Cashbuild feels the pinch during hard times
By Mark Allix - Mar 7th 2018, 09:09
Cashbuild, South Africa’s largest retailer of building materials, is feeling the pinch of SA’s poor economy.
The group’s revenue for the six months to December was up a tepid 5% as operating profit fell 10% and headline earnings per share declined 8%.
The group sells directly to cash-paying customers through a constantly expanding chain of stores — 317 at the end of the current financial period.
“You don’t have to be a rocket scientist to see that the market we are trading in is exceptionally tough,” CEO Werner de Jager said. “You have to be realistic in these times.”
The group added 22 more stores in the period, which outweighed the growth in earnings. “[But] it’s an investment for the future, so we are not concerned about this at all,” De Jager said.
Additions and renovations make up most of the group’s earnings, derived from retail customers and “bakkie builders”.
“[Bigger] contractors gave us bad debts,” De Jager said. “There is a lot of work and low margins and a big risk of not getting paid, especially by government.”
Cashbuild recently opened two stores in the Zambian cities of Kabwe and Ndola and will open two more in the capital Lusaka. This adds to group stores in Namibia, Botswana, Malawi, Lesotho, and Swaziland.
De Jager said the outlook for the next six months was infused with the new positive political sentiment in SA, but that this would not transform into real top-line growth.
In August 2017, Cashbuild bought the Build It business in Hunter’s Retreat in Port Elizabeth and in September 2017 acquired Buffalo Building Supplies, for a combined sum of R72.6m.
The businesses now trade under Cashbuild’s P&L Hardware stores brand. Between them, they contributed revenue of R25.4m and a net loss of R0.4m to the group during the reporting period.
Had a full six-month results from July 1, 2017, to December 31, 2017, been included in the group’s interim financial statements, the total revenue and net contribution from these acquisitions would have been R43.5m and R1.1m, respectively.© BusinessLIVE MMXVIII
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