| Wed 25 Aug 2004, 8:40 | | Cashbuild Limited - Audited Annual Financial Resul |
|
Cashbuild Limited - Audited Annual Financial Results For The Year Ended 30 June
Release Date: 25/08/2004 07:00:03 Code(s): CSB
Cashbuild Limited - Audited Annual financial Results for the year ended 30 June
2004
Cashbuild Limited
Registration number: 1986/001503/06)
(Incorporated in the Republic of South Africa)
JSE Share code: CSB ISIN code: ZAE000028320
- HEADLINE EARNINGS up 19%
- NET ASSET VALUE PER SHARE up 31%
- Operating PROFIT up 28%
- Revenue up 17%
- CASH RESOURCES up 35%
AUDITED ANNUAL financial RESULTS for the year ended 30 June 2004
CONDENSED Group income statement
for the year ended 30 June Audited
As
previously
Restated reported
June June % June
R`000 2004 2003 Change 2003
Revenue 1 635 233 1 394 783 17
Cost of sales 1 281 919 1 081 880
Gross profit 353 314 312 903
Operating expenses 271 426 248 996 9
Operating profit before
financing income 81 888 63 907 28
Net financing income 8 002 9 489 (16)
Profit before taxation 89 890 73 396 22
Taxation 31 909 23 052
Profit after taxation 57 981 50 344 15
Minority interest 4 652 4 792
Attributable earnings 53 329 45 552 17
Reconciliation of
attributable earnings to
headline earnings:
Attributable earnings 53 329 45 552 45 195
Loss/(profit) on sale of
assets after taxation 137 (235) (235)
Impairment of property 307
Amortisation of goodwill 217 133 133
Headline earnings 53 990 45 450 19 45 093
Earnings per share (cents):
- Headline 251.4 224.1 12 196.8
- Fully diluted headline 232.5 195.7 19 194.2
- Basic 248.3 224.6 11 197.3
- Fully diluted basic 229.6 196.1 17 194.6
Dividend per share (cents):
- Interim paid 29 25 25
- Final (note 8) 49 40 40
Number of shares in
issue (000s) 23 225 23 225 23 225
Weighted number of
shares (000s) 21 477 20 283 22 912
Fully diluted number of
shares (000s) 23 225 23 225 23 225
CONDENSED Group Cash Flow Statement
for the year ended 30 June Audited
June June
R`000 2004 2003
Cash flows from operating activities
Cash receipts from customers 1 637 186 1 393 419
Cash paid to suppliers and employees (1 520 304) (1 364 941)
Cash generated from operations 116 882 28 478
Interest received 8 683 10 040
Interest paid (681) (551)
Dividend received - 221
Dividends paid (15 300) (14 043)
Taxation paid (28 002) (8 585)
Net cash inflows from operating activities 81 852 15 560
Cash flows from investing activities
Additions to property, plant and equipment (41 042) (33 178)
Excess of purchase price over net
asset value - (2 000)
Additions to system implementation (6 442) -
Additions to trademarks (22) (6)
Acquisition of subsidiary 4 -
Proceeds on disposal of property,
plant and equipment 1 024 2 443
Net cash (outflows) from investing
activities (46 478) (32 741)
Cash flows from financing activities
Increase in shareholders` funds due to
share buyback - 2 914
Increase in shareholders` funds due to
resale of shares purchased - 2 452
Net treasury shares movement 2 038 (4 270)
(Decrease) in long-term borrowings (30) (63)
(Decrease) in short-term borrowings (106) (52)
Net cash inflows from financing activities 1 902 981
Net increase/(decrease) in cash and cash
equivalents 37 006 (16 200)
Cash and cash equivalents at beginning
of year 106 390 122 590
Cash and cash equivalents at end of year 143 396 106 390
CONDENSED Group Balance Sheet
as at 30 June Audited
June June
R`000 2004 2003
Assets
Non-current assets 120 149 88 343
Property, plant and equipment 103 331 73 676
Intangible assets 8 521 1 875
Deferred taxation 608 3 097
Other non-current assets 7 689 9 695
Current assets 460 413 388 386
Inventories 279 141 249 263
Trade and other receivables 37 876 32 733
Cash and cash equivalents 143 396 106 390
Total assets 580 562 476 729
Equity and liabilities
Shareholders` funds 168 343 128 276
Minority interest 16 570 11 918
Non-current liabilities 564 297
Interest-bearing borrowings 203 -
Deferred taxation 361 297
Current liabilities 395 085 336 238
Short-term borrowings 289 63
Tax liability 17 787 16 433
Trade and other liabilities 375 794 315 446
Employee benefits (note 4) 1 215 4 296
Total liabilities 395 649 336 535
Total equity and liabilities 580 562 476 729
Capital expenditure 48 697 35 184
Depreciation of property, plant and
equipment 10 664 8 028
Amortisation of intangible assets 220 134
Net asset value per share (cents) 725 552
Capital commitments 53 221 8 107
Contingent liabilities 3 044 1 576
GROUP STATEMENT OF CHANGES IN EQUITY
Foreign Audited
currency Dis-
transla- tribu-
Share Share tion table
R`000 capital premium reserve reserves Total
Balance at
1 July 2002
as previously
reported 226 35 606 2 730 56 617 95 179
Effect of
consolidating
the share incentive
trust (note 3) (27) (8 897) - 8 152 (772)
Restated opening
balance at
1 July 2002 199 26 709 2 730 64 769 94 407
Effect of change in
accounting policy - - - (97) (97)
Attributable earnings
for the year - - - 45 552 45 552
Dividends paid - - - (12 903) (12 903)
Dividend received on
repurchased shares - - - 221 221
Net treasury shares
movement (note 3) 4 (4 274) - - (4 270)
Repurchased shares
sold (note 6) 6 2 446 - - 2 452
Surplus on sale of
repurchased shares - 2 914 - - 2 914
Restated balance at
1 July 2003 209 27 795 2 730 97 542 128 276
Attributable earnings
for the year - - - 53 329 53 329
Dividends paid - - - (15 300) (15 300)
Net treasury shares
movement 11 2 027 - - 2 038
Closing balance
at 30 June 2004 220 29 822 2 730 135 571 168 343
CONDENSED Group SEGMENTAL ANALYSIS
Other members
of common
South Africa monetary area
June June June June
R`000 2004 2003 2004 2003
Income statement
Revenue
- External 1 239 762 984 425 215 291 211 752
- Internal 33 161 30 662
Operating profit
before financing
income 65 668 32 746 13 774 15 027
Balance sheet
Segment assets 472 317 371 719 51 648 50 278
Segment
liabilities 306 529 255 992 43 568 44 018
Other segment items
Depreciation 8 945 6 383 566 597
Amortisation 202 133 - -
Impairment of
property 307 - - -
Capital expenditure 42 438 29 134 4 307 506
CONDENSED Group SEGMENTAL ANALYSIS (continued)
Botswana and Malawi Group
June June June June
R`000 2004 2003 2004 2003
Income statement
Revenue
- External 180 180 198 606 1 635 233 1 394 783
- Internal
Operating profit before
financing income 2 446 16 134 81 888 63 907
Balance sheet
Segment assets 56 597 54 732 580 562 476 729
Segment liabilities 45 552 36 525 395 649 336 535
Other segment items
Depreciation 1 153 1 048 10 664 8 028
Amortisation 18 1 220 134
Impairment of
property - - 307 -
Capital expenditure 1 952 5 544 48 697 35 184
NOTES TO THE CONDENSED GROUP ANNUAL FINANCIAL INFORMATION
1. Audit opinion. The condensed announcement of results has been derived from
the consolidated financial statements, prepared in accordance with South African
Statements of Generally Accepted Accounting Practice and in the manner required
by the Companies Act. PricewaterhouseCoopers Inc. have audited the consolidated
annual financial statements and their unqualified audit report as well as their
report on the condensed announcement are available for inspection at the
registered office of the company.
2. Accounting policies. The accounting policies used in the preparation of the
annual financial statements are consistent with those used in the annual
financial statements for the year ended
30 June 2003 except as noted below.
3. Change in accounting policy. As a result of a recent ruling by the JSE
Securities Exchange South Africa, the group has consolidated The Cashbuild Share
Incentive Trust (`trust`). The trust has been consolidated as if it were a
subsidiary from date of formation of the trust. The loan to the trust has been
eliminated on consolidation and the shares held by the trust have been deducted
as treasury shares from the issued number of shares in determining the weighted
average number of shares. The trust held 1 269 946 Cashbuild shares as at 30
June 2004 (2 306 646 shares as at 30 June 2003).
The comparative figures have been appropriately restated. In addition to the
changes evident from the statement of changes in equity and the earnings per
share calculations, the following items have been restated:
Opening
distribut- Attri- Distribut-
able butable able Share
R`000 reserves earnings reserves capital
Balance at
30 June 2003
as previously
reported 56 617 45 195 88 000 232
Opening balance a
djusted for trust
consolidation 8 152 8 152
Reversal of
provision against
loans receivable in
trust 370 370
Taxation in trust (13) (13)
Dividend received on
treasury shares in
trust 1 033
Consolidation of
treasury shares in
trust (23)
Consolidation of
loan to trust
Staff loans in
trust
Restated balance
at 30 June 2003 64 769 45 552 97 542 209
Trade &
Share other
premium receivables Loan
Balance at 30 June 2003
as previously reported 40 966 29 503 6 882
Opening balance adjusted
for trust consolidation
Reversal of provision
against loans receivable in
trust
Taxation in trust
Dividend received on treasury
shares in trust
Consolidation of treasury
shares in trust (13 171)
Consolidation of loan to trust (6 882)
Staff loans in trust 3 230
Restated balance at
30 June 2003 27 795 32 733 -
4. Employee benefits. The group has changed the benefit structure of the long
service awards paid to employees resulting in a reduction of R2.6 million before
taxation in employee benefits.
5.Reporting period. The group adopts the retail accounting calendar, which
comprises the reporting period ending on the last Saturday of the month (2004:
26 June (52 weeks); June 2003 : 28 June (52 weeks)).
6.Repurchased shares. The company purchased 631 296 ordinary shares of Cashbuild
Limited through its subsidiary Cashbuild (South Africa)(Pty) Limited during the
period December 2001 to February 2002. These shares were sold to The Cashbuild
Share Incentive Trust in December 2002. The surplus realised on the sale of
shares and the dividend received on these shares were transferred directly to
equity.
Number of shares reconciliation: June 2004 June 2003
Shares in issue/fully diluted
number of shares 23 224 812 23 224 812
Weighted number of treasury shares (1 748 021) (2 629 194)
Weighted number of shares repurchased - (313 054)
Weighted number of shares 21 476 791 20 282 564
7.Earnings per share. Basic earnings per share is calculated by dividing the
earnings attributable to shareholders by the weighted average number of 21 476
791 ordinary shares in issue during the year (June 2003 : 20 282 564 shares). To
calculate the headline earnings per share, the earnings attributable to
shareholders is adjusted for the loss/(profit) on sale of assets after taxation,
impairment of property and the amortisation of goodwill. It is also calculated
net of treasury shares acquired or sold by The Cashbuild Share Incentive Trust,
which are included in the calculation from the date of acquisition. This
headline earnings calculation is in compliance with SAICA Circular 7/2002 as
directed by the JSE Securities Exchange South Africa.
8. Declaration of dividend. The board has declared a final dividend (No. 23),
of 49 cents per ordinary share to all shareholders of Cashbuild Limited.
Date dividend declared: Monday, 23/08/2004. Last day to trade `CUM` the
dividend: Friday, 10/09/2004. Date commence trading `EX` the dividend: Monday,
13/09/2004. Record date: Friday, 17/09/2004.
Date of payment: Monday, 20/09/2004. Share certificates may not be
dematerialised or rematerialised between Monday, 13 September 2004 and Friday,
17 September 2004, both dates inclusive.
On behalf of the board
DONALD MASSON - Chairman PAT GOLDRICK - Chief Executive
Johannesburg
23 August 2004
COMMENTS
NATURE OF BUSINESS
Cashbuild is southern Africa`s largest retailer of quality building materials
and associated products, selling direct to a cash-paying customer base through
our constantly expanding chain of stores (124 at the end of this reporting
period). Cashbuild carries an in-depth quality product range tailored to the
specific needs of the communities we serve. Our customers are typically
homebuilders and improvers, contractors, farmers, traders and increasingly,
large construction companies and government-related infrastructure developers,
as well as all discerning customers looking for quality building materials at
lowest prices.
Cashbuild has built its credibility and reputation by consistently offering
lowest everyday prices, and through a purchasing and inventory policy that
ensures that customers` requirements are always in stock.
FINANCIAL HIGHLIGHTS
Profit from operations increased by 28% to R81.9 million from the previous
year`s R63.9 million. Cash resources improved by 35% to R143.4 million.
Headline earnings of R54.0 million improved by 19% on the prior year`s R45.5
million. Headline earnings per share affected by the change in the weighted
average number of shares as the result of the consolidation of The Cashbuild
Share Incentive Trust (see note 3 to financial information), has increased by
12%.
The board has declared a final dividend of 49 cents per share, which together
with the interim dividend brings the full year`s dividend to 78 cents per share.
This represents a 20% increase on the comparative year.
The company has traded well during the year with annual revenue in comparison to
the prior year having 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, as well as 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).
Cashbuild had experienced deflation during most of the year, with inflation only
returning late in the fourth quarter. This deflationary environment had a
negative impact on percentage margins as Cashbuild maintained lower selling
prices on stock purchased at pre-deflationary prices. Inflation has returned in
the fourth quarter largely as a result of increases in timber and Iscor steel
prices. Cashbuild has also seen a shift in product mix during the year,
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.
Operating costs remained well managed and controlled and although a 9% increase
is recorded for the year, this is largely due to the costs added by the new
stores. Operating cost increases other than those added by the new stores have
been well managed to below inflationary levels. In terms of AC 116, Cashbuild
has in the past been required to provide for the liability arising from future
costs for long service awards which were paid based on a percentage of salary.
The company`s policy, after consultation with employees, has changed and the
awards are now paid at more significant levels of service in small fixed sums.
On this basis the company has written back to profits, from provisions, R2.6
million before taxation in the current year.
Interest income from cash held in the business was adversely affected in the
current year by lower interest rates. This has had less of an impact on results
in the second half of 2004, as during the comparative year rates had already
decreased.
Cashbuild`s balance sheet remains solid. Working capital continues to be well
managed with stock levels for existing stores (excluding the stocking of 12 new
stores opened during the year) increasing by only 1% in relation to the prior
year. This has been achieved with the implementation of the company`s `optimum
stock model` determined through a project completed in the first half of 2003.
The implementation of this model has resulted in the reduction of stock days
from 92 days in June 2003 to 84 days in June 2004, whilst ensuring customer
requirements are always met. The success of this approach can be seen in the
lower stock levels whilst experiencing strong growth in transactions, unit sales
and revenue. Trade receivables and payables remain well managed.
In February 2004 the first of Cashbuild`s Malawi stores was opened in Lilongwe,
supported by local shareholders who, it is anticipated, will support and grow
the business. In the store`s short term of trading it has become apparent that a
good market exists and management is confident this venture will prove
successful.
Cashbuild continues to expand conservatively, with 12 new stores opened, four
existing stores refurbished and one store relocated in the year under review.
Commitments of R53.2 million is attributable to the new IT systems due for
implementation in September 2004 (see notes under prospects) and to new store
developments.
SEGMENTAL ANALYSIS
Continued weakness in the Botswana Pula, particularly with the devaluation of
the currency during the year, has had a negative effect on the Botswana results.
This devaluation has negatively impacted operating profits in comparable terms
by R9.9 million with the result that operating profits in Botswana, with the
elimination of the forex variances has dropped by 14%. This decrease is
attributable entirely to a drop of 2% in revenue (in Pula terms) as a result of
Cashbuild not expanding its market share. The problem has been identified and
addressed. At the same time the South African subsidiary has shown a R6.6
million profit as a result of the devaluation of the Pula with the net effect of
a R3.2 million loss to the group.
PROSPECTS
The current market for total building materials is estimated to be between R30
and R60 billion per annum and growing. Cashbuild is currently achieving revenue
in excess of R1.6 billion, giving a market share of between 3% and 5%. This
growth in the building materials market is attributable to a strong
macroeconomic environment and the continued property culture arising from
people`s perceptions of home ownership being a dependable and profitable
investment. This property culture is further supported by the prioritisation of
property over other forms of spending, as individuals take pride in the
ownership and improvement of their piece of land. Given low inflation, low
interest rates, the benefit of tax cuts and the priority of spend on property,
Cashbuild believes the property market, be it new housing or maintenance and
improvement of existing buildings, will continue to be buoyant.
Aside from the economics of the countries within which we trade, there is also
pent up demand for building materials throughout southern Africa that is only
being realised upon the availability of outlets in previously under-serviced/non
serviced areas. Cashbuild has also seen an opportunity to provide quality
building materials at lowest prices to markets that have previously had limited
choice and is finding a demand for our business delivery. Cashbuild`s objective
is to grow profitable revenue over a period of time by:
- Ratcheting growth in existing store locations through continuous focus on the
business fundamentals and core strategies that have proven to be successful,
i.e. Lowest prices; Quality products (never sell seconds quality); Always in
stock; Product ranging; Focused micro-marketing; Customer delivery service;
Excellent in-store customer service;
- Store refurbishments and store relocations. Cashbuild is aiming to either
refurbish or relocate all pre-existing stores over a period of five years;
- Growing the base each year by at least 10 stores.
Our prime target customer is unchanged and remains the cash-paying consumer
intent on necessary domestic improvements and structural repairs, plus the
contractor who services the consumer. Cashbuild is also making headway in
increasing the volume of revenue generated from contractors involved in
government-related contracts.
Margins are also expected to return to prior year levels as the deflationary
environment abates and inflation - albeit at low levels - returns. With the new
stock model now firmly in place, lower levels of stock will, in future limit any
deflationary impact on margins.
Cashbuild has a proven strategy to deal with a deflationary environment and will
continue to apply this strategy should the need arise.
Excess cash will continue to be utilised for expansion, refurbishments,
relocations and dividend flows.
Information technology
Cashbuild initiated a project 24 months ago to determine the company`s IT
requirements for the next five to ten years. Based on our findings we concluded
that our current systems were unable to continue to provide the company with its
information needs into the foreseeable future and at the same time posed certain
risks. A strategic decision was made to outsource the entire solution i.e.
hardware and software, networks and all associated maintenance. The project
identified Datacentrix as the ideal outsource partner and the software solutions
to be Great Plains at support office and UCS`s ActiveRetail at store level. The
proof of concept was successfully completed and the initial implementation plans
have been put in place. Support office and one store will be rolled out in
September 2004 and the remainder of the stores over a period of 18 months. The
total cost of ownership for the new system is aligned with inflation growth and
current cost trends and is expected to provide additional benefits.
Directorate
The Cashbuild board is proud to announce the appointment of two new non-
executive directors: Jeff Molobela and Noma Simamane, effective 01 September
2004. The board believes that the addition of these new directors will enhance
its capacity and add to the skills, experience and diversity of the board. We
are honoured to have these individuals join our board and welcome them. We look
forward to and are confident of the valuable contribution they will make to the
company.
Directors: D Masson* (Chairman), P K Goldrick (Chief executive) (Irish), C T
Daly, F M Rossouw* (*Non-executive) Company secretary: Alan C Smith Auditors:
PricewaterhouseCoopers Inc.
Sponsor: Nedbank Corporate Registered office: cnr Aeroton and Aerodrome Roads,
Aeroton, Johannesburg 2001 PO Box 90115, Bertsham 2013
Transfer secretaries: Computershare Investor Services 2004 (Pty) Ltd, 70
Marshall Street, Johannesburg 2001 PO Box 61051, Marshalltown 2107
Visit our website at www.cashbuild.co.za
LARGEST RETAILER OF BUILDING MATERIALS IN SOUTHERN AFRICA
