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Steinhoff’s shares slide as retailer warns of volatile markets in countries it operates in

Pedestrians pass the entrance to an Ackermans retail store, operated by Steinhoff International, in Johannesburg. File photo

Pedestrians pass the entrance to an Ackermans retail store, operated by Steinhoff International, in Johannesburg. File photo

Published Jun 27, 2022

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Steinhoff International's share price took an almost 6 percent dip on Friday, in spite of increasing its core profit, as the retailer warned that the markets within it operates are likely to remain volatile in the near term.

The shares traded at R2.69 after the company said the core profit increased by 13 percent for the six months to end-March bolstered by the easing of Covid-19 restrictions. The counter closed at 5.24 percent at R2.71.

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The core profit increase was driven by Pepkor's robust performance. Group revenue from continuing operations grew 12 percent to €5.15 billion (R250bn), compared with the previous year's €4.6bn for the corresponding period.

"The markets within which the group operates are likely to remain volatile in the near term, due to the situation in Ukraine, ongoing global inflationary pressures, and other regional challenges," Steinhoff said.

Steinhoff's subsidiary Pepkor Holdings, which has the largest retail store footprint in southern Africa, with more than 5 700 stores operating across 11 countries, had revenue growth of 9 percent to €2.420bn.

Pepkor's profitability remained strong with core profit increasing by 19 percent to €308 million.

"The Pepkor Holdings Group’s ability to achieve ongoing organic growth is evidenced by its robust store expansion programme. During the reporting period under review, 144 new stores were opened," the group said.

Individual businesses, such as Pepkor Holdings and Pepco Group, with their everyday value focus, continued to perform well throughout the reporting period, while others, such as Greenlit Brands and Mattress Firm reported declining trade.

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Mattress Firm's core profit decreased by 4 percent, while profit for the period increased by 17 percent.

Greenlit Brands revenue slipped by 4 percent to €361m as lockdown restrictions imposed as a result of the omicron variant across Australia and New Zealand negatively affected sales activities.

Steinhoff said its net debt rose by 26 percent to €10.23bn, with the group’s global litigation, including €1.1bn in cash settlements, and its cash pile halved year-on-year to €1.18bn.

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"Overall operational results are under pressure as costs are increasing while revenue is being dampened, both as a result of the economic pressures," it said.

Steinhoff said the rising inflationary outlook together with increasing interest rates were putting both consumers and businesses under pressure.

"The markets within which we operate are likely to remain volatile in the near term, due to these ongoing challenges. As we look ahead, we must make progress with step 3 of the strategic plan, restructuring our debt and financing costs," the group said.

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The embattled Steinhoff group made headlines as it faced off several claims and litigation actions against it in the wake of an accounting scandal. The company implemented a global settlement process in February.

BUSINESS REPORT

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