Holdsport, the owner of the Sportsmans Warehouse and Outdoor Warehouse retail chains, will list on the JSE later this year, providing Ethos Private Equity with an opportunity to exit its investment and give the firm scope to accelerate growth.
Holdsport chief executive Kevin Hodgson said yesterday that the retail business had been involved in private equity deals for the past few years, was heavily geared and therefore had to be cautious.
He said the private equity model had been a healthy structure, with its emphasis on the importance of cash flow.
Holdsport generates about R1.1 billion in turnover a year. Since 1998 it has delivered annual turnover growth of between 16 percent and 17 percent.
Hodgson said the firm had delivered consistent profit growth, and earnings before interest, tax, depreciation and amortisation was R230 million.
Holdsport chairman Syd Muller said the company was set to see significant growth in the short to medium term because of the increase in consumer confidence and South Africans’ love of sport, exercise and the outdoor lifestyle.
Holdsport offered a number of initiatives to drive its future growth and take advantage of opportunities, Muller said.
Muller formerly headed Woolworths as chief executive.
Hodgson said opportunities included broadening its range in golf, fishing and cycling equipment as well in its technical apparel business.
The group owns an interest in First Ascent, an independently managed business, which supplies technical apparel to the sporting goods industry.
Hodgson said an opportunity might exist to open specialised technical apparel stores.
The group boosts 33 Sportsmans Warehouse stores and 18 Outdoor Warehouse outlets, and plans to open another two or three stores a year over the next three to five years.
But the challenge was to find suitable space, Hodgson said.
The floor space of Sportsmans Warehouse stores averages about 1 600m² and that of Outdoor Warehouse 800m², making it difficult to find suitable space in shopping centres.
Hodgson said the firm had no constraints in terms of capital, adding that “retail is a tough game” and most big retail businesses had some footprint in the sports category.
But Holdsport’s brands differ as it specialises in a wide range of functional sport and outdoor equipment, while many sport retailers, such as Mr Price Sport, focus on sport-themed clothing.
Absa Investments equity analyst Chris Gilmour said Holdsport should do quite well given that it was in a high margin business and South Africans were “sports mad”.
However, it was facing stiff competition with Foschini’s Totalsports and Mr Price Sport.
Gilmour added that the time was “reasonable” to list as the economy was in recovery, and although the upturn was not that strong, it would probably continue much longer. With Muller, “there is good pedigree in management”, Gilmour said.
Ethos Private Equity Fund V invested in Holdsport in 2006 and holds about two thirds of the business. It will utilise the listing on the JSE to realise the majority of its stake through a private placement with institutional shareholders.
UBS is the sole bookrunner for the private placement.
Holdsport management, which holds about a third of the business, will retain its stake.
Hodgson said no capital would be raised for Holdsport through the listing, but the listing would enable it to access future capital and raise the profile of the business. - Samantha Enslin-Payne