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UNI - Universal Industries Corporation - Audited results for the year ended 31
December 2010
Universal Industries Corporation Limited
(Incorporated in the Republic of South Africa)
(Registration Number: 1996/004343/06)
("Universal" or "the group")
JSE Code: UNI
ISIN: ZAE000110664
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2010
- Revenue increased by 20% and headline earnings per share ("HEPS") increased by
19%;
- Distribution to shareholders increased to 3,5 cents per share (increase of
17%);
- Net asset value per share increased by 14%;
- Export revenue increased by 19% to R151 million, amounting to 21% of revenue;
and
- Acquisitions of BCE and Glacier completed during the year under review but had
no impact on HEPS due to the timing of the acquisition.
Consolidated Statement of Comprehensive Income
Year ended 31 December
Audited Audited
R`000 2010 2009
Revenue 702 318 587 072
Cost of goods sold (496 482) (421 309)
Gross profit 205 836 165 763
Other income 1 776 323
Operating expenses (117 651) (93 148)
Profit from operations 89 961 72 938
Interest received 9 677 16 863
Interest paid (10 750) (16 693)
Profit before taxation 88 888 73 108
Taxation (27 265) (22 034)
Profit for the year 61 623 51 074
Other comprehensive income - -
Total comprehensive income for the year 61 623 51 074
Attributable to:
Equity holders of the parent 60 921 51 074
Non-controlling interest 702 -
61 623 51 074
Number of shares in issue (`000) 457 919 448 419
Weighted average number of shares in issue 449 198 448 863
(`000)
Diluted weighted average number of shares in 449 225 448 863
issue (`000)
Basic and headline earnings per share (cents) 13,6 11,4
Diluted basic and headline earnings per share 13,6 11,4
(cents)
Distribution per share (cents) 3,5 3,0
Consolidated Statement of Financial Position
As at 31 December
Audited Audited
R`000 2010 2009
Assets
Non-current assets 361 312 211 946
Property, plant and equipment 57 593 18 563
Intangible assets 285 771 192 064
Restraint of trade prepayment 8 700 -
Deferred taxation assets 1 475 1 319
Loan receivable 7 773 -
Current assets 423 489 331 046
Inventories 169 340 87 047
Trade and other receivables 207 299 133 622
Taxation receivable 2 609 28
Cash and cash equivalents 44 241 110 349
Total assets 784 801 542 992
Equity and liabilities
Capital and reserves 413 609 353 388
Share capital and premium 151 957 153 439
Accumulated profits 260 950 199 949
Equity attributable to the equity holders of the 412 907 353 388
parent
Non-controlling interest 702 -
Non-current liabilities 187 063 68 803
Interest bearing liabilities 159 669 65 316
Deferred taxation liabilities 9 536 1 008
Operating lease liabilities 3 452 2 479
Other financial liabilities 14 406 -
Current liabilities 184 129 120 801
Trade and other payables 124 686 96 257
Current portion of:
- interest bearing liabilities 43 753 20 714
- other financial liabilities 9 977 350
Taxation payable 5 713 3 480
Total equity and liabilities 784 801 542 992
Number of shares in issue (`000) 457 919 448 419
Net asset value per share (cents) 90,2 78,8
Tangible net asset value per share (cents) 30,3 36,0
Consolidated Statement of Cash Flows
Year ended 31 December
Audited Audited
R`000 2010 2009
Cash flows from operating activities 36 989 93 234
Cash generated by operations 79 448 111 785
Interest received 9 677 16 863
Interest paid (10 626) (11 119)
Taxation paid (41 510) (24 295)
Cash flows from investing activities (84 937) (7 816)
Additions to property, plant and equipment (15 070) (8 010)
Proceeds on disposal of property, plant and 138 194
equipment
Acquisition of businesses and subsidiaries (59 205) -
Restraint of trade payment (10 800) -
Cash flows from financing activities (18 160) (110 645)
Net interest bearing liabilities repaid (10 297) (11 769)
Net other financial liabilities raised/(repaid) 1 392 (85 111)
Capital distribution paid to shareholders from (13 453) (13 467)
share premium
Proceeds from issue of shares net of loans 4 244 -
advanced to executives under the assisted share
purchase scheme
Share buyback and expenses (46) (298)
Decrease in cash and cash equivalents (66 108) (25 227)
Cash and cash equivalents at beginning of year 110 349 135 576
Cash and cash equivalents at end of year 44 241 110 349
Segment Reporting
Year ended 31 December
Audited Audited
R`000 2010 2009
Revenue 702 318 587 072
- Refrigeration 336 474 291 870
- Baking systems 308 012 295 202
- Catering and kitchen equipment 59 467 -
- Inter segment sales eliminated on (1 635) -
consolidation
Segment profit from operations 101 242 79 942
- Refrigeration 42 422 38 778
- Baking systems 48 132 41 164
- Catering and kitchen equipment 10 688 -
Business acquisition expenses (7 242) -
Unallocated corporate expenses (4 039) (7 004)
Profit from operations 89 961 72 938
Net interest (paid)/received (1 073) 170
Profit before taxation 88 888 73 108
Consolidated Statement of Changes in Equity
Share Share Accumulated
capital premium profits
Audited R`000 R`000 R`000
Balances at 31 December 2008 4 167 200 148 875
Capital distribution to - (13 467) -
shareholders
Share buyback and expenses - (298) -
Total comprehensive income - - 51 074
for the year
Balances at 31 December 2009 4 153 435 199 949
Capital distribution to - (13 453) -
shareholders
Issue of shares 1 12 016 -
Share buyback and expenses - (46) -
Total comprehensive income - - 60 921
for the year
Share based payments - - 80
Balances at 31 December 2010 5 151 952 260 950
Total equity
attributable
to the Non-
equity holders controlling Total
of the parent interest equity
Audited R`000 R`000 R`000
Balances at 31 December 2008 316 079 - 316 079
Capital distribution to (13 467) - (13 467)
shareholders
Share buyback and expenses (298) - (298)
Total comprehensive income 51 074 - 51 074
for the year
Balances at 31 December 2009 353 388 - 353 388
Capital distribution to (13 453) - (13 453)
shareholders
Issue of shares 12 017 - 12 017
Share buyback and expenses (46) - (46)
Total comprehensive income 60 921 702 61 623
for the year
Share based payments 80 - 80
Balances at 31 December 2010 412 907 702 413 609
COMMENTARY
TRADING ENVIRONMENT
The group operates as a major supplier of commercial refrigeration, baking,
catering and kitchen equipment to the food industry encompassing the retail,
wholesale, hospitality and manufacturing segments. Trading has traditionally
been primarily with the SA food retailers but following the acquisition of BCE
the hospitality industry (ie hotels, restaurants and fast food outlets) will
become a significant revenue source for the group. BCE is Southern Africa`s
leading supplier of a comprehensive range of commercial catering equipment,
kitchen utensils, industrial cookware and kitchen appliances.
Food retailers are still reporting satisfactory profitability which, coupled
with strong statements of financial position, bodes well for continued
investment in new outlets and the upgrading of existing stores. However, the
lack of property development has impacted on the availability of new sites and
accordingly further store roll-outs will be limited until retail property
development recovers. The group has a significant installed base of products
that have limited useful lives, which ensures a healthy component of annuity
based revenue on an ongoing basis.
FINANCIAL RESULTS
Group revenue increased by 20% to R702 million (2009: R587 million) resulting in
profit after tax increasing by 19% to R61 million (2009: R51 million).
Excluding the BCE and Glacier acquisitions the group increased revenue by 4% but
increased operating profit by 15% (refer to "Acquisitions" paragraph below).
Operating profit margin improved as the businesses benefited from the relative
strength of the exchange rate and from an improved sales mix with more
internally manufactured products being sold.
Cash generated from operations was R79 million despite improved seasonal trading
during the last quarter of 2010, which absorbed a further R22 million into
working capital. Although the group raised a term loan of R121 million to partly
finance the acquisition of BCE, the statement of financial position remains
strong with a gearing ratio of 44% and with R44 million cash on hand at year
end.
REVIEW OF OPERATIONS
Refrigeration business
The business unit performed satisfactorily in a tough trading environment,
increasing revenue by 15% and operating income by 9%.
To date the business manufactured evaporator coils mainly for its own internal
consumption. The group has committed to invest a further R5,5 million in new
plant and equipment to increase manufacturing capacity and efficiency in this
department, and will aggressively pursue external coil manufacturing
opportunities in the future.
Baking business
The baking systems business had a satisfactory performance with revenue
increasing by 4% and operating income by 17% to R48 million (2009: R41 million)
in a tough trading environment. Operating profit margin improved as the business
benefited from the relative strength of the exchange rate and from an improved
sales mix with more internally manufactured products being sold.
The business invested a further R9 million in new plant and equipment. The
additional capacity from the capital equipment investment will reduce lead times
and increase capacity to meet customer requirements, in particular the bakeware
division supplying baking tins and pans.
The businesses successfully relocated to a new purpose built facility in May
2010 which now includes Marsden (the bakeware division) which operated from a
separate facility in the past. The integration of Marsden offers many
operational synergies and savings.
Catering and kitchen equipment
As the acquisition of the BCE business only became unconditional on 1 November
2010 the results only include eight weeks of trading. BCE reported satisfactory
results for this limited period. BCE will become a significant contributor to
group earnings in the future. The BCE business is synergistic with the group`s
other operations and will enhance the group`s offering to its customers while
offering significant opportunities through the group`s export initiatives.
PROSPECTS
Provided there is no deterioration in the global political and economic
situation the anticipated improvement in general economic conditions and
recovery in consumer spending in 2011 is expected to create favourable trading
conditions for the group`s activities. Enquiry and activity levels across the
group`s operations are encouraging and are expected to continue into the coming
year.
The full impact of the BCE acquisition will only reflect in the group`s 2011
results. In the BCE acquisition circular to shareholders of 29 July 2010, ("the
acquisition circular") the pro-forma financial impact of the acquisition on the
group`s HEPS was calculated as an increase of 4,2 cents per share (4,9 cents if
transaction expenses are excluded).
Based on the anticipated improved market conditions, and taking into account the
full impact of the BCE acquisition, the board expects continued growth for the
2011 financial year.
ACQUISITIONS
The company made the following acquisitions during the year under review:
BCE Food Service Equipment (Pty) Limited ("BCE")
Universal acquired BCE effective from 1 November 2010. Comprehensive information
on BCE and the acquisition was provided in the acquisition circular.
Glacier Door Systems (Pty) Limited ("Glacier")
The company acquired a 51% interest in Glacier, effective from 1 March 2010.
Glacier is a manufacturer of glass products, primarily glass doors and aligned
products used in the refrigeration industry. Subsequently a manufacturing,
technology sharing and distribution agreement was concluded with Anthony
International, the world`s leading manufacturer and supplier of these products,
that allows for the local manufacture of Anthony International products
utilising Glacier`s plant and expertise.
Details of acquisitions R`000
Tangible net assets acquired 134 111
Intangible assets 30 446
Surplus recognised as goodwill 66 625
Fair value of assets acquired 231 182
Loans acquired and/or raised (134 259)
Cash paid by Universal 96 923
Cash acquired (37 718)
Net cash outflow for Universal 59 205
Contribution to revenue and profit
The acquired businesses contributed revenue of R93 million, operating income of
R6 million and profit after tax of less than R1 million (after taking into
account transaction related expenses of R7 million incurred during the current
period).
Had the acquisitions been effective from 1 January 2010 the businesses would
have contributed R367 million to revenue and R50 million to operating profit
(based on information extracted from management accounts and excluding
transaction related expenses) which would have resulted in group revenue being
R976 million and operating profit being R134 million.
The increased borrowings (and reduction in group cash) should be considered when
evaluating the full effect of the acquisitions and shareholders are referred to
the pro-forma financial impact of the BCE acquisition as contained in the
acquisition circular.
CAPITAL COMMITMENTS
The group has committed capital of R9,5 million to the acquisition of new plant
and equipment for the refrigeration businesses. The commitments will be funded
from bank facilities and internal cash resources.
CHANGES TO CAPITAL STRUCTURE
In November 2010 the company bought back 36 000 of its own shares at an average
price of R1,26 per share. Authority to continue with share repurchases will be
submitted for renewal at the annual general meeting and the board will continue
to evaluate this strategy subject to the group`s liquidity position and the
share price.
During the year the company issued 9 536 127 shares under the executive assisted
share purchase scheme at R1,26 per share and granted 4 675 000 share options at
R1,40 to selected executive directors and senior management. Details of the
assisted share purchase scheme were included in the acquisition circular.
DISTRIBUTION TO SHAREHOLDERS BY WAY OF A CAPITAL REDUCTION
The group has a dividend policy of distributing 25% of profits attributable to
equity holders annually, subject to the operational cash requirements of the
group. Approval was granted at the last annual general meeting for distributions
by way of a capital reduction and accordingly, the board has declared a cash
distribution by way of a capital reduction from share premium, in lieu of an
ordinary dividend, of 3,5 cents per share (2009: 3 cents per share).
The relevant dates are as follows:
Last day to trade cum the distribution Friday, 1 April 2011
Shares will commence trading ex the distribution Monday, 4 April 2011
on
Record date Friday, 8 April 2011
Distribution paid on Monday, 11 April 2011
Shares may not be dematerialised or rematerialised between Monday, 4 April 2011
and Friday, 11 April 2011.
BASIS OF PREPARATION
These annual financial results have been prepared in accordance with
International Financial Reporting Standards ("IFRS"), the AC500 series of
Interpretations, the requirements of IAS34, the Listing Requirements of the JSE
Limited and the Companies Act of South Africa. The accounting policies used are
consistent with those applied in the previous financial year.
AUDIT REPORT
These summarised financial results have been audited by Universal`s auditors,
PKF (Jhb) Inc, whose unqualified audit report is available for inspection at
Universal`s registered office.
ANNUAL REPORT
Shareholders are advised that the annual report containing the financial
statements will be posted on or before 31 March 2011.
IN APPRECIATION
The board extends its thanks to management, employees and the directors for
their efforts, support and valuable contribution over the past year.
By order of the board
G Khan D Paynter
Chairman Chief Executive Officer
10 March 2011
CORPORATE INFORMATION
Executive directors:
D Paynter (CEO)
I Morgan (CFO)
J Martin
Non-executive directors:
G Khan (Chairman)
C Brayshaw
W Brett
I Essa (alternate to G Khan)
A Levy
Registration number:
1996/004343/06
Registered address:
16 Precision Street, Kya Sand, Randburg
Postal address:PO Box 3667, Randburg, 2125
Telephone: 011 462 2130
Facsimile: 011 704 3257
Company secretary:
Probity Business Services (Pty) Limited
Transfer secretaries:
Link Market Services South Africa (Pty) Limited
Auditors:
PKF (Jhb) Inc
Sponsor:
Java Capital
Date: 10/03/2011 17:26:14 Supplied by www.sharenet.co.za
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