Township spending boosts Cashbuild margins

IMPROVED spending on home renovations and buying by small building contractors, especially in the townships, has boosted Cashbuild’s sales and increased the group’s gross margins.

The group’s operations director Shane Thoresson said yesterday that there had been some stability in the general building markets with more money available in the group’s traditional market.

Cashbuild is a building materials retailer servicing small contractors, as well as small builders among other customers, with most of its stores in the township areas.

Despite tough trading conditions, Cashbuild grew revenue 12 percent to R3.97 billion.

Gross profits climbed 16 percent for the six months to December to R941.9 million from R814.5m in the previous period.

“It’s been a good six months for us; we are very encouraged by the results. This is despite the fact that it had been a difficult time to trade in this market,” Thoresson said.

“But we are particularly encouraged by the fact that our comparable-stores are starting to trade very nicely. We are seeing an above-inflation growth coming through our top line on the revenue side and that is very encouraging for us,” he added.

The group’s gross margins improved from 22.9 percent to 23.7 percent.

“Generally there has been a pick up in the Cashbuild traditional market. However, we have seen strong growth from our stores in the townships.”

Thoresson said he could not tell whether the growth was coming from big projects or contractors, but there had been some increased foot traffic from walk-in customers, as well as smaller builders in the past months.

In the past six months, Cashbuild had also tested the DIY (Do-it-Yourself) market through 11 pilot stores, which Thoresson said had borne some mixed results. “We have seen mixed results coming back from DIY pilot project. Because it is a pilot, we specifically went out (to) a mixture of sites.”

He said: “Currently we have 11 of the DIY stores trading and there is no intention of opening more at this stage, we believe the stores must prove themselves first.”

Thoresson said Cashbuild customers were cash-based and that was the market which seemed to be doing better than the credit-reliant market.

Cashbuild does have an unsecured lending unit through Nedbank Consumer Credit, but only 5 percent of the business was done via this unit.

For the year to date, Cashbuild has opened four new stores and plans to open another six stores in the next six months. Shares closed up 0.53 percent at R217.50 on the JSE yesterday.