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NWL - Nu-World Holdings Limited - Audited financial statements for the year
ended 31 August 2007
NU-WORLD HOLDINGS LIMITEDRegistration number 1968/002490/06
(Incorporated in the Republic of South Africa)
JSE share code: NWL
ISIN code: ZAE000005070
("Nu-World" or "the Group" or "the Company")AUDITED FINANCIAL STATEMENTS FOR THE
YEAR ENDED 31 AUGUST 2007
TURNOVER UP 13,9% TO R1 865mATTRIBUTABLE INCOME UP 3,8% TO R85,131mCAPITAL
DISTRIBUTION PER SHARE UP 3,7% TO 125,3 centsNET ASSET VALUE PER SHARE UP 11,6%
TO 2 498,1 centsCASH GENERATED FROM OPERATIONS R93,772 MillionCASH AND CASH
EQUIVALENTS AT END OF YEAR R287,813 Million
* Five Year Compound Average Annual Growth rate in Attributable Income of 16,3%*
Seventeen consecutive years of growth in Turnover and Attributable Income
* Headline earnings per share down 34,2% to 249,1 cents
ABRIDGED CONSOLIDATED INCOME STATEMENT
Year ended Year ended
31 August 31 August
2007 2006 %
(R000) (R000) change
Turnover 1 865 783 1 638 724 13,9
Net operating income 116 114 129 061
Depreciation 7 087 7 415
Interest paid 4 691 1 223
Income before taxation 104 336 120 423
Taxation 15 214 29 613
Income after taxation 89 122 90 810
Share of associate company loss 6 994
Minority interests 3 991 1 786
Attributable income 85 131 82 030 3,8
Capital distribution 28 377 27 357 3,7
Capital distribution from share 125,3 120,8 3,7
premium (cents)
Attributable Income 85 131 82 030 3,8
Headline earnings 54 383 82 030 (33,7)
Earnings per share (cents) 389,9 378,3 3,1
Headline earnings per share 249,1 378,3 (34,2)
(cents)
Capital distribution per share 125,3 120,8 3,7
(cents)
Dividend declared / capital 3,0 3,0
distribution cover
Interest cover 23,2 99,5
Shares in issue 21 833 040 21 683 890 0,7
Shares in issue - weighted 21 833 040 21 683 890 0,7
Shares in issue - diluted 22 494 040 22 634 890 (0,6)
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
Year ended Year ended
31 August 31 August
2007 2006
(R000) (R000)
Cash generated by operating activities 34 188 54 659
Cash generated from operations 93 772 122 041
Interest paid (4 691) (1 223)
Dividend paid (27 357) (27 820)
Normal tax on companies (27 536) (38 339)
Cash flows from investing activities (3 322) 9 996
Purchase of tangible fixed assets (2 768) (4 222)
Proceeds on disposal of fixed assets 1 319 220
Reclassification of associate to (8 471)
subsidiary
Increase in investment in subsidiary (1 873) 22 469
Cash flows from financing activities (10 630) 12 374
(Decrease)/increase in shareholders loans (11 361) 11 361
Proceeds from issue of treasury shares 731 1 013
Net increase in cash and cash equivalents 20 235 77 029
Cash and cash equivalents at the 267 578 190 549
beginning of the year
Cash and cash equivalents at end of the 287 813 267 578
year
SUPPLEMENTARY INFORMATION
Year ended Year ended
31 August 31 August
2007 2006 %
(R000) (R000) change
Determination of Attributable
Earnings and Headline Earnings
Net income attributable to 85 131 82 030 3,8
ordinary shareholders
Profit on sale of trademarks (30 748)
Headline earnings 54 383 82 030 (33,7)
Operating income as percentage 6,2% 7,9%
of turnover (%)
Net negative debt to equity (52 7%) (55,1%)
ratio (%)
Effective taxation rate (%) 14,6% 24,6%
Net asset value per share 2 498,1 2 238,0 11,6
(cents)
Capital expenditure
Expansion 1 230 2 815
Replacement 1 538 1 407
2 768 4 222
Goodwill and amortisation
At beginning of year 25 729 18 089
Net acquisition of subsidiaries (623) 15 978
Reclassification of subsidiary (8 338)
25 106 25 729
ABRIDGED CONSOLIDATED BALANCE SHEET
Year ended Year ended
31 August 31 August
2007 2006
(R000) (R000)
ASSETS
Non-current assets
Fixed assets 35 839 41 673
Goodwill 25 106 25 729
Deferred taxation 11 905 8 125
Current assets
Inventory 153 085 179 030
Trade and other receivables 225 793 241 512
Cash equivalents 287 813 267 578
Total assets 739 541 763 647
EQUITY AND LIABILITIES
Ordinary shareholders` funds 545 405 485 282
Minority interests 51 345 47 949
Total shareholders` funds 596 750 533 231
Long term liabilities 11 361
Current liabilities
Trade and other payables 142 791 219 055
Total equity and liabilities 739 541 763 647
SEGMENTAL INFORMATION
Year ended Year ended
31 August 31 August
2007 2006 %
(R000) (R000) change
Geographical revenue
South Africa 1 138 578 1 124 014
Offshore subsidiaries 727 205 514 710
1 865 783 1 638 724 13,9
Geographical income
South Africa 77 432 83 275
Offshore subsidiaries 7 699 (1 245)
85 131 82 030 3,8
STATEMENT OF CHANGES IN EQUITY
Foreign
currency
Share Share Treasury translation
capital premium share reserve
(R000) (R000) (R000) (R000)
Balance as at 1 226 136 402 (21 944) (186)
September 2005
Net profit for the year
Dividends
Dividend settled
IFRS adjustments - share
based payments
Fair value movement 352
Net treasury movement 1 013
Balance as at 31 August 226 136 402 (20 931) 166
2006
Net profit for the year
Capital distribution (27 357)
from share premium
IFRS adjustments - share
based payments
Fair value movement 1 079
Net treasury movement 731
Balance as at 31 August 226 109 045 (20 200) 1 245
2007
STATEMENT OF CHANGES IN EQUITY (Contd)
Share
based
Accumulated Shareholders compensation
profit for dividend reserve Total
(R000) (R000) (R000) (R000)
Balance as at 1 307 821 0 159 422 478
September 2005
Net profit for the 82 030 82 030
year
Dividends (20 971) 20 971 0
Dividend settled (20 971) (20 971)
IFRS adjustments - 380 380
share based payments
Fair value movement 352
Net treasury 1 013
movement
Balance as at 31 368 880 0 539 485 282
August 2006
Net profit for the 85 131 85 131
year
Capital distribution (27 357)
from share premium
IFRS adjustments - 539 539
share based payments
Fair value movement 1 079
Net treasury 731
movement
Balance as at 31 454 011 0 1 078 545 405
August 2007
COMMENTS
Financial overview The Directors of Nu-World, a leading international source for
branded consumer durables, confirm results for the financial year-end to 31st
August 2007, in line with the trading update released on SENS on 24 August 2007.
In light of a moderation of the rate of growth being experienced in the South
African economy, more particularly in durables and other interest rate sensitive
product groups, Nu-World is actively broadening our product offering and
diversifying our ranges and customers base both locally and internationally.
South African retailers are experiencing a moderation in the rate of growth,
coming off high levels of previous years. Higher interest rates, food inflation
and higher fuel costs, have inevitably lead to a softening of consumer
sentiment. However, it must be noted that the economy remains relatively strong
and positive factors such as structural changes, tax cuts, sustained employment
growth and infrastructure spend, continue to support household income and should
sustain a gradual moderation in retail sales growth, avoiding a sharp
contraction.
Group turnover increased by 13,9% to R1 865,8m (August 2006 : R1 638,7m). South
African revenues increased marginally with strong revenue growth generated from
offshore subsidiaries. In South Africa, prices firmed for consumer electronics
but remained flat year-on-year for appliances.
EBITDA decreased by 10,0% to R116,114m (August 2006 : R129,061m)
Operating margins decreased to 6,2% from the previous year`s 7,9%, a reflection
of the tough trading conditions in South Africa as well as the increasing
percentage of off-shore revenue - our off-shore subsidiaries operate on an
indent business model, with lower gross margins. Our off-shore operations
contributed 39,0% of group revenues during the current year, against 31,4% for
the previous year.
Income before tax is down, whereas Income after tax remained relatively flat
year on year, August 2007: R89,122m (August 2006: R90,810m).
Attributable income increased by 3,8% to R85,131m (August 2006 :
R82,030m).
Headline earnings per share on a weighted basis - H.E.P.S. decreased to 249,1
cents (August 2006 : 378,3 cents).
The differential between attributable earnings and headline earnings, is profit
earned from a once off sale of trademarks. The Group has exclusive right of use
of these trademarks in the future.
Capital Distribution per share is up 3,7% to 125,3 cents (2006 : 120,8
cents).Distribution cover remains in line with 2006, at 3 times cover.
Cash generated from operations amounted to R93,772m.
Overall net working capital days of 71,9 is an improvement on the previous
year`s 80,2 days, due to improved turnover of stock.
The balance sheet remains strong with cash balances on hand of R287,813m.
The net asset value per share is up 11,6% to 2 498,1 cents (August 2006 : 2
238,0 cents).
ACCOUNTING POLICIESThe final report is prepared on the historical cost basis,
except financial instruments, which have been fair valued.
This is in accordance with the recognition and measurement principles of
International Financial Reporting Standards (IFRS), the requirements of the
South African Companies Act and the JSE Listings Requirements.
The results are presented in terms of IFRS statements and IAS 34. The Group
adopted and applied IFRS for the first time for the year ended 2006.
OPERATIONAL REVIEWOffshore Subsidiaries
Yale Prima Pty Ltd * Nu-World U.K. Ltd * On Corporation USA
Yale Prima Pty Ltd is a 59,4% held subsidiary operating out of Sydney Australia.
Australia remains the largest by turnover, of the Group`s offshore operations.
Yale Prima has provided a positive contribution to group income for the
financial year.
The Australian economy remains buoyant on the back of the commodities boom. The
Australian reserve bank is keeping a tight reign on interest rates, in an effort
to curb inflation and credit extension. Australian consumer sentiment and demand
however, remains robust. The market for consumer electronics (our primary focus)
remains strong, but intensely competitive. Yale Prima is diversifying into other
consumer durable segments with an increasing range of large appliances, "White
Goods". In addition, Yale Prima has taken a majority interest in Primex Products
Pty Ltd, an importer and distributor of home-wares. Directors intend to add
Yale`s existing customer base of mass merchandisers, to the Primex customer
base.
Nu-World U.K. Ltd is a 60% held subsidiary. With the expectation of lower
interest rates, consumer sentiment in the U.K. is set to improve and high street
spending is set to increase. Nu-World U.K. is now trading with a wider customer
base across wholesalers, department stores, TV shopping and internet retailers.
A reduction in overhead costs and the introduction of new Retro and Nostalgia
ranges of appliances and a solid order book for the Christmas season, should
further improve the contribution from the U.K.
On Corporation USA. The Group retains a controlling interest in On Corporation
USA. On Corporation USA supplies a growing range of flat panel TV`s and consumer
electronics to leading USA and Canadian retailers, including Aaron Sales and
Lease, Sears, and CTC of Canada. On Corporation USA has achieved rapid growth
for the period under review. It is expected that revenue and profit contribution
will continue to grow at the same pace during the forthcoming period.
PRODUCT RANGE Consumer Electronics * Small Electrical Appliances * Conti
Motorsport * Air-Conditioning * White Goods * Cell phones * GPS Navigation
Systems * Power Tools * Generators * DIY * Home Improvement *
The Nu-World brands now cover the spectrum of a widely increasing range of
consumer durables, including small appliances, consumer electronics, motorsport,
large appliances, air-conditioning and more. New initiatives seek to capitalise
on the boom in home improvement, Eskom load shedding and a growing rental market
opportunity.
The market for televisions, the single largest category of consumer electronics,
is increasingly competitive, with aggressive price cutting evident in price-
entry CRT TV`s. With margins under pressure for entry level TV`s, Nu-World is
focusing on middle to high-end flat, slim-line CRT`s and flat panel LCD`s and
Plasma`s.
The benefits from the initiative to increase and extend ranges of our durable
products offering are expected to support revenue growth for the forthcoming
year. New products have been added to ranges within motorsport, power tools,
generators, porcelain tiles, air-conditioning and white goods etc. Our inroads
into the market for a new range of car accessories and GPS navigation systems,
has opened up a broader customer base and new distribution channels.
The extensive Conti Motorsport range has continued to expand and now
includes:- scooters, road bikes, super bikes, pit bikes, quad bikes, bicycles,
generators, go-carts, golf carts and car accessories. The growth drivers for
Conti Motorsport being affordable ownership and fuel efficient transport,
will inevitably change the nature of commuting in South Africa, in line with
other emerging markets. Service and support are the keys to satisfied
customers and Nu-World has appointed more than 80 service agents nationwide,
providing 24 hour service and spare parts. Conti Motorsport is also making
inroads into the SADEC markets with excellent opportunities for growth.
MANPOWER and SOCIAL RESPONSIBILITYThe Group`s BEE initiatives are in line with
the DTI`s BEE Codes of Good Practice on broad-based Black Economic Empowerment -
in terms of management, employment equity, skills development, preferential
procurement, enterprise development and corporate social responsibility. The
Group is committed to comply with environmental regulations.
PROSPECTSThe Group has now achieved growth in turnover and attributable income
for 17 consecutive years. It is evident that the South African "high street"
market, estimated to be close to R400bn, is experiencing a moderation in the
rate of growth - primarily in interest rate sensitive durables and passenger
cars. The BER is forecasting a softening of consumer demand through to the
second quarter of 2008. However, it must be noted that structural changes within
the economy, personal tax relief in line with the 2007 budget and Government`s
committed infrastructure spend, will continue to support sustainable positive
economic growth.
Although consumer confidence has declined marginally, confidence remains high by
historical levels, underpinned by employment growth and structural changes such
as urbanisation and an emerging middle class.
The National Credit Act has further impacted retailer confidence, however
despite lower levels of confidence, retailers still remain optimistic about
prevailing business conditions.
Nu-World`s diversification in South Africa and off-shore, into an increasingly
wider range of consumer durable market segments, provides for broader market
exposure and offers greater scope for sustainable growth. Nu-World and its
subsidiaries continue with the initiative to diversify further into areas of
durables which offer scope for improved margins. The Group has delivered growth
in attributable income over the last 5 financial years, C.A.G.R. averaging
16,3%. Notwithstanding the difficult market conditions in South Africa at this
time, the Group remains well positioned for long term growth.
AUDIT REPORTThe consolidated financial statements for the year have been audited
by Tuffias Sandberg KSi and their accompanying unqualified audit report as well
as their unqualified audit report on this set of summarised financial
information is available for inspection at the Company`s registered office.
CAPITAL DISTRIBUTION TO SHAREHOLDERSThe Board has resolved to make a
distribution to ordinary shareholders from the Company`s share premium account
amounting to 125,3 cents per ordinary share ("the capital distribution").
Notice is hereby given that the board of directors ("the board") has resolved to
distribute to ordinary shareholders a portion of the share premium account in
lieu of a dividend to ordinary shareholders of the Company. The distribution
will be paid in terms of a general authority to make such payments granted to
the board by shareholders at the Company`s AGM held on Wednesday, 24 January
2007. The distribution will amount to 125,3 cents per ordinary share, based on a
reduction to share premium of R28 376 020.
The following salient dates will be applicable:
Last date to trade "cum" the capital Friday, 7 December 2007
distribution
Trading commences "ex" the capital Monday, 10 December 2007
distribution
Record date Friday, 14 December 2007
Date of payment Tuesday, 18 December 2007
Share certificates may not be dematerialised or rematerialised between Monday,
10 December 2007 and Friday, 14 December 2007, both dates inclusive.
FINANCIAL EFFECTSThe table below illustrates the effect of the capital
distribution on the earnings and net asset value per Nu-World ordinary share and
is based on the audited results for the year ended 31 August 2007. These
financial effects which have been reviewed by the Company`s auditors, Tuffias
Sandberg KSi, are prepared for illustrative purposes only, are the
responsibility of the Board, and because of their nature, may not give a true
indication of the Company`s financial position and results of operations.
Before After Change
(cents) (cents) (%)
Earnings per share (cents) 389,9 382,0 (2,0)
Headline earnings per share (cents) 249,1 241,1 (3,2)
Net asset value per share (cents) 2 498,1 2 360,1 (5,5)
Net tangible asset value per share 2 383,1 2 245,1 (5,8)
(cents)
Notes to the financial effects:
It is assumed that the capital distribution had been paid to shareholders on 1
September 2006; and based on a reduction of R28 376 020 and an after tax
interest rate earned on cash resources of 6,1%.
ANNUAL REPORT
The annual report will be posted to shareholders in due course. The annual
general meeting will take place on Wednesday, 20 February 2008, at the
registered office of the Company.
On behalf of the board of directors
M.S. Goldberg B.H. HaikneyExecutive Chairman
Company Secretary
23 October 2007
Administration
Registered office35 3rd Street
Wynberg
Sandton 2199
Republic of South Africa
Tel +27 (11) 321 2111
Fax +27 (11) 440 9920
Transfer secretariesComputershare Investor Services 2004 (Pty) Ltd
70 Marshall Street Johannesburg 2001
Company secretaryB.H. Haikney
AuditorsTuffias Sandberg KSi
SponsorSasfin Capital
a division of Sasfin Bank Limited
Directors
M.S. Goldberg (Executive Chairman)
J.A. Goldberg (Chief Executive)
G.R. Hindle (Financial Director)
Non-executive DirectorJ.M. Judin
Independent Non-executive DirectorD. Piaray
www.nuworld.co.za
Date: 23/10/2007 17:00:01 Supplied by www.sharenet.co.za
Produced by the JSE SENS Department.
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