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Preliminary results for the year ended 30 June 2012
AVI LIMITED
ISIN: ZAE000049433
JSE share code: AVI
Registration number: 1944/017201/06
("AVI" or "the Group" or "the Company")
Results for the year ended 30 June 2012
KEY FEATURES
Revenue from continuing operations up 11% to R8,29 billion
Operating profit from continuing operations up 23% to R1,37 billion
Headline earnings per share from continuing operations up 30% to 320 cents
Operating profit margin from continuing operations improved from 14,9% to 16,6%
Increased capital expenditure of R541,1 million to cover major capacity and
efficiency projects
Green Cross acquisition concluded
Final dividend of 120 cents per share and total normal dividend up 62% to
203 cents per share
Special dividend of 180 cents per share
GROUP OVERVIEW
AVI's portfolio of consumer businesses performed well in a year characterised by
constrained consumer demand, increased competition and rising soft commodity input
costs. Many of our brands grew sales volumes in the year and together with our on-going
focus on, and investment in, manufacturing improvement drove good profit leverage.
The Fashion Brands businesses, Spitz and Indigo, achieved sound volume growth and
realised strong gross profit margins supported by favourable import exchange rates
that were secured before the rand weakened during the first half of the year. I&J
benefitted materially from the weaker rand, supported by on-going good performance
from its catching and processing operations. Snackworks had a strong second half
driven by recovery in sales volumes and improving manufacturing performance, resulting
in a material improvement in full year profits. Entyce had a better second half
performance, benefitting from new coffee and creamer capacity as well as a recovery
in Ciro's out-of-home coffee business driven by volume growth. Revenue from the rest
of Africa grew in line with the domestic market and healthy profit margins were
maintained.
Revenue from continuing operations rose by 10,6%, from R7,49 billion to R8,29
billion with selling price increases and volume growth in most categories as well
as stronger export revenue in I&J due to the weaker rand. Gross profit rose by
11,5% to R3,76 billion with the consolidated gross profit margin increasing from
45,1% to 45,4%. A significant increase in commodity input costs was ameliorated
by volume leverage, on-going efficiency gains and favourable import exchange rates
secured at the beginning of the year in line with our normal hedging practice.
Operating profit increased by 22,8%, from R1,12 billion to R1,37 billion due to
the higher gross profit margins and well managed selling and administrative costs,
which rose by 5,9% compared to last year.
Headline earnings from continuing operations rose by 28,5%, from R745,4 million
to R957,5 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 dollar. Headline earnings per share from continuing
operations increased 29,9% from 246,4 cents to 320,0 cents with less shares in issue
following the re-purchase of 9,0 million shares in June 2011.
Cash generated by operations was strong, increasing by 6,1% to R1,45 billion after
working capital changes. Working capital increased by R226,3 million reflecting
volume growth as well as stronger sales in the last few months of the year compared
to the same period last year. Capital expenditure increased to R541,1 million with
material expenditure on major projects to improve capacity, technology and efficiency.
Other material cash outflows during the period were dividends of R475,5 million and
taxation of R396,3 million. Net cash at the end of June 2012 was R175,0 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 year with benefits expected to accrue more
materially in the 2013 financial year. In addition the expansion of the Isando
distribution centre was successfully completed and SAP was implemented at Entyce and
Snackworks with minimal disruption to sales volumes. A number of other material
projects are on track to meet commissioning dates in 2013.
The Green Cross acquisition was concluded in July 2012 and we are excited about the
additional scale and growth opportunity this business brings to our Fashion Brands
portfolio. AVI will consolidate Green Cross' financial results with effect from
1 July 2012.The initial payment of R382,5 million was made in July 2012.
In March 2012 AVI announced a change in the annual dividend payout ratio from 2,0
to 1,5 times covered by diluted headline earnings from continuing operations. In line
with this new policy a final dividend of 120 cents per share has been declared, bringing
the total normal dividend for the year to 203 cents. In addition the Board has approved
a special dividend of 180 cents per share, resulting in an effective dividend yield of
7,7% on the 30 June 2012 closing share price of R50,00.
Taking the initial payment for Green Cross of R382,5 million that was made in July 2012
and the special dividend into account, AVI's debt to capital employed ratio is expected to
increase above 20% in the 2013 year.
The AVI Black Staff Empowerment Share Scheme reached its first normal vesting date on
31 December 2011 in respect of the first tranche of shares allocated in January 2007.
AVI's strong share price performance has resulted in gains totalling R117,6 million
accruing to 3 688 black employees at all levels across the Group since inception of
the scheme.
On 1 July 2012 Mr Angus Band stepped down as chairman ahead of his retirement from the
Board at the Company's next annual general meeting scheduled for 2 November 2012. Mr Band
joined the Board in 1997 as an executive director and was appointed Chief Executive
Officer of National Brands Limited in 1998. He became AVI's Group Chief Executive Officer
in 1999 and served in this role until 2005 when he stepped down and moved into the role of
non-executive chairman. The Board wishes to express its sincere gratitude to Mr Band
for his outstanding 16 years of service to AVI and vital contribution to AVI's success.
SEGMENTAL REVIEW - CONTINUING OPERATIONS
Year ended 30 June
Segmental revenue Segmental operating profit
2012 Restated* % 2012 Restated* %
Rm 2011 change Rm 2011 change
Rm Rm
Food & beverage brands 6 274,8 5 641,2 11,2 922,5 758,2 21,7
Entyce 2 330,7 2 112,2 10,3 415,4 402,2 3,3
Snackworks 2 428,7 2 159,7 12,5 328,5 263,9 24,5
Chilled & frozen convenience brands 1 515,4 1 369,3 10,7 178,6 92,1 93,9
Fashion brands 2 005,2 1 842,6 8,8 463,6 368,5 25,8
Personal care 918,1 890,3 3,1 155,7 132,4 17,6
Footwear & apparel 1 087,1 952,3 14,2 307,9 236,1 30,4
Corporate 7,1 5,9 (13,6) (9,2)
Group 8 287,1 7 489,7 10,6 1 372,5 1 117,5 22,8
* = restated to exclude Real Juice now shown as a discontinued operation.
Entyce (excluding Real Juice now shown as discontinued)
Revenue increased 10,3% to R2,33 billion while operating profit increased by 3,3% from R402,2
million to R415,4 million with the operating profit margin at 17,8% compared to 19,0% in
the prior period.
Growth in revenue came primarily from higher selling prices for tea, coffee and creamer in
response to increased raw and wrapping material costs. Volume performance was pleasing in the
context of constrained overall category performance, with volume declining in both the tea and
coffee categories in the year.Tea volumes were 6,2% higher than last year due to effective
promotional activity and tactical pricing. Coffee sales volumes for the second half showed growth
on the same period in the prior year, however full year volumes declined without the additional
demand that arose from competitor supply problems in the first half of last year. Creamer volumes
increased sharply in the second half with tactical pricing supported by the capacity and lower
costs from the new creamer tower and full year volumes were higher than last year despite additional
demand that arose from competitor supply problems in the first half of last year.
Gross profit margins decreased with significant increases in coffee, glucose and rooibos input
costs not fully recovered given the constrained consumer environment and competitive pressures.
However, volume increases and well-controlled selling and administration costs contributed to an
improvement in operating profit over last year's exceptional result. Profit margins in absolute
terms remain at strong levels and the new creamer tower and coffee agglomeration plant at Isando
are both expected to yield further benefits in the new financial year.
The Ciro out-of-home coffee business re-gained volume momentum and controlled costs tightly to
deliver a material improvement in operating profit.
Snackworks
Revenue of R2,43 billion was 12,5% higher than last year while operating profit rose by 24,5%,
from R263,9 million to R328,5 million. The operating profit margin increased from 12,2% to 13,5%.
The increase in revenue is attributable to higher selling prices and an 8,2% increase in biscuit
sales volumes. Biscuit selling prices were higher on average following the increases implemented
in the previous financial year, despite the re-alignment of price points for key products with
consumer expectations. Better price points on key lines drove strong volume uplift in the second
half and the resulting profit leverage, together with improved factory performance, enabled
Snackworks to recover significant raw material cost increases and still improve operating
profit margin. Factory performance improved during the year with higher throughput, improved product
yields and more effective management of labour costs all contributing to the overall Snackworks
result. Approximately 550 tons of production was lost at Westmead following an industry shortage of
liquid petroleum gas in October and November, however the operating profit impact was largely covered
by insurance proceeds.
The Snacks business benefited from better price points in the category, slightly higher sales
volumes and tight control of selling and administrative costs, resulting in a meaningful improvement
in operating profit. Sales volumes were slightly higher than last year despite lost sales attributable
to temporary delistings during price negotiations with customers in the first half of the year.
The packaging automation project at Isando biscuits was successfully commissioned and is being extended
to cover all major lines in the factory. Packaging automation is also being evaluated for the Westmead
factory. New projects that will further improve capacity, yields and efficiency in both biscuit
factories were approved during the semester.
Chilled & Frozen Convenience Brands (I&J excluding Alpesca)
Revenue increased by 10,7% from R1,37 billion to R1,52 billion while operating profit rose from R92,1
million to R178,6 million. The operating profit margin increased from 6,7% to 11,8%.
Export exchange rates in the first semester were materially weaker than the same period in the prior
year, and the resulting increase in revenue was a key driver of I&J's improved result for the year.
Export volumes increased with the benefit of increased quota, however prices remained under pressure
with reduced demand from customers and increased supply from other fish resources. I&J improved its
position in the domestic market, achieving both higher selling prices and an increase in volumes for
the year.
High catch rates for the year and improved fishing and factory performance were offset by a significant
increase in fuel costs, however tight cost control and the benefit of foreign exchange gains, compared
to losses last year, contributed to the material improvement in operating profit for the year.
A major project to reconfigure and automate a large part of the Woodstock processing operation has been
approved and is expected to be commissioned in the second half of the 2013 financial year. The project
will cost R59 million and has a planned payback period of less than three years.
Fashion Brands (personal care, footwear and apparel)
Revenue rose by 8,8% to R2,01 billion and operating profit increased by 25,8%, from R368,5 million to
R463,6 million with the operating profit margin increasing from 20,0% to 23,1%.
In the personal care category, Indigo's revenue grew by 3,1% to R918,1 million while operating profit
increased 17,6% to R155,7 million. The operating profit margin for the period improved from 14,9% to 17,0%.
Revenue growth was constrained in a highly competitive environment, however Indigo maintained its strong
position in aerosols and achieved good growth in Yardley colour cosmetics. Profit margin benefitted from
lower input costs due to the favourable import exchange rates secured at the beginning of the year, higher
volumes and tightly controlled selling and administrative costs.
In the footwear and apparel category, revenue increased by 14,2% to R1,09 billion and operating profit
increased by 30,4% from R236,1 million to R307,9 million. The operating profit margin increased from
24,8% to 28,3%. 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 and favourable import exchange rates
secured at the beginning of the year. Footwear sales volumes in Spitz increased by 9,5% 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 11 new stores opened during the year, bringing the total to 26 stores at the
end of the year. These stores are contributing to Spitz's overall result and trading density will continue
to improve over the next few years.
DISCONTINUED OPERATIONS (REAL JUICE,DENNY AND ALPESCA)
Year ended 30 June
Segmental Segmental Capital items
revenue operating profit
2012 Restated* 2012 Restated* 2012 Restated*
Rm 2011 Rm 2011 Rm 2011
Rm Rm Rm
Real Juice 146,2 196,6 8,1 10,7 0,1 (12,8)
Denny - 385,2 - 50,0 27,3 (0,4)
Alpesca - 298,4 - (37,5) - (53,6)
146,2 880,2 8,1 23,2 27,4 (66,8)
* = restated to include Real Juice now shown as a discontinued operation.
In May 2012 AVI entered into an agreement in terms of which Clover will acquire 100% of Real Juice for R60
million, subject to the approval of the South African Competition Authorities, which was received on 30 August
2012. Revenue for the year decreased due to the sale of Sir Juice in November 2010, declining sales of the
premium Real Juice brand and rationalisation of unprofitable product lines. The core Quali brand continues to
perform well and together with excellent management of the manufacturing and distribution operations this
enabled Real Juice to record a credible operating profit despite a significant increase in raw material costs
during the year.
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.
I&J concluded the sale of Alpesca in May 2011.
DIVIDENDS
In March 2012 the Board approved a change in AVI's annual dividend pay-out ratio from 2,0 to 1,5 times covered
by diluted headline earnings from continuing operations. This change is commensurate with the Group's strong
cash-generating ability and also compensates shareholders for any dividend withholding tax that they may be liable
for after 1 April 2012. In terms of this new policy a final dividend of 120 cents per share has been declared,
bringing the total normal dividend for the year to 203 cents, 62,4% higher than last year.
In addition, in line with AVI's on-going commitment to return excess cash generated to shareholders the Board
has approved a special dividend of 180 cents per share, resulting in an effective dividend yield of 7,7% on the
30 June 2012 closing share price of R50,00.
OUTLOOK
We anticipate that the current constrained consumer demand environment will persist and consequently expect
increased competition in our categories which, coupled with raw material and other cost pressures, will put
pressure on margins in the FMCG sector generally. I&J has secured more than half of its export foreign exchange
requirements at rates comparable to last year and Entyce and Snackworks have implemented selling price increases
to help offset the impact of higher commodity prices and the strong US dollar.
The performance of key categories in the 2012 financial year reinforces our confidence that with our strong brand
portfolio, improving manufacturing performance and effective sales and marketing activity we can continue to compete
effectively in the year ahead. In addition the capital projects commissioned in the last year will make a greater
contribution and we continue to work on new projects and other initiatives that should deliver organic profit growth
over time. These include local and regional market opportunities, factory improvements and the on-going development
of shared and support services. The establishment of our new AVI International structure during the year under review
will help to accelerate the sound growth that our Africa business has achieved over the last few years.
Green Cross' performance since the conclusion of the acquisition has been encouraging and will add meaningfully to the
growth of our Fashion Brands portfolio.
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.
Gavin Tipper Simon Crutchley
Chairman CEO
10 September 2012
PRELIMINARY SUMMARISED GROUP BALANCE SHEETS
Restated Restated
Audited at Audited at Audited at
30 June 30 June 01 July
2012 2011 2010
Rm Rm Rm
Assets
Non-current assets
Property, plant and equipment 1 756,9 1 459,5 1 340,4
Intangible assets and goodwill 748,6 759,4 923,4
Investments 328,4 310,0 304,1
Deferred taxation 47,2 83,3 78,9
2 881,1 2 612,2 2 646,8
Current assets
Inventories and biological assets 1 042,0 943,1 918,4
Trade and other receivables including derivatives 1 315,6 1 116,9 1 189,5
Cash and cash equivalents 242,1 380,1 589,3
Assets of discontinued operations classified as held-for-sale* 43,4 344,3 288,8
Other assets classified as held-for-sale** 5,7 3,8 4,4
2 648,8 2 788,2 2 990,4
Total assets 5 529,9 5 400,4 5 637,2
Equity and liabilities
Capital and reserves
Attributable to equity holders of AVI 3 615,1 2 866,7 2 905,7
Non-controlling interests (17,8) (19,8) (19,8)
Total equity 3 597,3 2 846,9 2 885,9
Non-current liabilities
Financial liabilities, borrowings and operating lease 15,7 55,8 65,1
straight-line liabilities
Employee benefits 349,7 359,2 360,1
Deferred taxation 90,9 73,1 113,6
456,3 488,1 538,8
Current liabilities
Current borrowings 63,2 583,0 848,1
Trade and other payables including derivatives 1 338,7 1 279,1 1 183,4
Share buy-back liability - 100,7 -
Corporate taxation 15,3 16,6 17,3
Liabilities of discontinued operations classified as held-for-sale* 59,1 86,0 163,7
1 476,3 2 065,4 2 212,5
Total equity and liabilities 5 529,9 5 400,4 5 637,2
Net (cash)/debt*** (175,0) 246,2 310,1
* Discontinued operations in 2010 comprised the Argentinian hake and shrimp operations conducted by Alpesca, a wholly owned
subsidiary of I&J, that was sold in May 2011. In 2011 discontinued operations comprised the fresh, canned and value added
mushroom business conducted by Denny, which was disposed of with effect from 1 July 2011. In 2012 discontinued operations
comprise the fresh fruit juice manufacturing business of Real Juice Co Holdings Proprietary Limited ("Real Juice") which
will be disposed of with effect from 30 September 2012.
** Other assets held-for-sale comprise equipment and properties held for disposal.
*** Comprises financial liabilities, borrowings and current borrowings less
cash and cash equivalents.
PRELIMINARY SUMMARISED GROUP STATEMENTS OF COMPREHENSIVE INCOME
Restated
Audited Audited
Year ended Year ended
30 June 30 June
2012 2011 %
Rm Rm change
Continuing operations
Revenue 8 287,1 7 489,7 10,6
Cost of sales 4 524,3 4 114,7 10,0
Gross profit 3 762,8 3 375,0 11,5
Selling and administrative expenses 2 390,3 2 257,5 5,9
Operating profit before capital items 1 372,5 1 117,5 22,8
Income from investments 13,8 9,4 46,8
Finance costs (28,1) (49,6) (43,3)
Share of equity-accounted earnings of joint ventures 46,8 36,1 29,6
Capital items (13,8) (8,4) 64,3
Profit before taxation 1 391,2 1 105,0 25,9
Taxation 443,6 365,9 21,2
Profit from continuing operations 947,6 739,1 28,2
Discontinued operations*
Revenue 146,2 880,2 (83,4)
Operating profit before capital items 8,1 23,2 (65,1)
Income from investments 2,2 7,8 (71,8)
Finance costs (2,5) (13,7) (81,8)
Capital items 27,4 (66,8) (141,0)
Profit/(loss) before taxation 35,2 (49,5) (171,1)
Taxation 10,3 (12,0) (185,8)
Profit/(loss) from discontinued operations 24,9 (37,5) (166,4)
Profit for the year 972,5 701,6 38,6
Profit attributable to:
Owners of AVI 970,5 701,6 38,3
Non-controlling interests 2,0 -
972,5 701,6 38,6
Other comprehensive income/(expense), net of tax 100,9 17,5 476,6
Foreign currency translation differences 59,7 15,9 275,5
Actuarial gain/(loss) recognised 32,7 (10,5) (411,4)
Cash flow hedging reserve 24,4 12,8 90,6
Income tax on other comprehensive income/(expense) (15,9) (0,7) 2 171,4
Total comprehensive income for the year 1 073,4 719,1 49,3
Total comprehensive income attributable to:
Owners of AVI 1 071,4 719,1 49,0
Non-controlling interests 2,0 -
1 073,4 719,1 49,3
Basic earnings per share from continuing operations (cents)# 316,7 244,3 29,6
Diluted earnings per share from continuing operations (cents)## 302,0 236,0 28,0
Basic earnings per share (cents)# 324,3 231,9 39,8
Diluted earnings per share (cents)## 309,3 224,0 38,1
Depreciation and amortisation of property, plant and equipment, fishing rights and trademarks 220,7 192,8 14,5
included in operating profit from continuing operations
* Discontinued operations comprise the fresh fruit juice manufacturing business of Real Juice which will be disposed of with effect
from 30 September 2012, 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 continuing operations (cents)# 320,0 246,4 29,9
Diluted headline earnings per share from continuing operations (cents)## 305,2 238,0 28,2
# Basic earnings and headline earnings per share is calculated on a weighted average of 299 228 661 (30 June 2011: 302 547 792)
ordinary shares in issue.
## Diluted earnings and diluted headline earnings per share is calculated on a weighted average of 313 746 916 (30 June 2011 : 313 191 990)
ordinary shares in issue.
PRELIMINARY SUMMARISED GROUP STATEMENTS OF CASH FLOWS
Restated
Audited Audited
Year ended Year ended
30 June 30 June
2012 2011 %
Rm Rm Change
Continuing operations
Operating activities
Cash generated by operations before working capital changes 1 678,9 1 358,6 23,6
(Increase)/decrease in working capital (226,3) 10,7 (2 215,0)
Cash generated by operations 1 452,6 1 369,3 6,1
Interest paid (28,1) (49,6) (43,3)
Taxation paid (396,3) (327,6) 21,0
Net cash available from operating activities 1 028,2 992,1 3,6
Investing activities
Interest received 15,0 13,1 14,5
Property, plant and equipment acquired (541,1) (410,2) 31,9
Proceeds from disposals of property, plant and equipment 8,4 4,9 71,4
and businesses
Movement in joint ventures and other investments 66,7 52,2 27,8
Net cash used in investing activities (451,0) (340,0) 32,6
Financing activities
Increase in shareholder funding 99,9 38,4 160,2
Short-term funding repaid (524,2) (179,5) 192,0
Own ordinary shares purchased by the Company (100,7) (169,2) (40,5)
Capital repayment - (226,6) (100,0)
Dividends paid (475,5) (335,6) 41,7
Net cash used in financing activities (1 000,5) (872,5) 14,7
Discontinued operations*
Cash flows from operating activities (3,4) 42,1 (108,1)
Cash flows from investing activities 0,9 16,5 (94,5)
Cash flows from financing activities (6,0) (105,0) (94,3)
Proceeds on disposal of discontinued operation 261,9 69,6 276,3
Cash flows from discontinued operations 253,4 23,2 992,2
Decrease in cash and cash equivalents (169,9) (197,2) (13,8)
Cash and cash equivalents at beginning of year 404,1 598,0 (32,4)
234,2 400,8 (41,6)
Translation of cash equivalents of foreign subsidiaries 7,9 3,3 139,4
Cash and cash equivalents at end of year 242,1 404,1 (40,1)
Attributable to:
Continuing operations 242,1 380,1 (36,3)
Discontinued operations** - 24,0 (100,0)
* Discontinued operations comprise the fresh fruit juice manufacturing business of Real Juice which will be disposed of with effect from
30 September 2012, 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.
** Cash flows between continuing and discontinued operations are eliminated on consolidation. These amounted to R277,4 million
(2011: R39,0 million) net cash flow from discontinued operations to continuing operations.
PRELIMINARY SUMMARISED GROUP STATEMENTS OF CHANGES IN EQUITY
Share Treasury Reserves Retained Total Non- Total
capital and shares Rm earnings Rm controlling equity
premium Rm Rm interests Rm
Rm Rm
Year ended 30 June 2012
Balance at 1 July 2011 (Restated) 29,5 (707,8) 69,7 3 475,3 2 866,7 (19,8) 2 846,9
Profit for the year 970,5 970,5 2,0 972,5
Other comprehensive income
Foreign currency translation differences 59,7 59,7 59,7
Actuarial gains/(losses) recognised 23,6 23,6 23,6
Cash flow hedging reserve 17,6 17,6 17,6
Total other comprehensive income - - 100,9 - 100,9 - 100,9
Total comprehensive income for the year - - 100,9 970,5 1 071,4 2,0 1 073,4
Transactions with owners, recorded directly in equity
Share-based payments 18,1 18,1 18,1
Deferred taxation on Group share scheme recharge 34,5 34,5 34,5
Dividends paid (475,5) (475,5) (475,5)
Own ordinary shares sold by AVI Share Trusts 86,6 13,3 99,9 99,9
Total contributions by and distributions to owners - 86,6 52,6 (462,2) (323,0) - (323,0)
Total transactions with owners - 86,6 52,6 (462,2) (323,0) - (323,0)
Balance at 30 June 2012 29,5 (621,2) 223,2 3 983,6 3 615,1 (17,8) 3 597,3
Year ended 30 June 2011
Balance at 1 July 2010 183,9 (682,0) 70,5 3 381,7 2 954,1 (19,8) 2 934,3
Change in accounting policy (refer note 3) (53,9) 5,5 (48,4) (48,4)
Restated balance at 1 July 2010 183,9 (682,0) 16,6 3 387,2 2 905,7 (19,8) 2 885,9
Profit for the year 701,6 701,6 - 701,6
Other comprehensive income
Foreign currency translation differences 15,9 15,9 15,9
Actuarial gains/(losses) recognised (7,6) (7,6) (7,6)
Cash flow hedging reserve 9,2 9,2 9,2
Total other comprehensive income - - 17,5 - 17,5 - 17,5
Total comprehensive income for the year - - 17,5 701,6 719,1 - 719,1
Transactions with owners, recorded directly in equity
Share-based payments 25,7 25,7 25,7
Deferred taxation on Group share scheme recharge 9,9 9,9 9,9
Dividends paid (335,6) (335,6) (335,6)
Capital repayment (261,8) 35,2 (226,6) (226,6)
Issue of ordinary shares to AVI Share Trusts 107,8 (107,8) - -
Own ordinary shares purchased by Company (0,4) (269,5) (269,9) (269,9)
Own ordinary shares sold by AVI Share Trusts 46,8 (8,4) 38,4 38,4
Total contributions by and distributions to owners (154,4) (25,8) 35,6 (613,5) (758,1) - (758,1)
Total transactions with owners (154,4) (25,8) 35,6 (613,5) (758,1) - (758,1)
Balance at 30 June 2011 29,5 (707,8) 69,7 3 475,3 2 866,7 (19,8) 2 846,9
SUPPLEMENTARY NOTES TO THE PRELIMINARY SUMMARISED CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2012
AVI Limited ("AVI" or the "Company") is a South African registered company. The preliminary summarised consolidated 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 preliminary summarised consolidated annual financial statements have been prepared in accordance with the recognition and measurement
criteria of International Financial Reporting Standards ("IFRS"), the presentation and disclosure requirements of IAS 34 - Interim
Financial Reporting, the AC 500 Standards issued by the Accounting Practices Board, the Listing Requirements of the JSE Limited (the "JSE")
and the South African Companies Act.
2. Basis of preparation
The preliminary summarised consolidated financial statements are prepared in millions of South African Rands ("Rm") on the historical cost
basis, except for derivative financial instruments, biological assets and liabilities for cash settled share-based payment arrangements
which are measured at fair value and non-current assets and disposal groups held-for-sale which are stated at the lower of carrying amount
and fair value less costs to sell. The accounting policies used in the preparation of these results are consistent with those presented in
the annual financial statements for the year ended 30 June 2012 and have been applied consistently to the years presented in these
preliminary summarised consolidated financial statements by all Group entities.
3. Changes in accounting policies
In the 2012 financial year the Group adopted the option to recognise immediately in other comprehensive income actuarial gains and losses
arising from the defined benefit post retirement medical aid plan, in accordance with the allowed alternative under the existing IAS 19 -
Employee Benefits. In prior years, the Group applied the corridor method to recognise actuarial gains or losses in profit or loss.
The change in accounting policy has been applied retrospectively with the restatement of comparatives. The table below summarises the
adjustment made to the balance sheet and statement of comprehensive income on implementation.
Employee Net Retained
benefits deferred earnings/
liability taxation profit or
R'm asset/ loss Reserves
(liability) R'm R'm
R'm
Balance as reported at 1 July 2010 (292,8) (53,6) (3 381,7) (70,5)
Effect of change in accounting policy (67,3) 18,9 (5,5) 53,9
Restated balance at 1 July 2010 (360,1) (34,7) (3 387,2) (16,6)
Balance as reported at 30 June 2011 (286,7) (10,1) (3 466,0) (131,2)
Effect of change in accounting policy (67,3) 18,9 (5,5) 53,9
Effect on profit or loss (5,2) 1,4 (3,8) 7,6
Restated balance at 30 June 2011 (359,2) 10,2 (3 475,3) (69,7)
The effect on the statement of comprehensive income was as follows:
2012 2011
R'm R'm
Selling and administrative expenses (2,7) (5,3)
Taxation 0,8 1,5
(1,9) (3,8)
The effect on basic earnings per share and diluted earnings per share was as follows:
2012 2011
cents cents
Basic earnings per share from total operations as previously reported 323,7 230,6
Effect of change in accounting policy 0,6 1,3
Restated basic earnings per share from total operations 324,3 231,9
Diluted earnings per share from total operations as previously report 308,7 222,8
Effect of change in accounting policy 0,6 1,2
Restated diluted earnings per share from total operations 309,3 224,0
For the year ended 30 June 2012
4. Determination of headline earnings
Restated
Audited Audited %
Year ended Year ended change
30 June 30 June
2012 2011
Rm Rm
Profit for the year attributable to owners of AVI 970,5 701,6 38,3
Total capital items after taxation 7,1 (56,8)
Net loss on disposal of investments, properties and plant and equipment (1,8) (1,0)
Net profit/(loss) on disposal of assets of disposal 0,3 (0,2)
groups held-for-sale
Profit on disposal of Denny 27,3 -
Loss on disposal of Sir Juice - (12,4)
Loss on disposal of Alpesca - (53,9)
Impairment of plant and equipment, investments, intangible assets and assets classified as held-for-sale (13,5) (7,7)
Other 1,3 -
Capital items attributable to non-controlling interests (0,1) 3,2
Taxation attributable to capital items (6,4) 15,2
Headline earnings 963,4 758,4 27,0
Attributable to:
Continuing operations 957,5 745,4 28,5
Discontinued operations 5,9 13,0
963,4 758,4 27,0
Headline earnings per ordinary share (cents) 322,0 250,7 28,4
Continuing operations (cents) 320,0 246,4 29,9
Discontinued operations (cents) 2,0 4,3
Diluted headline earnings per ordinary share (cents) 307,1 242,2 26,8
Continuing operations (cents) 305,2 238,0 28,2
Discontinued operations (cents) 1,9 4,2
5. Segmental results
Segmental results
Restated
Audited Audited
Year ended Year ended
30 June 30 June
2012 2011 %
Rm Rm change
CONTINUING OPERATIONS
Segmental revenue
Food and beverage brands 6 274,8 5 641,2 11,2
Entyce 2 330,7 2 112,2 10,3
Snackworks 2 428,7 2 159,7 12,5
Chilled and frozen convenience brands 1 515,4 1 369,3 10,7
Fashion brands 2 005,2 1 842,6 8,8
Personal care 918,1 890,3 3,1
Footwear and apparel 1 087,1 952,3 14,2
Corporate 7,1 5,9
Group 8 287,1 7 489,7 10,6
Segmental operating profit before capital items
Food and beverage brands 922,5 758,2 21,7
Entyce 415,4 402,2 3,3
Snackworks 328,5 263,9 24,5
Chilled and frozen convenience brands 178,6 92,1 93,9
Fashion brands 463,6 368,5 25,8
Personal care 155,7 132,4 17,6
Footwear and apparel 307,9 236,1 30,4
Corporate (13,6) (9,2)
Group 1 372,5 1 117,5 22,8
Discontinued operations
Segmental revenue
Alpesca - 298,4 (100,0)
Denny - 385,2 (100,0)
Real Juice 146,2 196,6 (25,6)
146,2 880,2 (83,4)
Segmental operating profit before capital items
Alpesca - (37,5) (100,0)
Denny - 50,0 (100,0)
Real Juice 8,1 10,7 (24,3)
8,1 23,2 (65,1)
On 31 May 2012 AVI entered into an agreement in terms of which Clover will acquire 100% of the equity in and shareholders' loans against
Real Juice. The transactionis subject to the approval of the South African Competition Authorities in terms of the Competition Act No 89
of 1998, as amended, which was received on 30 August 2012. Real Juice has therefore been disclosed as a discontinued operation in AVI's
results for the year ended 30 June 2012 and comparatives for the year ended 30 June 2011 in the statements of comprehensive income and
cash flows have been restated accordingly.
6. 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 Proprietary Limited ("Blue Falcon") for a consideration of R261,9 million
(after adjustments and interest). Blue Falcon's shareholders include RMB Ventures Six Proprietary 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.
7.Commitments
Restated
Audited Audited
Year ended Year ended
30 June 30 June
2012 2011
Rm Rm
Capital expenditure commitments for property, plant and equipment* 302,4 372,8
Contracted for 175,0 182,6
Authorised but not contracted for 127,4 190,2
* Not included in capital commitments in respect of property, plant and equipment contracted for at 30 June 2011 are commitments of R1,6
million relating to Denny. It is anticipated that this expenditure will be financed by cash resources, cash generated from activities and
existing borrowing facilities. Other contractualcommitments have been entered into in the normal course of business.
8. Post balance sheet events
Acquisition of Green Cross
Effective 1 March 2012 AVI entered into an agreement in terms of which it acquired 100% of the issued share capital and shareholders' loans
of Green Cross. Since the acquisition of A&D Spitz Proprietary Limited ("Spitz") in July 2005, AVI's premium branded footwear and apparel
portfolio has contributed meaningfully to the Group's growth in profitability. The transaction represents a rare opportunity to acquire an
established, category leading brand of relevant scale with a solid record of profitable operations.
The purchase consideration payable by AVI was an initial amount of R382,5 million plus a contingent earn-out payment up to a maximum amount
of R35,0 million, payable in March 2013 subject to certain profit hurdles being achieved in Green Cross' financial year ending 28 February
2013. The transaction was subject to the fulfilment of certain conditions precedent including the unconditional approval of the South African
Competition Authorities in terms of the Competition Act No 89 of 1998, as amended, and the receipt by the parties of the written consent of
certain landlords in respect of the transfer of certain leases over premises utilised by Green Cross in its retails operations. The conditions
precedent were met shortly after year-end and consequently the transaction will be effective fom 1 July 2012.
If the acquisition had occurred on 1 July 2011, Group revenue and profit after taxation would have been increased by a further R315,5 million
and R42,7 million respectively. These amounts have been calculated using the Group's accounting policies and by adjusting the results of the
business for the impact of funding the purchase consideration from existing cash resources. The purchase price allocation exercise has not yet
been completed, however, it is expected that the intangible assets recognised will be of an indefinite life and will therefore not be amortised
going forward but rather be assessed for impairment on an annual basis.
Carrying
amount
Rm
Non-current assets 45,6
Current assets 134,2
Non-current liabilities (97,9)
Current liabilities (33,1)
Net identifiable assets and liabilities 48,8
Premium paid 377,3
Total consideration 426,1
Total consideration comprises:
Initial purchase consideration 382,5
Interest payable on initial consideration 8,6
Contingent purchase consideration 35,0
Disposal of Real Juice Co Holdings Proprietary Limited
Effective 31 May 2012 AVI entered into an agreement with Clover S.A. Proprietary Limited ("Clover"), a subsidiary of Clover Industries Limited,
in terms of which 100% of the equity in and shareholders' loans against Real Juice Co. Holdings Proprietary Limited ("Real Juice") will be disposed
of for a consideration of R60 million.
Real Juice is a leading producer of fresh fruit juices, nectars and concentrates sold under the Quali and Real Juice brands predominantly in the
Eastern, Western and Northern Cape. The only condition precedent to which the transaction is subject is the approval of the South African
Competition Authorities in terms of the Competition Act No 89 of 1998, as amended. Approval was received on 30 August 2012 and consequently the
transaction will be effective on the last day of the month following the receipt of such approval, being 30 September 2012. Real Juice has been
disclosed as a discontinued operation in AVI's results for the year ended 30 June 2012 and comparatives for the year ended 30 June 2011 have been
restated accordingly.
Other than the above acquisition and disposal there have been no significant events outside the ordinary course of business since the reporting date.
9. Dividend declaration
Notice is hereby given that a gross final dividend No 76 of 120 cents per share for the year ended 30 June 2012 and gross special dividend No 77 of
180 cents per share have been declared payable to shareholders of ordinary shares. Both dividends have been declared out of income reserves and will be
subject to dividend withholding tax at a rate of 15%. The Company has no secondary tax credits available and consequently a net final dividend of 102
cents per share and a net special dividend of 153 cents per share will be distributed to those shareholders who are not exempt from paying dividend tax.
In terms of the dividend tax legislation, the dividends tax amount due will be withheld and paid over to the South African Revenue Services by a nominee
company, stockbroker or Central Securities Depository Participant ("CSDP") (collectively "Regulated Intermediary") on behalf of shareholders. However,
all shareholders should declare their status to their Regulated Intermediary, as they may qualify for a reduced dividend tax rate or exemption.
AVI's issued share capital at the declaration date is 342 144 990 ordinary shares. AVI's tax reference number is 9500/046/71/0. The salient dates
relating to the payment of both dividends are as follows:
Last day to trade cum dividend on the JSE Friday, 5 October 2012
First trading day ex dividend on the JSE Monday, 8 October 2012
Record date Friday, 12 October 2012
Payment date Monday, 15 October 2012
In accordance with the requirements of Strate Limited, no share certificates may be dematerialised or rematerialised between Monday, 8 October 2012
and Friday, 12 October 2012, 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 Monday, 15 October 2012.
10. Reports of the independent auditors
The unmodified audit reports of KPMG Inc., the independent auditors, on the annual financial statements and the preliminary summarised financial
statements contained herein for the year ended 30 June 2012, dated 7 September 2012, are available for inspection at the registered office of the
company.
11. Preparer of financial statements
These preliminary summarised financial statements have been prepared under the supervision of Owen Cressey CA (SA), the AVI Group Chief Financial
Officer.
12. Annual report
The annual report for the year ended 30 June 2012 will be posted to shareholders on or about Tuesday, 2 October 2012. The financial statements will
include the notice of the annual general meeting of shareholders to be convened on Friday, 2 November 2012.
ADMINISTRATION AND PRINCIPAL SUBSIDIARIES
Administration
Company registration
AVI Limited ("AVI")
Reg no: 1944/017201/06
JSE 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
Green Cross
Incorporating the following legal entities:
Green Cross Manufacturing (Pty) Limited
Reg no: 1994/08549/07
Green Cross Properties (Pty) Limited
Reg no: 1994/09874/07
Green Cross Retail Holdings (Pty) Limited
Reg no: 1998/003766/07
26 - 30 Benbow Avenue
Epping Industria 7460
PO Box 396
Eppindust 7475
Managing director
Gunter Zeppel
Telephone: +27 (0)21 507 9700
Telefax: +27 (0)21 507 9707
DIRECTORS
Executive
Simon Crutchley
(Chief executive officer)
Owen Cressey
(Chief financial officer)
Independent non-executive
Gavin Tipper 2
(Chairman)
Angus Band 2
James Hersov
Kim Macilwaine 5
Adriaan Nühn 4
Mike Bosman 1
Andisiwe Kawa 2
Abe Thebyane
Neo Dongwana 1,3
Barry Smith 3
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: 10/09/2012 07:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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