Commenting on the group's performance, William Kirsh, Primedia CEO, said:
"The implementation of the Group's strategy has started to reap rewards and this is clearly reflected in the group's overall results and in the Board's decision to re-commence distributions to shareholders. The accomplishments of the last six months bring the group a step closer towards its stated objective of becoming a world-class South African media group, encompassing a balanced portfolio of leading media businesses with strong cash flow characteristics."
In South
Africa, the group made further progress with its innovations in its advertising businesses with secured revenues over two years now materially exceeding the R75 million previously reported. These innovations, together with improved market conditions and positive contributions from previously under-performing businesses, resulted in turnover increasing by 15,8% to R318,7million. PBIT increased by 23,5% to R77,2 million and PBIT margins improved from 22,7% to 24,2%. These businesses once again achieved strong cash flow generation.
The South African filmed entertainment businesses incorporating Ster-Kinekor Theatres, Ster-Kinekor Pictures and Ster-Kinekor Home Entertainment all performed well, supported by good content and ongoing operational excellence. Turnover grew by 15,3% to R424,4 million and PBIT increased by 26,9 % to R36,0 million. PBIT margins increased from 7,7% to 8,5%. Cash flow generation was seasonally impacted by working capital requirements relating to Sony
PlayStation, as retailers stocked up for Christmas. These have since reversed in January and February.
Kirsh went on to say that good progress has been made on the orderly disposal of the group's non-core international interests and on improving profitability ahead of disposal.
The formal sale process of the remaining Ster Century Europe territories commenced in February 2003 and the outcome is expected to be announced by the end of the current fiscal. Onerous lease terms were renegotiated prior to the commencement of the sale process.
Ster Century Middle East has been successfully restructured and is now cash flow positive and alternatives for maximising shareholder value are being explored.
Following a number of corrective actions taken in the UK-based one to one businesses, the operating loss was significantly reduced to R7,8 compared to R18,7 million in the immediately preceding six months. The loss for the period was however worse than the
comparative six months last year. Losses for the period also include R3,9 million of surplus property related costs and through subletting every effort is being made to mitigate this. Notwithstanding these operating losses, the one to one businesses remain self-funded.
Financial Results
Group turnover was up 9,2% to R929,3 million with turnover from the South African businesses up 14,8% to R752,6 million. Group EBITDA was up 15,0% to R137,0 million with EBITDA from the South African operations up 21,4% to R143,7 million.
Depreciation increased by 12,3% to R41,8 million due mainly to the amortisation of the R22 million infrastructural costs relating to Rank TV, which are being amortised over 5 years. Group PBIT was up 16,2% to R95,2 million with PBIT from the South African operations up 23,8% to R112,3 million. Net interest paid was 32,1% lower than the prior year.
The net foreign exchange losses mainly reflect the impact of the strengthening rand
on the group's investments in Ster Century Europe and Ster Century Middle East. Compliance with the provisions of the Accounting Standard on financial instruments (AC 133) also resulted in a foreign exchange loss of R2,9 million relating primarily to the purchases of Sony PlayStation stock.
EPS, excluding unrealised foreign exchange gains or losses, increased to 11,8 cents from a loss of 25,2 cents. Comparable EPS excluding foreign exchange gains or losses, and adjusting 2001 for the tax effect of the debenture interest, increased by 181,0%.
The group reflected an improvement in its liquidity position, with net short-term debt declining to R73,4 million (2001: R157,6 million).
The Board reported that further consideration has been given to alternative corporate structures which would enable the group's "N" share structure to be dismantled without negatively affecting Primedia's empowerment profile. The Board has concluded that there are no alternatives
presently available that could persuade sufficient shareholders, including Mineworkers Investment Company, to pass a resolution to dismantle the "N" share structure. Accordingly, the "N" share structure will remain in place for the time being. The Board indicated that it will continue to look for viable alternatives and remains open to considering alternative proposals at any time.
Looking forward Kirsh said, "The group's core South African businesses are anticipated to continue producing good results, which should enable the repayment of most of the group's short-term debt by June 2003. Continued efforts will be made to realise the value in the group's international businesses. A consistent distribution policy will also be followed for the full year."
