MANUFACTURING: Shoe-In For Green Cross
Recent Western Cape Business News
WHO would have thought that a ‘health shoe’ business would fetch a price tag of close to R400 million.
Cape Town-based footwear specialist Green Cross, a third generation family business founded in the mid seventies, was last month bought out by consumer brands giant AVI for R382 million.
That’s a serious purchase price for a business that sits in a small niche of the beleaguered SA clothing and textile sector. But clearly, as we shall see later, it’s a highly profitable niche, and one that AVI believes (excuse the pun) has legs.
Green Cross, which employs over 500 people, still manufactures from a plant in Epping for its own retail and wholesale outlets.
Green Cross’ comfort shoe brands should fit snugly into AVI, which has made a huge success of its premium branded footwear brand, A&D Spitz, which was acquired in mid-2005.
AVI said the Green Cross acquisition represented a “rare opportunity to acquire an established, category leading brand of relevant scale with a solid record of profitable operations.”
AVI noted there was an opportunity to substantially increase the scale and profitability of Green Cross’ operations through increased brand focus, product innovation as well as greater investment in both the retail and wholesale operations.
Other possible initiatives could include opportunities to boost trading margins by utilising the AVI and Spitz shared services infrastructures. There could also be plans to introduce the credit and loyalty programmes – currently offered at AVI’s Spitz and Kurt Geiger outlets - at Green Cross.
What might surprise CBN readers – accustomed to reading about the woes of fashion item manufacturing in SA is the profitability at Green Cross.
In the year to end February 2012 the business generated more than R300 million in turnover, which was turned into operating profits of R70 million and after tax profits of R50 million. In other words AVI are paying dearly for this well-established business.
There are profit warranties attached to the deal. AVI will stump up an extra R35 million if Green Cross clears certain profit hurdles for this financial year (ending February 2013).
Sounds like a shoe-in...
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