| Wed 21 Jul 2004, 10:58 | | TRADING UPDATE AND CAUTIONARY ANNOUNCEMENT |
|
CASHBUILD LIMITED - TRADING UPDATE AND CAUTIONARY ANNOUNCEMENT
CASHBUILD LIMITED
(Registration number: 1986/001503/06)
(Incorporated in the Republic of South Africa)
JSE share code: CSB ISIN: ZAE000028320
(`Cashbuild` or `the company`)
TRADING UPDATE AND CAUTIONARY ANNOUNCEMENT
Cashbuild is currently finalising its results for the year ended 30 June 2004.
In line with past disclosure, Cashbuild herewith provides its quarterly trading
update and an early indication of its performance for the past financial year.
Cashbuild advises its shareholders that its headline earnings for the year ended
30 June 2004 (in Rand terms) will be materially higher than that of the prior
corresponding period (in accordance with JSE Listing Requirements, a material
change would indicate a change of between 10% and 30%). This increase in
headline earnings may not, however translate into a similar increase in headline
earnings per share as Cashbuild is obligated to consolidate its share incentive
trust in line with a recent ruling by the GAAP Monitoring Panel. The overall
impact of this change will be disclosed in the final reported results.
On a sales level, the fourth quarter continued the trend of the previous 3
quarters and showed strong overall growth. Sales have grown at a healthy 19% for
this quarter, with a promising 10% from stores in existence since the beginning
of the prior reporting period (pre-existing stores) and 9% from the 22 stores
the company has opened since the end of the 2002 financial year (new stores).
After 3 quarters of deflation, inflation has been at around 5% during the fourth
quarter. This inflationary pressure arose entirely out of ISCOR`s pricing
policies and Safcol`s timber price increases. With the strength of the exchange
rate and low overall inflation levels, few other price changes have occurred.
The above sales trends have continued into July 2004.
With the fourth quarter results complete, the outlook is positive for the year.
Annual sales in comparison to the prior year have increased by an encouraging
17%, with 8% attributable to pre-existing stores and 9% to new stores. These
results are due to a continued strong, and well publicised macroeconomic
environment, consumer confidence and the continued property culture arising from
government`s drive to increase home ownership and private homeowners striving
for larger and better housing. Particularly encouraging, is the fact that this
growth has been achieved, not out of price increases but out of real organic
growth from our existing store infrastructure as evidenced by the increase in
units sold and volumes of transactions through the tills and by growth in market
share through our new store expansion. For the year, Cashbuild has experienced
growth in units sold of 26% (12% from pre-existing stores and 14% from new
stores) and growth in the number of transactions recorded through the tills,
increasing by 19% (7% attributable to pre-existing stores and 12% from new
stores).
The deflationary environment experienced during most of the year had a negative
impact on percentage margins as Cashbuild maintained lower selling prices on
stock purchased at pre-deflationary prices. Cashbuild has also seen a shift in
product mix in the fourth quarter, particularly to lower margin commodity items
such as cement and bricks. This indicates a shift in the market to building
additions and improvements rather than just property maintenance and is further
evidence of the property culture and overall consumer confidence referred to
earlier. This is particularly encouraging for Cashbuild as it shows that the
company continues to be recognised in the market place as a complete supplier
for projects ranging from construction and additions to general maintenance. The
drop in margin percentage due to the above is more than compensated for by the
increase in volumes of units sold, with an overall positive impact on Rand
margins.
Continued weakness in the Botswana Pula exchange rate throughout the year,
particularly with the devaluation of the currency during the year has negatively
impacted on the results of the Cashbuild Botswana subsidiary.
Operating costs remained well managed and controlled throughout the year ended
30 June 2004.
Interest income from cash held in the business continues to be adversely
affected by lower interest rates. This has had less of an impact on results in
the fourth quarter 2004, as during the comparative period rates had already
decreased. The company will continue to utilise this cash for expansion,
refurbishments, relocations and dividend flows.
Cashbuild`s balance sheet remains solid with working capital well managed.
Cashbuild continues to expand conservatively, with ten new stores opened in the
last financial year, four existing stores refurbished and one store relocated.
Cautionary announcement
As the results for the year ended 30 June 2004 have not been reviewed and
reported on by Cashbuild`s auditors, shareholders are advised to exercise
caution when dealing in Cashbuild`s shares until aforementioned results have
been published on or about 25 August 2004.
Johannesburg
21 July 2004
Sponsor
Nedbank Capital
Date: 21/07/2004 10:47:48 AM
Produced by the JSE SENS Department
