
Employee costs: share option 108 164 295
scheme
Dividends paid (41 109) (31 016) (85 479)
532 660 432 073 455 587
CONSOLIDATED CASH FLOW STATEMENTS
Twelve
months
Six months ended ended
31 December 31 December 30 June
2008 2007 2008
R`000 (Unaudited) (Unaudited) (Audited)
Cash flow from operating
activities
Cash generated from operations 160 124 123 778 270 529
Finance expenses paid (1 247) (421) (496)
Income tax paid (56 147) (51 910) (106 614)
Dividends paid to equity (32 042) (24 016) (70 743)
shareholders
Dividends paid to minorities (9 067) (7 000) (14 736)
Dividends paid to preference (11 478) (10 726) (22 115)
shareholders
Net cash generated from operating 50 143 29 705 55 825
activities
Cash flow from investing
activities
Acquisition of subsidiary, net of (63 428) - -
cash acquired
Acquisition of joint ventures, net - (6 408) (15 682)
of cash acquired
Purchases of property, plant and (4 450) (3 631) (13 838)
equipment ("PPE")
Proceeds from sale of PPE 11 - 269
Proceeds from sale of assets held 2 547 - -
for sale
Purchases of intangible assets (3 494) (350) (2 440)
Investment in preference shares - - (15 750)
Preference shares redeemed 1 050 - 1 050
Repayment of loans by associates 385 1 629 -
Advances of loans to associates (500) - (5 226)
Finance income received 9 534 7 304 13 547
Preference dividend received - - 1 579
Dividends received from associates 4 509 - 8 619
Net cash used in investing (53 836) (1 456) (27 872)
activities
Cash flow from financing
activities
Proceeds from issue of ordinary 1 179 1 179 1 488
shares
Proceeds from borrowings 18 769 - 2 125
Repayment of borrowings - (370) (49)
Repayment of preference shares (11 560) (11 566) (25 423)
Movement in loans receivable - (1 078) 14 175
Net cash generated from/(used in) 8 388 (11 835) (7 684)
financing activities
Net increase in cash and cash 4 695 16 414 20 269
equivalents
Cash and cash equivalents at the 137 843 117 574 117 574
beginning of the period
Cash and cash equivalents at the 142 538 133 988 137 843
end of the period
CONSOLIDATED BALANCE SHEET
31 December 31 December 30 June
2008 2007 2008
R`000 (Unaudited) (Unaudited) (Audited)
Assets
Non-current assets 627 587 603 812 576 677
Property, plant and equipment 55 980 28 034 30 937
Intangible assets 315 068 341 110 327 529
Goodwill 184 242 165 866 147 777
Investment in associates 58 647 53 549 55 734
Loans receivable 13 650 15 253 14 700
Current assets 440 253 359 611 369 990
Inventories 16 629 20 850 13 849
Trade and other receivables 277 755 202 828 215 230
Loans receivable 3 331 1 945 3 068
Cash and cash equivalents 142 538 133 988 137 843
Assets classified as held for - - 2 672
sale
Total assets 1 067 840 963 423 949 339
Equity
Capital and reserves
attributable to equity
holders of the group
Ordinary share capital 1 338 1 334 1 335
Share premium 14 510 13 026 13 334
Revaluation and other reserves 88 443 88 204 88 335
Retained earnings 381 157 283 023 307 150
Total shareholders` equity 485 448 385 587 410 154
Minority interest 47 212 46 486 45 433
Total equity 532 660 432 073 455 587
Liabilities
Non-current liabilities 271 017 330 457 275 401
Borrowings 208 909 257 127 209 222
Deferred income tax liabilities 62 108 73 330 66 179
Current liabilities 264 163 200 893 218 226
Trade and other payables 198 706 161 681 178 368
Borrowings 45 536 15 861 23 963
Income tax liabilities 19 921 23 351 15 895
Liabilities directly associated - - 125
with assets classified as held
for sale
Total liabilities 535 180 531 350 493 752
Total equity and liabilities 1 067 840 963 423 949 339
Commentary
1. Comments on results
General
Kagiso Media is pleased to announce an increase in headline earnings of 20,2%
for the six months to 31 December 2008, above that recorded in the preceding
comparative period. The company posted headline earnings per share of 79,5
cents compared to 66,1 cents for the same period last year.
Revenue
Revenue for the period under review for the continuing operations increased by
26,1% to R512,8m. Revenue from broadcasting increased by 6,9%, information
services and solutions by 11,9% and Exhibitions and Events` ("Exhibitions")
revenue increased by 76,3% or R28,6m. Revenue in Merafe Outdoor, previously
named Clear Channel Merafe, was 10,8% less than in the prior period.
Production, or Urban Brew Studios (Pty) Ltd ("Urban Brew"), contributed
R51,7m, which increased the consolidated revenue by R12,7%.
Operating profit margin
The operating profit margin for the group was 32,9%, compared to 37,0% in the
previous period. The margins improved at the information, services and
solutions segment from 34,6% to 37,8%. However, broadcasting`s margins
decreased from 54,5% to 50,0%, partially due to the reallocation of barter
income to revenue (1,5%) and partially due to the weakening economic
conditions (3,5%). The production segment contributed profits for two months.
This unit`s operating profit margin was 10,3%. Exhibitions made an operating
loss of R920 000; this was an improvement of R7,2m on the comparative period.
Finance income
Finance income received for the period increased by R2,2m.
Finance expenses
Finance expenses pertain mainly to the dividend payable on preference shares.
During the period funding remained stable, but increases in interest rates
manifested in an increase in funding costs.
Associates
The share of results of associates of R10,8m is made up of holdings in OFM
(24,9%), a 33,3% economic interest in Heart 104.9 and iGagasi 99.5 and 25,1%
in Kaya FM. This composition has not changed from the previous reporting
period.
Taxation
The effective tax rate decreased from 37,2% to 33,8%, due to the utilisation
of a secondary tax on companies ("STC") credit and group relief on dividends
declared by Jacaranda FM. The effective tax rate excluding STC is 31,8%, which
was in line with the prior reporting period.
Minorities` share of profits
Minorities owned 20% of Jacaranda 94.2, 35% of Kagiso Outdoor and 49,9% of
Urban Brew. The movement in the minorities` share of the profits reflects the
changes in the results of these units.
Acquisitions
On 1 November 2008 Kagiso Media acquired a 50,1% majority stake in Urban Brew
(Proprietary) Limited. Urban Brew is involved in the creation and distribution
of audio-visual content on broadcasting platforms including but not limited to
live and pre-recorded television, concept development, content production,
post-production, editing and broadcasting. It has a history of being one of
the largest audio-visual content production companies in South Africa and has
strong relationships in the emerging African broadcasting market.
An initial purchase consideration of R75,1m was settled in cash and a back-
payment is payable in 2011, if certain performance criteria were met.
The operational results for Urban Brew for the period 1 November 2008 to 31
December 2008 were included in Kagiso Media`s results. This resulted in an
increase in revenue for the group of R51,7m of 12,7%. The EBITDA margin for
the entity for the period was 16,8%. A provision of R1,7m was made for the
amortisation of intangible assets. The profit contributed to the group`s
results was R1,9m, which translated into an increase of 2,1% for the group.
2. Review Of Operations
During the period under review and in the comparative preceding period,
revenue, operating profit/(loss) and profit/(loss) contribution per business
segment were as follows:
Segmental analysis of the six months ended 31 December
Revenue Operating Profit/(loss)*
profit/(loss)
R`000 2008 2007 2008 2007 2008 2007
Central 766 1 331 (12 408) (12 371) (24 492) (27 201)
services
Broadcasting 260 097 243 286 130 032 132 649 96 252 94 522
Information 113 806 101 732 42 996 35 209 31 818 24 850
services and
solutions
Outdoor 20 236 22 691 3 865 2 982 2 052 1 257
Exhibitions 66 181 37 531 (920) (8 096) (1 452) (5 257)
and events
Production 51 684 - 5 303 - 1 871 -
Total 512 770 406 571 168 868 150 373 106 049 88 171
*Attributable to equity holders of the company.
Central Services
Consulting revenues decreased. Expenses were marginally in line with those of
the prior period. All of the preference dividends and interest incurred in the
procurement of investments are accounted for under group costs. The group`s
share of STC in all the subsidiaries, joint ventures and associates are
allocated to this segment. The decrease in the loss was mainly due to the
decreased STC charge.
Broadcasting
Overall - Revenue for the broadcasting segment increased by 6,9% or 4,9% if
the 2007 revenue is recalculated to include barter income. Operating profit
decreased by 2,0% (R2,6m) to R130,0m in the period under review. This
performance is attributable mainly to the weakening economic conditions, which
have negatively impacted on the advertising market.
East Coast Radio - East Coast Radio`s revenue increased by 6,3% over the
comparative six months, with most of the growth attributable to the
performance of the national sales team. The local sales teams have been the
first to experience the down-turn in the market, consequently delivering
revenue of 19% or R7m less than in 2007. Costs increased by 7,8%, and the
station`s operating profit margin decreased to 53,3% (56,0% when calculated on
the same basis as in 2007). Market category listenership (LSM 6-10, 25-49)
continues to grow at East Coast Radio, and its share of this core market has
grown from 38,4% to 42,6% year-on-year.
Jacaranda 94.2 - Revenue for the six months increased by 5,8%. Price
discounting, which was the main contributor to the lower than expected revenue
growth, increased compared to 2007. Costs increased by 11,3%, resulting in a
decrease in the station`s operating profit margin to 42,5% (42,6% when
calculated on the same basis as in 2007, i.e. barter income not included in
revenue).
The core target market (LSM 6-10, 25-49) has risen in Johannesburg and
Pretoria but has declined slightly in Mpumalanga and the North West province.
Overall audience declined in areas outside Gauteng as a result of the three
new radio stations, which fall within Jacaranda`s footprint. Fortunately, none
of the losses were in Jacaranda 94.2`s crucial market category listeners.
Jacaranda received two awards at the inaugural South African Radio Awards with
morning show presenter Darren Scott winning Radio DJ of the Year, while the
breakfast show, `The Just Plain Breakfast` sponsored by Wimpy, was awarded the
Most Innovative Radio Show for 2008. Jacaranda was also placed second by
CEO Magazine on their poll of the best radio stations in the country following
a reader survey.
Associates
OFM`s total weekly listenership is up 4,6% year-on-year. Despite its revenue
declining by 2,5%, the station`s operating profit margin increased from 32,1%
to 35,2%. OFM intends defending its current revenue results through its
various transmitter splits which may help to bring in new smaller clients to
replace medium-sized cancellations, especially in the car industry. OFM is
also reliant on election spending and management believes that agriculture, as
a category, may benefit the station.
iGagasi 99.5`s total listenership improved further with the introduction of
its new transmitters across the entire coastline of KZN. The station`s total
weekly listenership of 1 949 000 represents a 36% growth on last year. The
station`s revenue increased by 41,2% and the operating profit margin increased
from 13,9% to 19,1%.
Heart 104.9`s market share in the Western Cape appears to have stabilised at
13% of LSM 6-10 in the 25 - 49 age group. It does lead in the Cape
Town/Fringe, LSM 6-10, age 25 - 49, coloured market with 36% of the available
listeners. Revenue improved by 6,1% with a positive trend being established in
the direct sales teams` performance during the past few months. The operating
profit margin remains in the low 20 percentiles.
RadMark - RadMark, being the group`s sales house, was the first to experience
the changes in the market. The trend displayed in the period was mixed in that
motoring declined whereas retail, financial and petroleum still showed
increases. Due to RadMark`s clients and their profile, advertising spend from
government, beverage and gaming categories are limited. Jacaranda`s direct
team, which forms part of RadMark`s offering to the station, delivered growth
on last year. RadMark`s revenue and expenses increased by 10,6% and 13,7%
respectively, with the result that the operating profit margin decreased from
44,8% to 43,3%.
Outdoor
The airport portfolio of sites has held up reasonably well despite the
building activity at most airports. This could be due to these clients being
major international brands and clients wanting to secure good locations in the
lead-up to the Fifa World Cup tournament. Compared to the prior year, the
revenue for the period decreased by R2,4m. The gross profit margin increased
from 18% to 30%, mainly due to the sale of Nameplate, in June 2008, an
operating unit with low margins.
Information services and solutions
LexisNexis increased revenue by 11,9% (2007: 29,5%) and contributed 30,0% to
the group`s profit. Printed products remain the highest contributor currently
at 55,9% (2007: 55,9%) of revenue. Business from the rest of the continent
contributed 9,2% (2007: 6,3%) to revenue. The operating profit margin
increased from 34,6% in the comparative six months to 37,8% in the period to
31 December 2008.
Exhibitions and events
The group staged inter alia the Johannesburg International Motor Show
("JIMS"), the East Coast Radio House and Garden, and finalised the event in
Zaragoza during the six months. Exhibitions also delivered services to various
events via its stand-building operating unit. The group contributed 12,9% to
Kagiso Media`s revenue and its operating loss decreased by R7,2m, even after a
R3,5m write-off of the Rand Show trademark and retrenchments costs of about
R700 000. JIMS contributed R4,0m to the operating profit, the stand-building
unit R700 000 and the Exhibitions division reported R2,7m. Mobil Alliance
posted a loss of R320 000. JIMS` revenue was just under R40,0m, Kagiso Media
included 50% of this (its share in the joint venture) in revenue.
Production
Urban Brew`s business currently centres around five major activities. These
are commercial television productions such as children and youth (Yo-TV), talk
(3 Talk) and game shows (Lotto draw), One Gospel, a channel on the DSTV
bouquet, Soweto Community Television, environmental productions and
opportunities in Africa.
3. Financial position
Working Capital
The group had available cash of R142,5m at 31 December 2008; this was R4,7m up
from the R137,8m at 30 June 2008. The increase in cash is mainly attributable
to the trading results, cash available in Urban Brew, offset against cash
utilised for the purchase of the shares in Urban Brew. The increase in trade
and other receivables is a result of the increased revenue at the stations
over this seasonal peak period and LexisNexis increasing its exposure in
academic materials in preparation of the starting of the new academic year.
Cash flow
The cash flow from operating activities for the six months increased by R36,3m
to R160,1m; a direct result of the trading results and the inclusion of Urban
Brew`s results for two months. The group`s cash flow remains positive. A
dividend of R46,8m will be paid to shareholders in March 2009. Another R44,7m
will be used to repay the group`s short-term funding requirements, its
preference dividend obligations as well as the redemption of 5% of its
preference shares on 31 March 2009.
Borrowings
At 31 December 2008 the gearing was 43,0% (2007: 57,7%) expressed as a
percentage of ordinary shareholders` interest. Long-term borrowings mainly
comprises preference shares. Included in the short-term borrowings is a loan
of R20,0m which was used to partially fund the purchase of the shares in Urban
Brew.
4. Business combinations
On 1 November 2008 Kagiso Media Limited purchased 50,1% of Urban Brew for
R75,1m. Urban Brew is involved in, inter alia, the creation and distribution
of audio visual content on any platform, trading in television content,
conducting of community television, and in the creation, development and
trading of music content. R20,0m of the purchase price was settled via a six-
month loan from a banking institution and the remaining amount from available
cash resources.
The revenue, operating profit as well as the profit after tax for the two-
month period till 31 December 2008 are reflected in the segmental analysis
under "Production". If the acquisition had occurred on 1 July 2008, the
contributions to the group`s revenue would have been approximately R123,9m and
the contributions to the profits would have been a net profit of approximately
R3,1m. These amounts have been calculated using the group`s accounting
policies and by adjusting the results of the subsidiary to reflect the
additional amortisation that would have been charged assuming a fair value
adjustment to intangible assets had applied from 1 July 2008, together with
the consequential tax effects.
The goodwill is attributable to the future benefits of Kagiso Media`s
diversification into the production of audio-visual content and ancillary
services attached thereto.
An exercise has been undertaken in accordance with the provisions of IFRS 3,
"Business combinations", to value the intangible assets inherent to this
entity. This final information will be included in the June 2009 results.
Details of the net assets acquired and
provisional goodwill are as follows:
R`000
Purchase consideration:
- cash paid 75,137
- direct costs relating to the 2,251
acquisition
Total purchase consideration 77,388
Provisional fair values of net -40,799
identifiable assets acquired (see below)
Provisional goodwill 36,589
The assets and liabilities arising from
the acquisition are as follows:
Acquiree`s
carrying Provisional
amount fair values
Group (R`000) on acquisition on acquisition
date date
Property, plant and equipment 27,996 27,996
Intangible assets 677 677
Goodwill 1,905 1,905
Deferred income tax assets 2,957 2,957
Income tax assets 6,198 6,198
Cash and cash equivalents 13,960 13,960
Trade and other receivables 36,501 36,501
Trade and other payables (26,309) (26,309)
Borrowings (14,050) (14,050)
Deferred income tax liabilities (731) (731)
Income tax liabilities (8,305) (8,305)
Net identifiable assets acquired 40,799 40,799
Minorities` share 20,318
Kagiso Media group`s share in the fair 20,481
value of net assets acquired
- cash purchase consideration 75,137
- direct costs relating to the 2,251
acquisition
- cash and cash equivalents in (13,960)
subsidiary acquired
Cash outflow on acquisition 63,428
5. Regulatory matters
New primary market licences: These licences are still not issued. Indications
from ICASA are that the regulator will issue invitations to apply ("ITA`s")
for new licences either in 2009 or at the beginning of 2010. The licences, for
both FM and medium wave, will cover Gauteng, KwaZulu-Natal and the Western
Cape. Management has taken legal advice to ensure its strategy of bidding for
the licences will not violate ownership regulations. The process of
identifying bid partners continues.
Licence fee regulations: Kagiso Media, in conjunction with other commercial
radio operators, has made a submission to ICASA, objecting to aspects of the
proposed new licensing fees regime. These regulations massively increase
licensing fees for radio broadcasters. For example, annual license fees would
increase from 1% of gross revenue to 2,5%, while amendment fees increase from
R30 000 to R250 000. ICASA is holding public hearings into the proposed
regulations in the current quarter.
Needletime: As reported previously, the National Association of Broadcasters
("NAB"), of which Kagiso Media is a member, gave notice of its decision to
refer this dispute with the South African Music Performance Rights Association
("SAMPRA") to the Copyright Tribunal. The dispute centres on the formula for
calculating the levy, as well as the effective date thereof. The NAB asked the
High Court for a declarator as to the Tribunal`s competency to hear the matter
and make a finding on the levy amount and the effective date of such
liability. In the quarter SAMPRA has, in turn, indicated its intention to also
refer the dispute to the Tribunal. However, SAMPRA requested by way of letters
of demand that the direct broadcasters should pay the levy into an escrow
account until such time as the dispute is resolved. While SAMPRA would like
the levy to be effective from 2006, legal opinion advised that this is
unenforceable. The NAB still reserves the right to challenge the Needletime
regulations themselves on the grounds that they are in parts contradictory and
unreasonable. No provision has been made in the results to date. This is
currently viewed as a contingent liability.
SAMRO: The negotiations with the South African Music Rights Organisation
("SAMRO") regarding the levy formula for music usage remained inconclusive.
6. Seasonality
The first six months of the financial year normally represent the peak trading
period for radio broadcasting as well as information services and solutions.
Due to the current market conditions, it is anticipated that the percentage
contribution towards the year`s results from these segments in the first six
months will be higher than what it was in previous comparable reporting
periods.
7. Interim dividend declaration
It is the group`s policy to return 50% of its headline earnings for the year
to the shareholders. It was decided, in view of the uncertain economic
conditions, to maintain the dividend at 35 cents per share, similar to what
was declared in March 2008. The board will consider the dividend policy and
final dividend payment after year-end.
Notice is hereby given that a dividend of 35 cents (2008: 35 cents) per share
has been declared in respect of the six months ended 31 December 2008 and is
payable to holders of ordinary shares recorded in the register of the company
on Friday, 20 March 2009.
The following salient dates apply to this dividend:
Last date to trade cum-dividend Friday, 13 March 2009
Shares commence trading ex-dividend Monday, 16 March 2009
Record date Friday, 20 March 2009
Payment of the dividend Monday, 23 March 2009
Share certificates may not be dematerialised or rematerialised between Monday,
16 March 2009 and Friday, 20 March 2009, both days inclusive.
In terms of the Companies Act, the directors confirm that, after the payment
of the above dividend, the company will be able to meet its commitments and
settle its liabilities as these fall due in the ordinary course of business
and that its consolidated assets, fairly valued, exceed its consolidated
liabilities.
8. Basis of preparation
The group has prepared condensed consolidated interim financial statements for
the six months ended 31 December 2008 in accordance with IAS 34 "Interim
Financial Reporting" and in compliance with the listing requirements of the
JSE Limited and the South African Companies Act 61 of 1973, as amended. The
interim condensed financial report should be read in conjunction with the
annual financial statements for the year ended 30 June 2008. Nameplate, a
discontinued operation as at 30 June 2008 has been reclassified from
continuing operations to discontinued operations in the 31 December 2007
numbers.
9. Accounting policies
The accounting policies adopted and methods of computation are consistent with
those of the annual financial statements for the year ended 30 June 2008, as
described in the annual financial statements for the year ended 30 June 2008.
10. Capital expenditure
Tangible Intangible
R`000 assets assets
Six months ended 31 December 2008
Opening net carrying amount 30 937 327 529
Additions 4 450 3 493
Acquired in subsidiary 27 996 677
Disposals/write-off (192) (20)
Depreciation, ecognizedn and other (7 211) (16 611)
movements
Closing net carrying amount 55 980 315 068
Six months ended 31 December 2007
Opening net carrying amount 29 284 351 570
Additions 3 693 350
Disposals/write-off (6) -
Depreciation, ecognizedn and other (4 937) (10 810)
movements
Closing net carrying amount 28 034 341 110
11. Share capital
Number of Ordinary Share
shares shares premium Total
R`000 R`000 R`000
1 July 2008 133 507 611 1 335 13 334 14 669
Shares issued - 284 243 3 1 180 1 183
employee share option
scheme*
Share issue expenses - - (4) (4)
31 December 2008 133 791 854 1 338 14 510 15 848
1 July 2007 133 136 477 1 331 11 850 13 181
Shares issued - 284 243 3 1 180 1 183
employee share option
scheme*
Share issue expenses - - (4) (4)
31 December 2007 133 420 720 1 334 13 026 14 360
*Weighted average price: 565 cents (2007: 477 cents).
12. Non-current liabilities - borrowings
Twelve months
Six months ended ended
31 December 31 December 30 June
2008 2007 2008
(Unaudited) (Unaudited) (Audited)
(R`000) (R`000) (R`000)
Preference shares
Opening balance 209 010 234 433 234 433
Share issue expenses - 458 - -
offset in previous year
Redeemed (11 560) (11 566) (25 423)
Closing balance 197 908 222 867 209 010
Share issue expenses (348) (387) (348)
197 560 222 480 208 662
Other borrowings
Instalment sale 11 349 168 560
agreements
Liability attributable to - 34 479 -
the shareholding in Mobil
Alliance
208 909 257 127 209 222
13. Income taxes
Income tax expense is ecognized based on management`s best estimate of the
weighted average annual income tax rate expected for the full financial year.
The estimated average annual tax rate used for 2008 is 34,5% (the estimated
tax rate for the first half of 2008 was 34,0%).
14. Contingent liabilities
The contingent liabilities, as reported in the 2008 annual financial
statements, remain applicable. During the period Kagiso Media Limited also
guaranteed the commitments of KMI in respect of a short-term loan to the value
of R20,0m. This amount was borrowed on 4 November 2008 and used to partially
fund the investment in Urban Brew. The loan will be repaid on 6 April 2009 and
an interest rate of JIBAR (a three-month Johannesburg Inter-Bank agreed rate)
plus 275 basis points per month is applicable. The outstanding loan amount is
reflected in current borrowings.
15. Related party transactions
Payments made to Kagiso Trust Investments (Proprietary) Limited ("KTI") in
terms of the sub-lease:
Costs for
R`000 Rent Operating Costs for other
costs common area services
31 December 2008 606 104 18 138
31 December 2007 504 113 41 159
30 June 2008 1 489 109 32 346
Outstanding balances
owing to KTI in terms
of the sub-lease:
31 December 2008 - - - 13
31 December 2007 475 - - 1 056
30 June 2008 496 - - 1 044
Loans
repaid/
(advanced)
Opening during the Interest Closing
R`000 balance period charged balance
Loans to/(from) related parties
Thebe Convergent Technologies (Proprietary) Limited ("Thebe")
31 December 2008 - - - -
31 December 2007 - - - -
30 June 2008 (4 861) 4 861 - -
Makana Radio Communications (Proprietary) Limited ("Makana")
31 December 2008 1 715 69 - 1 784
31 December 2007 1 348 (500) - 848
30 June 2008 1 348 367 - 1 715
The loans from Thebe and to Makana are unsecured, interest-free and are
payable on demand.
Loans to directors (Unrestricted Share Purchase Scheme)
31 December 2008 9 484 4 334 540 14 358
31 December 2007 3 869 4 708 358 8 935
30 June 2008 3 869 4 708 907 9 484
Loans to directors are granted in terms of the "Unrestricted Share Purchase
Scheme". These loans are repayable within six years from date of grant and
carry interest at prime less two percentage points. These loans are deemed
current and risk-free albeit possible fluctuations in the share price.
Loan from minority shareholder: MSG Afrika Media (Proprietary) Limited
31 December 2008 (15 750) - - (15 750)
31 December 2007 (15 750) - - (15 750)
30 June 2008 (15 750) - - (15 750)
The loan is unsecured, interest-free and is payable on demand.
Preference share investment in minority shareholder
MSG Afrika Media (Proprietary) Limited
31 December 2008 14 700 (1 050) - 13 650
31 December 2007 16 240 (1 898) 1 211 15 553
30 June 2008 16 240 (1 540) - 14 700
The loan as reported at the end of June 2007 was converted into preference
shares, on the same preference share terms and conditions as those available
to the Kagiso Media group. This includes dividends payable every six months,
at 70% of prime and payments into a sinking fund, equal to 5% of the issued
value. The holding company of this entity issued a guarantee for the entity`s
delivery in accordance with the agreement.
Deferred consideration liability to the joint shareholder in Mobil Alliance
Opening Closing
R`000 balance Movement balance
31 December 2008 5 657 (2 029) 3 628
31 December 2007 - 34 479 34 479
30 June 2008 - 5 657 5 657
The effective date of the investment in Mobil Alliance was 1 November 2007.
The deferred purchase consideration is to be paid in terms of the sale
agreement on 30 April 2012. It was calculated with reference to fair market
value of the company at 31 December 2011 taking into account sustainable
business into the future. The determined liability is adjusted to the
goodwill.
16. Events after balance sheet date
Investment in Merafe Outdoor (Proprietary) Limited ("MO") - A memorandum of
agreement ("MOA") was entered into between the shareholders of MO at the time
of the initial investment in 2007. As previously advised, Kagiso Media,
through Kagiso Outdoor (Proprietary) Limited ("KO"), has decided not to
purchase shares in INM (Proprietary) Limited ("INM"). INM exercised their call
on the shares owned by KO on 27 January 2009. The price, according to the MOA,
will equal the original amount invested plus interest at prime less two
percentage points. The MOA stipulated that the shareholders will, within a
period of 180 days after the date on which notice of exercise of the call
option was issued, co-operate to find another suitable shareholder. INM will,
however, purchase these shares after 180 days, should this not be possible.
Kagiso Exhibitions and Events (Proprietary) Limited ("KEE") - Kagiso Media
decided to close all unprofitable and unsustainable business units, shows and
exhibitions. KEE will continue with the East Coast Radio House and Garden
show, the Durban Motor show, the Johannesburg International Motor show and
events linked to the South African Tourism contract. The result is that the
group will be retrenching staff (anticipated 25 people), incur costs to cancel
lease agreements, write-off of trademarks and goodwill not relating to the
above events, and actively continue with the process to attempt to sell these
business units and KEE`s investments as a going concern. The scaling down
process commenced after December 2008 and only certain known expenses were
included in the results to date. The process should be finalised by the end of
the financial year. The Rand Show trademark was sold in January 2009 for R5,0m
and Saitex for R50 000.
17. Prospects
Kagiso Media`s portfolio of assets is indeed experiencing the toughening
market conditions. Broadcasting will track, and in some instances may exceed
the market share.
The information services and solutions division`s performance in Africa is
expected to decline and in light of the upcoming elections, certain budget
lines in state owned entities and departments were frozen. However, all will
be done to ensure that double-digit growth in this division will be
maintained, albeit at lower levels than before. Outdoor`s performance is
expected to track the previous six months` results.
Production will include the eight month`s results for Urban Brew.
Management will continue to ensure effective cost management and adoption of
optimal tactical approaches to counteract the current situation.
On behalf of the board
RM Motanyane M Morobe
Chairperson Chief executive
23 February 2009
Registered office: 1st Floor, Kagiso House, 16 Fricker Road, Illovo Boulevard,
Illovo, 2196
Transfer secretaries: Link Market Services South Africa (Proprietary) Limited
5th Floor, 11 Diagonal Street, Johannesburg, 2001
(PO Box 4844, Marshalltown, 2000)
Directors: RM Motanyane (Chairperson) #, MJN Njeke (Deputy Chairperson),
M Morobe* (Chief Executive), OC Essack*, S Pienaar*, HI Appelbaum,
RL Hiemstra#, ZJ Matlala, A Patel, AA Paruk#, WC Ross#
*Executive #Independent
Also available at: www.kagisomedia.co.za
Date: 23/02/2009 10:00:01 Produced by the JSE SENS Department.
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