JOHANNESBURG, Feb 29 (Reuters) – South African furniture and clothing group Steinhoff International , which wants to buy Britain’s Home Retail, on Monday reported a 67 percent rise in half-year operating profit, boosted by growth in the discount market in Africa and Europe.
Frankfurt-listed Steinhoff, which makes its furniture mostly in developing countries and sells it to budget-conscious consumers in Europe, said its operating profit before capital items rose 67 percent to 802 million euros ($873 million) in the six months to end-December.
“The strong development in the reporting period was mainly due to the above-market growth in the discount market especially in Steinhoff’s key regions Europe and Africa,” the company said.
Steinhoff, which is battling with Britain’s Sainsbury’s to buy Home Retail, said it sees the positive growth in the discount segment of the market continuing for the rest of the financial year.
Read also: Steinhoff v Sainsbury battle heats up: final bid deadline set for 18 March
The group, which bought clothing retailer Pepkor last year in a $5.7 billion deal, increased its revenue by 47 percent to 6.7 billion euros, but announced last week it could cut around 4,000 jobs at its South African furniture retail unit JD Group.
Steinhoff International media statement
Steinhoff continues its growth path in the first half of the financial year 2016
- Revenue growth of 47% to €6.7bn
- Operating profit before capital items increased by 67% to €802m
- Successful listing on Frankfurt Stock Exchange
Amsterdam, The Netherlands, 29 February 2016 – Steinhoff International Holdings N.V. („Steinhoff“) today announced its financial results for the first half of the financial year 2016 ended 31 December 2015. Due to Steinhoff’s strong position in the growing discount market segment, the group increased its revenue by 47% to €6.7bn. Its operating profit before capital items rose by 67% to €802m in the same period. Excluding the performance of the acquired Pepkor group, operating margins increased for the third consecutive year. The strong development in the reporting period was mainly due to the above-market growth in the discount market especially in Steinhoff’s key regions Europe and Africa.
Read also:Â Steinhoff lists on Frankfurt SE, largest in 2015. Secondary listing on JSE.
Markus Jooste, CEO of Steinhoff, said: “The first six months of our financial year 2016 have been very exciting for Steinhoff. Through our strategic focus on key markets and territories, supported by good efficiencies within our supply chain we were able to keep prices low and grow market share. The integration of the Pepkor group of companies is on track, and synergistic cost savings and enhanced growth capabilities for the combined group will continue to support earnings.”
Good growth momentum
Revenue of the Household goods retail segment increased by 8% to €4.2bn, and operating profit rose by 27% to €587m. This retail segment benefited from strong Christmas trade and market share gains in strategic product categories, thereby benefiting margins. The acquisition of kika-Leiner became effective in December 2015. This leading furniture retailer with annual revenues of approximately €1bn, will further strengthen Steinhoff’s market presence in key European markets such as Austria, Hungary, Czech Republic, Slovakia and Romania.
The General merchandise retail segment reflects the successful integration of the multi- national retailer Pepkor, which was acquired on the 1st of April 2015. The acquisition of Pepkor expanded the group’s position in the discount retail segment and diversified its product portfolio in this fast growing area. Notwithstanding the 6% devaluation of the South African rand to the euro, revenue of the business segment rose by 19% to €1.85bn and operating profit increased by 25% to €197m.
Read also: The Steinhoff story – revisiting the humble roots of today’s R260bn giant
The revenue of the comparatively small Automotive retail business segment remained flat during the period at €649m compared to the comparative period, although constant currency revenue increased by 5%. Operating profit declined by 5.3% to €18m.
Strong cash flow performance
Supported by the strong cash generative model of the general merchandise retail division, the group generated cash from operations of €791m, after taking into account the investment in working capital. Apart from the group’s own share repurchases amounting to €758m during the reporting period, Steinhoff continued investments into its integrated supply chain and property portfolio.
Successful listing on the Prime Standard of the Frankfurt Stock Exchange
On the 7th of December 2015 Steinhoff listed on the Prime Standard of the Frankfurt Stock Exchange. With a market capitalization of €19bn, this event marked the largest prime standard listing in Germany during 2015. The listing in Frankfurt will enhance the group’s ability to access global capital markets and support the expansion of its European operations and other growth opportunities available in the international markets. The group retains its secondary listing on the Johannesburg Stock Exchange in South Africa where Steinhoff has been listed since 1998.
Outlook
The positive growth momentum of the discount market segment is expected to continue for the remainder of this financial year. This growth momentum, supported by the investment in the group’s store network in the last three years, should continue to enable the group to take market share. The group is confident that its supply chain and sourcing strategies will protect margins for the remainder of this financial year.
