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Cashbuild business model robust in challenging market

Operating profit up 13%.

The share price of building materials retailer Cashbuild on Tuesday morning dropped from its opening price of R380.02 to R365.53 after the release of the group’s results for the year ended June 30. Later in the day it however recovered and closed at R380.00.

In the year to date, the share price has increased by 10.47%.

Cashbuild is the country’s largest building materials retailer selling directly to the public for cash from 297 outlets.

The group reported a 12% increase in revenue to R9.7 billion compared to the previous financial year and a 13% increase in operating profit to R620 million.

Headline earning per share (Heps) increased by 8% to 2 045c and the total dividend per share decreased by 7% to 930c.

Cashbuild CEO Werner de Jager said the reporting period was one of Cashbuild’s most challenging periods with consumer spend in the consumer segments the group serves under severe pressure. “The acquisition of P&L Hardware, together with the new Cashbuild stores opened during the year, positively impacted our results for the financial year under review,” De Jager said.

The P&L acquisition added 10% to revenue growth. The revenue of the group’s so-called existing stores (opened before July 1, 2015) decreased by 2% while 23 new stores contributed 4 % to revenue growth.

Selling price inflation was 2% and the gross profit margin decreased from 26.1% in the prior year to 25.5%, largely due to the inclusion of P&L for the full year.

Operating expenses, excluding the BEE transaction in the prior year, increased by 13% and operating profit increased by 1%. The operating profit margin increased to 6.4%, compared to 6.3% in the prior year.

De Jager said Cashbuild’s financial position is healthy with a cash balance at the end of the reporting period of R801 million.

Cashbuild CFO Etienne Crouse said on Moneyweb’s RSG Geldsake radio program that the group recently opened its first outlet in Zambia and sees a lot of opportunities for new stores in the Western Cape and Gauteng.

He said the group expects the new year to be difficult as the current challenging market conditions persist.

The group also said in a statement: “Our business model has proven to be resilient under these circumstances and our expansion plans, in particular through the P&L Hardware store model, should be able to generate moderate growth going forward,” the group said.

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