Steinhoff share price up past R2 on Pepco revenue increase
Steinhoff International’s share price is at a 10-month high amid reports its Pepco group may be sold, and after an earnings update
Steinhoff International’s share price initially climbed by more than 20% to a 10-month high on Wednesday, after its Pepco signaled it will report another quarter of double-digit revenue growth, even as the stock was boosted this week by reports that the business may soon be sold.
The Pepco group, which runs Poundland and Pepco discount stores, indicated in a trading update that a 13.3% rise in revenue in its quarter to end-December, amid a rapid expansion of its store base. This was slightly less than the group’s quarter to end-December 2018, when revenue grew 14.6%.
Steinhoff’s share climbed to its best level since May 2019 on Wednesday morning, extending gains after a 47.22% surge on Tuesday. That came after Sky News reported that Poundland’s former owner, Advent International, had joined forces with two private equity firms to undertake a takeover that could value Pepco at more than £3.8bn (R73bn).
In afternoon trade, however, Steinhoff had given back 11.95% to R1.40.
Steinhoff has been selling off assets and is battling for survival after uncovering a €6.5bn (about R110bn) hole in its accounts in 2017. This caused a share collapse and multiple lawsuits from former business partners and aggrieved shareholders.
Steinhoff reported net debt of €9bn in August 2019, said Bloomberg Intelligence’s Charles Allen, and that figure could be closer to €10bn by August this year.
While a sale would make a difference, there “is still a big gap that the remaining Steinhoff business does not look able to fill”, said Allen.
The Pepco group said on Wednesday that Poundland likely extended market share during the quarter, while Pepco expanded its store portfolio by more than 20% year-on-year, opening 94 net new stores in the quarter. In addition, Pepco upsized or relocated a further 23 stores, the group said.
Pepco CEO Andy Bond said on Wednesday that the group expects to continue to to grow revenue for the rest of its financial year, and is planning further expansion, including its first Pepco store in Italy in April.
“Pepco Group has continued to deliver operational and strategic progress, in this important trading quarter, reflecting our clear growth strategy, centred on the significant long-term opportunity for further Pepco stores in central Europe, together with a focus on day-to-day retail execution,¨ said Bond.
Update: February 5 2020
This article has been updated with analyst comment.