Johannesburg - Household goods company
Steinhoff International Holdings [JSE:SHF] said Tuesday that its African operations performed in line with expectations and on a very similar trend to that experienced in the prior financial year.
In a statement at the group's AGM, CEO
Markus Jooste said once again the Unitrans group delivered an excellent performance for the quarter. All three divisions, consisting of the logistics, passenger and automotive divisions, were on budget and exceeded their prior year results.
The ongoing pressure on the building industry in South Africa continues to have a knock-on effect on the timber and building material retail markets. In spite of this the group's timber operations came in on budget for the period under review, which is a marked improvement compared to the prior year.
The building material retail division continues to deliver results in line with the industry. The group is constantly reviewing its overheads and infrastructure in order to improve its bottom-line performance in the face of weak demand, which we expect to continue, he said.
The raw material operations continue to grow in line with expectations and are on track to achieve the performance targets set for the current financial year.
"Our African operations continue to investigate opportunities in South Africa and across the African continent and a number of business units are currently expanding into Africa. Our operations in the Pacific Rim have seen a marked improvement in the performance compared to the prior year, albeit still not at desired levels.
"The management team, with the assistance of our group services team, has put a lot of time and effort into the business and we expect the business to show continuous improvement as the year progresses. Our sourcing operations in the East again delivered a solid growth performance and service levels remain excellent," he said.
The group's European business reported good results for the quarter under review, in line with expectations. The Continental European retail division's performance was the highlight of the quarter under review and delivered good top line growth at slightly improved margins.
The resilience of the German, Austrian and Swiss economies supported the good results in our European divisions.
"This territory presents a number of exciting consolidation opportunities, as well as access to territories inwhich the company does not currently have a presence," he said.
Performance during October and November exceeded expectations and bodes well for a solid interim performance, measured in constant currency. However, the rand, as reporting currency, has been much stronger than the comparative period last year and this will again have an effect on translating foreign currency denominated income into Rand.
The UK is experiencing challenging trading conditions as a result of the uncertain economic environment and fiscal policy changes brought about by the Coalition government. However, our UK operations are holding their own and gained market share in the UK. The timeous closure of some Irish retail operations will affect like-for-like growth, but should have a positive impact on margins.
The manufacturing divisions of Eastern Europe reported solid results, much in line with the prior year notwithstanding a volatile currency environment.
"The consolidation of the industry is continuing on a daily basis and Steinhoff is well positioned to participate in this process as it develops. Our brand management activities have performed satisfactorily for the quarter under review, with royalty income achieved on budget," he added.
The treasury function performed well and underlying margins for the business as a whole remain on track.
Financial markets showed renewed levels of interest and activity in recent months. This was underpinned by improved liquidity, at spreads substantially lower than those of a few months back. The company took advantage of these favourable market conditions and launched a Euro300 million convertible bond on 15 September 2010.
"Within an hour of opening the book, the company received applications that far exceeded our expectations or requirements and eventually closed the book on Euro390 million with a 5% coupon. The funds raised have strengthened the company's balance sheet and extended the debt maturity profile to 2016," Jooste said.
Working capital management for the consolidated group was better than budgeted and resulted in lower finance charges compared to budget. In all of the divisions, working capital management remained a focus area, thereby achieving the appropriate stock levels and resultant cash generation.
The company also announced that elections to receive the cash distribution of 63 cents per share were made in respect of 291.4 million ordinary shares - or 19.7% of Steinhoff's issued shares - totalling an aggregate cash distribution of R183.573m. Accordingly, 45 131 680 new ordinary shares have been issued.