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CASHBUILD LIMITED - AUDITED ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 30 JUNE
2003
CASHBUILD LIMITED
Registration number: 1986/001503/06
(Incorporated in the Republic of South Africa)
JSE Sharecode: CSB
ISIN Code: ZAE000028320
Audited Annual Financial Results for the year ended 30 June 2003
Headline earnings per share up 81%
Net asset value per share up 35%
Revenue up 24%
CONDENSED GROUP BALANCE SHEET
as at 30 June Audited
R"000
2003 2002
Assets
Non-current assets 95 225 68 122
Property, plant and equipment 73 676 50 734
Intangible assets 1 875 3
Loans receivable 6 882 2 889
Deferred taxation 3 097 2 562
Other non-current assets 9 695 11 934
Current assets 385 156 350 025
Inventories 249 263 198 238
Trade and other receivables 29 503 28 759
Tax paid in advance - 438
Cash and cash equivalents 106 390 122 590
Total assets 480 381 418 147
Equity and liabilities
Shareholders" funds 131 928 95 179
Minority interest 11 918 8 266
Non-current liabilities 297 349
Interest-bearing borrowings - 63
Deferred taxation 297 286
Current liabilities 336 238 314 353
Short-term borrowings 63 115
Tax liability 16 433 1 887
Trade and other liabilities 319 742 312 351
Total liabilities 336 535 314 702
Total equity and liabilities 480 381 418 147
Capital expenditure 35 184 13 015
Depreciation of property, plant
and equipment 8 028 8 240
Amortisation of intangible assets 134 1
Net asset value per share (cents) 568 421
Capital commitments 8 107 4 390
Contingent liabilities 1 576 3 364
GROUP INCOME STATEMENT
for the year ended 30 June Audited
R"000
52 weeks 52 weeks %
2003 2002 Change
Revenue 1 394 783 1 122 692 24
Cost of sales 1 081 880 873 572
Gross profit 312 903 249 120 26
Operating expenses 249 366 216 078 15
Operating profit before financing
income 63 537 33 042 92
Net financing income 9 489 5 789 64
Profit before taxation 73 026 38 831 88
Taxation 23 039 11 847
Profit after taxation 49 987 26 984
Minority interest 4 792 2 955
Attributable earnings 45 195 24 029 88
Reconciliation of attributable
earnings to headline earnings:
Attributable earnings 45 195 24 029
Amortisation of goodwill 133 -
(Profit)/loss on sale of assets after
taxation (235) 931
Headline earnings 45 093 24 960 81
Earnings per share (cents):
- Headline 196.8 108.9 81
- Fully diluted headline 194.2 107.5 81
- Basic 197.3 104.9 88
- Fully diluted basic 194.6 103.5 88
Dividend per share (cents):
- Interim paid 25 -
- Final payable (Note 6) 40 35
Total dividend 65 35 86
Number of shares in issue ("000s) 23 225 23 225
Weighted number of shares ("000s) 22 912 22 911
Fully diluted number of
shares ("000s) 23 225 23 225
GROUP STATEMENT OF CHANGES IN EQUITY Audited
R"000
Foreign
currency Distri-
Share Share translation butable
capital premium reserve reserve Total
Opening balance
at 1 July 2001 232 38 052 2 730 38 162 79 176
Attributable earnings
for the year 24 029 24 029
Dividend paid (5 574) (5 574)
Cost of shares
repurchased (6) (2 446) (2 452)
Balance at
1 July 2002 226 35 606 2 730 56 617 95 179
Effect of change in
accounting policy (97) (97)
Attributable earnings
for the year 45 195 45 195
Dividends paid (13 936) (13 936)
Dividend received on
repurchased shares 221 221
Repurchased shares
sold 6 2 446 2 452
Surplus on sale of
repurchased shares 2 914 2 914
Closing balance at
30 June 2003 232 40 966 2 730 88 000 131 928
CONDENSED GROUP CASH FLOW STATEMENT
for the year ended 30 June Audited
R"000
52 weeks 52 weeks
2003 2002
Net cash inflows from operating
activities 15 283 73 831
Net cash (outflows) from investing
activities (36 734) (12 181)
Net cash inflows/(outflows) from
financing activities 5 251 (2 553)
Net (decrease)/increase in cash
and cash equivalents (16 200) 59 097
Cash and cash equivalents at
beginning of year 122 590 63 493
Cash and cash equivalents at end of year 106 390 122 590
NOTES TO THE CONDENSED GROUP ANNUAL FINANCIAL INFORMATION
1. Accounting policies
The group"s condensed financial information has been extracted from the audited
group annual financial statements, which have been prepared in accordance with
South African Statements of Generally Accepted Accounting Practice. 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 2002, except that AC 133 Financial Instruments: Recognition and
Measurement, has been adopted. The effect of this change is reflected in the
group statement of changes in equity.
2. Reporting period
The group adopts the retail accounting calendar which comprises the reporting
period ending on the last Saturday in June (2003: 28 June - 52 weeks; 2002: 29
June - 52 weeks).
3. Audit opinion
PricewaterhouseCoopers Inc. audited the condensed announcement of annual results
contained herein, as well as the comprehensive financial statements from which
the condensed results were derived. The unqualified audit reports on the
comprehensive financial statements and the condensed financial results are
available for inspection at the company"s registered office.
4. Repurchased shares
The company purchased 631 296 ordinary shares of Cashbuild Limited through its
subsidiary Cashbuild (South Africa) (Pty) Ltd 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 have been transferred directly to equity.
Number of shares reconciliation: June 03 June 02
Shares in issue/fully diluted number
of shares 23 224 812 23 224 812
Weighted number of shares repurchased (313 054) (313 480)
Weighted number of shares 22 911 758 22 911 332
5. Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable to
shareholders by the weighted average number of 22 911 758 ordinary shares in
issue during the year (2002: 22 911 332 shares). To calculate the headline
earnings per share, the earnings attributable to shareholders is adjusted for
the (profit)/loss on sale of assets after taxation and the amortisation of
goodwill. This headline earnings calculation is in compliance with SAICA
Circular 7/2002 as directed by the JSE Securities Exchange South Africa.
6. Declaration of dividend
The board has declared a final dividend (No. 21), of 40 cents per ordinary share
to all shareholders of Cashbuild Limited.
Date dividend declared: 25/8/2003
Last day to trade "CUM" the dividend: 12/9/2003
Date commence trading "EX" the dividend: 15/9/2003
Record date: 19/9/2003
Date of payment: 22/9/2003
Share certificates may not be dematerialised or rematerialised between Monday,
15 September 2003 and Friday, 19 September 2003, both dates inclusive.
On behalf of the board
DONALD MASSON PAT GOLDRICK
Chairman Chief Executive
Johannesburg 25 August 2003
COMMENTS
NATURE OF BUSINESS
Cashbuild has for a number of years been southern Africa"s largest retailer of
quality building materials and associated products. The group sells direct to a
cash-paying customer base through its constantly expanding chain of stores (113
at the end of the reporting year).
Cashbuild carries an in-depth quality product range tailored to the specific
needs of the communities it serves. Its 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 looking for quality building materials at lowest
prices.
Cashbuild has built its credibility and reputation by consistently and reliably
offering quality products at lowest everyday prices, whilst adhering to a
purchasing and inventory policy that ensures that customers" requirements are
always in stock.
Our store staff continue to play an invaluable role in our success through their
knowledge of the business and commitment to a consistently outstanding level of
customer service.
FINANCIAL HIGHLIGHTS
Management is proud to announce a further strong increase in headline earnings
per share of 81% for the year ended 30 June 2003.
Net asset value per share has increased by 35%, from 421 cents (June 2002) to
568 cents (June 2003).
The board has declared a final dividend of 40 cents per share, which together
with the interim dividend brings the full year"s dividend to 65 cents. This
represents an 86% increase on the comparative year. It is the intention of the
board to continue with the payment of interim dividends.
The improvement in headline earnings is mainly attributable to revenue growth
which was especially gratifying in both our new and existing stores. Overall
revenue increased by 24% for the year, with new stores contributing 8% and
existing stores a creditable 16%.
This improvement in revenue was achieved dissimilarly over the two halves of the
year. In the first half, an improvement of 34% was achieved from a low base in
the previous six months when growth in revenue had been modest as a result of
management"s decision to withdraw all advertising while improving and
reinforcing core strategies. This level of growth was not expected to continue,
with revenue growth in the second half increasing by a more realistic 16%.
Gross profit improved by 26% compared to the previous 12 months, due to revenue
improvement and a higher gross profit percentage. This improved percentage was
principally due to better stock management, reduced shrinkage (0,4% of revenue),
our enhanced buying power, and improved control of inventory ranging and
obsolescence.
Operating expenses remain under tight control, the increase for the reporting
year being 15%. The group benefits considerably from economies of scale as new
stores are established. New stores represented 8% of the increase in operating
expenses for the year under review, whereas existing stores accounted for 7%.
Financing income showed a healthy increase from R5.8 million to R9.5 million for
the year. This increase is attributable to improved cash flows generated by the
business operations as well as good treasury management.
Working capital continues to be a focus of our attention, with growth in
inventories and trade liabilities in line with management"s expectations, given
current levels of revenue, the group"s "always in stock" strategy, and our rate
of organic expansion. Management is keenly aware of the need to balance customer
requirements with the efficient management of its working capital. During this
reporting year, management invested significantly in stock (an increase of 26%)
and achieved a corresponding increase in revenue and customer satisfaction. Of
this 26% increase in stock, 12% is attributable to the stocking of new stores.
Management during the past 18 months has adopted its "always in stock" strategy
and put in place appropriate policies. It has been observed that during the
implementation of this strategy, together with additional levels of stock, a
concomitant increase in revenue and customer satisfaction was achieved. This has
proven to management that the policies the company has adopted in relation to
this strategy have provided obvious benefits. Given this outcome, Cashbuild
undertook towards the end of the first half of this financial year to initiate a
project to determine the optimum level of stock holdings given the impact on
revenue, margins and the opportunity cost of this investment. This project was
performed under very strict ranging and stock control management. It has
resulted in the utilisation of available cash in the business to fund varying
levels of stock and to assess and analyse the outcome in relation to overall
profitability. Before year end, Cashbuild, as a result of this detailed project,
was able to determine the optimal stock model for the business. This stock model
has now been applied and is expected to lower overall stock levels within the
business whilst ensuring all stores are "always in stock" and providing the
business with maximum return on assets employed. Given the strict control over
the term of this project, management does not foresee any significant markdowns
or write-offs due to the current higher stock levels.
The immediate result of the implementation of the stock model is lower stock
ordering levels and the resultant stabilisation of trade liabilities at year
end. Cashbuild has also utilised excess cash within the year to negotiate
mutually beneficial settlement terms with suppliers. Whilst Cashbuild has
finalised its ongoing settlement terms and arrangements with creditors, this
will continue to be reviewed on an ongoing basis.
The group"s cash balance of R106.4 million at year end, has arisen from
continued expansion and refurbishing activities, the payment of our first
interim dividend, and our focus on our "always in stock" strategy. Working
capital is expected to contribute to improved cash levels as our stock model is
actualised.
EXPANSION STRATEGY
In June of last year, Cashbuild undertook to open 10 new stores per year. By the
end of this reporting year, 11 new Cashbuild outlets had been opened. Our
commitment to this level of organic expansion will continue into the foreseeable
future. We possess the resources in management, finance, and infrastructure to
make this possible.
Besides the new store expansion, our store in Maun, Botswana, was entirely
rebuilt. We also completed our first store refurbishment, in Mabopane. This
store is part of a structured programme designed to revitalise all existing
stores in order to maximise returns on these investments.
Sites for new stores and stores requiring refurbishment are identified on the
basis of dependable demographic data that indicates unambiguously worthwhile
revenue potential in the proposed locality. Additionally all financial
investments must meet the strict criteria that have always characterised the
Cashbuild business model, which has proved its ability to maximise returns in
all the markets in which we are active - rural, urban and mass housing.
Cashbuild"s ongoing organic expansion programme will continue to be prudently
managed and funded through cash flows from operational profitability.
MANAGEMENT
The group"s results are in line with the board"s expectation and show once
again, the continuing benefit the company derives from the experience,
specialised knowledge, and commitment of its management at all levels. Managers
accept that they are personally responsible for delivering sustainable results
and readily take ownership of issues to be resolved and opportunities to be
exploited. Management style at Cashbuild is detailed and comprehensive. The
team is cohesive and well equipped to accept and deal with challenges, including
those presented by the need to tightly control our store expansion programme.
Cashbuild"s management, with its vested shareholder stake in the business, will
continue to deliver steadily improving, sustainable results and will stay
focussed on its proven key business strategies. Tight financial and operational
controls will continue to be exercised.
PROSPECTS
Cashbuild strives to continue to increase its revenue by profitably growing
market share to a minimum of 30%. Our prime target customer remains the cash-
paying individual intent on necessary domestic improvements and structural
repairs - and the contractor who services him.
We are also making headway in our efforts to increase the volume of revenue
generated from government-related contracts.
Management is confident that Cashbuild"s markets will continue to grow,
supported by government drives to increase home ownership, and the continued
striving of private home builders and developers to meet the aspirations of more
and more home owners for larger homes and better housing. In all of the
countries in which Cashbuild trades, home ownership is increasingly seen as a
dependable and profitable investment.
Cashbuild is the first-choice supplier of quality building materials in all the
markets in which it is represented. Our permanent strategy of expansion and
store relocations continually increases the size of the market to which we have
access.
The group is confident that it will be able to maintain its record of rewarding
its stakeholders and share owners with consistently improving and sustainable
results into the foreseeable future.
Directors: D Masson* (Chairman), PK Goldrick (Chief executive) (Irish), CT Daly,
FM Rossouw* (*Non-executive)
Company secretary: Alan C Smith.
Registered office: Cnr Aeroton and Aerodrome Roads, Aeroton, Johannesburg 2001;
PO Box 90115, Bertsham 2013.
Transfer Secretaries: Computershare Limited, 70 Marshall Street, Johannesburg
2001; PO Box 61051, Marshalltown 2107.
Registration number: 1986/001503/06 (Incorporated in the Republic of South
Africa)
Listed on the JSE Securities Exchange South Africa
JSE Sponsor: Nedbank Corporate
Auditors: PricewaterhouseCoopers Inc.
JSE Sharecode: CSB
ISIN Code: ZAE000028320
Largest retailer of building materials in southern Africa.
Visit our website at: www.cashbuild.co.za
Date: 27/08/2003 07:00:15 AM Supplied by www.sharenet.co.za
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