Turnover increased 12.3% to more than 7.5 billion dirhams and net income up 25% to 165 million DH : the year 2016 has been flourishing for the group of large-scale distribution. After years of strong growth, the group embarked on a strategic shift.
In 2016, the sales of Label’Life for the first time surpassed the mark of 7 billion dirhams (7.5 billion dirhams). The increase of 12.3% year on year. With a little hindsight, we measure the path traveled by the moroccan specialist in the large-scale distribution. It was a few years back, the “small” sign had only a dozen points of sale. Its turnover barely exceeded the one billion DH.
Today, the company has become a giant of the large-scale distribution, based on a network of 170 stores and over 160,000 m2 of sales area. To the point of eclipsing gradually its major competitors and to grow against the current market of the great distribution which, in its entirety, runs out of steam.
“In relative value, relative to the market, we are even more proud of these results. All of our competitors are in negative territory in 2016, they are hard discounter or not”, stresses the management, who presented to the press and the analyst community to its annual results.
This dynamic growth is reflected in the steady pace of opening of shops (Carrefour market, Hyper Carrefour and Attacadao). In 2016, not least of hosts 16,700 m2 of sales area were carried out and 7 new stores have seen the light of day. In 2017, the network expansion is expected to accelerate with the opening of 15 new stores, two of which are already operational in Salé and Rabat, for a total investment of 1 billion DH. A capital increase in the amount of 400 million dirhams is planned.
VLV in Stock in 4 years ?
After the period of strong growth, Label’Life began a strategic shift in important, evidenced by the merger between Vector Label’Life (VLC, the land of Label’Life, which counts the EBRD and foreign-based investment funds in its round table) and the group Petra. This merger should allow to maximize the real estate value of existing assets, develop a diversified portfolio of assets to quality performance and to accompany the Group Label’Life in the realization of its program of opening.
“At the outset, we have made real estate by bond, but our core business remains the distribution,” explains the management. “The weight of the real estate has become too important in relation to our business. This is the reason why we have separated our business into two activities : the party, propco and the party opco” (property company and operating company editor’s note), precise-t-on.
With 4 billion dirhams of assets under management, VLV aims clearly today the OPCI (undertaking for collective investment in real estate), the texts of which application should be released after the summer of 2017, as promised by the ministry of Finance. “If tomorrow we go to a real estate mutual fund, it is not excluded to make use of the market”, explains the management.
In what timeframe and in what form ? An IPO in 4 years is in the pipe, to provide a nice output to investment funds, institutionalize the round table, and allow to Label Life back the cash.
The participation of Label’Life in VLV could even go under 50% (it currently holds 60%). “Strategically, there is no interest to hold an equally important part in this type of vehicle,” explains Rachid Hadni, Director-general. “Hold a large part : no. Stay in control and in control : yes,” says he.
Label’Life will retain a share “significantly” in VLV in order to keep an influence on the fate and the state of the real estate assets. This new situation is beginning to arouse the curiosity or even the appetite of moroccan investors. “We are receiving more and more we said it. We deal much more with foreign investors, who are more aware of the business of the land. But this is changing, and it is so much better”. ■
The margin rate, sinews of war, large-scale distribution, improved 0.4 pb account, pro-forma, from 22.2% in 2015 to 22.6% in 2016. This improvement is primarily related to the increase in the margin rate direct of 0.7 pb.
“The margin growth in 2016 has not impacted our price image, and therefore our customers at store level. We went to look upstream,” says the management. How ? Through the removal of intermediaries and the direct negotiation with the farmers, explain to the management Purchase. “By the way, Thanks to the extension of our volumes and in our stores, we have more weight vis-à-vis our suppliers. Suddenly, we have been able to improve our margins back,” he said.