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Cashbuild Limited - Audited interim results December 2005
CASHBUILD LIMITED
(Registration number: 1986/001503/06)
(Incorporated in the Republic of South Africa)
Listed on the JSE Limited
JSE Share Code: CSB & ISIN: ZAE000028320
Audited interim results December 2005
Revenue up 35%
Net asset value per share up 22%
Operating profit up 10%
Headline earnings up 7%
Capital investment up 61%
CONDENSED GROUP INCOME STATEMENT - AUDITED
R"000 Six months Six months
ended ended Year ended
31 December 31 December % 30 June
2005 2004 Change 2005
(Restated) (Restated)
Revenue 1,433,174 1,058,850 35 2,208,902
Cost of sales (1,120,215) (825,128) 36 (1,725,135)
Gross profit 312,959 233,722 34 483,767
Selling expenses (205,642) (136,772) 50 (300,333)
Administrative
expenses (35,267) (32,029) 10 (61,271)
Other operating
expenses (1,105) (651) 70 (2,407)
Operating profit 70,945 64,270 10 119,756
Interest - paid (381) (207) 84 (645)
- received 3,011 4,345 (30) 7,599
Profit before income
tax 73,575 68,408 8 126,710
Income tax expense
for the period (23,862) (23,896) - (42,546)
Profit for the period 49,713 44,512 12 84,164
Attributable to:
Equity holders of the
company 45,039 41,813 8 78,191
Minority interest 4,674 2,699 73 5,973
49,713 44,512 12 84,164
Earnings per share
(cents) 200.4 195.2 3 356.9
Diluted earnings per
share (cents) 174.5 180.0 (3) 321.8
CONDENSED GROUP BALANCE SHEET - AUDITED
R"000 31 December 31 December 30 June
2005 2004 2005
(Restated) (Restated)
ASSETS
Non-current assets 203,865 150,079 169,531
Property, plant and equipment 192,266 135,985 157,078
Intangible assets 7,712 8,430 7,648
Deferred income tax assets 3,887 5,664 4,805
Current assets 741,312 656,876 598,527
Inventories 480,998 377,199 394,747
Trade and other receivables 35,704 38,643 36,610
Cash and cash equivalents 224,610 241,034 167,170
Total assets 945,177 806,955 768,058
EQUITY AND LIABILITIES
Shareholders" equity 259,261 189,529 215,196
Share capital and reserves 233,737 171,953 194,346
Minority interest 25,524 17,576 20,850
Non-current liabilities 27,548 25,586 26,247
Deferred operating lease
liability 23,809 21,799 22,453
Deferred profit 1,985 2,037 2,011
Deferred income tax liability 385 381 414
Borrowings (non interest-bearing) 1,369 1,369 1,369
Current liabilities 658,368 591,840 526,615
Trade and other liabilities 632,950 569,881 505,605
Current income tax liabilities 24,471 20,230 20,012
Borrowings - 279 47
Employee benefits 947 1,450 951
Total equity and liabilities 945,177 806,955 768,058
ADDITIONAL INFORMATION - AUDITED
R"000 Six months Six months Year
ended ended ended
31 December 31 December 30 June
2005 2004 2005
(Restated) (Restated)
Net asset value per share (cents) 906 740 753
Ordinary shares (`000):
- In issue 25,805 23,225 25,805
- Weighted-average 22,478 21,426 21,906
- Diluted weighted-average 25,805 23,225 24,300
Capital investment 46,006 28,498 59,281
Depreciation of property, plant
and equipment 9,201 6,833 14,760
Amortisation of intangible assets 833 344 1,025
Impairment of intangible assets - 120 239
Capital commitments 27,909 62,945 39,977
Property operating lease
commitments 540,101 264,546 334,969
Contingent liabilities 4,025 2,042 1,874
CONDENSED GROUP CASH FLOW STATEMENT - AUDITED
R"000 Six months Six months Year
ended ended ended
31 December 31 December 30 June
2005 2004 2005
(Restated) (Restated)
Cash flows from operating activities
Cash generated from operations 123,874 164,992 146,565
Interest paid (381) (207) (645)
Taxation paid (18,514) (21,042) (39,018)
Net cash generated from
operating activities 104,979 143,743 106,902
Cash flows from investing activities
Net investment in assets (45,964) (28,498) (58,162)
Interest received 3,011 4,345 7,599
Net cash used in investing
activities (42,953) (24,153) (50,563)
Cash flows from financing activities
Proceeds from issue of ordinary
shares - - 74,880
Net treasury shares movement 7,661 (9,502) (82,537)
Decrease in other borrowings (47) (213) (445)
Dividends paid - own equity (12,200) (10,754) (22,980)
- minorities - (1,483) (1,483)
Net cash used in financing
activities (4,586) (21,952) (32,565)
Net increase in cash and cash
equivalents 57,440 97,638 23,774
Cash and cash equivalents
at beginning of period 167,170 143,396 143,396
Cash and cash equivalents
at end of period 224,610 241,034 167,170
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY - AUDITED
R"000 31 December 31 December 30 June
2005 2004 2005
(Restated) (Restated)
Balance as previously reported 199,542 154,238 154,238
SA GAAP and IFRS adjustments
(Refer to IFRS reconciliation) (5,196) (1,045) (1,045)
Restated opening balance 194,346 153,193 153,193
Currency translation
differences (1,109) (2,797) (6,401)
Dividends paid (12,200) (10,754) (22,980)
Net profit for the period 45,039 41,813 78,191
Shares issued - - 74,880
Net movement of treasury shares 7,661 (9,502) (82,537)
Equity attributable to equity
holders of the parent 233,737 171,953 194,346
Minority interest 25,524 17,576 20,850
Total 259,261 189,529 215,196
RECONCILIATION OF PREVIOUS SA GAAP TO IFRS
Six months Year 01 Jul 31 Dec 30 Jun
ended ended 2004 2004 2005
31 Dec 30 Jun
2004 2005
Net profit for the period Equity attributable
attributable to the equity to equity holders
holders of the parent the parent
R"000
As previously
reported 41,097 75,941 154,238 189,184 199,542
SA GAAP adjustments 587 1,987 (1,671) (17,986) (6,085)
Straightlining of
leases (note 3) (293) - - (14,398) -
Reclassification of
finance leases
(note 4) 481 962 (1,671) (1,190) (708)
Effects of changes to
foreign exchange
rates (note 5) 399 1,025 - (2,398) (5,377)
IFRS adjustments 129 263 626 755 889
Property, plant and
equipment (note 6) 129 263 626 755 889
Restated under IFRS 41,813 78,191 153,193 171,953 194,346
CONDENSED GROUP SEGMENTAL ANALYSIS - AUDITED
South Africa
R"000 Six months Six months Year
ended ended ended
31 December 31 December 30 June
2005 2004 2005
(Restated) (Restated)
Income statement
Revenue 1,154,491 826,893 1,739,638
Operating profit 54,613 51,281 90,097
Balance sheet
Segment assets 757,240 656,229 619,900
Segment liabilities 583,892 538,075 474,913
Other segment items
Depreciation 7,966 5,899 12,778
Amortisation 813 344 1,025
Impairment - 100 198
Capital investment 32,332 23,132 49,421
Other members of common monetary area *
R"000 Six months Six months Year
ended ended ended
31 December 31 December 30 June
2005 2004 2005
(Restated) (Restated)
Income statement
Revenue 183,420 125,110 263,224
Operating profit 12,517 7,001 13,786
Balance sheet
Segment assets 118,113 76,259 83,719
Segment liabilities 53,519 27,512 22,428
Other segment items
Depreciation 833 385 985
Amortisation - - -
Impairment - - -
Capital investment 9,525 5,256 9,486
*Includes Namibia, Swaziland and Lesotho
Botswana and Malawi
R"000 Six months Six months Year
ended ended ended
31 December 31 December 30 June
2005 2004 2005
(Restated) (Restated)
Income statement
Revenue 95,263 106,847 206,040
Operating profit 3,815 5,988 15,873
Balance sheet
Segment assets 69,824 74,467 64,439
Segment liabilities 48,505 51,839 55,521
Other segment items
Depreciation 402 549 997
Amortisation 20 - -
Impairment - 20 41
Capital investment 4,149 110 374
Group
R"000 Six months Six months Year
ended ended ended
31 December 31 December 30 June
2005 2004 2005
(Restated) Restated)
Income statement
Revenue 1,433,174 1,058,850 2,208,902
Operating profit 70,945 64,270 119,756
Balance sheet
Segment assets 945,177 806,955 768,058
Segment liabilities 685,916 617,426 552,862
Other segment items
Depreciation 9,201 6,833 14,760
Amortisation 833 344 1,025
Impairment - 120 239
Capital investment 46,006 28,498 59,281
NOTES TO THE CONDENSED GROUP INTERIM FINANCIAL INFORMATION
1. Basis of preparation. The condensed consolidated financial information
("financial information") announcement is based on the audited financial
statements of the group for the period ended 31 December 2005 which have been
prepared in accordance with International Financial Reporting Standards
("IFRS"), IAS 34, the listing requirements of the JSE Limited and the South
African Companies Act (1973).
The financial information set out in the announcement is subject to changes
based on future interpretation of IFRS. The financial statements for the period
ended 31 December 2005 are Cashbuild"s first published financial statements
stating compliance with IFRS. Refer to the Reconciliation of previous SA GAAP to
IFRS for the effects of IFRS compliance on previously reported financial
statements. The nature of all items reconciling SA GAAP to IFRS have been
described in detail in the financial statements for the period ended 31 December
2005.
2. Independent audit by the auditors. These condensed consolidated results have
been audited by our auditors PricewaterhouseCoopers Inc., who have performed
their audit in accordance with the International Standards on Auditing. A copy
of their unqualified audit report is available for inspection at the registered
office of the company.
3. Straightlining of leases. The results for December 2004 have been adjusted
following the circular 7/2005 issued by SAICA on 2 August 2005 - a clarification
of the interpretation of IAS 17 (Leases) for South African companies. This
interpretation had already been taken into account in compiling the June 2005
year-end results.
4. Reclassification of finance leases. Based on the interpretation of IAS 17 in
respect of the classification of operating leases as finance leases, certain
operating leases were reclassified as finance leases. This interpretation was
taken into account in compiling the results and assets and liabilities amounting
to R12.1 million and R1,4 million respectively as at 31 December 2005, have been
accounted for on the balance sheet.
5. Effects of changes in foreign exchange rates. IAS 21 introduces the concept
of "functional currency". Due to a reassessment of the "functional currency" of
our African subsidiaries, translation differences previously recognised in the
income statement have been moved to the cumulative translation adjustment on the
balance sheet.
6. Property, plant and equipment. IAS 16 requires the reassessment of an asset"s
useful life and residual value at each balance sheet date. Applying this
statement retrospectively has had the effect of the results being restated.
7. Reporting period. The group adopts the retail accounting calendar, which
comprises the reporting period ending on the last Saturday of the month (2005:
24 December (26 weeks); 2004: 25 December (26 weeks);
June 2005: 25 June (52 weeks)).
8. Earnings per share. Earnings per share is calculated by dividing the earnings
attributable to shareholders for the period by the weighted average number of
22,478,083 ordinary shares in issue during the year (December 2004: 21,425,595;
June 2005: 21,905,687 shares).
9. Headline earnings per ordinary share. The calculations of headline earnings
and diluted headline earnings per ordinary share are based on headline earnings
of R45,0 million (December 2004: R41,9 million; June 2005: R78,3 million), a
weighted average of 22,478,083 (December 2004: 21,425,595; June 2005:
21,905,687) and fully diluted weighted of 25,805,347 (December 2004: 23,224,812;
June 2005: 24,300,035) ordinary shares in issue.
Reconciliation between net profit attributable to the equity holders of the
company and headline earnings:
%
R"000 Dec-05 Dec-04 Change Jun-05
Net profit attributable to the
company"s equity holders 45,039 41,813 8 78,191
Impairment of goodwill - 120 239
(Profit)/loss on sale of assets
after taxation (41) 9 (50)
Headline earnings 44,998 41,942 7 78,380
Headline earnings per share
(cents) 200.2 195.8 2 357.8
Diluted headline earnings per
share (cents) 174.4 180.6 (3) 322.6
10. Declaration of dividend. The board has declared an interim dividend (No.
26), of 58 cents (Dec 2004: 53 cents) per ordinary share to all shareholders of
Cashbuild Limited. This dividend is 9% higher than that of the comparative
period.
Date dividend declared: Wednesday, 12/04/2006
Last day to trade "CUM" the dividend: Friday, 05/05/2006
Date commence trading "EX" the dividend: Monday, 08/05/2006
Record date: Friday, 12/05/2006
Date of payment: Monday, 15/05/2006
Share certificates may not be dematerialised or rematerialised between Monday,08
May 2006 and Friday, 12 May 2006, both dates inclusive.
On behalf of the board
DONALD MASSON PAT GOLDRICK
Chairman Chief executive
Johannesburg 12 April 2006
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 (144 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, 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.
INTERNATIONAL FINANCIAL REPORTING STANDARDS
The group is reporting its interim audited results in accordance with
International Financial Reporting Standards ("IFRS"). Results for the prior
period (six months ended 31 December 2004) as well as the prior financial year
(year ended 30 June 2005), have been restated. The conversion to IFRS has had a
limited effect on the group"s results.
FINANCIAL HIGHLIGHTS
Revenue for the period increased by 35% whilst profit for the period increased
by 12%. Operating profit increased by 10%. Headline earnings increased by 7%.
Net asset value per share has, notwithstanding the issue of an additional 2.6
million shares, increased by 22%, from 740 cents (December 2004) to 906 cents.
Stores in existence since the beginning of July 2004 (pre-existing stores)
accounted for a healthy 25% increase with the remaining 10% increase due to the
22 new stores the company has opened since July 2004. This increase has been
achieved as a result of the continued favourable trading conditions, which
included a good Christmas trading period, as well as initiatives to grow
revenue. Despite a slight percentage decline compared to December 2004 the
margins for the period under review remained at positive levels.
From the start of the current financial period Cashbuild embarked on a strategy
to invest in the business in order to step-up and support the future growth of
the company. Part of this strategy was to grow the Cashbuild brand. This
strategy has resulted in a 43% increase in operational expenses.
The areas of operational expenses influenced by this strategy are:
- Continued intense and comprehensive advertising campaign including non-
recurring brand-building activities;
- Free local customer delivery service (currently at budgeted levels);
- People investment -
- The appointment of an experienced operations manager to concentrate on
the growth of the business in neighbouring countries;
- Additional people employed and extra shifts worked to deal 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 as a result of the implementation of
Cashbuild"s formal grading system (equating to a total company increase of 9%);
and
- Continued technical and professional support to remedy issues in the
implementation of the new IT system.
The tax rate for the year is at anticipated levels, but lower than that of the
prior year, mainly due to the reduction in the South African companies tax rate
and once-off non-resident shareholders" tax in the prior period.
Cashbuild"s balance sheet remains solid. Stock levels have increased by 28% on
the back of higher trading volumes (30% increase in the 2nd quarter) with the
Cashbuild stock model being adhered to by line management. This increase is
further attributable to the stocking of 12 stores during this financial period
(accounting for 8% of the increase). Overall stockholding remains well managed
at 73 days (Dec 2004: 70 days; June 2005: 73 days). The step-up in the opening
of new stores, the increase in operating expenses as well as the utilisation of
cash to early settle creditors at favourable discounts resulted in the company"s
cash levels decreasing by 7% to R225 million. Trade debtor balances remained
well under control.
During the half-year period Cashbuild opened a record number of 11 new stores,
which is equal to the number of stores opened during any previous full financial
year. This has resulted in an increase in opening costs, with real revenue and
profit benefits only materialising at a later stage. The principle reasons for
the step-up in new store openings are:
- Cashbuild has been pursuing a number of sites during the past five years,
which have now started to come to fruition; and
- Shopping centres are now being built in rural areas and townships where
Cashbuild is a strong brand and preferred tenant.
Two stores were refurbished and one store relocated during this period.
PROSPECTS
Management remains positive regarding the prospects for the second half of the
financial year. A trading statement for the third quarter will be issued
shortly.
INFORMATION TECHNOLOGY
The corrective action plan put in place by management to bed down the new IT
system at support office remains a focal point. These system issues are confined
to support office and do not have any impact on store management and customer
service.
The second phase, being the roll-out of a new IT platform at store level has
been put on hold pending the support office system being fully bedded down and
reassessed by management.
Directors: D Masson* (Chairman), P K Goldrick (Chief executive) (Irish), 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
LARGEST RETAILER OF BUILDING MATERIALS IN SOUTHERN AFRICA
www.cashbuild.co.za
Date: 18/04/2006 11:13:16 AM Supplied by www.sharenet.co.za
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