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AVU
AVU
AVU - Avusa Limited - Unaudited condensed consolidated financial results for the
six months ended 30 September 2010
AVUSA LIMITED?
Incorporated in the Republic of South Africa
Registration number: 2008/002461/06
Share code: AVU
ISIN code: ZAE000115895
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30
SEPTEMBER 2010
- Revenue +5%
- Profit from operations +22%
- Attributable earnings per share +17%
- Headline earnings per share +30%
Condensed consolidated statement of comprehensive income
Unaudited Unaudited Audited
% six months six months year
change ended ended ended
30 September 30 September 31 March
2010 2009 2010
(restated)
Rm Rm Rm
Continuing operations
Revenue 5 2 322 2 220 4 712
Cost of sales (1 483) (1 443) (3 039)
Gross profit 8 839 777 1 673
Operating expenses (728) (693) (1 426)
Operating costs (664) (633) (1 315)
Depreciation (47) (44) (84)
Amortisation (13) (10) (22)
Share-based payments (4) (6) (5)
Profit from operations 32 111 84 247
before exceptional items
Exceptional items - 7 3
Profit from operations 22 111 91 250
Net finance income 9 7 12
Finance income 20 32 50
Finance costs (11) (25) (38)
Share of profits of 1 2 9
associates (net of income
tax)
Profit before taxation 21 121 100 271
Taxation (49) (36) (94)
Income tax expense (40) (27) (85)
Secondary tax on (9) (9) (9)
companies expense
Profit after taxation 13 72 64 177
Discontinued operations
Profit from discontinued - - 2
operations
Profit for the period 13 72 64 179
Other comprehensive
income
Exchange differences on - (3) (2)
translation of foreign
?operations
Other comprehensive - (3) (2)
income for the period
(net of income tax)
Total comprehensive 72 61 177
income for the period
Profit attributable to:
Owners of the company 19 63 53 159
Non-controlling interest 9 11 20
Profit for the period 72 64 179
Total comprehensive
income attributable to:
Owners of the company 63 50 157
Non-controlling interest 9 11 20
Total comprehensive 72 61 177
income for the period
Earnings per ordinary
share (cents)
Basic 17 61 52 155
Diluted 17 61 52 155
Earnings per ordinary
share from continuing
operations (cents)
Basic 61 52 153
Diluted 61 52 153
Earnings per ordinary
share from discontinued
operations (cents)
Basic - - 2
Diluted - - 2
Condensed consolidated segmental statement
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 September 30 September 31 March
2010 2009 2010
(restated)
Rm Rm Rm
Revenue from external customers
Media 1 071 1 014 1 986
Retail 473 483 1 131
Entertainment 510 453 1 022
Books and Maps 268 270 573
2 322 2 220 4 712
Profit (loss) from operations
before exceptional items
Media 87 70 127
Retail (14) (2) 63
Entertainment 12 11 30
Books and Maps 22 24 59
107 103 279
Corporate 8 (13) (27)
115 90 252
Share-based payments (4) (6) (5)
111 84 247
Condensed consolidated statement of financial position
Unaudited Unaudited Unaudited Audited
as at 30 September 30 September 30 September 31 March
2010 2009 2008 2010
(restated) (restated)
Rm Rm Rm Rm
ASSETS
Non-current assets 951 899 800 901
Tangible assets 393 376 336 380
Intangible assets 367 354 300 367
Interests in 47 42 40 45
associates
Long-term receivable 31 - - -
Deferred taxation 113 127 124 109
assets
Current assets 1 866 2 011 2 063 2 013
Inventories, 1 461 1 580 1 644 1 448
receivables and other
current assets
Bank balances, 405 431 419 565
deposits and cash
Total assets 2 817 2 910 2 863 2 914
EQUITY AND
LIABILITIES
Total equity 1 574 1 462 1 319 1 581
Equity attributable 1 464 1 367 1 249 1 474
to owners of the
company
Non-controlling 110 95 70 107
interest
Non-current 237 250 295 245
liabilities
Long-term borrowings 3 5 29 3
Post-retirement 180 167 173 180
benefits liabilities
Operating leases 29 61 80 43
equalisation
liabilities
Deferred taxation 25 17 13 19
liabilities
Current liabilities 1 006 1 198 1 249 1 088
Payables and other 930 958 1 002 1 017
current liabilities
Short-term borrowings 5 9 6 10
Bank overdrafts 71 231 241 61
Total equity and 2 817 2 910 2 863 2 914
liabilities
Condensed consolidated statement of changes in equity
Share Other Accumu- Owners` Non- Total
capital reserves lated interest con- equity
and Rm profits Rm trolling Rm
premium Rm interest
Rm Rm
Balance at 1 108 (12) - 1 096 40 1 136
31 March 2008
Total (6) 158 152 10 162
comprehensive
income for the
period
Equity-settled 1 - 1 - 1
share incentive
plans
Effect of - - - 30 30
acquisitions and
disposals
Dividends paid by - - - (10) (10)
subsidiaries to
non-controlling
interests
Balance at 1 108 (17) 158 1 249 70 1 319
30 September 2008
(unaudited)
Total (2) 150 148 14 162
comprehensive
income for the
period
Equity-settled 2 - 2 - 2
share incentive
plans
Effect of - - - 13 13
acquisitions and
disposals
Call options over (23) - (23) - (23)
Avusa shares (see
note 5)
Balance at 1 108 (40) 308 1 376 97 1 473
31 March 2009
(audited)
Total (3) 53 50 11 61
comprehensive
income for the
period
Equity-settled 3 - 3 - 3
share incentive
plans
Dividends paid by - - - (13) (13)
subsidiaries to
non-controlling
interests
Dividend paid - (62) (62) - (62)
Balance at 1 108 (40) 299 1 367 95 1 462
30 September 2009
(unaudited)
Total 1 106 107 9 116
comprehensive
income for the
period
Effect of - - - 3 3
acquisitions and
disposals
Balance at 1 108 (39) 405 1 474 107 1 581
31 March 2010
(audited)
Total - 63 63 9 72
comprehensive
income for the
period
Equity-settled 4 - 4 - 4
share incentive
plans
Dividends paid by - - - (6) (6)
subsidiaries to
non-controlling
interests
Dividend paid - (77) (77) - (77)
Balance at 1 108 (35) 391 1 464 110 1 574
30 September 2010
(unaudited)
Condensed consolidated statement of cash flows
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 September 30 September 31 March
2010 2009 2010
(restated)
Rm Rm Rm
Net cash flows from 137 134 325
operations before working
capital changes
Working capital changes (124) (152) 55
Net cash flows from 13 (18) 380
operations
Net finance income 9 10 12
Taxation paid (31) (60) (104)
Net cash flows from operating (9) (68) 288
activities
Net cash flows from investing (74) (70) (121)
activities
Net cash flows from financing (87) (77) (77)
activities
Net (decrease) increase in (170) (215) 90
cash and cash equivalents
Cash and cash equivalents at 504 416 416
beginning of the period
Foreign operations - (1) (2)
translation adjustment
Cash and cash equivalents at 334 200 504
end of the period
Notes
1. Basis of preparation
The unaudited condensed consolidated interim financial
statements for the six months ended 30 September 2010 have been
prepared using accounting policies compliant with International
Financial Reporting Standards (IFRS), IAS 34 Interim Financial
Reporting, the AC 500 standards as issued by the Accounting
Practices Board or its successor, 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 2010 annual report,
except for the adoption on 1 April 2010 of those new and amended
statements of generally accepted accounting practice and
interpretations of statements of generally accepted accounting
practice listed in Avusa`s 2010 annual report with effective
dates for Avusa of 1 April 2010, and those amendments included
in the International Accounting Standards Board`s annual
improvements project where such amendments are effective for
Avusa on 1 April 2010. 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 an
effect on the group`s financial results.
Unaudited Unaudited Audited
% six months six months year
change ended ended ended
30 September 30 September 31 March
2010 2009 2010
Rm Rm Rm
2. Exceptional items
Profit on disposal - 5 4
of property
Fair value - 2 2
adjustment of
investments
Loss on closure of - - (4)
Career Junction
Middle East
business
Pension fund - - 1
surplus
apportionment
- 7 3
3. Discontinued
operations
Profit on sale of - - 2
Nigerian and Kenyan
interests
4. Reconciliation (restated)
between earnings
and headline
earnings
Earnings 63 53 159
Profit on disposal - (5) (4)
of tangible and
intangible assets
Profit on sale of - - (2)
discontinued
operations
Total tax effect - - -
Attributable to non- - - -
controlling
interest
Headline earnings 31 63 48 153
Headline earnings
per ordinary share
(cents)
Basic 30 61 47 149
Diluted 30 61 47 149
5. Shares in issue
Shares in issue at 103 821 159 103 821 159 103 821 159
beginning of the
period
Less: Call options (1 357 478) (1 379 978) (1 357 478)
over Avusa shares
Adjusted shares in 102 463 681 102 441 181 102 463 681
issue at end of the
period
Weighted average 102 463 681 102 441 181 102 448 681
for the period
Weighted average 102 659 022 102 481 865 102 503 924
for the period
(diluted)
At 30 September 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 R63 million (2009:
R53 million) and headline earnings of R63 million
(2009: R48 million) respectively, and on a weighted average
of 102 463 681 (2009: 102 441 181) ordinary shares in issue.
The calculation of diluted earnings and headline earnings
per ordinary share is based on earnings of R63 million (2009:
R53 million) and headline earnings of R63 million
(2009: R48 million) respectively, and on a weighted average
of 102 659 022 (2009: 102 481 865) diluted ordinary shares in
issue.
as at Unaudited Unaudited Audited
30 September 30 September 31 March
2010 2009 2010
Rm Rm Rm
7. Contingent liabilities and
operating lease
commitments
Contingent liabilities 2 8 2
Operating lease 873 562 913
commitments
- due within one year 181 163 169
- due after one year* 692 399 744
*March and September 2010
include rental on head
office lease renewal.
8. Capital expenditure
commitments
Contracted but not 4 16 1
provided for
Approved but not yet 153 - 184
contracted for*
157 16 185
*March and September 2010 include printing press approval.
2009 2008
restatement restatement
Rm Rm
9. Restatements
Comparatives have been restated in
respect of the following:
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 period`s inter-
group revenue elimination.
Increase in revenue 11
Increase in cost of sales 11
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 7
Increase in cost of sales 2
Decrease in operating costs (9)
Decrease in finance income (3)
Increase in profit after taxation 8
Increase in earnings per ordinary share
(cents)
Basic 8
Diluted 8
Increase in headline earnings per
ordinary share (cents)
Basic 8
Diluted 8
Statement of financial position
Decrease in deferred taxation assets (3) -
Decrease in inventories, receivables and (20) (37)
other current assets
Increase in payables and other current 8 7
liabilities
Statement of cash flows
Increase in net cash flows from 25
operations before working capital
changes
Decrease in working capital changes (25)
There is no impact on net cash flows
from operations
Commentary
Overview
This period delivers improved results in a macro environment that has seen only
a marginal improvement in advertising revenues, and continued soft spend on
discretionary entertainment products. These group results for the first half of
the current year affirm the long-term sustainability and cash flows of our
advertising and consumer retail business.
Financial results and position
Revenue grew 5% from R2,220 billion to R2,322 billion, while profit from
operations exceeded that of last year by 22%. The income tax expense is elevated
as a result of the recognition on assessment of R5 million of tax charges
relating to prior years.
The group`s financial position at 30 September remained strong, with net cash of
R334 million.
Operational review
Media
The business unit performed satisfactorily during the review period as the
upturn in advertising identified in the last quarter of the previous financial
year continued. This recovery has been uneven, however, with advertising
revenues in our newspaper business showing growth, while advertising revenues in
our magazine and digital advertising businesses remained under pressure. As
previously advised, we expect recruitment advertising to be the last sector to
recover from the downturn.
Our Eastern Cape titles grew their profit contribution strongly as the benefits
of extensive restructuring in prior periods continued to flow through.
The Times maintained its good performance, and produced a small profit for the
six months against a loss of R8 million in the comparative period. The title
recorded a sharp increase in single-copy sales following the reduction in the
cover price to R2.
Avusa`s Nelson Mandela Bay Printers partnership with Caxton was dissolved by
mutual agreement, with Avusa acquiring full ownership of the premises at
Hunter`s Retreat, Port Elizabeth. Two second-hand printing presses were acquired
to provide a modern facility geared to meeting the printing needs of our titles
in the Eastern Cape.
As with print advertising, the digital recruitment sector continued to be
affected by the economic downturn.
Airport Media, which was hampered by extensive building operations at OR Tambo
International Airport in the previous reporting period, produced pleasing
results.
I-Net Bridge invested in updating and improving its core products, and is
developing a business news website, Business Live, which will be launched in the
second half of the financial year.
Retail
Exclusive Books` turnover and profit dipped as the economic downturn reduced
consumers` discretionary spend. The period under review saw a shift from higher-
priced books to lower-priced books, while the strong rand reduced selling prices
without a compensatory increase in demand. Trading was affected by the Soccer
World Cup which kept regular customers away from the stores. The business
remained focused on its programme to reconfigure under-performing stores and
rightsize its store portfolio, with one store closed during the period.
Van Schaik Bookstore also contended with reduced selling prices as a result of
the strong rand.
Avusa`s online store, Exclusives.co.za, which was launched in March 2010 and
retails DVDs, CDs, books and electronic games, has been well received by the
market.
Entertainment
The Entertainment business unit recorded mixed results for the six months, with
Nu Metro Cinemas showing an improved, positive EBIT. Attendances, fuelled by 3D
screenings and strong content, grew 15% over the prior year, contributing to a
sharp increase in cinema revenues. Intense management focus was placed on costs,
attendances and returns by site. The Soccer World Cup live football shown in 3D
at various Nu Metro cinemas around the country was well received, with Nu Metro
being first to market and having the largest cinema footprint in the world for
the event.
Conversely, the retail business, Nu Metro Home Entertainment, faced a
significant slowdown in trading due to consumer disposable income being under
pressure. The Blu-ray movie format continued to grow, reflected by increased
unit sales on DVD. Content weakness affected interactive gaming revenues.
Nu Metro Films performed well due to excellent content, generating additional
revenues from the expanding 3D format. This business continued to develop local
content, with the release of Spud the Movie eagerly awaited later this month.
Gallo Music posted depressed results due to weaker content and slow retail
trading.
Books and Maps
The effects of the recession and tough trading conditions were felt across the
entire business unit, with the three key factors being retail trading
conditions, exchange rates and pricing pressures.
Retail trading remained poor in all markets as a result of the world-wide
economic recession. Rand strength continued to negatively impact revenues, with
the selling price of imported titles declining without a compensating increase
in demand, and euro-denominated navigation royalties from the digital mapping
business yielding lower rand revenues. The business unit continued its cost-
savings programme.
These results include a foreign exchange loss of R1 million compared to a R3
million loss in the comparative period.
Corporate
The Corporate segment includes a R21 million credit from a group retirement fund
that is being wound down.
Post-balance sheet event
Avusa acquired the UHC business, comprising the entire issued share capitals of
Hirt & Carter (Proprietary) Limited and Universal Print Group (Proprietary)
Limited, from UHC Communications (Proprietary) Limited on 1 November 2010, for a
purchase consideration comprising
20 555 555 new Avusa shares and R337,5 million cash. The cash consideration was
funded from Avusa`s own cash resources and bank borrowings.
Outlook
We have made significant progress in rolling out our strategy. Consumer spending
remains cautious and advertising revenue growth continues to be volatile.
We remain confident that a return to stability in spending, supported by the
contribution from UHC, will see an improvement in the enlarged group`s
performance.
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
17 November 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:
www.avusa.co.za
Date: 18/11/2010 10:00:02 Produced by the JSE SENS Department.
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