Cashbuild targets 20 new stores
• Building materials retailer upbeat on recovery in retail market but is braced for ‘extremely challenging’ conditions
Building materials retailer Cashbuild is taking a bet on the recovery of the retail market and will stick to its expansion strategy by adding another 20 stores in its 2019 financial year.
Building materials retailer Cashbuild is taking a bet on the recovery of the retail market and will stick to its expansion strategy by adding another 20 stores in its 2019 financial year.
The new stores, 10 each for Cashbuild and recent acquisition P&L Hardware, will ignite Cashbuild’s growth prospects in a gloomy retail environment that hit the retailer’s earnings and profit in the year ended June 30.
In a depressed market and amid deteriorating financial performance, new stores boost Cashbuild’s revenue.
“Revenue for the stores that were in existence since July 2016 remained at similar levels to last year, with the 42 new stores opened since then largely responsible for the 5% increase [in revenue in the 2018 financial year],” Cashbuild CEO Werner de Jager said on Tuesday.
The group, which sells directly to cash-paying customers, is also suffering the effects of a slowdown in homebuilding activity for middle- to lower-income consumers.
The continuation of the store rollout is a bet on a recovery of the retail market and positions Cashbuild well for improved conditions in a market that has become increasingly competitive, especially after French home improvement retailer Leroy Merlin entered SA in 2018. Earlier this year, Leroy Merlin announced plans to open its first store in SA in Greenstone, Edenvale, before the end of 2018.
De Jager said Cashbuild was well placed to take advantage of a positive change in the economy through the expanding network of stores. But for the next 12 months, the firm said it was bracing itself for “extremely challenging” conditions.
The 20 new stores are in addition to several the group integrated into its network in previous years. For instance, in the year ended June 30, Cashbuild added 25 new stores. In the year ended June 2017, the company opened 12 new stores.
With conditions in SA, Lesotho, Swaziland and Namibia expected to be depressed for longer, growth was likely to come from new acquisitions, De Jager said.
“Unfortunately, Lesotho, Swaziland and Namibia are also experiencing the same problems as SA,” he said.
“So we will continue with the growth strategy in the new financial year,” he said.
He said Cashbuild planned to build three stores outside SA, each in Lesotho, Namibia and Zambia. He said new stores in SA would be spread throughout the country.
“It will depend where there are shopping mall developments. We are looking at Gauteng, KwaZulu-Natal and Limpopo,” De Jager said.
In the year ended June 30, Cashbuild’s operating profit decreased 12% to R543m.
Headline earnings were down 9% to R424m, while basic headline earnings per share and headline earnings per share decreased by 10% and 9% respectively. Revenue increased 5% to R10.2bn.
De Jager said the increase in revenue did not compensate for the company’s expenses, hence the 12% fall in operating profit. Operating expenses, which include the stores added during the financial year, were up 9%.
Cashbuild reported that the total dividend fell 9% to 842c per share. The company has continued to pay a dividend despite the tough retail environment.
De Jager said the board discussed the dividend policy at a meeting on Monday and the view was “that we must stick to the current policy”.
Cashbuild shares on Tuesday closed 3.21% down at R302.94.
REVENUE FOR THE STORES THAT WERE IN EXISTENCE SINCE JULY 2016 REMAINED AT SIMILAR LEVELS TO LAST YEAR