The growth rates of JSE-listed Kagiso Media's digital assets outstripped gains in its traditional media segments, and the company is now looking outside of SA's borders for new opportunities.
The firm yesterday evening reported its results for the year to June and said revenue, excluding LexisNexis, which was sold after year-end, grew 12%, to R789.2 million. Operating profit gained 2.4%, to R252 million, and the company declared a final dividend of 38c a share.
Kagiso Media owns assets such as Jacaranda FM, East Coast Radio, Knowledge Factory, Mobil Alliance and Gloo. The star performer was again its new media unit, which reported revenue growth of 123%, to R84.1 million.
Kagiso Media CEO Murphy Morobe says non-broadcasting assets contributed 51.5% of total revenue. The company decided five years ago to reduce its reliance on advertising revenue, he adds.
Kagiso Media's 2008 decision to diversify into digital offerings was the right one, although the challenge is to choose the right assets, says Morobe.
Kagiso is on the hunt for more digital businesses to add to its portfolio, says Morobe. He aims to position Kagiso to be at the forefront of a “great wave of change in broadcasting and technology convergence”.
“Although domestic economic growth prospects are uncertain, we believe the South African economy holds attractive opportunities for media companies. In addition, we continually evaluate emerging business opportunities in sub-Saharan Africa,” says Morobe.
Digitisation across all media is part of Kagiso's growth strategy, notes Morobe. This includes voice, as well as documentation, such as court decisions and laws, and there is potential to grow into this space in Africa.
Digital shines
Revenue from Gloo Digital Design leapt 76.3% as it expanded its client base, while HowzitMSN is SA's largest Web site by audience, according to the Online Publishers' Association, which has since been renamed as the Digital Media and Marketing Association.
HowzitMSN is “now poised for expansion into East Africa, and with further growth prospects from mobile and its continued channel rollout strategy,” says Kagiso.
Acceleration Media delivered “good growth in revenue and a pleasing increase in operating profit”, the company adds.
Its content segment grew revenue 23.5%, despite “a tough operating environment”.
Knowledge Factory's revenue met Kagiso's expectations and the sales pipeline is encouraging, it points out. Kagiso bought Knowledge Factory in the first half of the year for R19.5 million and then swapped a 35% share in Knowledge Factory for software, systems and customers in Mint's property division.
Tough times
Revenue from its broadcasting unit improved year-on-year, but growth was impacted by a slowdown in demand after the end of the 2010 Fifa World Cup. The unit delivered “marginal growth” thanks to a fourth-quarter recovery.
Over the past two years, Kagiso has been building internal capacity to drive a convergence strategy, Morobe explains. The company sees a time when traditional media, such as radio, will converge with new technology, leading to online radio stations, for example. “The radio guys are talking to the digital guys.”
Revenue from its information and other sector was “disappointing” because of “tough market conditions”. Operating profit in this unit, which included LexisNexis and Mobil Alliance, only increased 5.2%, says Kagiso.
LexisNexis delivered satisfactory financial results for 2011, turning over R212.2 million. However, Kagiso decided to sell its 50% stake after the end of the year as it could not buy out the joint venture partner.
Kagiso says Mobil Alliance's performance was on target, underpinned by the management contract for the Sharks digital advertising within the Kings Park Stadium. The unit has a good pipeline as it recently won the rights to manage the contract for another national team in SA.
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