South Africa: Kagiso New-Media Foray Pays Off

Investment

Kagiso Media 's decision to diversify revenue streams away from a dependence on advertising revenue to new media just three years ago has paid off, according to the company's latest results for the year to June.

Acquisitions such as Urban Brew Studios, Gloo Digital Design and Acceleration Media have proved the to be the foil for lower advertising revenue from Kagiso's radio stations. Despite marginally improved revenue of R472.4m this year against R469.9m last year in the broadcast sector, radio's share of total advertising spend contracted from 13.1% to 12.4%.

The company reported an 8% increase in diluted headline earnings per share, from 126.5c to 136.6c . Group revenue rose 6% to R906.3m, largely on the performance of Urban Brew Studios and Acceleration Media, which saw operating profit grow to R9.7m from R2.1m last year.

The content segment, which houses the group's TV production service, saw a 3% decline in operating profit to R25m.

CEO Murphy Morobe last week said Kagiso Media showed a strong performance in tough economic conditions. "The 8% increase in headline earnings per share is a clear demonstration that we continued to implement our strategy to diversify revenue streams," he said, and the company's business model "has become more resilient".

About three years ago, "the performance of Kagiso Media was highly dependent on our broadcasting asset, LexisNexis and the exhibitions and events division. Our business model has become more resilient".

Kagiso Media's plan was to increase inroads into new media for long-term growth. "Our partnership with MSN announced in June 2010 was yet another crucial step in positioning us in the internet space."

The partnership sees Kagiso Media managing the MSN portal for Microsoft. Morobe said start-up costs would have a dilutive effect on profit next year with a positive contribution expected in 2012.

Morobe said the World Cup had a negative effect on Kagiso Media's radio and TV divisions. The event's biggest beneficiary when it came to advertising spend was TV, with radio getting overflow spending in the months leading up to the event. But the disruption of normal programming had led to a slowdown in commissioning and renewal of programmes.
(source: Business Day)