| Mon 9 Mar 2009, 17:26 | | UNI - Universal - Audited results for the year ended 31 December 2008 |
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UNI
UNI
UNI - Universal - Audited results for the year ended 31 December 2008
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 company")
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2008
HIGHLIGHTS
- Headline earnings per share increased by 28%*;
- Tangible net asset value per share increased by 56%;
- Strong balance sheet with R136 million cash on hand and gearing of only 14%;
and
- Export turnover exceeding R100 million.
* Compared to the pro forma financial results (as defined below#)
CONSOLIDATED INCOME STATEMENTS
Year ended 31 December
2008 2007
R`000 R`000
Revenue 648 188 314 222
Cost of goods sold (462 165) (235 476)
Gross profit 186 023 78 746
Other income 3 798 452
Operating expenses (89 486) (32 891)
Profit from operations 100 335 46 307
Interest received 7 982 1 706
Interest paid (6 081) (2 281)
Profit before taxation 102 236 45 732
Taxation (28 600) (16 753)
Profit for the year attributable to the equity
holders of the parent 73 636 28 979
Number of shares in issue (`000) 448 912 480 000
Weighted average number of shares in issue (`000) 472 369 364 438
Basic and headline earnings per share (cents) 15,6 8,0
Distribution per share (cents) 3,0 7,8
CONSOLIDATED BALANCE SHEETS
as at 31 December
2008 2007
R`000 R`000
Restated*
Assets
Non-current assets 210 676 196 244
Property, plant and equipment 15 041 12 968
Intangible assets 194 305 181 739
Deferred taxation 1 330 1 537
Current assets 386 061 239 636
Inventories 91 365 73 795
Trade and other receivables 153 427 116 341
Taxation prepaid 5 693 28
Bank and call deposits 135 576 49 472
Total assets 596 737 435 880
Equity and liabilities
Capital and reserves 316 079 265 073
Share capital 4 5
Share premium 167 200 189 829
Accumulated profits 148 875 75 239
Non-current liabilities 87 342 65 556
Interest bearing liabilities 82 843 1 009
Deferred taxation 2 424 4 909
Other financial liabilities 2 075 59 638
Current liabilities 193 316 105 251
Trade and other payables 88 472 76 518
Current portion of:
- interest bearing liabilities 14 956 1 533
- other financial liabilities 79 887 15 408
Taxation payable 10 001 11 792
Total equity and liabilities 596 737 435 880
Number of shares in issue (`000) 448 912 480 000
Net asset value per share (cents) 70,4 55,2
Tangible net asset value per share (cents) 27,1 17,4
* Certain prior year numbers have been restated or reclassified as a result of
the finalisation of at acquisition fair values in terms of IFRS3. The
restatement had no impact on the prior year profit. Deferred tax liabilities
increased by R6 million and Intangible assets by R6 million with a re-allocation
between goodwill, brand names and customer lists (all shown as intangible
assets)
CONSOLIDATED CASH FLOW STATEMENTS
Year ended 31 December
2008 2007
R`000 R`000
Cash flows from operating activities 33 793 39 899
Cash generated by operations 65 245 55 853
Interest received 7 982 1 706
Interest paid (1 100) (2 281)
Taxation paid (38 334) (15 379)
Cash flows from investing activities (5 369) (104 204)
Additions to property, plant and equipment (5 433) (1 427)
Acquisition of business - (104 570)
Proceeds on disposal of:
- property, plant and equipment 64 109
- listed investment - 1 684
Cash flows from financing activities 57 680 82 937
Shareholders` loans repaid - (5 686)
Net interest bearing liabilities raised/(repaid) 95 257 (1 569)
Net payment of other financial liabilities (14 947) -
Net proceeds/(payment) from shares issued/(buyback) (22 630) 117 692
Dividend paid - (27 500)
Increase/(decrease) in cash and cash equivalents 86 104 18 632
Cash and cash equivalents at beginning of year 49 472 30 840
Cash and cash equivalents at end of year 135 576 49 472
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Accumulated
capital premium profits Total
Group R`000 R`000 R`000 R`000
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
Dividend paid - - (27 500) (27 500)
Balances at 31 December 2007 5 189 829 75 239 265 073
Share buyback and expenses (1) (22 629) - (22 630)
Profit for the year - - 73 636 73 636
Balances at 31 December 2008 4 167 200 148 875 316 079
SEGMENT REPORTING
Refrigeration Baking** Corporate Total
R`000 R`000 R`000 R`000
Turnover
- 2008 310 064 338 124 - 648 188
- 2007 284 483 29 739 - 314 222
Profit from operations
- 2008 47 414 56 145 (3 224) 100 335
- 2007 43 945 2 514 (152) 46 307
Capital commitments
- 2008 3 800 - - 3 800
- 2007 - - - -
** Includes only six weeks of trading in December 2007.
COMMENTARY
The board is pleased to report a year of strong results for Universal in this
our first full trading year as a listed entity. Despite a more challenging
operating environment than anticipated at the time of our listing we have
achieved basic and headline earnings per share of 15,6 cents compared to 15,4
cents per share as forecast in the prospectus.
TRADING ENVIRONMENT
The group operates as a major supplier of refrigerated and baking plant,
equipment and utensils to the perishable foods industry encompassing the retail,
wholesale and manufacturing segments. Trading is primarily exposed to the SA
economy and food retailers in particular.
Food retailers and their suppliers continue to invest in new locations as well
as in the refurbishment and upgrading of existing facilities. These retailers
are still reporting excellent turnover growth and increased profitability which,
coupled with strong balance sheets, bodes well for continued investment in new
and existing stores.
The group has a significant installed base of products that has a limited life
estimated between six and eight years. The replacement of these products already
makes up a large portion of the group`s turnover.
FINANCIAL RESULTS
When analysing the financial results it should be taken into consideration that:
- the acquisition of the business of Macadams International only became
effective 15 November 2007 and accordingly the 31 December 2007 reporting period
includes Macadams for a six week period;
- the raising of R120 million following the private placement and subsequent
listing of the group on the JSE, effective 29 November 2007.
Accordingly comparison to the 2007 results is not meaningful.
To facilitate a more meaningful analysis the operational review contains
turnover and operating income for the baking systems business as per its
management accounts for the year ended 31 December 2007 (referred to as the "pro
forma#" results). As the pro forma results form a more appropriate basis for
comparison, all references to Macadams for the prior period refer to these pro
forma results.
The group achieved turnover of R648 million and profit after tax of R74 million,
increasing basic and headline earnings per share to 15,6 cents, an increase of
28% on the 2007 pro forma 12,2 cents per share. The group generated cash from
operations of R65 million and our balance sheet remains strong with cash on hand
of R136 million (2007: R49 million) and net gearing of 14% (2007: 11%).
REVIEW OF OPERATIONS
Refrigeration businesses
The refrigeration businesses increased sales by 9% to R310 million. The unit
experienced minimal volume growth and performed below budget with operating
margins under pressure.
The businesses delivered operating income of R47 million (2007: R44 million) but
experienced a slight decline in operating margin. The decline in operating
margin is attributed to a combination of sales mix and cost inflation. The
businesses were unable to pass on cost increases on raw materials, in particular
on steel related items where prices increased by up to 80% on certain steel
products. Labour costs also increased above expectation as an existing steel
industry bargaining council agreement was renegotiated at increased wage rates.
Colcab, the Cape Town based operation, relocated to a new purpose built 17 000m2
factory. Colcab`s results reflect the benefits gained in efficiency and process
improvements and we are confident that these benefits will become even more
apparent as volumes increase over the longer term.
For the year under review the businesses invested some R4 million in new plant
and equipment. The flexibility in our manufacturing capability will be further
enhanced through the continued upgrading of plant and equipment in the future.
International trends indicate that the environmental impact of refrigeration
products will be under closer scrutiny. The refrigeration division has access to
international technology agreements in this regard and is working closely with
our customer base to ensure that it is able to offer customised solutions of an
international standard to meet these more intense requirements.
Baking systems business
The baking systems business had an excellent year increasing sales over the pro
forma comparable period by 26% to R338 million (2007 pro forma: R269 million)
and achieving operating income of R56 million (2007 pro forma: R41 million).
The business benefited from volume growth in both its existing core range of
products as well as from new product ranges. As a result of the additional
volumes requiring limited investment in resources and overhead, improved
operating margins were achieved compared to the prior year.
The foodservice division will continue to leverage the preferred supplier status
that Macadams enjoys with the majority of local baking equipment customers.
Export sales has always been a significant component of the business,
historically fluctuating between 25% and 35%. Macadams remains committed to
continue its drive into the export markets, with a strong emphasis on the Africa
market, and is looking at investing in more resources to service this existing
and growing market.
Marsden, the bakeware division supplying baking tins and pans, had another good
year and is investigating investment in additional plant and equipment to
increase production capacity to better service its customers.
PROSPECTS
The unprecedented deterioration in the global economic outlook is well
documented and being discussed at the highest levels of Government and business
throughout the world. It seems certain that in the short term the South African
economy will experience low growth. This has resulted in a high level of
uncertainty being created in the business community. This uncertainty may have
an impact on our business as capital projects could be delayed should the
uncertainty continue for any length of time.
Under the current circumstances management finds it very difficult to predict
trading levels over the short term but remains confident that the group is well
positioned for growth over the medium to long term.
The current uncertainty does however afford an opportunity to grow the group
through reasonably priced acquisitions and the group`s cash on hand and
borrowing capacity leave it well positioned to capitalise on suitable
acquisition opportunities.
BORROWINGS
The group raised a term loan facility from Nedbank at the time of the
acquisition of Macadams in November 2007. In terms of the facility the group was
allowed to draw down on the facility for a period of 12 months and accordingly
it was utilised in the current year. The proceeds are reflected in cash on hand
and will be utilised to pay the vendor loans due at the end of the current
financial year.
CAPITAL COMMITMENTS
The group had no significant outstanding capital commitments as at 31 December
2008.
CONTINGENCIES
In terms of the purchase agreement entered into with the vendor of the Macadams
International business, part of the purchase price relates to a contingent
portion based on profit after tax targets being met. The profit target for the
2008 year has been met and the amount has been raised as an accrual. The profit
target for the 2009 year is R46 million. The company is liable to pay a maximum
of R15 million if the profit target is met i.e. a total contingent liability of
R15 million (2007: R30 million) exists at year-end.
CHANGES TO CAPITAL STRUCTURE
Universal acquired some 31 million of its own shares that were thereafter
cancelled, resulting in the shares in issue decreasing from 480 million to 449
million. Details of the buyback were announced on SENS. Authority to continue
with share repurchases will be renewed at the annual general meeting and the
board will continue to evaluate this option.
DISTRIBUTION TO SHAREHOLDERS BY WAY OF A CAPITAL REDUCTION
At listing the group adopted a dividend policy of once a year distributing 25%
of profits attributable to equity holders. Considering that the group has
already spent R23 million buying back its own shares and taking into account the
prevailing uncertain economic outlook, the board has decided to increase the
dividend cover for the current year.
Accordingly the board has proposed a cash distribution from share premium, in
lieu of an ordinary dividend, of 3 cents per share. The distribution requires
approval at the annual general meeting.
The relevant dates are:
Approval of distribution at annual general meeting on 28 April 2009
Announcement of results of annual general meeting 28 April 2009
Last day to trade cum the distribution 15 May 2009
Shares will commence trading ex the distribution on 18 May 2009
Record date 22 May 2009
Distribution paid on 25 May 2009
Shares may not be dematerialised or rematerialised between Monday, 18 May 2009
and Friday, 22 May 2009.
CHANGES TO DIRECTORATE
Mr Adam Esa has resigned as director of Universal due to other work commitments.
The board would like to thank Mr Adam Esa for his contribution. Mr Ishmail Essa
has been appointed as an alternate director for Mr Gaff Khan.
BASIS OF PREPARATION
These annual financial results have been prepared in accordance with
International Financial Reporting Standards ("IFRS"), the requirements of IAS
34, the listing requirements of the JSE and the Companies Act of South Africa,
1973. 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 the
company`s registered office.
ANNUAL REPORT
Shareholders are advised that the annual report containing the financial
statements will be posted on or before 31 March 2009.
APPRECIATION
The board extends its thanks to management, employees and the non-executive
directors for their efforts over the past year.
By order of the board
G Khan D Paynter
Chairman Chief Executive Officer
9 March 2009
CORPORATE INFORMATION
Executive directors: D Paynter (CEO), I Morgan (CFO)
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 (Pty) Limited
Date: 09/03/2009 17:26:01 Produced by the JSE SENS Department.
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