Consumer Research Africa

Shoprite (SHP) – Fixing its capital-intensive retail model

SHP delivered solid 1H21 results with significant cash generation, which was used to reduce borrowings. SHP has experienced a long-term decline in its creditor funding ratio, which resulted from its expansion into Africa. The reversal of this trend is encouraging as it could lead to lower debt levels for SHP, we believe more creditor funding can be gained. SHP is addressing its capital-intensive retail model, but we believe the deployment of capital outside SA remains disproportionate to the contribution of this segment. Management remains committed to its Angolan operations which they believe can be returned to previous profit contribution levels.