Cashbuild interim dividend stays flat despite steep drop in earnings

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Building material retailer Cashbuild's headline earnings are down 22%, but it managed to pay out an interim dividend to shareholders of 435 cents - the same as the previous year's - thanks to a strong cash position, it said.

The group, which is southern Africa's largest building material retailer with a presence of 321 stores, on Tuesday released its interim results for the six months ended December 31, 2019.

Headline earnings per share are down 22%, from 972.3 cents reported in the previous year to 762.4 cents. Revenue declined by a mere 1% from R5.6 billion to R5.5 billion. However, operating profit increased 5% from R285 million to R299 million.

The board decided to pay out an interim dividend because of the group's "strong cash position". Cash and cash equivalents increased 32% to R1.4 billion. Cash generated from operations has a "substantial" increase from R280 million to over R1 billion, mainly due to supplier payments which were effected prior to the financial year end close, in June 2019, the group said. 

Challenging trading conditions

While Cashbuild management expects trading conditions to "remain extremely challenging", the group intends to continue its strategy of store expansions, relocation and refurbishment – and said it will do so in a "controlled manner" with a "rigorous process".

Over the six-month period, the group opened eight new stores – seven of which were Cashbuild stores, one was a P&L Hardware store. It also refurbished nine stores and closed two Cashbuild stores.

In the prior year Cashbuild closed 14 stores, but opened 11 new stores.

Since July 2018, Cashbuild's 19 new stores managed to contribute 3% to revenue growth, it said. In contrast, revenue from older stores declined 1%.

Cashbuild's share price, which is 30% weaker than it was trading over a year ago, on Tuesday opened at R155.19. By noon it was trading 2.65% stronger at R159.11.

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