| Thu 23 Jun 2011, 7:05 | | AVU - Avusa Limited - Audited condensed consolidated financial results for the |
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AVU
AVU
AVU - Avusa Limited - Audited condensed consolidated financial results for the
year ended 31 March 2011
AVUSA LIMITED
Incorporated in the Republic of South Africa
Registration number: 2008/002461/06
Share code: AVU, ISIN code: ZAE000115895
AUDITED CONDENSED CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH
2011
- Headline earnings per share + 18%
- Dividend per share + 13%
Commentary
OVERVIEW
These financial results include the Retail Solutions business for the five
months since its acquisition on 1 November 2010.
The R800 million acquisition was inexpensive, timeous and strongly supports the
Avusa strategy to grow new markets, diversify revenues and increase enterprise-
wide earnings.
Avusa`s traditional businesses satisfy discretionary income spend, where
consumer confidence has not yet fully returned. While we have retained or grown
volumes and market shares, the effects of price deflation and our continuing
prudent investment in digital has kept earnings flat.
FINANCIAL RESULTS AND POSITION
Revenue grew 13% from R4,7 billion to R5,3 billion, while profit from operations
exceeded that of last year by 30%. Headline earnings per share rose 18% year-on-
year. The income tax expense includes non-deductible charges relating to the
acquisition of the Retail Solutions business and the recognition on assessment
of R5 million of tax charges relating to prior years.
During the review period, a three-year revolving credit facility of R230 million
was raised to part-finance the Retail Solutions acquisition. Avusa`s balance
sheet remains strong.
OPERATIONAL REVIEW
MEDIA
The Media business unit enjoyed strong profit growth despite the uneven nature
of the economic recovery.
Our newspapers grew advertising revenue by 10%, aided by the diversification of
our revenue streams after restructuring the advertising team to focus on key
advertising sectors. As we anticipated at the half-year, recruitment advertising
has yet to recover, underscoring the importance of our diversification efforts.
The Times has enjoyed strong circulation growth. The title produced its first
full-year profit and is now well entrenched as an English-language daily
newspaper in Gauteng, KwaZulu-Natal and the Western Cape.
During the year, we secured long-term printing arrangements for our newspapers
in the Eastern and Western Cape.
Our magazine and out-of-home businesses performed profitably.
While our digital businesses performed solidly, profit contributions were
impacted by significant investments in new-generation products and in I-Net
Bridge`s Business Live initiative. Career Junction is also building an e-
classifieds product suite to add automotive and property solutions to its online
offering.
RETAIL
The Retail business unit reflected a good performance in academic book retail at
Van Schaik Bookstore, but disappointing results from general book retail at
Exclusive Books.
Van Schaik Bookstore benefited from increased unit sales of academic and general
books, and the opening of three new stores.
Trading at Exclusive Books continued to be affected by selling price deflation
due to the strong rand, reduced consumer discretionary spend, and lack of best-
sellers during the year. Units sold fell by 1,6%.
Avusa`s online store, Exclusives.co.za, which was launched in March 2010 and
retails DVDs, CDs, books and electronic games showed good growth in a
developmental stage.
ENTERTAINMENT
The business unit`s profitability was impacted by losses of
R17 million incurred by the interactive gaming business, including stock write-
offs of R19 million, and a loss in the music business of R12 million.
While Nu Metro Cinemas had a positive start to the year, weaker content in the
second half of the year affected overall performance. Although cost-control
remained a focus, administered prices such as electricity and rates and taxes
increased sharply. Brand marketing was significantly increased, and has raised
consumer awareness and loyalty.
Nu Metro Home Entertainment continued to face difficult retail trading
conditions due to constrained consumer disposable income. Pressures on pricing
drove down average selling prices. The rental business remains solid, and
continues to provide consumers with a viable entertainment option.
Nu Metro Interactive was fully integrated into the Home Entertainment business.
The recessionary impact was more deeply felt in interactive gaming than in other
home entertainment categories, with severe price discounting in the gaming
market.
Gallo Music was also integrated into the Home Entertainment business to yield a
shared sales and merchandising platform.
Nu Metro Films continued to profitably drive new genres and segments, with
representation in the local industry, faith-based films and comedy.
BOOKS AND MAPS
The Books and Maps business unit turned in a good performance, increasing its
EBIT from R59 million to R66 million.
The tough trading conditions that were experienced by the unit in the first half
of the year, mirroring the depressed retail trading environment, the strong rand
and pricing pressures, continued in the second six months. The focus for the
year remained on quality of earnings and reducing costs. The business continued
to position itself in the expanding digital book market.
The logistics businesses performed well over the year, despite pricing pressures
on book and entertainment products. These businesses were rebranded under the
@Velocity umbrella, and significant progress was made in delivering an end-to-
end supply-chain solution for the book and entertainment market.
RETAIL SOLUTIONS
Avusa acquired the Retail Solutions business, comprising the entire issued share
capitals of Hirt & Carter and Universal Print Group, from UHC Communications on
1 November 2010. The purchase consideration was R800 million, settled by the
allotment and issue of 20 555 555 new Avusa shares and the payment of R337,5
million cash. The cash consideration was funded from Avusa`s internal resources
and bank borrowings.
The Retail Solutions business unit has performed well above expectations in the
five months since its acquisition.
EVENT AFTER THE REPORTING PERIOD
In March 2011, Avusa received an unsolicited expression of interest from a
consortium led by Capitau Holdings to acquire Avusa`s entire issued share
capital. Avusa`s board established an independent sub-committee to consider the
expression of interest and to engage with the consortium. The sub-committee has
communicated progress on the matter via regular JSE SENS announcements, and will
continue to do so.
DIVIDEND
Notice is hereby given that a dividend (number 3) of 85 cents per ordinary share
has been declared by the directors for the year ended 31 March 2011, and is
payable to shareholders recorded in the register of members of the company at
the close of business on Friday, 29 July 2011.
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, 22 July 2011
Shares commence trading ex dividend Monday, 25 July 2011
Record date Friday, 29 July 2011
Payment date Monday, 1 August 2011.
Share certificates may not be dematerialised or rematerialised between Monday,
25 July 2011 and Friday, 29 July 2011, both days inclusive.
OUTLOOK
Avusa will see the benefits in the coming year of the growing annualised
contribution from Retail Solutions and of the current positive indications of
improving advertising support for Media.
The Entertainment and Books businesses will mirror consumer confidence and
discretionary spending. We have a strategy to maximise value and extract cash
from all contemporary physical businesses.
Adv. Dumisa Buhle Ntsebeza SC Prakash C Desai Howard Benatar
Chairman Group Chief Chief Financial
Executive Officer Officer
For and on behalf of the board
Rosebank
21 June 2011
Condensed consolidated statement of comprehensive income
31 March 31 March
2011 2010
for the year ended % change Rm Rm
Continuing operations
Revenue 13 5 310 4 712
Cost of sales (3 354) (3 039)
Gross profit 17 1 956 1 673
Operating expenses (1 632) (1 426)
Operating costs (1 471) (1 315)
Depreciation (105) (84)
Amortisation (38) (22)
Share-based payments (18) (5)
Profit from operations
before exceptional items 31 324 247
Exceptional items - 3
Profit from operations 30 324 250
Net finance income 3 12
Finance income 32 50
Finance costs (29) (38)
Share of profits of associates
(net of income tax) 5 9
Profit before taxation 23 332 271
Taxation (115) (94)
Income tax expense (106) (85)
Secondary tax on companies expense (9) (9)
Profit after taxation 23 217 177
Discontinued operations
Profit from discontinued operations - 2
Profit for the year 21 217 179
Other comprehensive income
Exchange differences on translation
of foreign operations 3 (2)
Other comprehensive income for
the year (net of income tax) 3 (2)
Total comprehensive income for the year 220 177
Profit attributable to:
Owners of the company 22 194 159
Non-controlling interest 23 20
Profit for the year 217 179
Total comprehensive income
attributable to:
Owners of the company 197 157
Non-controlling interest 23 20
Total comprehensive income for the year 220 177
Earnings per ordinary share (cents)
Basic 14 176 155
Diluted 12 174 155
Earnings per ordinary share from
continuing operations (cents)
Basic 15 176 153
Diluted 14 174 153
Earnings per ordinary share from
discontinued operations (cents)
Basic - 2
Diluted - 2
Condensed consolidated segmental statement
31 March 31 March
2011 2010
for the year ended Rm Rm
Revenue from external customers
Media 2 129 1 986
Retail 1 137 1 131
Entertainment 1 010 1 022
Books and Maps 541 573
Retail Solutions 493 -
5 310 4 712
Profit (loss) from operations
before exceptional items
Media 153 127
Retail 56 63
Entertainment (4) 30
Books and Maps 66 59
Retail Solutions 89 -
Corporate (18) (27)
342 252
Share-based payments (18) (5)
324 247
Condensed consolidated statement of financial position
31 March 31 March
2011 2010
as at Rm Rm
ASSETS
Non-current assets 1 758 901
Property, plant and equipment 589 380
Intangible assets 1 003 367
Interests in associates 47 45
Deferred taxation assets 119 109
Current assets 2 341 2 013
Inventories, receivables and
other current assets 1 742 1 448
Bank balances, deposits and cash 599 565
Total assets 4 099 2 914
EQUITY AND LIABILITIES
Total equity 2 199 1 581
Equity attributable to owners of the company 2 077 1 474
Non-controlling interest 122 107
Non-current liabilities 628 245
Long-term borrowings 284 3
Post-retirement benefits liabilities 205 180
Operating leases equalisation liabilities 39 43
Deferred taxation liabilities 100 19
Current liabilities 1 272 1 088
Payables and other current liabilities 1 129 1 017
Short-term borrowings 73 10
Bank overdrafts 70 61
Total equity and liabilities 4 099 2 914
Condensed consolidated statement of cash flows
31 March 31 March
2011 2010
for the year ended Rm Rm
Net cash flows from operations 438 380
Net finance income 8 12
Taxation paid (116) (104)
Net cash flows from operating activities 330 288
Net cash flows from investing activities (444) (121)
Net cash flows from financing activities 140 (77)
Net increase in cash and cash equivalents 26 90
Cash and cash equivalents at beginning
of the year 504 416
Foreign operations translation adjustment (1) (2)
Cash and cash equivalents at end of the year 529 504
Condensed consolidated statement of changes in equity
Share Non-
capital Accum- con-
and Other ulated Owners` trolling Total
premium reserves profits interest interest equity
Rm Rm Rm Rm Rm Rm
Balance at
31 March 2009 1 108 (40) 308 1 376 97 1 473
Total
comprehensive
income for
the year (2) 159 157 20 177
Equity-settled
share incentive
plans 3 - 3 - 3
Effect of
acquisitions
and disposals - - - 3 3
Dividends paid by
subsidiaries to
non-controlling
interests - - - (13) (13)
Dividend paid - (62) (62) - (62)
Balance at
31 March 2010 1 108 (39) 405 1 474 107 1 581
Shares issued
at a premium 463 - - 463 - 463
Total
comprehensive
income for
the year 3 194 197 23 220
Equity-settled
share incentive
plans 16 - 16 - 16
Disposal of
call options
over Avusa shares 4 - 4 - 4
Dividends paid by
subsidiaries to
non-controlling
interests - - - (8) (8)
Dividend paid - (77) (77) - (77)
Balance at
31 March 2011 1 571 (16) 522 2 077 122 2 199
Notes
1. Basis of preparation
The audited condensed consolidated group annual financial
statements for the year ended 31 March 2011 have been prepared
using accounting policies compliant with International
Financial Reporting Standards (IFRS), information as required
by IAS 34 Interim Financial Reporting, the AC 500 Standards as
issued by the Accounting Practices Board and the JSE Limited`s
Listings Requirements. 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
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 had
no effect on the group`s financial results.
31 March 31 March
% 2011 2010
for the year ended change Rm Rm
2. Exceptional items
Profit on disposal of property - 4
Loss on closure of Career
Junction Middle East business - (4)
Fair value adjustment of investments - 2
Pension fund surplus apportionment - 1
- 3
3. Discontinued operations
Profit on sale of Nigerian and
Kenyan interests - 2
4. Reconciliation between earnings
and headline earnings
Earnings 22 194 159
Profit on disposal of property - (4)
Profit from discontinued
operations - (2)
Total tax effect - -
Attributable to non-controlling
interest - -
Headline earnings 27 194 153
Headline earnings per ordinary
share (cents)
Basic 18 176 149
Diluted 17 174 149
5. Shares in issue
Shares in issue at beginning of
the year 103 821 159 103 821 159
Shares issued during the year 20 555 555 -
124 376 714 103 821 159
Less: Call options over
Avusa shares (1 142 084) (1 357 478)
Adjusted shares in issue at end
of the year 123 234 630 102 463 681
Weighted average for the year 110 528 499 102 448 681
Weighted average for the year
(diluted) 111 514 637 102 503 924
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
The calculation of basic earnings and headline earnings per
ordinary share is based on earnings of R194 million (2010:
R159 million) and headline earnings of R194 million (2010:
R153 million) respectively, and on a weighted average of
110 528 499 (2010: 102 448 681) ordinary shares in issue.
The calculation of diluted earnings and headline earnings per
ordinary share is based on earnings of R194 million (2010:
R159 million) and headline earnings of R194 million (2010:
R153 million) respectively, and on a weighted average of
111 514 637 (2010: 102 503 924) diluted ordinary shares in
issue.
31 March 31 March
2011 2010
as at Rm Rm
7. Contingent liabilities and operating
lease commitments
Contingent liabilities 1 2
Operating lease commitments 853 913
- due within one year 164 169
- due after one year 689 744
8. Capital expenditure commitments
Contracted but not provided for 14 1
Approved but not yet contracted for* 150 184
164 185
* Includes printing press approval.
9. Acquisition of Retail Solutions business
The Retail Solutions purchase price allocation has been
recorded as net tangible assets of R202 million, intangible
assets of R285 million (net of related deferred tax) and the
balance of R313 million as goodwill. Had the date of
acquisition been at the beginning of the year, the group
revenue would have been R715 million higher and the profit for
the year would have reflected R53 million more. Further
details regarding the acquisition of the Retail Solutions
business are included in Avusa`s circular released in
October 2010.
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 2011. 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.
Company secretary: J R Matisonn E-mail: matisonnj@avusa.co.za
Directors: DB Ntsebeza (Chairman), PC Desai* (Group Chief Executive Officer), H
Benatar* (Chief Financial Officer),
LM Machaba-Abiodun, TRA Oliphant, MJ Willcox, TA Wixley,
MSM Xayiya *Executive
Address: 4 Biermann Avenue, Rosebank, 2196, Johannesburg
P O Box 1746, Saxonwold, 2132
These results may be viewed on the internet at http://www.avusa.co.za
Date: 23/06/2011 07:05:01 Produced by the JSE SENS Department.
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