Steinhoff shows steady growth in a subdued African and European market
First-half healthy 7% rise in profit
STEINHOFF International’s first-half profit rose 7 percent as market share increased, the furniture chain, which last year agreed to buy Pepkor for $5.3 billion (R62bn), said yesterday.
Net income for the six months to December rose to R4.95 billion from R4.61bn a year earlier, the furniture and household goods retailer said in a statement yesterday. Sales advanced 12 percent to R64.6bn.
Steinhoff also owns a majority stake in JD Group and shares in KAP Industrial.
The group’s chief executive, Markus Jooste, said: “Our market share gains in all countries where we operate have been very encouraging for the period under review.
“In what remains a subdued European and African retail market, our discount positioning has underscored a strong set of results.”
Jooste said what was more pleasing was that the European business had done well in euro terms with more than a 7 percent increase in top line growth in a difficult European market.
Steinhoff is expanding into clothing with the acquisition of Pepkor, South Africa’s largest retailer, and is seeking to become one of the biggest discounters with operations in Europe, Australia and Africa.
The company plans to list on the Frankfurt Stock Exchange this year to increase its exposure to investors on the continent, where it generates more than half its sales.
Footprint
Jooste said Pepkor would improve the group’s growth trajectory by enabling it to further expand its footprint and product offering in the value discount market.
“Pepkor is an expanding business and will continue to open stores in Africa as per usual. The exciting part for us is the extension in eastern Europe, which includes opening up stores in Hungary and Romania,” he said.
After the Pepkor deal, about 30 percent of the group’s activities will be in Africa, with the rest in other parts of the world.
Shares fell as much as 5.3 percent, the most on an intraday basis in six months, and closed 2.35 percent lower at R66.40 in Johannesburg yesterday. That pared the gain for the year to 11 percent, outperforming a 6.6 percent increase on the all share index.
“Despite the clear momentum in the business, execution risks and second-half foreign exchange headwind lead us to remain cautious,” London-based Exane BNP Paribas analysts said in a note to clients. “Following a strong run into these results, the shares now trade close to our target price of R67.”
Pricing, marketing campaigns and store investment “resulted in further market share gains”, Steinhoff said.
Pepkor would “increase the group’s growth trajectory by enabling the group to expand its footprint and product offering in the discount market”.