VictoryShares US Small Cap High Div Volatility Wtd ETF Price & Performance (CSB)

Good morning, everybody, and welcome to this cash built interim results presentation. Thank you for taking the time to join us for this online presentation of the results. I'm going to as per usual start in the beginning with a short overview and then Andre will take you through the detail on the financial side and Sjane will then do some detail on the product categories. Afterwards, I will give a summary and finalize or finish up on the presentation. So, if we start on the nature of the business, nothing's changed. We're still a mass retailer of building materials and related products. We offer a quality focused range of products at very competitive prices and MiWay has bought a Scion cement, definitely the cheapest prices and we're selling predominantly for cash. It's been like that over the years, although the definition of cash must have changed a bit, but we still focus on selling predominantly on that basis. We have three eighteen stores at the off year end, mainly through the P and L and cash flow brands and I'll elaborate on that at the end of the presentation. We're going to look at the key financial statistics just on a statutory basis on the high level.

Revenues 6,100,000,000.0 for the quarter for the half year, 5% up and you can see there at the bottom of the screen on a two year compound basis 4% up and on a five year compound basis 2% up. We then look at operating profit, SEK 174,000,000. You can see there's 7% down and that's normalized for the impairment of the prior year that's been taken out of that numbers. If you look on a statutory basis, it would have been up more than 100%, but from a comparable basis 7% down. On a two year basis, 19% down and then you'll see that we have the five year number back. We have comparable results now that we can give you the number again. It's 10% down. Then on headline earnings per share, CHF five seventy three, four percent up and you can see at the bottom there as well the two year nine percent and six percent down on the five year compound basis. Last but not least, the net asset value per share, 79.11%, two % up. And we can see the two years eight percent down and over five years one percent down. That's mainly because of the impairment of the P and L good tool that we've passed in the prior couple of years that we had to put through.

So that's the short intro, high level on the results. I'll hand it to Henreid that will take you through some of the detail on the financial side.

Thank you, Werner, and good morning, everyone. Let's start off with the income statement slide. And as Werner mentioned, our revenue is at ZAR6.1 billion with a period on period increase of 5%. This is on the back of aggressive pricing strategies as well as ensuring we have feed through our stores, which yielded ZAR50 million increase in gross profit at a 24.3% gross profit margin, taking into account prior year at 24.7%. Our operating expenses is at ZAR1.3 billion, showing a 5% reduction from a statutory perspective. If one normalizes the impairment on P and L, goodwill and trademark, our operating expenses increased by 5%. Taking all activities above into account, our operating profit is at SEK 174,000,000 and a 2.9% operating profit margin. Our net financing cost halved compared to the prior period. This is due to the reducing profile of our IFRS 16 leases as well as improved cash management of our cash balances. Our profit for the period at ZAR118 million after tax is 3% higher compared to the prior period if we normalize for the impairment. Earnings per share is at CHF543 with headline earnings per share at CHF573, up 4% period on period. We've been able to maintain our dividend cover policy and our dividend per share is at SEK326 flat on period on period.

Moving over to our operating expenses, as I mentioned at ZAR1.3 billion and excluding impairments giving a 5% increase. The main contributors to our OpEx are our people cost increasing by 5% and comprising 44% of our OpEx cost. Property increased by 14% and at 18.7 of OpEx. The main drivers behind our property increase is depreciation on lease modifications as well as new stores. Our refits and conversions of our 20 stores as well as repairs and maintenance and higher regulated utility and rates and taxes contributed to the rest. Our advertising and delivery expenses are well controlled and up by only 1%. Our IT costs up by 10%, which constitutes IT support fees, cloud migration as well as connectivity costs. We are in the process and always busy reviewing our cost structures, including our model stores as well as looking at energy efficiencies. Our customer transactions increased by 5.5% on the back of our aggressive pricing strategies as well as various marketing activities to attract new customers. Our average basket size at ZAR536 is slightly up period on period. Our quarter two shows our higher but lower basket retail customer spent compared to the first quarter where it's more our contractors with larger baskets that contributed to this period.

Looking at our mental disclosures and one can see from CashBuild South Africa, our aggressive pricing strategy with an increase in revenue of 6% yielding an increase in gross profit in rand terms, but at lower GP percentages. Our P and L Hardware result is pleasing showing a 7% increase on revenue resulting in operating loss of ZAR7 million, much improved on the prior period. Also taking into account ZAR7 million loss includes ZAR6 million closure cost of our P and L stores as we restructure the business. Cash build in Africa, unfortunately disappointed on the revenue side, but made up for satisfactory result at operating profit level. Capital investment at ZAR109 million for the period increased significantly based on the prior period and showing our investment to grow. Gross profit and operating profit margin is depicted on the slide showing the post COVID boom years, retracting down to a 24.3% gross profit margin and a 2.9% operating profit margin. We are looking to improve both with sustainable and responsible sales growth strategies. Our headline earnings per share is at 4% increase at C573. Our dividend cover policy has been maintained at 1.5x at C326 flat year period on period.

We are proud to say that our Cash Bill Empowerment Trust paid ZAR360 million to date based on all employee levels. We have a strong sustainable financial position showing cash resources at ZAR1.9 billion with inventory slightly lower compared to the prior period at just over ZAR2 billion and eighty eight inventory days. Our shareholders' equity is at ZAR1.9 billion and our net asset value per share increased by 2% at ZAR0.71. Our cash flow generated from operating activities before working capital showed a pleasing ZAR398 million, down 4% period on period. Our working capital outflow increased slightly if one ignores the fifty third re creditors that was paid in the previous financial year. Together with all the other cash flow items, it yielded a closing balance of ZAR1.9 billion for the group, which is very pleasing. I now hand over to our COO, Shane Thoreson. Thank you.

Thank you, Andre. Good morning, everybody. I'm going to take you through some slides just showing performance of some of our major categories. I'm going to start with the group total group sales per week. And as we can see in the first and second quarters growth of 56%. This on the back of purchase inflation of 1.5%. So we're quite happy with the growth in terms of the unit and volume of sales. We're averaging around ZAR220 million a week. And relative to the market, we've really only got two comparatives that we can make at this stage. We do follow Stats SA's numbers and they've come out recently reporting numbers for the period October to December. And although that was an improvement on the prior three months period, it was still 2.7% negative growth for hardware, paint and glass. The second number that we can obviously follow at this stage is earlier this week, Iteltau reported some numbers and their volume their revenue was down by negative 1%. So we're still happy that in terms of our strategy, we're gaining market share and we believe that that's really closely related to our approach in terms of aggressive pricing, which Andre has already alluded to.

We have a look at our performance for the first seven weeks of the third quarter, that's plus 6% on the prior year. Possibly just to point out on the graph and it's a trend that you'll see throughout the graph, if you look at the peak, the earlier peak in December, it's nothing more than a cutoff and also Christmas and Christmas Day and Boxing Day not being in a comparative week in the prior year. Moving on to cement sales and this is specifically a slide showing pockets of cement sales. And we can see growth in the first quarter pleasing 6%, slowed down a bit in the second quarter, only a 1% positive growth. And in terms of mix, consistent with the prior year in the first quarter, '20 '3 point '1 percent and declining slightly into the second quarter, '20 point '6 percent. This is really indicative of better performance of some of our decorative categories, which you will see later on in a couple of slides. This performance is on the back of purchase inflation of 2.1% on cement. I can say that certainly of late there has been a retraction of some of the price increases that were processed earlier in the year post this reporting period and I'll touch on those a little bit later as well.

So volumes of around 550,000 pockets a week. Again, relative to what's happening in the market out there, we really only have comparisons in terms of what is being reported publicly. And a couple of days ago, PPC reported that their volumes for South Africa and Botswana have in fact declined by negative 1%. So again, still happy that our strategy in terms of cement pricing and being the lowest price in all of our stores is working and gaining market share. Again, if we look at the performance for the first couple of weeks of the third quarter, it's 6% up on the prior year in terms of pockets. This slide shows the cement unit sales per supplier or effectively each supplier's market share of the cash flow business. And again, we've seen consistent growth certainly in terms of Ciparku or Dangote Cement growing from 27% to 30%. We've also seen growth in Mamba from 26% to 27 over the period. And then also Afrisam growing from 7% to 9% over the period. These growth on the back of declines specifically in PPC from 15% to 13%. Also in terms of AfriMat or the old Lafarge business from 4% to 2% as they battled some issues during their transition period.

And then we've also seen down the coast, NPC's volumes declining in terms of our business from 5% to 4%. Cement industry generally at this stage is very, very volatile. There's a lot of short term strategic decisions being taken by the majority of the suppliers. Everybody believes they're losing market share at stage, so pricing is extremely erratic. And obviously, with not having consolidated numbers to view and we do believe that that is going to change in the next couple of months, We have been informed that the majority of the major suppliers have all agreed to share some numbers in terms of size of the market. So that's hopefully going to stabilize the market a bit when people start to realize their share of the market based on their capacity as well. Also maybe just from an interest perspective, we also understand that imported cement volumes have increased significantly in excess of 20% during the last twelve months. We've seen volumes grow to 1,200,000 tons, which on the in the market of between 25,000,000 tons depending on who you speak to. So it's around 10% of the market at this stage and growing. We move on to total timber sales.

We've seen growth of 7% in quarter one and four percent in quarter two, mix of 7.46.8% in the first and second quarters respectively. This on the back of slightly higher than average purchase inflation of 2.5% and volumes of around 17,000,000 odd a week. In terms of the market and how the market is performing, we do get figures from an organization called CRICMA who reports specifically on building lumber. And our information is that building lumber has increased by 1% during the reporting period. So again, happy to see that we are growing market share there. And also if we look at performance going into the first couple of weeks of quarter three, a positive 9%. Moving on to brick sales and the makeup of this category is really the clay bricks as well as the cement various cement products and growth at 4% and well, declining to only a 1% growth in the second quarter. It's indicative of what's happened with the cement as well. This on the back of purchase inflation of 5.6% and clearly we're not doing a good enough job in terms of negotiating with our brick suppliers. We take a note of that purchase inflation a lot higher than what we're seeing on cement for example.

Volumes around ZAR16 million a week and going into the third quarter, first '7 weeks positive 6% growth. Total roofing sales and the makeup of this category is roof sheeting and also concrete products. We've seen growth here of six percent and four percent in the respective first and second quarters, negative purchase inflation of 1.6% and really on the back of all the noise that's happening out in the steel industry at the moment With regards to imports potential tariffs, we all know what has been reported in terms of the way forward for Oslo Mittal. So who knows what's going to happen with purchase inflation going forward. At the moment, volumes of around ZAR20 odd million a week and going into the third quarter again positive 5%. Total opening sales, the makeup year is really all the frames, door frames and window frames as well as the doors on the various products. So we obviously have steel product, aluminum, which is still driving this category and then a bit of wood related products. Growth here consistently at 10% in both quarters, which is very encouraging. Purchase inflation only at 0.9% and obviously the negative impact here of steel, which I alluded to earlier on.

Volumes rose around ZAR 17,000,000 a week and going into the third quarter again positive 8%, which is encouraging. And lastly, our total decorative sales in the makeup of this category is paint and related products as well as our flooring, ceramic and porcelain, etcetera. And as I said early on, some positive growth in the second quarter, '4 percent in the first, '10 percent in the second quarter on the back of slightly higher average inflation of 2.8%, largely driven by paint related products. Volumes apart from the peak trading period of around ZAR30000 million a week. And again, relative to the market here, we get some stats from a company called Aquanet Consulting and they're indicating that paint volumes are up by around 2% on the prior year. So again, growing some market share and going into the third quarter year positive 5% growth. So those are the slides. We're happy to take some questions later. Thank you very much.

Thank you, Shane. I'll finish up with a few comments and information on our store development and a few other matters. So, this slide you've become used to this is more for information purposes on the market. The only change we did to this slide is we changed some of the owners on the corporate competitive side that you will see. I have nothing more to add on this slide. Then over to sales by province or by region, just a quick reminder on the layout of the slide, you'll see the percentages in the bubbles at the top is the percentage growth year on year of sales and then the numbers at the bottom of the bar charts are the number of stores this year and the prior year, the prior year being in the gray bars. So, when we look at this KZN still the top performing, good performance in that area, albeit off the base of two extra stores in that area. The next best one would be Limpopo Province and there we've actually had two less stores. So, that's purely reflective of the better performance that we've seen in the P and L business. It's a big portion of the Limpopo numbers.

And similarly, on Bumalanga, Seven Point Four Percent up, two less stores, but reflecting the better performance as mentioned. The disappointing one on the slide would be the neighboring countries down 1.5%. It's mostly because of the Malawi company as well as Eswatini that's facing some difficult trading conditions at the moment. Then if we look at stores by location, the pie chart showing you the different locations and the store numbers on the pie chart, not too much have changed on them. On the right hand side, there's the block that shows you the sales growth by the different locations and you can see that the rural stores are still performing very well and actually outperforming the rest of the classifications. They're even on the existing side growing by 9.7%. The metro stores are disappointing down 2.1%, albeit of a slightly lower store base of one less on a smaller store base and then the countries we have spoken about on the previous slide. Then I want to spend a bit of time on the slide on store development. You can see overall the store number came down from 3.22 at the June to 3.18. So, it's a drop of four stores and I'll explain that mostly because of the rationalization of the P and L stores and we will cover a bit more on that.

In the middle there, you can see the brand representation 39 P and L hardware stores, two seventy eight cash built stores and then the one CabbyFit store and I'll deal with that in some slides to come a bit later. This slide or the pie chart will change as we continue our process of converting P and L hardware stores into cash builds as well as closing some more of the P and L non performing stores. On the right hand side there, you've got the group refits, relocations and conversions, 20 of them in total. So, quite a pleasing number, more or less the same as we've seen in the total year for the last three financial years and that also speaks to the higher R and M cost that Andre spoke about earlier. In summary, at the bottom, what happened to how we got to these numbers? There were three new stores, two cash build stores and the one cabi fit. We had refits and relocations, we had 14 cash build refits and then the one P and L relocation. On convergence, we did five P and L hardware conversions to cash build stores and we closed seven P and L hardware stores and you can see that leaves us with the three eighteen stores.

This is where we've opened the three stores I spoke about on the previous slide. You can see Mettlerangbodir and Limpopo is a traditional cash built model and then Pomeroy in KZN is a small model store and then the Cavifit one was opened in Harmonts Grohl. So during this half year, we launched two new pilot store formats. The first one there is KabiFit. CABBIFIT is a cut, eat and drill shop that also sells associated products and it's focused on the contractors and cabinet makers. And you can see on the right hand side, there is the picture of the store that we opened in Hermann Scroll. We're busy with another one of them and we should have another one open by the end of this financial year. Then the next one is really just a bit of an update on the cash build brand. So what we did here is that there are some larger cash build stores and when I say larger, it means it's got a bigger footprint and what we're busy doing is we're extending the range in that store and as well as adding new product categories. And in order for us to show customers that come past the store or that gets the marketing for that store that they can expect something extra in that store, it's just not a standard cash built offering.

We've updated the branding to read the cash built extra as you can see on screen there. We're monitoring these two very closely because we want to make sure that we get all the learnings that we can and improve on it as we do more on more of these pilot stores and hopefully, we'll roll out more of them as time progress. In summary, at the end, it's been a slightly improved result for the group for the six months. Its market sentiment seems to be more optimistic than a year ago. We're showing you their growth in the first seven weeks of past this half year, up 6%. Maybe just a short note why we're showing the seven weeks is that we are more comfortable with the numbers coming in quicker and hence we can show you now seven weeks going forward, not the six weeks that you've been used to over a couple of years. The Zikili Kaia project is gaining momentum. There's a high amount of interest in this and lots of queries coming through the business and interest shown in this project. The two part system did not translate into the expected growth, not just for us, but building retailers in general And it seems like customers or consumers use that money to pay for taxes and buy food and some household goods.

And we also understand that some of them use it to actually pay off debt. Our focus on our stores and investing in our business and getting more stores out there and delivering on our promise, we've launched CapiFit during the six months. We had the Cashbook Extra I spoke about. The rollout of the small model stores are progressing well. Although only one opened, there's quite a number been approved and it's in different stages of the process. And then our plan with P and L Hardware of closing some stores, relocating and also converting some of them remains positive. We are quite happy with the progress that we've made on that. As you can see, we are laser focused on delivering our strategy and executing very well. So, the business is currently in a very good spot. We're comfortable where we are, but we'll keep on focusing on finding improvements and getting driving efficiencies in the business. I thank you for your attendance at the presentation.