Spar plans to bolster distribution capacity
SPAR plans to spend R500 million on capital expenditure in the next six months in its southern Africa operations to bolster the capacity of its distribution centres, the retailer said yesterday.
The group planned to purchase land to expand its KwaZulu-Natal distribution centre and would construct a future distribution centre in Joburg’s west as part of its multimillion capex programme, the retail chain said.
Spar chief executive Graham O’Connor said yesterday that trading conditions in South Africa had been challenging with political uncertainty undermining consumer and business confidence but the company’s distribution network had withstood the headwinds.
“Spar’s extensive distribution capacity and Spar-branded products that offer exceptional value to consumers ensure its independent retailers are suitably positioned to address these challenges,” O’Connor said.
The group said it had already spend R213 million in capital expenditure in the six months ended March in its southern Africa operations.
This included R95.6m to expand its perishables facilities in the North Rand and Western Cape distribution centres.
The group also invested R111m to acquire six corporate stores, while the other money was spent on upgrading its IT infrastructure.
The group’s revenue for the six months ended March increased 13.9 percent to R48.4bn, and its gross profit in the period jumped to R4.5bn from R.3.7bn in the comparative period.
However, the group’s operating profit fell 4.1 percent to R1.2bn in the period, while headline earnings slipped 0.9 percent to 475.5c a share.
The group’s operating expenses rose 54.4 percent, which the company attributed to the acquisition it made in Switzerland in the period.
The group acquired a 60 percent stake in Spar Switzerland for R690m last year. The group’s southern Africa business turnover grew 4.9 percent to R32.5n, bolstered by growth in liquor sales.
The group said it had grown to 2 069 stores, and completed 89 store upgrades.
The group’s Ireland and south-west England (BWG Group) business reported euro-denominated growth of 1.6 percent.
The total number of BWG stores during the period stood at 1 335, and 33 new stores opened in this region.
Its Swiss operations reported turnover of R5.2bn and added three new stores.
However, the company said sales declined by 3.1 percent in its Swiss business in the period and was disappointed in the performance of the 47 corporate stores in the country. O’Connor said retail operations were the management’s main focus to drive improved returns in Switzerland.
“In order to achieve the expected returns, the group transferred the managing director of Spar’s KwaZulu-Natal region to Spar Switzerland to take over as chief executive.
Together with the recently bolstered retail team, he would be responsible for improving the retail offering to the same standard as the other regions in which the group operates. “Plans included updated store designs and revised product offerings which have been positively received by local independent retailers.”
Spar shares dropped 2.76 percent on the JSE yesterday to close at R170.92.