The acquisition of Conforama, one of the largest furniture retailers in Europe, and the streamlining of its diversified portfolios helped Steinhoff International Holdings smoothly glide into an 87 percent rise in annual revenue to R80 billion, chief executive Markus Jooste said yesterday.
The group’s operating profit for the year to June grew by 48 percent to R8bn, with attributable headline earnings increasing 43 percent to R5.4bn.
Jooste said he was pleased with the overall performance of all the divisions in the group, which include retail operations, sourcing, manufacturing, property and logistics in a number of regions including Europe, Africa, the Pacific rim and the UK.
Jooste was particularly pleased with Conforama’s performance, which was included in the 2012 income statement following its acquisition in March last year.
“Conforama continues to dominate continental Europe’s performance, coupled with the strong growth experienced from household goods sales across central Europe,” he said.
The retailer, which caters for the middle class and lower end of the market, gained market share in its furniture and home decoration sales.
“With the difficulties in Europe, more and more customers have scaled down their purchases, therefore we were able to gain market share in all the territories [Conforama] operates in. This shifting in consumer behaviour has benefited us.
“This is the kind of consumer purchasing pattern that is more viable for business in tough economic times than in booming times,” he said.
He said there were a lot of changes during the reporting period and that Steinhoff still had a lot to absorb. He believed every division was in the right place and ready to attract growth.
In the 12 months Steinhoff completed its 50.1 percent acquisition of listed furniture retailer JD Group and its 62 percent controlling stake in KAP International.
“We have crystallised our pillars of investment. As you see with African operations we have placed a number of portfolios with KAP International and with the JD Group, which is our retail platform for Africa. We also believe that our property portfolio division is a good investment for the future,” Jooste said.
Yesterday KAP International, which drives the logistics and manufacturing division of Steinhoff, reported a 7 percent increase in operating profit to R1.1bn while headline earnings were up by 16 percent to R490 million in the year to June.
Reuben Beelders, a portfolio manager at Gryphon Asset Management, said that the group had been involved in significant corporate activity over the past two years and this made determining organic growth difficult. Nevertheless, the group had delivered more than 20 percent growth in diluted headline earnings a share, despite the 17 percent increase in weighted shares in issue.
He said at a share price of R26, the group was trading on a price-earnings ratio of nine times, which appeared to offer value.
“Investors, however, had to be aware that the group was exposed to Europe where economies were weak and austerity measures were likely to impact discretionary spending into the future,” he said.
Beelders added that Steinhoff was, however, focused on the discount segment of the market which would mitigate some of this pressure.
“There remains the possibility that the group will separately list its European operations, this would likely unlock some of the value inherent in the share at the moment. Market conditions are probably not conducive to this at the moment, so investors will have to be patient”, Beelders said.
Steinhoff said it had put the decision to list its European divisions in the European market on hold due to uncertain economic patterns in that region. The company had previously said it would wait 12 months for the Conforama acquisition to consolidate before listing in Europe.
“It is not a suitable time,” the company said.
Steinhoff closed 1.24 percent lower at R26.20 on the JSE yesterday.