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AVI
AVI
AVI Limited - Interim Results for the six months ended 31 December 2006
and dividend declaration
AVI Limited
Reg no: 1944/017201/06
Share code: AVI
ISIN: ZAE000049433
("AVI")
INTERIM RESULTS
for the six months ended 31 December 2006
Key features
- Revenue from continuing operations up 15% to R3,3 billion;
- Operating profit from continuing operations up 41% to R408 million;
- Operating margin improved from 10,1% to 12,4%;
- Headline earnings per share from continuing operations up 36% to 82,8 cents
per share;
- Interim dividend up 50% at 30 cents per share
Condensed group balance sheets
Unaudited Unaudited Audited
At 31 At 31 At 30
December December June
2006 2005 2006
Rm Rm Rm
ASSETS
Non-current assets
Property, plant and 1 244,5 1 152,4 1 182,4
equipment
Intangible assets and 1 041,5 999,5 1 041,7
goodwill
Investments 249,2 245,5 263,0
Deferred tax asset 110,5 99,7 100,8
2 645,7 2 497,1 2 587,9
Current assets
Non-current assets 2,1 9,9 26,3
held for sale**
Inventories 635,6 530,3 578,2
Trade and other 1 115,8 1 053,1 883,2
receivables
Cash and cash 380,5 288,8 335,8
equivalents
2 134,0 1 882,1 1 823,5
Total assets 4 779,7 4 379,2 4 411,4
EQUITY AND
LIABILITIES
Capital and reserves
Attributable to 2 543,6 2 209,0 2 339,9
equity holders of AVI
Minority interests (14,3) (4,8) (8,5)
Total equity 2 529,3 2 204,2 2 331,4
Non-current
liabilities
Interest-bearing 207,7 426,7 192,8
borrowings
Deferred taxation 142,6 169,4 130,1
Provisions 298,9 275,2 277,7
649,2 871,3 600,6
Current liabilities
Trade and other 1 038,4 930,5 1 011,7
payables
Corporate taxation 61,9 80,8 56,2
Short-term borrowings 500,9 292,4 411,5
1 601,2 1 303,7 1 479,4
Total equity and 4 779,7 4 379,2 4 411,4
liabilities
Notes:
**Assets held for sale in the current period are the remaining assets of an
ancilliary subsidiary. The figure at 31 December 2005 represents the assets
of an ancilliary subsidiary. At 30 June 2006 assets held for sale included a
building sold in December 2006.
Condensed group income statements
Unaudited Unaudited Audited
Six Six Year
months months
ended ended ended
31 31 30 June
December December
2006 2005 Change 2006
Rm Rm % Rm
CONTINUING OPERATIONS
Revenue 3 299,3 2 868,2 15 5 406,6
Operating profit 407,9 289,7 41 517,3
before capital items
Income from 8,0 10,3 (22) 16,5
investments
Finance costs (27,4) (25,6) (7) (49,7)
Share of equity (10,8) 1,6 (12,3)
accounted earnings of
joint ventures
Capital items 46,4 (7,5) (10,9)
Profit before taxation 424,1 268,5 58 460,9
Taxation 128,6 89,4 (44) 143,1
Profit from continuing 295,5 179,1 65 317,8
operations
DISCONTINUED
OPERATIONS**
Revenue - 12,2 13,9
Operating - (2,1) (2,1)
profit/(loss)before
capital items
Capital items - 10,4 6,8
Profit before taxation - 8,3 4,7
Taxation - - -
Profit from - 8,3 4,7
discontinued
operations
Profit for the period 295,5 187,4 58 322,5
Attributable to:
Equity holders of AVI 299,7 189,0 59 327,6
Minority interests (4,2) (1,6) 163 (5,1)
295,5 187,4 58 322,5
Basic earnings per 95,5 57,9 65 103,4
share from continuing
operations (cents) #
Diluted earnings per 95,0 57,4 66 102,7
share from continuing
operations (cents) ^
Depreciation and 88,6 83,2 (6) 168,2
amortisation of
property, plant and
equipment, fishing
rights and trademarks
included in operating
profit
Notes:
** Discontinued operations in the prior year were the I&J Pelagic
operations, which were halted during the six months ended December 2005.
# Earnings per share is calculated on a weighted average of 313 649 284
(2005: 312 214 234 and 30 June 2006: 312 373 484) ordinary shares in issue.
^ Diluted earnings per share is calculated on a weighted average of 315 488
354 (2005: 314 687 152 and 30 June 2006: 314 331 770) ordinary shares in
issue.
Condensed group cash flow statements
Unaudited Unaudited Audited
Six Six Year
months months
ended ended ended
31 31 30 June
December December
2006 2005 Change 2006
Rm Rm % Rm
CONTINUING OPERATIONS
Operating activities
Cash generated by 557,5 371,2 50 660,2
operations before
working capital
changes
Cash flow from 8,3 10,3 (19) 17,0
investments
Increase in working (273,9) (239,8) 14 (36,5)
capital*
Cash generated by 291,9 141,7 106 640,7
operations
Interest paid (27,8) (15,7) 77 (29,7)
Taxation paid (120,5) (82,8) 46 (186,4)
Cash (utilised 143,6 43,2 232 424,6
by)/available from
operating activities
Dividends paid (105,4) (115,7) (9) (179,2)
Cashflows from 38,2 (72,5) 153 245,4
operating activities
INVESTING ACTIVITIES
Property, plant and (143,6) (97,4) 47 (215,1)
equipment acquired
Proceeds from 72,2 2,1 4,9
disposals
Net investment in (71,4) (95,3) (25) (210,2)
property, plant and
equipment
Intangible assets - (1,6) (19,2)
purchased
Investments - net (347,4) (246,6) 41 (230,6)
acquisitions - see
note 5
(418,8) (343,5) 22 (460,0)
FINANCING ACTIVITIES
Proceeds on issue or 7,6 5,1 49 10,1
disposal of shares
Long-term borrowings - (12,5) 5,1 (345) 54,2
net movement
(4,9) 10,2 (148) 64,3
DISCONTINUED
OPERATIONS**
Cash flows from - 4,2 4,2
operating activities*
Cash flows from - 33,1 33,1
investing activities
- 37,3 37,3
Decrease in net cash (385,5) (368,5) 5 (113,0)
and cash equivalents
Net cash and cash 264,3 370,2 (29) 370,2
equivalents at
beginning of period
(121,2) 1,7 257,2
Translation of cash 0,8 (5,3) (115) 7,1
equivalents of foreign
subsidiaries at
beginning of year
Net cash and cash (120,4) (3,6) 264,3
equivalents at end of
period
Short-term borrowings 500,9 292,4 71 71,5
Cash and cash 380,5 288,8 32 335,8
equivalents at end of
period
Notes:
* Comparative six months to December 2005 has been adjusted to exclude
intercompany cashflows amounting to R54 million
** Discontinued operations in the prior year were the I&J Pelagic operations,
which were halted during the six months ended December 2005.
Condensed group statements of changes in equity
for the six months ended 31 December
Share
capital Treasury Retained
and
premium shares Reserves earnings
Rm Rm Rm Rm
Six months ended 31
December 2006
Balance at 1 July 20,5 (40,8) (13,2) 2,376,1
2006
Profit for the 299,7
period
Foreign currency (0,1)
translation
differences
Cash flow hedging (0,6)
reserve
Share based payments 1,3
Dividends paid (103,8)
Disposal of own 7,2
ordinary shares by
AVI Incentive Share
Trusts (net)
Balance at 31 20,5 (33,6) (12,6) 2 572,0
December 2006
Six months ended 31
December 2005
Balance at 1 July 15,9 (51,7) (22,3) 2 227,2
2005
Profit for the 189,0
period
Foreign currency (41,2)
translation
differences
Cash flow hedging 1,4
reserve
Share based payments 3,3
Dividends paid* (115,4)
Issue of ordinary 2,6 (2,6)
shares*
Disposal of own 5,5
ordinary shares by
AVI Incentive Share
Trusts (net) *
Balance at 31 18,5 (48,8) (58,8) 2 300,8
December 2005
Premium on
minority
equity Minority Total
transactions Total interests equity
Rm Rm Rm Rm
Six months ended
31 December 2006
Balance at 1 July (2,7) 2 339,9 (8,5) 2 331,4
2006
Profit for the 299,7 (4,2) 295,5
period
Foreign currency (0,1) (0,1)
translation
differences
Cash flow hedging (0,6) (0,6)
reserve
Share based 1,3 1,3
payments
Dividends paid (103,8) (1,6) (105,4)
Disposal of own 7,2 7,2
ordinary shares by
AVI Incentive
Share Trusts (net)
Balance at 31 (2,7) 2 543,6 (14,3) 2 529,3
December 2006
Six months ended
31 December 2005
Balance at 1 July (2,7) 2 166,4 (2,9) 2 163,5
2005
Profit for the 189,0 (1,6) 187,4
period
Foreign currency (41,2) (41,2)
translation
differences
Cash flow hedging 1,4 1,4
reserve
Share based 3,3 3,3
payments
Dividends paid* (115,4) (0,3) (115,7)
Issue of ordinary - -
shares*
Disposal of own 5,5 5,5
ordinary shares by
AVI Incentive
Share Trusts
(net)*
Balance at 31 (2,7) 2 209,0 (4,8) 2 204,2
December 2005
Notes:
* Minority equity transaction in comparative disclosure reclassified as
treasury shares and minority dividends
Share
capital Treasury Retained
and
premium shares Reserves earnings
Rm Rm Rm Rm
Year ended 30 June
2006
Balance at 1 July 15,9 (51,7) (22,3) 2 227,2
2005
Profit for the year 327,6
Foreign currency 32,6
translation
differences
Cash flow hedging (28,0)
reserve
Share based payments 4,5
Dividends paid (178,7)
Issue of ordinary 4,7 (4,7)
shares
Disposal of own 15,6
ordinary shares by
AVI Incentive Share
Trusts (net)
Redemption of (0,1)
convertible
redeemable
preference shares
Balance at 30 June 20,5 (40,8) (13,2) 2 376,1
2006
Premium on
minority
equity Minority Total
transactions Total interests equity
Rm Rm Rm Rm
Year ended 30 June
2006
Balance at 1 July (2,7) 2 166,4 (2,9) 2 163,5
2005
Profit for the 327,6 (5,1) 322,5
year
Foreign currency 32,6 32,6
translation
differences
Cash flow hedging (28,0) (28,0)
reserve
Share based 4,5 4,5
payments
Dividends paid (178,7) (0,5) (179,2)
Issue of ordinary - -
shares
Disposal of own 15,6 15,6
ordinary shares by
AVI Incentive
Share Trusts (net)
Redemption of (0,1) (0,1)
convertible
redeemable
preference shares
Balance at 30 June (2,7) 2 339,9 (8,5) 2 331,4
2006
Supplementary notes to the consolidated interim financial statements
for the six months ended 31 December 2006
AVI Limited (the "Company") is a South African registered company. The
condensed consolidated financial statements of the Company comprise the
Company and its subsidiaries (together referred to as the "Group") and the
Group`s interest in associates and jointly controlled entities.
1. Statement of compliance
The condensed consolidated interim financial statements have been prepared in
accordance with IAS34 - Interim Financial Reporting and the Listing
requirements of the JSE Limited. These financial statements have not been
reviewed or audited by the group`s auditors.
2. Basis of preparation
The financial statements are prepared in millions of South African Rands
("Rm") on the historical cost basis, except for certain financial and equity
instruments recognised at fair value.
The accounting policies are those presented in the annual financial
statements for the year ended 30 June 2006 and have been applied consistently
to the periods presented in these condensed consolidated financial statements
and by all Group entities.
In the year ended 30 June 2006 the Group adopted SAICA Circular 9/2006 -
Transactions giving rise to adjustments to revenue/purchases. In order to
present the six months to December 2005 on a consistent basis the following
restatements have been made:
Six
months
ended
31
December
2005
Rm
Decrease in revenue 22,3
Decrease in selling and administration 22,3
expenses
Unaudited Unaudited Audited
Six Six Year
months months
ended ended ended
31 31 30 June
December December
2006 2005 Change 2006
Rm Rm % Rm
3. Determination of
headline earnings
Profit for the period 299,7 189,0 59 327,6
attributable to
equity holders of AVI
Total capital items 40,0 1,2 (5,3)
included in earnings
Net surplus/(deficit) 46,4 3,2 2,2
on disposal of
investments,
properties, vessels
and plant and
equipment
Impairment of plant - - (7,5)
and equipment in
joint venture
Impairment of fishing - (6,3) (6,3)
rights
Taxation attributable (6,4) 4,3 6,3
to capital items
Minority interest in - - -
capital items
Headline earnings 259,7 187,8 38 332,9
Attributable to:
Continuing operations 259,7 189,9 37 335,0
Discontinued - (2,1) (2,1)
operations
259,7 187,8 38 332,9
Headline earnings per 82,8 60,1 38 106,5
ordinary share
(cents)
Continuing operations 82,8 60,8 36 107,2
(cents)
Discontinued - (0,7) (0,7)
operations (cents)
Diluted headline 82,3 59,6 38 105,9
earnings per ordinary
share (cents)
Continuing operations 82,3 60,3 36 106,6
(cents)
Discontinued - (0,7) (0,7)
operations (cents)
4. Segmental results*
CONTINUING OPERATIONS
SEGMENTAL REVENUE
Retail beverage 687,4 622,4 10 1
brands 238,3
Retail snacking 757,6 705,4 7 1
brands 288,9
Chilled and frozen 1 085,4 900,0 21 1
convenience brands 687,2
Out of home 174,2 147,6 18 288,4
Fashion brands 584,8 477,0 23 871,4
Corporate 9,9 15,8 32,4
GROUP 3 299,3 2 868,2 15 5
406,6
SEGMENTAL OPERATING
PROFIT BEFORE CAPITAL
ITEMS
Retail beverage 80,7 66,5 21 147,2
brands
Retail snacking 96,9 89,1 9 127,0
brands
Chilled and frozen 81,2 23,7 243 27,3
convenience brands
Out of home 30,5 23,0 33 42,5
Fashion brands 131,0 96,4 36 165,6
Corporate (12,4) (9,0) 7,7
GROUP 407,9 289,7 41 517,3
* As detailed in the annual report for the year ended 30
June 2006, a new operating structure has been implemented
and the segments have been recategorised to reflect the new
structure of the group in accordance with IAS 14 - Segment
Reporting
5. Investment activity
During July 2006 the acquisition of the remaining 40% of the shares of Spitz
by AVI Limited was concluded, and the deferred purchase consideration of R340
million raised in the prior year was settled. The business was considered a
wholly owned subsidiary from 2 July 2005 in terms of IFRS3 - Business
Combinations and no minorities were recognised.
There were no other significant changes to investments in the year to date.
6. Commitments
Six months Six months Year
ended ended ended
31 31 30
December December June
2006 2005 2006
Rm Rm Rm
Capital expenditure 67,5 114,8 94,1
commitments for
property, plant and
equipment
Contracted for 45,8 71,3 55,7
Authorised but not 21,7 43,5 38,4
contracted for
It is anticipated that this expenditure will be financed by cash resources,
cash generated from activities and existing borrowing facilities. Other
contractual commitments have been entered into in the normal course of
business.
7. Contingent liabilities
The South African Revenue Service ("SARS") has issued revised assessments on
a foreign subsidiary for taxes plus penalties and interest in respect of the
tax years previously assessed, 1998 through 2003. The additional taxes
assessed by SARS amount to R49,4 million. The total amount in terms of the
assessments, including penalties and interest, is R208,2 million. Were
assessments to be issued for the 2004 to 2006 tax years on the same basis
applied in the assessments received, the total amount of additional tax
payable in respect of these years would be R26,2 million, excluding penalties
and interest.
The company filed a notice of appeal against the 1998 to 2003 assessments on
11 April 2005, and SARS provided the statement of grounds assessment on 10
August 2006. The company has commenced preparation of its statement of
grounds of appeal, which will be submitted to SARS by the end of March 2007.
The issues in dispute are of a complex nature and it is anticipated that the
matter will remain unresolved for an extended period.
8. The AVI Staff Black Economic Empowerment transaction
The shareholders have approved a transaction whereby approximately 7,7% of
AVI`s issued share capital (8,5% of the issued share capital before the
issue) will be subscribed for by a broad base of the AVI Group`s current and
future black employees. The ownership of the AVI shares by the employees
will be facilitated through the creation of a Black Staff Empowerment Trust.
The board considers the introduction of black ownership into AVI as a further
demonstration of its commitment to BEE. The Empowerment Scheme will ensure a
wide distribution of benefits to the AVI Group`s black employees and enhance
AVI`s ability and commitment to attract, retain and incentivise talented
black employees. The financial effects of the transaction are disclosed in
the circular to shareholders dated 28 September 2006. It is expected that
the scheme will be fully implemented by 31 March 2007.
9. Dividend declaration
Notice is hereby given that an interim ordinary dividend No 65 of 30 cents
per share for the half year ended 31 December 2006 has been declared payable
to shareholders of ordinary shares. The salient dates relating to the payment
of the dividend are as follows:
Last day to trade cum dividend on Thursday, 29 March 2007
the JSE Limited ("JSE")
First trading day ex dividend on the Friday, 30 March 2007
JSE
Record date Thursday, 5 April 2007
Payment date Tuesday, 10 April 2007
In accordance with the requirements of STRATE, no share certificates may be
dematerialised or rematerialised between Friday, 30 March 2007 and Thursday,
5 April 2007, both days inclusive.
Dividends in respect of certificated shareholders will be transferred
electronically to shareholders` bank accounts on payment date. In the absence
of specific mandates, dividend cheques will be posted to shareholders.
Shareholders who hold dematerialised shares will have their accounts at their
Central Securities Depository Participant ("CSDP") or broker credited on
Tuesday, 10 April 2007.
Group overview
A substantially improved financial performance from Irvin & Johnson Limited
("I&J") and continued growth from A&D Spitz (Pty) Limited ("Spitz") were
augmented by generally sound performances from the other business units.
Headline earnings from continuing operations rose by 36,8% to R259,7 million
while headline earnings per share increased by 36,2% to 82,8 cents. An
interim dividend of 30 cents per share (2005: 20 cents per share) has been
declared.
Consumer demand remained strong and the Group was able to realise selling
price increases in most categories in response to cost pressures in respect
of raw materials and packaging. The strong recovery in I&J`s performance,
combined with leverage from volume growth across the rest of the Group, led
to an improvement in operating margin from 10,1% to 12,4%.
Good progress has been made in the implementation of AVI`s revised operating
structure and the new business structures and management teams are in place.
In addition the consolidation of the company`s shared and service structures
has proceeded well, particularly with regard to debtors, creditors and
payroll across the business units.
Group financial results
Revenue from continuing operations rose by 15,0% from R2 868,2 million in
2005 to R3 299,3 million in 2006 as a result of sales volumes growth in most
categories and higher selling prices. Higher shrimp sales volumes arising
from improved shrimp fishing in Argentina contributed an additional R82
million.
Operating profit rose by 40,8%, from R289,7 million to R407,9 million. All
business units contributed to the increase, with the largest increases
achieved at I&J and Spitz which contributed R59,1 million and R31,0 million
of the increase respectively.
Net financing costs increased from R15,3 million in 2005 to R19,4 million
mainly as a result of higher interest rates.
AVI`s interests in joint ventures realised a net loss of R10,9 million
principally due to the ongoing poor performance of I&J`s Australian fish
processing joint venture with Simplot (Australia) Pty Limited ("Simplot"). A
large scale automation project at this operation which was commissioned in
the second half of the previous financial year continues to deliver
efficiencies well below Simplot`s initial projections.
The improved operating profit, offset by higher net financing costs and the
net loss from joint ventures, led to a 36,8% increase in headline earnings to
R259,7 million.
The capital items for continuing operations of R40,0 million after tax
largely comprise a profit on the sale of I&J`s former head office in Cape
Town.
Continuing operations generated cash of R557,5 million, 50% higher than in
2005. Cash and cash equivalents decreased by R385,5 million over the period,
largely due to the seasonal investment in working capital that is a
characteristic of AVI`s first half cash flows and the final payment for the
Spitz acquisition of R340,0 million. Other material cash outflows during the
period were capital expenditure of R143,6 million, taxation of R120,5 million
and dividends of R105,4 million. These were partially offset by proceeds from
asset disposals of R72,2 million.
Segmental review - continuing operations
Six months ended 31 December
Segmental revenue Segmental operating
profit
2006 2005 Change 2006 2005 Change
Rm Rm % Rm Rm %
Retail 687,4 622,4 10,4 80,7 66,5 21,3
beverage
brands
Retail 757,6 705,4 7,4 96,9 89,1 8,7
snacking
brands
Chilled and 1 085,4 900,0 20,6 81,2 23,7 242,6
frozen
convenience
brands
Out of home 174,2 147,6 18,0 30,5 23,0 32,6
Fashion 584,8 477,0 22,6 131,0 96,4 35,9
brands
Corporate 9,9 15,8 (12,4) (9,0)
Group 3 299,3 2 15,0 407,9 289,7 40,8
868,2
Retail Beverage Brands
The Retail Beverage Brands business unit comprises the group`s hot beverage
brands (tea, coffee and creamer) and the short-life juice brands of the Real
Beverage Company (Pty) Ltd ("RBC"). Revenue growth of 10,4% was achieved on
the back of higher volumes and price increases in all categories, while
operating profit increased by 21,3%. The operating profit improvement is a
result of much improved performances from the coffee and creamer category.
Rising black tea purchase prices and high production and distribution costs
constrained the operating profit performance of the tea and juice categories
respectively.
The combined RBC operation recorded strong revenue growth of 25% supported by
an enhanced product range and improved service levels. Operating profit
performance remained hampered by an inefficient distribution model which,
combined with raw and packing material price increases, resulted in an
operating loss of R9,7 million compared to an R8,8 million loss in 2005. This
business is receiving high focus to address these operational issues.
Retail Snacking Brands
The Retail Snacking Brands business unit comprises the company`s biscuit,
potato and maize extruded snack brands. Revenue grew by 7,4% driven
materially by biscuit volume growth and a strong improvement in potato and
maize snack volumes, while operating profit increased by 8,7%. Operating
efficiencies in the biscuit factories were below standard as a result of
capacity constraints related to record Christmas demand and commissioning
problems on a newly installed line at the Westmead biscuit facility. A very
successful potato crisp promotion over the holiday season resulted in an
increase in the potato and maize snacks` operating profit, despite the loss
of the Stimorol Gum agency business in the prior period.
Chilled and Frozen Convenience Brands
Chilled and Frozen Convenience Brands include I&J and Denny Mushrooms (Pty)
Limited ("Denny"). Revenue increased by 20,6% and operating profit more than
doubled. The increase in both revenue and operating profit is attributable to
I&J, which benefited from excellent shrimp fishing in Argentina and an
average increase in realisations across key sea-food product categories. The
realised prices reflect a more optimised sales mix as well as price increases
in the domestic market and the benefit of more favourable exchange rates.
Hake fishing performance remained strong in Argentina and improved slightly
in South Africa towards the end of the calendar year. Significant focus on
the operational efficiency of I&J continued during the period with the focus
on trawling and processing operations yielding benefits. Initial gains were
partially offset by deliberate investments in additional repair and
maintenance costs in the trawling operations as part of a programme to
improve the availability and performance of vessels and the ongoing impact of
smaller size fish which required higher processing activity.
Denny`s performance was affected by disappointing production yields which
resulted in a 15% decrease in production volumes and constrained revenue
growth. Management changes have been made to resolve the poor production
performance experienced. Whilst the Denny performance was disappointing,
market demand remained sound with improved selling prices of both fresh and
canned product partially off-setting the decline in production volumes.
Out of Home
The Out of Home business unit comprises the Ciro Alliances operation and the
out of home juice component of RBC. Revenue increased by 18,0% driven by good
volume growth in Ciro Alliances` core coffee solutions business and increased
out of home juice volumes. Operating profit increased by 32,6%.
Fashion Brands
The Fashion Brands business unit comprises Spitz and Indigo Cosmetics (Pty)
Limited ("Indigo"). Spitz continued to benefit from strong demand with volume
driven revenue growth of 38,5% yielding an increase of 44,7% in operating
profit. Same store revenue growth of 26% was achieved while the six new
stores opened during the period January to December 2006 accounted for the
balance of the growth.
Indigo`s revenue increased by 9,3%, primarily due to strong volume growth
across all categories, while operating profit increased by 13,4%. Increased
focus on the domestic market and successful new product launches underpinned
performance for the period.
Dividends
An interim dividend of 30 cents per share (2005: 20 cents per share) has been
declared.
Black Economic Empowerment
The AVI Black Staff Empowerment Scheme was approved by shareholders in
October 2006 and is being implemented during March 2007 following an
extensive staff communication programme. This scheme will place R411 million
of share purchase rights into the hands of approximately 5 200 employees,
enabling them to participate in the capital growth of the shares over the
next five years. The scheme seeks to be as broad based as possible with
meaningful allocations to all levels of employee.
Other key transformation initiatives, including employment equity, executive
succession, skills development and preferential procurement are receiving
high focus to consolidate the various initiatives across the Group into more
unitary and effective processes in line with the new operating structures.
Outlook
Notwithstanding early indications that the rate of growth of consumer demand
is abating, a generally positive business environment is expected for the
balance of the financial year. While cost pressures are anticipated to
continue through the second semester, the strength of our brands should
underpin our ability to sustain margins. Moreover the new operating structure
enhances AVI`s ability to continue improving operational effectiveness in
underperforming areas.
Continued improvement in I&J`s financial results is partially dependent on
exogenous factors, most notably the performance of the fisheries in South
Africa and Argentina, which at the time of this report show no material
change compared to the first semester. Assuming this continues, the improved
financial performance of I&J should be maintained in the second semester.
Whilst the traditional bias of AVI`s financial performance is to the first
semester, the potential for enduring recovery at I&J, sustained consumer
demand and the maturing benefits of the company`s new operating structure
should underpin earnings growth for the full year.
Angus Band Simon Crutchley
Chairman CEO
12 March 2007
19 Impala Road, Chislehurston, Johannesburg, South Africa
PO Box 1897, Saxonwold 2132, South Africa
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www.avi.co.za
Date: 12/03/2007 08:42:13 Produced by the JSE SENS Department.
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