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| HWW - Hardware Warehouse Limited - Unaudited Interim Results For the Six Months | 18 Mar 2009 |
HWW
HWW
HWW - Hardware Warehouse Limited - Unaudited Interim Results For the Six Months
Ended 31 December 2008
Hardware Warehouse Limited
Incorporated in the Republic of South Africa
(Registration number: 2007/004302/06)
Share code: HWW & ISIN: ZAE000104253
("Hardware Warehouse" or "the group")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2008
Revenue up 61.12%
Profit for the period up 34.45%
Earnings per share up 16.89%
Headline earnings per share up 17.85%
CONSOLIDATED GROUP INCOME STATEMENT
Unaudited Reviewed Audited
six months six 12 months
to months to
to
31 % 31 30 June
December December
2008 change 2007 2008
R`000 R`000 R`000
Revenue 165 711 61.12 102 848 220 504
Cost of sales 127 547 60.71 79 364 170 802
Gross profit 38 164 62.51 23 484 49 702
Other operating 371 1.37 366 210
income
Administration 1 869 264.33 513 800
expenses
Personnel costs 11 960 85.92 6 433 17 073
Other operating 12 474 52.21 8 195 16 759
costs
Operating 12 232 40.45 8 709 15 280
profit
Investment 126 (47.72 241 452
income )
Finance costs 1 056 145.01 431 1 304
Profit before
taxation 11 302 32.67 8 519 14 428
Taxation 3 180 28.33 2 478 3 968
Profit for the 8 122 34.45 6 041 10 460
period
Total shares in 77 900 80 000 80 000
issue (`000)
Weighted
average number 71 150 61 833 66 667
of shares in
issue (`000)
Earnings per
share (cents) 11.42 16.89 9.77 15.69
Headline
earnings per 11.42 17.85 9.69 15.49
share (cents)
RECONCILIATION OF HEADLINE EARNINGS
Unaudited Reviewed Audited
six months six 12 months
to months to
to
31 December 31 30 June
December
2008 2007 2008
R`000 R`000 R`000
Profit for the 8 122 6 041 10 460
period
After tax profit
on sale of
property, plant - (135) (135)
and equipment
After tax loss on
proposed - 89 -
acquisition
Headline earnings 8 122 5 995 10 325
CONSOLIDATED GROUP CASH FLOW STATEMENT
Unaudited Reviewed Audited
six months six months 12 months
to to to
31 31 30 June
December December
2008 2007 2008
R`000 R`000 R`000
Operating income 12 232 8 709 15 280
Non-cash items 1 355 658 2 576
Working capital 885 (11 426) (20 091)
changes
Cash generated by / 14 472 (2 059) (2 235)
(absorbed by)
operations
Taxation paid (2 941) (2 462) (3 194)
Finance costs (1 056) (431) (1 304)
Cash generated by /
(absorbed by) operating 10 475 (4 952) (6 733)
activities
Cash effect of
investing activities (8 870) (11 228) (13 930)
Cash effect of
financing activities 7 935 16 369 15 246
Net cash change for 9 540 189 (5 417)
period
Cash at beginning of (8 921) (3 504) (3 504)
period
Net cash at end of 619 (3 315) (8 921)
period
CASH AND CASH EQUIVALENTS INCLUDE THE FOLLOWING FOR THE PURPOSES OF THE CASH
FLOW STATEMENT
Unaudited Reviewed Audited
six months six months 12 months
to to to
31 31 30 June
December December
2008 2007 2008
R`000 R`000 R`000
Cash and cash 3 741 1 480 761
equivalents
Bank overdraft (3 122) (4 795) (9 682)
Net cash at end of 619 (3 315) (8 921)
period
CONSOLIDATED GROUP BALANCE SHEET
Unaudited Reviewed Audited
at 31 at 31 at 30
December December June
2008 2007 2008
R`000 R`000 R`000
ASSETS
Non-current assets
Property, plant and 16 958 10 709 11 664
equipment
Intangible assets 11 834 8 654 9 491
Current assets
Inventories 65 930 48 705 55 485
Trade and other 9 108 6 070 5 672
receivables
Cash and cash equivalents 3 741 1 480 761
Total assets 107 571 75 618 83 073
EQUITY AND LIABILITIES
Shareholders` equity 35 430 24 565 28 927
Non-current liabilities
Borrowings 12 452 6 917 3 733
Deferred taxation 72 43 11
Current liabilities
Borrowings 7 736 6 457 15 994
Trade and other payables 47 584 34 301 30 285
Income tax liability 4 297 3 335 4 123
Total equity and liabilities 107 571 75 618 83 073
Net asset value per share 45.48 30.71 36.16
(cents)
Net tangible asset value per
share (cents) 30.29 19.89 24.29
CONSOLIDATED GROUP STATEMENT OF CHANGES IN EQUITY
Share Share Retained
capital Premium Earnings
R`000 R`000 R`000
Balance 30 June 2007 10 - 7 462
Shares issued 6 21 495 -
Share issue expenses - (1 949) -
Treasury shares (2) (8 498) -
Profit for the period - - 6 041
Balance 31 December 2007 14 11 048 13 503
Share issue expenses - (56) -
Profit for the period - - 4 418
Balance 30 June 2008 14 10 992 17 921
Share buy-back (1) (1 618) -
Profit for the period - - 8 122
Balance 31 December 2008 13 9 374 26 043
Segmental information
Unaudited Reviewed
as at as at
31 31
December December
2008 2007
R `000 R `000
Business segment:
Revenue:
Hardware Warehouse stores 163 878 102 848
On-tap Stores 1 833 -
Profit before tax:
Hardware Warehouse stores 11 309 8 519
On-tap Stores (7) -
Assets:
Hardware Warehouse stores 92 732 75 618
On-tap Stores 14 839 -
Liabilities:
Hardware Warehouse stores 64 200 51 053
On-tap Stores 7 941 -
COMMENTARY ON RESULTS
1. NATURE OF 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 group`s customer base falls within the lower
to middle income rural groups, we have identified that our customers needs
are changing, in that they are becoming more aspirational, and will
continue to adapt accordingly.
With the acquisition of the On-Tap franchise incorporating Tiles-On-Tap in
a portion of the region of the Eastern Cape, the group has diversified its
base to include: urban customers, middle to high LSM groups, plumbing and
other contractors.
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 group has developed a specific environment and approach to make the
selection of products both comfortable and understandable, with a strong
emphasis on supplying quality products at competitive prices.
2. BASIS OF PREPARATION
These interim results are prepared in accordance with International
Financial Reporting Standards ("IFRS"), IAS34 (Interim Financial
Reporting), the Companies Act, 1973 (Act 61 of 1973), as amended, and the
Listings Requirements of JSE Limited. These interim results have not been
reviewed or audited by the group`s auditors. The accounting policies
applied in preparing these interim financial results are consistent with
those applied in the audited annual financial statements for the year ended
30 June 2008.
3. FINANCIAL PERFORMANCE
The board of directors continues to be positively pleased with our third
six month reporting period since listing. In all three instances, we have
exceeded forecasts or expectations of stakeholders, this despite the
extreme decline within the economic environment.
Revenue increased by R62.9 million to R165.7 million from R102.8 million
for the same period in the previous year. 26.22% is attributable to new
store openings and 34.90% to organic growth. We regard any positive organic
growth as good performance in these market conditions.
For the six months to December 2008, our net profit before tax increased to
R11.3 million compared to R8.5 million for the same period in the previous
year. The group continued to invest in personnel and systems to support
current and future growth. This is to ensure that we are appropriately
resourced for when the upswing in the economy occurs.
Net asset value per share is 45.48 cents per share. This has grown by
48.10% since 31 December 2007, due to the policy of retaining earnings to
fund growth.
These interim results are especially encouraging, considering the continued
negative effects visited upon the retail sector during the reporting
period. High interest and inflation rates, and higher fuel and electricity
costs have affected disposable income. Motivated staff have assisted with
improvement in areas such as cost control, product range, strategic
initiatives and constant operational improvements and efficiencies.
The business model remains simple, which will ensure sustainable growth
into the future.
4. OPERATIONAL PERFORMANCE
WORKING CAPITAL
Expansion has been achieved through gearing as much as possible using the
group`s own balance sheet. Current conditions on the equity market have not
been conducive to the raising of funds.
STORES
The On-Tap acquisition, which comprised three On-Tap stores being acquired
and one new store being opened under the On-Tap banner, became effective on
1st December 2008.
At 31 December 2008, the total number of stores under the expanded Hardware
Warehouse, Bath and Tile Warehouse and the On-Tap brand totalled 20. This
represents a store growth of 82% over an 18 month period.
In the next six months, only one new store will be opened, in Nelspruit.
This will be the first operational investment into the Mpumalanga province.
The group will then be represented within three of the five identified key
provinces. This is in line with our strategy to have a national footprint
in the identified areas in which we operate. Identifying and securing
premises for further expansion into Kwa-Zulu Natal and Mpumalanga, will be
a high priority over the next 18 months, to this end an additional three
new stores per province are planned.
During the next calendar year, we will concentrate on bedding in the
acquisitions of On-Tap and the Granite Top business. In addition, we will
be concentrating on operational efficiencies and inter-company synergies,
with specific ongoing attention to overhead control.
5. PROSPECTS AND FUTURE PERFORMANCE
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 the continued
anticipated general slowing of sales in the retail sector.
The short to medium term strategy of selective expansion within SADC region
continues to receive senior management attention. We are currently seeking
strong alliances for this expansionary objective during late 2009 and 2010.
It is within Africa that we strongly believe our unique and simple business
model will enable margin growth.
6. GOVERNMENT TENDERS
The group will also continue to focus on the securing of tenders to supply
local government structures. This comprises supplying the local government
housing departments and large contractors, with a turnkey solution to
assist in rolling out housing delivery.
7. INVENTORY LEVELS
The board of directors continues to focus on reducing inventory levels to
be more aligned with the industry standard. Inventory levels at December
2008 were extraordinarily high, due to the acquisition of On-Tap on 1
December 2008. This gave rise to additional inventory of R8.8 million at 31
December 2008.
8. INDUSTRY CONCERNS
RISING PRICES
Hardware Warehouse continues to pursue reductions in the prices of building
materials. The group firmly believes that price reductions from suppliers
are stubbornly unresponsive to the current market conditions and management
will continue to aggressively pursue price reductions for the benefit of
its consumers.
9. SUBSEQUENT EVENTS
The board of directors is not aware of any material matters or
circumstances arising since the end of the interim period and up to the
date of this report.
10. DIVIDENDS
No dividend has been declared or paid during the interim period. This is
in line with our prospectus and our growth strategy.
11. APPRECIATION
The commitment and dedication of our management team and staff, coupled
with the numerous service providers, has positioned us well to work through
the tough times, as well as for sustainable growth. I would like to thank
our group`s board members, personnel, suppliers and advisors and look
forward to the coming year with enthusiasm.
SHAUN CRAIG MILLER
CHIEF EXECUTIVE OFFICER
18 March 2009
REGISTERED OFFICE
17 Vincent Road
Vincent
East London
5247
Telephone : 27-43-726 6341
Fax : 27-43-726 8131
Website : www.hwwh.co.za
Email : finance@hwwh.co.za
DIRECTORS
Ivan Merrick John Senar (Executive Chairman), Shaun Craig Miller (Chief
Executive Officer), Lesley Ann Rhind (Financial Director) Neville Errol Woollgar
(Non-Executive Director) Hamilton Anthony Long (Non-Executive Director)
COMPANY SECRETARY
Charteris & Barnes Administrative Services cc
DESIGNATED ADVISER
Merchantec (Proprietary) Limited
For further information, please contact Shaun Miller on +27-43-726 6341
Hardware Warehouse - Always the Lowest Prices!
Date: 18/03/2009 10:29:01 Produced by the JSE SENS Department.
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