| Tue 18 Sep 2007, 7:05 | | HWW - Hardware Warehouse Limited - Abridged Prospe |
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JSE
HWW
HWW - Hardware Warehouse Limited - Abridged Prospectus
HARDWARE WAREHOUSE LIMITED
Incorporated in the Republic of South Africa
(Registration number: 2007/004302/06)
Share code: HWW & ISIN: ZAE000104253
("Hardware Warehouse" or "the company")
ABRIDGED PROSPECTUS
This abridged prospectus is not an invitation to the general public to subscribe
for or to purchase ordinary shares in Hardware Warehouse, but is issued in
compliance with the Listings Requirements of JSE Limited ("JSE") only, and
relates to a private placement of Hardware Warehouse ordinary shares by way of
an offer by the company for subscription of 15 000 000 ordinary shares in the
issued share capital of the company at an issue price of 100 cents per ordinary
share thereby raising R15 million before expenses ("the private placement") and
the subsequent listing of the ordinary shares of Hardware Warehouse on the
Alternative Exchange ("AltX") of the JSE.
The information in this abridged prospectus has been extracted from a full
prospectus issued by Hardware Warehouse on 18 September 2007 ("the detailed
prospectus"), which is available as set out in paragraph 10 below. At the date
of listing, the authorised share capital of Hardware Warehouse will comprise 500
000 000 ordinary shares having a par value of 0.02 cents each, of which, after
the private placement of 15 000 000 ordinary shares at 100 cents per share,
80 000 000 will be in issue.
1. BACKGROUND AND HISTORY
Hardware Warehouse has operated in the building materials retailing industry
for over ten years. The company provides affordable building materials, such
as cement, corrugated iron roof sheeting, doors, windows and timber to
customers of low to medium income levels who are mainly from the rural areas
of the Eastern Cape. The company currently operates from 12 stores and
continues to expand. Two further stores are planned to be opened by year
end.
Hardware Warehouse was established in 1996 in King Williams Town. The first
warehouse-style operation quickly expanded to three other stores and from
this base the company opened one to two further stores per year in the towns
of Alice, Butterworth, Port Alfred, Mdantsane, Ngcobo, Mthatha, Cofimvaba
and most recently, Lusikisiki. The company has finalised the acquisition of
its first store in KwaZulu-Natal, which will provide a base for expansion
into the north eastern provinces of South Africa and neighbouring
territories.
Hardware Warehouse`s core competencies are in the understanding of its niche
market, the precise selection of retail sites in chosen areas and the choice
of product range to meet the particular needs of the target market, ensuring
that its product range remains at the most competitive prices.
Recent growth in turnover has been exponential, largely due to the
increasing number of rural customers being able to build and improve their
own houses. Continued growth is forecast on the back of Government
investment into low cost housing.
2. RATIONALE FOR LISTING
Hardware Warehouse intends to list on the AltX as a strategic step that will
allow the company to raise capital in support of its vision to expand its
number of stores both within and beyond South Africa. To support both
organic and acquisitive growth as well as the growing number of local
builders undertaking Government`s low cost housing and community upliftment
projects, the company needs to fund increased stock holdings and credit that
will be sufficient to meet the increased demand.
To establish a national footprint, the company also seeks to use a listing
to enhance its profile and increase its brand with stakeholders such as
suppliers and partners, including future potential BBBEE partners.
A listing will also facilitate in the incentivisation of staff through a
share purchase scheme and the establishment of an empowerment trust.
3. PROSPECTS
The directors of Hardware Warehouse are of the opinion that Hardware
Warehouse has exciting prospects, both locally and in neighbouring countries
for the following reasons: The homebuilding sector of the construction
industry in the regions within which Hardware Warehouse currently and in the
future intends to operate is expected to continue to experience further
growth. Government spend, a buoyant economy and recent trends indicate that
Hardware Warehouse`s markets will continue to grow, supported by
Government`s drive to increase home ownership, and the continued drive by
builders of private homes and developers to meet the demands of an
increasing number of individuals who want to own and improve their homes,
particularly in the lower LSM levels, which is the company`s core target
market.
One of the Department of Housing`s major objectives is to eradicate all
forms of informal housing by 2014. For this reason, Government has initiated
several projects to replace these settlements. Projects include the
provision of housing, hostel and infrastructure upgrading such as roads and
the provision of electricity and street-lighting. Social infrastructure such
as child-care facilities, schools, clinics, sports fields, libraries, police
stations, centres for the aged, post offices and playgrounds are also to be
provided.
In the short term, Hardware Warehouse will seek to expand its operations by
first targeting regions adjacent to the Eastern Cape including Kwazulu-
Natal, Lesotho, Mpumalanga and the Limpopo Provinces. In the medium to long
term, the company will seek to establish itself in selected, identified,
under-serviced SADC countries exhibiting the same need for affordable
building materials, most specifically Namibia, Botswana and Mozambique.
Hardware Warehouse also plans to expand into urban areas within current
regions of operation. Such areas were previously avoided due to the high
demand for credit; however, it is believed that the potential for higher
margins within such urban areas will outweigh the associated risk of
offering credit.
4. THE PRIVATE PLACEMENT
4.1 Salient features
4.1.1 The salient features of the private placement are as follows:
Offer price per ordinary share (cents) 100
Par value per ordinary share (cents) 0.02
Premium per ordinary share (cents) 99.98
Number of ordinary shares offered by the 15 000 000
company for subscription in terms of the
private placement
Issue consideration to be received by the R15 million
company before expenses
4.1.2 The opening and closing dates of the private placement are as follows:
Opening date of the private Tuesday, 18 September 2007
placement at 09:00 on
Closing date of private Thursday, 20 September 2007
placement at 12:00 on
Anticipated listing date on AltX Friday, 28 September 2007
at commencement of trade on
5. SUMMARY OF THE HISTORICAL AND FORECAST INCOME STATEMENTS
The summarised historical and forecast financial information of Hardware
Warehouse for the financial year ended 30 June 2007 and the financial years
ending 30 June 2008 and 30 June 2009, the preparation of which is the
responsibility of the directors, is set out below. The forecast financial
information is contained in the detailed prospectus referred to in paragraph
10 below and has been reviewed and reported on by the reporting accountants.
Such report will be contained in the detailed prospectus and will also be
available for inspection.
Extracts from the historical and forecast income statements
Audited Forecast Forecast
2007 2008 2009
R R R
Revenue 126 284 754 197 001 607 268 985 108
Cost of sales 8 312 578 156 408 341 212 003 009
Gross profit 27 972 176 40 593 266 56 982 099
Other Operating Income 1 039 845 - -
Operating costs 19 339 102 26 339 353 35 554 611
Profit from operations 9 672 919 14 253 913 21 427 488
Investment Income 83 394 377 934 1 059 073
Finance costs 664 559 648 218 537 037
Profit before taxation 9 091 754 13 983 629 21 949 524
Taxation 2 951 851 4 055 252 6 365 362
Profit for the year 6 139 903 9 928 377 15 584 162
Pro forma weighted average 65 000 000 76 250 000 80 000 000
ordinary shares in issue
Pro forma earnings per ordinary 9.4 13.0 19.5
share (cents)
Pro forma headline earnings per 8.1 13.0 19.5
ordinary share (cents)
Notes:
1. The pro forma weighted average number of ordinary shares in issue at 30
June 2007 is based on the sub-division of the ordinary shares in issue into
50 000 000 ordinary shares, an issue of an additional 8 500 000 ordinary
shares to current shareholders at par value and an issue of an additional 6
500 000 ordinary shares to The Hardware Warehouse Empowerment Trust at 100
cents per share as set out in paragraph 18.3 of the detailed prospectus.
2. The main assumptions on which the forecast income statements are based are
set out in paragraph 11.2 of the detailed prospectus.
3. The above income statement takes into account the effects of the
anticipated issue of ordinary shares detailed in paragraph 18 of the
detailed prospectus.
4. Surplus cash will be applied to the organic and acquisitive growth of the
business in the medium term and therefore no dividends are planned for the
forecast period.
6. DIRECTORS
The full names, ages, qualifications and designations of the directors are
as follows:
Director Age Qualification Designation
Ivan Merrick John Senar 43 BCom Executive
Chairman
Shaun Craig Miller 41 BCompt Hons FQE CTA Managing
Director
Lesley Ann Rhind 40 Completed auditing Financial
articles Director
Neville Errol Woollgar 67 BCom, practising Non-executive
attorney at law Director
Member of the Audit Committee
The business address of the directors is 69 Devereux Avenue, Vincent, East
London, 5241.
All directors are South African citizens.
7. SHARE CAPITAL
The authorised and issued share capital of Hardware Warehouse, taking into
account the private placement and listing costs as set out in paragraph 13.1
of the detailed prospectus, which are to be offset against the share
premium, are set out below:
Rand
Authorised
500 million ordinary shares of 0.02 cents each 100 000
Issued, before the private placement
65 million ordinary shares of 0.02 cents each 13 000
Share premium 6 498 700
Issued, after the private placement
80 million ordinary shares of 0.02 cents each 16 000
Share premium 19 609 700
19 625 700
8. MAJOR SHAREHOLDERS
Save as set out in the table below, there are no shareholders directly or
indirectly beneficially interested in 5% or more of the issued ordinary
share capital of Hardware Warehouse at the last practicable date and who
will, as far as the directors of Hardware Warehouse are aware, hold 5% or
more of the issued ordinary share capital of Hardware Warehouse following
the private placement, as set out below:
Name of shareholder Percentage Percentage Number of
held before held after shares after
private private private
placement placement placement
The Shaun Miller 22.50 18.28 14 625 000
Family Trust
I M J Senar* 20.31 16.50 13 203 500
I M J S Family Trust 13.50 10.97 8 775 000
M J Willard 10.74 8.72 6 977 750
Hardware Warehouse 10.00 8.13 6 500 000
Empowerment Trust
S C Miller* 9.30 7.55 6 042 700
Total 86.35 70.15 56 123 950
* Director
** Neville Woollgar, as nominee on behalf of The Hardware Warehouse
Empowerment Trust, will hold the shares until registration of The Hardware
Warehouse Empowerment Trust.
9. LISTING ON THE JSE
Subject to the required spread of public shareholders in terms of the
Listings Requirements being obtained pursuant to the private placement, the
JSE has granted Hardware Warehouse a listing in respect of 80 000 000
ordinary shares on AltX under the
abbreviated name "Hardware", share code "HWW" and ISIN ZAE000104253, with
effect from the commencement of business on Friday, 28 September 2007.
10. COPIES OF THE PROSPECTUS
Copies of the prospectus, in English, may be obtained during business hours,
prior to the closing of the private placement from Hardware Warehouse, the
Designated Adviser and the transfer secretaries, details of which are set
out in below:
- Hardware Warehouse, 69 Devereux Avenue, Vincent, East London, 5241;
- Merchant Sponsors (Proprietary) Limited, 2nd Floor, North Block, Hyde Park
Office Tower, Corner 6th Road and Jan Smuts Avenue, Hyde Park, Johannesburg,
2196;
- Computershare Investor Services 2004 (Proprietary) Limited, Ground Floor, 70
Marshall Street, Johannesburg, 2001.
Johannesburg
18 September 2007
Designated Adviser
Merchant Sponsors (Proprietary) Limited
Corporate adviser
Merchantec (Proprietary) Limited
Auditors and independent reporting accountants
Charteris & Barnes, Chartered Accountants (SA) Limited assurance provider
BDO Spencer Steward (Johannesburg) Inc.
Attorneys
Fluxmans Inc.
Date: 18/09/2007 07:05:02 Produced by the JSE SENS Department.
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