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CASHBUILD LIMITED - OPERATIONAL REVIEW, TRADING UPDATE AND CONSEQUENT CAUTIONARY ANNOUNCEMENT Cashbuild Limited Registration number: 1986/001503/06 (Incorporated in the Republic of South Africa) Share Code: CSB ISIN Code: ZAE000028320 OPERATIONAL REVIEW, TRADING UPDATE AND CONSEQUENT CAUTIONARY ANNOUNCEMENT OPERATIONAL REVIEW Cashbuild is finalising the compilation of its interim financial results for the six months ending 31 December 2003 and, in addition to meeting the Listings Requirements of the JSE Securities Exchange South Africa, the company"s board provides the following information to give shareholders an early indication of Cashbuild"s performance during this interim period. Turnover amounted to R836 million, a healthy increase of 16% on the comparative period. Half of the increase is attributable to stores in existence since the beginning of the prior reporting period (pre-existing stores) and half to the sixteen stores the company has opened since the end of the 2002 financial year (new stores). Given deflation of 1% in relation to the comparative period, real growth in turnover in excess of 8% and the growth in market share achieved through the opening of the new stores is considered satisfactory. The increase in turnover at the pre-existing stores was achieved with a 6% increase in customer transactions through the tills and a 10% increase in units sold. Overall (including new stores) transactions grew by an encouraging 19% and the number of units sold improved by an impressive 25%. Cashbuild"s continued commitment to its "always in stock" policy and to its "always lowest prices" strategy has placed the group"s margins under pressure. Though deflation had adversely affected rand margins this has been more than compensated for by the growth in unit sales over the period. Deflation on specific large commodity lines has, however, required Cashbuild to lower its prices on stock purchased at pre-deflationary prices with the result that the group"s percentage margins have been adversely affected. This effect has been well managed and has been limited to a fall of less than 1% in percentage margin terms when compared to the prior period. Management is satisfied with this outcome as Cashbuild"s policies and strategies have paid off in terms of customer satisfaction as can be seen from the growth in transactions, unit sales and market share, and from growing rand margins. Overheads continue to be well managed and controlled. Management expects operating profits to show a material improvement on the corresponding prior period. Cashbuild is exceptionally cash generative and previously enjoyed substantial earnings from its financing activities. The downward shift in interest rates has severely impaired its ability to generate income from this source. With interest rates at almost half of last year"s level, finance income is expected to be more than 40 percent down on the prior period. Cashbuild"s balance sheet remains solid. Working capital continues to be well managed with stock levels (in spite of the stocking of 10 new stores opened in the last year) expected to be in line with the prior period. Debtors levels are also expected to remain unchanged. The company"s strong cash generating ability and its strict management of working capital is expected to result in an overall increase in cash levels to in excess of R200-million, representing a 25% improvement on the prior period (with no interest-bearing debt). The company continues to expand conservatively. Six new stores were opened in the last six months and the company has refurbished two stores. The company remains in a strong growth phase in an expanding market. A dividend of four times cover is expected for this period. Prospects Turnover growth since the end of December continues to be strong and trading conditions look positive for the remainder of the financial year. TRADING UPDATE AND CAUTIONARY ANNOUNCEMENT Shareholders are advised that Cashbuild"s headline earnings per share will be in the upper half of significant in comparison to the prior period. In this announcement, the word "significantly" refers to an increase of between 0 percent and 10 percent, and the word "materially" refers to an increase of between 10 percent and 30 percent, both as defined in the Listings Requirements of the JSE Securities Exchange South Africa. The above guidance on expected earnings has not been reviewed by, or reported on by, Cashbuild"s auditors. Shareholders are therefore advised to exercise caution when dealing in their securities until the release of the interim results on 12 February 2004. Johannesburg 27 January 2004 Sponsor Nedbank Corporate Date: 27/01/2004 05:33:04 PM Supplied by www.sharenet.co.za Produced by the JSE SENS Department
