| Wed 12 Mar 2008, 16:59 | | UNI - Universal Industries Corporation Limited - A |
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UNI
UNI
UNI - Universal Industries Corporation Limited - Audited results for the year
ended 31 December 2007
UNIVERSAL INDUSTRIES CORPORATION LIMITED
(formerly Universal Food Systems (Proprietary) Limited)
(Incorporated in the Republic of South Africa)
(Registration number 1996/004343/06)
JSE code: UNI: ZAE000110664
("Universal" or the "group")
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2007
HIGHLIGHTS
Acquisition of the baking equipment business of Macadams effective from 15
November 2007 (6 weeks trading is included in the 2007 results); and
Successful private placement of shares raising R120 million and listing on the
JSE Main board on 29 November 2007.
Consolidated Income Statement
Period ended 31 December 2007 2006
R`000 R`000
Year 16 months
Revenue 314 222 331 189
Cost of goods sold (235 476) (253 370)
Gross profit 78 746 77 819
Other income 452 443
Operating expenses (32 891) (26 198)
Profit from operations 46 307 52 064
Interest received 1 706 1 530
Interest paid (2 281) (1 569)
Profit before taxation 45 732 52 025
Taxation (16 753) (15 021)
Profit attributable to the equity holders of the
parent 28 979 37 004
Number of shares in issue (`000) 480 000 353 333*
Weighted average number of shares in issue (`000) 364 438 360 128*
Basic earnings per share (cents) 8,0 10,3*
Basic headline earning per share (cents) 8,0 10,3*
* The actual number and weighted average number of shares in issue for the
2006 period was 195 and 199 shares respectively. The earnings and net asset
value per share were calculated on the equivalent number of shares taking into
account the sub-division and capitalisation issue during the 2007 financial
year.
Consolidated Balance Sheet
As at 31 December 2007 2006
R`000 R`000
Assets
Non-current assets 191 335 17 921
Property, plant and equipment 12 968 8 800
Deferred taxation 2 144 228
Goodwill 176 223 7 037
Listed investment - 1 856
Current assets 239 636 104 013
Inventories 73 795 29 923
Trade and other receivables 116 341 43 222
Taxation prepaid 28 28
Bank and call deposits 49 472 30 840
Total assets 430 971 121 934
Equity and liabilities
Capital and reserves 265 073 75 902
Share capital and share premium 189 834 2 142
Accumulated profits 75 239 73 760
Non-current liabilities 60 647 2 281
Interest bearing liabilities 1 009 2 281
Other financial liabilities 59 638 -
Current liabilities 105 251 43 751
Trade and other payables 76 518 27 639
Current portion of:
interest bearing liabilities 1 533 7 610
other financial liabilities 15 408 -
Taxation payable 11 792 8 502
Total equity and liabilities 430 971 121 934
Number of shares in issue (`000) 480 000 353 333*
Net asset value per share (cents) 55,2 21,5*
Tangible net asset value per share (cents) 18,1 19,4*
Consolidated statement of Share Share Accumulated Total
changes in equity capital premium profits
R`000 R`000 R`000 R`000
Balances at 31 August 2005 - 3 500 36 756 40 256
Share buy back - (1 358) - (1 358)
Profit for the 16 month - - 37 004 37 004
period
Balances at 31 December 2006 - 2 142 73 760 75 902
Share capitalisation 4 (4) - -
Issue of shares 1 189 999 - 190 000
Listing expenses - (2 308) - (2 308)
Profit for the year - - 28 979 28 979
Dividends paid - - (27 500) (27 500)
Balances at 31 December 2007 5 189 829 75 239 265 073
Consolidated Cash Flow Statement
Period ended 31 December 2007 2006
R`000 R`000
Year 16 months
Cash flows from operating activities 39 899 41 207
Cash generated by operations 55 853 48 926
Interest received 1 706 1 530
Interest paid (2 281) (1 569)
Taxation paid (15 379) (7 680)
Cash flows from investing activities (104 204) (5 811)
Additions to property, plant and equipment (1 427) (3 964)
Acquisition of business (104 570) -
Listed investment acquired - (1 856)
Proceeds on disposal of:
property, plant and equipment 109 9
listed investment 1 684 -
Cash flows from financing activities 82 937 (12 723)
Shareholders loans repaid (5 686) (6 060)
Net repayment of interest bearing liabilities (1 569) (5 305)
Share buy back - (1 358)
Net proceeds from shares issued 117 692 -
Dividends paid (27 500) -
Increase / (decrease) in cash resources 18 632 22 673
Cash resources at beginning of period 30 840 8 167
Cash resources at end of period 49 472 30 840
COMMENTARY
INTRODUCTION
The directors are pleased to announce the financial results of Universal
Industries Corporation Limited ("Universal") for the year ended 31 December
2007. Universal achieved some significant milestones during this reporting
period, the most notable being:
- the acquisition of the Macadams business, effective from 15 November 2007;
and
- the successful private placement of shares raising R120 million and listing
of Universal on the JSE Main board on 29 November 2007.
REVIEW OF OPERATIONS
Analysis and interpretation of the financial results and position of the group
are complicated by the following factors:
- For the period ended 31 December 2006:
- Universal consisted of the refrigeration businesses only and the
results do not include the baking systems business acquired from
Macadams in 2007; and
- the reporting period covers a 16-month period following a change in
the financial year-end from 31 August to 31 December;
- For the year ended 31 December 2007:
- the acquisition of the Macadams business was only effective as of 15
November 2007 and the results incorporate only six weeks of trading of
the baking systems business. As a result of the December factory shut
down Macadams` profit contribution to the group for the period was
negligible; and
- the raising of R120 million following the private placement and
subsequent listing of the group on the JSE, effective 29 November
2007.
Had the Macadams acquisition been effective from the beginning of the financial
year being reported upon, the group revenue and operating profit before interest
and tax would have been R553 million and R85 million respectively and basic
earnings would have been 12,2 cents per share.
Refrigeration businesses
The refrigeration businesses had another good year increasing sales by 12% (when
compared to the sales for the 12 months ended 31 December 2006) to R284 million
with operating income of R44 million. Capital expenditure of some R10 million
on the upgrading of plant and equipment in recent years is expected to continue
to contribute to improved efficiencies and product quality.
A key differentiating factor of the business is its ability to provide solutions
tailor-made to customer requirements. This customisation can vary depending on
product aesthetics, dimensions, lighting, colour and even specialist
refrigeration and/or electrical components installed on the production line.
This flexibility in our manufacturing capability will be further enhanced
through the continued upgrading of manufacturing facilities and equipment.
Baking systems business
The baking equipment business had a satisfactory 12 month period increasing
sales by 6% (when compared to the sales for the 12 months ended 31 December
2006) to R269 million and achieving operating income of R41 million. As
explained above the audited results include only 6 weeks of this period.
During the 12 month period Macadams successfully added a further range of
complementary and specialist items to its product offering that has improved its
ability to offer a "one stop" solution to all its customers` baking and related
equipment needs. The move into foodservice equipment (commercial kitchen type
equipment) offers a tremendous opportunity for the business. Having already
established itself as a preferred supplier to the majority of the local baking
customers, cross-selling opportunities through the same sales and distribution
channels will continue to be exploited. Macadams is committed to driving growth
in this area of the business.
Export sales have always been a significant component of the business and for
the past year these amounted to 28% of total sales. Going forward Macadams will
continue its drive into export markets, with a strong emphasis on the African
market.
FINANCIAL RESULTS
Universal achieved attributable profit of R29 million, translating to basic
earnings of 8,0 cents per share.
The group experienced margin pressure towards the end of 2007 attributed to:
- cost increases, mainly on labour and steel related products;
- the weakening of the Rand that led to margin pressure on imported equipment
whilst the majority of export sales are Rand denominated and therefore do
not enjoy the immediate benefit of any weakening of the Rand; and
- Macadams` entry into the foodservice market required an investment in
resources to establish capacity and the foodservice equipment generally has
a lower gross profit margin than their traditional baking equipment.
The group ended the year with a strong balance sheet with R49 million cash on
hand.
Acquisition of the Macadams business
Universal acquired the Macadams business for a total consideration of R250
million, being:
- R110 million which was paid in cash on the implementation date, 15November
2007;
- R70 million which was paid through the issue of 46 666 667 shares at R1.50
per shares on 29 November 2007; and
- R70 million payable on 31 December 2009 (disclosed as other financial
liabilities at a present value of R60 million).
The company is liable to pay an additional R15 million for each of the 2008 and
2009 years should profit after tax exceed R40 million and R46 million
respectively.
As at acquisition date the business had net tangible assets of R71 million with
the balance of the purchase price of R169 million accounted for as goodwill.
The identifiable intangible assets will be fair valued in terms of IFRS 3 during
the next reporting period.
Segment reporting
The 2007 results include only 6 weeks of trading of the baking systems business.
The 2006 year comprised only the refrigeration businesses.
December 2007
(R`million)
Business segments: Refrigeration Baking Group Total
Systems
Revenue 284 30 314
Segment profit from operations 44 3 47
Capital commitments
The group has capital expenditure already contracted but not provided for in
respect of property, plant and equipment amounting to R3,8 million. The
expenditure will be financed from operating cash flow and available bank
facilities.
PROSPECTS
The group`s fortunes are largely linked to the perishable food sector, with
regard to both local and export business. Store rollout projections, which are
provided by Universal`s major customers remain on-track. Despite the current
deterioration in investor sentiment and the power issues experienced, it remains
our view that food retail will continue to be more resilient than retail in
general.
One area of concern is the impact of the power crisis on shopping centre
development. In the medium to long term prolonged uncertainty may have an impact
on our business as capital projects could be delayed should the uncertainty
continue for any length of time.
The refrigeration businesses have an installed base of approximately 70 000
units whilst the baking systems business has approximately 30 000 units which
are both replaced on average every 7 years. If shopping centre development does
slow down this could be mitigated by a renewed focus on store refurbishment.
Macadams` export network offers a significant opportunity to the group and
should assist the refrigeration businesses in penetrating these markets, in
particular as a result of the sharp weakening of the Rand.
Universal`s strong balance sheet with R49 million of cash and R110 million of
unutilised facilities will enable Universal to capitalise on acquisition
opportunities which arise, particularly in light of the current decrease in
asset valuations in general.
DIVIDENDS
On 1 November 2007 the Company declared a dividend of R27,5 million (being 7,8
cents per share) to the pre-listing shareholders in settlement of their
unsecured loans.
As stated in the prospectus at the time of listing, Universal intends
implementing an annual dividend policy of 25% of profits attributable to the
equity holders, subject to operational requirements, at the conclusion of the
2008 financial year.
CHANGES TO CAPITAL STRUCTURE
The group listed on the Main Board of the JSE on 29 November 2007. Pre-listing
the company sub-divided each share of R1,00 each into 100 000 shares of R0.00001
per share and undertook a capitalisation award in terms of which 338 333 333
shares were issued to the pre-listing shareholders at par (R0,00001 per share).
80 000 000 shares were issued at R1.50 per share in a private placement, and a
further 46 666 667 shares were issued at R1.50 per share to the Macadams vendors
in part payment for the Macadams acquisition.
BASIS OF PREPARATION
The annual financial statements have been prepared in accordance with
International Financial Reporting Standards, the requirements of IAS 34 and in
compliance with the listing requirements of the JSE and the Companies Act of
South Africa, 1973. The accounting policies used to prepare these financial
statements are consistent with those applied at the previous financial year-end.
AUDIT REPORT
These summarised financial statements have been audited by Universal`s Auditors,
PKF (Jhb) Incorporated whose unqualified audit report is available for
inspection at the Company`s registered office.
ANNUAL REPORT
Shareholders are advised that the annual report containing the financial
statements will be posted by 31 March 2008.
APPRECIATION
The Board extends its thanks to the management and employees for their efforts
last year. The company has entered an exciting new era and we all look forward
to consolidating the businesses so that we can deliver rewards to our
shareholders in the years ahead.
By order of the Board
12 March 2008
L Boyd DG Paynter
Chairman Chief Executive Officer
CORPORATE INFORMATION
Executive directors: D Paynter (CEO), I Morgan (CFO)
Non-executive directors: L Boyd (Chairman); G Khan (Deputy Chairman);
C Brayshaw, W Brett, A Esa, I Essa (Alternate to A Esa), A Levy
Registration number: 1996/004343/06
Registered address: 16 Precision Street, Kya Sand, Randburg
Postal address: P.O Box 3667, Randburg, 2125
Telephone: 011 462 2130
Facsimile: 011 704 3257
Company Secretary: Probity Business Services (Pty) Ltd
Transfer secretaries: Link Market Services South Africa (Pty) Ltd
Auditors: PKF (Jhb) Inc
Sponsor: Java Capital (Pty) Ltd
Date: 12/03/2008 16:59:47 Produced by the JSE SENS Department.
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