Caxton 'will continue to prosper'

South African newspaper publisher Caxton on Wednesday reported diluted headline earnings per share of 59,2 cents for the six months ended December 2005 from 53,5 cents a year ago. Headline earnings per share came in at 59,8 cents from 54,2 cents before.

Turnover rose to R1,863-billion from R1,723-billion before, while operating profit rose to R405,9-million from R362,7-million. No interim dividend was declared.

The company said a continuation of the buoyant trading conditions that prevailed in the previous financial year has led to further good results achieved during the period under review.

As a result of the strength of the rand, raw material inputs in many instances remained the same or decreased, which resulted in the selling prices of the company’s various products staying constant or in certain divisions reducing.
Cost inputs such as labour have increased in line with the level of inflation in the country.

Intensified competition, particularly in the company’s commercial printing operations, had to be contended with and this resulted in a reduction in selling prices.

“In the circumstances, the increase in turnover of 8,1% is considered satisfactory as it is approximately 4% above overall inflation, which is currently running at about 4%,” it said.

Caxton also announced the erection of two large gravure printing facilities—one in Durban and the other in Isando—at a cost in excess of R300-million, it said.

Both of these plants are due to be commissioned in June 2006 and both are on track to achieve this commissioning date. Although the presses are pre-owned, they have been completely refurbished to close-to-new condition and will cost approximately 40% of the price of equivalent new presses.

The newspaper division continues to produce excellent results and, with the exception of Academic Publishing, the other activities of the company have been impacted by reduced margins and in the packaging and stationery divisions little growth was achieved, it said.

Looking ahead, Caxton says there is very little doubt that South Africa will continue to prosper over the short term. It has spent extensively on new equipment over many years with commensurate success. The capital programme that is now nearing completion has been extensive and, relative to the size of the company, has been material.

“It has positioned the company to efficiently cater for the ever-increasing demands of its customers in a business where volume growth is being experienced. Furthermore, on completion, there will be for the first time sufficient capacity available during peak seasonal periods.”

Not only have the commercial printing plants been upgraded but, in addition, all the newspaper printing facilities—not only in the major metropolitan areas but also in all the smaller outlying areas—have been extensively modernised, it said.

“This augurs well for the future as the company will be able to cater for the present market and be in a position to take on large publications as the opportunities presents themselves. Further major capital expenditure for the next two to three years will therefore not be necessary—subject, however, to the requirements of our customers,” it added.

With the large investment having been made, it is inevitable that depreciation will substantially increase in future years. This is, however, a non-cash cost and the investments made into new presses is of the type that the assets will last for many years.

Initially these investments will impact on the company’s profitability, but the directors are confident that these investments will improve profitability in the medium term.

“Subject to this caveat, with an economy booming and advertising spend increasing, the company will continue to prosper and earnings growth above inflation should continue to be achieved,” it concluded.—I-Net Bridge

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