Cash generated from operations improved by 10.9% to R377.6 million. Headline earnings per share was up 12% to 153.1 cents and the group declared a final dividend of 38.0 cents per share.
Its performance for the year shows that it is moving towards its objective of becoming a converging organisation and that it is delivering on the revenue diversification strategy.
Operational review
- While Broadcasting's revenue of R486.1 million was higher than the previous year, the growth rate was impacted by slow demand after the 2010 FIFA World Cup. A fourth quarter recovery was however instrumental in delivering marginal growth for the year.
- Jacaranda FM showed a double digit increase in its audience in Johannesburg as a result of increased marketing investments. It reached Number 1 in the Gauteng Afrikaans market with 28.3% share. Its total audience of 2.2 million is up 9% on a year ago.
- The revenue of East Coast Radio was under pressure in the first half of the year but the second half performance exceeded expectations, enabling it to recover most of the backlog. Through a stringent focus on costs, the operating profit target was achieved.
- Kagiso Media increased its economic interest in Kaya FM to 47.4%, and was delighted with the revenue growth of 24% by the radio station.
- RadMark was rebranded as Media Mark to reflect its evolution from a radio sales house to incorporate digital sales and positioned itself for television sales in line with its strategy to become a media marketing solutions provider.
- The revenue of Information and Other was disappointing, largely as a result of tough market conditions, particularly in the Risk segment. Operating profit increased 5.2%.
- Although LexisNexis delivered satisfactory financial results for 2011, the group accepted an offer of R565 million from its joint venture partner to sell its 50% interest in the business unit subsequent to financial year-end. The disposal was concluded as there was no scope to take a controlling interest to drive growth.
- The revenue of Knowledge Factory met the acquisition plan expectations and the current sales pipeline is encouraging.
- The performance of Mobil Alliance was on target, underpinned by the management contract for the Sharks digital advertising within the Kings Park stadium. It has a strong pipeline having recently won the rights to manage the contract for another National team in South Africa.
- The New Media segment delivered outstanding results for the year under review with a 123% increase in revenue to R84.1 million.
- Gloo delivered an impressive revenue growth of 76.3% as it continued to expand its blue-chip client base and made substantial investments to ramp up capacity to further entrench its leadership in the South African digital services segment.
- HowzitMSN has grown rapidly to become South Africa's largest website by audience as measured by the OPA. It is now poised for expansion into East Africa and with further growth prospects from mobile and its continued channel rollout strategy.
- Acceleration Media delivered good growth in revenue and a pleasing increase in operating profit.
- The Content segment resumed its strong growth with revenue increasing 23.5% despite a tough operating environment.
- Urban Brew Studios (UBS) benefited from new production commissions which also reflected in increased operating profit.
- UBS also reported a significant improvement in deal flow from the SABC and a success rate of more than 90% on renewals of prior year contracts.
Strategy review
- Kagiso Media has adopted a more proactive approach of managing its assets to enhance long term value creation. The executive team is pursuing a greater increased influence over its media assets, with a new prerequisite of acquiring majority interests.
- The group has made progress with repositioning its investment portfolio in support of the strategy:
- Increased stake in Kaya FM, the fastest growing radio station in South Africa to 47,4% of the economic interest together with an agreement to reduce its holding in Gagasi 99.5 FM and Heart 104.9 to 20%.
- Acquisition of 65% of Knowledge Factory, an information business specialising in the use of geospatial and property deeds data, with effect from 1 November 2010.
- Disposal of 50% holding in LexisNexis subsequent to year-end for R565 million with management currently evaluating various alternatives to replace this asset.
Commenting on the performance and strategy, Kagiso Media CEO Murphy Morobe, said, "The group has once again made progress with the strategy which was adopted five years ago to reduce its dependence on advertising revenues. Through selective acquisitions, we have built an impressive suite of assets which extend beyond our traditional broadcasting assets into the online and content segments. The revenue profile in 2011 is a clear demonstration of success, as non-broadcasting assets contributed 51.5% of total revenue."
"It is equally pleasing that the group has successfully extended its business from a commissioned provider of content to a content owner. We remain committed to our four key segments, namely broadcasting, content, new media, and information and other and are confident that these will deliver long term value for our shareholders and other stakeholders."
"Although domestic economic growth prospects are uncertain, we believe that the South African economy holds attractive opportunities for media companies. In addition, we continually evaluate emerging business opportunities in sub-Saharan Africa. The fundamentals are in place for our business-to-consumer related revenue streams and at the same time we are seeing strong signals of increased competitor activity in both the retail and telecommunications sectors which bodes well for our business-to-business activities. The ongoing reduction in bandwidth costs benefits all dimensions of the business."
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