Steinhoff pleased with overseas results

The furniture retailer now derives 55% of its revenue in foreign currencies, mainly the euro, pound sterling and Australian dollar.

Presenting annual results for the year to June, CEO Marcus Jooste said on Tuesday that the UK business had contributed to the group for the first time. “It took some time for us to turn the UK business around.”

He said the group, which ran just under 700 retail outlets in the UK, revamped the logistics division of the UK business and overhauled merchandise patterns.

Jooste also said the group's vertical integration drive was near completion.

Factories, located mostly in SA and eastern Europe, produced goods for its own retail stores.

Excluding the UK, Steinhoff has more than 1000 retail stores worldwide.

The overseas expansion plan had seen the consolidation of various EU retail investments, which were lumped into a new holding unit, European Retail Management SA.

Over the past five years, Steinhoff had made investments in the EU. Jooste said the group had now exercised its option to capitalise these investments into full ownership.

“The consolidated results of these investments provided additional growth to the group, both at revenue and operating profit level,” he said.

Operating margin rose to 10,3% from 8,9% and revenue surged 32% from R34,22bn to R45,04bn. Headline earnings per ordinary share increased to 263,5c from 200,1c, while headline earnings attributable to shareholders grew 42% to R3,37bn from R2,37bn.

The group declared a cash distribution of 60c.

Jooste said the results reflected sound performance and growth. “This was achieved notwithstanding the challenging operating conditions that prevailed in all the regions where we operate.”

Net finance charges rose to R705m from R454m, mainly due to higher interest rates and the strengthening of the euro against the rand.

Gearing remained at 38%. Jooste said the company's debt:equity ratio was well below its self-imposed level of 40% 50%. The UK retail operation had delivered “solid” results in the worst economic conditions experienced in many years.

In southern Africa, the results of the building supplies business were below expectations. “This was due to cost pressures experienced in product costs, distribution costs, internal restructurings, strengthening of the management team and start-up costs associated with increasing the footprint in strategic areas,” Jooste said.

As for the Pacific Rim, the retail operations “continued to experience competitive trading conditions on the back of high interest rates, increased fuel prices and the higher cost of living,” he said.

Jooste said the restructuring of the group's eastern European division had been completed.

The state of the global economy posed a challenge for the new financial year.

Source: Business Day

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