Avusa diluted earnings fall 36%

Johannesburg - Media and entertainment group Avusa [JSE:AVU] on Thursday reported diluted headline earnings per share of 111 cents for the year ended March 2012, down 36% from a year ago’s 174 cents per share.

Revenue for the year grew 12% on the prior period to R5.96bn, mainly as a result of the full-year inclusion of the Retail Solutions business unit. However, profit from operations declined to R273m from R324m and profit for the year declined to R169m from R217m.

Excluding the Retail Solutions business unit, which contributed for its first full year, revenue contracted by 2%, the company said.

The decline, while largely a result of adverse trading conditions in the current global economic slowdown, also reflected the benefit of R36m of 2010 Soccer World Cup revenue in the prior year.

Following the November 2010 acquisition of the Retail Solutions business unit, 20.555 million new Avusa shares were issued, borrowings were incurred, and the company moved from an interest-earning to interest-paying position, it noted.

Earlier this month, Avusa received an offer by Mvelaphanda Group through its wholly-owned subsidiary, Richtrau No 229, to acquire the issued share capital of Avusa not already held by Richtrau.

Consequent on the offer, no dividend has been declared by the directors in respect of Avusa's 2012 financial year.

The group enjoyed a much stronger second half and as a result diluted headline earnings per share improved from a 90% decline at the interim period to a 36% year-on-year decline for the full year, it noted.

“The second half of the financial year showed a marked improvement on the first six months.

"Despite tough trading conditions persisting and depressed consumer spend, improvements in revenue and profit from operations were encouraging”, said acting CEO Mike Robertson.

The group’s newspapers performed well overall with the Sowetan, The Times and Sunday World all recording triple-digit percentage improvements in their operating profits, with the Sunday World trading profitably for the first time since launching more than a decade ago.

The return of banking and telecoms newspaper advertising spend is expected to positively impact on especially the Sunday Times.

“The improved performance is mainly as a result of our intervention strategy and cost savings drive gaining traction,” Robertson said.

During the reporting period the group finalised its outsourced printing contracts, the main benefits of which are expected to flow through in the current financial year.

One such a benefit is that Avusa’s newspaper titles are now able to offer a much improved regional insert option to advertisers.

Improvements in the confectionery product mix and an increased number of 3D titles released improved revenue at Nu Metro Cinemas. The business unit also made good progress with its strategy of terminating leases at under-performing cinema sites.

Avusa's aim is that the entertainment division transforms from an intermediary to a consumer-facing entity.

Robertson also pointed out that the arrival of digital terrestrial television provides the group with opportunities to partner with technology companies in the provision of video-on-demand.

Robertson noted that the integration of Hirt & Carter and Universal Print (now called Retail Solutions) is adding value as anticipated, with R91m of spend internalisation achieved for the year.

The Retail Solutions business will continue to focus on retaining and growing its key account base and to make prudent investments in print technology to enable sustained growth.

“We are making good progress in addressing structural shifts in some of our businesses,” said Robertson. Despite tough trading conditions, the South African book publishing business increased turnover by 5%.

The business is converting books to digital formats and making titles available across multiple platforms, with digital revenues growing by more than 330%, although off a low base.

“Our digital strategy is on track and we will leverage our strong brands and content, which will be available across multiple platforms” Robertson said. “We have already started with the process of charging for online content.”

The group reported that its investment phase at Interactive Junction Holdings was completed during the review period, with I-Net Bridge still continuing its investment in new generation products.

In addition, BDFM, Avusa’s 50%-owned entity, is developing a new business content portal called Business Day Live, which will be launched in the first half of the 2013 financial year.

Looking forward, Robertson said that the full benefits of most of the interventions are expected to be realised in the current financial year.

“In the light of continued global economic uncertainty, we expect the domestic economy to grow modestly.

"Against this backdrop, we remain confident that interventions implemented during the review period, along with further growth and efficiency initiatives to be implemented in the current financial year, will grow revenues, enhance margins and contain costs,” he said.