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.
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