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Nu-World Holdings Limited - Audited Financial Statements For The Year Ended 31
August 2002
NU-WORLD HOLDINGS LIMITED
(Registration No. 1968/002490/06)
AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 AUGUST 2002
5 Year Compound Average Annual Growth Rate in Headline Earnings - 24%
Twelve consecutive years of Growth in Turnover, Operating Income, Attributable
Income, Headline Earnings per Share and Dividend
- SOUTH AFRICAN TURNOVER up 15.8%
- ATTRIBUTABLE INCOME up 18.0%
- HEPS up 18.0%
- DIVIDEND PER SHARE up 15.0%
- CASH GENERATED BY OPERATIONS R45,920m
SALIENT FEATURES
Cash generated by operations up R45,920m
Manufactured exports up 400%
Exports in hard currency up 320%
In-house manufacturing output up 42%
Group exports in excess of R10m per month.
Positive contribution from Australian Associate Prima Australasia Pty Ltd
R2,296m
TELEFUNKEN, SUNBEAM, IDEAS and IDEAL ranked as leading South African brands.
STRATEGIC FOCUS
Nu-World`s strategic focus is to utilize local and international leading brand
positions as a key supplier of branded consumer durables to Southern African
retailers.
A sustained design and engineering effort to secure our position as an
international low cost, high volume manufacturer of domestic appliances.
Export of finished products to exploit the benefit of a Rand based manufacturing
cost of production, destined for sale in export markets around the world, in
hard currency.
A focus on international growth by investing in strategic distributors in key
export markets.
INCOME STATEMENT
Year ended Year ended %Change
31 Aug 31 Aug
2002 2001
R000 R000
Turnover 942,084 884,252 6.5%
Net operating income 60,846 55,721
Operating margin as 6.5% 6.3%
% of turnover
Depreciation 4,724 4,234
Interest paid 8,355 8,988
Income before 47,767 42,499 12.4%
taxation
Taxation 9,998 8,335
Income after 37,769 34,164
taxation
Share of associate 2,296 (135)
companies
net income
Outside (87)
shareholders`
interest
Earnings
attributable to
ordinary 40,065 33,942 18.0%
shareholders
Headline earnings 40,065 33,942 18.0%
HEPS (cents) 184.7 156.4 18.0%
Dividend 31.3 27.2 15.0%
declared(cents)
Dividend cover 5.9 5.7
Interest cover 6.7 5.7 17.3%
Number of shares in 21,695,465 0.0%
issue 21,695,465
Deconsolidated
comparative
information
Turnover 942,084 813,500 15.8%
EBITDA 60,846 54,476 11.7%
Income before 47,767 42,144 13.3%
taxation
Income after 37,769 33,922 11.3%
taxation
Attributable income 40,065 33,942 18.0%
BALANCE SHEET
Year Year
Ended Ended
31 Aug 31 Aug
2002 2001
R000 R000
Assets
Non-current assets
Fixed assets 36,203 28,089
Investment in associate 21,082 12,864
company
Current assets
Inventory 117,385 103,137
Trade and other 156,563 162,433
receivables
Cash and cash resources 87,143 65,078
Total assets 418,376 371,601
Equity and liabilities
Shareholders` interest 274,845 240,683
Non-current liabilities 8,951 12,973
Current liabilities
Trade and other 134,580 117,945
payables
Total equity and 418,376 371,601
liabilities
Net tangible asset 1266,9 1109,4
value per share (cents)
Debt: Equity Ratio 0.0% 0.0%
STATEMENT OF CHANGES IN
EQUITY
Equity at beginning of 240,683 208,101
year
Change in accounting 4,900
policies
(AC107)
Share capital redeemed (1,272)
Foreign currency (87)
translation
reserve
Retained earnings for 40,065 33,941
the year
Dividend paid (5,903) (4,900)
Equity at the end of 274,845 240,683
the year
CASH FLOW STATEMENT
Year Year
Ended Ended
31 Aug 31 Aug
2002 2001
R000 R000
Cash generated by 45,920 12,335
operating
activities
Cash generated by 71,734 41,316
operations
Interest paid (8,355) (8,988)
Dividend paid (5,856) (4,894)
Taxation paid (11,603) (15,099)
Cash flow from (18,736) (254)
investing activities
Purchase on tangible (14,003) (6,507)
fixed assets
Proceeds on disposal of 1,189 107
fixed assets
Increase in investment (5,922)
in associate
Reclassification of 6,146
subsidiary
Cash flows from (5,119) (7,333)
financing activities
Repayment of long term (5,119) (6,062)
borrowings
Share repurchase (1,271)
Net increase in cash 22,065 4,748
and cash
equivalents
Effects of exchange (201)
rate changes
Cash and cash
equivalents at
the beginning of the 65,078 60,531
year
Cash and cash
equivalents at
the end of the year 87,143 65,078
FINANCIAL OVERVIEW
The Board of Directors of Nu-World Holdings Ltd is again pleased to report
satisfactory growth results for the year ending 31st August 2002. For the
twelfth year in succession, the Group has produced growth in Turnover, operating
income, attributable income, headline earnings per share and dividend.
Nu-World is a leading South African source for branded consumer durables. The
Group manufactures, imports, exports and distributes a one-stop supply of a
broad range of consumer durables under a total of 19 international and local
brands. The Group holds a 44.7% interest in associate Company Prima Australasia,
a Melbourne based distributor of branded consumer durables.
Notwithstanding the difficult economic conditions, particularly in the second
half of the year under review, the Group achieved satisfactory growth.
South African turnover increased by 15.8% to R942,084m.
Attributable income increased by 18.0% to R40,065m (August 2001 : R33,942m).
Headline earnings per share on a weighted basis - increased by 18% to 184.7
cents (August 2001 : 156.4 cents).
Dividend declared per share is up 15.0% to 31.3 cents (August 2001 : 27.2
cents).
Cash generated by operating activities is up 272% to R45,920m (August 2001 :
R12,335m).
The improved working capital position, has resulted in a reduction of interest
paid of R633,000.
Stock turn ratios have greatly improved, whilst inventory increases were held
below increases in turnover.
The D.S.O. debtors collection measure, reflects a significant improvement, with
debtors days being 57 compared to 65 of the previous year.
The Group remains ungeared with cash balances on hand of R87,143m (August 2001
: R65,078m).
The net asset value per share at 1267 cents is up 14.3%
(August 2001 : 1109 cents).
At the time of writing, Nu-World shares were trading at a 17% discount to net
asset value per share, at the current share price of R10.50.
The benefits of the increased capital expenditure, utilized primarily for
gearing up manufacturing capacity for exports as well as the design and
development of new products for the local and export markets, are already
apparent and will show further results in the forthcoming year.
DECONSOLIDATION OF PRIMA AUSTRALASIA PTY LTD
Prima Australasia Pty Ltd was deconsolidated on the 1st March 2001 and
reclassified as an associate Company. The August 2001 turnover include Prima
revenues of R70,752m and profit after tax of R242,000. The deconsolidated
figures provide a more meaningful year on year comparison.
OPERATIONAL REVIEW
SMALL ELECTRICAL APPLIANCES - IN-HOUSE MANUFACTURING
Nu-World is South Africa`s leading low-cost, high-volume manufacturer, importer
and exporter, of small electrical appliances.
During the year under review, the manufacturing division has been restructured
in order to gear up production to meet export demand. The substantial capital
investment program undertaken, has generated an increase of 42% in manufacturing
output.
Manufacturing is expected to produce strong growth during the forthcoming year,
with the launch of new products and further substantial increases in exports.
In surveys recently commissioned by leading retailers the Sunbeam brand has been
recognized as the leading brand in small appliances, in South Africa. In the
mass price-entry market, Nu-World`s brands, "IDEAL" and "IDEAS" are rated first
and second.
Leading on from the Sunbeam success, the Company will introduce a range of top-
end up-market products under the Sunbeam Designer label.
EXPORTS
IN-HOUSE MANUFACTURED APPLIANCE - EXPORTS UP 400%
TOTAL GROUP - EXPORTS UP 320%
The success of our export program, most specifically our focus on the United
States is proving successful. Manufactured exports have increased 400%, year on
year. The manufacturing division exported more than 250,000 appliances during
the passed three quarters, to the United States, United Kingdom, Europe and
Australia.
In-house manufacturing and concurrent exports, provide a natural hedge against
the devaluation of the Rand. Import replacement and exports will continue to be
a key driver of growth in the forthcoming year.
CONSUMER ELECTRONICS
JVC * TELEFUNKEN * THOMSON * NU-TEC
Nu-World`s consumer electronics division, with our range of complimentary
international brands, differentiated within distinct market segments, from price
entry to top-end, continues to generate growth.
JVC
Difficult market conditions prevailed, due to increase in retail price points as
a consequence of the depreciation of the Rand. However, notwithstanding this
extremely difficult trading environment, JVC continues to hold its own within
the consumer electronics market in Southern Africa.
Over the passed year, JVC increased its share of the car audio market and is now
considered by market analysts as the most sought after brand in this category.
JVC hometheatre systems continue to lead the market in design as well as visual
and sound quality. JVC will launch the first 6.1 channel hometheatre system in
the market, before the year end. JVC`s progressive scan technology DVD, has
been awarded the coveted EISA award of Europe.
JVC will launch the latest flat screen televisions into the market in the
forthcoming year. The market acceptance of the 74cm model has been enthusiastic
and the full line up is to follow.
TELEFUNKEN
The Telefunken brand, which enjoys high consumer recognition, has proved to be a
huge marketing success for the Group. Brand awareness and market penetration
continues at an exceptional pace.
In the Markinor survey commissioned by the Sunday Times - Telefunken has been
recognised as one of the leading brands in Southern Africa.
Almost 30 new products and new technologies were introduced over the passed
year, with more than 50 new products planned for the new financial year.
Telefunken have expanded its visual range - by introducing a full new line up of
CRT televisions for Christmas as well the largest size rear projection TV (RPT),
measuring 165cm.
The audio range has expanded to include hometheatre systems, DVD and mini DVD
systems, as well as a DVD/VCR combination unit.
Leading on from the Telefunken success in South Africa, our associate Company,
Prima Australasia, is making good progress with the introduction of the
Telefunken brand in Australia.
The Group`s purchasing power, for the Southern African and Australasian markets,
provides a strategic advantage in obtaining world-best pricing and trading
terms.
WHITE GOODS - LAUNDRY / COOKING AND REFRIGERATION
This division, although a small part of the Group`s turnover, is opening up new
areas of growth, with the introduction of a range of products under the
Telefunken brand.
Extending the Telefunken brand to large appliances has proved to be successful.
Telefunken is now established in laundry with a range of twintubs and top-loader
washing machines. The Telefunken cooking range now includes under-counter, built
in ovens / hobs as well as free-standing stoves.
PRIMA AUSTRALASIA PTY LTD
AKAI * TELEFUNKEN * PRIMA ELECTRONICS * NU-TEC
Associate, Prima Australasia Pty Ltd recorded a positive contribution of
R2,296m.
Nu-World increased its shareholding in Prima to 44.7% in September 2001. Prima
has experienced a dramatically positive turnaround during the year under review,
with Turnover increasing 48.4% to AUD $49,6m. Gross profit is up 65%,
indicating firmer margins and the Company recorded an attributable income for
the year, of AUD $870,000.
The launch of the Telefunken brand in the second half of the year has been
successful. The Company continues to make inroads into leading Australian
retailers including:- Harvey Norman, Retravision, Target, The Coles Myer Group
and The Good Guys, amongst others.
Prima is budgeting for strong growth during the forthcoming year.
PROSPECTS
Over the passed 12 years, the Group has demonstrated its resilience to adverse
market conditions, by sustaining a remarkable level of growth, notwithstanding
the difficult economic climate in Southern Africa.
Since the beginning of calendar 2002, consumer sentiment and consumer spending
has been negatively impacted by rising prices and rising interest rates.
Notwithstanding the difficult economic climate however, the Group remains
focused on sustaining current levels of growth.
Import substitution and export growth will generate above average growth levels
in the manufacturing division. A number of new products will be introduced for
the local market and for the U.K and U.S.A in particular. The benefits of the
passed year`s increased capital expenditure will continue to flow through with
increased production throughput and productivity gains. Increasing hard currency
denominated exports, will generate increased profit margins, should the South
African currency weaken further.
The Group aims to increase market penetration in each of its areas of operation
in Southern Africa, with new and increased ranges of products lined up for the
consumer electronic and large appliance divisions.
Prima Australasia Pty Ltd is budgeting to accelerate growth further and is
expected to generate an increased contribution.
Despite the difficult market conditions, government`s delivery on housing and
the ongoing electrification program, serves to underpin growth in the electrical
appliance and consumer electronics sectors.
Future sustainable growth levels in the medium term, are supported by the
Group`s increasing strategically diversified base.
BASIS OF PREPARATION OF FINANCIAL STATEMENTS
The financial statements have been prepared in accordance with South African
statements of Generally Accepted Accounting Practice and the accounting policies
used are consistent with the prior year other than as set out below.
CHANGE IN ACCOUNTING POLICIES
The change in accounting policy relates to the recently amended South African
statements of Generally Accepted Accounting Practice with regard to dividend
payments in terms of AC107. These changes in accounting policies have had no
effect on the headline earnings per share for the year.
INDEPENDENT REVIEW
The Group`s auditors Tuffias Sandberg, have audited the financial information
for the year ended 31 August 2002. Their report is available for inspection at
the registered office of the Company.
DIVIDENDS
Notice is hereby given that the final dividend number 15 (fifteen) of 31,3 cents
per share (2001: 27,2 cents) has been declared to shareholders.
The dividend is payable to the shareholders of the company recorded in the books
of the company at the close of business on Friday, 13 December 2002 ("the record
date"). The last date to trade cum dividend will be Friday, 6 December 2002 and
trading commences ex dividend from Monday, 9 December 2002. The dividend will be
paid on Tuesday, 17 December 2002. Share certificates may not be rematerialised
or dematerialised between Monday, 9 December 2002 and Friday, 13 December 2002.
On behalf of the board
M.S. Goldberg
Executive Chairman
11 November 2002
DIRECTORS
M.S. Goldberg BCom MBA (Wits) (Chairman), J.A. Goldberg BSc (Eng) (Wits)
(Managing), G.R. Hindle CA (SA), B.H. Haikney CA (SA) (Company Secretary), P.
Gross B.Com L.L.B. (Wits)*, J.M. Judin Dip Law (Wits)*
(* Non-executive Directors.)
Registered office
35 - 3rd Street
Wynberg, Sandton
2199
Transfer secretaries
Computershare Investor Services Ltd
P.O. Box 61051
Marshalltown 2107
Share Code: NWL
ISIN Code: ZAE000005070
SPONSORS
Sasfin Bank Limited BOE Securities (Pty) Ltd
13 - 15 Scott Street 187 Rivonia Road
WAVERLEY MORNINGSIDE
2090 2057
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