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AVI - AVI Limited - Interim Results for the six months ended 31 December 2011

Release Date: 12/03/2012 07:05
Code(s): AVI
Wrap Text

AVI - AVI Limited - Interim Results for the six months ended 31 December 2011 AVI Limited ISIN: ZAE000049433 Share code: AVI Registration number: 1944/017201/06 ("AVI" or "the Group" or "the Company") Interim Results for the six months ended 31 December 2011 Key features Revenue from continuing operations up 9% to R4,49 billion Operating profit from continuing operations up 27% to R855 million Headline earnings per share from continuing operations up 32% to 194 cents I&J result underpinned by weaker rand and improving operational performance Strong Fashion Brands profit growth from increased volumes and improved gross margins Sound overall Food & Beverage Brands performance in a competitive environment High project activity in the semester Annual dividend cover reduced from 2,0 to 1,5 Group overview AVI has delivered strong results for a semester characterised by constrained consumer demand, strong competition and high capital project activity within the group. I&J benefited materially from the weaker rand during the half, supported by good performance from its catching and processing operations. The Fashion Brands businesses, Spitz and Indigo, achieved solid volume growth and also realised strong gross profit margins supported by favourable mix changes and import exchange rates that were secured before the rand weakened during the semester. Snackworks achieved a satisfactory improvement in results underpinned by stable and improving manufacturing performance and regained volume momentum in the biscuits category by re-aligning price points with consumer expectations. Entyce had a difficult semester with high raw material prices leading to margin pressure in coffee, creamer and rooibos tea which was exacerbated by poor creamer service levels in the second quarter. Coffee and Creamer revenue was slightly below last year, despite higher prices, due to lower sales volumes in the absence of the competitor supply problems that occurred in the first half of last year. Revenue from continuing operations rose by 8,6%, from R4,14 billion to R4,49 billion due to selling price increases in most categories, stronger export revenue in I&J due to the weaker rand and volume growth in Spitz, Indigo and Tea. Gross profit rose by 10,7% to R2,08 billion with the consolidated gross profit margin increasing from 45,4% to 46,3% due to strong improvements at I&J, Spitz and Indigo. Entyce and Snackworks experienced some gross margin pressure in the semester resulting from increases in raw and wrapping material costs that were not fully recovered by price increases given the constrained consumer environment and competitive pressures. Operating profit increased by 26,8%, from R674,2 million to R855,0 million due to the higher gross profit margins and a constrained increase in selling and administration costs, which rose by 1,7% compared to the first half of last year due mainly to I&J recording material foreign exchange gains compared to losses in the first half of last year. Headline earnings rose by 29,1%, from R446,5 million to R576,3 million due to the higher operating profit, lower net finance costs and higher earnings from I&J`s joint venture with Simplot in Australia, which benefited from the strong Australian currency. Headline earnings per share from continuing operations increased 31,5% from 147,8 cents to 194,4 cents with less shares in issue following the re-purchase of 9,0 million shares in June 2011. Cash generated by operations remained strong, increasing by 1,7% to R765,7 million after working capital changes. Working capital increased by R152,7 million compared to R22,3 million in the first half of last year reflecting relative timing differences on purchases and creditor payments close to the end of the period as well as higher stock levels in parts of the group. Capital expenditure increased to R290,9 million with material expenditure on the major projects to improve capacity, technology and efficiency. Other material cash out-flows during the period were dividends of R221,5 million and taxation of R205,8 million. Net cash at the end of December 2011 was R50,6 million compared to net debt of R246,2 million at the end of June 2011. On the project front, Indigo`s new aerosol plant, the packaging automation at Isando biscuits and Entyce`s new creamer tower and coffee granulation plant were all successfully commissioned during the semester with benefits expected to accrue more materially during the second half of the financial year as performance is optimised at normal production levels. In addition the expansion of the Isando distribution centre was successfully completed and the SAP implementation at Entyce and Snackworks has progressed well with minimal disruption to sales volumes. The board has approved a change in AVI`s annual dividend payout ratio from 2,0 to 1,5 times covered by diluted headline earnings from continuing operations. An interim dividend in line with this new policy will be considered by the board in April 2012 and will be subject to the new dividend withholding tax. The AVI Black Staff Empowerment Share Scheme reached its first normal vesting date on 31 December 2011. AVI`s strong share price performance since these shares were allocated in January 2007 has resulted in a total gain of R68 million accruing to 2 509 black employees at all levels across the group. Segmental review - continuing operations Six months ended 31 December Segmental revenue Segmental operating profit 2011 Restated* % 2011 Restated %
Rm 2010 change Rm * change Rm 2010 Rm Food and beverage 3 341,1 3 101,5 7,7 549,9 442,3 24,3 brands Entyce 1 301,7 1 246,4 4,4 245,9 258,8 (5,0) Snackworks 1 290,3 1 185,6 8,8 203,2 180,5 12,6 Chilled and frozen 749,1 669,5 11,9 100,8 3,0 3 260,0 convenience brands Fashion brands 1 148,5 1 030,7 11,4 316,9 237,4 33,5 Personal care 487,5 470,3 3,7 85,9 67,3 27,6 Footwear and 661,0 560,4 18,0 231,0 170,1 35,8 apparel Corporate 3,2 3,3 (11,8) (5,5) Group 4 492,8 4 135,5 8,6 855,0 674,2 26,8 * = restated to exclude Denny Mushrooms now shown as a discontinued operation. Entyce Revenue increased 4,4% to R1,30 billion while operating profit decreased by 5,0% from R258,8 million to R245,9 million with the operating profit margin at 18,9% compared to 20,8% in the prior period. Growth in revenue came primarily from higher selling prices on tea, coffee and creamer in response to increased raw and wrapping material costs. Tea volumes were 8,4% higher than last year due to effective promotional activity and tactical pricing, however coffee and creamer sales volumes declined without the additional demand that arose from competitor supply problems in the first half of last year. Creamer volumes were also impacted by low service levels caused by production planning problems in the last few months of the period. Gross profit margins decreased with higher raw and wrapping material costs not fully recovered given the constrained consumer environment and competitive pressures, and also due to the lower coffee and creamer sales volumes. However selling and administration costs were well controlled which ameliorated the decrease in operating profit. Profit margins in absolute terms remain at strong levels and Entyce is expecting to benefit from improved volumes in the second half of the year following the commissioning of the new creamer tower and coffee agglomeration plant in its Isando factory. Snackworks Revenue of R1,29 billion was 8,8% higher than last year while operating profit rose by 12,6%, from R180,5 million to R203,2 million. The operating profit margin increased from 15,2% to 15,7%. The increase in revenue is largely attributable to higher selling prices, supported by a 1,4% growth in biscuits sales volumes. Biscuit selling prices were higher following the increases implemented in the previous financial year, despite the re-alignment of price points for key products with consumer expectations. Factory performance improved during the period with greater stability, better product yields and consistency and more effective management of labour costs all contributing to the overall Snackworks result. A shortage of liquid petroleum gas in October and November disrupted output from the Westmead factory, resulting in the loss of approximately 550 tons of production and R8 million of operating profit in the period. The Snacks business benefitted from better price points in the category as well as tight control of selling and administrative costs, resulting in a slight improvement in operating profit despite lower volumes attributable to temporary delistings during price negotiations with customers. The packaging automation project at Isando biscuits was successfully commissioned and will now be extended to cover all lines in the factory. New projects amounting to R65,1 million that will improve capacity and yields in the Westmead factory were approved during the semester. Chilled and Frozen Convenience Brands (I & J excluding Alpesca) Revenue increased by 11,9% from R669,5 million to R749,1 million while operating profit rose from R3,0 million to R100,8 million. The operating profit margin increased from 0,5% to 13,5%. The weaker rand caused a material increase in export revenue compared to the first half of last year. While export volumes increased with the benefit of increased quota, prices remained under pressure with reduced demand from customers and increased supply from other fish resources. Domestic market volumes were slightly higher than last year when I&J`s centenary celebrations drove significant promotional activity, however prices have improved during the semester. Catch rates for the six months remained high which together with improved fishing and factory performance, tight cost control and the benefit of foreign exchange gains, compared to losses last year, yielded a material improvement in operating profit. The hake Total Allowable Catch for the year ending 31 December 2012 was increased by 9,8%, with I&J`s quota increasing proportionally. Fashion Brands (personal care, footwear and apparel) Revenue rose by 11,4% to R1,15 billion and operating profit increased by 33,5%, from R237,4 million to R316,9 million with the operating profit margin increasing from 23,0% to 27,6%. In the personal care category, Indigo`s revenue grew by 3,7% to R487,5 million while operating profit increased 27,6% to R85,9 million. The operating profit margin for the period improved from 14,3% to 17,6%. Revenue growth is largely attributable to higher sales volumes with Indigo maintaining its strong position in aerosols and achieving good growth in Yardley colour cosmetics. Profit margin benefitted from lower input costs due to the stronger rand, higher volumes and tightly controlled selling and administrative costs. In the footwear and apparel category, Spitz`s revenue increased by 18,0%, and operating profit increased by 35,8% from R170,1 million to R231,0 million. The operating profit margin increased from 30,3% to 34,9%. The improvement is largely attributable to strong sales volume growth and higher gross profit margins in Spitz resulting from higher selling prices on core ranges, an improved sales mix and the stronger rand. Footwear sales volumes in Spitz increased by 10,3% with the core Carvela, Lacoste, and Kurt Geiger brands performing well. The expansion of the mono branded Kurt Geiger men`s clothing stores has progressed well, with seven new stores opened during the six months, bringing the total to 22 stores out of the total of 25 stores planned by the end of the 2012 financial year. DISCONTINUED OPERATIONS (ALPESCA AND DENNY) Six months ended 31 December Segmental Segmental Capital items revenue operating
profit 2011 Restated* 2011 Restated* 2011 Restated* Rm 2010 Rm 2010 Rm 2010 Rm Rm Rm
Alpesca - 227,2 - (9,5) - 0,3 Denny - 187,6 - 21,0 27,3 - - 414,8 - 11,5 27,3 0,3 * = restated to include Denny Mushrooms now shown as a discontinued operation. I&J concluded the sale of Alpesca in May 2011. Denny was sold with effect from 1 July 2011 resulting in a capital profit of R27,3 million before capital gains taxation of R10,3 million. The comparative numbers for the six months ended 31 December 2010 have been restated to reflect Denny as a discontinued operation. DIVIDENDS The board has reviewed AVI`s dividend policy given the group`s strong cash generating capability which has been enhanced by the growth of the footwear business over the last few years. It has resolved to change the annual dividend pay-out ratio from 2,0 to 1,5 times covered by diluted headline earnings from continuing operations. After the increase in dividends the group will retain ample capacity to fund acquisitions that may arise. The board remains committed to returning excess cash generated to shareholders and the company will continue with its practice of periodically paying additional dividends or buying back shares where appropriate. An interim dividend in line with this new policy will be considered by the board in April 2012 and will be subject to the new dividend withholding tax. The change in dividend cover will also compensate shareholders for any dividend withholding tax that they may be liable for after 1 April 2012. OUTLOOK AVI believes that consumer demand will remain restrained in the second half of the financial year. However the group has good levels of forward exchange cover in place to limit the cost of imports and some commodity costs have started to soften, both of which will allow more leeway to manage the balance between price, volume and profitability with the flexibility that constrained trading environments require. The projects commissioned in the last year have improved our ability to compete in terms of capacity, quality and cost efficiency and further projects are in progress. In addition we continue to work on various initiatives that should deliver organic growth over time. These include local and regional market opportunities, factory improvements and on-going development of shared and support services. At current exchange rates, I&J`s performance in the second half is likely to be reasonably in line with the second half of last year and consequently it is unlikely that the rate of earnings growth in the second half of the financial year will be as high as in the first half. The board is confident that AVI is well positioned to continue pursuing growth from the current brand portfolio while remaining vigilant for brand acquisition opportunities both domestically and regionally. The above outlook statements have not been reviewed or reported on by AVI`s auditors. Angus Band Simon Crutchley Chairman CEO 12 March 2012 CONDENSED GROUP BALANCE SHEETS Unaudited at 31 Audited December at 30 June
2011 2010 2011 Rm Rm Rm Assets Non-current assets Property, plant and equipment 1 640,8 1 375,6 1 459,5 Intangible assets and goodwill 757,3 903,3 759,4 Investments 325,2 326,5 310,0 Deferred taxation 44,7 54,9 66,1 2 768,0 2 660,3 2 595,0 Current assets Inventories and biological assets 917,5 865,9 943,1 Trade and other receivables including derivatives 1 288,1 1 261,4 1 116,9 Cash and cash equivalents 293,5 479,3 380,1 Assets of discontinued operations classified as - 227,5 344,3 held-for-sale* Other assets classified as held-for-sale** 3,2 3,7 3,8 2 502,3 2 837,8 2 788,2 Total assets 5 270,3 5 498,1 5 383,2 Equity and liabilities Capital and reserves Attributable to equity holders of AVI 3 408,0 2 980,6 2 918,9 Non-controlling interests (19,6) (21,8) (19,8) Total equity 3 388,4 2 958,8 2 899,1 Non-current liabilities Financial liabilities, borrowings and operating 51,4 61,1 55,8 lease straight-line liabilities Employee benefits 297,3 313,1 286,7 Deferred taxation 102,2 108,5 76,2 450,9 482,7 418,7 Current liabilities Current borrowings 203,7 619,5 583,0 Trade and other payables including derivatives 1 171,8 1 239,9 1 279,1 Share buy-back liability - - 100,7 Corporate taxation 55,5 76,8 16,6 Liabilities of discontinued operations classified - 120,4 86,0 as held-for-sale* 1 431,0 2 056,6 2 065,4 Total equity and liabilities 5 270,3 5 498,1 5 383,2 * Discontinued operations at 31 December 2010 comprise the Argentinian hake and shrimp operations conducted by Alpesca, a wholly owned subsidiary of I&J, that was sold in May 2011. At 30 June 2011, discontinued operations comprise the fresh, canned and value-added mushroom business conducted by Denny, which was disposed of with effect from 1 July 2011. ** Other assets held-for-sale comprise equipment and properties held for disposal. CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME Unaudited six Audited months ended 31 year
December ended 30 June Restated % 2011 2011 2010 change Rm
Rm Rm Continuing operations Revenue 4 492,8 4 135,5 9 7 686,3 Cost of sales 2 412,6 2 256,9 7 4 234,1 Gross profit 2 080,2 1 878,6 11 3 452,2 Selling and administrative expenses 1 225,2 1 204,4 2 2 329,3 Operating profit before capital items 855,0 674,2 27 1 122,9 Income from investments 2,9 6,2 (53) 12,9 Finance costs (16,5) (32,2) (49) (52,7) Share of equity-accounted earnings of 25,3 14,6 73 36,1 joint ventures Capital items 1,7 (17,2) (110) (21,2) Profit before taxation 868,4 645,6 35 1 098,0 Taxation 290,0 213,8 36 363,0 Profit from continuing operations 578,4 431,8 34 735,0 Discontinued operations* Revenue - 414,8 (100) 683,6 Operating profit before capital items - 11,5 (100) 12,5 Income from investments - 2,2 (100) 4,3 Finance costs - (6,8) (100) (10,6) Capital items 27,3 0,3 9 000 (54,0) Profit/(loss) before taxation 27,3 7,2 (279) (47,8) Taxation 10,3 2,1 390 (10,6) Profit/(loss) from discontinued 17,0 5,1 (233) (37,2) operations Total operations Profit for the period 595,4 436,9 36 697,8 Profit attributable to: Owners of AVI 595,2 438,9 36 697,8 Non-controlling interests 0,2 (2,0) (110) - 595,4 436,9 36 697,8 Other comprehensive income, net of tax 81,6 (37,3) (319) 25,1 Foreign currency translation differences 54,0 (26,4) (305) 15,9 Cash flow hedging reserve 38,3 (15,1) (354) 12,8 Income tax on other comprehensive income (10,7) 4,2 (355) (3,6) Total comprehensive income for the period 677,0 399,6 69 722,9 Total comprehensive income attributable to: Owners of AVI 676,8 401,6 69 722,9 Non-controlling interests 0,2 (2,0) (110) - 677,0 399,6 69 722,9 Basic earnings per share from continuing 195,1 143,5 36 242,9 operations (cents)# Diluted basic earnings per share from 187,8 139,3 35 234,8 continuing operations (cents)## Basic earnings per share (cents)# 200,8 145,3 38 230,6 Diluted basic earnings per share 193,2 140,9 37 222,8 (cents)## Depreciation and amortisation of 106,8 96,5 11 195,6 property, plant and equipment, fishing rights and trademarks included in operating profit from continuing operations * Discontinued operations comprise the Argentinian hake and shrimp operations conducted by Alpesca, a wholly owned subsidiary of I&J, that was sold in May 2011, as well as the fresh, canned and value-added mushroom business conducted by Denny, which was disposed of with effect from 1 July 2011. Headline earnings per share from 194,4 147,8 32 248,2 continuing operations (cents)# Diluted headline earnings per share from 187,0 143,3 30 239,7 continuing operations (cents)## # Basic earnings and headline earnings per share is calculated on a weighted average of 296 405 261 (2010: 302 013 133 and 30 June 2011: 302 547 792) ordinary shares in issue ## Diluted basic earnings and headline earnings per share is calculated on a weighted average of 308 126 447 ( 2010: 311 572 063 and 30 June 2011: 313 191 990) ordinary shares in issue. CONDENSED GROUP STATEMENT OF CASH FLOWS Unaudited six Audited months ended 31 year December ended 30
June Restated % 2011 2010 change 2011 Rm Rm Rm
Continuing operations Operating activities Cash generated by operations before 918,4 774,9 19 1 372,1 working capital changes (Increase)/decrease in working capital (152,7) (22,3) 585 21,5 Cash generated by operations 765,7 752,6 2 1 393,6 Interest paid (15,7) (31,3) (50) (50,9) Taxation paid (205,8) (113,8) 81 (330,1) Net cash available from operating 544,2 607,5 (10) 1 012,6 activities Investing activities Cash flow from investments 2,9 4,6 (37) 15,0 Property, plant and equipment acquired (290,9) (149,4) 95 (412,7) Proceeds from disposals of property, plant 5,2 17,1 (70) 19,3 and equipment Movement in joint ventures and other 45,0 2,6 1 631 53,8 investments Net cash used in investing activities (237,8) (125,1) 90 (324,6) Financing activities Net increase in shareholder funding 18,6 21,7 (14) 38,4 Short-term funding repaid (384,1) (211,8) 81 (218,3) Own ordinary shares purchased by Company (100,7) - (169,2) Capital repayment - (226,6) (100) (226,6) Dividends paid (221,5) (184,1) 20 (335,6) Net cash used in financing activities (687,7) (600,8) 14 (911,3) Discontinued operations* Cash flows from operating activities - 47,1 100 21,6 Cash flows from investing activities - 5,8 100 8,7 Cash flows from financing activities - (41,2) (100) (73,8) Proceeds on disposal of discontinued 261,9 - 69,6 operation Cash flows from discontinued operations 261,9 11,7 2 138 26,1 Total operations Decrease in cash and cash equivalents (119,4) (106,7) 12 (197,2) Cash and cash equivalents at beginning of 404,1 598,0 (32) 598,0 period 284,7 491,3 400,8 Translation of cash equivalents of foreign 8,8 (6,7) (231) 3,3 subsidiaries at beginning of year Cash and cash equivalents at end of period 293,5 484,6 404,1 Attributable to: Continuing operations** 293,5 479,3 (39) 380,1 Discontinued operations*** - 5,3 (100) 24,0 * Discontinued operations comprise the Argentinian hake and shrimp operations conducted by Alpesca, a wholly owned subsidiary of I&J, that was sold in May 2011, as well as the fresh, canned and value-added mushroom business conducted by Denny, which was diposed of with effect from 1 July 2011. ** Cash and cash equivalents of R479,3 million at 31 December 2010 include R41,0 million in respect of Denny which has been reflected as part of the discontinued operation in the statements of comprehensive income and cash flows for the six months ended 31 December 2010. *** Cash flows between continuing and discontinued operations are eliminated on consolidation and therefore the movement on the closing cash balances does not reconcile to the individual cash flow movements reflected above. CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY Share Treasury Reserves Retained
capital shares Rm earnings and Rm Rm premium Rm
Six months ended 31 December 2011 Balance at 1 July 2011 29,5 (707,8) 131,2 3 466,0 Profit for the period 595,2 Other comprehensive income Foreign currency translation 54,0 differences Cash flow hedging reserve 27,6 Total other comprehensive - - 81,6 - income Total comprehensive income for - - 81,6 595,2 the period Transactions with owners, recorded directly in equity Share-based payments 8,7 Deferred taxation on Group 6,5 share scheme recharge Dividends paid (221,5) Own ordinary shares sold by AVI 16,7 1,9 Share Trusts (net) Total transactions with owners - 16,7 15,2 (219,6) Balance at 31 December 2011 29,5 (691,1) 228,0 3 841,6 Six months ended 31 December 2010 Balance at 1 July 2010 183,9 (682,0) 70,5 3 381,7 Profit for the period 438,9 Other comprehensive income Foreign currency translation (26,4) differences Cash flow hedging reserve (10,9) Total other comprehensive - - (37,3) - income Total comprehensive income for - - (37,3) 438,9 the period Transactions with owners, recorded directly in equity Share-based payments 13,9 Dividends paid (184,1) Capital repayment (261,8) 35,2 Issue of ordinary shares to AVI 107,8 (107,8) Share Trusts Own ordinary shares sold by AVI 32,0 (10,3) Share Trusts (net) Total transactions with owners (154,0) (40,6) 13,9 (194,4) Balance at 31 December 2010 29,9 (722,6) 47,1 3 626,2 Year ended 30 June 2011 Balance at 1 July 2010 183,9 (682,0) 70,5 3 381,7 Profit for the year 697,8 Other comprehensive income Foreign currency translation 15,9 differences Cash flow hedging reserve 9,2 Total other comprehensive - - 25,1 - income Total comprehensive income for - - 25,1 697,8 the period Transactions with owners, recorded directly in equity Share-based payments 25,7 Deferred taxation on Group 9,9 share scheme recharge Dividends paid (335,6) Capital repayment (261,8) 35,2 Issue of ordinary shares to AVI 107,8 (107,8) Share Trusts Own ordinary shares purchased (0,4) (269,5) by Company Own ordinary shares sold by AVI 46,8 (8,4) Share Trusts Total transactions with owners (154,4) (25,8) 35,6 (613,5) Balance at 30 June 2011 29,5 (707,8) 131,2 3 466,0 CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY CONTINUED Total Non- Total Rm controlling equity interests Rm Rm
Six months ended 31 December 2011 Balance at 1 July 2011 2 918,9 (19,8) 2 899,1 Profit for the period 595,2 0,2 595,4 Other comprehensive income Foreign currency translation 54,0 54,0 differences Cash flow hedging reserve 27,6 27,6 Total other comprehensive income 81,6 - 81,6 Total comprehensive income for the 676,8 0,2 677,0 period Transactions with owners, recorded directly in equity Share-based payments 8,7 8,7 Deferred taxation on Group share 6,5 6,5 scheme recharge Dividends paid (221,5) (221,5) Own ordinary shares sold by AVI Share 18,6 18,6 Trusts (net) Total transactions with owners (187,7) - (187,7) Balance at 31 December 2011 3 408,0 (19,6) 3 388,4 Six months ended 31 December 2010 Balance at 1 July 2010 2 954,1 (19,8) 2 934,3 Profit for the period 438,9 (2,0) 436,9 Other comprehensive income Foreign currency translation (26,4) (26,4) differences Cash flow hedging reserve (10,9) (10,9) Total other comprehensive income (37,3) - (37,3) Total comprehensive income for the 401,6 (2,0) 399,6 period Transactions with owners, recorded directly in equity Share-based payments 13,9 13,9 Dividends paid (184,1) (184,1) Capital repayment (226,6) (226,6) Issue of ordinary shares to AVI Share - - Trusts Own ordinary shares sold by AVI Share 21,7 21,7 Trusts (net) Total transactions with owners (375,1) - (375,1) Balance at 31 December 2010 2 980,6 (21,8) 2 958,8 Year ended 30 June 2011 Balance at 1 July 2010 2 954,1 (19,8) 2 934,3 Profit for the year 697,8 - 697,8 Other comprehensive income Foreign currency translation 15,9 15,9 differences Cash flow hedging reserve 9,2 9,2 Total other comprehensive income 25,1 - 25,1 Total comprehensive income for the 722,9 - 722,9 period Transactions with owners, recorded directly in equity Share-based payments 25,7 25,7 Deferred taxation on Group share 9,9 9,9 scheme recharge Dividends paid (335,6) (335,6) Capital repayment (226,6) (226,6) Issue of ordinary shares to AVI Share - - Trusts Own ordinary shares purchased by (269,9) (269,9) Company Own ordinary shares sold by AVI Share 38,4 38,4 Trusts Total transactions with owners (758,1) - (758,1) Balance at 30 June 2011 2 918,9 (19,8) 2 899,1 SUPPLEMENTARY NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2011 AVI Limited ("AVI" or the "Company") is a South African registered company. The condensed consolidated interim financial statements of the Company comprise the Company and its subsidiaries (together referred to as the "Group") and the Group`s interest in jointly controlled entities. 1. Statement of compliance The condensed consolidated interim financial statements have been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ("IFRS"), the presentation as well as the disclosure requirements of IAS34 - Interim Financial Reporting, the AC 500 Standards as issued by the Accounting Practices Board, the Listing Requirements of the JSE Limited (the "JSE") and the requirements of the Companies Act of South Africa, 2008 (as amended). These condensed interim 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 derivative financial instruments and biological assets which are measured at fair value. The accounting policies are those presented in the annual financial statements for the year ended 30 June 2011 and have been applied consistently to the periods presented in these condensed consolidated interim financial statements by all Group entities. These condensed financial statements have been prepared under the supervision of Owen Cressey CA(SA) in his capacity as Chief Financial Officer. 3. Determination of headline earnings Unaudited % Audited six months ended change year ended
31 December 30 June 2011 Restated 2011 Rm 2010 Rm Rm
Profit for the year 595,2 438,9 36 697,8 attributable to equity holders of AVI Total capital items included 18,9 (12,5) (56,8) in earnings Net surplus/(loss) on 0,5 0,6 (1,0) disposal of investments, properties, vessels and plant and equipment Net surplus/(loss) on - 0,3 (0,2) disposal of assets of disposal groups held-for-sale Net profit on disposal of 27,3 - - Denny Net loss on disposal of Sir - (12,4) (12,4) Juice Net loss on disposal of - - (53,9) Alpesca Impairment of vessels and - (5,4) (7,7) plant and equipment, investments, intangible assets and assets classified as held-for-sale Other 1,2 - - Capital items attributable to - 2,9 3,2 non-controlling interests Taxation attributable to (10,1) 1,5 15,2 capital items Headline earnings 576,3 451,4 28 754,6 Attributable to: Continuing operations 576,3 446,5 29 750,8 Discontinued operations - 4,9 3,8 576,3 451,4 28 754,6 3. Determination of headline earnings continued Unaudited % Audited
six months ended change year ended 31 December 30 June 2011 Restated 2011 Rm 2010 Rm
Rm Headline earnings per 194,4 149,5 30 249,4 ordinary share (cents) Continuing operations (cents) 194,4 147,8 32 248,2 Discontinued operations - 1,7 1,2 (cents) Diluted headline earnings per 187,0 144,9 29 240,9 ordinary share (cents) Continuing operations (cents) 187,0 143,3 30 239,7 Discontinued operations - 1,6 1,2 (cents) 4. Segmental results Unaudited % Audited six months ended change year ended 31 December 30 June 2011 Restated 2011
Rm 2010 Rm Rm Continuing operations Segmental revenue Food and beverage brands 3 341,1 3 101,5 8 5 837,8 Entyce 1 301,7 1 246,4 4 2 308,8 Snackworks 1 290,3 1 185,6 9 2 159,7 Chilled and frozen 749,1 669,5 12 1 369,3 convenience brands Fashion brands 1 148,5 1 030,7 11 1 842,6 Personal care 487,5 470,3 4 890,3 Footwear and apparel 661,0 560,4 18 952,3 Corporate 3,2 3,3 5,9 Group 4 492,8 4 135,5 9 7 686,3 Segmental operating profit before capital items Food and beverage brands 549,9 442,3 24 763,3 Entyce 245,9 258,8 (5) 410,9 Snackworks 203,2 180,5 13 261,8 Chilled and frozen 100,8 3,0 3 260 90,6 convenience brands Fashion brands 316,9 237,4 33 368,8 Personal care 85,9 67,3 28 132,7 Footwear and apparel 231,0 170,1 36 236,1 Corporate (11,8) (5,5) (9,2) Group 855,0 674,2 27 1 122,9 4. Segmental results continued Unaudited % Audited
six months ended change Year ended 31 December 30 June 2011 Restated 2011 Rm 2010 Rm
Rm Alpesca - 227,2 (100) 298,4 Denny - 187,6 (100) 385,2 - 414,8 (100) 683,6 Segmental operating profit before capital items Alpesca - (9,5) (100) (37,5) Denny - 21,0 (100) 50,0 - 11,5 (100) 12,5 The fresh, canned and value-added mushroom business conducted by Denny was sold with effect from 1 July 2011. As a result, Denny was disclosed as a discontinued operation in AVI`s results for the year ended 30 June 2011, and comparatives for the six months ended 31 December 2010 in the statements of comprehensive income and cash flows have been restated accordingly. 5. Investment activity Effective 1 July 2011, the Group entered into an agreement in terms of which it sold 100% of the issued share capital of and AVI`s shareholder claims against Denny to Blue Falcon 134 Trading (Pty) Limited ("Blue Falcon") for a consideration of R261,9 million (after adjustments and interest). Blue Falcon`s shareholders include RMB Ventures Six (Pty) Limited, an indirect subsidiary of FirstRand Limited, which holds a 49,9% interest therein, and Denny`s executive management team. The value of the net assets disposed at the effective date amounted to R234,6 million and consequently a capital profit of R27,3 million was earned, before attributing capital gains taxation of R10,3 million. Other than the above transaction, there were no significant changes to investments during the period. 6. Commitments Unaudited Audited six months ended Year 31 December ended
30 June 2011 Restated 2011 Rm 2010 Rm Rm
Capital expenditure commitments for 287,5 270,6 372,8 property, plant and equipment Contracted for 214,9 168,4 182,6 Authorised but not contracted for 72,6 102,2 190,2 It is anticipated that this expenditure will be financed by cash resources, cash generated from operating activities and existing borrowing facilities. Other contractual commitments have been entered into in the normal course of business. 7. Post-balance sheet events No significant events outside the ordinary course of business have occurred since the balance sheet date. ADMINISTRATION AND PRINCIPAL SUBSIDIARIES Administration Company registration AVI Limited ("AVI") Reg no: 1944/017201/06 Share code: AVI ISIN: ZAE000049433 Company secretary Sureya Naidoo Business address and registered office 2 Harries Road, Illovo Johannesburg 2196 South Africa Postal address PO Box 1897, Saxonwold 2132 South Africa Telephone: +27 (0)11 502 1300 Telefax: +27 (0)11 502 1301 e-mail: info@avi.co.za Website: www.avi.co.za Auditors KPMG Inc. Sponsor The Standard Bank of South Africa Limited Commercial bankers Standard Bank FirstRand Bank Transfer secretaries Computershare Investor Services 2004 (Pty) Limited Business address 70 Marshall Street, Marshalltown Johannesburg 2001 South Africa Postal address PO Box 61051, Marshalltown 2107 South Africa Telephone: +27 (0)11 370 5000 Telefax: +27 (0)11 370 5271 Principal subsidiaries Food and beverage brands National Brands Limited Reg no: 1948/029389/06 (incorporating Entyce Beverages, Snackworks and Ciro Beverage Solutions) 30 Sloane Street, Bryanston 2021 PO Box 5159, Rivonia 2128 Telefax: +27 (0)11 707 7799 Managing directors Donnee MacDougall (Entyce Beverages) Telephone: +27 (0)11 707 7100 Gaynor Poretti (Snackworks) Telephone: +27 (0)11 707 7200 Paul Hanlon (Ciro Beverage Solutions) Telephone: +27 (0)11 287 6700 The Real Juice Co Holdings (Pty) Limited Reg no: 2001/001413/07 2 Harries Road, Illovo 2196 PO Box 1897, Saxonwold 2132 Managing director Donnee MacDougall Telephone: +27 (0)11 707 7100 Telefax: +27 (0)11 707 7808 Chilled and frozen convenience brands Irvin & Johnson Holding Company (Pty) Limited Reg no: 2004/013127/07 1 Davidson Street, Woodstock Cape Town 8001 PO Box 1628, Cape Town 8000 Managing director Ronald Fasol Telephone: +27 (0)21 402 9200 Telefax: +27 (0)21 402 9282 Fashion brands Indigo Brands (Pty) Limited Reg no: 2003/009934/07 16-20 Evans Avenue, Epping 1 7460 PO Box 3460, Cape Town 8000 Managing director Susan O`Keeffe Telephone: +27 (0)21 507 8500 Telefax: +27 (0)21 507 8501 A&D Spitz (Pty) Limited Reg no: 1999/025520/07 29 Eaton Avenue, Bryanston 2021 PO Box 782916, Sandton 2145 Managing director Robert Lunt Telephone: +27 (0)11 707 7300 Telefax: +27 (0)11 707 7763 DIRECTORS EXECUTIVE SIMON CRUTCHLEY (CHIEF EXECUTIVE OFFICER) OWEN CRESSEY (CHIEF FINANCIAL OFFICER) INDEPENDENT NON-EXECUTIVE ANGUS BAND2 (CHAIRMAN) JAMES HERSOV KIM MACILWAINE5 ADRIAAN NUHN4 GAVIN TIPPER1, 2 MIKE BOSMAN1 ANDISIWE KAWA2 ABE THEBYANE NEO DONGWANA1,3 BARRY SMITH3 1 MEMBER OF THE AUDIT AND RISK COMMITTEE 2 MEMBER OF THE REMUNERATION, NOMINATION AND APPOINTMENTS COMMITTEE 3 MEMBER OF THE SOCIAL AND ETHICS COMMITTEE 4 DUTCH 5 BRITISH For more information, please visit our website: www.avi.co.za Date: 12/03/2012 07:05:12 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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