Building materials retailer Cashbuild reported a 3% increase in revenue to R5.563 billion in the six months to end-December. Factoring in selling price inflation of 3% for the period, sales were flat in real terms. It says trading conditions remain “tough”, with a 12% drop in operating profit and an 11% drop in headline earnings for the six months.
The core Cashbuild business in South Africa remains the engine of the group, comprising 78% of the group’s total sales. In this unit, however, revenue was only up 2% to R4.3 billion. Operating profit declined 11%, with the operating margin dropping from 7% to 6%. In the P&L Hardware business – which it bought in 2016 – sales were up 15% to R671 million, with operating profit declining by 7% year-on-year. This unit operates on a relatively razor-thin margin of 2.5%. Trading in Namibia, Swaziland and Lesotho was flat, with a 30% drop in operating profit, while markets outside of the common monetary area (Botswana, Malawi and Zambia) grew both revenue and operating profit by 5%.
In the six months, Cashbuild opened eight new stores, refurbished 15, relocated three and closed six. Of these six, three were traditional Cashbuild stores, while three were pilot Cashbuild DIY stores. It now only has a footprint of four DIY stores, suggesting that the pilot will be wound down. Overall, the group has 320 stores, including the DIY ones and 62 P&L Hardware-branded ones. These outlets are predominantly situated in Limpopo and Mpumalanga. At the time of the purchase, the business had a footprint of 39 stores.
This means a net increase in outlets of just two in the six months (eight new, less six closures). This is significantly lower than the 22 stores it added in the comparable period last year (10 Cashbuild and 12 P&L Hardware stores).
It says the rollout of new stores will “continue in a controlled manner, applying the same rigorous process as in the past.”
Trading in the hardware and building materials segment remains tough, judging from the results reported by listed competitors. In November, Massmart said sales growth in its Massbuild division (and the DIY category) had slowed from August. In the year to end-September, Pepkor’s The Building Company (previously Steinbuild) reported a sales decline of 3.1% (excluding the impact of a business it acquired during the year).The Spar Group’s Build It unit seems to have bucked the trend with sales growth of 10.3% in the 17 weeks to end-January.
Broadly, however, the trading environment shows no signs of improvement. Cashbuild says revenue for the first six weeks of 2019 decreased by 1% on the comparable period in 2018. It says “management believes trading conditions will remain extremely challenging”.
Cashbuild reported a dividend per share for the six months of 435 cents, a decline of 12%.
Brought to you by Cashbuild.