ACROSS THE BOARD - JSE MAGAZINE

ACROSS THE BOARD

The recent listing of Steinhoff Africa Retail Limited on the JSE is yet another step in the group’s strategy to maintain its position as a leading retailer throughout the continent

Steinhoff Africa Retail Limited (STAR) is the 14th company to list on the JSE this year. STAR, which listed in the broadline retailers subsector on the exchange’s Main Board on 20 September 2017, is an integrated African retailer that brings together a pool of iconic retail brands that share a collective history – in some instances dating back to the early 1900s. These retail brands have all been intrinsically part of SA’s economic landscape. The retailer’s shares traded above the pre-listing price on its first day of trade, opening at R20.58 per share and closing at a strong R21.52 per share. The day’s trading volume included nearly 6.9 million shares, which equates to more than R1.5 billion in terms of value.

STAR brings the total number of broadline retailers listed on the JSE to six. This subsector has a total market cap of R91.5 billion, contributing 1% to the exchange’s overall market cap.

STAR is a subsidiary of integrated global retailer Steinhoff International Holdings N.V., and provides everyday products at affordable prices, serving customers at their convenience. Through the global benefits of group sourcing, scale advantages, shared best practices and strategic direction, STAR effectively competes with both domestic and international retailers in Africa.

‘The decision to separate Steinhoff’s emerging and developed market retail businesses and establish STAR was a natural progression, given the business’s distinct strategic and geographic focus,’ says Ben la Grange, CEO of STAR.

La Grange’s career within the Steinhoff Group began 14 years ago, and included his role as CFO of the southern hemisphere operations that today includes the STAR Group retail businesses.

‘STAR is a listed, diversified, multi-format retail champion of significant size and scale, with its roots in Africa,’ he says. With its rich history, solid foundations and a focused business strategy, STAR is a truly African company comprising strong brands, good people, a solid infrastructure and a passion for opportunity.

TRULY COMMITTED TO AFRICAN COMMUNITIES
STAR is a proudly African company. The dedication to the communities and customers it serves resonates solidly among its management and employees. As such, and to celebrate the successful listing of STAR, management and some of its business partners have committed to contribute R1.3 million, which will be divided between the following four CSI initiatives within the group.

Ackermans Ububele Schools
This is an early childhood development project that focuses on building strong early literacy foundations for children between the ages of three and six years old. Since 2015, Ackermans has partnered with 14 schools in the Western Cape and there are plans in place to expand the project to other provinces over the next three years.

Mitzvah School
Established in 1987, this school provides 12 months of tuition to 40 matric students from Alexandra township every year. Since its inception, more than 1 200 students have passed matric at the school, and the project boasts nine consecutive years whereby the students have achieved a 100% pass rate.

PEP Academy
Since 2008, the PEP Academy has provided literacy and numeracy transition skills to more than 15 000 learners countrywide. The academy is an after-school programme that provides additional tuition to intermediate phase learners as they transition from tuition in their mother tongue (Grade 3) to tuition in English (Grade 4).

Steinhoff Extended Family
Initiated by Steinhoff 14 years ago, this is a home-based care programme that includes more than 400 children in Soweto. The project is managed in partnership with Abraham Kriel Childcare and focuses on caring for children affected by HIV/Aids by providing them with basic day-to-day necessities, while simultaneously developing them into educated, responsible and productive young adults.

KEY PRINCIPLES
STAR is a retail champion

  • STAR has one of the largest footprints within the formalising African market, including more than 4 800 stores across 12 African countries.
  • It holds a strong market share in apparel and footwear; electronics and appliances; and furniture and home improvement.
  • More than R50 billion is generated annually.

High exposure to the emerging consumer class
Africa has the fastest-growing population in the world, with the majority of people being customers in the discount and value market segment, seeking value for money in everyday products.

Defensive discount model
The market’s discount segment is outgrowing the general retail market due to good value and quality everyday products being available at lower prices.

‘Best price leadership’ strategy
The Star Group (its discount brands in particular) has built its reputation of ‘best prices’ over a number of years, developing customer loyalty by keeping prices down.

Established multi-brand strategy
The STAR Group includes many brands that offer various products for the home and lifestyles of customers, from building or renovating a house to making it a home with furniture and appliances, and clothing families with dignity and pride.

Serving customers at their convenience
STAR’s 4 800 stores are conveniently located throughout SA and in key locations in other African countries. Approximately 110 000 Flash units further extend the access of customers to services, including airtime and electricity payments, while providing a source of income to informal traders.

Superior supply chain management
STAR has developed a comprehensive supply chain over the years, building long-term relationships with suppliers and using its large product volumes to minimise logistics and distribution costs.

Strong organic and innovative growth opportunities and initiatives
Existing growth initiatives under way within the group include continued new store roll-outs, expansion of product ranges and the strategic leveraging of group scale in terms of operating platforms to further lower the cost of doing business.

Innovative and experienced management team, loyal and committed employees
Each of STAR’s businesses are managed by an experienced and proven management team.

Highly cash-generative and robust operating model

STAR’s ability to keep costs and prices low allows it to be highly cash-generative, creating opportunities for growth and expansion.

Stable of well-known brands
STAR’s vision is to be the preferred destination for delivering value to the African consumer and all other stakeholders.

Discount and value retailers
STAR’s discount and value division represents nearly 80% of the group’s revenue, and it contributed 95% of earnings before interest and tax in the 2016 financial year. The clothing, footwear and homeware retail concepts represent the biggest part of this division.

PEP is the biggest single-brand retailer in Africa, providing customers with a variety of discount-range everyday necessities, including clothing, footwear, homeware, personal accessories, cellular products and financial services.

Ackermans is a value retail brand that offers casual wear that appeals to the mass middle market. Located in close proximity to other essential shops and customer services, the main focus is on kids’ and women’s wear, so that moms can shop for their children and themselves in one convenient retail store.

The household goods discount and value brands include Russells, Bradlows, Rochester and Poco.

Speciality retailers

STAR’s speciality division contributed 23% of group revenue and 5% of earnings (before interest and tax) in the 2016 financial year. This division comprises four categories:

  • DIY includes BUCO, Timbercity, The Tile House and Hardware Warehouse.
  • G2 (electronics and appliances) includes Incredible Connection and HiFi Corp.
  • CFH (clothing, footwear and homeware) includes Shoe City, Dunns, John Craig, Refinery and Tekkie Town.
  • Speciality bedding is represented by Sleepmasters.

www.steinhoffafricaretail.co.za