| Thu 21 Jun 2012, 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 2012
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
2012
Commentary
FINANCIAL RESULTS
Revenue for the year ended 31 March 2012 grew 12% on the prior period. Excluding
the Retail Solutions business unit, which contributed for its first full year,
revenue contracted by 2%. 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, borrowings were incurred,
and the company moved from an interest-earning to interest-paying position.
Avusa`s financial position at 31 March 2012 remained strong, with net cash of
R493 million.
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.
Advertising and circulation revenue remained depressed in the year under review
with the banking and telecommunications sectors most affected. Following
restructuring measures in the first half, the business unit`s operating profit
was 33% behind last year (from 54% at the half-year), including straight-lining
of leases, provisioning for post-retirement medical aid costs, a R9 million
correction of subscription liabilities at the 50%-owned BDFM unit, once-off
retrenchment costs of R11 million mostly from the Eastern Cape operations and a
R25 million pension fund surplus credit.
The Sunday Times traded at 20% below the previous year`s operating profit (21%
at the half-year), while the Sowetan, the Times and Sunday World all recorded
triple-digit percentage improvements in their operating profits. The Sunday
World traded profitably for the first year since its launch more than a decade
ago. Circulation of Avusa`s newspaper titles remained steady in a market showing
steep declines among many of our competitors. The profit contribution of the
Eastern Cape titles improved towards the end of the year with the new press
coming on stream, but, for the full year, profits were significantly down,
reflecting the depressed state of that province`s economy. After extensive
restructuring, the magazine division recorded profit growth of 60%.
The profit contribution from the digital businesses was 60% behind last year
primarily due to ongoing investment in new-generation products. The investment
phase is complete at Interactive Junction Holdings, while I-Net Bridge continues
to invest in new-generation products.
BDFM, in conjunction with I-Net Bridge and Avusa`s newspaper titles, is
developing a new business content portal, Business Day Live. This is scheduled
to launch in the first half of the 2013 financial year.
RETAIL SOLUTIONS
The Retail Solutions business unit comprises Hirt & Carter and Uniprint which
have been part of Avusa for the 17 months from 1 November 2010.
While both businesses faced tough trading conditions during the review period,
they successfully continued to provide specialist expertise, services and
product. Pressure on the top line was substantial in certain segments of the
market where customers held back spending.
Given that customers and potential customers are carefully reviewing their
marketing budgets, differentiation through innovation remains a strong driver
for Hirt & Carter, delivering efficiencies and cost-savings to customers. The
strategic focus on retaining and growing a strong key account base continues to
prove its worth, and will be reinforced by additional investment in research,
development and computer software, including large-format digital printing,
where clients are using outdoor as a communication medium. Tight control of
overheads continues. In addition to investing in a five-colour press, installed
to maintain Hirt & Carter`s leadership in print technology, investments have
also been made in software and associated print technology to ensure the
business continues to offer innovative and cost-effective print solutions to its
clients.
Uniprint designs, manufactures and distributes a wide range of commercial print
products and services to corporate customers and institutions with consumer mass
markets or branch networks in South Africa and throughout Africa.
Notwithstanding a year typified by tough trading and significant cost pressures,
with international clients applying global costing standards in awarding
business, Uniprint performed strongly. With limited opportunities to further
improve operating efficiencies, management will focus on differentiation
strategies to generate sustainable revenue growth in the year ahead. Continued
capital investment is keeping the company abreast of international print
technology advancements and will ensure continued growth. Uniprint has benefited
from the internalisation of large volumes of Hirt & Carter and other Avusa print
work.
The forms division secured printing tenders for local and general elections in
South Africa and Zambia, and a number of print and fulfilment contracts with
major South African users. It remains the leading manufacturer of pre-paid
cellphone vouchers. Investment in capital equipment continued, with a state-of-
the-art press installed in January. A point-of-sale till-roll manufacturing line
was also commissioned, and this fully-integrated production line should secure a
meaningful share of this high-volume market.
Point-of-purchase and commercial printing faced a shift in buying patterns with
a number of large FMCG (fast-moving consumer goods) manufacturers using
specialist procurement agencies, which has suppressed market prices. The unit
has to reformulate its marketing approach, as creativity in concept and design
is an integral part of point-of-sale products. A multi-colour litho press was
installed to support future growth. Progress is being made toward ISO 22000
accreditation.
Turnover in the labels division was below expectation, but budgeted profits were
achieved through strategic raw material buying and controlled labour costs. The
division is well-placed to grow its shrink-sleeve, wrap-around and self-adhesive
labels business. A state-of-the-art 10-colour press has replaced a number of
older presses and this, together with new finishing equipment, offers customers
a cost-effective labelling solution.
Web printing, Uniprint`s largest operation, enjoys strong support
from businesses in the Avusa stable. Key focus areas include securing
additional long-term contracts as a strategic supplier to public-sector
and corporate customers.
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 under 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, characterised by lower demand for leisure books and
a behavioural shift, with consumers `buying down`. Trading was also hampered by
the refurbishment of two stores and construction work in four shopping malls
housing Exclusive Books shops. In line with international trends, online and
digital sales continue to grow. The business has addressed its trading terms and
a number of its major expense lines to improve margins and reduce costs, with
the full benefits expected to emerge in the 2013 financial year. Academic book
sales through Van Schaik Bookstore were strong as the business benefits from
growing student numbers at tertiary institutions and increased bursary funding
by government. In addition, more education institutions are using bursary
administrators with the benefit that bursary monies are ring-fenced, resulting
in increased spending at academic bookstores. Van Schaik has also expanded its
product range to include general books and non-book merchandise.
Trade book sales remained weak across all territories as traditional retailers
struggled to adjust to the changing landscape, including the growth in e-book
sales and growing dominance of Amazon. Even with difficult trading conditions,
the South African book publishing businesses increased turnover over the prior
year by 5%. In reaction to growth in the digital and
e-book market, the businesses are converting books into digital formats and
making titles available across a number of digital platforms. Digital revenues
grew over 330% on the prior year, although off a low base. The offshore
publishing businesses continued to struggle in extremely tough international
book markets. In response, a significant downsizing exercise was completed
during the year in the United Kingdom and staff numbers were reduced by 60%. Map
Studio`s paper-based mapping remained under pressure with the shift to digital
applications. Turnover was 5% down on the prior year.
MapIT was affected by declining navigational revenues, the largest of its income
streams, as a result of downward pressure on data prices, the impact of the
strong rand on euro-denominated earnings and lower volumes of personal
navigation devices sold. The business also lost a major navigation customer
following the customer`s alignment with its international parent. Accordingly,
the business focused on transforming from a pure mapping data provider to
becoming a mapping solutions provider, with non-navigational revenues growing
over the year by 25%. In the last quarter of the year, MapIT signed an exclusive
distribution agreement for sub-Saharan Africa with deCarta, a leading
independent enabler of location-based services.
The book logistics business performed well over the year, but was affected by
the loss of a major customer, Penguin Books, which consolidated its trade book
distribution into its in-house educational book distribution in February. Mega
Digital, our digital book-printing business, performed ahead of the prior year
on strong growth from the educational submissions business.
ENTERTAINMENT
The Entertainment business unit comprises Nu Metro (Films, Cinemas, Home
Entertainment and Popcorn Cinema Advertising), Gallo Music, Compact Disc
Technologies (CDT), Entertainment Logistics Services (ELS), Associated Musical
Distributors (AMD) and Collage Litho.
The business unit faced multiple challenges during the year. Retail businesses,
Home Entertainment and Gallo Music, tackled weaker content, price deflation,
format shifts and constrained consumer disposable income. In addition, the
rental store base reduced dramatically, with around 25% of South Africa`s video
stores closing down during the year. However, market share of the DVD business
showed slight growth in both revenue and units. Reduced retail volumes and unit
prices had a knock-on effect at the business unit`s manufacturing arm, CDT, and
at its logistics businesses, ELS and AMD.
Content feed through Nu Metro Films was fair in respect of theatrical successes,
such as Breaking Dawn, but hampered by the downturn in the home entertainment
market. Video-on-demand (VOD) revenues have started rising, partially
compensating for reduced DVD volumes. Nu Metro Cinemas had reasonable content,
particularly over key holiday periods. While attendance fell 10% year on year,
largely due to disposable income pressures, revenue benefited from the increased
number of 3D titles released and an improved confectionery product mix. The
Sunnypark cinema site in Tshwane was closed at a cost of R11 million after an
early termination of the lease and related asset write-offs. Popcorn Cinema
Advertising posted increased advertising and eventing revenues.
The business remodelling exercise planned for the second half to address costs
and restructure the business to better manage format declines and price
deflation was implemented, and key licenses were renewed.
CORPORATE
The corporate segment includes a R4 million credit from a group retirement fund
that is being wound down (2011: R23 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. A further charge of R6 million from the accelerated vesting of share
incentives held by the former group chief executive officer is included in the
share-based payments expense.
CHANGES IN DIRECTORATE
Since the announcement of Avusa`s interim financial results, Mesdames Alison
Gillwald and Amanda Jivhuho, and Messrs Ravi Naidoo and Tony Ruiters were
appointed as independent non-executive directors of the company on 1 January
2012. Mr Bryan Hopkins resigned as a non-executive director on 6 February 2012.
Mr Andrew Bonamour was appointed as a non-executive director on 12 March 2012.
EVENT AFTER THE REPORTING PERIOD
Earlier this month, Avusa received an offer by Mvelaphanda Group through its
wholly-owned subsidiary, Richtrau No. 229, to acquire the issued share capital
of Avusa not already held by Richtrau. Details of the offer were advised to
shareholders via a JSE SENS announcement on Tuesday 12 June 2012.
DIVIDEND
Consequent upon the abovementioned offer, no dividend has been declared by the
directors in respect of Avusa`s 2012 financial year.
OUTLOOK
Economic conditions during the year remained uncertain and challenging. Mindful
of the economic environment, Avusa implemented a number of interventions,
detailed above, to improve the group`s performance. Further growth and
efficiency initiatives, including restructurings, will continue to be
implemented in the new financial year to grow revenues, 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
19 June 2012
Condensed consolidated statement of comprehensive income
31 March 31 March
2012 2011
for the year ended Rm Rm
Revenue 5 963 5 310
Cost of sales (3 868) (3 354)
Gross profit 2 095 1 956
Operating expenses (1 822) (1 632)
Operating costs (1 620) (1 471)
Depreciation (125) (105)
Amortisation (58) (38)
Goodwill impairment (6) -
Share-based payments (13) (18)
Profit from operations 273 324
Net finance (costs) income (10) 3
Finance income 31 32
Finance costs (41) (29)
Share of profits of associates
(net of income tax) 3 5
Profit before taxation 266 332
Taxation (97) (115)
Income tax expense (79) (106)
Secondary tax on companies expense (18) (9)
Profit for the year 169 217
Other comprehensive income
Exchange differences on translation of
foreign operations 4 3
Other comprehensive income for the year
(net of income tax) 4 3
Total comprehensive income for the year 173 220
Profit attributable to:
Owners of the company 156 194
Non-controlling interest 13 23
Profit for the year 169 217
Total comprehensive income attributable to:
Owners of the company 160 197
Non-controlling interest 13 23
Total comprehensive income for the year 173 220
Earnings per ordinary share (cents)
Basic 126 176
Diluted 126 174
Condensed consolidated segmental statement
31 March 31 March
2012 2011
for the year ended Rm Rm
Revenue from external customers
Media 2 123 2 129
Retail Solutions 1 265 493
Books 1 514 1 489
Entertainment 1 061 1 199
5 963 5 310
Profit (loss) from operations
Media 103 153
Retail Solutions 163 89
Books 93 85
Entertainment (30) 33
329 360
Corporate (43) (18)
286 342
Share-based payments (13) (18)
273 324
Condensed consolidated statement of financial position
31 March 31 March
2012 2011
as at Rm Rm
ASSETS
Non-current assets 1 804 1 758
Property, plant and equipment 606 589
Intangible assets 974 1 003
Interests in associates 75 47
Deferred taxation assets 149 119
Current assets 2 370 2 341
Inventories, receivables and other
current assets 1 780 1 742
Bank balances, deposits and cash 590 599
Total assets 4 174 4 099
EQUITY AND LIABILITIES
Total equity 2 234 2 199
Equity attributable to owners of the company 2 132 2 077
Non-controlling interest 102 122
Non-current liabilities 648 628
Long-term borrowings 272 284
Post-retirement benefits liabilities 232 205
Operating leases equalisation liabilities 33 39
Deferred taxation liabilities 111 100
Current liabilities 1 292 1 272
Payables and other current liabilities 1 129 1 129
Short-term borrowings 66 73
Bank overdrafts 97 70
Total equity and liabilities 4 174 4 099
Condensed consolidated statement of cash flows
31 March 31 March
2012 2011
for the year ended Rm Rm
Net cash flows from operations 417 438
Net finance (costs) income (10) 8
Taxation paid (120) (116)
Net cash flows from operating activities 287 330
Net cash flows from investing activities (166) (444)
Net cash flows from financing activities (155) 140
Net (decrease) increase in cash and
cash equivalents (34) 26
Cash and cash equivalents at beginning
of the year 529 504
Foreign operations translation adjustment (2) (1)
Cash and cash equivalents at end of the year 493 529
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
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
Total
comprehensive
income for
the year 4 156 160 13 173
Equity-settled
share
incentive
plans (3) - (3) - (3)
Effect of
acquisitions
and disposals
of non-
controlling
interests (18) - (18) (2) (20)
Disposal of
call options
over Avusa
shares 21 - 21 - 21
Dividends
paid by
subsidiaries
to non-
controlling
interests - - - (31) (31)
Dividend paid - (105) (105) - (105)
Balance at
March
2012 1 571 (12) 573 2 132 102 2 234
Notes
1. Basis of preparation
The audited condensed consolidated group annual financial statements for the
year ended 31 March 2012 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, 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 the amended
statement of generally accepted accounting practice listed in Avusa`s 2011
integrated annual report with the effective date 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 amended statement of generally accepted
accounting practice and improvements project amendments had no effect on the
group`s financial results.
The preparation of these condensed consolidated group annual financial
statements for the year ended 31 March 2012 was supervised by Avusa`s chief
financial officer, Mr H Benatar CA(SA).
31 March 31 March
% 2012 2011
for the year ended change Rm Rm
2. Reconciliation between earnings
and headline earnings
Earnings (20) 156 194
Profit on disposal of property,
plant and equipment (26) -
Profit on sale of business (3) -
Loss on disposal of intangible assets 1 -
Goodwill impairment 6 -
Tax effect 3 -
Attributable to non-controlling
interest - -
Headline earnings (29) 137 194
Headline earnings per ordinary
share (cents)
Basic (37) 111 176
Diluted (36) 111 174
3. Shares in issue
Shares in issue at beginning
of the year 124 376 714 103 821 159
Shares issued during the year - 20 555 555
124 376 714 124 376 714
Less: Call options over Avusa shares - (1 142 084)
Adjusted shares in issue at end of
the year 124 376 714 123 234 630
Weighted average for the year 123 561 920 110 528 499
Weighted average for the year
(diluted) 123 602 384 111 514 637
The call options over Avusa shares had zero strike prices, and were 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 R156 million (2011:
R194 million) and headline earnings of R137 million (2011:
R194 million) respectively, and on a weighted average of
123 561 920 (2011: 110 528 499) ordinary shares in issue.
The calculation of diluted earnings and headline earnings per ordinary share is
based on earnings of R156 million (2011: R194 million) and headline earnings of
R137 million (2011: R194 million) respectively, and on a weighted average of 123
602 384 (2011: 111 514 637) diluted ordinary shares in issue.
31 March 31 March
2012 2011
as at Rm Rm
5. Contingent liabilities and operating
lease commitments
Contingent liabilities 1 1
Operating lease commitments 826 853
- due within one year 178 164
- due after one year 648 689
6. Capital expenditure commitments
Contracted but not provided for 2 14
Approved but not yet contracted for 1 150
3 164
7. 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 2012. Their
audit was conducted in accordance with International Standards on Auditing. 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. These condensed
group annual financial statements have been audited in compliance with any
applicable requirements of the Companies Act of South Africa. Any reference to
future financial performance included in this announcement has not been reviewed
or reported on by the company`s auditors.
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), AD Bonamour,
CB Cary, AN Gillwald, AZ Jivhuho, LM Machaba-Abiodun, HK Mehta,
R Naidoo, TRA Oliphant, AC Ruiters, 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
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 21/06/2012 07:05:02 Produced by the JSE SENS Department.
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