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Cashbuild stock spirals as P&L Hardware deal delayed

Werner de Jager Cashbuild

With the necessary approval still outstanding, but conditions such as due diligence satisfied, the effective date of the P&L transcation – initially set for the end of November 2015 – has been delayed. There is no indication when, and if, the authorities will give the green light.

Shares in Cashbuild have softened since the announcement which preceded the home improvement firm’s annual general meeting. The counter extended its losses on Monday to trade at R324/share before soaring to an all-time high of R352/share then settling at R330 (or R3.4 billion in market cap) on Wednesday. This is the same level it was trading at on the eve of the latest P&L news. Despite the hiccup, which some view as a correction after a furious rally, the firm remains one of the hottest stocks in 2015.

P&L is home to 39 retail building material and hardware stores in South Africa to Cashbuild’s 228 predominantly here with a few more stores in Botswana, Lesotho, Namibia and Swaziland. P&L’s footprint explains the JSE-listed group’s expectation that the deal will help it expand its share and “enhance its position in the market as well as aspiration of bringing quality building materials at the lowest prices to the communities in which it trades”.

Cashbuild claims to be “the first choice retailer in its chosen field” across all the regions where it is present. The rally the stock has seen this year, a function of sterling financial performance, speaks for itself.

Revenues leapt 13% to hit R7.7 billion while net profit, coming at R363 million for the full year, skyrocketed a whopping 35%. At 712c per share, dividends soared 35%. Shareholders are all smiles. By all measures, Cashbuild’s performance - not least given the subdued economic climate in South Africa - is nothing short of amazing.

This sparkling set of numbers is a tribute to CEO Werner de Jager and his 5000-strong team. Still, Cashbuild would do well to keep lessen its overreliance on the home market and build scale elsewhere in Southern Africa or beyond.

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