Cashbuild Limited (CSB) – Rebuild to Cashbuild

Cashbuild delivered a marginally improved set of results in 1H24 from a top-line perspective despite many headwinds from increased competition in the market and higher input costs. It reported low revenue growth from a low base last year, primarily driven by operations in South Africa, Lesotho and Malawi.

Improved performances in the Cashbuild SA segment, which is the primary contributor to revenue for the Group, and the Common Monetary Area were once again offset by a weak performance from the ailing P&L Hardware business. After implementing many changes to turn the business around, P&L’s goodwill was impaired in FY23, which negatively impacted the Group’s bottom line. As a result, management is now trialling store conversions to Cashbuild to reduce underperforming stores within the P&L brand. There has been a marked improvement in the one store that was converted at the end of FY23, with another store currently being converted and a third approved for conversion.

The Common Monetary Area observed revenue gains in Lesotho, while other countries in the region struggled. Management expects this segment to continue to forego margins to maintain the market share it has in these smaller economies. The Non-Common Monetary Area exited the Zambian market at the beginning of FY23 and had to contend with headwinds such as currency devaluations in Malawi and higher input costs. Despite this, Malawi’s performance was much improved, with revenue growth offset in this segment by the Botswana operations.

We expect a softer second half of the financial year for Cashbuild as sales volumes have historically been lower during this period. Management is also weary of the economic and socio-political challenges that this year will contain, which in our view will provide a lot of uncertainty for Cashbuild before the start of FY25.