Steinhoff FY numbers

Steinhoff reported numbers for their first full year that includes all the huge transactions that they have managed to close in the same time that Alibaba have been listed, not all full years of course, some of the transactions are recent. Marcus Jooste and his team are highly regarded, they now have one of the most iconic South African businessman as a large shareholder. You will recall in the message that we wrote last year in November: Steinhoff buying Pepcor, that Dr. Christo Wiese would own around 20 percent of the business. He has been potentially diluted a bit with the issue of convertible bonds, we wrote about that at the end of July -> Steinhoff convertible bonds.

We made a few points about shares in issue at the end of July, as well as the hard charging management at Steinhoff: "There are now 3.667 billion shares in issue, there was half that in 2013. Such has been the pace of deal making, acquiring JD Group (second time lucky) and Pepkor. Pursuing a strategy that has certainly worked well for them, the number of shares in issue in June 2005 was less than one-third of what it is now. That is not for the purists, this company is certainly run by some hard charging and very hungry individuals, Markus Jooste (53), Danie van der Merwe (56), Frikkie Nel (55) and Piet Ferreira (59) are up for it. After all, 50 is the new 30, right?"

And of course, if you missed it, just two days ago the company announced that they had got the necessary votes to proceed with the offshore listing in Frankfurt. Logistically speaking, what happens next is that a business called Genesis N.V. will acquire all the shares of Steinhoff, in exchange for each Steinhoff listed share on the Frankfurt stock exchange, there will no doubt be a version change. You will basically be an investor, owning a global depositary receipt of a business listed in Frankfurt and domiciled in the Netherlands. Got it? Easy, not so?

The founder of the group, Bruno Ewald Steinhoff, lives in Germany. His term as a director, as per the prospectus suggests not more than four years, in 2019 he will be 82 years old. Roughly the age of Warren Buffett now, a decade younger than Charlie Munger, there is a second generation on the board as an alternate non exec, Angela Kruger-Steinhoff. I am guessing she will in time represent the family interests. Christo Wiese, who turns 74 tomorrow (I can read ID numbers), has the same terms. His registered address is 98 The Ridge, Fourth Beach, Clifton. Familiar with that one? What is more interesting as per the prospectus, and I had heard this from a client who knows the team, three of the directors above, Marcus Jooste , Frikkie Nel and Danie van der Merwe all have the same registered address. True story, they all live together at Jonkersdrift Farm, Jonkershoek in Stellenbosch. Imagine seeing each other all day and then being able to continue that discussion during dinner? Quite amazing.

OK, let us have a look at the results now quickly. As we mentioned, the company had been really busy. With the rest of JD Group acquired, JD promptly turns around as a whole owned subsidiary and then acquires Iliad. They increased their investment in the PSG group to 27 percent. I guess that indirectly means that as a Steinhoff shareholder you own some Capitec and some Curro and some Zeder, as well as the rest of the PSG business. Scroll to page 8 of the investor presentation and you get a good idea of what and who the company is. The three separate divisions are household goods, general merchandise and lastly automotive, which consists of 87 dealerships and well as 46 rental locations.

Revenues grew 15 percent to nearly 135 million Rand, headline earnings increased an eye popping 36 percent with the all the transactions. Along with the transactions however and share issuances (average weighted number of shares in issue increased 38 percent) comes a dilution, headline earnings per share was 2 percent lower at 453.7 cents per share. The dividend increased 10 percent to 165 cents per share. Net asset value per share increased 22 percent. Pepkor is only in these numbers for three months, the 12 month revenues for Pepkor grew 18 percent. I am guessing some currency translations in there. In a tough European environment, the group managed to increase revenues in their household goods division by 7 percent. It seems that Europe is not finished for furniture, just "finished". Pfff. The company owns a fair amount of real estate too, 41.4 billion Rand worth, possibly a lot more in recent weeks, seeing as the Rand has weakened significantly to the Euro, around 9 percent in the last 3 months.

We have been buying a lot of these, in anticipation of a lift ahead of the Frankfurt listing, plus more importantly a general global recovery. This is a strange business in terms of the global reach, the geographies do not really all tie up, what has Western European retail got to do with African retail? I suppose people all want the same thing, value for money on furniture and clothing. The empire is being built, the team are strong and hungry and have years of experience to draw down on. We continue to accumulate and maintain our buy rating.