Spar goes global to fight rand effect
Spar Group looks to grow its footprint internationally as the economic slowdown and weakening rand impacts on its financials for the year to March.
|||Johannesburg - JSE-listed Spar Group said yesterday that it was looking to grow its footprint internationally as the economic slowdown and weakening rand impacted on its financials for the year to March.
The group said it grew its profit for the six months to March marginally by 5.3 percent to R825.4 million, up from R783.6m in the previous comparable period.
It said it would look to its international operations for future growth prospects.
Spar already has a presence in Ireland where it reported a 44.7 percent growth in revenue to R11.1 billion through its BWG Group. The profits after tax also surged by 109.5 percent to R118.6m.
The group’s overall revenue grew 16.8 percent to R42.48bn, from R36.38bn reported in March last year.
Spar Southern Africa recorded retail growth of 9 percent to R36.8bn.
“A lot has been said about the slowdown in the… economy and we do expect the trading environment to remain under pressure for the rest of the year,” Graham O’Connor, Spar’s chief executive, said. “Definitely the consumer’s levels of spending might be curtailed and unemployment remains a concern for us.”
The group’s liquor division, Tops, grew its retail turnover by 17.2 percent to R4.7bn.
Encouraging
Spar Southern Africa grew its turnover by 9.2 percent to R31bn with encouraging results coming from Zambia, Botswana, Swaziland and Mozambique.
However, the group said its biggest disappointment came from Zimbabwe. “We exited Zimbabwe… because it wasn’t doing well,” O’Connor said.
In the Build It division, the group showed a 16.6 percent revenue growth to R5.8bn.
During the period, the group also opened three SaveMor stores and nine pharmacies at Spar stores, bringing the total number of stores to 30 and 55, respectively, for each brand.
“We want to increase the Spar brand… we operate in 42 countries across the globe and we have performed well since we entered the Ireland market… and we want to continue looking for growth opportunities abroad,” he said.
Spar acquired 60 percent of the ordinary shares of Spar Holding for Sf44.5m (R709.4m) from the existing shareholders of Spar Switzerland.
“The continued economic recovery in Ireland provides an underpin for BWG Group’s second-half performance, while the acquisition of Spar Switzerland will make a positive contribution in the second half,” O’Connor said.
International acquisitions generate revenue in currencies other than the rand, which has weakened 24 percent against the dollar in the past 12 months.
The board approved an interim dividend of 255c per share. The dividend has been declared out of income reserves.
The acquisition of a majority share in Spar Switzerland expanded Spar into an established business in a stable market with growth potential. It was complementary to the operations in Ireland and south-west England, further diversifying Spar’s business portfolio into a third major geography.
Satisfied
O’Connor said despite Nigeria’s ranking as the leading economy in Africa, the group had no plans to enter that market for now.
“South Africa has the most positive economy and our companies rank high in terms of corporate governance. So we are satisfied with South Africa and we do believe that there is still a lot of business to do in the country,” O’Connor said.
Cash flows from operating activities remained comparable to the prior period, with cash utilised for operating activities of R942.5m, up from R737.7m in the prior period.
The group said after the balance sheet date, R2.1bn was raised through the issuance of 11.9 million ordinary shares, resulting in an improved working capital position.
Spar shares have gained 15 percent this year, in line with the food and drug retailers index. However, its share price fell 1.13 percent yesterday to close at R208.86.
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