| Thu 24 Jun 2010, 7:05 | | AVU - Avusa Limited - Audited condensed consolidated financial results for |
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AVU
AVU
AVU - Avusa Limited - Audited condensed consolidated financial results for
the year ended 31 March 2010
AVUSA LIMITED
Incorporated in the Republic of South Africa
Registration number: 2008/002461/06
Share code: AVU
ISIN code: ZAE000115895
www.avusa.co.za
Audited Condensed Consolidated Financial Results for the Year Ended 31 March
2010
*Dividend up 25%
*Operating costs decreased by 2%
*Advertising revenues down 17%
*Headline earnings per share down 38%
Condensed consolidated statement of comprehensive income
for the year ended % 31 March 31 March
change 2010 2009
(restated)
Rm Rm
Continuing operations
Revenue (4) 4 712 4 892
Cost of sales (3 039) (3 052)
Gross profit (9) 1 673 1 840
Operating expenses (1 426) (1 435)
Operating costs (1 315) (1 338)
Depreciation and amortisation (106) (100)
Goodwill impairment - (4)
Share-based payments (5) 7
Profit from operations before (39) 247 405
exceptional items
Exceptional items 3 (3)
Profit from operations (38) 250 402
Net finance income 12 23
Finance income 50 71
Finance costs (38) (48)
Share of profits of associates (net of 9 -
income tax)
Profit before taxation (36) 271 425
Taxation (94) (132)
Income tax expense (85) (130)
Secondary tax on companies expense (9) (2)
Profit after taxation (40) 177 293
Discontinued operations
Profit from discontinued operations 2 39
Profit for the year (46) 179 332
Other comprehensive income
Exchange differences on translation of (2) (8)
foreign operations
Other comprehensive income for the (2) (8)
year (net of income tax)
Total comprehensive income for the 177 324
year
Profit attributable to:
Owners of the company (48) 159 308
Non-controlling interest 20 24
Profit for the year 179 332
Total comprehensive income
attributable to:
Owners of the company 157 300
Non-controlling interest 20 24
Total comprehensive income for the 177 324
year
Earnings per ordinary share (cents)
Basic (48) 155 299
Diluted (48) 155 299
Earnings per ordinary share from
continuing operations (cents)
Basic 153 261
Diluted 153 261
Earnings per ordinary share from
discontinued operations (cents)
Basic 2 38
Diluted 2 38
Condensed consolidated segmental statement
for the year ended 31 March 31 March
2010 2009
(restated)
Rm Rm
Revenue from external customers
Continuing operations
Media 1 986 2 228
Retail 1 131 1 074
Entertainment 1 022 980
Books and Maps 573 610
4 712 4 892
Discontinued operations
Africa - 80
Profit (loss) from operations before
exceptional items
Continuing operations
Media 127 252
Retail 63 79
Entertainment 30 13
Books and Maps 59 83
279 427
Corporate (27) (29)
252 398
Share-based payments (5) 7
247 405
Discontinued operations
Africa - (18)
Condensed consolidated statement of financial position
as at 31 March 31 March 31 March
2010 2009 2008
(restated) (restated)
Rm Rm Rm
ASSETS
Non-current assets 901 876 860
Tangible assets 380 353 409
Intangible assets 367 351 276
Interests in associates 45 38 44
Deferred taxation assets 109 134 131
Current assets 2 013 2 199 1 995
Inventories, receivables and 1 448 1 642 1 585
other current assets
Bank balances, deposits and cash 565 557 410
Total assets 2 914 3 075 2 855
EQUITY AND LIABILITIES
Total equity 1 581 1 473 1 136
Equity attributable to owners of 1 474 1 376 1 096
the company
Non-controlling interest 107 97 40
Non-current liabilities 245 263 299
Long-term borrowings 3 3 34
Post-retirement benefits 180 167 162
liabilities
Operating leases equalisation 43 70 89
liabilities
Deferred taxation liabilities 19 23 14
Current liabilities 1 088 1 339 1 420
Payables and other current 1 017 1 189 1 200
liabilities
Short-term borrowings 10 9 85
Bank overdrafts 61 141 135
Total equity and liabilities 2 914 3 075 2 855
Net asset value per ordinary 1 420 1 325 1 056
share (cents)
Condensed consolidated statement of changes in equity
Share Accum- Owners` Non-
capital Other ulated interest con- Total
and reserves profits Rm trolling equity
premium Rm Rm interest Rm
Rm Rm
Balance at 31 1 150 (12) - 1 138 40 1 178
March 2008
Restatement (42) - - (42) - (42)
(see note 9)
Balance at 31 1 108 (12) - 1 096 40 1 136
March 2008
(restated)
Total (8) 308 300 24 324
comprehensive
income for the
year
Equity-settled 3 - 3 - 3
share incentive
plans
Effect of - - - 43 43
acquisitions and
disposals
Dividends paid by - - - (10) (10)
subsidiaries to
non-controlling
interests
Call options over (23) - (23) - (23)
Avusa shares
(see note 5)
Balance at 31 1 108 (40) 308 1 376 97 1 473
March 2009
Total (2) 159 157 20 177
comprehensive
income for the
year
Equity-settled 3 - 3 - 3
share incentive
plans
Effect of - - - 3 3
acquisitions and
disposals
Dividends paid by - - - (13) (13)
subsidiaries to
non-controlling
interests
Dividend paid - (62) (62) - (62)
Balance at 31 1 108 (39) 405 1 474 107 1 581
March 2010
Condensed consolidated statement of cash flows
31 March 31 March
for the year ended 2010 2009
(restated)
Rm Rm
Net cash flows from operations before working 325 471
capital changes
Working capital changes 55 (26)
Net cash flows from operations 380 445
Net finance income 12 22
Taxation paid (104) (134)
Net cash flows from operating activities 288 333
Net cash flows from investing activities (121) (148)
Net cash flows from financing activities (77) (47)
Net increase in cash and cash equivalents 90 138
Cash and cash equivalents at beginning 416 275
of the year
Foreign operations translation adjustment (2) 3
Cash and cash equivalents at end of the year 504 416
Notes
1. Basis of preparation
The audited condensed consolidated group annual financial statements
for the year ended 31 March 2010 have been prepared using accounting
policies compliant with International Financial Reporting Standards
(IFRS), IAS 34 Interim Financial Reporting, the JSE Limited`s
Listings Requirements and the South African Companies Act. The
accounting policies and their application are consistent, in all
material respects, with those detailed in Avusa`s 2009 annual report,
except for the adoption on 1 April 2009 of those new and amended
statements of generally accepted accounting practice and
interpretations of statements of generally accepted accounting
practice listed in Avusa`s 2009 annual report with effective dates
for Avusa of 1 April 2009, those amendments included in the
International Accounting Standards Board`s annual improvements
project where such amendments are effective for Avusa on 1 April 2009
and the correction of the application of the Nu Metro Films revenue
recognition policy in respect of sales to television broadcasters
(see note 9 below). The adoption of the new and amended statements of
generally accepted accounting practice, interpretations of statements
of generally accepted accounting practice, and improvements project
amendments has not had a material effect on the group`s financial
results, but has affected presentation in the group`s financial
statements.
In addition, the revised formula for the calculation of headline
earnings released by the South African Institute of Chartered
Accountants (SAICA) in August 2009 in the form of Circular 3/2009
Headline Earnings, was adopted by Avusa on 31 August 2009 with no
impact on the group`s reported headline earnings. The formula was
revised by SAICA to align it with changes in IFRS.
The statement and interpretation which have had the most effect on
their adoption by Avusa are IAS 1 Presentation of Financial
Statements and IFRIC 13 Customer Loyalty Programmes.
IAS 1 Presentation of Financial Statements
The amendments require information in financial statements to be
aggregated on the basis of shared characteristics, and introduce a
statement of comprehensive income. This enables users to analyse
changes in equity resulting from transactions with owners in their
capacity as owners separately from "non-owner" changes.
The revisions include changes in the titles of some of the financial
statements to reflect their function more clearly, for example, the
balance sheet is renamed the statement of financial position.
The adoption by Avusa of this amended statement has not had an impact
on Avusa`s results or financial position, but has resulted in
different presentation in the group`s financial statements.
IFRIC 13 Customer Loyalty Programmes
IFRIC 13 affects entities that issue points to customers entitling
them to a discount on future purchases. The interpretation requires
loyalty award credits to be accounted for as a separate component of
the sale transaction in terms of which they are granted by allocating
the sale proceeds between the loyalty award and the other components
of the sale. The amount allocated to the loyalty award is determined
by reference to its fair value and is deferred until the loyalty
reward is redeemed.
Exclusive Books operates its Fanatics customer loyalty programme. The
effect of IFRIC 13 is that Exclusive Books deducts the fair value of
customer loyalty points from revenue rather than including it in
marketing expenses, as was the previous accounting treatment.
Accordingly, the revenue and operating costs were reduced by R8
million for the year ended 31 March 2009 (see note 9 below).
% 31 March 31 March
change 2010 2009
for the year ended Rm Rm
2. Exceptional items
Profit on disposal of property 4 -
Loss on closure of Career Junction (4) -
Middle East business
Fair value adjustment of investments 2 (5)
Pension fund surplus apportionment 1 1
Other - 1
3 (3)
3. Discontinued operations - Nigerian
and Kenyan interests
Revenue - 80
Loss from operations - (18)
Net finance costs - (4)
Loss before taxation - (22)
Taxation - -
Loss after taxation before profit on - (22)
sale
Non-controlling interest - (1)
- (23)
Sale of Nigerian and Kenyan
interests
Profit on sale 2 62
Profit from discontinued operations 2 39
4. Reconciliation between earnings and (restated)
headline earnings
Earnings 159 308
Profit on disposal of tangible and (4) -
intangible assets
Profit on sale of discontinued (2) (62)
operations
Impairment of property, plant and - 3
equipment
Total tax effect - -
Attributable to non-controlling - -
interest
Headline earnings (39) 153 249
Headline earnings per ordinary share
(cents)
Basic (38) 149 242
Diluted (38) 149 242
5. Shares in issue
Shares in issue at beginning of the 103 821 159 103 821 159
year
Less: Call options over Avusa shares (1 357 478) (1 379 978)
Adjusted shares in issue at end of 102 463 681 102 441 181
the year
Weighted average for the year 102 448 681 102 939 803
Weighted average for the year 102 503 924 102 958 271
(diluted)
At 31 March 2010, Avusa held 1 357 478 call options over Avusa shares
as hedges against share incentives granted. 382 734 call options were
acquired by Avusa as part of the assets purchased from ElementOne,
997 244 were bought in October 2008 and 22 500 were sold at the end
of November 2009. The call options over Avusa shares have zero strike
prices, and are treated for accounting purposes as treasury shares.
The dilution arises as a result of equity-settled share incentives in
issue.
6. Earnings per ordinary share (2009 restated)
The calculation of basic earnings and headline earnings per ordinary
share is based on earnings of R159 million (2009: R308 million) and
headline earnings of R153 million (2009: R249 million) respectively,
and on a weighted average of 102 448 681 (2009: 102 939 803) ordinary
shares in issue.
The calculation of diluted earnings and headline earnings per
ordinary share is based on earnings of R159 million (2009: R308
million) and headline earnings of R153 million (2009: R249 million)
respectively, and on a weighted average of 102 503 924 (2009: 102 958
271) diluted ordinary shares in issue.
as at 31 March 31 March
2010 2009
Rm Rm
7. Contingent liabilities and operating lease
commitments
Contingent liabilities 2 10
Operating lease commitments 913 611
- due within one year 169 176
- due after one year* 744 435
* Includes rental on head office
lease renewal.
8. Capital expenditure commitments
Contracted but not provided for 1 10
Approved but not yet contracted for* 184 23
185 33
* Includes printing press approval.
2009 2008
restatement restatement
Rm Rm
9. Restatements
Comparatives have been restated in
respect of the following:
Adoption of IFRIC 13 Customer Loyalty
Programmes
Upon the adoption by Exclusive Books of IFRIC
13, the fair value of customer loyalty points
that were previously included in marketing
expenses is now deducted from revenue (see
note 1 above).
Decrease in revenue (8)
Decrease in operating costs (8)
Inter-group revenue eliminations
Data relating to inter-group sales within the
Entertainment business unit available from an
upgraded management information system has
resulted in an adjustment to the prior year`s
inter-group revenue elimination.
Increase in revenue 15
Increase in cost of sales 15
Revenue recognition
The time of recognising Nu Metro Films revenue
relating to sales to television broadcasters
has been changed from the time that the sale
agreements are entered into, to the time that
the broadcasters have the right to screen the
programmes. This change has been implemented
to better align the application of the revenue
recognition policy to the requirements of IAS
18 Revenue. The settlement in shares by Avusa
of its March 2008 acquisition of ElementOne`s
operating media and entertainment assets at
their carrying values, resulted in the
recognition of share premium. To the extent
that the above restatement reduced the March
2008 net asset value of the assets acquired,
the restatement has been adjusted against the
group`s share premium.
Statement of comprehensive income
Increase in revenue 10
Decrease in cost of sales (2)
Increase in operating costs 4
Decrease in finance income (3)
Increase in profit after taxation 3
Increase in earnings per ordinary
share (cents)
Basic 3
Diluted 3
Increase in headline earnings per
ordinary share (cents)
Basic 3
Diluted 3
Statement of financial position
Decrease in inventories, receivables (37) (39)
and other current assets
Increase in payables and other 2 3
current liabilities
Statement of changes in equity
Decrease in share premium (42)
Statement of cash flows
Increase in net cash flows from operations 5
before working capital changes
Decrease in working capital changes (5)
There is no impact on net cash flows
from operations
10. Audited results
The auditors, Deloitte & Touche, have issued an unmodified audit
opinion on the group`s annual financial statements for the year ended
31 March 2010. A copy of their audit report is available for
inspection at the company`s registered office. These condensed group
annual financial statements have been derived from the group annual
financial statements and are consistent in all material respects with
the group annual financial statements.
Overview
Softer economic activity in a recessionary climate that was evident
throughout the financial year saw reduced support for Avusa`s main value
driver of advertising. Despite the economic challenges, Avusa has delivered
results competitive with global and local peers, and confirmed the quality of
its operations.
Financial results and position
Revenue from continuing operations decreased 4% from R4,9 billion to R4,7
billion. This, together with a reduced gross margin due to recessionary
market conditions, resulted in gross profit being R167 million lower than the
comparative period. The successful implementation of group-wide cost-cutting
initiatives decreased operating costs by 2%.
The group`s financial position remains ungeared and strong, with net cash of
R504 million.
Operational review
Media
Although advertising revenues remained under pressure across the newspaper
and magazine divisions, these picked up in the last quarter as marketers
began returning to print. We expect that recruitment advertising, hard hit by
the slowdown in the economy, will be the last sector to recover.
Circulation revenue and copy sales of all our titles remained under pressure.
Subscriber debit-order rejections, which were much higher than usual, had
normalised by year end.
Readership of most of our titles continued to grow. The Sunday Times exceeded
the 4 million readership level for the first time, growing to
4,2 million.
The Times again performed well, halving its loss to R13 million from last
year`s R25 million loss.
BDFM, our 50% joint venture with Pearson, and publisher of Business Day and
Financial Mail, incurred a loss before interest and tax of R24 million
against last year`s R9 million loss. BDFM`s Weekender newspaper was closed
due to on-going losses, with the final issue published on 7 November 2009.
I-Net Bridge weathered the economic downturn to produce improved results,
despite having invested in a new generation of products.
Career Junction was affected by the slowdown in job placements. The company
closed its Dubai-based Middle East operation in the second half of the year.
In line with our out-of-home growth strategy, on 1 October 2009, Avusa
acquired a 51% stake in Boo Media and Communication (Boo Media). Boo Media
develops opportunities for advertisers, particularly in shopping malls and
building wraps.
Retail
This business unit grew revenues 5%, while profit from operations, which
included R15 million (2009: R4 million) of digital development and online
costs, declined by R16 million.
Exclusive Books increased revenue 5% over the comparative period, with same-
store revenue up 1%. The business concentrated on containing costs and on
rightsizing its store portfolio, with three loss-making stores closed during
the period and five new stores opened.
Van Schaik Bookstore introduced a new, contemporary corporate identity and
performed well during the year, boosted by heightened focus on the school
book market. Four new stores were opened in the second half, including one in
Soweto`s Maponya Mall.
The retail business unit successfully launched Avusa`s online store,
Exclusives.co.za, in March 2010. The online site retails DVDs, CDs, books and
electronic games.
Entertainment
Driven by an improved performance from Nu Metro Cinemas, excellent results
from Nu Metro Film Distribution, and a return to profitability at the Music
business, the business unit produced R30 million profit from operations,
compared to R13 million in the comparative period.
Attendances at Nu Metro Cinemas grew 14% over the prior year, contributing to
a 29% increase in revenue. Management intervention with branding, operations
and marketing assisted this improved performance. Nu Metro Cinemas partnered
with Clicks Club Card from 1 December 2009 to give both partners access to
new customers and increased marketing exposure. While two non-performing
cinema sites were closed in line with the focus on premium sites, Africa`s
first all-digital cinema complex was opened at Emperors Palace, as was the
state-of-the-art Galleria complex in Amanzimtoti, KwaZulu-Natal, in December
2009.
Despite operating in a market segment that recorded a trading decline of 11%,
Nu Metro Home Entertainment grew unit sales and limited its revenue fall to
2%. Home Entertainment acquired the Sony Pictures Home Entertainment and
Paramount/Dreamworks Home Entertainment licences in June 2009.
Nu Metro Interactive grew market share to 12% through its continued retention
and acquisition of licences.
Nu Metro Film Distribution continued to successfully build the Nu Metro
Inspires label, and develop local and Bollywood content. The business also
marketed and launched the year`s three biggest films, Avatar, Twilight and
Ice Age 3.
The Music business saw a further decline in sales, in line with the global
music market. Rightsizing and restructuring initiatives in the second half of
last year have paid off, with the business generating a small operating
profit for the year.
Books and Maps
Books and Maps, which incorporates Random House Struik, Struik Christian
Media, Map Studio, MapIT, Booksite Afrika, Entertainment Logistics Services
(ELS), Compact Disc Technologies (CDT), Collage Litho and Mega Digital, as
well as offshore book businesses in the United Kingdom, Australia and New
Zealand, experienced depressed trading conditions due to the global
recession. Rand strength continued to negatively impact revenues.
The South African businesses managed their margins and cut expenses. Random
House Struik was the South African business most affected by the current
economic climate as a result of a decline in backlist sales as book retailers
reduced stock levels and focused their buying on frontlist titles, and from
lower non-trade sales as customers retreated to their core activities. Struik
Christian Media acquired the Destiny Image agency, a leading international
publisher with strong author brands well suited to the South African market.
MapIT performed below the prior year due to the maturation of its market and
the consequent slow-down in sales of satellite navigation devices.
Internationally, the Australian and New Zealand businesses performed ahead of
last year, while the United Kingdom business continued to operate in a severe
recession, exacerbated by tightened credit extension across all trade
accounts.
Although cost-cutting and working capital reduction remained key focus areas
during the year, the business unit maintained its digital initiatives to
ready product for digital delivery.
The Books and Maps results include a foreign exchange loss of R7 million
compared to R3 million in the comparative period.
Post balance sheet event
As announced on 14 June 2010 on the JSE Limited`s SENS, Avusa has signed a
memorandum of understanding to acquire the entire issued share capitals of
Hirt & Carter (Proprietary) Limited and Universal Print Group (Proprietary)
Limited. The total purchase consideration is R925 million, to be settled by
a cash payment of R462,5 million and by the issue of 20 555 555 new Avusa
shares at R22,50 per share.
The proposed acquisition is subject to the conclusion of a due diligence
investigation to the satisfaction of Avusa, to any regulatory approvals
(including approval by the relevant competition authority) as may be
necessary to implement the transaction and to the approval by Avusa`s
shareholders.
The proposed acquisition is attractive to Avusa as it offers Avusa new
revenue streams with a presence in retail advertising production systems and
related database management and development. In addition, the acquisition
delivers resilient revenue bases and cash flows.
Outlook
The execution of our strategy to deliver long-term growth will deliver
shareholder value.
The positive impact from the Soccer World Cup and continued positive returns
from sustainable initiatives introduced in the current recession, will be
positive contributors to results.
We remain well positioned to capitalise on the anticipated improvement in the
economy.
Dividend
Notice is hereby given that a dividend (number 2) of 75 cents per ordinary
share has been declared by the directors for the year ended 31 March 2010,
and is payable to shareholders recorded in the register of members of the
company at the close of business on Friday, 30 July 2010.
In compliance with the requirements of Strate, the electronic settlement and
custody system used by the JSE Limited, the following salient dates are
applicable for the payment of the dividend:
Last day to trade cum dividend Friday, 23 July 2010
Shares commence trading ex dividend Monday, 26 July 2010
Record date Friday, 30 July 2010
Payment date Monday, 2 August 2010.
Share certificates may not be dematerialised or rematerialised between
Monday, 26 July 2010 and Friday, 30 July 2010, both days inclusive.
Adv. Dumisa Buhle Ntsebeza SC Chairman
Prakash C Desai Group Chief Executive Officer
Howard Benatar Chief Financial Officer
For and on behalf of the board
Rosebank
22 June 2010
Company secretary: JR Matisonn E-mail: matisonnj@avusa.co.za
Directors: DB Ntsebeza (Chairman), PC Desai* (Group Chief Executive Officer),
H Benatar* (Chief Financial Officer), MD Brand, YZ Cuba,
LM Machaba-Abiodun, TRA Oliphant, MJ Willcox, TA Wixley, MSM Xayiya
*Executive
Address: 4 Biermann Avenue, Rosebank, 2196, Johannesburg?
PO Box 1746, Saxonwold, 2132
These results may be viewed on the internet at http://www.avusa.co.za
Date: 24/06/2010 07:05:02 Produced by the JSE SENS Department.
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