Cashbuild increases operating profit 19%
CASHBUILD, southern Africa’s largest retailer of quality building materials and associated products, reported 19 percent growth in operating profit yesterday, with new store openings and cost control giving the company a much needed boost to its profits.
The group saw its operating profit climb to R549 million for the year to end June, up from R461m as compared with 2015. The operating profit would have been up by 33 percent to R612m if the black economic empowerment (BEE) transaction was excluded from the figure.
The BEE transaction saw the Cashbuild shareholders agreeing to a repurchase of 200 000 shares from the Cashbuild Empowerment Trust for a once-off cost of R63m. The shareholders agreed in November 2015 for this deal and it was effected at the end of January.
Shane Thoresson, an operations director, said: “We are continuing with expanding the company and we added 11 new stores in the last 12 months alone and we have refurbished 23 stores and relocated one store. We are spending more in this tough economic environment and that is why we were able to grow our business, despite facing these challenges in our economy.”
The company managed to grow revenue during the period, increasing it by 13 percent to R8.7 billion, up from R7.7bn in 2015. It said market conditions remained challenging as it saw selling price inflation of 3 percent.
As of the end of June, Cashbuild had a total of 284 stores in its portfolio.
The group has built its business focusing on consumers who pay on cash rather relying on credit. “Cashbuild is doing well in the townships and rural areas and we are confident that we are going to continue to perform well in that sector, because we have seen a lot of renovations and upgrading in those areas,” Thoresson said.
The group said cash and cash equivalents decreased by 20 percent to R749m during the period due to the acquisition of P&L Hardware.
The group acquired 100 percent of P&L Hardware for a consideration of R350m at the beginning of June. In line with Cashbuild’s strategy for growing market share, the group said the rationale for the acquisition was to expand Cashbuild’s geographical footprint and market share.
Cashbuild declared a final dividend of 488 cents per share, taking its total dividend for the year to end June to 1 001c per share. This is up 41 percent when compared with 2015.
Ian Cruickshanks, an independent analyst, said: “Cashbuild results are very impressive, with headline earnings up by 41 percent. They have done this by concentrating on supplying to its strong market. They are ahead of their competitors and they look like they will continue to do well in the future. They are a stock to hold at the moment.”
The group said it had already seen trading conditions coming under pressure in the first six weeks of trading for the financial year to end June 2017 and it was expecting this trend to continue over the short to medium term.
Cashbuild closed 2.01 percent higher at R406 per share on the JSE yesterday.