Long4Life, an acquisitive investment group founded by magnate Brian Joffe, is positioning itself to withstand economic downturns as it taps SA’s growing health-conscious middle class.
Founded four years ago, Long4Life has been carving out a niche in the leisure and lifestyle consumer sector, selling everything from gym equipment and bicycles to sugar-free alcoholic mixers and running more than 200 health, beauty and grooming franchises across SA.
"Retail is developing into different niches. All those niches have different possibilities and outlooks. Outdoors, which is basically sports, camping and the like, is a good space," said Joffe, who is best known for transforming Bidvest in 1988 from a small outfit selling bakery ingredients into an empire spanning dozens of businesses, including car dealerships, shipping and catering.
He told Business Day that there are pockets of growth in SA retail that do not always depend on the political and economic development in the country, and forecast "buoyant sales" this summer after reporting a 20% increase in the six months to end-August.
But the sales growth was overshadowed by a drop in the gross margin – down 1.8-percentage points – as consumers battling job losses, high personal debt levels and a weak economy delay their purchases until prices are marked down and on promotion.
Joffe said the company deliberately pushes promotional and marked-down goods to keep merchandise moving as consumer confidence declines, but he expects margins to improve in the second half of the company’s financial year.
The company, which runs the Sportmans Warehouse chain and beauty and grooming franchise Sorbet, reported a 4% drop to 15.4c in headline earnings per share in the six months to end-August.
Joffe said that while every business needs a healthy "economic backdrop" to grow in the medium to long term, Long4Life would grow returns for the full financial year because its businesses have been ramped up and positioned for the holiday and summer season trading.
"Unrelated to the market, under the current circumstances we are optimistic that we will beat last year’s performance in terms of earnings per share," he said. The company delivered earnings per share of 39c in the 2018 financial year.
Analyst Anthony Clark of Small Talk Daily said that even with a decline in profit margin, Long4Life’s businesses produced "fair" results considering the environment in which they operated in the interim period.
"It is a very difficult operating environment in a consumer space, but Long4Life fared fairly," Clark said.
Long4Life’s share price, which stood at R4.11 on Monday, trades at a huge discount to the group’s net asset value, or the value of underlying assets, of R5.58 per share, more or less in line with investment holding companies.
Long4Life, which withheld dividend payouts as it considered returning cash to shareholders via share buybacks, is sitting on a R600m cash pile, which it may use for acquisitions, Joffe said, adding that the company’s balance sheet could support acquisitions worth double the cash if it were to take on additional debt.
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