Spar plans to bol­ster dis­tri­bu­tion ca­pac­ity

The Star Early Edition - - COMPANIES - Ka­belo Khu­malo

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.

PHOTO: GCINA NDWALANE

Trad­ing con­di­tions have been chal­leng­ing for Spar, but its dis­tri­bu­tion net­work had with­stood the head­winds.

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