Advertise with fastmoving.co.za
 
 

Werner de Jager. Picture: FINANCIAL MAIL
Werner de Jager. Picture: FINANCIAL MAIL

Cashbuild cashes in, sees strong rise in earnings

RETAILER NEWS

bdlive.co.za - Aug 31st 2016, 08:44

CASHBUILD is cashing in on being Southern Africa’s largest retailer of building materials and associated products, selling directly to cash and card-paying customers through 284 stores in SA, Namibia, Lesotho, Botswana, Swaziland, and Malawi. 

In the year to June, group revenue jumped 13% to R8.7bn, as operating profit, excluding black economic empowerment costs, shot up 33% to R612m. Headline earnings per share leapt 25%, as total dividend per share grew 41%.

"It was one of those years where things really went well on all fronts," CEO Werner de Jager said on Tuesday. "It’s tough out there — you have to work harder for your turnover than ever before." But he also said that Cashbuild had an extremely focused range of products and that "pricing has always been very keen".

The group’s store count was bolstered by 10 DIY (do-it-yourself) stores and the recent R350m acquisition of 42 P&L Hardware stores. The latter are mainly in Limpopo and Mpumalanga. But the inclusion of P&L Hardware’s results — effectively for 25 days — "had an immaterial impact on the group’s results for the year under review", De Jager said.

The 200,000 share repurchase from the Cashbuild Empowerment Trust incurred a once-off cost of R63m. The value created in the trust as a result of the repurchase had been distributed to the trust’s beneficiaries.

More than 50% of Cashbuild’s sales come from rural areas and townships. De Jager said about 45% of customers used debit or credit cards to pay for goods, despite Cashbuild focusing on middle-to lower-income segments.

"I think Capitec (Bank) has done quite a lot to put plastic in people’s hands," he said. "I think people are getting more savvy in carrying cards around and not using cash."

He said products such as cement, timber, and roofing commanded lower margins, while power tools had higher margins. But he said the group’s competitive pricing and volume sales gave it negotiating power that did not "give away" margins.

There had been a substantial improvement in housing in SA, as money earned in cities was sent back to rural areas. This had led to informal structures being replaced by formal ones. "It’s amazing how the quality of housing has improved," De Jager said.

"Cashbuild has been a star performer, having significantly outperformed the General Retailers index," Ron Klipin, a Cratos Capital portfolio manager, said on Tuesday.

He said that from January 2015, the group’s share price had rocketed 147%, against an index return of 9%.

"The focus of operations is the supply of building materials to lower LSM [Living Standards Measure] customers in rural and peri-urban areas at affordable prices," Klipin said.

"Their stores carry a comprehensive range of materials … recent product diversification into higher-margin business, such as lighting and the acquisition of P&L Hardware, appears to be part of a new growth strategy."

"The group client base serves mainly Bakkie Builders [small-scale operators], and home renovators of RDP [Reconstruction and Development Programme], and affordable housing, whose income base comes mainly from social grants," he said.

"This has been a major catalyst of Cashbuild’s success, and [as a result, the group] has been relatively immune to the economic downturn," Klipin said.From DFM Publishers (Pty) Ltd 

Read more about: south africa | retail | earnings | cashbuild

Related News

Checkers brings world-class retail to Constantia with new flagship store
27/11/2019 - 13:01
Checkers has opened the doors to its state-of-the-art 2 330 m² flagship supermarket at the Constantia Emporium as the retailer continues to take innovation to new heights.

Woolworths carves out market share in SA
27/11/2019 - 10:11
In Australia, David Jones's sales declined 2.1%, with the company saying a store refurbishment contributed to the decline.

Push and pull strategies work together to keep consumers coming back for more
26/11/2019 - 10:20
The retail sector is under increasing pressure as consumers have shrinking disposable income in a strained economy. Maintaining share of wallet is critical. Relying solely on a push route to market strategy from manufacturers into retailers is not enough to get consumers buying products. A pull strategy needs to coexist with the push to drive brand consumption. Integrating these strategies requires intelligent and insightful decision-making. This, in turn, requires data generated through smart technology which provides line of sight across the value chain from manufacturer to distribution, retailer to the consumer.

Exclusive leases must fall: Commission cracks whip on Shoprite, Pick n pay, Spar, Woolies
26/11/2019 - 09:57
The Competition Commission Inquiry into Grocery Retail, published on Monday, called for an end to the exclusive leases negotiated by national retail chains in all shopping malls across the country in a bid to open up access to markets for smaller players.

Today’s customers are loyal to speed and convenience, not brands
25/11/2019 - 11:15
Consumer expectations are rapidly shifting as technologies such as mobile, geolocation, social media and increasingly, Internet of Things devices and wearables, connect people to a world of easily accessible information and convenient services. With the ability to browse, compare and order with a few swipes and taps, consumers are becoming trained to value convenience and service above nearly anything else.