Cashbuild’s interim dividend fell by 32% after growing numbers of its lower income customers struggled to find the additional spending power for new builds and home improvements, the chief financial officer Shane Thoresson said yesterday,
“It is a hell of a tough trading environment at present. For many of our customers, they need to focus on survival, as they have been severely impacted (by the weak economy, including rising prices for food, energy and interest rates), Thoresson said in a telephone interview.
The share price fall sharply by 5.1% yesterday morning to R188 yesterday, some 29.5% lower than at the same day a year before, following the release of the weak results.
Gryphon Asset Management analyst Casparus Treurnicht agreed that the retail sector, particularly for lower income earners, was taking “hectic strain.” The trading down trend had largely reached its end, and there was little discretionary income among these consumers left.
He also did not see a turnaround soon, as the cost of doing business in South Africa was up due to for instance, having to run generators, and there were still second and third round “sticky inflation” such as for insurance, tourism, shelter and other costs of doing business, that had to come through.
Cashbuild, one of southern Africa’s largest retailers of quality building materials and associated products to middle to lower income group customers, saw its headline earnings per share fall 39% R156m in the six months to December 31 due to challenging trading conditions.
In six weeks subsequent to period end, revenue was 8% lower than the prior year’s comparative six-week period.
“At the moment it doesn’t seem like there will be much of an improvement in trading conditions for 9 to 12 months,” said Thoresson.
He said they had been told that they had not yet lost market share, but management were treating the weak environment as if they had, and initiatives were underway to protect and grow market share, while the focus on finding suitable sites for new stores was ongoing, just more difficult to find.
The group, which sells to a mainly cash-paying customer base through 316 stores, saw revenue fall 4% to R5.6bn in the six months, while operating profit was well down by 47% to R262m. Revenue for stores in existence prior to July 2021 (pre-existing stores – 309 stores) decreased by 5% and seven new stores contributed 1% growth.
The group is also repurchasing shares to add value for shareholders, and Nedbank Corporate and Investment Banking had been mandated to begin a general repurchase of shares to the value of R49 million.
Cashbuild concluded an agreement with former CEO Patrick Kieran Goldrick, for Cashbuild to repurchase 1 000 000 of its ordinary shares for R194.32m, from him.
A process to buy back shares from odd-lot shareholders had also begun, with shareholders to vote on the plan next week, the aim of which was to “tidy” the shareholder book and reduce some administration costs.
During the period, three new Cashbuild stores were opened, 12 Cashbuild and two P&L Hardware stores were refurbished, while four Cashbuild and one P&L Hardware store were closed. The closures relate to one looted store, one temporary closure due to relocation, the remaining two stores in Zambia as well as one non-performing P&L Hardware store.
CEO Werner de Jager said in a statement: “Although our operations are less affected by load shedding due to either generators, battery power or solar systems at our stores, these installations come at a cost. The notable increase in independent competitors as well as the concerning increase of unregulated, inferior products in the market will also continue to negatively impact our business.”
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