Steinhoff clams up on tie-up

Picture: BDlive

Speaking to analysts on Wednesday, Jooste said South America was not on the cards at all. "On other rumours and stories in the market about potential acquisitions, we don’t comment on that."

Jooste said that while the company had worked its capital over the past year, Steinhoff remained committed to managing its balance sheet to protect its investment-grade ratings.

"We expect net debt after capital expenditure to come down in the next year by up to 10%. We are very comfortable with our capital structure and our ability to look at further acquisitions, although that is not something that we plan or have in mind at the moment," he said.

In the quarter ended September 30, Steinhoff reported a 12.1% rise in revenue to €3.4bn compared with the year-earlier period.

Operating profit increased 12.5% to €327m.

Cratos Wealth portfolio manager Ron Klipin said the group’s outlook appeared positive but there were "soft spots" such as Conforama in France and Switzerland. Conforama, a major player in the European household goods market, operates a total of 287 stores, of which 204 are in France and 83 are spread across Spain, Switzerland, Portugal, Luxembourg, Italy, Croatia and Serbia.

"Emerging markets in Eastern Europe, however, look extremely positive, with double-digit growth in the general merchandise sales," Klipin said.

As far as debt was concerned, Klipin said Steinhoff’s net debt to earnings before interest, tax, depreciation and amortisation was expected to decline in 2017 as recent acquisitions would begin to contribute. Interest payable on the debt would also begin to fall.

The quarterly results did not include recent acquisitions of UK’s Poundland and US-based Mattress Firm, which were completed in October.

"The balance sheet will be bolstered by the above following a spate of major investments over the past few years, while the low cost of funding in Europe has helped significantly," he said.

Klipin said Steinhoff’s shares appeared to offer value at its current price:earnings ratio "with superb management, geographical spread and product portfolio".

Vestact, which holds shares in Steinhoff, said that while there was nothing earth shattering in the results, the intraday share price in both Frankfurt and Johannesburg had shot up 9%.

"Steinhoff will continue with its strategy of sweating its businesses harder than its competitors. The end game is for the company to be the biggest retail merchandise business in Europe, and equally to be the biggest clothing business here in SA," said Vestact analyst Sasha Naryshkine.

Naryshkine said credit was due to management for having the foresight to make "bold bets when capital is cheap".

"Steinhoff is a lot bigger now than people believe. Adidas has a market cap of about €29bn. Steinhoff is sitting at about €20bn. I think shareholders will be pleasantly surprised in the year to come," he said.