WE ARE VERY PROUD TO HAVE WON THE 2005 FINANCIAL MAIL/ADFOCUS MEDIA OWNER OF THE YEAR AWARD WHICH HIGHLIGHTS THE SUCCESS OF PRIMEDIA'S ADVERTISING BUSINESSES
DIVISIONAL RESULTS | |||
| 2005 | 2004 | % | |
| R'm | R'm | change | |
| Revenue | 950,3 | 759,9 | 25,1 |
| EBITDA | 331,3 | 243,3 | 36,2 |
| PBIT | 297,0 | 211,7 | 40,2 |
| Excludes Primedia Unlimited Advertising. | |||
OVERVIEW
The advertising businesses once again delivered a solid performance, building on a three year platform of incremental growth. Fuelled by the twin factors of low inflation and interest rates, the good South African macro-economic environment continued to bolster consumer confidence and domestic expenditure, resulting in increased advertising-spend by our clients.
Operationally, we continue to benefit from excellent inter-group co-operation, and this plays a vital role in driving our sales strategy and in providing relevant and creative media products and services to our clients. By combining the skills and experience of our best people, we have been able to implement innovative ideas and solutions across all media types, thereby providing a one-stop media solution for our clients. Following on this success we have established a strategic "government advertising unit" which is making good progress in expanding our business across various government departments.
We have also continued to make further progress with our Africa strategy and have set up a strategic "African advertising unit" that is focused on sourcing low-risk opportunities on the African continent.
The advertising businesses increased revenue by 25,1% to R950,3 million (2004: R759,9 million). PBIT was up 40,2% to R297,0 million (2004: R211,7 million), with PBIT margins increasing from 27,9% to 31,3%. Excluding the new acquisitions made in the year by the division, namely 94.5 Kfm and 567 CapeTalk, organic growth in PBIT was a strong 18,0%. All radio stations performed well and are benefiting from the integration of key disciplines.
It is very pleasing to note that the non-broadcasting advertising businesses delivered in excess of R100 million of the group's PBIT, with our wide range of businesses showing good growth and often dominating their respective niches.
Our people are our greatest asset and as such, being an employer of choice and attracting the best people in the media sector remains a core focus. We are committed to growing and developing our employees in their areas of expertise and to achieving our transformation targets, which are in line with the ICT sector charter requirements.
We are very proud to have won the 2005 Financial Mail/Adfocus Media Owner of the Year award, which highlights the success of Primedia's advertising businesses, as judged by our clients and major advertisers. It is a testament to the group's unique media types, which straddle all income groups, ranging from LSM 1-10.
BROADCASTING AND INTERNET DIVISION
*Before central costs.
Primedia Broadcasting
Primedia Broadcasting is the owner and operator of four premium-branded commercial radio stations, namely 94.7 Highveld Stereo, 94.5 Kfm, Talk Radio 702 and 567 CapeTalk, which all have a combined audience in excess of three million listeners. In terms of the RAMS audience figures for the period from February to May 2005, the combined audience profile was as follows:
- 51% men and 49% women;
- 51% black and 49% white; and
- 83% of the audience is in the premium LSM 6 to 10 brackets.
Primedia Broadcasting has developed Talk Radio 702 and 567 CapeTalk as "Joburg and Cape Town's No. 1 News and Information Stations" respectively and 94.7 Highveld Stereo as "Joburg's No. 1 Hit Music Station". 94.7 Highveld Stereo's breakfast show, "The Rude Awakening", is Joburg's biggest breakfast show and the recently acquired 94.5 Kfm is in the process of being developed into "The Cape's No 1 Music Station".
Primedia Broadcasting continues to excel financially as the main driver of growth in the advertising division. Over the last year, all four stations grew their PBIT, with 94.7 Highveld Stereo once again putting in a stellar performance, delivering PBIT growth of 18%, off a very high base. Talk Radio 702 has regained its leadership position in talk and current affairs, showing significant year on year growth in its operating income, whilst 567 CapeTalk turned to profitability for the first time this year. Primedia Broadcasting took over the operations and management of 94.5 Kfm in the second half of the fiscal, following its acquisition of the station in October 2004. Since then, 94.5 Kfm has shown exciting growth relative to the previous year.
iafrica.com
iafrica.com is the fourth largest consumer portal in South Africa, averaging in excess of 400 000 unique users on a monthly basis.
Improved operational performance, as well as the acceptance by local advertisers of the internet as a viable advertising medium, has resulted in iafrica.com almost breaking even, its best financial performance to date. With its ability to leverage content across a number of digital platforms, iafrica.com is ideally placed to take advantage of the convergence opportunities expected from the legislative changes and the ongoing developments in digital technology.
OUT OF HOME DIVISION
*Before central costs.
Primedia Outdoor
Primedia Outdoor is a leading South African outdoor advertising media specialist, with significant presence in five primary sectors, namely airports, spectacular sites on major freeways and arterials, street furniture and retail directional signage in metropolitan markets, and both free standing and on-store signage in peri-urban and rural areas. In addition, Primedia Outdoor has operations in Namibia, Botswana, Lesotho, Swaziland, and has recently entered the Mozambique market.
Primedia Outdoor delivered an excellent financial performance during the financial year under review. Revenue for the year was 13,3% up on prior year, whilst PBIT increased by 22,5% mainly as a result of organic growth and innovation. Operating margins improved from 14,9% to 16,1%.
PrimeLites, a new outdoor format, was launched in the year as a new innovation, primarily in Johannesburg, and resulted in minimal cannibalisation of existing formats. PrimeLites is being rolled out, firstly to the key markets of Pretoria, Cape Town and Durban, and later to secondary towns, to achieve national coverage. Spinners, another innovation, was launched at the Cape Town International airport and is expected to be rolled out to sites in Durban and Johannesburg in the coming financial year.
Primedia Instore
Primedia Instore is South Africa's leading provider of retail instore media and promotional solutions ranging from trolley advertising to the latest state of the art moving point of sale media. Presented with the prestigious "Primedia Company of the Year" award in 2004 and the "Primedia Merit Award" for 2005 for consistent above-average growth over three consecutive years, Primedia Instore enjoys coverage in 860 "top-end" supermarkets and hypermarkets, which translates into a monthly audience of 22 million shoppers.
Primedia Instore experienced another good year, following on from its phenomenal compounded growth in revenue and PBIT since 2003. In the 2005 fiscal, revenue increased by 6,9% and PBIT grew by 20,8%.
New innovations such as the roll-out of Trolley Ads and the introduction of Showcase Sampler impacted favourably on the results for 2005. The Take One/Coupon Direct range was re-launched at the beginning of the financial year and the company continues to innovate extensively, with two major launches planned for the upcoming financial year. These launches include the introduction of a world first, "flashing", illuminated media services to be marketed under the brand names of Light Box and Shelf Illuminator.
Primedia Face 2 Face
Primedia Face 2 Face ("F2F") focuses on consumers within the LSM 3-6 segment through its 10 000 store universe base in townships and rural areas. The company offers a number of innovative services that enable marketers to communicate interactively and in the appropriate language and manner with their specific target markets.
F2F's distribution business under-performed, especially in the first half of the year, putting pressure on the overall business, which however posted a solid recovery in the second half.
CINEMA AND PRINT DIVISION
*Before central costs.
Cinemark
Cinemark sells advertising across all cinemas nationally, both on-screen and in the cinema foyers. During the 2005 fiscal, Cinemark delivered revenue growth of 21,0% and PBIT growth of 28,9% year on year. This performance was driven by excellent innovation and the successful renegotiation and expansion of the Golden Reel concept across 35mm celluloid film and digital screens.
Primedia @ Home
Primedia @ Home is a direct marketing company that specialises in targeted leaflet and consumer promotion distribution. This business distributes products to over 7 million homes in South Africa on a regular basis and represents the majority of the leading retailers in South Africa, Botswana and Namibia.
Low barriers to entry in this market and the resultant drop in rates resulted in PBIT being under pressure. The company has revised its business model, to take technology and other innovations on board in order to enhance and distinguish its offering.
Primedia Publishing
Primedia Publishing is a specialist magazine publisher of 12 magazine titles, namely SA Gardening, Tuin Paleis, ADvantage, Money Marketing, DIY Trade News, Hire SA, Leading Architecture and Design, Microsoft TechNet, Analytical Reporter, Frontshop, Molato and Film Finesse.
In spite of operating in a highly competitive market with low barriers to entry, Primedia Publishing produced a good set of results, showing a significant improvement in margins and PBIT.
COMMUTER MEDIA DIVISION
*Before central costs.
ComutaNet reaches in excess of 17 million economically active commuters and offers advertisers a bouquet of media platforms ranging from advertising on taxis, trailers, buses, trains, audio advertising, and interactive promotions.
After two years of exceptional growth, the commuter media division experienced a period of consolidation during the 2005 fiscal and was only able to grow its revenue by 1,3% and PBIT by just over 1%. Rank TV was adversely impacted by the loss of an anchor client, which has now been replaced. The core ComutaNet business and Rank Branding however delivered strong performances, which to some extent nullified the setback experienced by Rank TV.
In January 2005, the company launched its new innovation, Star Radio, which broadcasts daily, through a state of the art audio network to over twenty of the largest commuter nodes. This has added a new dimension and growth to this division's existing audio capabilities. Other innovations launched during the period include BrandMarks and Kiosk Branding.
SPORT DIVISION
*Before central costs.
Primedia Sport, which comprises Megapro Marketing and Signet, recorded an impressive 32% increase in PBIT during the financial year under review due to the continued growth of the industry and Megapro's sponsorship management business, as well as South Africa's appointment as host country for the 2010 FIFA World Cup and the accompanying commercial programmes initiated.
Megapro Marketing exclusively markets the commercial rights of a number of major sporting bodies. These rights are in the form of sponsorships, stadium advertising, corporate hospitality, sponsorship management, strategic marketing and events. During the year, Megapro secured eight of the 20 corporate sponsorships for South Africa's bid to host the 2010 FIFA World Cup.
Signet Licensing manages the licensing and merchandising strategies for South Africa's leading sports brands, including the Springboks, Kaizer Chiefs and Orlando Pirates.
Kaizer Chiefs
Kaizer Chiefs is the country's leading football club and is recognised as the top sports brand in South Africa. The club is celebrating its 35th anniversary in the 2006 financial year. In the period under review, the club won the Premier Soccer League title for the second successive year as well as the domestic Coca Cola Cup.
PRIMEDIA UNLIMITED ADVERTISING
One of the key features of Primedia's growth strategy is to enter into new growing sectors of the South African media industry that currently fall outside Primedia's present media and asset base. Primedia Unlimited's brief is to develop and grow new and innovative sectors of the media industry. During the year, Primedia Unlimited Advertising made the following acquisitions:
Forecourt Media
Forecourt Media is currently comprised of 40 LED screens placed at leading forecourts around the country. The medium offers advertisers an audio visual medium targeting LSM 7-10 consumers at a time when traditional media is limited and there is significant dwell time to capture the consumer.
The enormous growth of convenience marketing and the strategic decision of our petroleum partners to extend peripheral services to their clients provide us with an incredible platform from which to communicate. It is off this platform that Forecourt Media is offering advertisers a multitude of advertising options to dominate the space in the coming year. In addition we are increasing our portfolio of sites to over 100, providing our clients with an incredibly cost-effective medium to reach their target audiences.
Primall Media
Primall Media offers advertisers the unique ability to reach active consumers where there is no competing medium. Shopping malls have become an integral part of South African culture where more and more time is being spent in these environments encompassing shopping, entertainment, residential and tourism. Primall Media through its exclusive rights in malls and casinos, coupled with its innovative media platforms within the interior and exterior of malls, provides advertisers with the ability to reach consumers throughout their shopping experience. With 70% of purchase decisions being made within these environments, Primall Media is perfectly geared for an exciting year ahead.
Wide Open Platform
Wide Open Platform is the first company in South Africa to pay specific media attention to the existing urban environment. By focusing on media opportunities (outdoor and indoor) lying dormant within the existing urban landscape, Wide Open Platform has been pivotal in giving larger than life brands the quality, high-impact exposure that they require.
By leveraging large scale urban sites in a single brand context, Wide Open Platform offers advertisers the opportunity to reinvent public and high traffic spaces – to create and deliver a dominant brand identity that amazes and impresses the public. A significant part of the business is the wrapping of construction site scaffoldings with digital mesh media. Other innovative solutions include building wraps, night projections and sky lites. In addition the company has transformed airport media with its out of the box thinking including the wrapping of pillars and air bridges, parkade branding through to travelator branding.
Primestars Marketing
Primestars Marketing has launched a revolutionary marketing concept to connect with consumers – a new communication channel dubbed The Third Place that offers marketers a stage from which to build profitable long-term relationships rather than merely once-off sales. The Third Place essentially builds communities of interest by using state of the art technology and enables brands to conduct dialogue with them. The Third Place concept attracts audiences to Ster-Kinekor cinemas around the country, away from the home and work environment, engaging them with entertaining educational and networking opportunities. This new concept was launched with Entrepreneurial Wednesday sponsored by First National Bank in August, which is being followed by the roll out of a number of exciting channels which will include Healthy Tuesday as well as Financial Fitness on Fridays.
Most of the Primedia Unlimited Advertising businesses were owned for a six-month period and contributed revenue of R31,8 million and PBIT of R3,9 million.
ONE TO ONE (SOUTH AFRICA)
Knowledge Factory
Knowledge Factory delivered a solid performance during the financial year under review, achieving 142% growth in its PBIT, albeit off a small base. This growth was achieved as a result of the business crystallising its value proposition and re-focusing on providing its clients with market, channel and customer insights. Another contributory factor was the successful conclusion of a joint venture to deliver a robust and comprehensive mobile property valuation solution to the financial services industry, as well as the disposal of non-core operations during the 2004 financial year.
PROSPECTS
Primedia Advertising continues to build on its goals of achieving world-class performance and standards across all business units. The significant momentum created within the business over the past three years will allow us to leverage our strategy of incremental growth and strategic acquisitions.
In addition, we will also benefit from including the full year results of both 94.5 Kfm and Primedia Unlimited and the additional contributions from new acquisitions such as The Letter Corporation and XProcure.
We remain confident and optimistic about the future prospects of the division.
K Pillay
Divisional chief executive
Advertising Division
21 October 2005