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South Africa: Kagiso Considers Move Into Pay TV

Leading black-owned media company Kagiso Media may be looking at diversifying out of radio after it confirmed yesterday it was "entertaining" the idea of entering the pay-television space as part of its intended growth plans. "This is just one of the decisions we are considering, but there is nothing firm on the table as yet," said Kagiso financial director Sandra Pienaar .

Pienaar said the company had sent a letter of intent to ODM Media, one of the country's newly licensed pay-television companies, to "discuss" acquiring 10% of ODM's shares. Kagiso would, however, still need to weigh up the decision against other potential acquisitions, and no concrete decisions had been made. The Kagiso board said in a statement to the JSE last week that it would pay out a dividend of only 18c per share, 50% of the attributable earnings, in order to pursue "investment opportunities" in the media space.

CEO Murphy Morobe said that in future, the company "would focus on moving into the new media space" as well as concentrate on poorly performing assets within the company. The company declared a 14% increase in profit for the year to June, to R236m. It said revenue had increased 22% to R738m for the year, and that hefty financial investments for the year had affected the company's income, including a 37% increase in employee costs to bolster its underperforming exhibitions and events business.

Exhibitions and events increased its revenue 38% and Morobe said converting more of this into profit would be greatly assisted by the management restructuring process -- which had formed a part of the company's R107m investments into what it termed "employee costs".

Broadcasting revenue increased 16%, driven by growth in its controlled radio interests, namely East Coast Radio and Jacaranda FM. The group has a 25,1% interest in Johannesburg-based station Kaya FM, and Free State-based OFM, while Heart 104.9 serves the Cape Town market and iGagasi 99.5 reaches Durban and Pietermaritzburg audiences.

While it has reached its threshold in terms of the number of radio broadcasting licences available, Morobe said the company would look at further increasing its stakes within those radio stations which it did not already control. Revenue at its online and print publishing company, LexisNexis-Butterworths, grew 14% to R307m with operating profit up 22% to R95m.

The company formed Kagiso Outdoor alongside African Media Entertainment (AME). It owns 65% while AME owns the remaining 35%. Its first acquisition was 50,1% of Clear Channel Merafe, an out-of-home advertising company, in April this year.

(Business Day (Johannesburg), 26 September 2007)

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