DE JAGER ON CASHBUILD’S NO-FUSS BUSI­NESS MODEL

South Africa’s econ­omy ex­pe­ri­enced weak growth in 2015 but, de­spite this, CEO Werner de Jager and his team at Cashbuild de­liv­ered re­sults that were the envy of many, and the de­light of share­hold­ers who had in­vested in the build­ing and ma­te­ri­als re­tailer.

Finweek English Edition - - FRONT PAGE - By Mandy de Waal

w hen the go­ing gets tough, Cash build, it ap­pears, shines. De­spite South Africa’s econ­omy be­ing on a down­ward tra­jec­tory – GDP grew lit­tle more than 1% last year, and is ex­pected to grow only 0.9% in 2016 – the build­ing ma­te­ri­als re­tailer de­liv­ered strong re­sults for the six months end­ing De­cem­ber 2015.

In March 2016, Cashbuild re­ported that its rev­enue for the six months to end De­cem­ber 2015 in­creased by 14% year- on-year to R4.510bn. Gross profit was up 13% year- on-year to R1.067bn, and the re­tailer’s op­er­at­ing profit rose 7% to R267.8m.

Cash build is South Africa’ s largest re­tailer of build­ing ma­te­ri­als and sells to cash- pay­ing cus­tomers through some 220 plus stores. With branches in South Africa, Namibia, Le­sotho, Botswana, Swazi­land and Malawi, Cashbuild em­ploys over 4 700 peo­ple, and has been listed on the JSE since 1986.

The com­pany’s share­hold­ers must have been ec­static with their de­clared in­terim div­i­dend of R5.13 per share – up 36% com­pared with the in­terim div­i­dend a year be­fore. What does it take to de­liver these kinds of re­sults in a dif­fi­cult trad­ing en­vi­ron­ment?

“It took a great team ef­fort,” Werner de Jager, Cashbuild’s CEO, tells fin­week. “I can­not man­age the busi­ness by my­self so I need good peo­ple around me. In Cashbuild we have an abun­dance of good peo­ple. We all share the same goal of mak­ing the com­pany suc­cess­ful.

“We have an exco meet­ing ev­ery Mon­day morn­ing–some­times start­ing at 6: 30 – and to see the ex­cite­ment and en­ergy of the team that early on a Mon­day morn­ing re­ally makes for a suc­cess story. We man­age de­tail and when we make mis­takes, we are quick to rec­tify them.”

De Jager con­sid­ers hi s great­est achieve­ment as “be­ing ap­pointed chief ex­ec­u­tive of a re­ally great or­gan­i­sa­tion like Cashbuild”.

“Our brand is down to earth, straight­for­ward and well trusted. The trust in the brand has been earned over many years and is some­thing we deeply value and care much about,” De Jager says, adding: “Cash­builders in general are very proud of their brand.”

What does the fi­nan­cial com­mu­nity think of Cashbuild’s re­sults? Alex Sprules of Mo­men­tum SP Reid Se­cu­ri­ties tells

fin week :“Cash build posted an­other solid set of re­sults re­flect­ing a model which is well suited to the cur­rent tough en­vi­ron­ment.” Sprules says he as­cribes these strong re­sults to the re­silience of the build­ing ma­te­ri­als mar­ket with com­pet­i­tive pric­ing.

Cashbuild is South Africa’s largest re­tailer of build­ing ma­te­ri­als and sells to cash­pay­ing cus­tomers through some 220 plus stores.

“Cash build is ex­pected to con­tinue to grow and the mar­ket has priced it for this,” Sprules says, adding that the cur­rent price-to- earn­ings ra­tio (P/E) is around 20.

De Jager is typ­i­cally un­der­stated, and calls the re­sults “pleas­ing”. He be­lieves that the sec­tor has space for growth, and wants to add an­other 80 stores to the op­er­a­tion, which would bring the re­tailer’s foot­print to around 300.

Cash build’ s CEO says that the com­pany’ s busi­ness model is sim­ple and stan­dard­ised .“We are not try­ing to be ev­ery­thing to ev­ery­body and we have a fo­cused range,” he says. A big part of the re­tailer’s suc­cess has been achiev­ing pre­dictable pric­ing and sup­ply de­spite car­ry­ing a range that in­cludes a good share of im­ports dur­ing a time of ex­change rate volatil­ity. De Jager says the com­pany gives sup­pli­ers fore­casts that help with stock plan­ning and en­gen­der solid re­la­tion­ships.

And what is this CEO’s se­cret to con­sis­tently good cus­tomer ser­vice? “Ev­ery­thing in our or­gan­i­sa­tion cen­tres around the cus­tomer. Staff are aware that the cus­tomer pays their salaries. Even our sup­port of­fice staff view the Cashbuild stores as their cus­tomers and demon­strate the same val­ues to­wards the stores as the stores do to­wards their cus­tomers,” he ex­plains.

Werner de Jager CEO of Cashbuild

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