JD Group soars on news of finance unit sale
Picture: THINKSTOCK
Companies are scrambling to scale back credit to low-income consumers, who are struggling to repay loans in the face of the weak economy and rising food and fuel prices.
In August the Reserve Bank bailed out African Bank Investments Limited (Abil) after the lender was hit by rising bad debts.
"It’s another example of just how bad things are in the consumer credit sector," said Nic Norman-Smith, chief investment officer of Lentus Asset Management, which owns shares in JD Group’s parent, Steinhoff International.
JD Group, 86%-owned by furniture manufacturer and retailer Steinhoff, said in a statement late on Monday it had agreed to sell its finance unit to an international consumer finance group, adding that the deal, which did not include its insurance operations, had yet to be finalised.
It also said it was likely to report a large full-year loss later in September.
"For Steinhoff, the sale would clear up a lot of uncertainty in terms of future capital requirements in funding JD Group. It also focuses JD’s future onto pure retail, which is more in line with Steinhoff’s core business," said Mr Norman-Smith.
For years JD Group and other retailers have sold sofas and dining sets to lower-income customers on credit.
African Bank also sold furniture through its Ellerine Holdings arm, which is now undergoing "business rescue".
Shares of JD Group were up 5.12% at R23.60 at 9.44am, while shares of Steinhoff were down 2.90% at R51.65.
Ajeet kumar
PGDM
3rd SEM
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