Retailer laments worst results in two decades

By Zandile Mavuso
Editor: DIY

South Africa’s loved and renowned hardware retailer Cashbuild had released its financial year report which recorded the lowest figures the group has ever experienced in 20 years.

Cashbuild store

Speaking to News24, Cashbuild mentioned that it was experiencing the worst trading conditions in two decades, with its middle-to-lower-income consumers still abandoning home renovation and building projects halfway as they buckle under financial strain.

The report was based on the financial year ended June 25, 2023. Cashbuild showed revenue decrease of 4% in this period compared to the previous financial year. The report also indicates that revenue for stores that were or have been in existence prior to July 2021 (pre-existing stores – 308 stores) decreased by 6% and it 10 new stores contributed 2% growth.

The gross profit of the group decreased by 8% with gross profit margin percentage decreasing from 26.3% to 25.4%. Selling price inflation was 5.4% at the end of June 2023 when compared to June 2022. Comparable operating expenses, excluding the P&L Hardware Goodwill impairment in the current year and the looting effects of the prior year, increased by 5% (existing stores increasing by 4% and new stores contributed a 1% increase). On a statutory basis, operating expenses increased by 20% (existing stores increasing by 19% and new stores contributed a 1% increase).

The decrease in revenue together with increasing costs resulted in the operating profit decreasing by 73% (53% on a comparable basis mentioned earlier). Basic earnings per share decreased by 78% with headline earnings per share also decreasing by 37% from the prior year.

The high effective tax rate of 35.5% for the year is as a result of the impairment of the P&L Hardware Goodwill, however, still lower than the prior year due to withholding tax on inter-group dividends paid. Cash and cash equivalents 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 increased by 12% with stockholding at 90 days (June 2022: 81 days) at year end.

Net asset value per share decreased by 14%, from 9 350 cents (June 2022) to 8 068 cents. During the year, Cashbuild opened six new Cashbuild stores, refurbished 18 Cashbuild and two P&L Hardware stores. four Cashbuild stores and one P&L Hardware store were closed during the year. The closures relate to one looted store, another store because of a relocation and the remainder due to non-performance which included the last two Zambian stores.

With regards to its dividends, Cashbuild dividends recorded 332 cents compared to 677 cents in June 2022 per ordinary share, out of income reserves, excluding the impact of the impairment on the P&L Hardware Goodwill, to all shareholders of Cashbuild Limited. This equates to just over a 50% decrease, which stamps on the volatile economic conditions.

This comes after, in March this year, Cashbuild’s shares fell by over 4% after it cut its interim dividend by almost a third.

Meanwhile, revenue fell 4% to R5.6-billion for the six months from June 2022 to 25 December 2022, while diluted headline earnings per share fell 38% to 704 cents.

Therefore, the results of the financial year end do not come as a surprise.

Despite these unsatisfactory results, Cashbuild aims to continue its store expansion, relocation, and refurbishment strategy in a controlled manner, after considering its continuously evolving feasibility process.

Group revenue for the six weeks after period end is 1% lower than the prior year’s comparative six-week period. Management expects trading conditions to remain challenging. This information has not been reviewed nor audited by the company’s auditor.

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