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Steinhoff takes JD Group under its wing
by Adele Shevel,
2014-02-23 07:19:50.0
THERE is little doubt that Steinhoff International has taken strategic and operational control of JD Group, the country’s largest listed furniture retailer, which reported a loss at its interim results presentation this week.
The results were presented to a packed auditorium as usual at JD’s head office in Braamfontein, Johannesburg, but this time Steinhoff put in its own man to present the results.
Peter Griffiths has been appointed acting CEO with immediate effect, taking over from David Sussman, who is on indefinite compassionate leave.
Mr Griffiths comes from the Steinhoff stable. For five years, he ran Bravo, the furniture manufacturing business Steinhoff owned before its management buyout. Mr Griffiths was brought in to sort out JD’s distribution problems, but now has a bigger challenge on his hands: to fix the group.
Signalling further changes, Bennie van Rooyen, the CEO of JD Consumer Finance, resigned with immediate effect this week.
JD Group, the country’s largest listed furniture retailer and an unsecured lender, posted a first-half loss, hit by the near-doubling of its provision to cover customer bad debt.
It increased the provision for bad loans 66% to R1.6bn from R966m last June. This now equates to 15% of the loan book, up from 9.9% a year ago, but some suspect it may not be sufficient.
The amount set aside is higher than the group indicated in a trading update issued last week, earmarking between R1.3bn and R1.5bn.
In about two-and-a-half years the group has built up a massive personal loan book of R3bn, but investors are concerned that where the current provision is about 15%, the company might need to settle closer to 30% following a decision to ease further sales of personal loans.
The group reported a net loss of R138m for the period, from a profit of R502m a year earlier.
Revenue rose 4.3% to R17.1bn.
The company opted not to pay a dividend because of its poor performance.
One might wonder if Steinhoff rues taking over JD, given that there are more serious problems at the business than they had envisaged. But Steinhoff has long wanted JD as part of its portfolio.
Steinhoff became JD’s largest shareholder last March, when the group’s shareholders voted for a share swap that allowed Steinhoff to take 50.1% of the furniture retailer. It subsequently increased its stake to 56%.
Independent retail analyst Syd Vianello said Steinhoff wanted control of JD primarily as a channel to sell furniture, but also to provide finance to enable consumers to buy an array of household goods through new operating units JD Group subsequently acquired.
Steinhoff’s core business around the world is selling furniture — it is the world’s second-biggest furniture retailer.
The group also sees JD as a channel through which it could deposit its other retail interests in South Africa such as building materials and motor vehicles, so they sold Unitrans Motors, Penny Pinchers and Timber City into JD.
Steinhoff CEO Markus Jooste and Mr Sussman have a long-standing business relationship and friendship, and have sought to work together for years.
Seven years ago Steinhoff and JD tried to merge. But Steinhoff, with the support of JD’s management, failed to obtain the required shareholder support for the R15bn acquisition.
Though this was not discussed at the results presentation, the group is planning to do a trial “big box” format in South Africa, which it has done successfully in Poland, Germany and Australia.
Ultimately, one “big box” store could service target markets currently serviced by 40 to 50 smaller stores. Analysts have complained there are too many brands in the group.
JD’s share price has dropped nearly 40% over the past year and just more than 10% in the past month.
• This article was first published in Sunday Times: Business Times
Picture: FINANCIAL MAIL
THERE is little doubt that Steinhoff International has taken strategic and operational control of JD Group, the country’s largest listed furniture retailer, which reported a loss at its interim results presentation this week.
The results were presented to a packed auditorium as usual at JD’s head office in Braamfontein, Johannesburg, but this time Steinhoff put in its own man to present the results.
Peter Griffiths has been appointed acting CEO with immediate effect, taking over from David Sussman, who is on indefinite compassionate leave.
Mr Griffiths comes from the Steinhoff stable. For five years, he ran Bravo, the furniture manufacturing business Steinhoff owned before its management buyout. Mr Griffiths was brought in to sort out JD’s distribution problems, but now has a bigger challenge on his hands: to fix the group.
Signalling further changes, Bennie van Rooyen, the CEO of JD Consumer Finance, resigned with immediate effect this week.
JD Group, the country’s largest listed furniture retailer and an unsecured lender, posted a first-half loss, hit by the near-doubling of its provision to cover customer bad debt.
It increased the provision for bad loans 66% to R1.6bn from R966m last June. This now equates to 15% of the loan book, up from 9.9% a year ago, but some suspect it may not be sufficient.
The amount set aside is higher than the group indicated in a trading update issued last week, earmarking between R1.3bn and R1.5bn.
In about two-and-a-half years the group has built up a massive personal loan book of R3bn, but investors are concerned that where the current provision is about 15%, the company might need to settle closer to 30% following a decision to ease further sales of personal loans.
The group reported a net loss of R138m for the period, from a profit of R502m a year earlier.
Revenue rose 4.3% to R17.1bn.
The company opted not to pay a dividend because of its poor performance.
One might wonder if Steinhoff rues taking over JD, given that there are more serious problems at the business than they had envisaged. But Steinhoff has long wanted JD as part of its portfolio.
Steinhoff became JD’s largest shareholder last March, when the group’s shareholders voted for a share swap that allowed Steinhoff to take 50.1% of the furniture retailer. It subsequently increased its stake to 56%.
Independent retail analyst Syd Vianello said Steinhoff wanted control of JD primarily as a channel to sell furniture, but also to provide finance to enable consumers to buy an array of household goods through new operating units JD Group subsequently acquired.
Steinhoff’s core business around the world is selling furniture — it is the world’s second-biggest furniture retailer.
The group also sees JD as a channel through which it could deposit its other retail interests in South Africa such as building materials and motor vehicles, so they sold Unitrans Motors, Penny Pinchers and Timber City into JD.
Steinhoff CEO Markus Jooste and Mr Sussman have a long-standing business relationship and friendship, and have sought to work together for years.
Seven years ago Steinhoff and JD tried to merge. But Steinhoff, with the support of JD’s management, failed to obtain the required shareholder support for the R15bn acquisition.
Though this was not discussed at the results presentation, the group is planning to do a trial “big box” format in South Africa, which it has done successfully in Poland, Germany and Australia.
Ultimately, one “big box” store could service target markets currently serviced by 40 to 50 smaller stores. Analysts have complained there are too many brands in the group.
JD’s share price has dropped nearly 40% over the past year and just more than 10% in the past month.
• This article was first published in Sunday Times: Business Times
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