|
|
|
Notes to the FinancialStatements
for the year ended 30 June 2005
| | GROUP |
COMPANY |
| | 2005 | 2004 | 2005 | 2004 |
| | R'000 | R'000 | R'000 | R'000 |
| 1. | REVENUE | | | | |
| An analysis of the group's revenue is as follows: | | | | |
| – Sale of goods | 676 430 | 587 125 | – | – |
| – Services rendered | 1 303 878 | 1 165 262 | – | – |
| | | 1 980 308 | 1 752 387 | – | – |
| | | | | |
| 2. | EXCEPTIONAL ITEMS | | | | |
| Reversal of impairment of loans | 14 910 | – | 3 970 | – |
| Recovery of debts previously written-off | 200 | 9 844 | – | 3 058 |
| Profit on disposal of assets and investments | 4 057 | 9 189 | – | – |
| Impairment and write-down of assets and equity investments | (578) | 5 661 | 26 405 | (50 588) |
| Revaluation of listed investment | 1 165 | – | 1 165 | – |
| Reversal of onerous lease provisions | 3 334 | 4 249 | – | – |
| Charitable donation to The Nelson Mandela Foundation | (3 000) | – | – | – |
| Costs relating to The Museum of Television and | | | | |
| Radio International Council Meeting | (2 846) | – | – | – |
| Provision for legal and other costs | (327) | (5 635) | – | (3 086) |
| Gross exceptional items | 16 915 | 23 308 | 31 540 | (50 616) |
| Taxation (included in
note 7) | 485 | 690 | – | – |
| | Net exceptional items | 17 400 | 23 998 | 31 540 | (50 616) |
| | | | | |
| 3. | OPERATING PROFIT/(LOSS) | | | | |
| Operating profit/(loss) is arrived at after taking into account | | | | |
| the following items: | | | | |
| Income: | | | | |
| Foreign exchange gain – realised | 23 | 3 874 | – | – |
| Foreign exchange gain – unrealised | 1 682 | 1 638 | 1 | – |
| Profit on disposal of investments | – | 31 | – | – |
| Profit on disposal of property, plant and equipment | 1 258 | 1 612 | – | – |
| Management fees received | 514 | 396 | – | – |
| Expenses: | | | | |
| Auditors' remuneration | | | | |
| – current year | 5 617 | 5 187 | 536 | 901 |
| – prior year | 348 | 335 | – | 156 |
| – other services | 1 209 | 851 | 165 | 207 |
| | 7 174 | 6 373 | 701 | 1 264 |
| Fees paid to consultants | 14 148 | 9 808 | 387 | 285 |
| Foreign exchange loss – realised | 2 241 | 108 | – | – |
| Foreign exchange loss – unrealised | 1 565 | 4 374 | 26 | – |
| Loss on disposal of property, plant and equipment | 1 052 | 1 635 | – | – |
| Impairment of property, plant and equipment | 544 | – | – | – |
| Operating lease rentals | | | | |
| – premises | 67 659 | 76 840 | – | – |
| – plant and equipment | 4 094 | 2 349 | – | – |
| Research and development costs | 3 437 | 2 453 | – | – |
| Royalties paid | 6 794 | 3 291 | – | – |
| Staff costs (including retirement benefits) | 313 811 | 283 276 | – | – |
| Directors' emoluments – executive directors | | | | |
| – current year | | | 13 743 | 13 233 |
| – less: paid by subsidiary companies | | | (13 743) | (13 233) |
| | | | – | – |
| Directors' emoluments – non-executive directors | | | | |
| – board and committee fees | | | 3 369 | 3 120 |
| – other services as directors | | | 718 | 987 |
| – prior year | | | – | 75 |
| | | | 4 087 | 4 182 |
| – less: paid by subsidiary companies | | | (114) | (4 182) |
| | | | 3 973 | – |
| | Average number of employees: 2 605 (2004: 2 618) | | | | |
| |
| 4. | INVESTMENT INCOME | | | | |
| Dividends received from subsidiary companies | | | – | 96 286 |
| Interest received from subsidiary companies | | | 9 567 | 22 200 |
| Interest received from bankers | 6 963 | 9 907 | – | – |
| Interest received from South African Revenue Service | 127 | 1 014 | – | – |
| Other interest received | 718 | 4 659 | 492 | 25 |
| | | 7 808 | 15 580 | 10 059 | 118 511 |
|
| | | | |
| 5. | FINANCE COSTS | | | | |
| Bank overdrafts and borrowings | (10 338) | (15 123) | (5 892) | (6 384) |
| Interest bearing borrowings | (34 809) | (12 612) | – | – |
| South African Revenue Service | (657) | (3 609) | (1 603) | (28) |
| Amounts owed to vendors | (38) | (107) | – | – |
| Other interest paid | (1 713) | (591) | – | – |
| | | (47 555) | (32 042) | (7 495) | (6 412) |
| | | | | |
| 6. | SHARE OF ASSOCIATED COMPANIES' | | | | |
| PROFITS/(LOSSES) | | | | |
| | Unlisted investments | 457 | (331) | – | – |
| | | | | |
| 7. | TAXATION | | | | |
| South African normal taxation | | | | |
| – Current year | (55 081) | (37 247) | (516) | (1 601) |
| – Prior year over/(under) provision | 641 | (1 169) | (4) | – |
| Foreign taxation | | | | |
| – Current year | 77 | (1 620) | | |
| – Prior year over provision | 516 | – | | |
| Secondary taxation on companies | – | (8 723) | – | – |
| Deferred taxation | | | | |
| – Current year | (30 013) | (18 711) | 1 136 | 10 037 |
| – Prior year (under)/over provision | (454) | 3 438 | – | 2 108 |
| – Statutory tax rate change | (2 328) | – | (17) | – |
| | | (86 642) | (64 032) | 599 | 10 544 |
| Reconciliation of rate of taxation: | | | | |
| South African normal tax rate | 29,0 | 30,0 | 29,0 | 30,0 |
| Dividends received | – | – | – | (50,4) |
| Exceptional items – capital | (1,7) | (2,9) | – | 26,2 |
| Permanent differences | 1,2 | (0,9) | (31,3) | 0,4 |
| Amortisation of intangibles | – | 0,4 | – | – |
| Prior year over/(under) provision | 0,2 | (0,9) | – | – |
| Deferred tax not raised on assessed losses | 0,1 | 0,5 | – | – |
| Deferred tax asset raised on prior year assessed losses | (2,4) | (4,3) | – | (3,7) |
| Secondary tax on companies and other taxes | – | 2,4 | – | (21,0) |
| Effect of statutory rate change | 0,7 | – | – | – |
| | Effective tax rate per income statement | 27,1 | 24,3 | (2,3) | (18,5) |
| |
| | | Group |
| | | | 2005 | 2004 |
| 8. | EARNINGS PER SHARE | | | | |
| 8.1 | Number of shares ('000)
| | | | |
| Number of shares in issue | 221 747 | 216 764 |
| Weighted average number of shares | | | 223 032 | 216 520 |
| Unexercised share options | | | 5 462 | 4 504 |
| Shares issued subsequent to year end | | | – | 4 624 |
| Fully diluted weighted average number of shares | 228 494 | 225 648 |
| 8.2 | Earnings | | | | |
| Net profit for the year | 215 572 | 175 528 |
| 8.3 | Headline earnings per share
| | | | |
| Net profit for the year | | | 215 572 | 175 528 |
| Adjusted for: | | | | |
| Amortisation of goodwill | | | – | 3 874 |
| Net profit on disposal of fixed assets and investments | | | (206) | (8) |
| Exceptional items: | | | | |
| – Impairment and write-down of assets and equity investments | | | 578 | (14 203) |
| – Profit on disposal of assets and investments | | | (4 057) | (9 189) |
| – Recovery of debts previously written-off | | | (200) | (9 844) |
| – Legal and other costs written back | (120) | – |
| | | | 211 567 | 146 158 |
| Tax effect of non-headline earnings items | 95 | 1 217 |
| Headline earnings | 211 662 | 147 375 |
| Headline earnings per share (cents) | | | 95 | 68 |
| Fully diluted headline earnings per share (cents) | 93 | 65 |
| Basic earnings per share is calculated by dividing the earnings for the year by the weighted average number of shares in issue during the period, net of those shares held by The Primedia Trust. |
| Diluted earnings per share is calculated by adjusting the weighted average number of shares in issue by the number of shares that would have been issued at fair value in respect of options granted but not exercised, as well as shares issued subsequent to year end. |
| Headline earnings per share is calculated by dividing the headline earnings attributable to shareholders by the weighted average number of shares in issue during the period, net of those shares held by The Primedia Trust. |
| | Diluted headline earnings per share is calculated by adjusting the weighted average number of shares in issue by the number of shares that would have been issued at fair value in respect of options granted but not exercised, as well as shares issued subsequent to year end. |
| | | | | | | |
| | Leased | | Office | |
| | | | assets and | Motor | furniture, | |
| | | | leasehold | vehicles, | equipment, | |
| | Land and | Advertising | improve- | plant and | décor and | |
| | buildings | structures | ments | equipment | computers | Total |
| | R'000 | R'000 | R'000 | R'000 | R'000 | R'000 |
| 9. | PROPERTY, PLANT AND EQUIPMENT | | | | | | |
| GROUP – at 30 June 2005 | | | | | | |
| Cost | 10 208 | 170 025 | 51 633 | 118 096 | 292 011 | 641 973 |
| Accumulated depreciation | (3 092) | (89 121) | (6 977) | (79 505) | (183 560) | (362 255) |
| Net carrying value | 7 116 | 80 904 | 44 656 | 38 591 | 108 451 | 279 718 |
| Movement summary | | | | | | |
| Opening net carrying value | 9 386 | 78 389 | 45 585 | 32 077 | 83 482 | 248 919 |
| Additions | – | 15 809 | 257 | 16 953 | 53 368 | 86 387 |
| Acquisition of businesses | – | 6 309 | – | 1 547 | 2 400 | 10 256 |
| Disposals – at cost | (891) | (3 130) | (195) | (2 543) | (15 036) | (21 795) |
| Disposals – accumulated depreciation | 18 | 1 900 | 195 | 2 347 | 14 561 | 19 021 |
| Depreciation | (1 049) | (18 393) | (1 184) | (11 813) | (30 241) | (62 680) |
| Impairment | – | – | – | – | (544) | (544) |
| Exchange rate adjustments | – | 20 | (2) | 13 | 123 | 154 |
| Reclassifications | (348) | – | – | 10 | 338 | – |
| Closing net carrying value | 7 116 | 80 904 | 44 656 | 38 591 | 108 451 | 279 718 |
| GROUP – at 30 June 2004 | | | | | | |
| Cost | 13 445 | 147 049 | 51 495 | 100 673 | 244 219 | 556 881 |
| Accumulated depreciation | (4 059) | (68 660) | (5 910) | (68 596) | (160 737) | (307 962) |
| Net carrying value | 9 386 | 78 389 | 45 585 | 32 077 | 83 482 | 248 919 |
| Movement summary |
| Opening net carrying value | 11 858 | 84 734 | 46 903 | 34 427 | 106 459 | 284 381 |
| Additions | 30 | 11 109 | 242 | 9 579 | 20 457 | 41 417 |
| Acquisition of businesses | 348 | – | (317) | 179 | 17 | 227 |
| Disposal of businesses | (1 223) | – | – | – | (2 748) | (3 971) |
| Disposals – at cost | (65) | (1 201) | – | (11 900) | (12 785) | (25 951) |
| Disposals – accumulated depreciation | 43 | 847 | – | 10 192 | 11 868 | 22 950 |
| Depreciation | (1 141) | (16 864) | (1 655) | (10 761) | (29 241) | (59 662) |
| Exchange rate adjustments | 36 | (236) | (26) | 264 | (334) | (296) |
| Transfer to intangible assets(1) | – | – | – | – | (10 176) | (10 176) |
| Reclassifications | (500) | – | 438 | 97 | (35) | – |
| Closing net carrying value | 9 386 | 78 389 | 45 585 | 32 077 | 83 482 | 248 919 |
| Leased assets comprise buildings, leasehold improvements, motor vehicles and equipment. Assets are encumbered as detailed in notes
19 and 20. |
| | A register containing the information required by paragraph 22 (3) of the 4th schedule to the Companies Act is available for inspection at the registered office of the company. |
| | (1) | Software which is not an integral part of the related hardware has been reclassified as intangible assets in accordance with AC 129 – Intangible assets. |
| |
| | Tradename, | |
| | | copyrights | | | |
| | | and trade- | | | |
| | Goodwill | marks | Licence | Software | Total |
| | R'000 | R'000 | R'000 | R'000 | R'000 |
| 10. | GOODWILL AND INTANGIBLE ASSETS | | | | | |
| GROUP – at 30 June 2005 | | | | | |
| Cost | 252 593 | 179 882 | 25 904 | 39 843 | 498 222 |
| Accumulated amortisation | (11 455) | (89) | – | (30 352) | (41 896) |
| Net carrying value | 241 138 | 179 793 | 25 904 | 9 491 | 456 326 |
| Movement summary | | | | | |
| Opening net carrying value | 105 446 | 110 | – | 10 231 | 115 787 |
| Additions | 68 991 | – | – | 4 108 | 73 099 |
| Disposals | – | – | – | (171) | (171) |
| Acquisition of businesses | 63 809 | 179 696 | 25 904 | 11 | 269 420 |
| Amortisation | – | (13) | – | (4 688) | (4 701) |
| Negative goodwill released | 2 892 | – | – | – | 2 892 |
| Closing net carrying value | 241 138 | 179 793 | 25 904 | 9 491 | 456 326 |
| GROUP – at 30 June 2004 |
| Cost | 116 901 | 186 | – | 32 413 | 149 500 |
| Accumulated amortisation | (11 455) | (76) | – | (22 182) | (33 713) |
| Net carrying value | 105 446 | 110 | – | 10 231 | 115 787 |
| Movement summary | | | | | |
| Opening net carrying value | 6 042 | 119 | – | – | 6 161 |
| Transfer from property, plant and equipment | – | – | – | 10 176 | 10 176 |
| Additions | 102 413 | 4 | – | 4 808 | 107 225 |
| Disposals | – | – | – | (20) | (20) |
| Acquisition of businesses | 3 825 | – | – | – | 3 825 |
| Amortisation | (3 874) | (13) | – | (4 733) | (8 620) |
| Impairment | (2 960) | – | – | – | (2 960) |
| Closing net carrying value | 105 446 | 110 | – | 10 231 | 115 787 |
| |
| The following intangible assets were assessed as having an indefinite life: |
| |
|
GROUP |
|
| 2005 | 2004 |
| |
| R'000 | R'000 |
| Tradename | | | | 179 634 | – |
| Licence | 25 904 | – |
| | 205 538 | – |
| | The directors have given due consideration to the financial forecasts of the businesses acquired, the group's history of dealings with the broadcasting regulatory authorities, industry analyses and the competitive landscape, and believe that the tradename and licence acquired will continue to generate net cash inflows for an indefinite period and the licence will continue to be renewed at the end of its legal expiry date. Accordingly, the directors are of the view that the tradename and licence have an indefinite economic life. |
| | | | | |
| |
COMPANY |
| 2005 | 2004 |
| | R'000 | R'000 |
| 11. | INVESTMENTS IN SUBSIDIARIES AND JOINTLY CONTROLLED ENTITIES | | |
| (ANNEXURE
2) | | | | | |
| 11.1 | Investments in subsidiaries
| | | | | |
| Shares at cost | | | | 488 536 | 485 013 |
| Loans to subsidiaries | | | | 2 291 009 | 2 290 041 |
| Loans from subsidiaries | (188 372) | (187 589) |
| | | | | 2 591 173 | 2 587 465 |
| Write-down of investments against share premium | (2 292 656) | (2 292 656) |
| Recoupment of amounts previously written-off against share premium | 264 204 | 123 279 |
| | 562 721 | 418 088 |
| 11.2 | Investments in jointly controlled entities
| | | |
| | Loan from jointly controlled entity | 22 693 | – |
| |
| |
GROUP |
COMPANY |
| | 2005 | 2004 | 2005 | 2004 |
| | R'000 | R'000 | R'000 | R'000 |
| 12. | INVESTMENTS IN ASSOCIATED COMPANIES | | | | |
| (ANNEXURE
1) | | | | |
| Balance at beginning of year | 8 062 | 24 217 | – | – |
| Share of associated companies' profit/(losses) | 457 | (331) | – | – |
| Reversal of impairment/(write-down) of investments | | | | |
| and loans | 10 940 | (14 479) | – | – |
| Interest in associated company acquired | – | 323 | – | – |
| Interest in associated company disposed | – | (84) | – | – |
| Loans advanced | 81 | 3 996 | – | – |
| Amounts realised on disposal of interest in associate | – | (5 580) | – | – |
| Reclassification from associate to subsidiary | (8 600) | – | – | – |
| Balance at end of year | 10 940 | 8 062 | – | – |
| Analysis of closing balance: | | | | |
| Unlisted investments | | | | |
| – Shares at cost (net of goodwill amortised) | 420 616 | 420 616 | – | – |
| – Share of reserves | (246 169) | (257 410) | – | – |
| Loans owing by associated companies | 112 359 | 131 581 | – | – |
| Impairment and write-down of investments | (275 866) | (286 725) | – | – |
| | | 10 940 | 8 062 | – | – |
| | | | | |
| 13. | OTHER INVESTMENTS | | | | |
| Unlisted investment | | | | |
| – The VWV group | 3 970 | – | 3 970 | – |
| Listed shares | 5 879 | – | 5 879 | – |
| Loans granted to share option participants | 2 656 | 2 200 | – | – |
| Preference share funding to empowerment partner | – | – | 81 359 | 81 359 |
| Other | 98 | 3 324 | – | 800 |
| | 12 603 | 5 524 | 91 208 | 82 159 |
| The directors have valued the unlisted investment at its recoverable amount. |
| The listed investment comprises 624 125 ordinary shares in African Media Entertainment Limited which are carried at fair value. |
| | The preference shares bear cumulative dividends at variable rates linked to the prime lending rate. |
| | | | | |
| | GROUP | COMPANY |
| | 2005 | 2004 | 2005 | 2004 |
| | R'000 | R'000 | R'000 | R'000 |
| 14. | DEFERRED TAX | | | | |
| Balance at beginning of year – as previously reported | 172 990 | 179 736 | 12 538 | (7) |
| Restatement – operating leases
(note 32) | – | 7 237 | – | 401 |
| Balance at beginning of year – as restated | 172 990 | 186 973 | 12 538 | 394 |
| Charge to income statement | (32 795) | (15 273) | 1 119 | 12 145 |
| Adjustment to equity arising on changes to tax | | | | |
| value of trademarks | (2 756) | 1 138 | – | – |
| Exchange rate adjustments | (455) | 40 | – | – |
| Disposal of businesses | – | (5) | – | – |
| Acquisition of businesses | (48 692) | 117 | – | – |
| Balance at end of year | 88 292 | 172 990 | 13 657 | 12 539 |
| Deferred tax asset | 151 417 | 173 262 | 13 657 | 12 539 |
| Deferred tax liability | (63 125) | (272) | – | – |
| Analysis of closing balance: | | | | |
| – Capital allowances | (8 424) | (7 952) | – | – |
| – Prepayments | (22 444) | (29 231) | – | – |
| – Provisions | 53 052 | 46 139 | 587 | 503 |
| – Effect of tax losses | 40 634 | 60 188 | – | – |
| – Trademarks and licences | 6 583 | 85 529 | – | – |
| – STC credits | 17 840 | 17 840 | 13 070 | 12 036 |
| – Other | 1 051 | 477 | – | – |
| | 88 292 | 172 990 | 13 657 | 12 539 |
| Tax losses at the end of the year | | | | |
| – South African | 269 423 | 331 861 | – | 7 063 |
| – Foreign | 3 921 | 2 867 | | |
| Utilised to raise deferred tax asset | (140 117) | (200 108) | – | (7 063) |
| Available to reduce future taxable income | 133 227 | 134 620 | – | – |
| Deferred tax not raised due to the uncertainty of future | | | | |
| | income streams against which the asset can be realised | 38 636 | 40 386 | – | – |
| |
| 15. | INVENTORIES | | | | |
| Finished goods(1) | 37 534 | 23 474 | – | – |
| Merchandise | 8 407 | 9 923 | – | – |
| Raw materials and components | 3 489 | 4 603 | – | – |
| Consumables and maintenance spares | 2 337 | 1 569 | – | – |
| | 51 767 | 39 569 | – | – |
| | (1) Includes inventories of R3,0 million (2004: R6,8 million) carried at net realisable value. |
| | | | | |
| | GROUP | COMPANY |
| | 2005 | 2004 | 2005 | 2004 |
| | R'000 | R'000 | R'000 | R'000 |
| 16. | TRADE AND OTHER RECEIVABLES | | | | |
| Trade receivables | 293 854 | 234 104 | – | – |
| Prepaid film royalties | 59 481 | 50 727 | – | – |
| Prepayments | 15 687 | 16 878 | – | 66 |
| Tax overpaid | 350 | 652 | – | – |
| Other | 38 417 | 30 971 | 353 | 109 |
| | 407 789 | 333 332 | 353 | 175 |
| Included in other receivables are loans to directors | | | | |
| with the following movements during the year: | | | | |
| Opening balance | 18 | – | – | – |
| Loans advanced | 3 | 715 | – | – |
| Loans repaid | (18) | (697) | – | – |
| Closing balance | 3 | 18 | – | – |
| | Accounts receivable of R201,6 million have been encumbered to secure long-term borrowings as recorded in
note 19. |
| | | | | |
| 17. | SHARE CAPITAL AND PREMIUM | | | | |
| 17.1 | Share capital
| | | | |
| Authorised share capital: | | | | |
| 100 000 000 ordinary shares of 2 cents each | 2 000 | 2 000 | 2 000 | 2 000 |
| 200 000 000 "N" shares of 0,02 cents each | 40 | 40 | 40 | 40 |
| | 2 040 | 2 040 | 2 040 | 2 040 |
| Issued share capital: | | | | |
| 52 086 276 (2004: 50 636 696) ordinary shares | | | | |
| of 2 cents each | 1 042 | 1 013 | 1 042 | 1 013 |
| 176 541 569 (2004: 173 366 966) "N" shares of | | | | |
| 0,02 cents each | 35 | 35 | 35 | 35 |
| | 1 077 | 1 048 | 1 077 | 1 048 |
| Less: shares held in The Primedia Trust | | | | |
| 379 307 (2004: 1 123 741) ordinary shares of | | | | |
| 2 cents each | (8) | (23) | | |
| 6 501 417 (2004: 6 115 634) "N" shares of | | | | |
| 0,02 cents each | (1) | (1) | | |
| Total share capital | 1 068 | 1 024 | 1 077 | 1 048 |
| 17.2 | Share premium | | | | |
| Gross premium, less issue expenses and | | | | |
| intangibles written-off | 506 688 | 477 657 | 506 688 | 477 657 |
| Premium on share buy-backs | (16 476) | (16 476) | (16 476) | (16 476) |
| Distribution to shareholders | (199 170) | (93 319) | (199 170) | (93 319) |
| Premium on shares held in The Primedia Trust | (22 895) | (20 464) | | |
| Distribution received by The Primedia Trust | 5 502 | 2 940 | | |
| Total share premium | 273 649 | 350 338 | 291 042 | 367 862 |
| | Total share capital and premium | 274 717 | 351 362 | 292 119 | 368 910 |
| |
| 18. | NON-DISTRIBUTABLE RESERVES | | | | |
| Reserve arising from tax relief on intangible assets | 235 875 | 238 631 | | |
| Foreign currency translation reserve | 10 739 | 9 338 | | |
| Shares held in The Primedia Trust | (63 056) | (43 831) | | |
| Goodwill and trademarks disposed of by subsidiary | | | | |
| companies previously written-off against share premium | 5 291 | 5 291 | | |
| Minority share of intangibles previously written-off | | | | |
| against share premium | 70 894 | 94 628 | | |
| Recoupment of investments in and loans to subsidiaries | | | | |
| previously written-off | – | – | 222 563 | 81 638 |
| Other | 1 062 | 1 062 | 8 010 | 8 010 |
| | 260 805 | 305 119 | 230 573 | 89 648 |
| | | | | |
| 19. | INTEREST BEARING BORROWINGS | | | | |
| Secured borrowings: | | | | |
| – Term loans | 233 776 | – | – | – |
| – Finance leases | 58 157 | 65 170 | – | – |
| – Instalment sale agreements | – | 56 | – | – |
| Total secured borrowings | 291 933 | 65 226 | – | – |
| Less: current portion included in other current liabilities | | | – | – |
| – Term loans | (90 757) | – | – | – |
| – Finance leases | (8 431) | (3 270) | – | – |
| – Instalment sale agreements | – | (44) | – | – |
| | 192 745 | 61 912 | – | – |
| | | | | |
| |
| | The term loans bear interest at three-month JIBAR plus a margin of 2,65%. The effective interest rate for the period to 30 June 2005 was approximately 10,3% (2004: Nil). Repayments on these loans commenced on
3 January 2005 and will continue until 31 October 2007. |
| The finance leases bear interest at various rates linked to the prime lending rate and are repayable in various monthly instalments over a period of one to eleven years. |
| Instalment sale liabilities bore interest at approximately 2% (2004: 2%) less than prime rate and were repayable in monthly instalments within the year. |
| | | | | |
| |
|
|
| GROUP | COMPANY |
| | 2005 | 2004 | 2005 | 2004 |
| |
| R'000 | R'000 | R'000 | R'000 |
| Secured over assets with a carrying value of: | |
| Land and buildings | 39 758 | 38 920 | – | – |
| Advertising structures | 3 503 | – | – | – |
| Motor vehicles and equipment | – | 6 780 | – | – |
| Office furniture, equipment, décor and computers | 1 672 | – | – | – |
| Accounts receivable | | | 201 613 | – | – | – |
| Bank balances and cash | 46 197 | – | – | – |
| | 292 743 | 45 700 | – | – |
| Certain companies in the group have provided cross guarantees and suretyships in respect of the term loans. |
| | | | | | | |
| | | | | | | 2010 | |
| | 2006 | 2007 | 2008 | 2009 | onwards | Total |
| | | R'000 | R'000 | R'000 | R'000 | R'000 | R'000 |
| Repayment terms |
| Term loans | 90 757 | 92 528 | 50 491 | – | – | 233 776 |
| Finance leases | 8 431 | 8 900 | 8 127 | 2 899 | 29 800 | 58 157 |
| | 99 188 | 101 428 | 58 618 | 2 899 | 29 800 | 291 933 |
| Finance leases |
| Future minimum lease payments | 18 441 | 18 798 | 18 151 | 5 437 | 48 613 | 109 440 |
| Finance costs | (10 010) | (9 898) | (10 024) | (2 538) | (18 813) | (51 283) |
| | 8 431 | 8 900 | 8 127 | 2 899 | 29 800 | 58 157 |
| |
| | GROUP | COMPANY |
| | 2005 | 2004 | 2005 | 2004 |
| | R'000 | R'000 | R'000 | R'000 |
| 20. | LANDLORD
INDUCEMENT PREMIUM |
| Total premium | | | 23 642 | 18 280 | – | – |
| Less: current portion included in other current liabilities | (2 258) | (1 233) | – | – |
| | 21 384 | 17 047 | – | – |
| A subsidiary company has entered into agreements with the landlords of two cinema complexes, in terms of which the landlords have made capital contributions to equip the cinema complexes. The monthly lease payments in terms of one of the agreements are based on the level of customer attendances experienced by the complex and extend for a period of seven years to 2012. The landlord has encumbered rights to the assets acquired and an imputed interest cost in respect of the premium has been charged to finance costs. |
| | The other inducement premium is not repayable and is being amortised to income over the life of the lease. |
| |
| | Post- | |
| | retirement | | | | | |
| | medical | Leave | | Onerous | | |
| | benefit | pay | Bonus | leases | Other | Total |
| | R'000 | R'000 | R'000 | R'000 | R'000 | R'000 |
| 21. | PROVISIONS | | | | | | |
| GROUP – at 30 June 2005 | | | | | | |
| Balance at beginning of year | 15 025 | 11 092 | 44 320 | 4 145 | 24 988 | 99 570 |
| Additional provisions raised | 868 | 8 193 | 50 122 | – | 929 | 60 112 |
| Provisions reversed | (181) | (988) | (382) | (3 334) | (1 781) | (6 666) |
| Payments against provisions | – | (6 347) | (41 596) | – | (16 827) | (64 770) |
| Acquisition of businesses | – | 978 | 60 | – | 2 994 | 4 032 |
| Exchange rate adjustments | – | (2) | (11) | – | 156 | 143 |
| Balance at end of year | 15 712 | 12 926 | 52 513 | 811 | 10 459 | 92 421 |
| Current portion | (1 418) | (6 796) | (52 513) | (811) | (8 184) | (69 722) |
| | 14 294 | 6 130 | – | – | 2 275 | 22 699 |
| | | |
| |
| Post- | |
| | retirement | | | | | |
| | medical | Leave | | Onerous | | |
| | benefit | pay | Bonus | leases | Other | Total |
| |
| R'000 | R'000 | R'000 | R'000 | R'000 | R'000 |
| GROUP – at 30 June 2004 |
| Balance at beginning of year | 15 638 | 10 804 | 32 586 | 9 299 | 62 146 | 130 473 |
| Additional provisions raised | – | 3 106 | 48 542 | 7 546 | (4 847) | 54 347 |
| Provisions reversed | (268) | (559) | – | (1 443) | 11 978 | 9 708 |
| Payments against provisions | – | (2 179) | (37 505) | – | (913) | (40 597) |
| Disposal of businesses | – | (298) | – | (3 562) | – | (3 860) |
| Acquisition of businesses | – | 6 | – | – | – | 6 |
| Exchange rate adjustments | – | (12) | – | (149) | (6 131) | (6 292) |
| Reclassifications | (345) | 224 | 697 | (7 546) | (37 245) | (44 215) |
| Balance at end of year | 15 025 | 11 092 | 44 320 | 4 145 | 24 988 | 99 570 |
| Current portion | (1 599) | (697) | (44 320) | (4 145) | (23 881) | (74 642) |
| | 13 426 | 10 395 | – | – | 1 107 | 24 928 |
| | | | | | | |
| | GROUP | COMPANY |
| | 2005 | 2004 | 2005 | 2004 |
| | R'000 | R'000 | R'000 | R'000 |
| 22. | OTHER CURRENT LIABILITIES |
| Trade payables and accruals | | | 334 837 | 272 384 | 17 313 | 7 871 |
| Deferred income | | | 9 030 | 16 424 | – | – |
| Amounts owed to vendors | | | 7 704 | 129 132 | – | – |
| Tax liabilities | | | 41 951 | 50 389 | 516 | 1 601 |
| Financial instruments liability | | | 11 380 | 5 378 | – | – |
| Current portion of interest bearing borrowings
(note 19) | 99 188 | 3 314 | – | – |
| Current portion of landlord inducement premium
(note 20) | 2 258 | 1 233 | – | – |
| Current portion of long-term provisions
(note 21) | 69 722 | 74 642 | – | – |
| | 576 070 | 552 896 | 17 829 | 9 472 |
| | The financial instruments liability relates to the unrealised loss on open foreign exchange contracts in respect of purchased currency
(note 30.2), the liability arising as a result of the valuation of the embedded derivative
(note 30.3) and the interest rate swap revaluation
(note 30.6). |
| |
| 23. | RETIREMENT BENEFIT FUNDS |
| |
| It is the policy of the group to encourage, facilitate and contribute to the provision of retirement benefits for all permanent employees. The majority of the group's employees belong to fourteen defined contribution and three defined benefit funds, one of which is located outside South Africa and is accordingly not subject to the Pension Funds Act, 1956. All South African funds are governed by the Pension Funds Act, 1956. |
| The total cost charged to income of R17,4 million (2004: R17,2 million) represents the contributions payable to these schemes by the group at rates specified in the rules of the schemes. All funds, with the exception of the Database Group Pension Fund, were confirmed as being financially sound as at their last valuation. |
| During prior years, the United Kingdom based Database Group Pension Fund, a defined benefit fund, was discontinued. Based on the latest actuarial valuation conducted as at 30 June 2005, the fund had a GBP 1 131 000 (2004: GBP 1 043 000) deficit, being the differential between the market value of plan assets of GBP 3 819 000 (2004: GBP 3 407 000) and the present value of plan liabilities of GBP 4 950 000 (2004: GBP 4 450 000). In accordance with the accounting treatment detailed in AC 116 – Retirement benefits, an amount of GBP 179 000 (2004: GBP 84 000) has been raised as a liability, with the balance of GBP 952 000 (2004: GBP 959 000) representing unrecognised actuarial losses to be amortised over the remaining working lives of the participating employees. |
| The key assumptions used in valuing the Database Group Pension Fund were as follows: |
| | | 2005 | 2004 |
| | | % | % |
| Discount rate | | 5,50 | 6,00 |
| Expected rate of inflation | | 2,75 | 3,00 |
| Expected rate of return on plan assets |
| – equities | | 8,60 | 8,50 |
| – bonds | | 4,75 | 5,50 |
| – cash | | 4,75 | 4,50 |
| Future pension increases | 2,75 | 3,00 |
| |
| The other two defined benefit funds have been valued by independent actuaries as follows: |
| | Valuation interval | Latest valuation date |
| Primovie Pension Fund | 3 years | 30 June 2002 |
| Alexander Forbes Pension Fund No.2 | 3 years | 30 April 2003 |
| The assets of the South African defined benefit funds are held mainly in cash and interest bearing stocks and currently show a surplus of R65,2 million. Retirement fund surpluses are required to be apportioned in terms of the Pension Funds Second Amendment Act, 2001 and a surplus apportionment implementation process has been instituted for the Primovie retirement funds. As this process has not yet been completed the group has adopted a prudent view in recognising none of the surplus to the company. |
| | |
| The key assumptions used in valuing the group's South African defined benefit funds were as follows: |
| | | 2005 | 2004 |
| | | % | % |
| Discount rate | | 9,00 | 10,50 |
| Expected rate of salary increases | | 5,50 | 7,00 |
| Expected rate of return on plan assets | | 4,50 | 6,00 |
| Future pension increases(1) | | 3,56 | 4,29 |
|
| (1) |
The fund's pension increases are determined by Sanlam. In light of proposed legislation, the funds will be required to set an increase policy targeting a percentage of CPI, but this will be limited to the actual increases declared by Sanlam. |
|
|
Amounts recognised in the income statement in respect of the defined benefit plans are as follows: |
| | | | GROUP |
| | | | 2005 |
| | | | R'000 |
| Current service cost | | | 1 454 |
| Expected return on plan assets | | | (12 876) |
| Interest on obligation | | | 4 297 |
| Unrecognised asset | | | 8 053 |
| | | | | 928 |
| |
| 24. | ACQUISITION AND DISPOSAL OF BUSINESSES |
| The following companies were acquired and consolidated during the financial year. |
| | | Economic or share |
| | Acquisition date | interest acquired |
| Kfm Radio (Pty) Limited | 1 October 2004 | 92,2% |
| CapeTalk (Pty) Limited | 1 January 2005 | 56,25% |
| Forecourt Television Network (Pty) Limited | 1 October 2004 | 100,0% |
| Wide Open Platform (Pty) Limited | 1 July 2004 | 50,1% |
| Primall Media (Pty) Limited | 1 July 2004 | 50,1% |
| |
| | The fair value of assets, liabilities and contingent liabilities acquired by the group were as follows: |
| | Acquired | Acquired | Disposed |
| | 2005 | 2004 | 2004 |
| | R'000 | R'000 | R'000 |
| GROUP – at 30 June 2005 |
| Non-current assets |
| – Property, plant and equipment | 10 256 | 227 | (3 971) |
| – Intangible assets | 205 611 | – | – |
| – Deferred tax asset | 10 914 | 117 | (5) |
| Current assets |
| – Inventories | – | 82 | (880) |
| – Trade and other receivables | 31 170 | 1 442 | (20 915) |
| – Bank balances and cash | 22 660 | 291 | (2 241) |
| Non-current liabilities |
| – Long-term provisions | (633) | (6) | – |
| – Interest bearing borrowings | – | (29) | 3 860 |
| – Deferred tax liability | (59 606) | – | – |
| Current liabilities |
| – Current portion of long-term provisions | (3 399) | – | – |
| – Trade and other payables | (12 059) | (1 140) | 28 461 |
| – Current portion of interest bearing borrowings | – | (10) | 2 |
| – Tax liability | (6 629) | (174) | – |
| Fair value of assets acquired/disposed | 198 285 | 800 | 4 311 |
| – Minority interest | (1 231) | – | 1 081 |
| – Cost of disposal | – | – | 323 |
| – Non-distributable reserve realised | – | – | 5 946 |
| – Reversal of provision for onerous lease | – | – | (3 562) |
| – Capitalised costs | (101) | – | – |
| – Goodwill | 63 809 | 3 825 | – |
| – Profit on disposal | – | – | (9 189) |
| Purchase price | 260 762 | 4 625 | (1 090) |
| – Bank balances and cash | (22 660) | (291) | 2 241 |
| Net purchase price | 238 102 | 4 334 | 1 151 |
| – Amounts owing(1) | (25 432) | – | – |
| – Amounts transferred from investment in associate | (8 600) | – | – |
| Net cash flow on acquisition/disposal | 204 070 | 4 334 | 1 151 |
| (1) The amounts owing are dependent on the achievement of agreed performance criteria. |
| |
| The following summarises the combined results for the group as though the acquisition date for all acquisitions had been at the beginning of the financial year. |
| | Total |
| | R'000 |
| GROUP – at 30 June 2005 | |
| Contribution of new businesses to revenue | |
| Revenue for the financial year | 162 148 |
| Revenue recognised since acquisition | (120 263) |
| | 41 885 |
| Contribution of new businesses to net profit after tax | |
| Net profit for the financial year | 48 582 |
| Net profit recognised since acquisition | (39 811) |
| | 8 771 |
| Acquisition of business | |
| During July 2003, the group acquired 50% of Inline Advertising (Pty) Limited, thereby increasing its holding to 100%. Previously 50% of assets and liabilities were consolidated on a line-by-line basis. |
| Disposal of businesses |
| | During November 2003, the group disposed of the Wheel Group (UK) Limited in continuance of its policy to dispose of loss-making, non-core operations. During July 2003, the group disposed its interest in Cinevation (Pty) Limited. |
| |
| | GROUP | COMPANY |
| | 2005 | 2004 | 2005 | 2004 |
| | R'000 | R'000 | R'000 | R'000 |
| 25. | RECONCILIATION OF OPERATING PROFIT/(LOSS) BEFORE | | | | |
| DEPRECIATION TO CASH GENERATED FROM/(UTILISED IN) | | | | |
| OPERATIONS | | | | |
| Operating profit/(loss) before depreciation | 418 929 | 324 700 | (343) | (4 583) |
| Realised foreign exchange (losses)/profits | (2 218) | 3 766 | – | – |
| Cash flows relating to exceptional items | (3 758) | 8 585 | – | 2 272 |
| | 412 953 | 337 051 | (343) | (2 311) |
| Adjustments for: | | | | |
| Profit on disposal on assets and investments | (4 263) | (8) | – | – |
| Provisions charged to the income statement | 58 546 | 55 912 | – | – |
| Payments against provisions | (65 005) | (40 523) | 1 603 | – |
| Bad debts written-off | 2 969 | 2 261 | – | – |
| Impairment of property, plant and equipment | 544 | – | – | – |
| Accruals and other non-cash flow items | (7 177) | (9 062) | – | (73) |
| Operating profit/(loss) before working capital changes | 398 567 | 345 631 | 1 260 | (2 384) |
| (Increase)/decrease in trade and other receivables | (48 452) | 20 814 | (165) | 21 |
| Increase/(decrease) in other current liabilities | 54 432 | (10 810) | (1 318) | (1 370) |
| Increase in inventories | (14 697) | (2 006) | – | – |
| Cash generated from/(utilised in) operations | 389 850 | 353 629 | (223) | (3 733) |
| Provisions charged to the income statement | | | | |
| As stated above | 58 546 | 55 912 | – | – |
| Included in current assets | | | | |
| – Provision for bad and doubtful debts | (1 629) | 8 306 | – | – |
| – Provision for stock obsolescences | (3 471) | (163) | – | – |
| | 53 446 | 64 055 | – | – |
| Payments against provisions | | | | |
| As stated above | (65 005) | (40 523) | 1 603 | – |
| Included in current assets | | | | |
| – Provision for bad and doubtful debts | 244 | (115) | – | – |
| – Provision for stock obsolescences | (9) | 41 | – | – |
| | | (64 770) | (40 597) | 1 603 | – |
| | | | | |
| | GROUP | COMPANY |
| | 2005 | 2004 | 2005 | 2004 |
| | R'000 | R'000 | R'000 | R'000 |
| 26. | TAX PAID | | | | |
| Amounts unpaid at beginning of year | (49 737) | (64 827) | (1 601) | – |
| Prior year over/(under) provided | 641 | (1 169) | (4) | – |
| Provision for South African current tax | (55 081) | (37 247) | (516) | (1 601) |
| Provision for secondary taxation on companies | – | (8 723) | – | – |
| Provision for foreign tax | 593 | (1 620) | – | – |
| Subsidiary companies/businesses acquired/disposed | (6 629) | (174) | – | – |
| Exchange rate adjustments | (753) | 218 | – | – |
| Amounts unpaid at end of year | 41 601 | 49 737 | 516 | 1 601 |
| | | (69 365) | (63 805) | (1 605) | – |
| |
| 27. | COMMITMENTS | | | | |
| 27.1 | Capital commitments
| | | | |
| Capital expenditure | | | | |
| Authorised, but not yet contracted | 96 870 | 78 802 | – | – |
| 27.2 | Financial commitments
|
| Film rights | 56 049 | 38 434 | – | – |
| Less: Amounts recoverable from third party | (13 581) | (8 193) | – | – |
| | 42 468 | 30 241 | – | – |
| Other commitments | – | 47 | – | – |
| | 42 468 | 30 288 | – | – |
| 27.3 | Operating lease commitments
| | | | |
| Premises and site rentals | | | | |
| Future lease payments expiring within: | | | | |
| – One year | 93 249 | 74 764 | – | – |
| – Two to five years | 192 833 | 184 357 | – | – |
| – After five years | 60 927 | 33 458 | – | – |
| | 347 009 | 292 579 | – | – |
| Office equipment | | | | |
| Future lease payments expiring within: | | | | |
| – One year | 3 086 | 3 068 | – | – |
| – Two to five years | 5 049 | 6 018 | – | – |
| | 8 135 | 9 086 | – | – |
| | The commitments will be financed by cash flows from operations and the utilisation of cash and borrowings of the group. The above include the group's share of associated companies' commitments. |
| | | | | |
| 28. | CONTINGENT LIABILITIES | | | | |
| 28.1 | Bank and other guarantees
| 62 960 | 55 000 | – | – |
| 28.2 | Parent company guarantees
|
| Ster Century Middle East | 24 702 | 25 274 | 24 702 | 25 274 |
| Ster Century Europe |
| – Bank guarantees | 4 785 | 4 410 | 4 785 | 4 410 |
| – Lease guarantees | 151 209 | 138 313 | 151 209 | 138 313 |
| Total contingent liabilities | 180 696 | 167 997 | 180 696 | 167 997 |
| Less: Indemnities obtained from purchasers(1) | (155 994) | (142 723) | (155 994) | (142 723) |
| Unindemnified contingent liabilities | 24 702 | 25 274 | 24 702 | 25 274 |
| | (1) Indemnities have been received from the purchasers of the various cinema interests of Ster Century Europe. |
| |
| 29. | INTEREST IN JOINTLY CONTROLLED ENTITIES
|
| 29.1 | Kfm Radio (Pty) Limited
| | | | |
|
During the financial year, the group acquired 100% of the issued share capital of New Africa Media Holdings (Pty) Limited, whose sole asset is its investment in Kfm Radio (Pty) Limited ("94.5 Kfm"). The last of the suspensive conditions of the acquisition was fulfilled on 4 October 2004 and the group has accounted for its effective interest in 94.5 Kfm from 1 October 2004. |
|
In terms of the shareholders' agreement, the group is entitled to an effective 92,2% of the economic interest in 94.5 Kfm. The shareholders' agreement requires unanimous consent of all directors on all major decisions, which is indicative of joint control. Consequently, the group has proportionately consolidated its interest in 94.5 Kfm on a line-by-line basis.
|
| |
| 29.2 | Clidet No 522 (Pty) Limited (division of Knowledge Factory) |
| Knowledge Factory (Pty) Limited entered into a joint venture on 21 September 2004 and owns 50% of the issued share capital of Clidet No 522 (Pty) Limited. In terms of the shareholders' agreement, each joint venture partner is entitled to appoint two directors to the board and the chairman does not have a casting vote. The group's share of income, expenses, assets and liabilities has been proportionately consolidated on a line-by-line basis. |
| On 30 June 2005 the following amounts were included in the consolidated financial statements as a result of the proportionate consolidation. |
| |
| GROUP |
| |
| 2005 | 2004 |
| |
| R'000 | R'000 |
| The group's proportionate share of assets and liabilities: |
| Property, plant and equipment | 2 846 | – |
| Intangible assets | 205 549 | – |
| Deferred tax asset | 53 | – |
| Other non-current assets | 46 360 | – |
| Current assets | 35 601 | – |
| Total assets | 290 409 | – |
| Non-current liabilities | (60 940) | – |
| Current liabilities | (13 532) | – |
| Net assets | 215 937 | – |
| The group's proportionate share of income and expenses: |
| Revenue | 79 016 | – |
| Expenses | (31 068) | – |
| Profit before tax | 47 948 | – |
| Taxation | (13 604) | – |
| Net profit after tax | 34 344 | – |
| The group's proportionate share of cash flows is as follows: |
| Cash flow from operating activities | 44 269 | – |
| Cash flow utilised from investing activities | (1 401) | – |
| Cash flow from financing activities | (38 477) | – |
| Increase in cash and cash equivalents | 4 391 | – |
| Capital commitments | 585 | – |
| Other commitments | 8 716 | – |
| | | 9 301 | – |
| |
|
30.
|
FINANCIAL RISK MANAGEMENT
|
|
The group's financial instruments consist mainly of cash and deposits with banks, bank loans and overdrafts, trade and other receivables and payables, investments and secured, unsecured and other borrowings. In respect of all financial instruments mentioned above, book value approximates fair value. Derivative instruments, such as forward exchange contracts and fixed interest rate agreements, are used by the group. The group does not speculate in the trading of derivative instruments.
|
|
30.1
|
Treasury risk management
|
|
A treasury committee, consisting of senior executives of the group, meets to analyse currency and interest rate exposure and to re-evaluate treasury management strategies. |
|
The group's central treasury function provides the group with access to local money markets and provides group subsidiaries with the benefit of bulk financing and depositing.
|
|
30.2
|
Foreign currency risk management
|
|
The group's policy is to cover forward all foreign trade commitments. Each subsidiary manages its own trade exposure. In this regard, the group has entered into certain forward exchange contracts, which do not relate to specific items appearing on the balance sheet, but which were entered into to cover foreign commitments not yet due and will be utilised during the next twelve months. |
|
The following open foreign exchange contracts relating to purchased currency, maturing from 1 July 2005 to
28 February 2006, existed at year end: |
| | Foreign | Average | Rand | Fair | Profit/ |
| | currency | rate | amount | value | (loss) |
| | '000 | | R'000 | R'000 | R'000 |
| GROUP – at 30 June 2005 | | | | | |
| Euros | 29 664 | 8,302 | 246 277 | 243 917 | (2 360) |
| US$ | 611 | 6,422 | 3 924 | 4 102 | 178 |
| GBP | 276 | 12,351 | 3 409 | 3 309 | (100) |
| GROUP – at 30 June 2004 | | | | | |
| Euros | 3 451 | 7,930 | 27 368 | 26 450 | (918) |
| US$ | 3 730 | 6,572 | 24 514 | 23 254 | (1 260) |
| GBP | 2 | 11,430 | 23 | 23 | – |
| The resultant profits and losses detailed above have been recognised in the income statement.
|
|
30.3
|
Embedded derivative
|
|
The group is entitled to receive payments for certain film rights which are determined and invoiced in US$, which is the reporting currency of neither the group nor the third party. This gives rise to an embedded derivative in terms of AC 133 – Financial instruments: Recognition and measurement. This embedded derivative has been fair valued and the resultant adjustment of R1,6 million (2004: R1,4 million) has been expensed in the income statement.
|
|
30.4
|
Credit risk management
|
|
Potential areas of credit risk consist of trade accounts receivable, cash deposits and investments. Trade accounts receivable consist mainly of a large widespread customer base. Group companies monitor the financial position of their customers on an ongoing basis and, where appropriate, use is made of credit guarantee insurance. The granting of credit is controlled by application and account limits. |
|
Provision is made for both specific and general bad debts and at the year end, management did not consider there to be any material credit risk exposure that was not already covered by the bad debt provision or credit guarantee insurance. |
|
It is group policy to deposit short-term cash investments with major banks.
|
|
30.5
|
Liquidity risk management
|
|
The group manages liquidity risk by managing forecast cash flows and ensuring that adequate unutilised borrowing facilities are maintained. |
|
There are no restrictions on the company's borrowing capacity imposed by the articles of association or any other covenant.
|
| Total borrowings comprise: |
| | |
GROUP |
| | 2005 | 2004 |
| | R'000 | R'000 |
| Interest bearing borrowings and landlord inducement premium | 315 575 | 83 506 |
| Unindemnified guarantees given (note
28) | 24 702 | 25 274 |
| The group has unutilised borrowing facilities of R132,9 million (2004: R190,0 million). These facilities are secured as detailed in
note 19.
|
|
30.6
|
Interest rate management
|
|
The company entered into an interest rate swap agreement on 1 July 2004 that entitles or obliges it to pay interest at a fixed rate, on notional principal amounts, and entitles or obliges it to receive interest at floating rates on the same notional principal amounts. The interest rate swap allows the company to swap floating rates on long-term borrowings into fixed rates that are lower or higher than those available if it had borrowed at fixed rates directly. Under this interest rate swap, the company agrees with other parties to receive, at specific quarterly intervals, interest at floating rates and pay interest at semi-annual intervals at fixed rates with reference to the agreed notional payments. |
| | |
GROUP |
| | 2005 | 2004 |
| | R'000 | R'000 |
| Fair value of interest rate swap liability | 7 518 | – |
| The fair value of the interest rate swap liability is represented by a notional principal amount of R100,0 million at a fixed rate of 10,0% and floating three-month JIBAR average for the year of 7,614%. |
| |
| 31.
| CHANGE IN ACCOUNTING POLICY
|
|
AC 140 has been adopted for business combinations effected after 31 March 2004. The principal impact of the new standard is the recognition of all identifiable assets, liabilities and contingent liabilities at the date of acquisition. Goodwill was previously recognised at cost less accumulated amortisation. Goodwill was amortised on a straight-line basis over its estimated useful life, up to a maximum of 20 years. |
|
Goodwill is now carried at cost less accumulated impairment losses and is no longer amortised. Impairment reviews are done annually, or more frequently if there is an indication that goodwill might be impaired. |
|
If the group had continued to amortise goodwill, it would have recorded goodwill amortisation of R27,8 million for the year. |
|
Negative goodwill represents the excess of the group's interest in the fair value of the identifiable assets and liabilities of a subsidiary, associate or jointly controlled entity at the date of acquisition over the cost of acquisition. Negative goodwill was previously released to income based on an analysis of the circumstances from which the balance resulted. To the extent that the negative goodwill was attributable to losses or expenses anticipated at the date of acquisition, it was released to income in the period in which those losses or expenses arose. The remaining negative goodwill was recognised as income on a straight-line basis over the remaining average useful life of the identifiable acquired depreciable assets. To the extent that such negative goodwill exceeded the aggregate fair value of the acquired identifiable non-monetary assets, it was recognised in income immediately. Negative goodwill arising on the acquisition of an associate was deducted from the carrying amount of that associate. |
| |
With the introduction of AC 140, all negative goodwill is now recognised immediately in the income statement.
As a result, previous years' negative goodwill of R2,9 million was released to opening retained income.
|
|
|
|
| 32.
| RESTATEMENT – OPERATING LEASES
|
|
AC 105 – Leases requires payments under an operating lease with fixed escalation terms to be recognised as an expense on a straight-line basis over the lease term unless another systematic basis is more representative of the time pattern of the benefit arising from the use of the leased asset. Previously the group recognised the operating lease expenses in the same period in which it was incurred. |
|
The group has changed this policy and now recognises lease rentals with fixed escalations on a straight-line basis over the term of the lease. The financial statements have been restated to reflect the change. |
|
The financial impact of the change in accounting policy is summarised as follows:
|
| |
|
|
GROUP |
COMPANY |
| | 2005 | 2004 | 2005 | 2004 |
| |
|
| R'000 | R'000 | R'000 | R'000 |
| Net profit for the year as previously stated | 213 259 | 174 695 | 27 059 | 67 708 |
| Adjustment to the income statement | 3 078 | 1 246 | (317) | (376) |
| Tax effect | (765) | (413) | 75 | 112 |
| Restated profit for the year | 215 572 | 175 528 | 26 817 | 67 444 |
| | | |
| |
|
GROUP |
| | 2004 | 2004 |
| |
| R'000 | R'000 |
| |
| Opening retained income as previously stated | (501 035) | (92 154) |
| Restatement | (17 343) | (932) |
| Adjustment to the income statement | (24 580) | (1 333) |
| Tax effect | 7 237 | 401 |
| | | |
| | Restated opening retained income | (518 378) | (93 086) |
|
|
|
|
33.
|
GOODWILL IMPAIRMENT REVIEW
|
|
In accordance with AC 140 – Business combinations, goodwill is reviewed annually for impairment, or more frequently if there is an indication that goodwill might be impaired. |
|
The recoverable amount of goodwill relating to all subsidiaries, associates and jointly controlled entities has been determined on the basis of value in use calculations.The companies operate in the same economic environment and therefore the same key assumptions have been used. The value in calculations have been determined using five-year cash flow projections based on financial budgets approved by management and a discount rate of 13,9%. Cash flows beyond the five year period were extrapolated using a steady 3% nominal growth rate, which management believe to be reasonably conservative. Any changes in revenue or costs are based on past practices and expectations of future changes in the market. |
| |
Management believe that changes to any of these key assumptions would not cause significant additional impairment losses. |
|
|
|
|
34.
|
DIRECTORS' REMUNERATION AND INTERESTS
|
|
34.1
|
Directors' remuneration
|
|
Directors' remuneration, including direct and indirect benefits, for the year ended 30 June 2005 is as follows:
|
| | Retirement | | Benefit in | |
| | | and medical | | respect of | 2005 |
| | Salary | contributions | Bonus | share options | Total |
| | R'000 | R'000 | R'000 | R'000 | R'000 |
| Executive directors |
| FA Gazendam | 1 293 | 208 | 1 000 | 1 228 | 3 729 |
| O Ighodaro | 1 262 | 238 | 1 963 | 1 593 | 5 056 |
| W Kirsh | 1 647 | 173 | 2 305 | – | 4 125 |
| K Pillay | 1 234 | 266 | 2 154 | 1 078 | 4 732 |
| | 5 436 | 885 | 7 422 | 3 899 | 17 642 |
| Benefit in respect of share options
exercised not charged to the income statement | (3 899) |
| Charge to the income statement | 13 743 |
| | |
| | Board and | Other | Benefit in | |
| | committee | services as | respect of | 2005 |
| | fees | directors(1) | share options | Total |
| | R'000 | R'000 | R'000 | R'000 |
| Non-executive directors |
| MJ Bosman | 200 | – | – | 200 |
| NJM Canca | 130 | – | – | 130 |
| I Kirsh | 460 | 515 | 2 895 | 3 870 |
| HM Khoza | 414 | – | – | 414 |
| HM Madima(2) | 200 | – | – | 200 |
| P Maw | 270 | 173 | 2 562 | 3 005 |
| K Motaung (appointed 25 February 2005) | 65 | – | – | 65 |
| AP Nkuna(2) | 600 | – | – | 600 |
| CS Seabrooke | 500 | 15 | – | 515 |
| BJT Shongwe | 260 | 15 | – | 275 |
| SV Zilwa | 270 | – | – | 270 |
| | 3 369 | 718 | 5 457 | 9 544 |
|
Benefit in respect of share options exercised not charged to the income statement |
(5 457)
|
| | | | | |
|
Charge to the income statement | 4 087
|
|
(1) Fees paid for time spent on group affairs outside of board or committee forums.
|
|
(2) These amounts were paid to Mineworkers Investment Company (Pty) Limited.
|
|
All the above amounts set out were approved by the remuneration committee in the 2005 financial year. |
|
None of the directors have service agreements with Primedia Limited extending beyond 1 July 2006. |
|
Directors' remuneration, including direct and indirect benefits, for the year ended 30 June 2004 was as follows: |
| | | Retirement | | Benefit in | |
| | | and medical | | respect of | 2004 |
| | Salary | contributions | Bonus | share options | Total |
| | R'000 | R'000 | R'000 | R'000 | R'000 |
| Executive directors |
| FA Gazendam | 1 297 | 203 | 689 | 2 309 | 4 498 |
| O Ighodaro | 1 085 | 200 | 1 981 | – | 3 266 |
| W Kirsh | 1 646 | 174 | 2 357 | 992 | 5 169 |
| K Pillay | 1 150 | 250 | 2 201 | 1 141 | 4 742 |
| | 5 178 | 827 | 7 228 | 4 442 | 17 675 |
| Benefit in respect of share options
exercised not charged to the income statement | ( 4 442) |
| Charge to the income statement | 13 233 |
| |
| | |
| | Board and | Other | Benefit in | |
| | committee | services as | respect of | 2004 |
| | fees | directors(1) | share options | Total |
| | R'000 | R'000 | R'000 | R'000 |
| Non-executive directors |
| MJ Bosman | 270 | – | – | 270 |
| NJM Canca | 130 | – | – | 130 |
| I Kirsh | 460 | 592 | – | 1 052 |
| HM Khoza | 330 | – | – | 330 |
| HM Madima(2) | 200 | – | – | 200 |
| P Maw | 270 | 225 | 1 360 | 1 855 |
| AP Nkuna(2) | 600 | – | – | 600 |
| CS Seabrooke | 330 | 170 | – | 500 |
| BJT Shongwe | 260 | – | – | 260 |
| SV Zilwa | 270 | – | – | 270 |
| | 3 120 | 987 | 1 360 | 5 467 |
| Prior year underprovision | | | | 75 |
| Benefit in respect of share options exercised
not charged to the income statement | (1 360) |
| Charge to the income statement | 4 182 |
|
(1) Fees paid for time spent on group affairs outside of board or committee forums.
|
|
(2) These amounts were paid to Mineworkers Investment Company (Pty) Limited.
|
|
All the amounts set out above were approved by the remuneration committee in the 2004 financial year.
|
|
34.2
|
Interests of directors in contracts
|
|
The directors have certified that, during the year and up to the date of approval of these financial statements, they were not materially interested in any transaction of any significance with the company and any of its subsidiaries. Accordingly, a conflict of interest with regard to directors' interests in contracts does not exist. |
| 34.3 | Interests of directors in share options |
| | | Number of | Options | Options | Options | Number of | | | Date from | |
| | | options at | granted | lapsed | exercised | Exercise | options at | Option | which | |
| | | 30 June | during | during | during | price | 30 June | price | exer- | Expiry |
| Name | Type | 2004 | the year | the year | the year | (cents) | 2005 | (cents) | cisable | date |
| FA Gazendam | N | 387 812 | – | – | (129 270) | 1 120 | 258 542 | 361 | 02/12/04 | 01/12/08 |
| | N | 173 840 | – | – | – | – | 173 840 | 604 | 01/12/05 | 30/11/09 |
| | Ord | 66 800 | – | – | (66 800) | 970 | – | 600 | 01/07/02 | – |
| | Ord | 167 000 | – | – | – | – | 167 000 | 600 | 01/01/03 | 31/12/06 |
| | N | – | 137 112 | – | – | – | 137 112 | 1 094 | 20/05/07 | 19/05/11 |
| O Ighodaro | N | 250 000 | – | – | (166 666) | 910 | 83 334 | 411 | 30/08/03 | 29/08/07 |
| | N | 304 709 | – | – | (101 569) | 1 110 | 203 140 | 361 | 02/12/04 | 01/12/08 |
| | N | 159 561 | – | – | – | – | 159 561 | 604 | 01/12/05 | 30/11/09 |
| | N | – | 197 603 | – | – | – | 197 603 | 1 094 | 20/05/07 | 19/05/11 |
| I Kirsh | Ord | 500 000 | – | – | (500 000) | 1 179 | – | 600 | 01/07/02 | – |
| W Kirsh | N | 158 632 | – | (158 632) | – | – | – | 585 | 01/07/02 | – |
| | N | 44 534 | – | – | – | – | 44 534 | 425 | 01/07/02 | 30/06/06 |
| | N | 470 914 | – | – | – | – | 470 914 | 361 | 02/12/04 | 01/12/08 |
| | N | 301 325 | – | – | – | – | 301 325 | 604 | 01/12/05 | 30/11/09 |
| | Ord | 11 134 | – | – | – | – | 11 134 | 425 | 01/07/02 | 30/06/06 |
| | Ord | 79 605 | – | – | – | – | 79 605 | 613 | 18/09/02 | 17/09/06 |
| | N | – | 249 362 | – | – | – | 249 362 | 1 094 | 20/05/07 | 19/05/11 |
| P Maw | N | 136 581 | – | (136 581) | – | – | – | 585 | 01/07/02 | – |
| | N | 43 420 | – | – | (43 420) | 920 | – | 425 | 01/07/02 | – |
| | Ord | 400 000 | – | – | (400 000) | 920 | – | 400 | 01/05/02 | – |
| | Ord | 16 700 | – | – | (16 700) | 920 | – | 425 | 01/07/02 | – |
| | Ord | 60 009 | – | – | (60 009) | 920 | – | 613 | 18/09/02 | – |
| K Pillay | N | 332 410 | – | – | (110 803) | 1 145 | 221 607 | 361 | 02/12/04 | 01/12/08 |
| | N | 173 841 | – | – | – | – | 173 841 | 604 | 01/12/05 | 30/11/09 |
| | Ord | 48 987 | – | – | (48 987) | 1 041 | – | 613 | 18/09/02 | – |
| | | N | – | 265 670 | – | – | – | 265 670 | 1 094 | 20/05/07 | 19/05/11 |
| |
|
35.
|
SHARE OPTION SCHEME
|
|
The company has a share option scheme, of which allocations to executive directors and staff enable them to participate in the growth of the company. As at 30 June 2005, the number of ordinary shares and "N" shares on hand, and thus available to the scheme, was 6 880 724 (2004: 7 239 375). The Primedia Trust was approved at a general meeting of the company held on 25 August 1995. |
|
The following rights and options over allocated ordinary shares and "N" shares have been granted and were outstanding in terms of The Primedia Trust at 30 June 2005: |
| Share options |
| | | Subscription | | |
| Date of grant | Expiry date | price (cents) | Ordinary shares | "N" shares |
| 01/07/2000 | 30/06/2006 | 425 | 11 134 | 44 534 |
| 18/09/2000 | 17/09/2006 | 613 | 79 605 | – |
| 01/01/2001 | 31/12/2006 | 600 | 167 000 | – |
| 30/08/2001 | 29/08/2007 | 411 | – | 83 334 |
| 02/12/2002 | 01/12/2008 | 361 | – | 5 533 546 |
| 01/12/2003 | 30/11/2009 | 604 | – | 3 712 623 |
| 20/05/2005 | 19/05/2011 | 1 094 | – | 9 913 274 |
| | | | 257 739 | 19 287 311 |
| Movement during the year |
| Balance at beginning of year | | 1 399 769 | 15 666 525 |
| Options granted | | | – | 9 913 274 |
| Options relinquished | | | – | (2 600 396) |
| Options exercised | | | (1 142 030) | (3 692 092) |
| | Balance at end of year | | 257 739 | 19 287 311 |
| |
|
36.
|
EVENTS SUBSEQUENT TO FINANCIAL YEAR END
|
|
Other than as mentioned below, the directors are not aware of any other matter or circumstance arising since the end of the financial year not otherwise dealt with in these annual financial statements, which would materially affect the operations of the group.
|
|
On 27 July 2005, Primedia announced that it had acquired Altmedia (Pty) Limited. Altmedia comprises two major business units, GMR, which is a leading player in transit media, and The Letter Corporation, which is a supplier of washroom advertising. Altmedia also has a strategic holding of outdoor advertising sites at the airports.
|
|
With effect from 1 September 2005, the group acquired an 80% shareholding in XProcure Software SA (Pty) Limited, the leading electronic ordering system provider to the pharmaceutical industry. The company handles
R3 billion of the R11 billion merchandise purchased by pharmacies and earns the bulk of its revenue from
advertising. |
|
The costs of the Altmedia and XProcure acquisitions will be approximately R110 million (subject to profit warranties), of which R98 million has already been settled. |
|
The group acquired a 50,1% shareholding in Book4Golf with effect from 1 July 2005. The purchase price will be dependent on Book4Golf's profits in the next four years, but is limited to a maximum amount of R20 million.
The group has also undertaken to fund a portion of the business up to a maximum amount of R1,2 million.
|
| |
Subject to regulatory approvals, the group has reached agreement to acquire the remaining minority interest in Africa on Air (Pty) Limited from Mineworkers Investment Company (Pty) Limited. The purchase consideration will be settled by the issue of 5 962 385 Primedia "N" shares and cash of R7,1 million.
|
|
