South African movie-goers’ growing appetite for the big screen helped turn local media group Primedia from a loss-maker into a profit-making concern for the financial year ending June 30.
Primedia’s latest results reveal that filmed entertainment, including cinema and video, was the biggest local revenue contributor — an increase of 10% to R789 552 — compared to advertising, which earned second place, with revenue of R686 449.
Operating income for filmed entertainment increased by 13,1% to a record R72,7-million. Ster Kinekor Theatres posted high double-digit growth in operating profits for the second consecutive year.
Profit growth was, however, muted by higher film rental payments that affect the entire cinema exhibition industry.
The group’s South African businesses nevertheless produced record operating profits of R214,9-million for the period — an increase of 30,2% — while group operating profits have also exceeded expectations, jumping about 33% to R198,5-million, with group turnover now headed for the R2-billion mark.
Cinema attendance grew 10% to 17,4-million, with an average price of R18 for a movie ticket. Movie-goers spent an average of R6,90 on refreshments. Only 3,6-million were black, and the company hopes to increase this number to eight million in the next three years.
Earlier this year Ster Kinekor, together with SABC2 and Rand Merchant Bank, announced a programme to boost local content by producing four feature films a year.
Helen Kuun, marketing manager: independent at Ster Kinekor Pictures, says locally produced Promised Land was the most successful art house movie for the year, with 14 914 patrons and gross revenue of R300 000 at Ster Kinekor cinemas.
This compared with the Oscar-winning (for best foreign film) No Man’s Land, which was seen by almost 10 000 pairs of eyes and grossed about R200 000 at Ster Kinekor theatres.
The best commercial and independently produced film shown during the past financial year was My Big Fat Greek Wedding, seen by 760 000 people and grossing R16,5-million.
Movies were, however, not the only source of good news for Primedia.
The group got rid of its stake in Ster Century Europe, which had cost it R43-million in the past financial year alone. It is also set to restructure Ster Century in the Middle East and has disposed of its loss-making stake in One on One in the United Kingdom. It plans to exit the profitable Database group — the only remaining operation in the UK.
The upshot of the restructuring has been the establishment of a predominantly South African business which, according to CEO William Kirsh, is now “leaner and meaner”.
Kirsh told I-Net-Bridge the group realised three years ago that it was “off track” and “chasing growth for growth’s sake”.
What Kirsh did not say, though, was that the decision to get rid of the company’s off-shore operations also followed shareholder activism instituted by its UK-based shareholder, Active Value.
Another battle is now brewing, with the Securities Regulation Panel (SRP) hearing an appeal from Active Value next week over a dispensation that was granted to the controlling shareholders of Primedia three years ago.
The controversial dispensation allowed the voting pool, which includes the Kirsh family and the Mineworkers Investment Company, to increase its holding to 41% without making an offer to minority shareholders.
Active Value, which claims a 34,9% stake in Primedia, says there was no proper disclosure.
Kirsh told the Mail & Guardian the MIC/Kirsh consortium had “acted within the dispensation given by the SRP”. He said it was under no obligation to disclose the information, but had nevertheless announced the dispensation in the press.
Asked whether Active Value had soured the relationship between the two biggest shareholders, Kirsh said the board would “continue to focus on delivering on performance, despite the shareholder’s agitation”.
Looking forward, Kirsh was positive about the group’s growth prospects. “All our businesses are market leaders and have the necessary critical mass to benefit from the anticipated continued upswing in trading conditions.”
Primedia sees as its strategic priorities for 2004 improving its South African media portfolio balance and making bigger inroads into black film entertainment.
On the first score, popular radio station 94.7 Highveld Stereo remains the group’s cash cow, contributing about 47% of the group’s operating profits, a situation Kirsh would like to see change, with the other media sources upping their contributions to the bottom line.
The group will also be looking at strategic acquisitions and further expansion into Africa. But its approach would be cautious, he said.
Kirsh would not comment on whether these acquisitions would include New African Investments (Nail). However, asked whether the fact that the company is still trading under cautionary had anything to do with Nail, Kirsh told MoneyWeb this week it “wouldn’t be an unfair conclusion”.