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CASHBUILD LIMITED - Audited interim results and dividend declaration for the six months ended 31 December 2018

Release Date: 26/02/2019 07:10
Code(s): CSB     PDF:  
 
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Audited interim results and dividend declaration for the six months ended 31 December 2018

Cashbuild Limited 
(Registration number: 1986/001503/06)
(Incorporated in the Republic of South Africa)
JSE code: CSB ISIN: ZAE000028320

AUDITED INTERIM RESULTS AND                   
DIVIDEND DECLARATION
for the six months ended 31 December 2018
CELEBRATING
40 YEARS

REVENUE(Rm)
Increased 3%

OPERATING PROFIT (Rm)
Decreased 12%  

HEADLINE EARNINGS (Rm)
Decreased 11% 

NAV PER SHARE (cents)
Increased 12%

DIVIDEND (cents)
Decreased 12% 

SPACE GROWTH (stores)
Increased 1 % 

COMMENTARY
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 (320 at the end of this
financial period which includes the four DIY stores and 62 P&L Hardware
stores). 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,
as well as all other customers requiring quality building materials at the
best value.

Cashbuild has built its credibility and reputation by consistently offering
its customers quality building materials at the best value and through a
purchasing and inventory policy that ensures customers' requirements
are always met.

International Financial Reporting Standards
The Group is reporting its audited results in accordance with International
Financial Reporting Standards ("IFRS").

Financial highlights
Revenue for the period increased by 3%. Revenue for stores in existence
prior to July 2017 (pre-existing stores - 287 stores) remained the same while
our 33 new stores since July 2017 provided the 3% increase. Selling price
inflation was 3%. Gross profit increased by 3% in tough trading conditions
with gross profit percentages decreasing from 25.2% to 25.1%.

Operating expenses, including new stores, continue to be well controlled and
increased by only 7% (existing stores 3%). Notwithstanding this, the increase
in revenue did not compensate for the increased expenses, resulting in the
operating profit decreasing by 12%. Earnings per share decreased by 12%
and headline earnings per share decreased by 11%.

The effective tax rate of 29.7% is higher than the previous period of 28.9% due
to a decrease in exempt income and an increase in disallowable charges
relating to share-based payments.

Cash and cash equivalents increased by 3% to R1,067 million. Stock levels,
including new stores, have increased by 12% with overall stockholding at
85 days (December 2017: 79 days) at period end. Net asset value per share
has shown a 12% increase, from 7 278 cents (December 2017) to 8 167 cents.

During the first half, Cashbuild Group opened eight new stores, refurbished
15 stores, relocated three stores and closed six (three Cashbuild and three
Cashbuild DIY stores). Cashbuild will continue its store expansion, relocation
and refurbishment strategy in a controlled manner, applying the same
rigorous process as in the past.

Prospects 
Group revenue for the subsequent six weeks after half year end has
decreased by 1% on the comparable six week period. Management believe
trading conditions will remain extremely challenging. This information has
not been reviewed nor audited by the company's auditor.

SUMMARY CONSOLIDATED INTERIM INCOME STATEMENT - AUDITED

                                                          *Restated
                                        Six months       Six months                 *Restated
                                             ended            ended                Year ended
                                       31 December      31 December                   30 June
                                              2018             2017         %            2018
R'000                                    (26 weeks)       (26 weeks)   change       (52 weeks)
Revenue                                  5 563 231        5 392 841         3      10 206 730
Cost of sales                           (4 168 975)      (4 036 466)        3      (7 638 277)
Gross profit                             1 394 256        1 356 375         3       2 568 453
Selling and marketing expenses            (968 961)        (894 962)        8      (1 778 355)
Administrative expenses                   (137 343)        (147 522)       (7)       (267 566)
Other operating expenses                    (9 808)          (1 428)     >100         (10 263)
Other income                                 6 725            9 578       (30)         30 926
Operating profit                           284 869          322 041       (12)        543 195
Finance cost                                (2 966)          (1 024)     >100          (3 143)
Finance income                              30 717           27 975        10          54 128
Profit before income tax                   312 620          348 992       (10)        594 180
Income tax expense                         (92 868)        (100 723)       (8)       (169 027)
Profit for the period                      219 752          248 269       (11)        425 153
Profit attributable to:                                                                      
- Owners of the company                    217 196          245 972       (12)        420 514
- Non-controlling interests                  2 556            2 297        11           4 639
                                           219 752          248 269       (11)        425 153
Earnings per share (cents)                   956.2          1 083.1       (12)        1 851.6
Diluted earnings per share (cents)           955.8          1 082.5       (12)        1 850.9

*   Certain comparative amounts shown do not correspond to the prior period financial statements and reflect adjustments made.
    Refer to note 1.

SUMMARY CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME - AUDITED
                                                                                               *Restated
                                                                          Six months          Six months           *Restated
                                                                               ended               ended          Year ended
                                                                         31 December         31 December             30 June
                                                                                2018                2017                2018
R'000                                                                      (26 weeks)          (26 weeks)          (52 weeks)
Profit for the period                                                        219 752             248 269             425 153
Other comprehensive income:                                                                                                
Total movement in foreign currency translation reserve
  (FCTR)                                                                       8 148               2 822               6 317
Attributable to:                                                                                                            
- Owners of the company                                                        7 161               2 773               5 395
- Non-controlling interests                                                      987                  49                 922
                                                                                                                           
Total comprehensive income for the period                                    227 900             251 091             431 470
Total comprehensive income attributable to:                                                                                
- Owners of the company                                                      224 357             248 745             425 909
- Non-controlling interests                                                    3 543               2 346               5 561
                                                                             227 900             251 091             431 470

*   Certain comparative amounts shown do not correspond to the prior period financial statements and reflect adjustments made.
    Refer to note 1.

SUMMARY CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION - AUDITED
                                                                                              *Restated           *Restated
                                                                         31 December        31 December             30 June
R'000                                                                           2018               2017                2018
ASSETS                                                                                                                     
Non-current assets                                                         1 684 111          1 614 077           1 665 001
Property, plant and equipment                                              1 128 254          1 052 109           1 100 132
Intangible assets                                                            428 842            433 017             433 467
Rent prepayments                                                              68 524             90 095              85 707
Deferred income tax assets                                                    58 491             38 856              45 695
Current assets                                                             3 129 527          2 873 970          2 634 996
Assets held for sale                                                          25 206              4 477               4 510
Inventories                                                                1 841 293          1 653 099           1 538 708
Trade and other receivables                                                  164 246            138 294             118 489
Prepayments                                                                   32 064             39 019              20 360
Cash and deposits                                                          1 066 718          1 039 081             952 929
                                                                                                                           
Total assets                                                               4 813 638          4 488 047           4 299 997
EQUITY AND LIABILITIES                                                                                                     
Shareholders' equity                                                       2 071 143          1 843 764           1 917 319
Share capital and reserves                                                 2 041 023          1 818 775           1 889 594
Non-controlling interests                                                     30 120             24 989              27 725
Non-current liabilities                                                      215 904            203 559             205 225
Finance lease obligation                                                           -                516                 115
Deferred operating lease liability                                           174 369            150 534             162 930
Deferred income tax liability                                                 40 089             39 331              42 180
Contingent consideration                                                       1 446             13 178                   -
Current liabilities                                                        2 526 591          2 440 724           2 177 453
Trade and other liabilities                                                2 445 748          2 350 582           2 102 343
Finance lease obligation                                                         516              1 127                 936
Current income tax liabilities                                                80 327             89 015              74 174
                                                                                                                           
Total equity and liabilities                                               4 813 638          4 488 047           4 299 997
*   Certain comparative amounts shown do not correspond to the prior period financial statements and reflect adjustments made.
    Refer to note 1.

SUMMARY CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS - AUDITED
                                                                                               *Restated
                                                                          Six months          Six months          *Restated
                                                                               ended               ended         Year ended
                                                                         31 December         31 December            30 June
R'000                                                                           2018                2017               2018
Cash flows from operating activities                                                                                       
Cash generated from operations                                               384 944             577 478            781 720
Interest paid                                                                 (2 966)             (1 024)            (3 143)
Interest received - non-investing                                                334                 370                389
Taxation paid                                                               (101 602)            (82 642)          (169 702)
Net cash generated from operating activities                                 280 710             494 182            609 264
Cash flows from investing activities                                                                                       
Net investment in assets                                                    (119 611)           (121 031)          (241 231)
Business combinations                                                              -             (72 597)           (72 573)
Interest received                                                             30 383              27 605             53 739
Net cash used in investing activities                                        (89 228)           (166 023)          (260 065)
Cash flows from financing activities                                                                                         
Shares purchased by Cashbuild Trusts or subsidiary
  companies for share incentive schemes                                            -                   -              (605)
Shares sold by The Cashbuild Share Incentive Trust                                 -                   -             1 610
Finance lease payments                                                          (535)               (600)           (1 192)
Dividends paid:                                                                                                            
- Own equity                                                                 (79 079)            (89 224)         (201 210)
- Non-controlling interests                                                   (1 148)               (565)           (1 044)
Net cash used in financing activities                                        (80 762)            (90 389)         (202 441)
Net increase in cash and cash equivalents                                    110 720             237 770           146 685
Cash and cash equivalents at beginning of period                             952 929             801 420           801 420
Effect of exchange rate movements on cash and cash
  equivalents                                                                  3 069                (109)            4 824
Cash and cash equivalents at end of period                                 1 066 718           1 039 081           952 929

*   Certain comparative amounts shown do not correspond to the prior period financial statements and reflect adjustments made.
    Refer to note 1.


SUMMARY CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY - AUDITED
                                                                                                              Attributable to owners of the company                                                   
                                                                                                                           Share-based
                                                                                                                              payments                         Retained        Non- controlling
R'000                                                                            Share capital           Share premium         reserve               FCTR      earnings               interests        Total equity
Balance at 30 June 2017                                                                    227                (275 419)         57 317             (8 329)    1 881 901                  23 208           1 678 905
Total comprehensive income for the period (*Restated)                                        -                       -               -              2 773       245 972                   2 346             251 091
Dividends paid                                                                               -                       -               -                  -       (89 223)                   (565)            (89 788)
Recognition of share-based payments                                                          -                       -           3 556                  -             -                       -               3 556
Balance at 31 December 2017                                                                227                (275 419)         60 873             (5 556)    2 038 650                  24 989           1 843 764
Total comprehensive income for the period                                                    -                       -               -              2 622       174 542                   3 215             180 379
Shares purchased by The Cashbuild Operations Management Member Trust                         -                    (605)              -                  -             -                       -                (605)
Shares sold by The Cashbuild Operations Management Member Trust                              -                   1 610               -                  -             -                       -               1 610
Dividends paid                                                                               -                       -               -                  -      (111 986)                   (479)           (112 465)
Recognition of share-based payments                                                          -                       -           4 636                  -             -                       -               4 636
Balance at 30 June 2018                                                                    227                (274 414)         65 509             (2 934)    2 101 206                  27 725           1 917 319
Total comprehensive income for the period                                                    -                       -               -              7 161       217 196                   3 543             227 900
Dividends paid                                                                               -                       -               -                  -       (79 079)                 (1 148)            (80 227)
Recognition of share-based payments                                                          -                       -           6 151                  -             -                       -               6 151
Balance at 31 December 2018                                                                227                 (274 414)        71 660              4 227     2 239 323                  30 120           2 071 143

*   Certain comparative amounts shown do not correspond to the prior period financial statements and reflect adjustments made. Refer to note 1.

ADDITIONAL INFORMATION - AUDITED
                                                                                              *Restated
                                                                         Six months          Six months           *Restated
                                                                              ended               ended          Year ended
                                                                        31 December         31 December             30 June
R'000                                                                          2018                2017                2018
Net asset value per share (cents)                                             8 167               7 278               7 561
Net asset value per share (excluding treasury shares)                         8 986               8 009               8 320
Ordinary shares ('000s):                                                                                                   
- In issue                                                                   24 990              24 990              24 990
- Weighted-average                                                           22 714              22 710              22 711
- Diluted weighted-average                                                   22 723              22 722              22 720
Capital investment                                                          124 491             186 982             243 999
Depreciation of property, plant and equipment                                66 286              63 974             130 356
Amortisation of intangible assets                                             3 399               4 256               7 631
Capital commitments                                                         221 672             259 668             231 083
Property operating lease commitments                                      1 998 506           1 905 706           1 948 239
Contingent liabilities                                                       14 618              29 049              16 022

*   Certain comparative amounts shown do not correspond to the prior period financial statements and reflect adjustments made.
    Refer to note 1.

SUMMARY CONSOLIDATED INTERIM SEGMENTAL ANALYSIS - AUDITED
                                                                                                                       South Africa                                                                                                              
                                                                                                                                                                               Other members of common
                                                      Group                                 Cashbuild business                         P&L Hardware business                       monetary area**                          Botswana, Malawi and Zambia
                                                                         Year                                          Year                                         Year                                     Year                                        Year
                                           Six months ended             ended           Six months ended              ended           Six months ended            ended         Six months ended            ended          Six months ended             ended
                                             31 December              30 June             31 December               30 June              31 December            30 June           31 December             30 June            31 December              30 June
                                                     *Restated      *Restated                      *Restated      *Restated                      *Restated    *Restated                   *Restated     *Restated                   *Restated       *Restated
R'000                                      2018           2017           2018           2018            2017           2018           2018            2017         2018          2018          2017          2018          2018          2017            2018
Income statement                                                                                                                                                                                                                                             
Revenue                               5 563 231      5 392 841     10 206 730      4 338 290       4 261 486      8 043 313        670 900         582 496    1 136 053       313 914       320 760       606 637       240 127       228 099         420 727
Operating profit                        284 869        322 041        543 195        248 114         277 547        478 776         16 535          17 771       21 388        15 456        22 179        36 266         4 764         4 544           6 765
Statement of financial
  position                                                                                                                                                                                                                                                   
Segment assets                        4 813 638      4 488 047      4 299 997      3 095 260       2 951 771      2 787 079        854 664         722 958     719 003        559 784       541 538       528 377       303 930       271 780         265 538
Segment liabilities                   2 742 495      2 644 283      2 382 678      1 998 559       1 828 618      1 418 988        371 341         447 624     635 375        190 365       199 380       172 615       182 230       168 661         155 700
Other segment items                                                                                                                                                                                                                                          
Number of stores                            320            317            318            225             226            225             62              58          60             18            18            18            15            15              15
Depreciation                             66 286         63 974        130 356         52 020          53 590        107 108          6 037           3 350       8 388          4 093         3 477         7 496         4 136         3 557           7 364
Amortisation                              3 399          4 256          7 631          3 271           4 126          7 377              -               -           -             47            52           103            81            78             151
Capital investment                      124 491        186 982        243 999        109 797          92 065        119 772          9 182          72 665      81 638          4 254        13 592        23 954         1 258         8 660          18 635

*    Certain comparative amounts shown do not correspond to the prior period financial statements and reflect adjustments made. Refer to note 1.
**   Includes Namibia, Swaziland and Lesotho.

NOTES TO THE SUMMARY CONSOLIDATED INTERIM
FINANCIAL INFORMATION
1.  Basis of preparation. The summary consolidated interim financial statements
    are prepared in accordance with International Financial Reporting Standards
    ("IFRS"), the presentation and disclosure requirements of IAS 34 - Interim
    Financial Reporting as required by the JSE Limited Listings Requirements, the
    SAICA Financial Reporting Guides as issued by the Accounting Practices
    Committee, Financial Pronouncements as issued by the Financial Reporting
    Standards Council and the requirements of the Companies Act of South Africa
    applicable to summary interim financial statements. The accounting policies
    applied in the preparation of the consolidated interim financial statements
    from which the summary consolidated interim financial statements were
    derived, are in terms of International Financial Reporting Standards and are
    consistent with those accounting policies applied in the preparation of the
    previous consolidated annual financial statements. There are three significant  
    new accounting standards which will impact the Group's reporting. The group
    has adopted the following standards that are effective for reporting periods
    commencing on or after 1 July 2018:

   -  IFRS 15 Revenue from Contracts with Customers
   -  IFRS 9 Financial Instruments

   IFRS 15 - Revenue from Contracts with Customers replaces IAS 18 - Revenue,
   and provides a single comprehensive model for revenue recognition based
   on the satisfaction of performance obligations and additional disclosures in
   respect of revenue. The adoption relates to the expected sale returns and
   the impact has been applied to the comparative figures to create a fair
   presentation for each period.

   IFRS 9 - Financial Instruments replaces IAS 39 Financial Instruments.
   The adjustments have taken into account the impairment allowance of
   receivables which were estimated on the incurred loss model and now
   estimated on an expected credit loss model. No restatement has been done
   for prior periods as there is no material impact.

The following table summarises the impact of the adoption of IFRS 15 on the
results of the comparative reporting periods:

                           Previously   Adjustment
                             reported      IFRS 15     Restated
IFRS 15                         R'000        R'000        R'000
December 2017                                                 
Non-current assets                                            
Deferred tax assets            36 494        2 362       38 856
Current assets                                                
Inventories                 1 618 671       34 428    1 653 099
Current liabilities                                           
Trade and other payables    2 307 658       42 924    2 350 582
Retained earnings           2 044 784       (6 134)   2 038 650
June 2018                                                     
Non-current assets                                            
Deferred tax assets            44 090        1 605       45 695
Current assets                                                
Inventories                 1 512 823       25 885    1 538 708
Current liabilities                                           
Trade and other payables    2 070 688       31 655    2 102 343
Retained earnings           2 105 371       (4 165)   2 101 206

    The interim financial statements have been prepared under the supervision
    of the Finance Director, Mr AE Prowse CA(SA), and approved by the board on
    25 February 2019.

2.  Independent audit by the auditor. These summary financial statements were
    derived from the consolidated interim financial statements for the six months
    ended 31 December 2018. The consolidated interim financial statements have
    been audited by PricewaterhouseCoopers Inc. who expressed an unmodified
    opinion thereon. A  copy of their unqualified audit report is available for
    inspection at the registered office of the company.

3. Reporting period. The Group adopts the retail accounting calendar, which
   comprises the reporting period ending on the last Sunday of the month (2018:
   23 December (26 weeks); 2017: 24 December (26 weeks); June 2018: 25 June
   (52 weeks)). The Group closed on the second last Sunday for the period ending
   December 2018. This was done to ensure a comparable 26 weeks year on year.

4. Declaration of dividend. The board has declared an interim dividend (No. 52),
   of 435 cents (2017: 496 cents) per ordinary share out of income reserves to all
   shareholders of Cashbuild Limited. The dividend per share is calculated based
   on 24 989 811 (2017: 24 989 811) shares in issue at date of dividend declaration.

   Net local dividend amount is 348 cents per share for shareholders liable to pay
   Dividends Tax and 435 cents per share for shareholders exempt from paying
   Dividends Tax. Local dividend tax is 20%.
   Cashbuild Limited's tax reference number is 9575168712.

   Date dividend declared:                          Monday, 25 February 2019
   Last day to trade "CUM" the dividend:            Monday, 18 March 2019
   Date to commence trading "EX" the dividend:      Tuesday, 19 March 2019
   Record date:                                     Thursday, 22 March 2019
   Date of payment:                                 Tuesday, 25 March 2019

   Share certificates may not be dematerialised or rematerialised between
   Tuesday, 19 March 2019 and Thursday, 22 March 2019, both dates inclusive.

5.  Earnings per share. Earnings per share is calculated by dividing the earnings
    attributable to owners of the company for the period by the weighted-average
    number of 22 714 257 ordinary shares in issue at period end (2017:
    22 709 554 shares; June 2018: 22 710 768).

6.  Headline earnings per ordinary share. The calculations of headline earnings
    and diluted headline earnings per ordinary share are based on headline
    earnings of R221  million (2017: R247 million; June 2018: R423 million) and a
    weighted-average of 22 714 257 (2017: 22 709 554 shares; June 2018: 22 710 768)
    shares and fully diluted of 22 723 330 (2017: 22 721 970; June 2018: 22 719 842)
    ordinary shares in issue.

    Reconciliation between net profit attributable to the equity holders of the
    company and headline earnings:

                                  Six months     Six months                    Year
                                       ended          ended                   ended
                                    December       December           %        June
   R'000                                2018           2017      change        2018
   Net profit attributable
     to the owners of the
     company                         217 196        245 972         (12)    420 514
   Loss/(profit) on sale of
     assets after taxation             2 034          1 306        >100       3 457
   Impairment on intangible
     assets                            1 620              -        >100           -
   Headline earnings                 220 850        247 278         (11)    423 971
   Headline earnings per
     share (cents)                     972.3        1 088.9         (11)    1 866.8
   Diluted headline
     earnings per share
     (cents)                           971.9        1 088.3         (11)    1 866.1

On behalf of the board                           
Stefan Fourie                                   Werner de Jager
Chairman                                        Chief Executive 
Johannesburg                                     

Directors: IS Fourie* (Chairman), AGW Knock (British)*, Dr DSS Lushaba*, NV Simamane*, HH Hickey*, GM Tapon Njamo*, WF de Jager (Chief Executive), AE Prowse, SA Thoresson, A Hattingh, WP van Aswegen (*Non-executive)
Company Secretary: T Nengovhela
Registered Office: 101 Northern Parkway, Ormonde, Johannesburg, 2091, PO Box 90115, Bertsham, 2013
Transfer Secretaries: Computershare Investor Services Proprietary Limited, Rosebank Towers, 15 Biermann Avenue, Rosebank, Johannesburg, 2196

Auditor: PricewaterhouseCoopers Inc. 
Sponsor: Nedbank CIB

www.cashbuild.co.za

26 February 2019


Date: 26/02/2019 07:10:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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