Cashbuild shareholders who might be smarting from the company’s failure to land its key takeover target have received handsome compensation. SA’s biggest building materials retailer has decided to pay out all of its R665m in annual profit to shareholders.
With no immediate acquisitions on the table after a proposed R1.1bn acquisition of Pepkor’s The Building Company (TBC) was blocked by competition authorities, CEO Werner de Jager said the group opted to up its dividend payout to reflect an “exceptional year”.
Cashbuild, valued at R7.4bn on the JSE, set a string of records in its 2021 year ending June, when revenue rose 25% to R12.6bn and profit jumped almost 150%, benefiting from demand for home improvement during the Covid-19 pandemic as people spent more time at home.
While a lack of debt and a cash pile of R2.5bn saw it opt for a dividend in line with its basic earnings, it said this was a one-off. The news sent the group’s shares up as much as 8% on Wednesday, when they were on track for their best day in about four months.
Cashbuild is still looking to expand and intends adding 10 more stores to its 318-strong base. It also has 36 stores to rebuild after the rioting and looting that engulfed SA in July, with the company’s sales for the six weeks after the end-June financial year dropping by a tenth. More than a third of its revenue is generated in Gauteng and KwaZulu-Natal.
“Many of these stores were so badly damaged, it is like building new stores from scratch,” he said. The company has the necessary insurance in place to mitigate losses, and has started rebuilding.
The group declared a R22.11 final dividend, a more than eightfold increase from the previous year, with its total dividend amounting to R29.35. Its normal dividend policy is for cover of two times, meaning it would be able to pay out any declared dividend twice from earnings.
De Jager said even when excluding the effects of the riots sales were roughly flat in the six-week period, a possible sign SA’s home-improvement boom is slowing.
“It’s not wheels off, but we aren’t going to see another 25% in growth,” he said.
The group said it had faced supply issues, with suppliers struggling to secure raw materials locally, even as they had challenges with imports. These affected steel, timber, cement, plastic and copper, but Cashbuild said it had been able to secure stock, citing a strong relationship with suppliers, and proactive measures to build up its inventory.
Stock levels, including new stores increased by more than a fifth year on year, with stock holding at 74 days at end-June. De Jager said the group still has its “hands full” trying to build up stock levels before December, traditionally a strong period, but there are already signs of improvement in supply.
Small Talk Daily’s Anthony Clark said the dividend is “testament to the fact that this company is a strong, strong, cash generator. These results are commendable, showing the underlying strength of Cashbuild.”
Cashbuild’s shares gained the most in just over seven months, up 7.39% to R305.50 by the JSE’s close. The stock is now up about 29% so far in 2021.
Update: September 1, 2021
This article has been updated with information throughout.
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