| Mon 25 Apr 2005, 14:45 | | Interim Results December 2004 |
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Cashbuild Limited - Audited Interim Results December 2004
CASHBUILD LIMITED
(Registration number: 1986/001503/06)
(Incorporated in the Republic of South Africa)
Listed on the JSE Securities Exchange South Africa
JSE Share Code: CSB ISIN: ZAE000028320
Audited interim results DECEMBER 2004
Headline earnings per share up 51% Operating profit up 66%
Revenue up 27% Cash resources up 15% Dividend per share up 83%
CONDENSED GROUP INCOME STATEMENT - AUDITED
R`000 Six months Six months Year
ended ended ended
31 Dec 31 Dec % 30 Jun
2004 2003 change 2004
Revenue 1,058,850 835,646 27 1,635,233
Cost of sales 825,128 663,068 24 1,281,919
Gross profit 233,722 172,578 35 353,314
Operating expenses 170,306 134,342 27 271,426
Operating profit before
financing income 63,416 38,236 66 81,888
Net financing income 4,138 3,615 14 8,002
Profit before taxation 67,554 41,851 61 89,890
Taxation 23,764 13,405 77 31,909
Profit after taxation 43,790 28,446 54 57,981
Minority interest 2,693 2,261 19 4,652
Attributable earnings 41,097 26,185 57 53,329
Reconciliation of attributable earnings to headline earnings
Attributable earnings 41,097 26,185 53 329
Loss on sale of assets
after taxation 9 103 137
Impairment of property - 307 307
Amortisation of goodwill 120 100 217
Headline earnings 41,226 26,695 54 53,990
Earnings per share (cents):
- headline 192.4 127.7 51 251.4
- fully diluted headline 177.5 114.9 54 232.5
- basic 191.8 125.2 53 248.3
- fully diluted basic 177.0 112.7 57 229.6
Dividend per share (cents):
- interim (note 8) 53 29 83 29
- final (note 8) - - 49
Number of shares in issue
(000s) 23,225 23,225 23,225
Weighted number of shares
(000s) 21,426 20,909 21,477
Fully diluted number of
shares (000s) 23,225 23,225 23,225
Effect of BEE transaction approved on 7 February 2005 (Note 7):
Number of shares in issue
(000s) 25,805
- Fully diluted headline
earnings per share
(cents) 159.8
- Fully diluted basic
earnings per share
(cents) 159.3
- Dividend per share
(cents) 53
CONDENSED GROUP BALANCE SHEET - AUDITED
R`000 31 Dec 31 Dec 30 Jun
2004 2003 2004
Assets
Non-current assets 140,069 101,238 120,149
Property, plant and equipment 124,493 89,444 103,331
Intangible assets 8,466 1,796 8,521
Deferred taxation 349 1,343 608
Other non-current assets 6,761 8,655 7,689
Current assets 659,116 502,092 460,413
Inventories 377,545 265,218 279,141
Trade and other receivables 40,537 26,292 37,876
Tax paid in advance - 82 -
Cash and cash equivalents 241,034 210,500 143,396
Total assets 799,185 603,330 580,562
Equity and liabilities
Shareholders` funds 189,184 145,956 168,343
Minority interest 17,780 14,178 16,570
Non-current liabilities 381 279 564
Interest-bearing borrowings - - 203
Deferred taxation 381 279 361
Current liabilities 591,840 442,917 395,085
Short-term borrowings 279 - 289
Tax liability 20,230 9,875 17,787
Trade and other liabilities 569,881 428,492 375,794
Employee benefits (note 4 ) 1,450 4,550 1,215
Total liabilities 592,221 443,196 395,649
Total equity and liabilities 799,185 603,330 580,562
Capital expenditure 28,468 22,245 48,697
Depreciation of property, plant
and equipment 6,905 5,010 10,664
Amortisation of intangible assets 464 102 220
Net asset value per share (cents) 815 628 725
Capital commitments 62,945 20,853 53,221
Property lease commitments 281,019 211,745 238,416
Contingent liabilities 2,042 1,996 3,044
GROUP STATEMENT OF CHANGES IN EQUITY - AUDITED
Foreign
currency Distri-
Share Share translation butable
R`000 capital premium reserve reserve Total
Opening balance at
1 July 2003 as
previously reported 232 40,966 2,730 88,000 131,928
Effect of consolidating
the share incentive
trust (note 3) (23) (13,171) 9,542 (3,652)
Restated opening 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
Attributable earnings
for the period 41,097 41,097
Dividends paid (10,754) (10,754)
Net treasury shares
movement (2) (9,500) (9,502)
Closing balance at
31 December 2004 218 20,322 2,730 165,914 189,184
CONDENSED GROUP CASH FLOW STATEMENT
Audited
R`000 Six months Six months Year
ended ended ended
Dec Dec Jun
2004 2003 2004
Cash flows from operating activities
Cash receipts from customers 1,056,189 836,135 1,637,186
Cash paid to suppliers and
employees (891,210) (687,510) (1,520,304)
Cash generated from
operations 164,979 148,625 116,882
Interest received 4,345 4,227 8,683
Interest paid (207) (612) (681)
Dividends paid (12,254) (8,787) (15,300)
Taxation paid (21,042) (18,309) (28,002)
Net cash inflows from
operating activities 135,821 125,144 81,582
Cash flows from investing activities
Additions to property, plant
and equipment (28,061) (22,222) (41,042)
Additions to system
implementation (407) - (6,442)
Additions to trademarks - (23) (22)
Acquisition of subsidiary - - 4
Proceeds on disposal of subsidiary - 650 -
Proceeds on disposal of property,
plant and equipment - 342 1,024
Net cash (outflows) from investing
activities (28,468) (21,253) (46,478)
Cash flows from financing activities
Net treasury shares movement (9,502) 282 2,038
(Decrease) in long-term
borrowings (203) - (30)
(Decrease) in short-term
borrowings (10) (63) (106)
Net cash (outflows)/inflows from
financing activities (9,715) 219 1,902
Net increase in cash and cash
equivalents 97,638 104,110 37,006
Cash and cash equivalents at
beginning of period 143,396 106,390 106,390
Cash and cash equivalents at
end of period 241,034 210,500 143,396
CONDENSED GROUP SEGMENTAL ANALYSIS
Six months ended 31 December 2004
Other members
of common Botswana
R`000 South Africa monetary area & Malawi Group
Income statement
Revenue
- External 826,893 125,110 106,847 1,058,850
- Internal 18,020
Operating profit before
financing income 50,858 7,011 5,547 63,416
Balance sheet
Segment assets 646,704 75,764 76,717 799,185
Segment liabilities 514,427 26,230 51,564 592,221
Other segment items
Depreciation 5,914 406 585 6,905
Amortisation 444 - 20 464
Impairment of property - - - -
Capital expenditure 23,102 5,256 110 28,468
Six months ended 31 December 2003
Other members
of common Botswana
R`000 South Africa monetary area & Malawi Group
Income statement
Revenue
- External 621,843 117,928 95,875 835,646
- Internal 18,440
Operating profit before
financing income 24,668 7,246 6,322 38,236
Balance sheet
Segment assets 494,375 55,953 53,002 603,330
Segment liabilities 334,715 63,036 45,445 443,196
Other segment items
Depreciation 4,180 266 564 5,010
Amortisation 101 - 1 102
Impairment of property 307 - - 307
Capital expenditure 21,663 328 254 22,245
Year ended 30 June 2004
Other members
of common Botswana
R`000 South Africa monetary area & Malawi Group
Income statement
Revenue
- External 1,239,762 215,291 180,180 1,635,233
- Internal 33,161
Operating profit before
financing income 65,668 13,774 2,446 81,888
Balance sheet
Segment assets 472,317 51,648 56,597 580,562
Segment liabilities 306,529 43,568 45,552 395,649
Other segment items
Depreciation 8,945 566 1,153 10,664
Amortisation 202 - 18 220
Impairment of property 307 - - 307
Capital expenditure 42,438 4,307 1,952 48,697
NOTES TO THE CONDENSED GROUP INTERIM FINANCIAL INFORMATION
1. Audit opinion. The condensed announcement of interim results has been derived
from the group interim 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
group interim 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
group interim financial statements are consistent with those used in the annual
financial statements for the year ended 30 June 2004, but differ from December
2003, as noted below.
3. Change in accounting policy. In accordance with the recommendations of 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 ordinary shares in determining the
weighted average number of ordinary shares. The trust held 1,455,296 Cashbuild
shares as at 31 December 2004 (December 2003: 1,908,496 shares; June
2004:1,269,946 shares). As per the requirements of AC103: `Net profit or loss
for the period, fundamental errors and changes in accounting policies`, the
relevant comparative information has been restated.
The effect of the restatement is reflected below and in the statement of changes
in equity.
Distri- Trade &
butable Share Share other
R`000 reserves capital premium receivables Loan
Balance at 31 Dec 2003
as previously
reported 104,895 232 40,966 25,707 3,452
Opening balance
adjusted for
trust consolidation 9,542
Dividend received on
treasury shares in
trust 503
Consolidation of treasury
shares in trust (19) (12,893)
Consolidation of loan to trust (3,452)
Staff loans in trust 585
Restated balance at
31 December 2003 114,940 213 28,073 26,292 -
4. Employee Benefits. The group changed the benefit structure of the long
service awards paid to employees in the latter half of the June 2004 year
resulting in a write-back to profits before taxation of R2.6 million.
5. Reporting period. The group adopts the retail accounting calendar, which
comprises the reporting period ending on the last Saturday of the month (2004:
25 December (26 weeks); 2003: 27 December (26 weeks); June 2004: 26 June (52
weeks)).
6. Weighted average number of shares
Number of shares reconciliation:
Dec-04 Dec-03 Jun-04
Shares in issue/fully diluted
number of shares 23,224,812 23,224,812 23,224,812
Weighted number of treasury
shares (1,799,217) (2,316,296) (1,748,021)
Weighted number of shares 21,425,595 20,908,516 21,476,791
7. Earnings per share. Basic earnings per share is calculated by dividing the
earnings attributable to shareholders by the weighted average number of
21,425,595 ordinary shares in issue during the period (December 2003:
20,908,516; June 2004: 21,476,791 shares). To calculate the headline earnings
per share, the earnings attributable to shareholders is adjusted for the loss 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.
In terms of the BEE transaction approved by shareholders on 7 February 2005,
2,580,535 shares were issued to the Cashbuild Empowerment Trust, bringing the
total issued shares to 25,805,347 shares in issue at date of dividend
declaration (December 2004: 23,224,812).
8. Declaration of dividend. The board has declared an interim dividend (No. 24)
of 53 cents per ordinary share to all shareholders of Cashbuild Limited. The
dividend per share is calculated based on three times earnings cover and
25,805,437 shares in issue at date of dividend declaration.
Date dividend declared: Monday, 25 April 2005
Last day to trade `CUM` the dividend: Friday, 13 May 2005
Date commence trading `EX` the dividend: Monday,16 May 2005
Record date: Friday, 20 May 2005
Date of payment: Monday, 23 May 2005
Share certificates may not be dematerialised or rematerialised between Monday,
16 May 2005 and Friday, 20 May 2005, both dates inclusive.
On behalf of the board
Donald Masson Pat Goldrick
Chairman Chief executive
Johannesburg 25 April 2005
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 (127 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 home
builders and improvers, contractors, farmers, traders and increasingly, large
construction companies and government-related infrastructure developers, as well
as all discerning customers requiring 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
Headline earnings per share increased by 51% and operating profit (before
financing income) by 66% for the six months ended 31 December 2004. Net asset
value per share has increased by 30%, from 628 cents (Dec 2003) to 815 cents.
The board has increased its interim dividend by 83% to 53 cents per share.
Revenue exceeded R1 billion, a healthy increase of 27% on the comparative
period. Stores in existence since the beginning of the prior reporting period
(pre-existing stores) accounted for a healthy 18% of the increase with the
remaining increase due to the 16 new stores the company has opened since the end
of the 2003 financial year (new stores).
These improvements have been achieved largely as a result of the continued
positive macro-economic environment, consumer confidence and the strong property
culture permeating throughout southern Africa. Cashbuild`s focus on its core
strategies of `always in stock`, `lowest everyday prices`, our free delivery
service, as well as our highly successful campaign based on `life offers no
guarantees, but Cashbuild does`, have had a positive impact on Cashbuild`s
revenue. Cashbuild has also initiated a loyalty programme to reward large
revenue customers. This programme has proven very successful in attracting and
retaining this targeted customer base. Cashbuild`s strategy of constantly
upgrading its existing stores via its store refurbishment and relocation
programme has continued to support the organic growth from the pre-existing
store base.
Management is further encouraged by the fact that the increase in revenue has
arisen from real growth as illustrated by the 22% growth in transactions through
our tills (including new stores) and the number of units sold improving by an
impressive 31%. Whilst within pre-existing stores, customer transactions grew by
10% and the number of units sold by 22%.
It is also significant to note that this revenue growth has been achieved
together with improved percentage margins. Deflation had a negative impact on
margins during the prior year, which resulted in Cashbuild maintaining lower
selling prices on stock purchased at pre-deflationary levels, and a shift in
product mix. It is apparent, from the exceptional increase in units sold, the
change in mix continues to play a role in Cashbuild`s success, as high
volume/low margin items continue to drive revenues higher. This change in mix is
however, more than compensated for by the increase off the deflationary low base
of the prior year. Cashbuild`s continued focus on stock management, through
shrinkage control (at the historically low level of 0.35% of revenue),
obsolescence control and management of unwarranted markdowns at the till have
further enhanced Cashbuild`s margins.
Total overheads show an increase of 27% on the prior period, with existing
stores accounting for 17% of the increase and the remainder due to new stores.
This increase is attributable to costs associated with the pro-active employment
and development of our people to support our planned future growth, our
strategic advertising campaign and free customer delivery service. This,
together with management`s planned increase in the costs involved in the
implementation of a new IT system has contributed to the rise in overheads.
With the full utilisation of STC tax credits and assessed losses in the prior
period, the tax rate of the current period is somewhat higher than the
comparable period, but at anticipated levels.
Cashbuild`s balance sheet remains solid. Stock levels have increased in line
with management`s expectations, by 42%. This increase is attributable to the
stocking of 10 new stores opened in the last year (accounting for 10% of the
increase). The remainder of the increase is on the back of higher demand, our
stockholding in relation to volume traded during our peak period and stock
availability during supplier closures. Overall stockholding remains well managed
at 70 days (Dec 2003: 66 days). Debtors` levels remain well under control. The
company`s strong cash generating ability resulted in an overall increase in cash
levels to R241 million, representing a 15% improvement on the prior period (with
no long-term interest-bearing borrowings).
Cashbuild`s expansion plans continue in a controlled manner with four new stores
opened, one relocated and one refurbished in the first half of the reporting
period.
PROSPECTS
Revenue growth in the third quarter of 2005 continues to show a further
improvement, even on the growth levels experienced in the second quarter of
2005. We have every expectation that these growth levels, barring any unforeseen
circumstances or significant macro-economic events, should continue into the
final quarter of this financial year.
INFORMATION TECHNOLOGY
Cashbuild`s new IT system implementation has been split into two phases, with
the first phase being the roll out of a new IT platform at support office. This
first phase which `went live` on 27 September 2004 is still in the process of
being bedded down. The second phase, being the roll out of a new IT platform at
store level is to begin when the first phase is complete. This roll out is
expected to take two years and will begin during the 2006 calendar year.
BEE TRANSACTION
Cashbuild`s broad-based BEE transaction has now been successfully completed.
This transaction has resulted in the introduction of its employee base of more
than 2,000, of which more than 90% qualify as Historically Disadvantaged South
Africans, as the broad-based black empowerment shareholder. Employees have,
through this transaction effectively acquired 10% of the share capital of the
company and will benefit through the earning of dividends and under specific
limited circumstances capital appreciation. Employees will benefit from this
transaction for the first time with the earning of dividends declared for this
half-year.
DIVIDENDS
Cashbuild`s board has resolved to change its dividend policy for this half-year
declaration, to three times earnings cover from the previous four times cover.
The 53 cents per share dividend declaration has been determined taking into
account the dividends due on the additional shares issued for the BEE
transaction.
Directors: D Masson* (Chairman), P K Goldrick (Chief executive) (Irish), C T
Daly, W F de Jager, J Molobela*, F M Rossouw*, N V Simamane*, A van Onselen
(*Non-executive)
Company secretary: Alan C Smith
Auditors: PricewaterhouseCoopers Inc.
Sponsor: Nedbank Capital
Registered office: cnr Aeroton and Aerodrome Roads, Aeroton, Johannesburg 2001.
PO Box 90115, Bertsham 2013
Transfer secretaries: Computershare Investor Services 2004 (Pty) Limited, 70
Marshall Street, Johannesburg 2001. PO Box 61051, Marshalltown 2107
