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NWL - Nu-World - Audited financial statements for the year ended 31 August
2009 and a capital reduction distribution to shareholders in lieu of a
dividend
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 2009AND A CAPITAL REDUCTION DISTRIBUTION TO
SHAREHOLDERS IN LIEU OF A DIVIDEND
NET OPERATING INCOME (EBITDA) R000 51,769
HEADLINE EARNINGS PER SHARE CENTS 143,1
CAPITAL DISTRIBUTION PER SHARE CENTS 33,9
CASH GENERATED BY OPERATIONS R000 40,705
CASH AND CASH EQUIVALENTS AT END OF YEAR R000 149,131
INCREASE IN COMPARATIVE PROFIT AFTER TAX - SECOND HALF UP 218,7%
CONDENSED GROUP INCOME STATEMENT
Year ended Year ended
31-Aug 31-Aug
2009 2008 %
R000 R000 Change
Continuing operations 1 443 104 1 525 034 (5,4%)
Discontinued operations 365 849
Total Turnover 1 443 104 1 890 883 (23,7%)
Continuing operations
Net operating income 51 769 60 564 (14,5%)
Depreciation 6 904 6 097
Interest paid 6 676 6 667
Restructuring costs - operations 3 027
Fair value adjustment on financial 1 720 1 230
instruments
Income before taxation 33 442 46 570
Taxation 8 465 10 440
Income after taxation from 24 977 36 130 (30,9%)
continuing operations
Discontinued operations
Income after taxation from 6 991
discontinued operations
Income after taxation from 24 977 43 121
continuing and discontinued
operations
Minority interests (1 943) (2 848)
Attributable income 23 034 40 273
RECONCILIATION OF HEADLINE EARNINGS:
Attributable income 23 034 40 273
Adjusted for:
Net loss on disposal of investments 7 251 3 323
Headline earnings 30 285 43 596 (30,5%)
Capital distribution 7 678 13 429
Capital distribution from share 33,9 59,3
premium (cents)
Capital distribution cover (times) 3,0 3,0
Earnings per share (cents) 108,8 185,6
Headline earnings per share (cents) 143,1 200,9 (28,8%)
Interest cover (times) 6,7 9,2
Shares in issue 21 148 614 21 214 613
Shares in issue - weighted 21 162 931 21 696 807
Shares in issue - diluted 21 809 614 21 875 613
Other group information
Headline earnings as percentage of 2,1 2,3
turnover (%)
Net negative debt to equity ratio (26,9) (25,4)
(%)
Effective taxation rate (%) 25,3 21,2
Net asset value per share (cents) 2 621,7 2 592,8 1,1%
Capital expenditure
Expansion 627 1 000
Replacement 1 582 1 250
2 209 2 250
Intangible assets
Goodwill
At beginning of year 37 991 25 106
Net acquisition of subsidiaries 12 885
37 991 37 991
Intellectual property
Net acquisition of subsidiaries 14 322 14 322
Total intangible assets 52 313 52 313
CONDENSED GROUP CASH FLOW STATEMENT
Year ended Year ended
31-Aug 31-Aug
2009 2008
R000 R000
Cash generated from/(utilised by) operating 12 088 (56 070)
activities
Cash generated from/(utilised by) operations 40 705 (6 262)
Interest paid (6 676) (6 789)
Capital distribution/dividend paid (13 669) (28 653)
Normal tax on companies (8 272) (14 366)
Cash flows from investing activities (2 645) (112 055)
Purchase of tangible fixed assets (5 607) (2 897)
Proceeds on disposal of fixed assets 563 98
Investment in financial assets and other (51 706)
investments
Increase in investment in subsidiary (38 798)
Net proceeds on sale of a subsidiary 3 481 (9 468)
Increase in investment in treasury shares (1 082) (9 284)
Cash flows from financing activities 20 000
Increase in long term borrowing 20 000
Net increase / (decrease) in cash and cash 9 443 (148 125)
equivalents
Cash and cash equivalents at the beginning of 139 688 287 813
the year
Cash and cash equivalents at end of the year 149 131 139 688
CONDENSED GROUP BALANCE SHEET
Year ended Year ended
31-Aug 31-Aug
2009 2008
R000 R000
Assets
Non-current assets
Fixed assets 32 563 35 054
Intangible assets 52 313 52 313
Financial assets and other investments 51 706 51 706
Deferred taxation 10 492 10 234
Current assets
Inventory 264 690 244 349
Trade and other receivables 198 153 239 221
Cash equivalents 149 131 139 688
Total assets 759 048 772 565
EQUITY AND LIABILITIES
Ordinary shareholders` funds 554 452 550 060
Minority interests 23 133 21 466
Total shareholders` funds 577 585 571 526
Long term liability 20 000 20 000
Current liabilities
Trade and other payables 161 463 181 039
Total equity and liabilities 759 048 772 565
SEGMENTAL INFORMATION
Year ended Year ended
31-Aug 31-Aug
2009 2008 %
R000 R000 change
Geographical revenue
South Africa 1 007 026 1 049 028 (4,0%)
Offshore subsidiaries 436 078 476 006 (8,4%)
Discontinued operations 365 849
1 443 104 1 890 883 (23,7%)
Geographical headline earnings
South Africa 29 875 42 225 (29,2%)
Offshore subsidiaries 410 1 098 (62,7%)
Discontinued operations 273
30 285 43 596 (30,5%)
CONDENSED STATEMENT OF CHANGES IN EQUITY
Foreign
currency
Share Share Treasury translation
capital premium shares reserve
R000 R000 R000 R000
Balance as at 1 September 2007 226 100 488 (20 200) 1 245
Net profit for the year
Capital distribution from share (28 377)
premium
Fair value movement 1 558
Net treasury share movement (727)
Balance as at 31 August 2008 226 72 111 (20 927) 2 803
Net profit for the year
Capital distribution from share (13 429)
premium
Fair value movement (400)
Net treasury share movement (1 083)
Balance as at 31 August 2009 226 58 682 (22 010) 2 403
CONDENSED STATEMENT OF CHANGES IN EQUITY (Contd)
Share
Accum- based
Hedging ulated Compensation
reserve profits reserve Total
R000 R000 R000 R000
Balance as at 1 September 2007 454 011 1 078 536 848
Net profit for the year 40 273 40 273
Dividend paid (276) (276)
Capital distribution from share (28 377)
premium
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
Net profit for the year 23 034 23 034
Dividend paid (239) (239)
Capital distribution from share (13 429)
premium
Loss on cash flow hedges (3 934) (3 934)
IFRS adjustments - share based 443 443
payments
Fair value movement (400)
Net treasury share movement (1 083)
Balance as at 31 August 2009 (3 934) 516 803 2 282 554 452
COMMENTS
FINANCIAL OVERVIEW
The Nu-World Group has performed in line with the Trading Statement released
on SENS on the 5th October 2009.
The year under review has proved to be a time of restructuring the group to
be leaner and better positioned for sustainable growth. Our local
manufacturing division has been restructured and substantially downsized. A
number of small appliances, which are no longer cost-competitive to
manufacture locally, are now outsourced from the East.
The second half of 2009 is showing signs of improvement as consumers respond
to lower rates and consumer and business sentiment improve. Inflation is
moderating and is predicted to inch lower to within the 3% - 6% official
target range (BER forecast 5,7% for 2010). South Africa`s medium-term growth
prospects are looking more positive, with leading economic indicators such as
vehicle sales and the ABSA house price index improving month-on-month, in
recent months. Government`s substantial infrastructure program, including
ongoing investment in low-cost housing, transport and electrification, will
stretch beyond the 2010 Soccer World Cup and will impact positively on GDP.
Structural changes, such as urbanization and the migration of consumers to
higher LSM levels, have supported GDP through the difficult years and will
add impetus to renewed growth. Interest rates have been cut by a cumulative 5
percentage points since December 2008.
After a difficult and slow first half to February 2009, the remainder of the
trading year "H2" has generated a substantial 218,7% improvement in profits
after tax, compared to the same period, March to August 2008.
Group turnover for continuing operations decreased by 5,4% to R1 443,1
million
(August 2008 : R1 525,0 million). The South African operation reflected a
decrease in revenue of 4,0% for the year under review.
Operating margins of 3,6% remained in line with margins from the previous
year. The South African market place remains intensely competitive. Our
subsidiaries in Australia are experiencing similar fierce competition in
tight market conditions.
Restructuring costs of R3,0 million arose principally from the rightsizing of
our staff complement, but costs were also incurred in the consolidation of
warehousing to improve controls and streamline operations for future growth.
Income before tax is down by 29,9% to R33,4 million (August 2008 : R47,7
million ).
The effective tax rate has increased to 25,3% from the previous year`s 21,2%.
Headline earnings per share on a weighted basis - H.E.P.S. decreased by
30,3% to 143,2 cents (August 2008 : 205,5 cents).
The net loss on disposal of investments represents the final write-down
incurred on the sale of the U.K. subsidiary, effective 1st September 2008.
Capital distribution per share is down 42,8% to 33,9 cents (August 2008 :
59,3 cents). Distribution cover remains in line with 2008, at 3 times cover.
Cash generated from operations amounted to R40,7 million.
The balance sheet remains strong with cash balances on hand of R149,1 million
(August 2008 : R139,7 million.) The group remains ungeared at the year end.
Inventories of R264,7 million are up 8,3% on the previous year (August 2008 :
R244,3 million) and management remains focused on improving stock turn.
The net asset value per share is up marginally to 2 621,7 cents (August 2008
: 2 592,8 cents). The current share price of 1 400 cents is trading at a 47%
discount to the net asset value.
OPERATIONAL REVIEW
Offshore Subsidiaries Australia
Yale Prima Pty Ltd
Overstockoutlet Pty Ltd
Yale Prima Pty Ltd is a 59,4% held subsidiary headquartered in Sydney
Australia.
Overstockoutlet Pty Ltd is a 51% held subsidiary of Yale Prima. OO.COM.AU is
the second largest Australian online internet retailer.
The Australian group remained marginally profitable for the year to August
2009 notwithstanding lower turnover and lower gross profit margins. Directors
and management remain focused on consolidating the companies into new
premises, cutting overheads and rightsizing staffing numbers.
In Australia, early signs point to an improving economy. Australia has become
the first major western nation to lift interest rates. On the 6th October
2009 the Reserve Bank of Australia "RBA", raised the official cash rate from
a decades long low of 3%, by 25bp basis points. The Australian dollar has
rebounded and the Consumer Price Index CPI has fallen below 2%.
Directors are hopeful that cost-benefit synergies will be achieved from the
consolidation of the two companies, the relocation of the premises to larger
but more affordable offices/warehousing and the concurrent savings in
administration, finance, shipping, warehousing, returns and repairs.
Both Yale Prima and OO.COM.AU are forecasting growth in turnover for the
forthcoming year. Yale is currently holding a much improved order book
through to February 2010 and is looking to new products, new listings and new
customers for growth.
OO.COM.AU has restructured to create an appropriate foundation for future
growth. The company is currently re-branding its marketing position to the
exclusive "Only Online". Specialist support has been outsourced for search
engine optimization and specialist category buyers have been brought on
board.
PRODUCT RANGE
* Consumer Electronics * Small Electrical Appliances * Conti Motorsport *
Air-Conditioning * White Goods * Power Tools * Gas, Paraffin and Solar
Appliances * DIY Home Improvement * Luxury Goods * 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, DIY and furniture.
The retail market for consumer durables has contracted over the past 3 years,
but Nu-World`s sales have proved to be relatively resilient and the company
has grown market share in a number of key categories. Apart from maintaining
a lion`s share of price-entry brands, Nu-World is focusing on value-added up-
market products specifically with consumer electronics - matching the
specifications of international brands at more affordable price points. The
"Vegas" range of consumer electronics and appliances has been added to our
top-line offering. New initiatives which will be available for the Christmas
season include:- Ideal Kids TV games, electronic musical instruments, full
featured LCD`s with IPOD docking and built-in DVD players, digital photo
frames and blue-ray DVD`s.
MANPOWER AND SOCIAL RESPONSIBILITY
Nu-World supports the DTI`s Broad Based Black Economic Empowerment (BBBEE)
initiatives and remains committed to achieving the objectives set out in the
DTI`s 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
Directors are confident that current strategic initiatives to consolidate and
rationalise will better position all companies in the group to be leaner and
more competitive, to withstand these challenging times and be better prepared
to take advantage as markets improve.
The group`s diversification has always been an advantage. The group is
diversified across a broad range of product categories and key brands. Our
product offering is diversified across market segments, from price-entry to
top-end. The group`s international exposure has been rationalized, but we
continue to operate in both Southern Africa as well as Australia.
Initiatives taken by management during the year under review:-
- The rightsizing of staffing levels within each company in the group.
- The ongoing right-sizing of inventory levels and the improvement of
stock turn.
- The downscaling and restructuring of the local manufacturing division.
- The sale of the loss-making U.K. subsidiary, Nu-World U.K. Ltd.
Recent economic data indicates that the worst of the economic cycle has
passed and that there are tentative signs of recovery. The second half of
2009 has shown signs of improvement as consumers respond to lower rates. This
is borne out by our South African company`s improved performance during the
second half as well as all companies in the group reporting improved sales at
reasonable margins in recent months.
Going forward, visibility remains limited, but current signs are positive and
economists are hopeful that South Africa may emerge from recession later this
year. The group`s conservative business model has served it in reasonable
stead through these recessionary times.
Directors are cautiously optimistic that the worst of the downturn has passed
and that the group is leaner and better positioned to provide shareholders
with sustainable growth in the medium and the long term.
ACCOUNTING POLICIES
The condensed financial statements have been prepared in accordance with:
- IAS 34: Interim Financial Reporting using accounting policies that are
in accordance with IFRS and consistent with those applied in the prior
year;
- The requirements of the South African Companies Act, 61 of 1973, as
amended; and
- The Listings Requirements of the JSE Limited.
AUDIT REPORT
The consolidated financial statements for the year have been audited by
Tuffias Sandberg KSi and their unqualified audit report as well as their
unqualified audit report on this set of condensed financial information is
available for inspection at the company`s registered office.
CAPITAL REDUCTION DISTRIBUTION TO SHAREHOLDERS
Notice is hereby given that the board of directors ("the board") has resolved
to make a capital reduction distribution to ordinary shareholders of a
portion of the share premium account in lieu of a dividend to ordinary
shareholders of the company ("the capital distribution"). 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, 18 February 2009. The capital distribution will amount to 33,9
cents per ordinary share, based on a reduction to share premium of R7 677
152.
The following salient dates will be applicable:
Last date to trade "cum" the capital distribution Friday, 4 December 2009
Trading commences "ex" the capital distribution Monday, 7 December 2009
Record date Friday,11 December 2009
Date of payment Monday,14 December 2009
Share certificates may not be dematerialised or rematerialised between
Monday, 7 December 2009 and Friday, 11 December 2009, 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 2009. 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 108,9 106,4 (2,3)
Headline earnings per share 143,2 140,6 (1,8)
Net asset value per share 2 621,7 2 582,9 (1,5)
Net tangible asset value per share 2 442,1 2 403,3 (1,6)
Notes to the financial effects:
It is assumed that the capital distribution had been paid to shareholders on
1 September 2008, and based on a reduction of R7 677 152 and an after tax
interest rate earned on cash resources of 7,03%.
NOTICE OF ANNUAL GENERAL MEETING AND POSTING OF ANNUAL REPORT
The annual report will be mailed to shareholders prior to end November 2009.
The annual general meeting will take place at 10h00 on Wednesday, 10 February
2010, at the registered office of the company.
On behalf of the board of directors
M.S. Goldberg B.H. Haikney
Executive Chairman Company Secretary
27 October 2009
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: 27/10/2009 17:00:01 Supplied by www.sharenet.co.za
Produced by the JSE SENS Department.
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