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Steinhoff announces 12.5% increase in operating profit

PUBLISHED: Wed, 07 Dec 2016 11:50:11 GMT

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Steinhoff reports solid results for the quarter ended 30 September 2016.

  • Revenue improves by 12.1% to €3.4bn (3MSep2015: €3.0bn)
  • Operating profit increased by 12.5% to €327m (3MSep2016: €291m)

Amsterdam, The Netherlands – Steinhoff International Holdings N.V. today announced its financial results for the quarter ended 30 September 2016. Due to the change in year end, as approved at the extraordinary general meeting held on 30 May 2016, a summarised consolidated income statement highlighting the performance of the group for the twelve months ended 30 September 2016 is also provided.

The group showed good momentum in the last quarter of the fiscal year 2016. The group’s total revenue for this quarter increased by 12.1% to €3.4 billion. Approximately 93% of revenue is generated by group retail operations. The retail operations improved sales by 15.6% for the quarter under review. While 61% of group revenue is earned in Europe and the United Kingdom, 32% of revenue is earned in Africa, mostly in South Africa. Adjusted for the impact of currency fluctuations during the quarter, versus that of the comparative quarter, retail sales in constant currency increased by 20.3%.

The group reported a 12.5% increase in operating margin to €327million representing an operating profit margin for the group as a whole of 9.7%. When adjusting for one of restructuring costs, the group increased margin by 21.1% to €352million, representing an 80 basis points increase in operating margin for the quarter under review.

Markus Jooste, CEO of Steinhoff, said: “As this calendar year is drawing to a close and I reflect on the past year, I recognise that this has been one of the most transformative years in the 53-year history of Steinhoff.”

Steady growth

Revenue of the Household goods retail segment increased by 13.6% to €2.2 billion, for the quarter ended 30 September 2016 (3MSep2016: €1.9 billion) and operating profit rose by 10.1% to €241 million in the quarter. Conforama reported revenue growth of 2% for the quarter with a good operating profit and cash flow performance in France. In Switzerland, the group is holding its own despite a particularly challenging market. The remainder of the international division comprising Italy, Iberia and the Balkans continue to report good growth. The sales growth in the European business units is particularly encouraging, given the fact that the European summer months are historically a slower period for the household goods business in many territories where the group operates. Germany and the eastern European markets continued to show solid growth, whereas sales in Austria and Africa were affected by the repositioning and restructuring initiatives in these markets. Despite the Brexit vote and pound weakness, the bedding and furniture retail business in the United Kingdom performed exceptionally well. Similarly the Australasian business performed well for the quarter under review, led by the strengthening of the housing market in that region.

For the three months ended 30 September 2016, theGeneral Merchandiseretail segment improved revenue by 18.0% to €895 million (3MSep2015: €758 million). Adjusted for currency fluctuations relating mostly to the South African rand, the general merchandise segment increased sales by 26.3% in constant currency during the quarter. In South Africa, this year marks the 17th consecutive year of double-digit revenue and operating profit growth in that region. An increased product range and a diligent focus on keeping prices to the consumer low, resulted in market share gains in this territory. The eastern European division continued its growth trajectory, with like-for-like sales growth during the quarter exceeding 20% in all countries, with a particularly strong performance in Hungary and Romania. The business in Australasia performed well, with increased like-for-like sales and improved profitability.

When adjusting for currency fluctuations in the South African rand, revenue in theAutomotive divisionwas stable compared to the previous quarter. This performance should be evaluated against the performance of the South African motor industry, in particular new vehicle sales, which has declined compared to the previous year.

Acquisitions

The period saw Steinhoff entrench their global market share in bedding further, with the acquisition of MattressFirm. This acquisition will form the world’s leading multi-brand mattress retail distribution network and facilitate the group’s entry into the USA, which has proven to be a strong mattress industry, that has demonstrated long-term stability and growth.

The strategic partnership with Groupe Cofel, in France will enhance the group’s access to the five factories operated in France, thereby supporting sustainability of supply and improving the ability to manage efficiencies throughout the supply chain.

The general merchandise product segment was expanded through the successful acquisition of Poundland in the United Kingdom and Tekkie Town in South Africa. In line with the company’s strategy to increase its relevance and product range to its core customer base in value and discount markets, and in addition to the decision to substantially scale the successful Pep&Co model in the United Kingdom, the Poundland acquisition presented a unique opportunity to the group to satisfy both these strategic initiatives. Similarly, Tekkie Town presents a good opportunity to the group to maximise supply chain benefits and add further scale and buying power to the group in footwear.

Outlook

Sales momentum in the group is expected to continue for the remainder of the year. In markets where the group has material market share, such as in France and Switzerland sales are expected to approximate or slightly outperform that of the market. In regions such as Germany, Spain, Portugal and eastern Europe, where the group is actively expanding its footprint, market share growth is expected to continue. In the United Kingdom and Australasia, focus remains on increasing market share in all segments of the resilient bedding market. Sales momentum, as measured in constant currency, is expected to continue in the African region.

The group remains confident in its ability to keep prices to consumers low, and to continue to improve operating margins.

Additional information

Additional information and the quarterly financial report and presentation for analysts and investors are available in English via the following link: www.steinhoffinternational.com.


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