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CSB
CSB
Cashbuild Limited - Cashbuild 2nd Quarter Operational Update
CASHBUILD LIMITED
(Registration number: 1986/001503/06)
(Incorporated in the Republic of South Africa)
JSE share code: CSB ISIN: ZAE000028320
("Cashbuild" or "the company")
CASHBUILD 2nd QUARTER OPERATIONAL UPDATE
Cashbuild is currently in the process of finalising its results for the half-
year ended 31 December 2005. In line with past practice and disclosure,
Cashbuild herewith provides its quarterly trading update.
Revenue growth for the 2nd quarter of the financial year was a satisfactory 30%
up on the comparable quarter of the prior year. Although in line with
management"s expectations, it is lower than the 43% growth experienced during
the first quarter. This equates to a 35% increase for the first half of the
financial year.
Stores in existence since the beginning of July 2004 (pre-existing stores)
contributed 19% of the increase, whilst the 22 stores that were opened since the
end of the 2004 financial year (new stores), contributed 11%. Transactions
through the tills increased by 27% and the number of units sold for the quarter
increased by 17% in comparison to the prior period.
Cashbuild continued to experience a favourable trading environment and these
coupled with initiatives to grow the top line have contributed to the overall
increase in revenue.
Gross margins in first quarter were under slight pressure but have recovered to
our expected levels during this quarter.
Cashbuild continued its strategy to invest in the business in order to step up
and support the future growth of the company. The areas of operational expenses
influenced by this strategy are:
Continued intense and comprehensive advertising campaign
The free local customer delivery service (currently at budgeted levels)
People investment
Appointment of an experienced operations manager to concentrate on the growth of
the neighboring countries
Additional people employed and extra shifts worked to cope with volumes and to
ensure that suppliers are paid timeously
Extra staffing in support of our extended trading hours
Additional internal security and field auditors
A 15% salary increase (effective 1 July 2005) for the majority of non-managerial
employees at store level resulting from the implementation of Cashbuild"s formal
grading system (equating to a total company increase of 9%)
Continued technical and professional support to remedy issues in the
implementation of the new IT system.
A total of seven new stores were opened during this quarter plus one
refurbishment and one relocation. Cashbuild for the first time opened a record
11 new stores during the half-year period. This equals the highest number of
stores ever opened during a full financial year. This doubling on opening new
stores also results in an increase to opening costs, with the real revenue and
profit benefits only materialising at a later stage. The principle reasons for
the step up of new store openings are:
Cashbuild has been perusing a number of sites during the past five years, which
have now started to come to fruition
Shopping centers are now being built in rural areas and townships where
Cashbuild is a strong brand and a preferred tenant
At the end of the half-year 144 stores were trading.
Although this investment strategy together with the stepped-up store expansion
is putting earnings for the first half under pressure, management has put in
place a comprehensive operational plan to ensure that the stated objective of
growing operating profits by at least 10% in excess of inflation, will be
achievable for the full year.
IT
The corrective action plan put in place by management to address the problems
experienced with the new IT system at support office remains an area of high
priority.
Prospects
A further trading update with indications of earnings expectations for the half-
year will be published at the end of February 2006.
Johannesburg
19 January 2006
Sponsor
Nedbank Capital
Date: 19/01/2006 04:16:51 PM Produced by the JSE SENS Department
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