Cashbuild trading update

This morning we received a sales update for the fourth quarter from Cashbuild. If you have been following my updates on this company you will know that is has been a tough year for Cashbuild and I was getting concerned that sales were actually going to decrease. Well a stronger fourth quarter has prevented that, let's look at the numbers in more detail.


On a comparable basis (last year compromised 53 weeks) full year revenues grew 3%. This is very much thanks to a strong fourth quarter which grew revenues by 8%. South Africa which compromises 88% of sales was the main driver with 8% growth in the last quarter.


The company which is usually quite conservative had a busy period operationally.

"Four new stores were opened during the fourth quarter, resulting in the number of stores trading at the end of the financial year to be 200. Two stores were relocated and seven stores refurbished during the fourth quarter. A total of nine new stores were opened during the financial year with 21 refurbishments and six relocations being completed."


So from the nine new stores opened this year, four were opened in the last quarter. This of course had an impact on sales but same store revenues still grew 5% in the quarter.


There are a number of factors which have affected sales. The company is mostly geared towards the lower LSM income brackets who have struggled, thanks mostly to a weaker rand. Weaker rand equals higher inflation, which has a knock on impact for the poor. We have also seen a big pull back in unsecured loans. Cashbuild do cash sales so when clients don't have the money to improve their homes they turn to the unsecured lenders. Lastly, there has been a big increase in competition from independent operators who, so I am told, do not adhere to many forced costs that face a big corporate (like taxes). This has affected margins.


None the less I am glad we have seen an uptick in sales and hopefully this is a continuing trend going into the first quarter of their next financial year. As for this year's numbers I wouldn't expect too much earnings growth but the share price is not expecting that. This is a long term hold and it is times like these when you should be accumulating such a well run business that have so often found themselves in a sweet spot among South African consumers. More details when the results come out, probably mid September.