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EXACTLY one year ago I wrote about Nu-World, at the time trading at a 5.9 times price-to-earnings ratio with a share price of 3450 cents. Nothing much happened since then, except that Nu-World reported results twice. Both showed an increase in headline earnings a share of about 15 percent. The price-to-earnings is now 4 and the historical dividend yield 8.6.
Nature of business
The primary business of Nu-World is the importing, assembling, marketing and distribution of branded consumer goods, including electronics, hi-tech, small electrical appliances, white products, liquor and furniture. Nu-World is one of the largest importers of consumer electronics in Southern Africa with their international brands of JVC and Telefunken and in-house brand Nu-Tec. Nu-World is the leading importer and exporter of small electrical appliances in South Africa.
Interim results in April
Management painted a rosy picture and was relatively positive about the future, despite the lacklustre local economy. The South African operations showed strong growth in both sales and profitability across most divisions. Additional electronics models, categories and brands were added, contributing to increased sales. Stock holding was enhanced to support customers with in-stock positions of fast-moving lines. The liquor division continued to grow sales and more domestic appliances, and white goods were introduced.
Offshore operations
The trading results of the Australian operations came under pressure due to the subdued economy, but the distribution network is being expanded to include e-commerce options as well as traditional customers. Nu-World showed growth in Africa, the Middle East and Brazil, assisted by these local currencies strengthening against the dollar. Uruguay continues to be a strong presence in Latin America. The distribution network is increasing, and additional stocks are being ordered for the India/Pakistan/Sri Lanka regions.
Annual report
As with the results in April, the 2017 annual report does not indicate anything bad to come. In the last five years revenue steadily increased by one third, and the net asset value grew from R31 to R46. Over the last few year years, the group has expanded internationally to become an essential player in branded consumer durables. Contrary to most other listed companies that ventured offshore they managed to grow operations overseas by double-digits by increasing its distributors around the globe. Offshore subsidiaries now contribute about 45 percent of the group attributable income.
Now in its 71st year of operation, Hu-World has survived economic, political and financial hurdles, by adapting to market conditions. The past year has been no exception. The JVC and Telefunken brands continue to gain momentum and gain market share.
Healthy growth
The audio division expanded its range and offering, designs and specifications, which allowed for healthy growth. A variety of tablets are on offer at the best price in the market. The seasonal product offerings of Sunbeam, Goldair and Ideal brands, has increased during the last year.
The latest inverter air conditioners which utilise less power and are quieter were introduced. Further innovative products include rechargeable fans and infrared patio heaters offering immediate “high heat”. New appliances launched include the latest glass kettle design incorporating LED lights, electricity efficient induction cookers, filtrated water dispensers, gas cookers and ovens utilising LPG gas for continuous efficient cooking, plus a new range of laundry products. Liquor sales grew more than 20 percent.
Improvements in strategic and operational plans are the focus of management to grow market share both locally and offshore. This, coupled with the expanded offshore territories that the group trades in, should increase the contribution from these businesses in future years.