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NWL
NWL
NWL - Nu-World - Unaudited Interim Report For The Half Year Ended 29 February
2008
NU-WORLD HOLDINGS LIMITED
(Registration No. 1968/002490/06)
JSE Code: NWL ISIN: ZAE000005070
("Nu-World" or "the Group" or "the Company")
- GROUP TURNOVER UP 18.9% TO R1 251.036m
- NET OPERATING INCOME DOWN (15.6%) TO R57.739m
- HEADLINE EARNINGS PER SHARE DOWN (18.5%) TO 161.2 cents
- NET ASSET VALUE PER SHARE UP 11.2% TO 2 564.4 cents
UNAUDITED INTERIM REPORT FOR THE HALF YEAR ENDED 29 FEBRUARY 2008
ABRIDGED CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited Audited
six months six months year
ended ended ended
29 February 28 February 31 August
2008 2007 % 2007
R`000 R`000 change R`000
Turnover 1 251 036 1 052 175 18.9% 1 865 783
Net operating income 57 739 68 433 (15.6%) 116 114
Depreciation 2 947 3 597 7 087
Interest paid 3 817 3 187 4 691
Income before taxation 50 975 61 649 104 336
Taxation 10 921 13 339 15 214
Income after taxation 40 054 48 310 89 122
Minority interests (5 030) (5 115) (3 991)
Attributable income 35 024 43 195 (18.9%) 85 131
Capital distribution 28 376
Capital distribution 125.3
from share premium
(cents)
Attributable earnings 35 024 43 195 85 131
Headline earnings 35 024 43 195 54 383
Earnings per share 161.2 197.8 389.9
(cents)
Headline earnings per 161.2 197.8 (18.5%) 249.1
share (cents)
Interest cover 14.4 20.3 23.2
Shares in issue 21 727 340 21 833 040 21 833 040
Shares in issue - 21 727 340 21 833 040 21 833 040
weighted
Shares in issue - 22 388 340 22 494 040 22 494 040
diluted
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
six months six months year
ended ended ended
29 February 28 February 31 August
2008 2007 2007
R`000 R`000 R`000
Cash (utilised)/generated by (113 720) (12 395) 34 188
operating activities
Cash (absorbed by)/generated by (73 755) 27 531 93 772
operations
Interest paid (3 817) (3 188) (4 691)
Capital distributions paid (28 376) (27 357) (27 357)
Normal tax on companies (7 772) (9 381) (27 536)
Cash flows from investing (53 540) (840) (3 322)
activities
Purchase of tangible fixed (1 757) (840) (2 768)
assets
Proceeds on disposal of fixed 1 319
assets
Increase in investment in (1 873)
subsidiary
Equity investment (51 706)
Increase in investment in (77)
treasury shares
Cash flows from financing 20 000 (10 214) (10 630)
activities
Increase in long term borrowing 20 000
Decrease in shareholders loans (11 361) (11 361)
Proceeds on issue of treasury 1 147 731
shares
Net (decrease)/increase in cash (147 260) (23 449) 20 236
and cash equivalents
Cash and cash equivalents at 287 814 267 578 267 578
the beginning of the
period/year
Cash and cash equivalents at 140 554 244 129 287 814
end of the period/year
SEGMENTAL INFORMATION
Unaudited Unaudited Audited
six months six months year
ended ended ended
29 February 28 February 31 August
2008 2007 % 2007
R`000 R`000 change R`000
Geographical revenue
South Africa 625 997 605 652 1 138 578
Offshore subsidiaries 625 039 446 523 727 205
1 251 036 1 052 175 18.9% 1 865 783
Geographical income
South Africa 30 885 37 689 77 432
Offshore subsidiaries 4 139 5 506 7 699
35 024 43 195 (18.9%) 85 131
ABRIDGED CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
six months six months year
ended ended ended
29 February 28 February 31 August
2008 2007 2007
R`000 R`000 R`000
Assets
Non-current assets
Fixed assets 34 649 38 917 35 839
Equity investment 51 705
Goodwill 25 372 25 729 25 106
Deferred taxation 10 105 17 995 11 905
Current assets
Inventory 285 914 201 213 153 085
Trade and other receivables 252 809 225 534 225 793
Cash equivalents 141 798 244 129 287 813
Total assets 802 352 753 517 739 541
Equity and liabilities
Ordinary shareholders` funds 557 166 503 273 545 405
Minority interests 63 839 54 649 51 345
Total shareholders` funds 621 005 557 922 596 750
Non-current liabilities
Long term liabilities 20 000 7 304
Current liabilities
Trade and other payables 160 103 188 291 142 791
Bank overdraft 1 244
Total equity and liabilities 802 352 753 517 739 541
SUPPLEMENTARY INFORMATION
Unaudited Unaudited Audited
six months six months year
ended ended ended
29 February 28 February 31 August
2008 2007 % 2007
R`000 R`000 change R`000
Determination of
attributable earnings
and headline earnings
Net income attributable 35 024 43 195 (18.9%) 85 131
to ordinary
shareholders
Profit on sale of (30 748)
trademark
Headline earnings 35 024 43 195 (18.9%) 54 383
Operating income as 4.6% 6.5% 6.2%
percentage of turnover
(%)
Net negative debt to (25.4%) (48.5%) (52.8%)
equity ratio (%)
Effective taxation rate 21.4% 21.6% 14.6%
Net asset value per 2 564.4 2 305.1 11.2% 2 498.1
share (cents)
Capital expenditure
Expansion 1 000 557 1 230
Replacement 757 283 1 538
1 757 840 2 768
Goodwill
At beginning of year 25 106 25 729 25 729
Net acquisition of 266 (623)
subsidiaries
25 372 25 729 25 106
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 1 226 136 402 (20 931) 166
September 2006
Net profit for the
year
Capital distribution (27 357)
from share premium
IFRS adjustments:
share based payments
Fair value movement 1 079
Net treasury share 731
movement
Balance as at 31 226 109 045 (20 200) 1 245
August 2007
Net profit for the
period
IFRS adjustments:
share based payments
Capital distribution (28 376)
from share premium
Fair value movement 4 810
Net treasury share (77)
movement
Balance as at 29 226 80 669 (20 277) 6 055
February 2008
STATEMENT OF CHANGES IN EQUITY (Contd)
Share
based
Accumulated compensation
profit reserve Total
R`000 R`000 R`000
Balance as at 1 September 368 880 539 485 282
2006
Net profit for the year 85 131 85 131
Capital distribution from (27 357)
share premium
IFRS adjustments: share 539 539
based payments
Fair value movement 1 079
Net treasury share movement 731
Balance as at 31 August 454 011 1 078 545 405
2007
Net profit for the period 35 024 35 024
IFRS adjustments: share 380 380
based payments
Capital distribution from (28 376)
share premium
Fair value movement 4 810
Net treasury share movement (77)
Balance as at 29 February 489 035 1 458 557 166
2008
COMMENTS
FINANCIAL OVERVIEW After what has proved to be an extremely difficult trading
period, evident from the disappointing festive season spend and a slow first
quarter of 2008, Nu-World Holdings Ltd has fared relatively well. In light of
the current economic slowdown being experienced in South Africa, directors of
Nu-World Holdings Ltd are reporting results for the period ending 29 February
2008.
Higher interest rates, tighter credit standards and increasing food and fuel
prices are impacting negatively on consumer confidence, with retailer and
wholesaler confidence negatively affected as a consequence. Notwithstanding
the recent decline in confidence levels however, the national budget
announced by the Minister of Finance in February went a long way to counter
the adverse impact of these developments. South Africa`s medium-term growth
prospects remain steadfast.
Group turnover increased by 18.9% to R1 251.036m (February 2007:
R1 052.175m). The South African operation achieved an increase in revenue of
3.4% for the period under review. The weaker Rand and higher fuel and
commodity prices are driving up input prices across our product range. On
average the higher input costs were absorbed during the period under review.
Net operating income, EBITDA decreased 15.6% to R57.7m (February 2007:
R68.4m). Operating margins came under pressure in an intensely competitive
South African marketplace. Australia, the United Kingdom and the USA are
experiencing similar aggressive competition in tight market conditions and as
a consequence, operating margins for the Group decreased by 1.9% to 4.6%
(February 2007: 6.5%).
Net interest paid increased to R3.8m (February 2007: R3.2m), attributable to
the increase in the bank rate, compounded by the cost of increased working
capital requirements to fund higher stock levels. Stocks have increased due
to the extended ranges of products and a slower than anticipated Christmas
season. All companies in the Group are actively working to reduce overall
stock holding to more sustainable levels. The effective tax rate of 21.4% is
in line with the previous year.
Attributable income decreased by 18.9% to R35.02m (February 2007: R43.2m).
Headline earnings per share - H.E.P.S. decreased by 18.5% to 161.2 cents
(February 2007: 197.8 cents).
Cash absorbed by operations amounted to R73.755m, reflected in the higher
stock holding.
The balance sheet remains solid, with negative gearing and cash balances on
hand of R140.6m (February 2007: R244.1m). Inventories of R285.9m are higher
due to a slower than anticipated Christmas season, but inventories have
subsequently been reduced and are currently at more acceptable levels. Trade
and other payables are reflected as down by 15% on the previous year.
The net asset value per share is up 11.2% to 2 564.4 cents (February 2007: 2
305.1 cents)
Accounting PoliciesThe interim report is prepared on the historical cost
basis, except for financial instruments which have been fair valued. This is
in accordance with the recognition and measurement of International Financial
Reporting Standards (IFRS), IAS 34: Interim Financial Reporting, the South
African Companies Act and the JSE Listing Requirements. The results are
presented in terms of IFRS statements.
Distribution to ShareholdersThe board has resolved to continue the policy of
a single distribution to shareholders at the end of each financial year.
OFFSHORE SUBSIDIARIES
Yale Prima (Pty) Ltd, Nu-World U.K. Ltd, On Corporation U.S.A.
Yale Prima (Pty) Ltd is a 59.4% held subsidiary operating out of Sydney
Australia. Whilst the strong Australian dollar, has been good for importers
in general, the Australian consumer is under pressure, with higher interest
rates, tighter access to credit and the increasing cost of food and fuel. The
Christmas season sell through was disappointing and retailers are sitting on
relatively high inventory levels. Yale Prima has performed relatively well
under these circumstances, providing a positive contribution to group income
for the interim period. Flat panel televisions remain a key growth driver,
and new ranges of white goods and small electrical appliances are becoming an
increasingly important component of our sales mix.
Nu-World U.K. Ltd is a 60% held subsidiary. The U.K. subsidiary has
experienced a difficult six months, with a net loss for the period. Although
interest rates in the U.K. are now down to 5%, consumer spending remains
under pressure from food and fuel inflation. Directors are hopeful that
interest in our new range of products coupled with our broader customer base
will underpin trading for the remainder of the financial year.
On Corporation USA supplies a growing range of flat panel televisions to
leading USA and Canadian retailers. On Corporation has produced exponential
growth during this interim period and has contributed to our off-shore
revenues and bottom line profit. The USA economy is under strain at this time
and as a consequence consumer confidence has been negatively impacted. The
market for full high definition flat panel televisions will continue to grow
in the light of broadcasters` intentions to terminate analogue broadcasting
in 2009. The affordable Proscan value brand continues to make inroads into
new key retailers and discounters.
PRODUCT RANGE * Consumer Electronics * Small Electrical Appliances * Conti
Motorsport * Air-Conditioning * White Goods * Cell phones * GPS Navigation
Systems * Power Tools * Generators * Gas Appliances * Paraffin Heaters* Solar
Powered Lights * DIY Home Improvement * Porcelain Tiles * Furniture
The Group`s line-up of international and in-house value brands encompasses 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.
The extensive Conti Motorsport range has expanded further into power tools
and power generation. With the cost of petrol and diesel sky rocketing, it is
evident that more and more commuters are switching from cars to road bikes
and scooters, as an affordable transport option.
The issues surrounding Eskom`s power supply and pricing have opened up new
opportunities for generators and appliances powered by alternative fuels
including:- gas, paraffin, solar and ethanol. Our Conti generators now range
in size from small price-entry 850W 2-stroke petrol motors to huge 110KVA 3-
phase diesel engines. We are actively building our range of gas appliances
from price-entry table-top cookers to heaters and extending our offering of
gas stoves. Paraffin heaters and cookers are in huge demand and we have
launched an ethanol gel cooker as a safer alternative energy cooking option.
MANPOWER AND SOCIAL RESPONSIBILITYThe Group`s BEE initiatives are in line
with the DTI`s BEE Codes of Good Practice on broad-based Black Economic
Empowerment. The Group is committed to comply with environmental regulations.
PROSPECTS
It is evident that the average South African consumer is under financial
pressure. As a result, retailers and wholesalers are reporting a contraction
in the rate of sales growth, more particularly within interest rate sensitive
product categories. Notwithstanding difficult and aggressively competitive
market forces, Nu-World has achieved growth in revenue and continues to
pursue new opportunities for growth.
The BER has released a downward revision to its forecast of household
consumption expenditure, but still expects real consumer spending to increase
by 2% - 3% during 2008. Whilst these levels are substantially lower than the
annual average of 5% during the previous 3 years, it is clear that real
consumer spending is still growing. In effect, growth will be underpinned by
the rotation away from diminishing consumer spending to fixed private and
public investment. Government`s huge infrastructure programme, with spend in
the region of R480bn-plus, coupled with private sector investment and
spending for the 2010 Soccer World Cup, will filter through to the tertiary
economy and alleviate the negative pressures on consumer demand.
The group looks to its diversification to sustain growth. We are diversified
across a broad range of product categories and 21 leading international and
local brands. In Southern Africa, we are diversified across LSM groupings,
from price-entry to top-end. In addition, the group is diversified globally,
with operating subsidiaries serving Australasia, the United Kingdom, the
U.S.A. and Canada.
A number of years of sustained economic growth has supported a structural
change within the economy. The economy now comprises a broader middle class,
comprising a growing number of consumers with a higher discretionary spend,
within the LSM 7 to 10 categories.
Directors are of the view that 2008 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 and deliver sustained growth in the medium and long
term
On behalf of the board of directors
M. S. Goldberg B. H. Haikney
Executive Chairman Company Secretary
6 May 2008
AdministrationRegistration 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 (Pty) Ltd
70 Marshall Street, Johannesburg, 2001
Company secretaryB. H. Haikney
AuditorsTuffias Sandberg KSi
SponsorSasfin 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 DirectorsJ. M. Judin
D. Piaraywww.nuworld.co.za
Date: 06/05/2008 17:00:01 Produced by the JSE SENS Department.
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