Cashbuild delivered underwhelming 1H26 results, with muted top-line growth mainly coming from the 15 net new stores added during the period. The group’s aggressive pricing strategy did not help defend market share, as we calculate that CSB lost market share despite a strong rebound in the overall South African hardware sector in 1H26.
The core business, Cashbuild SA, achieved marginal improvements at the gross profit level, but management’s aggressive store rollout strategy is driving up operating costs and dampening operating profit. Addressing this OPM decline will be the group’s focus ahead. The strategy to compete on price has not really worked, as the average basket size has remained flat.
The Other SA segment was created to disclose the operations of P&L Hardware and the three newly acquired Amper Alles stores. CSB continues to close P&L hardware stores, which has structurally lowered revenue from that division, but the turnaround strategy is beginning to show positive signs, with P&L Hardware generating operating profit of c. R1m and trading density growth of 27.1% y-y for that brand alone. While the inclusion of Amper Alles should offset the declining revenue from P&L, the large store format of Amper Alles softened trading density growth for the segment as a whole, although still positive at R40 235/m2 (+6.0% y-y).
The Common Monetary Area is not delivering sufficient returns for the capital investment deployed in those countries, in our view. While CSB has been able to avoid store consolidation, we think a review of the cost base could be needed to improve profitability. In the Non-Common Monetary Area, CSB disposed of Malawi despite a much-improved performance from that country. We believe the decision was made with a long-term view in mind, as volatile trading conditions have impacted CSB in the past.