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Nu-World - Audited Financial Statements For The Year Ended 31 August 2006

Release Date: 24/10/2006 17:00
Code(s): NWL
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Nu-World - Audited Financial Statements For The Year Ended 31 August 2006 NU-WORLD HOLDINGS LIMITED ("Nu-World" or "the Group" or "the Company")Registration number 1968/002490/06 (Incorporated in the Republic of South Africa) JSE share code: NWL ISIN code: ZAE000005070 - EBITDA OPERATING INCOME UP 26,0% TO R129,061m- PROFIT BEFORE TAX UP 38,4% TO R120,423m- ATTRIBUTABLE INCOME UP 12,0% TO R82,030m- HEADLINE EARNINGS PER SHARE UP 11,6% TO 378,3 cents- CASH BALANCES ON HAND UP 40,4% TO R267,578m- CASH GENERATED FROM OPERATIONS R122,041 Million- CAPITAL DISTRIBUTION PER SHARE 120,8 Cents AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 AUGUST 2006 ABRIDGED CONSOLIDATED INCOME STATEMENT Audited Restated year ended year ended
31 August 31 August 2006 2005 % (R000) (R000) Change Turnover 1 638 724 1 626 122 0,8 Net operating income 129 061 102 466 26,0 Depreciation 7 415 8 251 Interest paid 1 223 7 220 Income before taxation 120 423 86 995 38,4 Taxation 29 613 18 213 Income after taxation 90 810 68 782 32,0 Share of associate company loss (6 994) Minority interests (1 786) 4 444 Attributable income 82 030 73 226 12,0 Dividend declared 20 971 Dividend per share (cents) 92,6 Capital distribution 27 357 Capital distribution from share 120,8 premium (cents) Headline earnings 82 030 73 226 11,8 Earnings per share (cents) 378,3 339,1 11,6 Headline earnings per share (cents) 378,3 339,1 11,6 Dividend per share (cents) 92,6 30,5 Capital distribution per share 120,8 (cents) Dividend declared/capital 3,0 3,5 distribution cover Interest cover 99,5 13,0 Shares in issue 21 683 890 21 592 490 Shares in issue - weighted 21 683 890 21 592 490 Shares in issue - diluted 22 634 890 22 543 490 ABRIDGED CONSOLIDATED CASH FLOW STATEMENT Audited Restated
year ended year ended 31 August 31 August 2006 2005 (R000) (R000)
Cash generated by operating activities 54 659 65 467 Cash generated from operations 122 041 101 512 Interest paid (1 223) (7 220) Dividend paid (27 820) (15 252) Normal tax on companies (38 339) (13 573) Cash flows from investing activities 9 996 (26 342) Purchase of tangible fixed assets (4 222) (5 511) Proceeds on disposal of fixed assets 220 145 Reclassification of associate to (8 471) subsidiary Increase in investment in subsidiary 22 469 (20 884) Increase in investment in treasury shares (92) Cash flows from financing activities 12 374 (10 196) Repayment of long term borrowing (10 196) Increase in shareholders loans 11 361 Proceeds from issue of treasury shares 1 013 Net increase in cash and cash equivalents 77 029 28 929 Effects of exchange rate changes (68) Cash and cash equivalents at the 190 549 161 688 beginning of the year Cash and cash equivalents at end of the 267 578 190 549 year SEGMENTAL INFORMATION Audited Restated
year ended year ended 31 August 31 August 2006 2005 % (R000) (R000) Change
Geographical revenue Republic of South Africa 1 124 014 971 479 15,7 Offshore subsidiaries 514 710 407 039 26,5 Deconsolidated subsidiary - 247 604 1 638 724 1 626 122 0,8 Geographical income Republic of South Africa 83 275 76 963 Offshore subsidiaries (1 245) (3 737) 82 030 73 226 12,0 ABRIDGED CONSOLIDATED BALANCE SHEET Audited Restated year ended year ended
31 August 31 August 2006 2005 (R000) (R000) Assets Non-current assets Fixed assets 41 673 44 867 Goodwill 25 729 18 089 Current assets Inventory 179 030 171 341 Trade and other receivables 241 512 227 716 Cash equivalents 267 578 190 549 Total assets 755 522 652 562 EQUITY AND LIABILITIES Ordinary shareholders" funds 485 282 422 478 Minority interests 47 949 28 156 Total shareholders" funds 533 231 450 634 Non-current liabilities 10 607 6 928 Current liabilities Trade and other payables 200 323 195 000 Loans payable 11 361 Total equity and liabilities 755 522 652 562 SUPPLEMENTARY INFORMATION Audited Restated year ended year ended
31 August 31 August 2006 2005 % (R000) (R000) Change Analysis of Group turnover Current consolidated subsidiaries 1 638 724 1 378 518 18,9 Deconsolidated subsidiaries 247 604 (100) Total Group turnover 1 638 724 1 626 122 0,8 Operating income as percentage of 7,9 6,3 25,0 turnover (%) Net negative debt to equity ratio (%) (55,1) (45,1) Effective taxation rate (%) 24,6 20,9 17,5 Net asset value per share (cents) 2 238,0 1 956,6 14,4 Capital expenditure Expansion 2 815 4 002 Replacement 1 407 1 509 4 222 5 511
Goodwill and amortisation At beginning of year 18 089 5 926 Net acquisition of subsidiaries 15 978 9 751 Reclassification of subsidiary (8 338) Derecognition of negative goodwill in - 2 412 terms of IFRS 3 25 729 18 089 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. The Group has adopted and applied IFRS for the first time for the year ended 2006. The transition date is 1 September 2004. The following new accounting policies were adopted: Shared-based paymentsThe Group has applied IFRS 2 - shared based payments. IFRS 2 has been applied to all grants of equity, which were unvested as of 1 September 2004. Reconciliation of Income Statement Audited Restated year year ended ended 31 August 31 August
2006 2005 R"000 R"000 Profit attributable to shareholders As previously reported under SA GAAP 82 030 73 385 IFRS adjustment - share based payments (159) As reported under IFRS 82 030 73 226 Share based Retained compensation
earnings reserve R"000 R"000 1 September 2005 As previously reported 307 980 IFRS adjustment - share based payments (159) 159 As reported under IFRS 307 821 159 STATEMENT OF CHANGES IN EQUITY Foreign
currency Share Share Treasury translation capital premium share reserve R"000 R"000 R"000 R"000
Balance as at 1 September 217 115 632 (1 072) (813) 2004 (audited) IFRS adjustments Restated balance as at 1 217 115 632 (1 072) (813) September 2004 Net profit for the year Net profit as previously reported IFRS adjustments Derecognition of negative goodwill (IFRS 3) Dividends Dividend settled IFRS adjustments - share based payments Fair value movement 627 Net treasury movement (20 872) Treasury shares issued 9 20 770 Balance as at 31 August 226 136 402 (21 944) (186) 2005 Net profit for the year IFRS adjustments - share based payments Dividends Dividend settled Fair value movement 352 Net treasury movement 1 013 Balance as at 31 August 226 136 402 (20 931) 166 2006 STATEMENT OF CHANGES IN EQUITY (Contd) Share based
Accumulated Shareholders compensation profit for dividend reserve Total R"000 R"000 R"000 R"000 Balance as at 1 247 434 361 398 September 2004 (audited) IFRS adjustments Restated balance as 247 434 - - 361 398 at 1 September 2004 Net profit for the 73 226 73 226 year Net profit as 73 385 73 385 previously reported IFRS adjustments (159) (159) Derecognition of 2 412 2 412 negative goodwill (IFRS 3) Dividends (15 251) 15 251 - Dividend settled (15 251) (15 251) IFRS adjustments - 159 159 share based payments Fair value movement 627 Net treasury (20 872) movement Treasury shares 20 779 issued Balance as at 31 307 821 - 159 422 478 August 2005 Net profit for the 82 030 82 030 year IFRS adjustments - 380 380 share based payments Dividends (20 971) 20 971 - Dividend settled (20 971) (20 971) Fair value movement 352 Net treasury 1 013 movement Balance as at 31 368 880 - 539 485 282 August 2006 COMMENTS FINANCIAL OVERVIEW The Directors of the Group are pleased to report strong growth for the period ending 31 August 2006. For the sixteenth consecutive year, the Group has produced growth in turnover, operating income, attributable income, headline earnings per share and dividend/capital distribution. Nu-World is a leading South African source for branded consumer durables. The Group manufactures, imports, exports and distributes a one-stop supply of branded consumer durables. Notwithstanding a softening of consumer sentiment, the Nu-World Group has continued to benefit from the current positive economic conditions being experienced in the South African retail industry. In addition, positive factors such as a rebound in confidence of retailers of durable goods due to stronger than expected retail sales in the 3rd quarter, tax cuts and sustained employment growth, continue to support household income and should sustain a gradual easing in retail sales growth, avoiding a sharp contraction. Group turnover increased by 0,8% to R1,638m (August 2005: R1,626m). South African revenues increased 16% and had the Prima subsidiary not been deconsolidated, overall turnover increase would have been reported as 15,1%. Price deflation was evident in South Africa for most of the financial year and continues in Australia and the United Kingdom. EBITDA increased 26,0% to R129,061m (August 2005: R102,466m) Operating margins improved by 25,0% - increasing to 7,9% from the previous year"s 6,3%. Income before tax is up 38,4% to R120,423m (August 2005: R86,995m). The tax rate increased from 20,9% to 24,6%, being more reflective of the expected tax rate going forward. Attributable income increased by 12,0% to R82,030m. (August 2005: R73,226m). Headline earnings per share on a weighted basis - H.E.P.S. increased 11,6% to 378,3 cents (August 2005: 339,1 cents). Cash generated from operations amounted to R122,041m. Overall net working capital days of 80.2 is an improvement on the previous year"s 86,3 days. The balance sheet is strong and the Group remains ungeared with cash balances on hand up 40,4% to R267,578m (August 2005: R190,549m). The net asset value per share is up 14,4% to 2 238,0 cents (August 2005: 1 956,6 cents). OPERATIONAL REVIEW Nu-World is one of South Africa"s leading players in small electrical appliances and consumer electronics. Subsidiaries Nu-World U.K. Ltd; Yale Prima Pty Ltd; On Corporation USA Nu-World U.K. Ltd is a 60% held subsidiary. The U.K. retail market continues to experience weak consumer sentiment, with lower disposable income due to increasing energy costs and higher interest rates. We are pleased to report that a new line-up of products and an increasing customer base, has seen the company returning to profitability in the current year. The order book leading up to the Christmas season is healthy. Yale Prima Pty Ltd. In Australia, Nu-World has consolidated its two operations into a 54,8% shareholding of Yale Prima Pty Ltd, as of 1 August 2006. The Yale Appliance Group performed well for the year under review, with a business model better suited to Australia"s difficult trading conditions. Prima Australasia experienced a difficult year in an increasingly competitive and deflationary market. However, following the merger and the change of the Prima business model in line with Yale, directors are confident that the merged subsidiary will generate profits in the coming year. Since the date of the merger, Yale Prima has been profitable each month and the order book for the festive season is particularly strong. Australia represents the largest of the Group"s foreign operations with revenues of R452,369m. The Australian market for consumer electronics, whilst extremely competitive, remains strong with consumers trading up to flat-panel televisions and the latest innovative technologies. On Corporation USA. With effect from 1 May 2006, the Group acquired a controlling interest in On Corporation USA, with a Korean partner. Initial revenue contribution for the year under review has been marginal but is forecast to improve significantly in the years ahead. Consumer ElectronicsJVC * Telefunken * Nu-Tec * Palsonic The Nu-World brands, which in South Africa cover the spectrum of the consumer electronics market, from price entry to top-end, performed well during the period under review. Telefunken improved its rating in the latest Markinor survey. Flat panel televisions are taking a greater share of the TV market, which is the largest single category of the consumer electronics market. Telefunken and JVC have launched a range of flat panel televisions, both LCD and Plasma. JVC offers the largest rear projection TV in the market. Other latest technology offerings include second generation camcorders with 30GB hard disc drives as well as software to support direct copying to DVD. Car audio is moving into the portable visual entertainment arena, offering 61/2" LCD screens and IPOD ready audio. Latest innovations in home theatre, component systems, personal audio, portable multi-media and MP3"s, are driving aspirational purchases. New product range line-upConti Motorsport * Air-Conditioning * White Goods * Power Tools * Cell phones * GPS Guidance Systems The new ranges of products in terms of motorsport, air-conditioning and white goods etc., represent a small percentage of our business at this time. However, these segments have performed exceedingly well and offer substantial potential for growth. In addition we are marketing a range of cell phones and GPS Guidance systems. Conti MotorsportThe off-take of Conti Motorsport has been excellent. The range is ever growing and now includes: scooters, road bikes, super bikes, quad bikes, bicycles, generators, go-carts and golf carts. Conti Motorsport is driven by affordable ownership and fuel efficient transport. With the increase in the cost of fuel, the nature of commuting in South Africa will inevitably change in line with other emerging markets. Conti Motorsport provides consumers with an ownership opportunity. Ownership offers unlimited mobility, reduced commuting time, and cost-saving fuel efficiency. Service and support is key, with 76 appointed service agents nationwide providing 24 hour service and spare parts. AMID, the Association of Motorcycle Importers recently reported that sales of 2-wheelers year-to-date are up more than 50% on the previous year. MANPOWER AND SOCIAL RESPONSIBILITY The 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. PROSPECTS The Group has demonstrated its resilience by achieving growth for 16 consecutive years in turnover, operating income, attributable income and headline earnings per share. South Africa, with a "high street" retail market estimated at R385bn, has been experiencing a period of the best retail environment in many years, notwithstanding the recent dipping of consumer sentiment. Structural changes and cyclical factors have contributed to this strong trading environment. South Africa"s medium-term growth prospects are looking good. Urbanization and an emerging middle class support growth in sales of consumer durables, Nu- World"s product of trade. The slight deterioration in consumer sentiment in the third quarter, reflects a change in macroeconomic factors. The effects of higher petrol and food prices, interest rate hikes, the depreciation of the Rand and a slowdown in property increases has started to filter through to consumer sentiment. However, retailer confidence remains relatively high after a third quarter of superb sales growth. Third quarter statistics indicate that business confidence in the wholesale trade is extremely high. It is evident that notwithstanding recent pressures, consumer affordability levels have increased with many consumers upgrading their durables with more expensive, latest technology products. Infrastructure spending and preparation for the 2010 Soccer World Cup will sustain growth in the medium term. The government has committed to spend R400bn in the medium-term to upgrade the country"s electricity, water and transport infrastructure. Nu-World has provided shareholders with growth generation with the C.A.G.R over the last five years averaging 19,3%. The Group has demonstrated its ongoing ability to generate cash and shareholders have been rewarded with a steadily appreciating share price. The Group remains well positioned for long term growth in terms of our broad diversification, level of innovation and key customer relationships. AUDIT REPORT The 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 summarized financial information are available for inspection at the Company"s registered office. DISTRIBUTION TO SHAREHOLDERS The Board has resolved to declare a distribution to shareholders by way of a capital distribution out of share premium of 120,8 cents per share. Shareholders will be asked to consider, and if deemed fit, to approve the capital distribution at the annual general meeting of Nu-World to be held on 24 January 2007. Salient dates and times pertaining to the capital distribution will be announced following the annual general meeting. ANNUAL REPORT The annual report will be mailed to shareholders in due course. The annual general meeting will take place on Wednesday, 24 January 2007, at the registered office of the Company. On behalf of the board of directors M. S. Goldberg Executive Chairman B.H. Haikney Company Secretary 24 October 2006 Administration Registration number 1968/002490/06 (Incorporated in the Republic of South Africa) JSE share code: NWL ISIN code: ZAE000005070 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 Joint sponsorsNedbank Capital; Sasfin Corporate Finance, a division of Sasfin Bank Limited (Lead) 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: 24/10/2006 05:00:51 PM Supplied by www.sharenet.co.za Produced by the JSE SENS Department

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