Cashbuild building profits in difficult conditions
After opening at R367, the share price of Cashbuild, southern Africa’s largest retailer of building materials, climbed to R377.71 before moving back to R370.61, up 0.98% shortly after its interims’ release.
Cashbuild reported a 15% increase in revenue to R5.2 billion (H1 2015: R4.5 billion), for the first half to Deember, largely on the back of the acquisition of the P&L Hardware group. The buy will add 44 hardware outlets in Gauteng, Mpumalanga and Limpopo to Cashbuild’s portfolio consisting of 293 outlets.
During the reporting period, P&L contributed R501 million in revenue and R19.6 million profit before tax. The aim of the acquisition was to grow Cashbuild’s geographical footprint and retain the P&L brand.
Cashbuild’s operating profit increased by 36% to R362 million, compared to R265 million in the comparative period, and headline earnings per share (Heps) increased by 47% to 1 189.2c. The group reported an operating profit margin of 7%.
This was achieved in what Cashbuild CEO Werner de Jager described as a “challenging” market with consumer spend “under severe pressure”.
Revenue for existing stores was flat, with new stores contributing four percentage points to the 15% revenue growth and the P&L acquisition 11 percentage points. Selling price inflation was recorded at 3%.
“Our financial position remains strong with a reported cash balance of R1 billion subsequent to the P&L Hardware acquisition,” De Jager said.
An interim dividend of 540c was declared.
Amelia Morgenrood, stockbroker and portfolio manager at PSG Wealth Faerie Glen, said, if one strips out the effect of a BEE transaction in the prior period, Cashbuild’s Heps increased by 9%, showing little real growth.
She expects the performance to normalise at a lower level.