Connection Group is planning to establish a new retail management group in anticipation of consolidation in the specialist retail industry.
CEO Pierre Joubert says IT retailer Incredible Connection, which contributed almost 80% of the group`s revenue in the year to May, has completed a three-year turnaround strategy and is ready to enter its next growth phase.
Connection Group`s plan now is to establish Connection Universe, a retail management group which will put different technology and electronics retail chains under one banner.
The group`s other subsidiary, Enterprise Connection, will also be incorporated into Connection Universe and provide an IT platform to underpin the new entity.
The group will also acquire other retailers and put them under that banner.
"This is a long-term project," Joubert says. "It`s not going to happen in the next financial year. We`re not planning to rush out and make acquisitions. When it`s appropriate to make acquisitions, we`ll do that."
He says there are two drivers behind the new strategy. While there has been consolidation in various retail sectors, that has not yet happened in specialist retail, although that time is coming.
The second driver is the phenomenon of digital convergence. "We use the example of MP3 players. Is it a hi-fi or a data device like a PC? Who should be selling it?"
The lines are becoming blurred across the electronics spectrum, with home entertainment centres now being able to access data formats such as MP3s and digital photographs.
"We have recognised the trend and we are positioning ourselves to take advantage of it," he says. "But there has to be a common theme. We are not going to put a pro shop in there. Golf is not our business and we don`t know anything about it. The focus is on electronics, goods with chips, not electrical items like toasters and ovens."
Joubert says there is no timescale on the strategy, and the group is adopting a cautious approach. Although it has more than R80 million in the bank, that cash will not be used to rush into acquisitions.
"We understand that acquisitions are tricky things. If you make the right one at the right time it can add value to the business. But if not, it can destroy it."
The group is not planning to build up a cash pile. The cash it has is to be used to grow the business and buy back shares, as Joubert believes there is good value in the share at the moment, and repurchasing will avoid future dilution.
More Incredible Connection stores will be added to the 26. Joubert says Southern Africa could probably sustain 33 to 35 stores.
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