Management at Cashbuild, which is feeling the squeeze on consumer spend after revenues and headline earnings for the year to end June 2023 declined 4% and 38%, respectively, is anticipating tough trading conditions to remain challenging.
Cashbuild, which focuses on trading material, said revenue for the six week period post the June 2023 year end had fallen by 1% against the prior year comparative period.
“Management expects trading conditions to remain challenging,” the company said as it released its financials.
For the full year period under review, Cashbuild saw its revenues plunge by 4% to R10.7 billion, which forced down headline earnings for the same period by 38% to R271 million. It declared a final dividend of 332 cents which was, however, 51% lower.
Shane Thoresson, the operations director at Cashbuild, said in an interview that although overall revenues had declined, the company had lifted revenues from new stores.
The company had been able to meet its stated target of 10 new outlets per year, said Thoresson.
“We have been bad at that (store openings) for the last couple of years. Approved developments, can't get off the ground due to lack of services, such as getting water and Eskom to the site. If we can do that, we can get more new stores,” he said.
To its advantage, Cashbuild was not being heavily impacted by electricity load shedding, which escalated during the period under review, as the company’s stores were able to rely on generators to sustain sales.
However, “in the past, we spent R1 million. That has gone up four times to R4 million”.
Thoresson said Cashbuild could not foresee the end to load shedding any time soon.
But commenting on declining consumer spend, Thoresson said there had been a negative downtrend in consumer spending in the past 18 to 24 months.
This came as building plans that were approved were down as well as less spending on infrastructure.
However, he said South African were still doing decorative work and Cashbuild’s decorative sales had inched up, a trend that was also reflected on Italtile’s results that were released this week and which showed the company under pressure.
However, Thoresson said the group was well positioned for growth when the environment it operated in improved.
For Cashbuild, revenue from stores in existence prior to July 2021 decreased by 6% while the 10 new stores for the period yielded a 2% growth. Gross profit for the period decreased by 8%, with the gross profit margin percentage decreasing from 26.3% to 25.4%.
For the period under review, Cashbuild’s goodwill impairment and the looting effects of the prior year increased by 5%. Cash and cash equivalents for the period decreased to R1 583 million due to “higher stock levels in the current year and the repurchase” of shares.
Stock levels, including new stores, have resultantly increased by 12% against a 14% decrease in the firm’s net asset value per share of 9 350 cents.
Cashbuild closed four stores during the period as well as one P&L Hardware outlet, with the closures mainly related to one looted store and another that was relocated. The closure of the other stores has been attributed to non-performance, including the two that had remained functional in Zambia.
Cashbuild will continue its store expansion, relocation, and refurbishment strategy in a controlled manner, after considering its continuously evolving feasibility process.
During the year, Cashbuild opened six new Cashbuild stores, refurbished 18 Cashbuild and two P&L Hardware stores, the company said.
Looking ahead, Werner de Jager, the CEO of Cashbuild, said: “We are expecting load shedding to continue at a cost-burden to the Group, seeing as we have backup generators in all our stores.
“All indications are that the South African economy will remain under pressure in 2024 due to global market conditions remaining unstable and inflationary pressures. The 2024 National Election will also add to the uncertainty,” De Jager said.
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