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AVU
AVU
AVU - Avusa Limited - Unaudited condensed consolidated financial results for the
six months ended 30 September 2011
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 2011
Commentary
FINANCIAL RESULTS
Revenue for the six months to 30 September 2011 grew 23% over the prior period.
Excluding the recently-acquired Retail Solutions business unit, revenue
contracted by 4% or R101 million, impacting profitability. The decline, while
largely a result of adverse trading conditions in the current global economic
slowdown, also reflects the benefit of R36 million of 2010 Soccer World Cup
revenue in the prior year. Following the November 2010 acquisition of the
Retail Solutions business unit, 20 555 555 new Avusa shares were allotted and
issued, and the company moved from an interest-earning to interest-paying
position.
Despite the disappointing first-half results, Avusa`s financial position remains
strong, with further bottom-line initiatives, as detailed below, planned for the
second half.
OPERATIONAL REVIEW
MEDIA
The Media business unit includes the group`s interests in newspapers, magazines,
out-of-home advertising, and the digital businesses of I-Net Bridge, Interactive
Junction Holdings (formerly Career Junction) and Amorphous.
The protracted economic slowdown affected the performance of this business unit,
depressing both advertising and circulation revenues.
With the banking, investment and insurance sector under severe pressure, there
were steep cuts in advertising spend from this sector. Telecommunications
companies also curtailed their marketing activities, while recruitment
advertising remained stagnant in an economy that continues to shed jobs. Growth
in the share of retailer advertising was insufficient to offset the decline in
the three other main adspend categories.
Newspaper circulations remained under pressure, with most titles recording
decreases. In this environment, it was pleasing that The Times continued to grow
its circulation. The Sunday Times increased core circulation but recorded a
marginal decline in total sales.
To ensure continued profitability in this challenging environment, we have
initiated a process extensively restructuring our newspaper and magazine
operations. The half-year numbers include once-off retrenchment costs of R6m.
While our digital businesses were also affected by the economy, the primary
reason for their muted contribution was investment in new-generation products.
During the review period, I-Net Bridge successfully launched its I-Graph version
3 product, while Interactive Junction Holdings launched Auto Junction and
Property Junction to complete its suite of classified offerings alongside the
successful Career Junction.
RETAIL SOLUTIONS
The Retail Solutions business unit comprises Hirt & Carter and Uniprint.
The retail solutions market, with key industry sectors under financial pressure,
remained extremely competitive and price sensitive. Accordingly, there was a
strong focus on material content, improved efficiencies and tight cost controls.
The strong rand assisted in keeping imported material costs down, but hurt
competitiveness in the business unit`s African export markets. Software,
systems, innovation and differentiation remain vital to the business`s strategy
and success.
Uniprint benefited from supplying print material for South Africa`s local
elections in May, and for the Zambian general elections in September.
BOOKS
The Books business unit consists of book retail (Exclusive Books, Van Schaik
Bookstore and Exclusives.co.za), book and map publishing (Random House Struik,
Struik Christian Media, New Holland Publishers and Map Studio), digital mapping
(MapIT) and book logistics (Booksite Afrika and Mega Digital).
The sale of two commercial properties acquired in terms of purchase options on
lease terminations generated a profit of R28 million.
Exclusive Books was affected by the depressed economic environment and resultant
impact on disposable income, resulting in lower demand for leisure books and a
behavioural shift, with consumers `buying down`. Trading during the period was
also hampered by refurbishment of two Exclusive Books stores and construction
work in four shopping malls housing Exclusive Books shops. In line with
international trends, online and digital sales continue to grow. Academic book
sales through Van Schaik Bookstore flourished as the business benefits from
growing student numbers at tertiary education institutions and increased levels
of government funding made available to students.
Despite soft trading conditions, the South African book publishing businesses
traded ahead of the prior year as a result of strong publishing programmes. The
offshore publishing businesses struggled in extremely tough book markets which
are still trying to recover from major chains being liquidated or entering
administration in the prior year. Map Studio`s paper-based mapping remained
under pressure as mapping increasingly shifts towards digital applications.
MapIT, the digital mapping business, has been affected by declining navigational
revenues, the largest of its income streams, as a result of downward data
pricing pressures, the negative impact of the strong rand on euro-denominated
earnings and lower volumes of personal navigation devices sold into the market.
The business also lost a major navigation customer following alignment with the
customer`s international parent.
Despite lower volumes, the book logistics business performed well, driven
by good performance at Mega Digital, our digital book-printing business.
The business unit has embarked on a number of cost-saving and revenue/
margin-enhancing initiatives which are expected to have a positive impact
by year end. Cost-saving initiatives include a significant cut-back of our
UK business at the end of October 2011, a targeted response to marginal and
unprofitable Exclusive Books stores, a review of staffing at store level
and across back-office functions and specific measures to cut major expense
items. Revenue/margin-enhancing initiatives include widening the non-book
product range with emphasis on natural extensions, negotiating with suppliers
to improve purchase terms and implementation of a co-operative advertising
model to monetise in-store promotion space.
ENTERTAINMENT
The Entertainment business unit comprises Nu Metro (Films, Cinemas, Home
Entertainment and Popcorn Cinema Advertising), Gallo Music, Entertainment
Logistics Services (ELS), Compact Disc Technologies (CDT), Associated Musical
Distributors (AMD), Media Guide and Collage Litho.
The business unit faced multiple challenges in the first six months of the year.
Retail-facing businesses, Home Entertainment and Gallo Music, tackled weak
content, format change, price deflation and constrained consumer disposable
income, with knock-on effects at the manufacturing arm, CDT, and logistics
businesses, AMD and ELS, due to reduced volumes and average unit revenues.
Strong content, particularly over the June/July holiday period, supported
trading at Nu Metro Films, Nu Metro Cinemas and Popcorn Cinema Advertising. The
release of a higher volume of 3D films boosted average cinema ticket prices.
Collage Litho`s good performance was enhanced by the internalisation of group
spend. A continued concentration on cost control resulted in business unit
overheads being well contained.
This business unit will begin a remodelling exercise to address costs and
restructure the business to better manage potential format declines and
continued price deflation pressures.
CORPORATE SEGMENT AND SHARE-BASED PAYMENTS
The corporate segment includes a R3 million credit from a group retirement fund
that is being wound down (2010: R21 million), R5 million in costs arising from
the expression of interest received from Capitau and a R19 million charge from a
separation agreement between the company and its former group chief executive
officer, Prakash Desai.
A further charge of R6 million, arising from the accelerated vesting of share
incentives held by Mr Desai, is included in the share-based payments expense.
OUTLOOK
Economic conditions during the first half of the year were uncertain and
challenging, and remain so. Mindful of the current economic environment, Avusa
is in the process of implementing a number of initiatives to improve the
performance of the group. In addition to the pursuit of growth in the Media and
Retail Solutions business units, efficiency improvements including
restructurings have been initiated group-wide to enhance margins and contain
costs.
Mikki Xayiya Michael Robertson Howard Benatar
Chairman Acting Group Chief Chief Financial
Executive Officer Officer
For and on behalf of the board
Rosebank
22 November 2011
Condensed consolidated statement of comprehensive income
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 September 30 September 31 March
2011 2010 2011
Rm Rm Rm
Revenue 2 854 2 322 5 310
Cost of sales (1 845) (1 483) (3 354)
Gross profit 1 009 839 1 956
Operating expenses (935) (728) (1 632)
Operating costs (831) (664) (1 471)
Depreciation (64) (47) (105)
Amortisation (28) (13) (38)
Share-based payments (12) (4) (18)
Profit from operations 74 111 324
Net finance (costs) income (5) 9 3
Finance income 14 20 32
Finance costs (19) (11) (29)
Share of profits of associates
(net of income tax) 3 1 5
Profit before taxation 72 121 332
Taxation (36) (49) (115)
Income tax expense (19) (40) (106)
Secondary tax on companies
expense (17) (9) (9)
Profit for the period 36 72 217
Other comprehensive income
Exchange differences on
translation of foreign operations 3 - 3
Other comprehensive income for
the period (net of income tax) 3 - 3
Total comprehensive income for
the period 39 72 220
Profit attributable to:
Owners of the company 31 63 194
Non-controlling interest 5 9 23
Profit for the period 36 72 217
Total comprehensive income
attributable to:
Owners of the company 34 63 197
Non-controlling interest 5 9 23
Total comprehensive income for
the period 39 72 220
Earnings per ordinary share (cents)
Basic 25 61 176
Diluted 25 61 174
Condensed consolidated segmental statement
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 September 30 September 31 March
2011 2010 2011
Rm Rm Rm
Revenue from external customers
Media 1 051 1 071 2 129
Retail Solutions 633 - 493
Books 659 646 1 489
Entertainment 511 605 1 199
2 854 2 322 5 310
Profit (loss) from operations
Media 40 87 153
Retail Solutions 85 - 89
Books 16 (1) 85
Entertainment (21) 21 33
Corporate (34) 8 (18)
86 115 342
Share-based payments (12) (4) (18)
74 111 324
Condensed consolidated statement of financial position
Unaudited Unaudited Audited
30 September 30 September 31 March
2011 2010 2011
as at Rm Rm Rm
ASSETS
Non-current assets 1 775 951 1 758
Property, plant and equipment 575 393 589
Intangible assets 999 367 1 003
Interests in associates 69 47 47
Long-term receivable - 31 -
Deferred taxation assets 132 113 119
Current assets 2 232 1 866 2 341
Inventories, receivables and
other current assets 1 858 1 461 1 742
Bank balances, deposits and cash 374 405 599
Total assets 4 007 2 817 4 099
EQUITY AND LIABILITIES
Total equity 2 087 1 574 2 199
Equity attributable to owners
of the company 1 990 1 464 2 077
Non-controlling interest 97 110 122
Non-current liabilities 588 237 628
Long-term borrowings 265 3 284
Post-retirement benefits
liabilities 206 180 205
Operating leases equalisation
liabilities 27 29 39
Deferred taxation liabilities 90 25 100
Current liabilities 1 332 1 006 1 272
Payables and other current
liabilities 1 157 930 1 129
Short-term borrowings 66 5 73
Bank overdrafts 109 71 70
Total equity and liabilities 4 007 2 817 4 099
Condensed consolidated statement of cash flows
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 September 30 September 31 March
2011 2010 2011
Rm Rm Rm
Net cash flows from
operations before working
capital changes 165 137 493
Working capital changes (98) (124) (55)
Net cash flows from operations 67 13 438
Net finance (costs) income (5) 9 8
Taxation paid (86) (31) (116)
Net cash flows from operating
activities (24) (9) 330
Net cash flows from investing
activities (79) (74) (444)
Net cash flows from financing
activities (159) (87) 140
Net (decrease) increase in cash
and cash equivalents (262) (170) 26
Cash and cash equivalents at
beginning of the period 529 504 504
Foreign operations translation
adjustment (2) - (1)
Cash and cash equivalents at end
of the period 265 334 529
Condensed consolidated statement of changes in equity
Share Non-
capital Other Accu- control-
and re- mulated Owners` ling Total
premium serves profits interest interest equity
Rm Rm Rm Rm Rm Rm
Balance at 31
March 2009
(audited) 1 108 (40) 308 1 376 97 1 473
Total
comprehensive
income for
the period (3) 53 50 11 61
Equity-settled
share
incentive
plans 3 - 3 - 3
Dividends
paid by
subsidiaries
to non-
controlling
interests - - - (13) (13)
Dividend paid - (62) (62) - (62)
Balance at
30 September
2009
(unaudited) 1 108 (40) 299 1 367 95 1 462
Total
comprehensive
income for
the period 1 106 107 9 116
Effect of
acquisitions
and disposals - - - 3 3
Balance at
31 March
2010
(audited) 1 108 (39) 405 1 474 107 1 581
Total
comprehensive
income for
the period - 63 63 9 72
Equity-settled
share
incentive
plans 4 - 4 - 4
Dividends
paid by
subsidiaries
to non-
controlling
interests - - - (6) (6)
Dividend paid - (77) (77) - (77)
Balance at
30 September
2010
(unaudited) 1 108 (35) 391 1 464 110 1 574
Shares
issued at a
premium 463 - - 463 - 463
Total
comprehensive
income for
the period 3 131 134 14 148
Equity-settled
share
incentive
plans 12 - 12 - 12
Effect of
acquisitions
and disposals - - - (2) (2)
Disposal of call
options over
Avusa shares 4 - 4 - 4
Balance at
31 March
2011
(audited) 1 571 (16) 522 2 077 122 2 199
Total
comprehensive
income for
the period 3 31 34 5 39
Equity-settled
share
incentive
plans 1 - 1 - 1
Effect of
acquisitions
and disposals (17) - (17) (3) (20)
Dividends
paid by
subsidiaries
to non-
controlling
interests - - - (27) (27)
Dividend paid - (105) (105) - (105)
Balance at
30 September
2011
(unaudited) 1 571 (29) 448 1 990 97 2 087
Notes
1. Basis of preparation
The unaudited condensed consolidated interim financial
statements for the six months ended 30 September 2011 have been
prepared using accounting policies compliant with International
Financial Reporting Standards (IFRS), IAS 34 Interim Financial
Reporting, the AC500 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 2011
integrated annual report, except for the adoption on
1 April 2011 of those new and amended statements of generally
accepted accounting practice and interpretations of statements
of generally accepted accounting practice listed in Avusa`s
2011 integrated annual report with effective dates for Avusa of
1 April 2011 and those amendments included in the International
Accounting Standards Board`s annual improvements project where
such amendments are effective for Avusa on 1 April 2011. 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.
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 September 30 September 31 March
% 2011 2010 2011
change Rm Rm Rm
2. Reconciliation
between earnings
and headline
earnings
Earnings (51) 31 63 194
Profit on disposal
of property, plant
and equipment (28) - -
Tax effect 4 - -
Attributable to
non-controlling
interest - - -
Headline earnings (89) 7 63 194
Headline earnings
per ordinary
share (cents)
Basic (90) 6 61 176
Diluted (90) 6 61 174
3. Shares in issue
Shares in issue
at beginning of
the period 124 376 714 103 821 159 103 821 159
Shares issued
during the period - - 20 555 555
124 376 714 103 821 159 124 376 714
Less: Call options
over Avusa shares (1 142 084) (1 357 478) (1 142 084)
Adjusted shares in
issue at end of
the period 123 234 630 102 463 681 123 234 630
Weighted average
for the period 123 234 630 102 463 681 110 528 499
Weighted average
for the period
(diluted) 124 314 550 102 659 022 111 514 637
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.
4. Earnings per ordinary share
The calculation of basic earnings and headline earnings per
ordinary share is based on earnings of R31 million (2010: R63
million) and headline earnings of R7 million (2010: R63
million) respectively, and on a weighted average of 123 234 630
(2010: 102 463 681) ordinary shares in issue.
The calculation of diluted earnings and headline earnings per
ordinary share is based on earnings of R31 million (2010: R63
million) and headline earnings of R7 million (2010: R63
million) respectively, and on a weighted average of 124 314 550
(2010: 102 659 022) diluted ordinary shares in issue.
Unaudited Unaudited Audited
30 September 30 September 31 March
2011 2010 2011
as at Rm Rm Rm
5. Contingent liabilities
and operating lease
commitments
Contingent liabilities 1 2 1
Operating lease commitments 867 873 853
- due within one year 164 181 164
- due after one year 703 692 689
6. Capital expenditure commitments
Contracted but not
provided for 32 4 14
Approved but not yet
contracted for* 150 153 150
182 157 164
*includes printing press approval.
Company secretary: J R Matisonn E-mail: matisonnj@avusa.co.za
Directors: MSM Xayiya (Chairman), MW Robertson* (Acting Group
Chief Executive Officer), H Benatar* (Chief Financial Officer),
CB Cary, BD Hopkins, LM Machaba-Abiodun, HK Mehta, TRA Oliphant,
JH Schindehutte (Lead Independent Director), MJ Willcox *Executive
Address: 4 Biermann Avenue, Rosebank, 2196, Johannesburg
P O Box 1746, Saxonwold, 2132
These results may be viewed on the internet at:
www.avusa.co.za
Date: 24/11/2011 07:05:48 Produced by the JSE SENS Department.
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