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Cashbuild grew revenue in the year to June as it expanded and reshaped its store network, but weaker demand and rising costs put pressure on profitability for the building material retailer.The group responded to uneven trading conditions by opening nine stores and closing 11 underperforming outlets, while acquiring three Amper Alles stores and refurbishing a further 19. The disposal of its Malawi business added to the pressure on earnings, with the group recording a R34.9m loss on the transaction, it said in results for the year to end in June.As a result, basic earnings per share fell 25%, while HEPS were down 8%.“The expansion, relocation and refurbishment programme will continue in a controlled manner, while the rollout of the smaller Cashbuild small model store format remains on track,” the group said.The board declared a final dividend of 233c a share. The full-year payout was unchanged at 626c a share. Revenue increased 6% to R12.1bn, helped by a rise in transactions and contributions from new stores. Selling price inflation was just 1.5% at the end of June.Operating profit fell to R292m despite an 8% increase in gross profit as higher operating costs put pressure on the bottom line.It ended the period with R2bn in cash and short-term funds, giving it capacity to continue investing in its store network despite the softer trading environment.The group said there was little sign of an immediate recovery after year-end, with revenue for the seven weeks following the end of the financial year remaining at similar levels to the comparable period a year earlier.“Management expects trading conditions to remain challenging,” it said. The pressure on Cashbuild is not isolated. Afrimat recently said an overtraded cement market, inclement weather in the first quarter and sharp increases and volatility in fuel prices had weighed on its results. It linked the fuel price volatility to the Iran war.Ashburton Investments senior equity analyst Luresha Chetty said Cashbuild’s restructuring of its store network was beginning to shift the retailer towards a more sustainable footprint, particularly outside South Africa.“The underperforming P&L Hardware business has been the main source of store closures and conversions in recent years. Conversions to smaller Cashbuild stores have traded more profitably,” she said.“Footprint reductions across the rest of Africa, including Zambia and the sale of two stores in Malawi, have helped address underperforming operations. Of the remaining 27 stores, only Botswana remains outside the rand common monetary area,” Chetty said.However, she said Cashbuild’s customers were likely to remain under pressure in the near term as high energy and food costs erode disposable income. This is likely to keep DIY demand subdued, limiting the scope for a quick recover, Chetty said.
