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1st Quarter Financial Performance

1st Quarter Financial Performance. Revenue lower than budget by R11m (1%) and growing by 1.5% year-on-year. Expenses lower than budget by R4m (.3%) and increasing by 16.5% year-on-year. Depreciation R7m (9%) lower than budget, growing 4.5% year-on-year.

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1st Quarter Financial Performance

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  1. 1st Quarter Financial Performance • Revenue lower than budget by R11m (1%) and growing by 1.5% year-on-year. • Expenses lower than budget by R4m (.3%) and increasing by 16.5% year-on-year. • Depreciation R7m (9%) lower than budget, growing 4.5% year-on-year. • Net Interest (Finance costs) R11m (47%) higher than budget, 76% higher year-on-year.

  2. 1st Quarter Financial performance • TV advertising revenue • Decline in audience • Schedule changes • European companies cutting marketing budgets in RSA • TV advertising revenue under pressure (see box). R12m (1.7%) lower than budget,y-o-y decline was 1% • Radio advertising performing better than budget by R27m (10%),y-o-y growth was 14% • TV Licence revenue higher than budget by R13m (6%),y-o-y growth was 6% • Other revenue (content sales & trade exchanges) = R38m (41%) lower than budget,y-o-y growth was 7%

  3. 1st Quarter Financial performance • Productivity Gains • Request to change Government Guarantee (GG) targets was not approved in June’12. • Budget allocated to units (Feb’12) had to be reduced to balance back to GG targets. • Units have to find “gains”/savings from other expense line items during FY12/13. • Actual & projected savings are recorded against these expense line items. • Programme, Film, Sport and Broadcast costs were higher than budget but Sport rights and Production costs incurred were not capitalised to Programme Stock (Balance sheet). Costs overstated by R82m. • Signal distribution lower in view of lower need for ad hoc News feeds and slow roll-out of Low Power Transmitters. • Employee Costs lower than budget but 6% annual salary increase for Management was not paid/accrued yet. • Productivity Gains - see box. • Marketing costs lower than budget in view of delay in awarding tender to marketing agencies. • Direct TV Licence collection costs lower in view of lower sms-, paypoint- & debt collection costs. • Professional costs lower in view of a year-end accrual for management fees that was credited to the new year but not paid yet. Costs are understated by R16m. • Other Operational expenses - Leases, Maintenance and Travel were lower than budget. • Other Personnel expenses – Membership fees, Recruitment costs, Transport, Courses were lower than budget.

  4. 1st Quarter Financial performance • Balance of R1.1bln (before bank reconciliations and including bank guarantees) • Cash in cheque and savings accounts increased by R47m in quarter. • Monthly payments to Nedbank made as per loan agreement

  5. 1st Quarter Working Capital Management Debtors Programme Inventory • Average total debtor days:61 days – 10 days slower (seasonal fluctuations) • Average Advertising debtor days:67 days – 8 days slower • Local & Foreign stock days:234 days vs. 285 days last year • Sport rights stock days:142 days vs. 196 days last year Creditors Impact on Cash • Slower debt collection • Lower stock levels • Longer payment cycle • Improved cash management and balance • Average total creditor days:144 days vs. 123 days(increase in accruals & provisions)

  6. 1st Quarter Capex • Used R31m of a budget of R527m in first quarter. • Project managers are being employed to increase capacity to implement Capex projects. • Projecting to use R220m by year-end = 100% higher than previous year.

  7. 1st Quarter Projected performance • Please note: • Projections this early in the year is not very realistic in view of limited (3 months) data and the over/under statement of expenses. • At end of first quarter business units projected a loss of R16.6m by end of the year. • TV advertising revenue remained under pressure during the second quarter. • More realistic projection will be available at the end of the second quarter.

  8. 1st Quarter Government Guarantee • Lower than budget revenue from TV advertising continued during the second quarter. • Reducing variable costs over short term to balance back is unlikely. • The high surplus target of R536m will not be achieved if revenues do not improve.

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