“Over the past year, DIY chains have suffered”, as consumers rather channelled income to basic products, which increased substantially due to high food price inflation and transport as well as increased fuel pricing, partially as a result of more load shedding. File photo
Cashbuild, a retailer of building material and hardware products from 318 stores, plans to remain true to its strategy even though in the past year earnings fell hard as consumers held off on home improvement projects, whereas in the past, South Africa’s DIY stores were mostly immune to economic downturns.
This was according to chairman Alistair Knock, who, in the group’s integrated annual report to June 25, 2023, said they “are of the firm belief that the group’s strategy remains steadfast... ”.
He said the outlook for the industry was likely to remain the same and the wider view was that consumer confidence would only really improve when the country was seen to be a viable location for capital investment.
“This will require a perception that South Africa is a business-friendly environment and the rule of law is diligently safeguarded. The need for reliable energy and other infrastructure is a pre-requisite for any future investment, especially for energy-reliant industries,” he said.
In the past year, Cashbuild’s revenue fell 4.4% to R10.65 billion, operating profit decreased a substantial 73.4% to R233.3 million, headline earnings per share was down 36.7% to 1222 cents, and the dividend fell 42% to 732 cents.
Knock said the results were mainly impacted by challenges over which the management team had limited control. Despite having revised the P&L Hardware business strategy – the group’s 52 P&L Hardware stores operate across six countries in the sub-continent – a decision was reached to partially impair the P&L Hardware goodwill.
“Over the past year, DIY chains have suffered” as consumers rather channelled income to basic products, which increased substantially due to high food price inflation and transport, as well as increased fuel pricing partially as a result of more load shedding.
The repercussions of power outages that intensified in the latter half of 2022 had been dire for many suppliers and retailers, and mounting costs incurred ranged from diesel purchases for generators to substantial investments in back-up power systems, said Knock.
Cashbuild alone spent R19.3m this past year on diesel for generators compared to R4.3m in the previous financial year, a fourfold increase.
Knock said that without better capital investment in the country, unemployment would remain unacceptably high, with the obvious strain for consumers and therefore retailers as customers increasingly tighten their belts.
“Without a dedicated effort to increase employment the economy will fail to improve as growth remains well below the increase in population levels. The greylisting of the country in February 2023 by the Financial Action Task Force (FATF) is also likely to hamper any future critical investments,” said Knock.
Chief executive Werner de Jager said in the report that although their balance sheet remains robust with good cash generation, subdued sales and inflationary cost increases, together with increased load shedding costs, had created margin pressure.
He said that taking macroeconomic challenges into consideration, for the first six weeks of the year ending 30 June 2024, total group decreased by 1% compared to the prior year’s six-week period, which reflected tightening consumer spending.
“All indications are that the South African economic growth will remain under pressure in 2024 due to global market conditions remaining unstable and inflationary pressures. The national election will also add to the uncertainty, given interest rate increases and a general increase in the cost of living,” he said.
The group’s strategy is based on an ability to understand customers and markets, which enables it to offer a focused range of products and services, as well as mutually beneficial relationships with suppliers, substantial buying power and the ability to control costs, which enables the group to offer quality, best value products and services at convenient locations.
Progressive human resources practices promote a challenging and productive working environment, while the group also tries to improve the lives of people where it trades by providing best value products and services, offering employment opportunities, promoting enterprise development and supporting community projects.
According to the report, resources and industry and technology best practices were also optimally applied through “The Cashbuild Way“ to provide superior and sustainable returns to shareholders.
BUSINESS REPORT