HWW
HWW
HWW - Hardware Warehouse - Reviewed Interim Results For The Six Months
Ended 31 December 2007
Hardware Warehouse Limited
Incorporated in the Republic of South Africa
(Registration number: 2007/004302/06)
Share code: HWW & ISIN: ZAE000104253
("Hardware Warehouse" or "the company")
REVIEWED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2007
- Revenue up 73,5%
- Organic growth of 30.5%
- PBT up 66,3%
- EPS up 38,8%
- HEPS up 82,8%
CONSOLIDATED GROUP INCOME STATEMENT
Reviewed Reviewed Audited
six months six months 12 months
to to to
31 December % 31 December 30 June
2007 change 2006 2007
R R R
Revenue 102 848 172 73,54 59 263 366 126 284 754
Operating profit 8 708 901 58,23 5 503 868 9 672 919
Investment income 240 614 532,89 38 018 83 394
Finance costs 430 631 2,72 419 235 664 559
Net income before
taxation 8 518 884 66,30 5 122 651 9 091 754
Taxation 2 478 018 54,68 1 601 993 2 951 851
Profit for the 6 040 866 71,58 3 520 658 6 139 903
period
Total shares in 80 000 000 10 000 10 000
issue
Weighted average
number of shares 61 833 333 50 000 000 50 000 000
in issue
Earnings per share
(cents) 9,77 38,78 7,04 12,28
Headline earnings
per share (cents) 9,69 82,83 5,30 10,54
RECONCILIATION OF HEADLINE EARNINGS
Reviewed Reviewed Audited
six months six months 12 months
to to to
31 December 31 December 30 June
2007 2006 2007
R R R
Profit for the 6 040 866 3 520 658 6 139 903
period
After tax profit
on sale of
property, plant (134 737) (16 193) (13 699)
and equipment
After tax profit
on sale of - (855 000) (855 000)
trading name
After tax loss on
proposed 88 504 - -
acquisition
Headline earnings 5 994 633 2 649 465 5 271 204
CONSOLIDATED GROUP CASH FLOW STATEMENT
Reviewed Reviewed Audited
six months six months 12 months
to to to
31 December 31 December 30 June
2007 2006 2007
R R R
Operating income 8 708 901 5 503 868 9 672 919
Non-cash items 658 011 292 743 742 965
Working capital (11 425 (4 540 258) 989 483
changes 597)
Cash generated (2 058 685) 1 256 353 11 405 367
(utilised in)/generated
from operations
Taxation paid (2 462 009) (257 590) (1 766 975)
Finance costs (430 631) (419 235) (664 559)
Cash generated
(utilised in)/generated (4 951 325) 579 528 8 973 833
from operating
activities
Cash effect of
investing activities (11 228 (1 739 722) (6 876 909)
197)
Cash effect of
financing activities 16 368 372 (363 930) (2 292 657)
Net cash change for the 188 850 (1 524 124) (195 733)
period
Cash at beginning of (3 503 799) (3 308 066) (3 308 066)
the period
Net cash at end of the (3 314 949) (4 832 190) (3 503 799)
period
CASH AND CASH EQUIVALENTS INCLUDE THE FOLLOWING FOR THE PURPOSES OF THE CASH
FLOW STATEMENT
Reviewed Reviewed Audited
six months six months 12 months
to to to
31 December 31 December 30 June
2007 2006 2007
R R R
Cash and cash 1 480 024 236 455 1 415 892
equivalents
Bank overdraft (4 794 973) (5 068 645) (4 919 691)
(3 314 949) (4 832 190) (3 503 799)
CONSOLIDATED GROUP BALANCE SHEET
Reviewed Audited
at at
31 December 30 June
2007 2007
R R
ASSETS
Non-current assets
Property, plant and 10 709 144 6 052 019
equipment
Intangible assets 8 653 669 2 500 000
Current assets
Inventories 48 705 164 32 905 336
Trade and other receivables 6 069 757 2 662 842
Cash and cash equivalents 1 480 024 1 415 892
Total assets 75 617 758 45 536 089
EQUITY AND LIABILITIES
Shareholders` equity 24 565 456 7 472 270
Non-current liabilities
Borrowings 6 917 140 2 201 810
Deferred taxation 43 109 73 630
Current liabilities
Borrowings 6 457 133 5 981 128
Trade and other payables 34 301 306 26 520 160
Income tax liability 3 333 614 3 287 091
Total equity and liabilities 75 617 758 45 536 089
Net asset value per share 30,71 74 722,70
(cents)
Net tangible asset value per
share (cents) 19,89 49 722,70
CONSOLIDATED GROUP STATEMENT OF CHANGES IN EQUITY
Share Share Retained
capital premium earnings
Balance 30 June 2006 10 000 - 4 838 228
Dividends - - (2 082 014)
Profit for the period - - 3 520 658
Balance 31 December 2006 10 000 - 6 276 872
Dividends - - (1 433 847)
Profit for the period - - 2 619 245
Balance 30 June 2007 10 000 - 7 462 270
Shares issued 6 000 21 495 700 -
Share issue expenses - (1 949 380) -
Treasury shares (1 700) (8 498 300) -
Profit for the period - - 6 040 866
Balance 31 December 2007 14 300 11 048 020 13 503 136
COMMENTARY
1. NATURE OF THE BUSINESS
Hardware Warehouse is a retailer of low cost building materials and associated
products, selling directly to predominantly cash paying customers including
homebuilders, home improvers, contractors, traders and government organisations.
It is fast becoming the low cost building material retailer of choice in its
selected markets.
Whilst a large portion of the company`s customer base falls within the lower to
middle income rural groups, the company is experiencing a growing exposure to
urban customers and municipalities.
Acknowledging that the buying of materials to build or improve a home can be a
significant expenditure and a daunting process to its target market, the company
has developed a specific environment and approach to make the selection and
buying of products both comfortable and understandable, backed by quality and
price.
2. FINANCIAL PERFORMANCE
The Board of Directors is pleased to report what it considers excellent results
for its first interim period as a listed entity.
The company`s revenue increased by 73.5% to R103 million from the R59 million
for the same period in the previous year. The growth in revenue is attributed
both to strong organic growth and the opening of a number of new stores during
the period under review.
The company`s operating profit increased by 58.2%, with a resultant increase in
profit before tax of 66.3% to R8.5 million compared to R5.1 million for the same
period in the previous year.
During the period under review, the company embarked on extensive advertising
and re-branding campaigns as part of its marketing and business strategy, the
positive results of which should be seen in the next six months.
Net asset value per share is 30.71 cents per share, primarily due to the
proceeds earned on listing
These results are especially encouraging as trading, internal controls and sound
operational management continued, and were not negatively affected while the
senior management team spent much time away from operations during the process
of listing the company on the AltX. This is testament to the simplicity of the
business model and sustainability of operations.
3. OPERATIONAL PERFORMANCE
WORKING CAPITAL
Funds acquired through the listing process were partially applied toward the
acquisition of the Mtubatuba store. The balance of the funds has supported the
branch roll-out strategy of the most recently opened stores.
STORES
The company began the financial year with eleven stores, all based in the
Eastern Cape region. The company opened three new stores in the six month period
under review, including the Mtubatuba store, the first of the company`s stores
located in the KwaZulu-Natal region. This store has proven to be very
successful. An additional retail concept, branded "Bath and Tile Warehouse",
specialising in baths, sanitary ware, and flooring products (including ceramic
tiles), was added onto an existing store as a trial for potential product
expansion in all existing stores, and for roll-out as a stand alone branch
concept.
Eleven stores successfully completed a re-branding process during the period
under review, and the remaining three are expected to be completed by the end of
2008. The re-branding has been welcomed with great enthusiasm by customers,
staff and suppliers, which has had a positive impact on revenue growth.
4. PROSPECTS AND FUTURE PERFORMANCE
Historically, the first six months of the company`s financial year tend to show
seasonally higher turnover, with 60% of a financial year`s revenue being earned
from July to December. This trend is in line with the prospectus forecasts. The
profitability for the second half of the financial year is expected to be lower
than that of the first half of the year owing to both this seasonal factor as
well as an anticipated general slowing of retail sales in the retail sector.
The Board of Directors is confident however, that despite this sector trend, the
company will still meet the performance forecast in its prospectus.
For the month of January 2008, revenue increased by 64% year-on-year, of which
new stores contributed 49% and organic growth was 15%.
4a. NEW STORES
No new Hardware Warehouse stores will be opened before the end of the financial
year, as new store roll-outs are ahead of schedule. The focus for the next 6
months will be the roll out of the new "Bath and Tile Warehouse". The number of
stores forecast in the prospectus will be met, and any "Bath and Tile
Warehouses" will be over and above that forecast. At least a further 2 store
will be opened during the latter half of the calendar year. Acquisitions are
constantly investigated and the change in economic environment should present
more opportunities at good value.
4b GOVERNMENT TENDERS
The company will also continue to focus on the securing of tenders to supply
local government structures. A new division has been established to supply the
local government housing departments and large contractors, with a turnkey
solution to assist in rolling out housing delivery. Already, a new contract to
supply building material for 300 houses has been awarded by provincial
government, and the alliance has also been recognised as the preferred building
materials supplier for a further 330 houses.
4c INVENTORY LEVELS
The Board of Directors has made a strategic decision to reduce the company`s
inventory levels to be more aligned with the industry standard. This will be
implemented in such a way as to ensure that the customers` satisfaction through
the availability of inventory is maintained at all times. This strategy will
increase the inventory turnover ratios and shorten the cash to cash cycle,
thereby enabling the further expansion of the company without the need to raise
additional capital.
INDUSTRY CONCERNS
ELECTRICITY SUPPLY AND INTEREST RATE HIKES
The operations of the business have not been adversely affected by the current
crisis of electricity supply. All stores are able to continue operating using
generators to power computers and all essential items to ensure that risk is
minimised. The effect on revenue has also not been seen, owing to the market
niche in which the business operates, where the effects of power outages have
minimal effect.
With the majority of business being from mainly rural cash customers, the
interest rates hikes have also not impacted on revenue.
THE HARDWARE WAREHOUSE SHARE PURCHASE SCHEME
During the period under review, The Hardware Warehouse Share Purchase Scheme
acquired two million ordinary shares in the company from the shareholders of the
company as detailed in the prospectus. The company has assumed the liability for
the consideration in terms of the agreement entered into between the parties at
the time.
DIVIDENDS
In terms of the company`s prospectus, the Board of Directors will not recommend
the declaration of dividends for the short-term, in line with its strategy to
fund the organic growth of the company.
FINANCIAL STATEMENTS
The Interim Financial Statements of Hardware Warehouse for the period ended 31
December 2007 have been prepared in accordance with International Financial
Reporting Standards,IAS34 and the Companies Act (Act 61 of 1973), as amended.
The company`s auditors, Charteris & Barnes CA (SA) have reviewed the financial
information for the six month period ended 31 December 2007 and their unmodified
report is available for inspection at the registered office of Hardware
Warehouse.
Shaun Craig Miller
Chief Executive Officer
12 February 2008
REGISTERED OFFICE
17 Vincent Road, Vincent, East London, 5247
Tel: (043) 726 4474, fax: (043) 726 4434, website: www.hwwh.co.za, e-mail:
finance@hwwh.co.za
DIRECTORS
Ivan Senar (Executive Chairman), Shaun Miller (Chief Executive Officer), Lesley
Rhind (Financial Director), Neville Woollgar (Non-executive director).
COMPANY SECRETARY
Charteris & Barnes Administrative Services CC
DESIGNATED ADVISER
Merchant Sponsors (Proprietary) Limited
For further information, please contact Shaun Miller on 043-726-4474.
Hardware Warehouse - Always the lowest prices!
Date: 13/02/2008 07:22:03 Produced by the JSE SENS Department.
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