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NWL
NWL
NWL - Nu-World Holdings Limited - Unaudited Interim Report for the Half Year
Ended 28 February 2009
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")
UNAUDITED INTERIM REPORT FOR THE HALF YEAR ENDED 28 FEBRUARY 2009
Abridged Consolidated Income Statement
Period Period Year
ended ended ended
28 29 31
February February August
2009 2008 % 2008
R`000 R`000 change R`000
Turnover
Continuing operations 823 704 916 499 (10,1%) 1 589
234
Discontinued operations 334 537 372 653
Total turnover 823 704 1 251 (34,2%) 1 961
036 887
Net operating income 27 615 57 739 67 625
Depreciation 3 221 2 947 6 097
Interest paid 3 408 3 817 6 788
Income before taxation 20 986 50 975 54 740
Taxation 5 783 10 921 11 619
Income after taxation 15 203 40 054 43 121
Minority interests (1 571) (5 030) (2 848)
Attributable income 13 632 35 024 40 273
Continuing operations 13 632 32 686 40 000
Discontinued operations 2 338 273
Total attributable 13 632 35 024 40 273
income
Reconciliation of
headline earnings
Attributable income 13 632 35 024 40 273
Adjusted for:
IFRS 3 net loss on
disposal of investments 4 050 3 323
Headline earnings 17 682 35 024 (49,5%) 43 596
Capital distribution 13 429
Capital distribution from
share premium (cents) 59,3
Attributable earnings 13 632 35 024 40 273
Headline earnings 17 682 35 024 43 596
Earnings per share 64,5 161,2 (60,0%) 189,8
(cents)
Headline earnings per 83,6 161,2 (48,1%) 205,5
share (cents)
Interest cover 7,2 14,4 9,1
Shares in issue 21 149 21 727 21 214
414 340 613
Shares in issue - 21 177 21 727 21 696
weighted 842 340 807
Shares in issue - 21 810 22 388 21 875
diluted 414 340 613
Other group information
Headline earnings as a
percentage of turnover 2,1% 2,8% 2,2%
(%)
Net negative debt to (15,8%) (25,4%) (25,4%)
equity ratio (%)
Effective taxation rate 27,6% 21,4% 21,2%
Net asset value per 2 595,8 2 564,4 1,2% 2 592,8
share (cents)
Capital expenditure
Expansion 1 287 1 000 2 283
Replacement 270 757 471
1 557 1 757 2 754
Intangible assets
Goodwill
At beginning of year 37 991 25 106 25 106
Net acquisition of 266 12 885
subsidiaries
37 991 25 372 37 991
Intellectual Property
At beginning of year 143 22
Net acquisition of 14 322
subsidiaries
Total intangible assets 52 313 25 372 52 313
Abridged Consolidated Cash Flow Statement
Period Period Year
ended ended ended
28 29 February 31 August
February
2009 2008 2008
R`000 R`000 R`000
Cash utilised by (52 832) (113 720) (55 833)
operating activities
Cash absorbed by (32 892) (73 755) (6 619)
operations
Interest paid (3 408) (3 817) (6 789)
Capital (14 029) (28 376) (28 653)
distributions/dividends
paid
Normal tax on companies (2 503) (7 772) (13 772)
Cash flows from investing 55 (53 540) (112 292)
activities
Purchase of tangible (2 344) (1 757) (2 754)
fixed assets
Proceeds on disposal of
fixed assets
Investment in financial (51 706) (51 706)
assets and other
investments
Increase in investment (39 079)
in subsidiary
Net proceeds on sale of a 3 481 (9 468)
subsidiary
Increase in investment in (1 082) (77) (9 285)
treasury shares
Cash flows from financing - 20 000 20 000
activities
Increase in long term 20 000 20 000
borrowing
Net decrease in cash and (52 777) (147 260) (148 125)
cash equivalents
Cash and cash equivalents 139 688 287 814 287 813
at the beginning of the
period/year
Cash and cash equivalents 86 911 140 554 139 688
at end of the period/year
Abridged Consolidated Balance Sheet
Period Period Year
ended ended ended
28 29 February 31 August
February
2009 2008 2008
R`000 R`000 R`000
ASSETS
Non-current assets
Fixed assets 33 835 34 649 35 054
Non-current assets
Intangible assets 52 313 25 372 52 313
Financial assets and 51 706 51 705 51 706
other investments
Deferred taxation 11 608 10 105 10 234
Current assets
Inventory 307 216 285 914 224 998
Trade and other 175 906 252 809 239 221
receivables
Cash equivalents 86 911 141 798 139 688
Total assets 719 495 802 352 753 214
Equity and liabilities
Ordinary shareholders` 549 006 557 166 550 060
funds
Minority interests 22 301 63 839 21 466
Total shareholders` funds 571 307 621 005 571 526
Long term liabilities 20 000 20 000 20 000
Current liabilities
Trade and other payables 128 188 160 103 161 688
Bank overdraft 1 244
Total equity and 719 495 802 352 753 214
liabilities
Segmental Information
Period Period Year
ended ended ended
28 29 31 August
February February
2009 2008 % 2008
R`000 R`000 change R`000
Geographical revenue
South Africa 542 314 625 997 1 104 927
Offshore subsidiaries 281 390 290 502 484 307
Discontinued 334 537 372 653
operations
823 704 1 251 036 (34,2%) 1 961 887
Geographical headline
earnings
South Africa 16 718 30 885 42 225
Offshore subsidiaries 964 1 801 1 098
Discontinued 2 338 273
operations
17 682 35 024 (49,5%) 43 596
Statement of Changes in Equity
Foreign
currency
Share Share Treasury translation
capital premium shares reserve
Balance as at 1 226 109 045 (20 200) 1 245
September 2007
Net profit for the year
Dividend paid
Capital distribution (28 377)
from share premium
Share purchase (8 557)
IFRS adjustments:
share based payments
Fair value movement 1 558
Net treasury share (727)
movement
Balance as at 31 August 226 72 111 (20 927) 2 803
2008
Net profit for the
period
Dividend paid
IFRS adjustments:
share based payments
Capital distribution (13 429)
from share premium
Fair value movement 46
Net treasury movement (1 083)
Balance as at 28 226 58 682 (22 010) 2 849
February 2009
Statement of Changes in Equity (cont)
Share
Share based
holders compen-
Accumulated for sation
Profits dividend reserve Total
Balance as at 1
September 2007
Net profit for the 454 011 - 1 078 545 405
year
Dividend paid 40 273 40 273
Capital (276) (276)
distribution from
share premium
Share purchase (28 377)
IFRS adjustments: (8 557)
share based
payments
Fair value movement 761 761
Net treasury share 1 558
movement
Balance as at 31 (727)
August 2008
Net profit for the 494 008 - 1 839 550 060
period
Dividend paid 13 632 13 632
IFRS adjustments: (600) (600)
share based
payments
Capital 380 380
distribution from
share premium
Fair value movement (13 429)
Net treasury 46
movement
Balance as at 28 (1 083)
February 2009
507 040 - 2 219 549 006
FINANCIAL OVERVIEW
The Nu-World Group has performed in line with the Trading Statement released on
SENS on 9 April 2009. In light of the current economic slowdown and the
concurrent recessionary retail environment, specifically related to durable
goods, the period under review has proved to be one of the most difficult for
many years.
The current depressed environment is impacting negatively on consumer and
business confidence. Consumers remain under pressure. Falling asset prices are
minimising their wealth and a contracting economy is threatening their security
of employment. However, there are signs of light. Interest rates have been
reduced by a total of 350 basis points since December 2008, after five
percentage points of hikes over the preceding 2 years. It is expected that
consumer spending will remain muted for the remainder of the first half of 2009,
due to the propensity by over-indebted consumers to pay down debt and concerns
in terms of security of employment. The second half of 2009 should show signs of
improvement as consumers respond to lower rates and sentiment improves with the
expectations of further interest rate cuts over the next few months.
Both in South Africa and Australia, intense competition in deteriorating markets
has eroded margins and highlighted the need for rationalisation within the
Group. The directors of Nu-World are currently engaged in consolidating and
restructuring each company and division within the group, to be better
positioned for a continuing difficult economic environment. Manufacturing in
South Africa in general is currently under severe pressure. Our local
manufacturing division is receiving particular attention in terms of
restructuring and downsizing. Small appliances which are no longer cost-
competitive to manufacture locally are being outsourced to the East. The
rationalisation process is expected to be completed by the end of the financial
year.
Group turnover for continuing operations decreased by 10,1% to R823,7 million
(February 2008: R916,5 million). The "discontinued operations" comparative for
February 2008 includes the turnover of our subsidiary in the United Kingdom,
which has subsequently been sold. South African revenue reflects a decrease of
13,4%, a reflection of the subdued Festive Season sales.
Net operating income, EBITDA declined by 52,2% to R27,6 million (February 2008:
R57,7 million). Operating margins came under severe pressure in intensely
competitive South African and Australian marketplaces.
Net interest paid decreased to R3,4 million (February 2008: R3,8 million),
attributable to the decrease in interest rates and overall lower debt and higher
cash holding levels during the period. Inventory levels increased due to the
inclusion of stock for Overstockoutlet Pty Ltd., not reflected in the 2008
comparative. In South Africa and Australia, group companies continue to
consolidate stock holding in line with reduced demand.
The increase in the effective tax rate to 27,5% is due to the non-deductibility
of the capital loss of R4,0 million from the sale of the UK subsidiary.
Headline earnings per share - H.E.P.S. decreased by 48,1% to 83,6 cents
(February 2008: 161,2 cents).
The balance sheet remains strong, with negative gearing and cash balances on
hand of R86,9 million.
The net asset value per share is up 1,2% to 2 595,8 cents (February 2008: 2
564,4 cents).
ACCOUNTING POLICIES
The final report is prepared on the historical cost basis, except financial
instruments, which have been fair valued.
This is in accordance with the recognition and measurement principles of
International Financial Reporting Standards (IFRS), the requirements of the
South African Companies Act, IAS 34 - Interim Financial Reporting and the JSE
Listings Requirements.
The results have been prepared in terms of IFRS statements and are consistent
with those applied in the previous year.
OPERATIONAL REVIEW
Offshore Subsidiaries
Yale Prima Pty Ltd, Overstockoutlet Pty Ltd, Nu-World U.K. Ltd
Yale Prima Pty Ltd is a 59,4% held subsidiary headquartered in Sydney Australia.
Australian consumers are under pressure. Whilst interest rates are substantially
lower, consumers are encountering tighter access to credit from the banks.
Consumers are primarily paying off debt. Consumers are also shifting their
spending towards discounters/supermarkets as well as shopping on-line. The
Australian management is focussed on reducing overheads and aligning staffing
levels with the reduced order loading in the subdued economy. The acquisition of
Overstockoutlet has introduced further opportunities to consolidate and
rationalise overheads.
Overstockoutlet Pty Ltd. (www.oo.com.au) Effective 1st July 2008, the group
acquired a majority shareholding in online retailer, Overstockoutlet Pty Ltd,
(oo.com.au) the second largest Australian online internet retailer. The Company
trades primarily in leading international brands across a broad range of
consumer products:- including leading world brands in consumer electronics,
watches, perfumes, books, DVD`s, golf, health and fitness equipment, luggage,
manchester, and fashion accessories etc.
Nu-World UK Ltd was a 60% held subsidiary. The U.K. has been one of the hardest
hit economies during the current global financial crisis. The U.K. subsidiary
was experiencing difficulty in the recessionary U.K. market and consequently the
directors took the decision to dispose of the subsidiary, effective the 1st
September 2008.
Product Range
Consumer Electronics * Small Electrical Appliances * Conti Motorsport *
Air-Conditioning * White Goods * Power Tools
* Generators * 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.
Notwithstanding the downturn in the market for consumer durables, Nu-World is
holding its own and increasing market share in certain categories. Nu-World is
focusing on value-added up-market products within specific categories - matching
the specifications of international brands, but offering a more affordable
alternative. The "Vegas" range of consumer electronics and appliances has been
added to our top-line offering.
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
The current slowdown in the South African economy within the context of the
depressed global economy presents a challenging trading environment for the
remainder of the financial year. However the directors are confident that
current strategic initiatives to consolidate and rationalise, will better
position all companies in the group to withstand these challenges.
The Bureau of Economic Research has reviewed their forecast for real GDP growth
to slow to (0.8%) for 2009, turning positive again in 2010 to 2.5%. However
respected economists are forecasting that the economy will notch up growth of
0,5% for 2009, fuelled by infrastructure spending, sports events and interest
rate cuts. Government`s substantial infrastructure program will extend beyond
the 2010 World Cup and should serve to shelter the economy from the worst of the
international financial crisis. The Reserve Bank`s composite leading business
cycle indicator, the economy`s leading indicator of economic growth, which
predicts trends 6 to 12 months in advance, rose in February for the first time
in a year. Hopefully this may signal a "light at the end of the tunnel". South
Africa`s medium-term growth prospects remain positive.
The Group`s diversification is an advantage in turbulent times. 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 cut back, but we continue to
operate in both Southern Africa as well as Australia.
Whilst the directors acknowledge that 2009 will be a tough and demanding year,
we remain confident that the group will weather these 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
12 May 2009
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 (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: 12/05/2009 17:00:01 Produced by the JSE SENS Department.
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