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  Would still have preferred their price to be around R 352 than the current R 285 along with the dividend...  

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Cashbuild shareholders are smiling all the way to the bank

As the building materials retailer declares R128m interim divi.

Cashbuild shareholders are surely smiling all the way to the bank, with the R5.13 per share dividend declared up 36% from compared with the last interim dividend. Given the 24 million-plus ordinary shares in issue at the time of the declaration, it amounts to a R128 million dividend. Were it not from a BEE transaction, which saw 200 000 shares repurchased by the company from the Cashbuild Empowerment Trust and treated as an expense, headline line earnings would have seen a 36% increase. 

Despite tough economic conditions, the building and construction materials company released decent interim results for the six months to December 31, achieving a headline earnings increase of 2% to about R186 million compared with the prior corresponding period. Meanwhile, net cash flow and revenue were up 23% and 14% to R1.34 billion and R4.51 billion respectively. 

Group CEO Werner de Jager puts the company’s good performance down to the resilience of the market that Cashbuild serves, adding the the company had done a lot of work to ensure predictable pricing and predictable stock availability which has endeared it to their customers.

“I think also that, in an envrionment where credit is becoming harder to come by, consumers are looking for places where they purchase the building suppplies for cash and are looking for competitive prices in order to do that,” says de Jager, adding that Cashbuild only had a 6% percent increase in the company’s total cost base – 3% coming from existing stores and 3% from the new ones – which he views as not too bad. 

Not bad at all

Performance indicator

Value at 31 December 2015

Y/Y % change

Revenue

R4.509 billion

Up 14%

Net Cash Flow

R1.34 billion

Up 23%

Headline Earnings

R185.8 million

Up 2%

Dividend

R5.13 per share

Up 36%

Share price

R300 per share                               

Up 83%

Source: Cashbuild

Cash has also opened six new stores, bringing the total to 228 stores – up 5% from the same time a year before. The Cashbuild share price rallied in 2015, almost doubling from R164.20 on January 1 to R300 per share on December 31 2015, before returning to around R292 per share on Tuesday.

Thebe Stockbroking senior research analyst Janine Weilbach says Cashbuild’s impressive performance has been a trend in low-cost home renovation retailers, which have outperformed their premium brand counterparts quite significantly in recent years.

Italtile is another example of a company that has done well. Between the two of them they have outperformed the rest market, achieving an excess of 20% growth compared with the likes of Massbuild, for example.

“Considering that Cashbuild comes from a historically rural business model, you’re looking at a very low-value product. So it’s a volumes game,” says Weilbach. “They are the biggest cement retailer in the country, so the lower cement prices will also have contributed to their impressive growth. There are a range of factors, but ultimately, it’s about those low value products.”

Weilbach says Cashbuild’s diversification has seen it growing geographically with more stores; and acquire P&L Hardware’s 39 retail outlets for R350 million plus a potential further R80 million, depending on profit, over the next three years.

DIY stores hit and miss

One aspect of the company’s strategy that perhaps has not worked as well as expected has been the 10 DIY stores that were meant to drive demand for the  much larger wholesale stores. But de Jager says the hit and miss response meant the stores would be reevaluated a the next strategy meeting.

Says de Jager: “We’ve had three stores that have done fantastically well, and three that have not done well. And three others that have performed dismally. The idea behind the DIY stores was to gain presence in places that we couldn’t access before, like malls, where people could buy small DIY items and make orders for larger items which could be delivered from the workshop…But we’ll have to wait to understand why some stores have performed better than others before we make a decision whether to continue with the DIY rollout. The stores themselves don’t cost us too much.”


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Would still have preferred their price to be around R 352 than the current R 285 along with the dividend

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