audited final results and dividend …cashbuild.co.za/reports/2017/final_results_presentation...the...
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AUDITED FINAL RESULTS ANDDIVIDEND DECLARATION
2017
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DISCLAIMER
This presentation differs from the presentation available on the website and in the hand-out given topresentation participants as a result of industry sensitive information contained therein. The financialinformation pertaining to Cashbuild Limited’s (Cashbuild’s) results are exactly as published on SENSin terms of the JSE Limited’s Listings Requirements.
This presentation may contain certain "forward-looking statements" regarding beliefs or expectationsof Cashbuild, its directors and other members of its senior management about Cashbuild’s financialcondition, results of operations, cash flow, strategy and business and the transactions described inthis presentation. Forward-looking statements include statements concerning plans, objectives,goals, strategies, future events or performance, and underlying assumptions and other statements,which are other than statements of historical facts. The words "believe", "expect", "anticipate","intend", "estimate", "forecast", "project", "will", "may", "should" and similar expressions identifyforward-looking statements but are not the exclusive means of identifying such statements. Suchforward-looking statements are not guarantees of future performance. Rather, they are based oncurrent views and assumptions and involve known and unknown risks, uncertainties and otherfactors, many of which are outside the control of Cashbuild and are difficult to predict, that maycause the actual results, performance, achievements or developments of Cashbuild or the industryin which it operates to differ materially from any future results, performance, achievements ordevelopments expressed by or implied from the forward-looking statements. Each member ofCashbuild expressly disclaims any obligation or undertaking to provide or disseminate any updatesor revisions to any forward-looking statements contained in this announcement.
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NATURE OF BUSINESS
• Mass retailer of building materials, home improvement and related
products
• Offers a focused range of quality products at competitive prices
• Selling predominantly for cash
• Largest retail chain of building materials in southern Africa
• Currently 300 outlets and expanding (243 Cashbuild, 48 P&L
Hardware and 9 Cashbuild DIY outlets)
• Local market size via distribution estimated at R103 billion per
annum
• Large chain builders’ merchants – R52 billion
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Headline earnings
R464m
15%
10%
47%
(21%)
0
100
200
300
400
500
13 14 15 16 17
Rm
1st Half 2nd Half
Revenue
R9.7bn
2 year
5 year
12%
9%
15%
7%
0.0
2.0
4.0
6.0
8.0
10.0
12.0
13 14 15 16 17
Rbn
12%
1st Half 2nd Half
Operating profit
R620m
16%
9%
36%
(9%)
0100200300400500600700
13 14 15 16 17
Rm
13%
1st Half 2nd Half
FINANCIAL HIGHLIGHTS
Net asset value per share
6 642 cents
12%
11%
010203040506070
13 14 15 16 17
Ran
d
15%
Compound Annual Growth Rate (CAGR)
8%
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FINANCIALREVIEW
Operating expenses well controlled
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R’000Audited
June 2017Audited
June 2016%
changeRevenue 9 729 640 8 669 643 12
Gross profit % 25.5 26.1
Operating expenses 1 860 932 1 716 153 8
Operating expenses % 19.1 19.8
Operating profit 619 997 548 524 13
Operating profit % 6.4 6.3
Net financing income 37 029 70 163 (47)
Profit for the year 469 486 442 002 6
Earnings per share (cents) 2 047.7 1 920.4 7
Total dividend per share (cents) 930 1 001 (7)
Weighted number of shares (‘000) 22 708 22 779
INCOME STATEMENTSTATUTORY YEAR-ON-YEAR
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INCOME STATEMENT HIGHLIGHTSHALF YEAR COMPARISON
2nd Half 1st Half
R’000 2017 2016%
change 2017 2016%
change
Revenue 4 558 733 4 159 933 11 5 170 907 4 509 710 15
Gross profit 1 169 734 1 125 178 4 1 311 195 1 139 499 15
Gross profit % 25.7 27.0 25.4 25.3
Operating expenses 911 742 841 896 8 949 190 874 257 9
Operating expenses % 20.0 18.5 18.4 19.4
Operating profit 257 992 283 282 (9) 362 005 265 242 36
Operating profit % 5.7 6.8 7.0 5.9
Slides hereafter, unless indicated otherwise, excludes the 2016 BEE costs
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% increase
R’000 FY 2017 FY 2016 TotalNew
storesP&L
HardwareExisting stores*
Quarter 1 2 447 381 2 131 884 15 2 12 1
Quarter 2 2 723 526 2 377 826 14 4 10 -
1st Half 5 170 907 4 509 710 15 4 11 -
Quarter 3 2 230 311 2 037 965 9 4 10 (5)
Quarter 4 2 328 422 2 121 968 10 4 8 (2)
Total 9 729 640 8 669 643 12 4 10 (2)
REVENUE BREAKDOWN
* All stores in existence prior to 1 July 2015
1st 6 weeks trading since period end up 6%
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2017
2016
2015
All storesSALES
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Growth: Q1: 15% Q2: 14%
2017
2016
2015
Excluding new stores
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Growth: Q1: 1% Q2: 0%
* 2015 & 2016 have been smoothed for comparative 5 weeks vs 4 weeks
Q3: 9% Q4: 10%
Q3: (5%) Q4: (2%)
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2017
2016
2015
All stores
Excluding new stores
CUSTOMER TRANSACTIONS
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Growth: Q1: 7% Q2: 10%
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Growth: Q1: (5%) Q2: (2%)
Q3: 8% Q4: 5%
Q3: (5%) Q4: (6%)
2017
2016
2015
* 2015 & 2016 have been smoothed for comparative 5 weeks vs 4 weeks
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2017
2016
2015
All stores
2017
2016
2015
Excluding new storesGrowth Q1: 5% Q2: 2%
Growth Q1: 7% Q2: 4%
* 2015 & 2016 have been smoothed for comparative 5 weeks vs 4 weeks
AVERAGE BASKET SIZE
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Q3: 1% Q4: 5%
Q4: 4%Q3: 0%
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24.7%24.5%
25.4%25.3%
25.4%
24.5%
26.3%25.9%
27.0%
25.7%
5.1%
5.3%
6.0%
7.1%
6.4%
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
18.0%
19.0%
20.0%
21.0%
22.0%
23.0%
24.0%
25.0%
26.0%
27.0%
28.0%
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017
1HY 2HY FY EBIT margin
* Excludes BEE transaction
*
GROSS PROFIT AND EBIT MARGIN
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South Africa(incl P&L)
Namibia, Lesotho and Swaziland
Botswana, Malawi and Zambia Total
Rm June2017
June2016 % Var June
2017June2016 % Var June
2017June2016 % Var June
2017June2016 % Var
Revenue 8 748 7 650 14 596 601 (1) 386 419 (8) 9 730 8 670 12
Gross profit 2 236 2 004 12 143 151 (5) 102 110 (7) 2 481 2 265 10
Gross profit % 25.6 26.2 24.0 25.1 26.4 26.3 25.5 26.1
Operating profit 568 518 9 38 52 (27) 14 42 (67) 620 612 1
Operating profit % 6.5 6.8 6.4 8.7 3.6 10.0 6.4 7.1
Capital investment 119 163 (27) 43 15 >100 31 12 >100 193 190 2
90%
6% 4%
Revenue June 2017
88%
7% 5%
Revenue June 2016
92%
6% 2%
Operating profit June 2017
85%
8%7%
Operating profitJune 2016
South Africa (incl P&L Hardware)Namibia, Lesotho and SwazilandBotswana, Malawi and Zambia
SEGMENTAL DISCLOSURE
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R’000 June 2017 June 2016%
change
Revenue 8 363 878 8 523 182 (2)
Gross profit 2 198 013 2 223 198 (1)
Gross profit % 26.3 26.1
Operating expenses 1 613 720 1 606 438 -
Operating expenses % 19.3 18.8
Operating profit 584 293 618 361 (6)
Operating profit % 7.0 7.3
EXISTING BUSINESS TRADING
P&L Hardware currently classified as new business
“Existing business” refers to stores that have comparative trading results for an entire prior financial year
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R’000 FY 2017 FY 2016 % change
Existing business 1 613 720 1 606 438 -
- 1st Half 831 804 799 169 4
- 2nd Half 781 916 807 269 (3)
New business (23 Cashbuild and 46 P&L stores) 247 212 46 663
- 1st Half 117 386 12 036
- 2nd Half 129 826 34 627
Total 1 860 932 1 653 101 13
Total - 1st Half (excl BEE) 949 190 811 205 17
- 1st Half (incl BEE) 949 190 874 257 9
- BEE transaction - (63 052)
- 2nd Half 911 742 841 896 8
OPERATING EXPENSES
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R’000 FY 2017 FY 2016 % changeExisting business 680.4 700.4 (3)
- 1st Half 344.2 346.4 -
- 2nd Half 336.2 354.0 (5)
New business (23 Cashbuild and 46 P&L stores) 109.5 13.9
- 1st Half 53.0 5.0
- 2nd Half 56.5 8.9
Total 789.9 714.3 11
FTE headcount 6 365 6 029 6
• Increase for Cashbuild staff of 7.0% effective 1 July 2016 (P&L Hardware 6.2%)
• Benchmarks to ensure customer service standards are adhered to
• Continued focus on efficiencies
OPERATING EXPENSES – PEOPLE COST
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R’000 FY 2017 FY 2016 % changeExisting business 99.6 98.3 1
- 1st Half 48.8 49.7 (2)
- 2nd Half 50.8 48.6 5
New business (23 Cashbuild and 46 P&L stores) 15.0 1.8
- 1st Half 7.3 0.5
- 2nd Half 7.7 1.3
Total 114.6 100.1 14
% of Sales 1.2 1.2
• Revised existing logistics contracts
• Delivery expenses below benchmark level
• CPI growth seen in 2nd half
OPERATING EXPENSES – DELIVERY EXPENSES
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R’000 FY 2017 FY 2016 % changeExisting business 130.0 129.1 1
- 1st Half 78.6 76.3 3
- 2nd Half 51.4 52.8 (3)
New business (23 Cashbuild and 46 P&L stores) 17.7 5.8
- 1st Half 9.6 2.7
- 2nd Half 8.1 3.1
Total 147.7 134.9 9
% of Sales 1.5 1.6
• Continued focused micro advertising
• New store launch
OPERATING EXPENSES - ADVERTISING
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R’000 FY 2017 FY 2016 % changeExisting business 317.8 312.0 2
- 1st Half 159.5 153.2 4
- 2nd Half 158.3 158.8 -
New business (23 Cashbuild and 46 P&L stores) 60.7 7.8
- 1st Half 27.6 2.1
- 2nd Half 33.1 5.7
Total 378.5 319.8 18
% of Sales 3.9 3.7
• Majority of P&L Hardware stores leased
OPERATING EXPENSES - PROPERTY
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R’000 FY 2017 FY 2016 % change
1st Half 362 005 328 294 10
2nd Half 257 992 283 282 (9)
Total 619 997 611 576 1
5.9%5.4%
6.3%
7.3%7.0%
4.1%
5.2%5.8%
6.8%
5.7%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017
EBIT margin (% of revenue)
1st Half 2nd Half
-
OPERATING PROFIT (EBIT)
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649 601 824 844
1,212
414 547
733
1,076
862
-
400
800
1,200
1,600
2,000
2,400
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017
Cen
ts
1st Half 2nd Half
1 0631 148
1 557
1 920
Total EPS
7%
5 Year CAGR = 12%
2 048
EARNINGS PER SHARE (EPS)STATUTORY YEAR-ON-YEAR
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296 275376
513 540
191 253
336
488 390
0
200
400
600
800
1000
1200
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017
Cen
ts
1st Half 2nd Half
487 528
712
1 001
Total DPS
-
(7%)
930
• Dividend cover remains 2.0 times
• 2016 Interim dividend determined excluding the R63 million cost of the BEE transaction
• Cashbuild Empowerment Trust – R226 million to date
DIVIDEND PER SHARE (DPS)
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R’000Audited
June 2017Audited
June 2016 % changeAssets
Property, plant and equipment 978 615 929 163 5
Intangible assets 397 015 399 689 (1)
Investment property - 1 900 (100)
Assets held for sale 4 345 4 510 (4)
Inventories 1 289 491 1 225 580 5
Trade and other receivables 122 462 90 994 35
Cash resources 801 420 775 954 3
Shareholders’ equity and liabilities
Shareholders’ equity 1 682 976 1 465 425 15
Interest-bearing debt 2 243 30 068 (93)
Trade and other liabilities 1 768 942 1 784 043 (1)
Net asset value per share (cents) 6 642 5 776 15
STATUTORY STATEMENT OF FINANCIAL POSITION
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Stock holding – all stores % change
Stores stocked since June 2016 (12 stores) 5
Existing stores (2)
Cashbuild stores 3
P&L Hardware stores 2
Total 5
• Continued focus on SOQ and slow moving stock
INVENTORY ANALYSIS
Working capital days at year end June2017
Dec2016
June 2016
Inventory 78 81 77
Creditors 67 77 67
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749
762
64 31 21
34 234
197
181
16 801
400
600
800
1,000
1,200
1,400
1,600
OpeningbalanceJuly '16
Operating profit(cash)
Inventory Debtors Creditors Interest Dividends Taxation Fixed assets Effect ofexchange rate
ClosingbalanceJune '17
W/Cap outflow: R116m 149%
10%
21%
31%
7%
84%
16%
11%
STATUTORY CASH FLOWR’MILLION
% change from June 2016 Inflow Outflow
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OPERATIONSPRODUCTSTRUCTURES
Champion cementbrand doing
well
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W1 W4 W7 W10 W13 W16 W19 W22 W25 W28 W31 W34 W37 W40 W43 W46 W49 W52
2016 2017 2018
Q3Q2Q1
CEMENT SALESPOCKETS
Q4
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19%
24%
22%
1%
27%
4%3%
June 2017
AFRISAM PPC OTHERMAMBA
LAFARGE NPCSEPHAKU
21%
36%16%
14%
7%
3% 3%
June 2016
CEMENT UNIT SALESPER SUPPLIER
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9
11
13
15
17
19
W1 W4 W7 W10 W13 W16 W19 W22 W25 W28 W31 W34 W37 W40 W43 W46 W49 W52
2016 2017 2018
TOTAL TIMBER SALES
Q3Q2Q1 Q4
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6
7
8
9
10
11
12
13
14
15
16
W1 W4 W7 W10 W13 W16 W19 W22 W25 W28 W31 W34 W37 W40 W43 W46 W49 W52
2016 2017 2018
TOTAL BRICK SALES
Q3Q2Q1 Q4
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11
13
15
17
19
21
23
25
W1 W4 W7 W10 W13 W16 W19 W22 W25 W28 W31 W34 W37 W40 W43 W46 W49 W52
2016 2017 2018
TOTAL ROOF COVERING SALES
Q3Q2Q1 Q4
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5
6
7
8
9
10
11
W1 W4 W7 W10 W13 W16 W19 W22 W25 W28 W31 W34 W37 W40 W43 W46 W49 W52
2016 2017 2018
TOTAL CEILING SALES
Q3Q2Q1 Q4
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10
12
14
16
18
20
22
24
26
W1 W4 W7 W10 W13 W16 W19 W22 W25 W28 W31 W34 W37 W40 W43 W46 W49 W52
2016 2017 2018
TOTAL OPENING SALES
Q3Q2Q1 Q4
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34
7
8
9
10
11
12
W1 W4 W7 W10 W13 W16 W19 W22 W25 W28 W31 W34 W37 W40 W43 W46 W49 W52
2016 2017 2018
TOTAL PLUMBING SALES
Q3Q2Q1 Q4
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35
5
6
7
8
9
10
11
12
W1 W4 W7 W10 W13 W16 W19 W22 W25 W28 W31 W34 W37 W40 W43 W46 W49 W52
2016 2017 2018
TOTAL HARDWARE SALES
Q3Q2Q1 Q4
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36
12
17
22
27
32
37
42
W1 W4 W7 W10 W13 W16 W19 W22 W25 W28 W31 W34 W37 W40 W43 W46 W49 W52
2016 2017 2018
TOTAL DECORATIVE SALES
Q3Q2Q1 Q4
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37
5
6
7
8
9
W1 W4 W7 W10 W13 W16 W19 W22 W25 W28 W31 W34 W37 W40 W43 W46 W49 W52
2016 2017 2018
TOTAL TOOLS SALES
Q3Q2Q1 Q4
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4
5
6
7
8
9
10
11
W1 W4 W7 W10 W13 W16 W19 W22 W25 W28 W31 W34 W37 W40 W43 W46 W49 W52
2016 2017 2018
TOTAL ELECTRICAL SALES
Q3Q2Q1 Q4
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STORE DEVELOPMENT AND PERFORMANCE ANALYSIS
Zambia now tradingP&L Hardware
expanding
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Q3Growth: 9%
Q2Growth: 14%
Q1Growth: 15%
W1 W4 W7 W10 W13 W16 W19 W22 W25 W28 W31 W34 W37 W40 W43 W46 W49 W52
2018 2017 2016
SALES PER WEEKALL STORES
Q4Growth: 10%
Growth 2017/2018 Q1 1st 6 weeks: 6%
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58 61 37 30 30 26 15 15 8 848 31 30 27 28 24 14 14 8 8 -
500
1,000
1,500
2,000
2,500
Gauteng Limpopo Mpumalanga Eastern Cape Countries KwaZulu-Natal North West Free State Northern Cape Western Cape
9.9%
14.0%
4.3%
55.3%
4.9% (3.8%)
1.9%3.8%
8.1% (2.9%)
SALES BY PROVINCE
21.9%
19.1%
13.7%
11.2%
10.1%
8.5%
5.7%
4.7%2.9% 2.2%
% of Total sales
Year-on-year sales growth
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99 (87)
93 (54)
66 (59)
30 (32)
STORE CONTRIBUTION BY LOCATION
Number of stores June 2017 (June 2016)
Location Town Rural Town-ship Metro
2017 Stores 35% 32% 23% 10%
2017 Sales 34% 30% 25% 11%
2016 Stores 38% 23% 25% 14%
2016 Sales 30% 28% 26% 16%
• P&L Hardware stores predominantly rural
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-2%
0%
2%
4%
6%
8%
10%
12%
Operating profit margin (FY 2017)
Margin objective
8
NEW STORE PERFORMANCE(Grouped by opening years)
15 9 13 5 4 9 15 9 11 12
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Total stores
192 200 213 221272
June 2013 June 2014 June 2015 June 2016 June 2017
Existing stores New P&L Hardware New Cashbuild stores
274
215 222200
288
16 17 168 4
10 10 1416
10
June 2013 June 2014 June 2015 June 2016 June 2017
1st Half 2nd Half
26 302724
Refits and relocations
STORE DEVELOPMENT
• Refurbishments 12• Relocations 2
• New CSB stores 12• New P&L stores 4• Closed stores 2
14
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STORE DEVELOPMENT – NEW STORES
2017GAUTENGTembisa WestCloverdeneLIMPOPOMoutsiya Mall (Siyabuswa)Jane Furse COUNTRIESPilane Mall (Botswana) Outapi (Namibia)KWAZULU-NATALManguziBergvilleNORTH WESTKanana Mall (Orkney)EASTERN CAPEMtatha VulindlelaWESTERN CAPEMossel BayFREE STATEBotshabelo MallP&L HARDWAREKirkwoodMonsterlusTongaSchoemansdal
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POTENTIAL STORE GROWTH
• Approved at least 35 store locations - in various stages of development
• Still significant growth potential
• Approved 14 store locations
• Potential growth to at least match Cashbuild store numbers
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SUMMARY AND STRATEGIC OVERVIEW
Expansion strategy
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SIZE AND SEGMENTATION OF MARKET
Total material market- estimated R208bn
Building material market via distribution - R103bn
R103bnR105bn
Construction BuildingLocal hardware
Specialists Supermarkets
Large chains
R31bnR52bn
R10bnR10bn
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COMPETITOR LANDSCAPE
(Dec 2016: Store numbers)
31 (31)
350 (348)
13 (14)43 (42) 11 (10)38 (38)
7 (7)
140 (136)
160 (160)
245 (245)
78 (82)
24 (21) 49 (46)
43 (42)
3 (3)
20 (Converting to BUCO)
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ACQUISITIONS
• Build it Kirkwood and Build it Hunters Retreat
Both stores converted into P&L Hardware stores
• P&L Hardware – Zimbabwe option
Option to acquire P&L Hardware stores in Zimbabwe not exercised
Kirkwood Hunters Retreat
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ACQUISITIONS (CONTINUED)
• Buffalo Timber
Transaction subject to Competition Commission approval
Effective 5-business days after Competition Commission approval
7 Trading stores mainly located in the Eastern Cape
To be converted into P&L Hardware stores
One property acquired – trading as P&L Hardware Queenstown
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EXPANSION INTO NEW TERRITORIES - UPDATE
• Zambia
First store opened on 24 August 2017 – Kabwe
Second store under construction - Ndola – opening late 2017
Three more stores to open during 2018
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CHALLENGES / RISKS FOR THE YEAR AHEAD
Maintaining growth in a challenging environment
• Competitive market
• Civil unrest
• Low growth environment
Protecting gross and operating margins
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STRATEGY
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Thank you for your attendance and participation
www.cashbuild.co.zaSwitchboard: +27 11 248 1500
Werner de Jager Etienne ProwseChief Executive Finance Director
Shane Thoresson André van OnselenOperations Director Operations Director
For any further Investor Relations questions please contact:
Marlize Keyter Keyter Rech Investor [email protected]+27 87 351 3810