Results for the year ended 30 June 2018
Share code: AVI
Registration number: 1944/017201/06
("AVI" or "the Group" or "the Company")
RESULTS FOR THE YEAR ENDED 30 JUNE 2018
For more information, please visit our website: http://www.avi.co.za/investor/results-and-presentations/current-year/
- Profit growth in a challenging demand environment
- Carefully balanced value versus volume across key categories
- Revenue up 1,9% to R13,44 billion
- Gross profit margin recovery in line with easing of Rand driven cost pressures
- Operating profit up 7,0% to R2,55 billion
- Cash generated by operations up 16,1% to R2,69 billion
- Capital expenditure to grow and sustain our businesses of R419,9 million
- Return on capital employed increased to 28,7%
- Headline earnings per share up 7,0% to 543,1 cents
- Final dividend of 260 cents per share, total normal dividend up 7,4% to 435 cents per share
- Special dividend of 250 cents per share
Revenue growth for the 2018 financial year was constrained by a challenging trading environment. Poor consumer demand
and aggressive competition limited volume growth in many of our key categories. Our consumers have been impacted by a
prolonged period of price inflation driven by the effect of the weaker Rand on input costs, the VAT increase and higher
fuel prices, and compounded by the impact of job losses.
Group revenue rose by 1,9% largely due to the annualisation of selling price increases taken during the prior
financial year, partially offset by lower sales volumes in some categories. Selling price increases were only taken in
categories affected by specific raw material cost pressures and in most cases, selling prices were maintained throughout
the year to support sales volumes.
Despite lower price inflation and limited gains in sales volumes, the ongoing efforts to reduce procurement costs and
improve factory efficiencies supported an improvement in the consolidated gross profit margin for the year. Improved
exchange rates compared to last year and benign inflation in our basket of key raw materials priced in foreign currencies
contributed further to this improvement. Selling and administrative costs were tightly managed and benefited from the
restructuring initiatives completed in the prior financial year. All business units achieved operating profit growth and
the Group's consolidated operating profit margin improved over the prior year.
Both Entyce and Snackworks delivered sound operating profit growth in the context of the tough trading environment,
with particularly pleasing performances from the tea and snacks categories underpinning growth for the year. I&J had a
strong second semester supported by improved fishing and cost savings, resulting in good growth in operating profit
despite the adverse impact of a stronger Rand on export sales. Indigo Brands delivered a solid performance in a highly
competitive category. Spitz achieved good full year profit growth, notwithstanding a subdued second half with footwear
sales volumes under pressure following a very strong December performance.
Green Cross had a disappointing year. However, the business remains profitable and cash generative and the operational
changes made during the year will significantly improve core operating performance and working capital levels. A
further impairment of R108,0 million after tax has been made against this investment in recognition of the extended
period it will take to return the business to acceptable profitability from the current base. The impairment will be
recorded as a non-cash capital item.
Headline earnings rose 7,8%, from R1,65 billion to R1,77 billion, with the growth in operating profit and lower
finance costs partially offset by a decline in earnings from I&J's Australian joint venture. Headline earnings per share
increased 7,0% from 507,7 cents to 543,1 cents with a 0,7% increase in the weighted average number of shares in issue
due to the vesting of employee share options, including the AVI Black Staff Empowerment Scheme.
Cash generated by operations, before working capital changes, increased 10,7% to R3,03 billion. Working capital rose
R339,3 million, mostly due to an increase in debtors' payments deferred to the first business day in July. Capital
expenditure of R419,9 million, which included capacity and efficiency projects in the manufacturing operations as well
as new and refurbished stores in the retail businesses, was lower than last year with the finalisation and approval of
several factory improvement projects taking longer than expected. Other material cash outflows during the period were
dividends of R1,42 billion and taxation of R620,9 million. Net debt at the end of June 2018 was R1,27 billion compared
to R1,44 billion at the end of June 2017.
AVI has maintained a normal dividend payout ratio of 80% of diluted headline earnings. In line with this a final
dividend of 260 cents per share has been declared, bringing the total normal dividend for the year to
435 cents, an increase of 7,4% on last year.
In addition, in line with AVI's ongoing commitment to return excess cash to shareholders, the Board has approved a
special dividend of 250 cents per share.
Year ended 30 June
Segmental revenue Segmental operating profit
2018 2017 % 2018 2017 %
Rm Rm change Rm Rm change
Food & Beverage brands 10 282,5 10 076,0 2,1 1 922,6 1 790,6 7,4
Entyce Beverages 3 834,1 3 757,1 2,1 792,6 735,1 7,8
Snackworks 3 960,8 3 956,2 0,1 705,0 666,4 5,8
I&J 2 487,6 2 362,7 5,3 425,0 389,1 9,2
Fashion brands 3 155,0 3 108,6 1,5 645,0 607,5 6,2
Personal Care 1 190,6 1 194,5 (0,3) 250,3 241,5 3,6
Footwear & Apparel 1 964,4 1 914,1 2,6 394,7 366,0 7,8
Corporate - - (15,1) (12,8)
Group 13 437,5 13 184,6 1,9 2 552,5 2 385,3 7,0
Revenue increased 2,1% to R3,83 billion while operating profit increased 7,8% to R792,6 million with the operating
profit margin at 20,7% compared to 19,6% in the prior year.
Tea revenue grew by 5,4% due mainly to selling price increases taken in the current and prior financial years in
response to higher rooibos and black tea prices, offset by a 1,8% decrease in volumes. The premium Five Roses and
Freshpak tea brands continued to perform well considering the significant price inflation over the last three years.
An improved gross profit margin reflects some recovery of accumulated pressure in the first semester, with the second
semester gross profit margin in line with last year. Together with well-controlled selling and administrative costs,
including savings from the restructuring completed in the prior financial year, this resulted in good growth in
operating profit and an improved operating profit margin.
Coffee revenue and operating profit were lower than last year, due mainly to significant pressure on mixed instant
volumes from sustained aggressive competitor activity. This was partially offset by growth from the Hug In A Mug
speciality coffee range. Price points for our mixed instant coffee brands were reduced late in the first semester
resulting in improved demand in the second half of the year, albeit at lower margins. Overall Coffee profit and
profit margins remain healthy.
Creamer performance for the year was solid, with effective promotional activity and full distribution of the new
800 gram pack format resulting in sales volume growth despite aggressive competitor activity. Raw material cost
pressures abated in line with better import exchange rates achieved, resulting in an improvement in gross profit
margin. Operating profit and operating profit margin both showed good improvement over last year.
Revenue of R3,96 billion was 0,1% higher than last year while operating profit rose 5,8%, from R666,4 million to
R705,0 million. The operating profit margin increased from 16,8% to 17,8%.
Biscuits revenue decreased by 1,7% due to a 5,8% decrease in sales volumes, with constrained consumers migrating to
lower priced offerings, partially offset by higher prices attributable to increases implemented in the prior
financial year. Raw material cost pressures abated with lower wheat prices and better import exchange rates partially
offset by high butter prices, helping to offset the impact of lower volumes and resulting in a slight increase in the
gross profit margin. Operating profit for the year increased marginally despite the lower sales volumes and limited
price increases, with tightly controlled selling and administrative costs, including savings from the restructuring
completed in the prior financial year, resulting in an increase in operating profit margin.
Snacks revenue grew 5,9% due mainly to price increases implemented in the prior financial year and a small increase
in sales volumes. Gross profit margin improved with better import exchange rates achieved and lower maize prices
offsetting other cost pressures. Selling and administrative costs were well controlled, contributing to strong growth
in operating profit for the year.
Revenue increased by 5,3% from R2,36 billion to R2,49 billion while operating profit increased from R389,1 million
to R425,0 million. The operating profit margin increased from 16,5% to 17,1%.
Revenue growth stems from higher sales volumes and higher selling prices in domestic and export markets, partially
offset by lower Rand exchange rates achieved on export sales in line with the strengthening of the Rand. Sales
volumes increased, despite lower quota, due to the non-recurrence of the unprotected strike in August 2016, improved
fishing in the second half and higher volumes of non-hake products.
Operating profit increased despite the stronger Rand due to non-recurrence of the unprotected strike in August 2016
and higher unrealised foreign exchange gains, supported by sound performance from the fishing and processing
operations and good focus on cost-savings initiatives over the year.
Abalone profit declined as the stronger Rand reduced current period revenue and resulted in a smaller fair value
adjustment to the value of live abalone on hand at the end of the year.
Indigo's revenue from owned brands grew by 2,7% due to volume growth from gains in market share in key categories and
price increases implemented in the last financial year. Total revenue, including service fees and sales of product
manufactured for Coty, decreased by 0,3%. Export sales volumes declined with less launch activity and disruption in
several markets resulting from import restrictions and local currency weakness. This offset operating profit growth
in the domestic market, resulting in a 3,6% increase in operating profit for the year. The operating profit margin
increased from 20,2% to 21,0%.
Footwear & Apparel
The Footwear & Apparel category increased revenue by 2,6% to R1,96 billion while operating profit increased by 7,8%
from R366,0 million to R394,7 million. The operating profit margin increased from 19,1% to 20,1%.
The Spitz business grew revenue by 3,3% as a result of higher prices on non-core ranges. Selling prices of core
ranges have not been increased since April 2016, supporting demand and a strong December performance. After achieving
growth in the first semester, sales volumes were subdued in the second semester and full year volumes were slightly
lower than last year. Gross profit margin improved in line with better exchange rates achieved and selling and
administrative costs included savings from restructuring work completed last year. Consequently, operating profit for
the year grew by 11,7% from R339,9 million to R379,6 million, and the operating profit margin improved from 22,7% to
Green Cross operating profit declined from R26,8 million to R6,2 million primarily due to poor performance of new
ranges in the retail doors which resulted in a decline in sales volumes as well as gross profit margin, compounded
by the ongoing decline in the wholesale channel. Costs were well controlled but savings were insufficient to offset
the decline in sales volumes and gross profit margin. A further impairment of R108,0 million after tax has been made
against this investment in recognition of the extended period it will take to return the business to acceptable
profitability from the current base.
During the year, reporting lines for key activities in Green Cross were changed to provide direct oversight from the
Spitz management team and we are optimistic that this will yield material improvements in merchandise planning, stock
turn over and retail trading densities. Cash flow for the period was positive due mainly to a reduction in stock
levels and we do not foresee that Green Cross will require material funding through a period of recovery as cash will
be generated from the reduction of high inventory levels and capital expenditure requirements are low.
The trading environment is expected to remain difficult in the next financial year, with the current pressures on
consumer spending likely to be compounded by the cumulative impact of ongoing job losses in both the private and
public sectors. Our expectation is that many of our categories are likely to have low, or even negative, growth
rates until there is a meaningful improvement in the economy. If recent Rand weakness persists, we will see import
cost increases in the second semester that will be difficult to recover in a constrained environment, resulting in
pressure on profit margins. Notwithstanding this, our brands remain healthy and appealing to many consumers and a
good portion of the new financial year's import requirements have been covered at rates that support good levels of
profitability. We will continue to react quickly to market changes as we pursue the most appropriate balance of
price, sales volumes and profit margins for each of our brands.
We will sustain investment that underpins our manufacturing capacity, product quality and service levels. In addition
to the savings being realised from restructuring completed in the prior and current financial years, we will continue
to review organisational structures and fixed overhead costs to improve operational effectiveness and reduce our cost
base. AVI International, supported by our South African manufacturing capabilities, remains focused on steadily
building our brands' shares in export markets while sustaining strong profit margins.
I&J's prospects remain materially dependent on fishing performance and exchange rates. Excluding the impact of weather
conditions, catch rates on the freezer vessels have improved in the last few months and, if sustained, should result in
good sales volumes to well-priced export markets. Export exchange rates secured for the year are at levels that support
sound profitability and the more recent Rand weakness provides upside potential. The hake long-term rights application
process, to allocate rights from 2021, should commence formally during the next year, but is not expected to impact on
operations in this financial year.
The Board is confident that AVI remains well positioned to compete effectively; prudently manage fixed and variable
costs; and, recognising the challenging environment, be alert for appropriate 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
10 September 2018
ABRIDGED SUMMARISED CONSOLIDATED BALANCE SHEET
Audited at 30 June
Property, plant and equipment 3 403,6 3 480,8
Intangible assets and goodwill 926,2 994,0
Investments 360,0 376,9
Deferred taxation 24,3 24,1
4 714,1 4 875,8
Inventories and biological assets 2 165,4 2 068,8
Trade and other receivables including derivatives 2 442,3 2 074,9
Cash and cash equivalents 342,8 246,7
4 950,5 4 390,4
Total assets 9 664,6 9 266,2
Equity and liabilities
Capital and reserves 5 146,4 4 851,7
Total equity 5 146,4 4 851,7
Cash-settled share-based payment liability 38,9 -
Operating lease straight-line liabilities 14,3 12,8
Employee benefit liabilities 382,3 379,7
Deferred taxation 389,2 375,6
Current borrowings 1 612,6 1 690,8
Trade and other payables including derivatives 2 031,8 1 925,8
Current tax liabilities 49,1 29,8
3 693,5 3 646,4
Total equity and liabilities 9 664,6 9 266,2
Net debt* 1 269,8 1 444,1
Return on capital employed (%)** 28,7 28,0
* Comprises current borrowings less cash and cash equivalents.
**Operating profit before capital items and after taxation, as a percentage of average capital employed.
ABRIDGED SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
year ended 30 June
2018 2017 %
Rm Rm change
Revenue 13 437,5 13 184,6 1,9
Cost of sales (7 498,0) (7 422,4) 1,0
Gross profit 5 939,5 5 762,2 3,1
Selling and administrative expenses (3 387,0) (3 376,9) 0,3
Operating profit before capital items 2 552,5 2 385,3 7,0
Interest received 5,7 5,1 11,8
Finance costs (132,4) (157,5) (15,9)
Share of equity accounted earnings of joint ventures 56,3 63,2 (10,9)
Capital items (136,6) (127,5) 7,1
Profit before taxation 2 345,5 2 168,6 8,2
Taxation (669,7) (615,4) 8,8
Profit for the year 1 675,8 1 553,2 7,9
Profit attributable to:
Owners of AVI 1 675,8 1 553,2 7,9
1 675,8 1 553,2 7,9
Other comprehensive income/(loss), net of tax 33,0 (59,2)
Items that are or may be subsequently reclassified to profit or loss
Foreign currency translation differences 3,8 (37,5)
Cash flow hedging reserve 29,0 (8,7)
Taxation on items that are or may be subsequently reclassified
to profit or loss (8,1) 2,4
Items that will never be reclassified to profit or loss
Actuarial gain/(loss) recognised 11,5 (21,4)
Taxation on items that will never be reclassified to profit or loss (3,2) 6,0
Total comprehensive income for the year 1 708,8 1 494,0 14,4
Total comprehensive income attributable to:
Owners of AVI 1 708,8 1 494,0 14,4
1 708,8 1 494,0 14,4
Depreciation and amortisation included in operating profit 412,9 397,4 3,9
Earnings per share
Basic earnings per share (cents)# 513,1 479,0 7,1
Diluted earnings per share (cents)## 510,1 475,2 7,3
Headline earnings per share (cents)# 543,1 507,7 7,0
Diluted headline earnings per share (cents)## 540,0 503,6 7,2
# Basic earnings and headline earnings per share are calculated on a weighted average of 326 624 426
(30 June 2017: 324 230 182) ordinary shares in issue.
## Diluted earnings and diluted headline earnings per share are calculated on a weighted average of 328 520 186
(30 June 2017: 326 828 137) ordinary shares in issue.
ABRIDGED SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
year ended 30 June
2018 2017 %
Rm Rm change
Cash generated by operations 2 691,9 2 318,6 16,1
Interest paid (132,4) (157,5) (15,9)
Taxation paid (620,9) (546,7) 13,6
Net cash available from operating activities 1 938,6 1 614,4 20,1
Interest received 5,7 5,1 11,8
Property, plant and equipment acquired (419,9) (545,6) (23,0)
Additions to intangible assets (14,6) (2,3) 534,8
Proceeds from disposals of property, plant and equipment 14,8 18,0 (17,8)
Contributions to Enterprise and Supplier Development initiatives (8,6) - 100,0
Cash flows from joint ventures 83,9 79,1 6,1
Net cash used in investing activities (338,7) (445,7) (24,0)
Proceeds from shareholder funding 59,9 63,3 (5,4)
Short-term funding repaid (78,2) (46,9) 66,7
Payment to I&J BBBEE shareholders (65,0) - 100,0
Ordinary dividends paid (1 421,3) (1 244,5) 14,2
Net cash used in financing activities (1 504,6) (1 228,1) 22,5
Increase/(decrease) in cash and cash equivalents 95,3 (59,4) (260,4)
Cash and cash equivalents at beginning of year 246,7 309,1 (20,2)
342,0 249,7 37,0
Translation of cash equivalents of foreign subsidiaries 0,8 (3,0) (126,7)
Cash and cash equivalents at end of year 342,8 246,7 39,0
Movement in net debt
Opening balance 1 444,1 1 428,6 1,1
Short-term funding repaid (78,2) (46,9)
(Increase)/decrease in cash and cash equivalents (95,3) 59,4
Translation of cash equivalents of foreign subsidiaries (0,8) 3,0
Net debt 1 269,8 1 444,1 (12,1)
ABRIDGED SUMMARISED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
and Treasury Retained BBBEE Total
premium shares Reserves earnings shareholders equity
Rm Rm Rm Rm Rm Rm
Year ended 30 June 2018
Balance at 1 July 2017 280,3 (541,9) 449,9 4 666,1 (2,7) 4 851,7
Profit for the year - - - 1 675,8 - 1 675,8
Other comprehensive income
Foreign currency translation differences - - 3,8 - - 3,8
Actuarial gains recognised, net of tax - - 8,3 - - 8,3
Cash flow hedging reserve, net of tax - - 20,9 - - 20,9
Total other comprehensive income - - 33,0 - - 33,0
Total comprehensive income for the year - - 33,0 1 675,8 - 1 708,8
Transactions with owners, recorded directly in equity -
Share-based payments - - 37,0 - - 37,0
Group share scheme recharge - - 14,2 - - 14,2
Dividends paid - - - (1 421,3) - (1 421,3)
Own ordinary shares sold by AVI Share Trusts - 55,4 - 4,5 - 59,9
I&J BBBEE shareholders - - - - (103,9) (103,9)
Total contributions by and distributions to owners - 55,4 51,2 (1 416,8) (103,9) (1 414,1)
Balance at 30 June 2018 280,3 (486,5) 534,1 4 925,1 (106,6) 5 146,4
Year ended 30 June 2017
Balance at 1 July 2016 114,3 (435,9) 459,4 4 354,4 (2,7) 4 489,5
Profit for the year - - - 1 553,2 - 1 553,2
Other comprehensive loss
Foreign currency translation differences - - (37,5) - - (37,5)
Actuarial losses recognised, net of tax - - (15,4) - - (15,4)
Cash flow hedging reserve, net of tax - - (6,3) - - (6,3)
Total other comprehensive loss - - (59,2) - - (59,2)
Total comprehensive income for the year - - (59,2) 1 553,2 - 1 494,0
Transactions with owners, recorded directly in equity
Share-based payments - - 28,0 - - 28,0
Group share scheme recharge 21,4 21,4
Dividends paid - - - (1 244,5) - (1 244,5)
Issue of ordinary shares to AVI Share Trust 166,0 (166,0) - - - -
Own ordinary shares sold by AVI Share Trusts - 60,0 - 3,3 - 63,3
Transfer between reserves - - 0,3 (0,3) - -
Total contributions by and distributions to owners 166,0 (106,0) 49,7 (1 241,5) - (1 131,8)
Balance at 30 June 2017 280,3 (541,9) 449,9 4 666,1 (2,7) 4 851,7
NOTES TO THE ABRIDGED SUMMARISED CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
AVI Limited ('AVI'or the 'Company') is a South African registered company. These abridged summarised consolidated
financial statements comprise the Company and its subsidiaries (together referred to as the 'Group') and the Group's
interest in joint ventures.
1. Basis of preparation
The abridged summarised consolidated financial statements have been prepared in accordance with the
requirements of the JSE Limited Listings Requirements for abridged reports, and the requirements of the
Companies Act of South Africa applicable to summary financial statements. The Listings Requirements require
abridged reports to be prepared in accordance with the framework concepts and the measurement and recognition
requirements of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as
issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting
Standards Council and also, as a minimum, to contain the information required by IAS 34 - Interim Financial
The accounting policies used in the preparation of the abridged summarised consolidated financial statements were
derived and are in terms of International Financial Reporting Standards and are consistent with those accounting
policies applied in the preparation of the previous consolidated annual financial statements.
The abridged 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.
The Group has adopted the amendments to the following accounting standard in the preparation of these results,
which became effective for the Group from 1 July 2017:
Amendments to IAS 7 (Disclosure Initiative)
The amendments provide for disclosure that enables users of financial statements to evaluate changes in liabilities
arising from financing activities, including both changes arising from cash flow and non-cash changes. This includes
providing a reconciliation between the opening and closing balances for liabilities arising from financing activities.
The required disclosure has been provided in the annual consolidated financial statements. The implementation of the
amendments had no impact on the Group's results.
The remaining standards, amendments and interpretations, which became effective in the period ended 30 June 2018 were
assessed for applicability to the Group and management concluded that they had no impact.
2. Segmental results
year ended 30 June
2018 2017 %
Rm Rm change
Food & Beverage brands 10 282,5 10 076,0 2,1
Entyce Beverages 3 834,1 3 757,1 2,1
Snackworks 3 960,8 3 956,2 0,1
I&J 2 487,6 2 362,7 5,3
Fashion brands 3 155,0 3 108,6 1,5
Personal Care 1 190,6 1 194,5 (0,3)
Footwear & Apparel 1 964,4 1 914,1 2,6
Group 13 437,5 13 184,6 1,9
Segmental operating profit before capital items
Food & Beverage brands 1 922,6 1 790,6 7,4
Entyce Beverages 792,6 735,1 7,8
Snackworks 705,0 666,4 5,8
I&J 425,0 389,1 9,2
Fashion brands 645,0 607,5 6,2
Personal Care 250,3 241,5 3,6
Footwear & Apparel 394,7 366,0 7,8
Corporate and consolidation (15,1) (12,8)
Group 2 552,5 2 385,3 7,0
3. Determination of headline earnings
year ended 30 June
2018 2017 %
Rm Rm change
Profit for the year attributable to owners of AVI 1 675,8 1 553,2 7,9
Total capital items after taxation 98,1 92,8
Net gain on disposal of property, plant and equipment (13,4) (9,7)
Impairment of property, plant and equipment - 2,3
Impairment of Green Cross trademark* 150,0 150,0
Joint venture capital profit - (15,1)
Taxation attributable to capital items (38,5) (34,7)
Headline earnings 1 773,9 1 646,0 7,8
Headline earnings per ordinary share (cents) 543,1 507,7 7,0
Diluted headline earnings per ordinary share (cents) 540,0 503,6 7,2
Number Number %
of shares of shares change
Weighted average number of ordinary shares 326 624 426 324 230 182 0,7
Weighted average diluted number of ordinary shares 328 520 186 326 828 137 0,5
* The Green Cross trademark of R399,7 million was recognised on acquisition of the business on 1 March 2012.
An impairment loss of R150 million was recognised in the prior year, and a further impairment loss of
R150 million has been recognised in the current year, in consideration of the extended period it will
take to return the business to acceptable profitability from the current base.
4. Cash generated by operations
year ended 30 June
2018 2017 %
Rm Rm change
Cash generated by operations before working capital changes 3 031,2 2 738,4** 10,7
Change in working capital (339,3) (419,8)** (19,2)
Cash generated by operations 2 691,9 2 318,6 16,1
** Historically adjustments for non-cash items have taken into account the income statement charge for
incentive provisions and earnings-linked performance bonuses, as well as the current service cost
and interest cost relating to the Group's post-retirement medical aid obligation, without adjusting
for related cash payments.
This has been corrected in the current year, and the prior year has been restated. Accordingly, an
adjustment of R255,2 million has been processed between 'Cash generated by operations before working
capital changes' and 'Change in working capital' to more appropriately account for cash payments within
'Cash generated by operations before working capital changes'. 'Cash generated by operations' remains
5. I&J Broad-Based Black Economic Empowerment ('BBBEE') transactions
Previously the Company sold 20% of its shareholding in Irvin & Johnson Holding Company Proprietary Limited ('I&J')
to Main Street 198 Proprietary Limited ('Main Street'), a broad-based black empowered company with strong
commitments to the South African fishing industry. The I&J shareholders agreement provides for put and call options
between the Company and Main Street, the exercise price of which is determined by a fixed formula based on I&J's
During June 2018, the exercise date of the put and call options was extended from July 2018 to July 2022. As part
of the extension, a minimum guaranteed exercise price of R106,8 million was agreed with Main Street based on the
application of the fixed formula at 30 June 2018. R65,0 million of this minimum guaranteed amount was paid to
Main Street in June 2018 with the balance payable on exercise of the put and call options.
The sale of the 20% interest to Main Street was an equity instrument that was considered to have fully vested in the
hands of the participants before 1 January 2005. Under the exemption offered by IFRS 1 - First-time Adoption of IFRS
the transaction was not accounted for as a share-based payment. The extension of the arrangement in the current year
has been treated as a modification within the scope of IFRS 2 - Share-based Payments. Prior to the extension AVI could
elect to settle the transaction in either shares or cash. The inclusion of the minimum guaranteed amount, however,
results in the modification of the transaction from an equity-settled share-based payment transaction to a cash-settled
share-based payment transaction. Accordingly, the payment of R65,0 million and present value of the remaining minimum
guaranteed amount have been recorded directly against equity as part of the modification of the previous equity-settled
arrangement, and a cash-settled share-based payment liability of R38,9 million recognised for the present value of the
remaining minimum guaranteed amount plus estimated dividends over the remaining period.
year ended 30 June
Capital expenditure commitments for property, plant and equipment 371,4 351,8
Contracted for 143,3 97,6
Authorised but not contracted for 228,1 254,2
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
7. Fair value classification and measurement
The Group measures derivative foreign exchange contracts, fuel swaps and biological assets at fair value.
The fair value of foreign exchange contracts and fuel swaps is determined using a forward pricing model with reference
to quotes from financial institutions. Significant inputs into the Level 2 fair value measurement include yield curves
as well as market interest rates and foreign exchange rates. The estimated fair values of recognised financial
instruments approximate their carrying amounts based on the nature or maturity period of the financial instruments.
Biological assets comprise abalone which is farmed by I&J. These assets are disclosed as Level 3 financial instruments
with their fair value determined using a combination of the market comparison and cost technique as prescribed by IAS 41.
There were no transfers between Levels 1, 2 or 3 of the fair value hierarchy during the year ended 30 June 2018.
Further information about the assumptions made in measuring fair values is included in the consolidated financial
statements available at the Company's registered office.
8. Post-balance sheet events
No events that meet the requirements of IAS 10 have occurred since the balance sheet date.
9. New standards and interpretations in issue not yet effective
A number of new standards, amendments to standards and interpretations are not yet effective for the year ended
30 June 2018. These include the following standards and interpretations, and amendments to standards, that are applicable
to the business of the Group, and have not been applied in preparing these financial statements:
IFRS 15 - Revenue from Contracts with Customers
This standard combines, enhances and replaces specific guidance on recognising revenue with a single revenue standard that
introduces a new revenue recognition model for contracts with customers.
The core principle of IFRS 15 is that an entity will recognise revenue to depict the transfer of promised goods or services
to customers for an amount that reflects the consideration to which an entity expects to be entitled to in exchange for
those goods or services. The model features a contract-based five-step analysis of transactions to determine whether, how
much and when revenue is recognised.
The standard is mandatory for accounting periods beginning on or after 1 January 2018 and will therefore be adopted by AVI
for the year ended 30 June 2019. The Group is planning to apply the standard retrospectively, recognising the cumulative
effect of initially applying the standard in retained earnings at the date of initial application on 1 July 2018.
The Group has undertaken a detailed review of the main types of commercial arrangements with customers under the five-step
model of IFRS 15 and has concluded that the application of IFRS 15 will have the following indicative impact (based on the
results for the year ended 30 June 2018) on the presentation of the consolidated financial statements:
(i) An amount of R475,6 million in payments to customers currently treated as selling and distribution costs will be
reclassified as deductions from revenue due to clarity provided by IFRS 15 regarding 'identifiable' and 'separable' not
provided by IAS 18.
(ii) An amount of R63,4 million relating to transport and insurance costs currently offset against revenue will be reallocated
to cost of sales due to clarity provided by IFRS 15 regarding agent versus principal.
(iii)An amount of R305,5 million of accruals and provisions for payments to customers currently included in trade and other
payables will be offset against trade and other receivables due to clarity provided by IFRS 15 regarding 'identifiable'
and 'separable' not provided by IAS 18.
The implementation of the new standard will not materially impact the measurement and timing of revenue recognition and
therefore no impact on retained earnings on 1 July 2018 is expected.
IFRS 9 - Financial Instruments
IFRS 9 addresses the accounting principles for the financial reporting of financial assets and financial liabilities, including
classification, measurement, impairment, derecognition and hedge accounting. IFRS 9 replaces earlier versions of IFRS 9 and
completes the IASB's project to replace IAS 39 - Financial Instruments: Recognition and Measurement.
The standard is mandatory for accounting periods beginning on or after 1 January 2018 and will therefore be adopted by AVI for
the year ended 30 June 2019. The Group is planning to apply the standard retrospectively as at 1 July 2018, however, with no
restatement of comparative information for prior years. AVI has elected to retain the hedge accounting requirements of IAS 39.
IFRS 9 replaces the current IAS 39 categories of financial assets with three principle classification categories - measured at
amortised cost, fair value through other comprehensive income and fair value through profit or loss. Financial assets held by
the Group have been assessed, considering contractual cash flow characteristics and the business models for managing financial
assets. Based on the assessment, there will be no impact on the classification of financial assets as a result of the adoption
of IFRS 9.
IFRS 9 replaces the 'incurred loss' model of IAS 39 with a forward looking 'expected credit loss' model to measure impairment
losses on financial assets. The majority of the Group's financial assets are trade receivables for which IFRS 9 requires the
simplified approach to be applied, measuring the impairment loss allowance based on lifetime expected credit loss. Further
to this, as a practical expedient, AVI has applied a provision matrix assessing historical credit losses per aged bucket of
trade debtors and overlaying this with AVI's assessment of general economic conditions to estimate expected future losses. The
implementation of IFRS 9 will result in a R4,5 million increase in the impairment loss allowance. This will be recognised
against retained earnings on 1 July 2018.
IFRS 16 - Leases
IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a
contract, i.e. the customer ('lessee') and the supplier ('lessor'). IFRS 16 replaces the previous leases standard, IAS 17, and
IFRS 16 has one model for lessees which will result in leases previously classified as operating leases and recorded off-balance
sheet being capitalised on the balance sheet, requiring a lessee to recognise a right-of-use asset and a concomitant lease
liability. The standard will have the most significant impact in AVI's retail businesses which lease all their retail doors.
AVI does not have any finance leases.
The standard is mandatory for accounting periods beginning on or after 1 January 2019, however the Group is planning to early
adopt the standard for the year ended 30 June 2019 with the date of initial application 1 July 2018. The Group is planning to
apply the standard retrospectively recognising the cumulative effect of initially applying the standard in retained earnings at
the date of initial application (modified retrospective approach).
As part of the modified retrospective transition approach, AVI has elected to apply the practical expedient which allows single
discount rates to be applied to portfolios of leases with reasonably similar characteristics.
As an accounting policy election, AVI will apply the following recognition exemptions which allow for certain lease payments to
be expensed over the lease term as opposed to recognising a right-of-use asset and related lease liability on the lease
- Short-term leases - these are leases with a lease term of 12 months or less; and
- Leases of low value assets - these are leases where the underlying asset is of low value.
At transition date, the adoption of IFRS 16 will result in the recognition of right-of-use assets to the value of R367,1 million
and lease liabilities of R465,0 million. Taking into account leases in place on the initial application date, operating profit
is expected to increase by approximately R40 million due to the replacement of the operating lease expense with depreciation of
right-of-use assets. This increase will partly be offset by a higher interest expense on lease liabilities of approximately
R30 million, resulting in an estimated after tax gain in earnings of R7 million. On the statement of cash flows, estimated lease
payments of R180 million, previously included in cash generated by operations, will be disclosed under financing activities
(R150 million relating to the principal portion of lease payments) and interest paid (R30 million).
Non-applicable standards, amendments and interpretations
The other remaining standards, amendments and interpretations issued but not yet effective have been assessed for applicability
to the Group and management has concluded that they are not applicable to the business of the Group and will therefore have no
impact on future financial statements.
10. Dividend declaration
Notice is hereby given that a gross final ordinary dividend No 90 of 260 cents per share for the year ended 30 June 2018
and a gross special dividend No 91 of 250 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 20%.
Consequently, a net final ordinary dividend of 208 cents per share and a net special dividend of 200 cents per
share will be distributed to those shareholders who are not exempt from paying dividend tax. In terms of dividend tax legislation,
the dividend tax amounts 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 351 673 245 ordinary shares. AVI's tax reference number is
9500/046/71/0. The salient dates relating to the payment of the dividends are as follows:
Last day to trade cum dividend on the JSE Tuesday, 9 October 2018
First trading day ex dividend on the JSE Wednesday, 10 October 2018
Record date Friday, 12 October 2018
Payment date Monday, 15 October 2018
In accordance with the requirements of Strate Limited, no share certificates may be dematerialised or rematerialised between Wednesday,
10 October 2018, and Friday, 12 October 2018, 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 CSDP or broker credited on Monday, 15 October 2018.
11. Reports of the independent auditor
The abridged summarised consolidated financial statements for the year ended 30 June 2018 have been audited by Ernst & Young Inc.,
who expressed an unmodified opinion thereon. The auditor also expressed an unmodified opinion on the annual consolidated financial
statements from which these abridged summarised consolidated financial statements were derived. The auditor's report on the abridged
summarised consolidated financial statements does not necessarily report on all of the information contained in this announcement.
Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor's engagement they should
obtain a copy of the auditor's report on the abridged summarised consolidated financial statements and of the auditor's report on the
annual consolidated financial statements which is available for inspection at the Company's registered office, together with the
accompanying financial statements identified in the respective auditor's report.
12. Preparer of financial statements
These summarised financial statements have been prepared under the supervision of Owen Cressey CA(SA), the AVI Group Chief
13. Annual report
The annual report for the year ended 30 June 2018 will be posted to shareholders on or about Tuesday, 2 October 2018. The financial
statements will include the notice of the annual general meeting of shareholders to be convened on Thursday, 1 November 2018.
10 September 2018
ADMINISTRATION AND PRINCIPAL SUBSIDIARIES
AVI Limited ('AVI')
Reg no: 1944/017201/06
Share code: AVI
Business address and registered office
2 Harries Road
PO Box 1897
Telephone: +27 (0)11 502 1300
Telefax: +27 (0)11 502 1301
Ernst & Young Inc.
Appointed 30 January 2018
The Standard Bank of South Africa Limited
Computershare Investor Services Proprietary Limited
15 Biermann Avenue
PO Box 61051
Telephone: +27 (0)11 370 5000
Telefax: +27 (0)11 370 5271
Food & Beverage brands
National Brands Limited
Reg no: 1948/029389/06
(incorporating Entyce Beverages and Snackworks)
30 Sloane Street
PO Box 5159
Telephone: +27 (0)11 707 7200
Telefax: +27 (0)11 707 7799
Irvin & Johnson Holding Company Proprietary Limited
Reg no: 2004/013127/07
1 Davidson Street
Cape Town 7925
PO Box 1628
Cape Town 8000
Telephone: +27 (0)21 440 7800
Telefax: +27 (0)21 440 7270
Indigo Brands Proprietary Limited
Reg no: 2003/009934/07
16 - 20 Evans Avenue
Epping 1 7460
PO Box 3460
Cape Town 8000
Telephone: +27 (0)21 507 8500
Telefax: +27 (0)21 507 8501
Footwear & Apparel
A&D Spitz Proprietary Limited
Reg no: 1999/025520/07
29 Eaton Avenue
PO Box 782916
Acting managing director
Telephone: +27 (0)11 707 7300
Telefax: +27 (0)11 707 7763
Green Cross Manufacturers Proprietary Limited
Reg no: 1994/008549/07
26 - 30 Benbow Avenue
PO Box 396
Epping Industria 7475
Acting managing director
Telephone: +27 (0)21 507 9700
Telefax: +27 (0)21 507 9707
(Chief Executive Officer)
(Chief Financial Officer)
(Business Development Director)
Gavin Tipper (1) (Chairman)
James Hersov (2)
Adriaan Nuhn (1,4)
Mike Bosman (2)
Andisiwe Kawa (1,5)
Abe Thebyane (1)
Neo Dongwana (2,3)
1 Member of the Remuneration, Nomination and Appointments Committee.
2 Member of the Audit and Risk Committee.
3 Member of the Social and Ethics Committee.
5 Resigned 27 February 2018.
Date: 10/09/2018 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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