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MASTERFRIDGE LIMITED
(INCORPORATED IN THE KINGDOM OF SWAZILAND)
SWAZILAND REGISTRATION NUMBER 825 OF 1993
SOUTH AFRICAN REGISTRATION NUMBER 06/02051/10
INTERIM REPORT FOR THE SIX MONTHS ENDED 31 DECEMBER 1998
NOTE: ONE EMALANGENI IS EQUIVALENT TO ONE RAND
UNAUDITED AUDITED
SIX MONTHS ENDED YEAR ENDED
31 DECEMBER 30 JUNE
1998 1997 1998
CONSOLIDATED INCOME STATEMENTS (E'000)
TURNOVER 232 274 221 859 425 975
OPERATING PROFIT/(LOSS) BEFORE THE
FOLLOWING 21 520 (811) (44 754)
DEPRECIATION (5 838) (5 481) (9 644)
NET INTEREST PAID (14 464) (3 379) (12 385)
PROFIT/(LOSS) BEFORE TAXATION 1 218 (9 671) (66 783)
TAXATION (178) (202) 1 613
PROFIT/(LOSS) AFTER TAXATION 1 040 (9 873) (65 170)
OUTSIDE SHAREHOLDERS' INTEREST 6 949 (1 931) (3 048)
PROFIT/(LOSS) ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS 391 (7 942) (62 122)
HEADLINE PROFIT/(LOSS)
HEADLINE PROFIT/(LOSS) IS CALCULATED
AS FOLLOWS:
PROFIT/(LOSS) ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS 391 (7 942) (62 122)
ABNORMAL ITEMS 564 (787) 4 334
- EXCEPTIONAL ITEMS 1 060 - 5 170
- PROFIT ON SALE OF ASSETS (496) (787) (836)
TAXATION - - -
HEADLINE PROFIT/(LOSS) 955 (8 729) (57 788)
CALCULATIONS BASED ON WEIGHTED
AVERAGE NUMBER OF SHARES IN ISSUE
EARNINGS/(LOSS) PER SHARE (CENTS) 0,4 (8,0) (62,3)
HEADLINE EARNINGS/(LOSS) PER SHARE
(CENTS) 1,0 (8,8) (57,9)
FULLY DILUTED EARNINGS/(LOSS) PER
SHARE (CENTS) 1,0 (8,8) (57,9)
NET ASSET VALUE PER SHARE (CENTS) 103,2 187,2 103,3
NUMBER OF SHARES ('000S)
- IN ISSUE 100 291 100 291 100 291
- WEIGHTED AVERAGE 100 291 99 256 99 769
- WEIGHTED AVERAGE FULLY DILUTED 100 291 99 256 99 769
UNAUDITED AUDITED
SIX MONTHS ENDED YEAR ENDED
31 DECEMBER 30 JUNE
1998 1997 1998
CONSOLIDATED BALANCE SHEET (E'000)
EMPLOYMENT OF CAPITAL
SHAREHOLDERS' FUNDS 103 472 185 829 103 086
OUTSIDE SHAREHOLDERS' INTEREST (2 292) (759) (2 109)
LONG-TERM LIABILITY 39 415 31 168 33 049
DEFERRED TAXATION 5 2 383 94
140 600 218 621 134 120
CAPITAL EMPLOYED
FIXED ASSETS 89 636 80 614 94 988
GOODWILL - 30 700 -
NET CURRENT ASSETS 50 964 107 307 39 132
- CURRENT ASSETS 207 581 274 356 238 929
- CURRENT LIABILITIES 156 617 167 049 199 797
140 600 218 621 134 120
CONSOLIDATED CASH FLOW INFORMATION (E'000)
CASH (UTILISED)/GENERATED BY
OPERATING ACTIVITIES 18 734 (66 694) (48 054)
NET INTEREST PAID (14 464) (3 379) (12 385)
TAXATION PAID (147) (4 283) (4 287)
4 123 (74 356) (64 726)
CASH FLOW FROM INVESTING ACTIVITIES (2 863) (15 263) (33 750)
CASH FLOW FROM FINANCING ACTIVITIES 5 704 35 931 37 808
INCREASE/(DECREASE) IN BANK AND
CASH EQUIVALENTS 6 964 (53 688) (60 668)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR (72 574) (11 906) (11 906)
CASH AND CASH EQUIVALENTS AT
END OF YEAR (65 610) (65 594) (72 574)
RESULTS
THE SEVERE LOSSES WHICH OCCURRED IN THE 1998 FINANCIAL YEAR HAVE BEEN REVERSED
AND THE DIRECTORS ARE PLEASED TO REPORT A SMALL PROFIT ATTRIBUTABLE TO
SHAREHOLDERS OF E391 000 COMPARED TO A LOSS OF E7,94M FOR THE SIX MONTHS ENDED
31 DECEMBER 1997 AND A LOSS OF E62,1M FOR THE YEAR ENDED 30 JUNE 1998.
AN EQUALLY POSITIVE DEVELOPMENT IS THE REDUCTION OF THE COMPANY'S OVERDRAFT
FROM E72,6M AT 30 JUNE 1998 (RISING TO E123M IN OCTOBER 1998) TO E65,6M AS AT
31 DECEMBER 1998. THIS WILL BE REDUCED FURTHER AS THE DEBTORS BOOK REFLECTING
EXCEPTIONALLY GOOD SALES DURING NOVEMBER AND DECEMBER 1998 WILL BE COLLECTED
DURING THE FIRST QUARTER WITH A CONCOMITANT DROP IN FINANCE CHARGES DURING THE
MONTHS AHEAD.
HEADLINE EARNINGS IMPROVED FROM A LOSS OF E8,7M FOR THE SIX MONTHS ENDED 31
DECEMBER 1997 TO EARNINGS OF E0,96M FOR THE PERIOD UNDER REVIEW. THE COMPANY
RECORDED A HEADLINE LOSS OF E57,8M FOR THE YEAR ENDED 30 JUNE 1998.
THE POSITIVE EARNINGS WERE ACHIEVED WITH A SMALL INCREASE IN TURNOVER FROM
E221,9M TO E232,3M AND ARE THE RESULT OF INCISIVE REMEDIAL ACTION DETAILED IN
THE FINANCIAL RESULTS ANNOUNCEMENT DATED 25 SEPTEMBER 1998 AND THE ANNUAL
REPORT.
THE RESULTS FOR THE SIX MONTHS WERE NEVERTHELESS ADVERSELY AFFECTED BY
EXCEPTIONAL LOSSES AMOUNTING TO E3,5M. THEY INCLUDE
- E0,7M LOSSES EMANATING FROM MASTERFRIDGE ZIMBABWE
- EL,0M STOCK LOSSES AT THE FRIDGE MASTER STOVE COMPANY (UNIVA STOVES).
- E1,1M ADDITIONAL RETRENCHMENT COSTS
- AN E0,7M UNDER-RECOVERY FOR THE MONTH OF JULY 1998 DUE TO THE LATE START UP
IN THE GAS ABSORPTION REFRIGERATOR PLANT IN BRONKHORSTSPRUIT.
REVIEW OF OPERATIONS
MANAGEMENT ATTENTION FOCUSED ON IMPLEMENTING THE REMEDIAL ACTION OUTLINED IN
THE FINANCIAL RESULTS ANNOUNCEMENT OF 25 SEPTEMBER 1998.
MUCH OF THIS HAS BEEN ACCOMPLISHED AND THE EFFECTS OF MANY OF THE STEPS TAKEN
WILL BECOME EVIDENT IN THE FORM OF IMPROVED PROFITS DURING THE CURRENT
HALF-YEAR AND THE NEXT FINANCIAL YEAR COMMENCING 1 JULY 1999.
PARTICULAR SUCCESS HAS BEEN ACHIEVED THROUGH RELENTLESS WORKING CAPITAL
MANAGEMENT, REFLECTED IN AMONG OTHERS LOWER INVENTORIES OF RAW MATERIALS,
COMPONENTS AND FINISHED GOODS AND AN IMPROVED DEBTORS BOOK.
EXTENSIVE INVESTIGATION INTO PRODUCT WARRANTY COSTS UNCOVERED LAX CONTROLS BY
THE SERVICE DEPARTMENTS, WHICH HAVE COST THE COMPANY A CUMULATIVE E2,0M OVER
BUDGET DURING THE PERIOD. COSTS WERE BROUGHT UNDER CONTROL BY NOVEMBER 1998 AND
FURTHER PROGRESS ON COST REDUCTIONS IN THIS AREA IS UNDERWAY.
THE APPOINTMENT OF A NEW GROUP FINANCIAL DIRECTOR AS WELL AS SENIOR FINANCIAL
MANAGERS AT THE MANUFACTURING SUBSIDIARIES, TOGETHER WITH THE TRANSFER OF
OVERALL FINANCIAL CONTROL TO THE COMPANY'S BEDFORDVIEW OFFICE HAS ALSO PAID
DIVIDENDS.
PROFITABILITY WILL BE FURTHER ENHANCED BY A SELLING PRICE INCREASE ALREADY
NEGOTIATED WITH THE COMPANY'S CUSTOMERS TO TAKE EFFECT IN FEBRUARY 1999. DURING
THE PAST FEW DIFFICULT MONTHS THE COMPANY HAS CONTINUED TO RECEIVE THE SUPPORT
FROM THE LEADERS IN THE RETAIL TRADE FOR ITS PRODUCTS AND ENCOURAGEMENT FOR
RESTORING PROFITABILITY AND RETAINING MARKET LEADERSHIP.
THE STRONG FOCUS DURING THE PAST FEW MONTHS ON COST REDUCTIONS AND THE
APPOINTMENT OF AN EXECUTIVE DIRECTOR DEDICATED TO GROUP PURCHASING IN AUGUST
LAST YEAR, HAVE RESULTED IN SIGNIFICANT RAW MATERIAL AND COMPONENT COST SAVINGS
THE FOUNDATIONS HAVE ALSO BEEN LAID FOR MAJOR EXPORT CONTRACTS WITH SIZEABLE
DISTRIBUTORS IN EUROPE. IN THE LOCAL MARKETS VOLUMES ARE IN LINE WITH THE SALES
BUDGET. THE COMPANY CONTINUES TO GAIN MARKET SHARE, PARTICULARLY EVIDENT IN
NOVEMBER AND DECEMBER WHEN THE SWAZILAND FACTORIES HAD TO INTRODUCE A SEVEN-DAY
WEEK TO COPE WITH ORDERS.
BRINGING FRIDGE MASTER STOVE COMPANY (UNIVA - IN LIQUIDATION) TO PROFITABILITY
IS TAKING LONGER THAN EXPECTED. THE MAJOR PROBLEM IS THAT LEGAL OWNERSHIP WILL
ONLY BE OBTAINED IN FEBRUARY 1999 AND THAT DURING THIS PERIOD CONTRACT LABOUR
HAD TO BE EMPLOYED. UNDER THE CIRCUMSTANCES IT WAS NOT POSSIBLE TO IMPLEMENT
AND ENFORCE RAW MATERIAL AND FINANCIAL MANAGEMENT DISCIPLINES. A HIGHLY
EXPERIENCED GENERAL MANAGER HAS RECENTLY TAKEN CHARGE OF THE OPERATION.
INDICATIONS ARE THAT FROM FEBRUARY 1999 ONWARDS THE SUBSIDIARY WILL PRODUCE A
SMALL MONTHLY PROFIT.
THE MANUFACTURING COMPANIES IN SWAZILAND ARE OPERATING PROFITABLY AND MEETING
PRODUCTION TARGETS DESPITE STAFF DOWNSIZING. THE BRONKHORSTSPRUIT OPERATION HAS
BEEN MANAGED TO A BREAK EVEN SITUATION FROM A NET LOSS TO JUNE 1998 OF E8,3M.
THE ONLY OPERATION WHICH HAS NOT BEEN RESPONDING TO REMEDIAL ACTION IS
MASTERFRIDGE ZIMBABWE IN WHICH MASTERFRIDGE HOLDS 60% OF THE SHARES. THE
RAMPANT INFLATION IN ZIMBABWE HAS SIGNIFICANTLY DIMINISHED DISPOSABLE INCOME
REDUCING DEMAND FOR REFRIGERATORS AND FREEZERS TO THE POINT WHERE IT IS NO
LONGER VIABLE FOR THE COMPANY TO CONTINUE MANUFACTURING. THE SHAREHOLDERS ARE
SERIOUSLY CONSIDERING LIQUIDATION OF THE COMPANY. APART FROM THE E0,7M LOSS
ALREADY ACCOUNTED FOR IN THE INTERIM RESULTS, LOSSES ARISING FROM LIQUIDATION
ARE LIKELY TO BE MINIMAL. THE HIGHLY VALUABLE PLANT AND EQUIPMENT WILL BE
TRANSFERRED TO THE SWAZILAND FACTORIES, MINIMISING THE COMPANY'S LOSS ON ITS
INITIAL INVESTMENT.
PROSPECTS FOR SECOND HALF
WHILE SALES VOLUMES TEND TO BE LOWER DURING THE SECOND HALF YEAR THE DIRECTORS
ARE CONFIDENT THAT TRADING WILL RESULT IN A MODEST PROFIT FOR THE ENTIRE
FINANCIAL YEAR, BARRING UNFORESEEN CIRCUMSTANCES WHICH WOULD NEGATIVELY AFFECT
THE ECONOMY GENERALLY.
PROFITABILITY WILL BE POSITIVELY INFLUENCED BY
- LOWER FINANCE CHARGES DUE TO THE REDUCED OVERDRAFT
- THE FULL EFFECT OF A LOWER WAGE AND SALARY BILL DUE TO RE-ENGINEERING
- THE FULL EFFECT OF RAW MATERIAL COST SAVINGS
- STABILITY IN MANAGEMENT AND STAFFING STRUCTURES AND THE BENEFIT OF NEWLY
APPOINTED SENIOR FINANCIAL AND GENERAL MANAGEMENT
- A GENERAL PRICE INCREASE AND GROWING EXPORTS
- VASTLY REDUCED WARRANTY SERVICE COSTS
- MAINTENANCE OF RIGID COST CONTROL AND WORKING CAPITAL MANAGEMENT.
YEAR 2000 COMPLIANCE
THE COMPANY DOES NOT FORESEE THAT IT WILL EXPERIENCE OPERATIONAL DIFFICULTIES
AS IT HAS MADE ADEQUATE PROVISION FOR THE TIMEOUS COMMISSIONING OF ITS NEW YEAR
2000 COMPLIANT IT SYSTEM.
SIMILARLY THE COMPANY DOES NOT ANTICIPATE RUNNING A RISK OF FACING LIABILITY
DIRECTLY OR INDIRECTLY ARISING FROM A FAILURE TO ADDRESS OR MEET THE PROBLEMS
ASSOCIATED WITH THE ADVENT OF THE YEAR 2000.
THE COMPANY IS ESTABLISHING THE STATE OF COMPLIANCE OF ALL ITS AGENTS. SHOULD
THESE BE FOUND LACKING COMPLIANCE, TRADING WILL BE SUSPENDED UNTIL SUCH TIME
COMPLIANCE HAS BEEN ACHIEVED.
ON BEHALF OF THE BOARD:
- G S MANGAN, CHIEF EXECUTIVE;
- E ROETS, GROUP FINANCIAL DIRECTOR.
MATSAPHA INDUSTRIAL SITES, SWAZILAND.
10 FEBRUARY 1999
MASTERFRIDGE - PRESS RELEASE
MASTERFRIDGE RETURNS TO PROFITABILITY
MASTERFRIDGE LTD, THE SWAZILAND BASED REFRIGERATOR AND FREEZER MANUFACTURING
COMPANY, RETURNED A MODEST PROFIT FOR THE SIX MONTHS ENDED 31 DECEMBER 1998,
RECOVERING FROM A LOSS OF E62,1M RECORDED FOR THE YEAR ENDED 30TH JUNE 1998.
(ONE EMALANGENI IS EQUIVALENT TO ONE RAND.) TURNOVER INCREASED MARGINALLY FROM
E221,9M IN 1997 TO E232,3M.
PROFIT ATTRIBUTABLE TO ORDINARY SHAREHOLDERS ROSE TO E0,391M FROM A LOSS OF
E7,942M FOR THE SIX MONTHS ENDED 31 DECEMBER 1997. HEADLINE EARNINGS WERE
E0,955M COMPARED TO A LOSS OF E8,729M FOR THE SAME PERIOD THE PREVIOUS YEAR.
EARNINGS PER SHARE WERE 0,4 CENTS (8,0 CENTS LOSS) AND HEADLINE EARNINGS PER
SHARE 1,0 CENT (8,8 CENTS LOSS). NET ASSET VALUE STOOD AT 103,2 CENTS PER SHARE
THE COMPANY DECREASED SUBSTANTIALLY ITS OVERDRAFT FROM A HIGH OF E123M DURING
OCTOBER 1998 TO E65,6M AS AT 31 DECEMBER 1998.
MASTERFRIDGE ACCOUNTED FOR EXCEPTIONAL LOSSES OF E3,5M EMANATING FROM LOSSES OF
THE ZIMBABWE OPERATION, STOCK LOSSES AT ITS STOVE COMPANY, ADDITIONAL
RETRENCHMENT COSTS AND UNDER-RECOVERY DUE TO LATE START UP IN THE
BRONKHORSTSPRUIT PLANT. EXCESSIVE PRODUCT WARRANTY COSTS EXCEEDING BUDGETED
EXPENDITURE BY E2,0M WERE BROUGHT UNDER MANAGEMENT CONTROL THROUGH IMPROVED
PRODUCT QUALITY AND ADMINISTRATIVE DISCIPLINES.
MASTERFRIDGE CEO GEOFF MANGAN SAYS THAT REMEDIAL ACTION IMPLEMENTED DURING THE
PAST FEW MONTHS FOCUSED ON WORKING CAPITAL MANAGEMENT, REFLECTED IN AMONG
OTHERS LOWER STOCKS OF RAW MATERIALS, COMPONENTS AND FINISHED GOODS AND AN
IMPROVED DEBTORS BOOK.
THE APPOINTMENT OF A NEW GROUP FINANCIAL DIRECTOR AND SENIOR FINANCIAL MANAGERS
AT THE MANUFACTURING SUBSIDIARIES SIGNIFICANTLY ENHANCED OVERALL FINANCIAL
CONTROL NOW CENTRALISED AT THE COMPANY'S BEDFORDVIEW OFFICE.
PROBLEM AREAS WHICH CONTINUED TO AFFECT PROFITABILITY ADVERSELY WERE THE FRIDGE
MASTER STOVE COMPANY AND MASTERFRIDGE ZIMBABWE.
LEGAL OWNERSHIP OF THE STOVE COMPANY - UNIVA IN LIQUIDATION - WAS OBTAINED FROM
1 FEBRUARY 1999. THE COMPANY CAN NOW USE PERMANENT EMPLOYEES IN PLACE OF HIRED
CONTRACT LABOUR WHICH HINDERED THE IMPLEMENTATION AND ENFORCEMENT OF RAW
MATERIAL AND FINANCIAL MANAGEMENT DISCIPLINES. AIDED BY THE APPOINTMENT
RECENTLY OF A HIGHLY EXPERIENCED GENERAL MANAGER, INDICATIONS ARE THAT THE
SUBSIDIARY WILL PRODUCE A SMALL MONTHLY PROFIT FROM THIS MONTH ONWARDS.
TRADING CONDITIONS IN ZIMBABWE HAVE DETERIORATED TO THE EXTENT THAT THE DEMAND
FOR REFRIGERATORS AND FREEZERS NO LONGER JUSTIFIES MANUFACTURING LOCALLY IN
THAT COUNTRY. MASTERFRIDGE AND THE 40% SHAREHOLDERS IN ZIMBABWE HAVE DECIDED TO
LIQUIDATE THE COMPANY.
MANGAN IS UPBEAT ABOUT THE PROSPECTS FOR THE CURRENT SIX MONTHS ENDING 30 JUNE
1999 AND IS CONFIDENT THAT TRADING WILL RESULT IN A MODEST PROFIT FOR THE
ENTIRE FINANCIAL YEAR, BAR UNFORESEEN CIRCUMSTANCES WHICH WOULD NEGATIVELY
AFFECT THE ECONOMY GENERALLY.
FACTORS WHICH ARE CONTRIBUTING TO POSITIVE RESULTS ARE POTENTIAL EXPORT
CONTRACTS TO SIZEABLE DISTRIBUTORS IN EUROPE, LOWER FINANCE CHARGES BY VIRTUE
OF THE CONTINUING DECLINE OF THE OVERDRAFT, THE FULL EFFECT OF A LOWER WAGE
BILL, RAW MATERIAL COST SAVINGS AND AN ALREADY NEGOTIATED PRICE INCREASE.
ENDS
FOR FURTHER INFORMATION CONTACT : MR GEOFF MANGAN
CEO, MASTERFRIDGE LTD,
TEL (011) 616-0260
FAX (011) 622-0696
PRESS RELEASE COMPILED BY : COR FALING,
INFOKOM (PTY) LTD
TEL (011) 664-7574
FAX (011) 664-7573
10 FEBRUARY 1999
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