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NWL - Nu-World - Audited Financial Statements For The Year Ended 31 August 2008
and capital distribution
NU-WORLD HOLDINGS LIMITED
Registration No. 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 2008
- TURNOVER UP 5, 2% TO R1 961, 9 MILLION
- HEADLINE EARNINGS PER SHARE DOWN 17,5% TO 205,5 CENTS
- CAPITAL DISTRIBUTION PER SHARE OF 59,3 CENTS
- NET ASSET VALUE PER SHARE UP 3,8% TO 2 592,8 CENTS
- CASH AND CASH EQUIVALENTS AT END OF YEAR R139,7 MILLION
ABRIDGED CONSOLIDATED INCOME STATEMENT
Year ended Year ended
31-Aug 31-Aug
2008 2007 %
R000 R000 change
Turnover 1 961 887 1 865 783 5,2%
Net operating income 67 625 116 114
Depreciation 6 097 7 087
Interest paid 6 788 4 691
Income before taxation 54 740 104 336
Taxation 11 619 15 214
Income after taxation 43 121 89 122
Minority interests (2 848) (3 991)
Attributable income 40 273 85 131
Reconciliation of headline earnings:
Attributable income 40 273 85 131
Adjusted for:
Net loss on disposal of subsidiary 3 323
Profit on sale of trademarks (30 748)
Headline earnings 43 596 54 383 (19,8%)
Capital distribution 13 429 28 376
Capital distribution from share 59,3 125,3
premium (cents)
Capital distribution cover (times) 3,0 3,0
Earnings per share (cents) 189,8 389,9
Headline earnings per share (cents) 205,5 249,1 (17,5%)
Interest cover (times) 9,1 23,2
Shares in issue 21 214 613 21 833 040 (2,8%)
Shares in issue - weighted 21 696 807 21 833 040 (0,6%)
Shares in issue - diluted 21 875 613 22 494 040 (2,7%)
Other group information
Headline earnings as percentage of 2,2 2,9
turnover (%)
Net negative debt to equity ratio (25,4) (52,8)
(%)
Effective taxation rate (%) 21,2 14,6
Net asset value per share (cents) 2 592,8 2 498,1 3,8%
Capital expenditure
Expansion 2 283 1 230
Replacement 471 1 538
2 754 2 768
Intangible assets
Goodwill
At beginning of year 25 106 25 729
Net acquisition of subsidiaries 12 885 (623)
37 991 25 106
Intellectual property
Net acquisition of subsidiaries 14 322
Total intangible assets 52 313 25 106
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
Year ended Year ended
31-Aug 31-Aug
2008 2007
R000 R000
Cash (utilised by)/generated from operating (55 833) 33 771
activities
Cash (utilised by)/generated from operations (6 619) 93 355
Interest paid (6 789) (4 691)
Dividend paid (28 653) (27 357)
Normal tax on companies (13 772) (27 536)
Cash flows from investing activities (112 292) (3 322)
Purchase of tangible fixed assets (2 754) (2 768)
Proceeds on disposal of fixed assets 1 319
Investment in financial assets and other (51 706)
investments
Increase in investment in subsidiary (39 079) (1 873)
Net proceeds on sale of a subsidiary (9 468)
Increase in investment in treasury shares (9 285)
Cash flows from financing activities 20 000 (10 214)
Increase in long term borrowing 20 000
Decrease in shareholders loans (11 361)
Proceeds from issue of treasury shares 1 147
Net (decrease)/increase in cash and cash (148 125) 20 235
equivalents
Cash and cash equivalents at the beginning of 287 813 267 578
the year
Cash and cash equivalents at end of the year 139 688 287 813
ABRIDGED CONSOLIDATED BALANCE SHEET
Year ended Year ended
31-Aug 31-Aug
2008 2007
R000 R000
Assets
Non-current assets
Fixed assets 35 054 35 839
Intangible assets 52 313 25 106
Financial assets and other investments 51 706
Deferred taxation 10 234 11 905
Current assets
Inventory 224 998 153 085
Trade and other receivables 239 221 225 793
Cash equivalents 139 688 287 813
Total assets 753 214 739 541
EQUITY AND LIABILITIES
Ordinary shareholders` funds 550 060 545 405
Minority interests 21 466 51 345
Total shareholders` funds 571 526 596 750
Long term liability 20 000
Current liabilities
Trade and other payables 161 688 142 791
Total equity and liabilities 753 214 739 541
SEGMENTAL INFORMATION
Year ended Year ended
31-Aug 31-Aug
2008 2007 %
R000 R000 change
Geographical revenue
South Africa 1 104 927 1 138 578 (3,0%)
Offshore subsidiaries 856 960 727 205 17,8%
1 961 887 1 865 783 5,2%
Geographical headline earnings
South Africa 42 225 46 684 (9,6%)
Offshore subsidiaries 1 371 7 699 (82,2%)
43 596 54 383 (19,8%)
STATEMENT OF CHANGES IN EQUITY
Foreign
currency
Share Share Treasury translation
capital premium shares reserve
R000 R000 R000 R000
Balance as at 1 September 2006 226 136 402 (20 931) 166
Net profit for the year
Capital distribution from share (27 357)
premium
IFRS adjustments - share based
payments
Fair value movement 1 079
Net treasury share movement 731
Balance as at 31 August 2007 226 109 045 (20 200) 1 245
Net profit for the year
Dividend paid
Capital distribution from share (28 377)
premium
Share purchase (8 557)
IFRS adjustments - share based
payments
Fair value movement 1 558
Net treasury share movement (727)
Balance as at 31 August 2008 226 72 111 (20 927) 2 803
STATEMENT OF CHANGES IN EQUITY (Contd)
Share
based
Accumulated compensation
profits reserve Total
R000 R000 R000
Balance as at 1 September 2006 368 880 539 485 282
Net profit for the year 85 131 85 131
Capital distribution from share (27 357)
premium
IFRS adjustments - share based 539 539
payments
Fair value movement 1 079
Net treasury share movement 731
Balance as at 31 August 2007 454 011 1 078 545 405
Net profit for the year 40 273 40 273
Dividend paid (276) (276)
Capital distribution from share (28 377)
premium
Share purchase (8 557)
IFRS adjustments - share based 761 761
payments
Fair value movement 1 558
Net treasury share movement (727)
Balance as at 31 August 2008 494 008 1 839 550 060
COMMENTS
FINANCIAL OVERVIEW
The year under review has been both difficult and challenging. Consumers in
South Africa are under pressure on many fronts. Falling asset prices are
minimising their wealth, slowing growth is threatening their employment, whilst
higher interest rates and fuel and food prices are squeezing disposable income.
Retailer and wholesaler confidence have been negatively affected as a
consequence. After a slow first half of 2008, the remainder of the trading year
was adversely impacted by the lower consumer discretionary spend, both in South
Africa and abroad.
However, South Africa`s medium-term growth prospects remain steadfast. It is
apparent that Government`s substantial infrastructure program will stretch
beyond 2010 and will continue to underpin growth and employment for key sectors
of the South African economy.
Group turnover increased by 5,2% to R1 961,9m (August 2007: R1 865,8m). The
South African operation reflected a decrease in revenue of 3,0% for the year
under review.
Headline earnings as a percentage of turnover decreased to 2,2% from the
previous year`s 2,9%. Operating margins came under pressure in an intensely
competitive South African marketplace. The weaker Rand and higher fuel and
commodity prices are driving up input prices across our product range and
pressurising margins. Our subsidiaries in Australia and the United Kingdom are
experiencing similar aggressive competition in tight market conditions.
Our off-shore operations contributed 43,7% of group revenue during the current
year, up from 39,0% during the previous year. This increasing percentage of off-
shore revenue, where subsidiaries` business models produce lower margins, had an
increased effect on overall group margins.
Although off-shore subsidiaries delivered a higher percentage of revenue, the
percentage of off-shore headline income contribution fell to 3,1% from the
previous year`s 14,2%.
Income before tax is down by 47,5% to R54,7m (August 2007:R104,3m). An increase
in the effective tax rate from 14,6% to 21,2% further reduced income after tax.
Headline earnings per share on a weighted basis decreased by 17,5% to 205,5
cents (August 2007:249,1 cents). Headline earnings was unaffected by the once-
off loss incurred on the sale of the U.S.A. subsidiary, effective 1 March 2008.
Capital distribution per share is down 52,7% to 59,3 cents (August 2007:125,3
cents). Distribution cover remains in line with 2007, at 3 times cover.
Cash utilised by operating activities amounted to R6,6m - reflected primarily in
the higher level of inventories.
The balance sheet remains strong with cash balances on hand of R139,7m. The
group remains ungeared at the year end. Inventories of R225,0 whilst lower than
levels disclosed at the half-year of R285,9m, are up 47,0% on the previous year
end (August 2007: R153,1m). All companies in the group are actively working to
reduce overall stock holding to more acceptable levels.
Interest paid of R6,8m is up 44,7% on the previous year (August 2007: R4,7m) -
attributable to the increase in the bank rate, compounded by the cost of
increased working capital requirements to fund higher stock levels.
The net asset value per share is up 3,8% to 2 592,8 cents (August 2007:2 498,1
cents).
ACCOUNTING POLICIES
The 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 South
African Companies Act and the JSE Listings Requirements.
The results have been prepared in terms of IFRS statements, IAS 34 and are
consistent with those applied in the previous year.
OPERATIONAL REVIEW
Offshore Subsidiaries
Yale Prima Pty Ltd, Nu-World UK Ltd, On Corporation USA.
Yale Prima Pty Ltd is a 59,4% held subsidiary operating in Sydney Australia.
The Australian consumer is under pressure, with high interest rates, tighter
access to credit and the increasing cost of food and fuel. Yale Prima`s primary
customer base has been discounters and sales levels have been maintained to
these retailers. The company seeks to diversify its product offering in the
subdued economy. The market for flat panel televisions, an important historical
growth driver, has become increasingly competitive and the company`s
diversification into less competitive, higher margin opportunities, continues.
New ranges of white goods and small electrical appliances are becoming an
increasingly important component of the sales mix.
Primex Products Pty Ltd. Yale Prima has wound down and closed the operations of
its loss-making subsidiary Primex Products Pty Ltd, an importer and distributor
of house-wares. The outlook for Primex`s return to profitability in the
foreseeable future was bleak, and the company was closed to prevent further
losses.
Overstockoutlet Pty Ltd. (www.oo.com.au). Effective 1 July 2008, the group
acquired a majority shareholding in the online retailer. Overstockoutlet, is the
second largest Australian online internet retailer. Overstockoutlet was
incorporated in Sydney in 2004 and enjoys an exclusive relationship with Virgin
Blue and its in-flight shopping offering, Velocity. The company trades primarily
in leading international brands in a broad range of consumer products, including
leading world brands in consumer electronics, watches, perfumes, toys, DVD`s,
luggage, manchester, golf and fashion accessories etc.
Nu-World UK Ltd is a 60% held subsidiary. The UK subsidiary has experienced a
difficult year and reported a net loss for the period, with consumer sentiment
and consumer spending remaining under pressure. New product ranges, coupled with
a broader customer base and an improved order book for the Christmas season,
should benefit the company in the forthcoming year.
On Corporation USA. Effective 1 March 2008, the Group disposed of its interest
in On Corporation USA. This initiative was a conservative move to avoid exposure
to the deteriorating USA retail environment.
Product Range
Consumer Electronics * Small Electrical Appliances * Conti Motorsport *
Air-Conditioning * White Goods * Power Tools * Generators * Gas,
Paraffin and Solar Appliances * DIY Home Improvement * Furniture *
The group`s line-up of international and in-house value brands, encompass an
increasing spread of consumer durables, including small appliances, consumer
electronics, motorsport, large appliances, air-conditioning, generators, gas
appliances, home improvement and DIY, furniture and more.
Notwithstanding the downturn in the market for consumer electronics, Nu-World is
holding its own and increasing market share in certain categories. Nu-World is
focusing on value-added up-market products within specific categories - matching
the specifications of international brands, but offering a more affordable
alternative. 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 "Telefunken Vegas" range of LCD`s and Plasmas has been
added to our top-line offering. New models of plug-and-play Home Theatre,
digital photo frames and blue-ray DVD`s, will be available for the Christmas
Season.
PROSPECTS
The current state of the South African economy within the context of the broader
global economy represents a challenging trading environment for the new year.
Strategic initiatives have been put in place and all companies in the group have
been re-positioned to meet these challenges.
Initiatives taken by management during the year under review:
* The on-going right-sizing of inventory levels and the improvement of stock
turn.
* The downscaling and consolidation of the local manufacturing division.
* The sale of On Corporation USA - a conservative move to avoid exposure to the
deteriorating USA retail environment.
* The winding down and closure of Yale Prima`s loss-making Australian subsidiary
Primex Products Pty Ltd.
* The strategic acquisition in Australia of online retailer Overstockoutlet Pty
Ltd.
The group continually looks to its diversification to sustain growth. The group
is diversified across a broad range of product categories and key brands. In
Southern Africa, we are diversified across LSM groupings, from price-entry to
top-end. The group is diversified globally, with operating subsidiaries serving
Australasia and the United Kingdom. Directors are of the view that 2009 will be
a difficult year, but with cost-cutting initiatives underway, lower inventory
target levels and higher stock turns, new product initiatives and range
extensions, the group will weather the challenging times.
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 is
available for inspection at the company`s registered office.
CAPITAL REDUCTION DISTRIBUTION TO SHAREHOLDERS
The Board has resolved to make a capital reduction distribution to ordinary
shareholders from the company`s share premium account amounting to 59,3 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 capital
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, 20
February 2008. The capital distribution will amount to 59,3 cents per ordinary
share, based on a reduction to share premium of R13 429 353.
The following salient dates will be applicable:
Last date to trade "cum" the capital distribution Friday, 5 December 2008
Trading commences "ex" the capital distribution Monday, 8 December 2008
Record date Friday, 12 December 2008
Date of payment Monday, 15 December 2008
Share certificates may not be dematerialised or rematerialised between Monday, 8
December 2008 and Friday, 12 December 2008, both dates inclusive.
FINANCIAL EFFECTS
The 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 2008. 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 %
cents cents change
Earnings per share 191,6 186,6 (2,6)
Headline earnings per share 207,2 202,3 (2,4)
Net asset value per share 2 592,8 2 524,1 (2,7)
Net tangible asset value per share 2 413,8 2 345,0 (2,8)
Notes to the financial effects:
It is assumed that the capital distribution had been paid to shareholders on 1
September 2007, and based on a reduction of R13 429 353 and an after tax
interest rate earned on cash resources of 7,7%.
ANNUAL REPORT
The annual report will be mailed to shareholders in due course. The annual
general meeting will take place at 10h00 on Wednesday, 18 February 2009, at the
registered office of the company.
On behalf of the board of directors
M.S. Goldberg B.H. Haikney
Executive Chairman Company Secretary
28 October 2008
Administration
Registration number 1968/002490/06
(Incorporated in the Republic of South Africa)
JSE share code: NWL
ISIN code: ZAE000005070
Registered office
35 3rd Street, Wynberg, Sandton 2199
Republic of South Africa
Tel +27 (11) 321 2111
Fax +27 (11) 440 9920
Transfer secretaries
Computershare Investor Services 2004 (Pty) Ltd
70 Marshall Street, Johannesburg 2001
Company secretary
B.H. Haikney
Auditors
Tuffias Sandberg KSi
Sponsor
Sasfin 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 directors
J.M. Judin
D. Piaray
www.nuworld.co.za
Date: 28/10/2008 17:00:03 Supplied by www.sharenet.co.za
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