Irish unit significantly boosts Spar Group profit

SPAR Group’s take over of Irish-based BWG, a leading food retail company, has helped to significantly boost earnings and turnover in the six months to March, the company said yesterday.

The solid results are against the backdrop of a tough environment of high consumer debt and unemployment.

South Africa’s second biggest grocery retailer said its performance in the first seven weeks after March was strong and impacted by the Easter holidays.

Headline earnings a share grew by 22.7 percent to R788.3 million from R642m in the same period last year, of which 13.3 percent was from its local business, and the difference from the BWG.

Spar rewarded shareholders as it approved an interim dividend of 239 cents a share, up 22.6 percent on 195 cents a share last year.

The results underscore market share growth and power disruptions that added pressure on consumer spending.

Group turnover grew by 40.9 percent to R36.4 billion compared to R25.8bn in the same period last year, as Spar Ireland contributed R7.7bn of total group turn over.

Gross margin rose

to 8.6 percent compared with last year’s 8 percent.

Pressure on South African consumer spending would continue in light of weak economic growth, the company said.

Food inflation

“The impact of the current drought on maize pricing is likely to increase pressure on food inflation.

“Further, the risk of increased load-shedding by power utility, Eskom, in the winter months could pose additional pressure on retail sales,” Graham O’Connor, Spar chief executive said.

O’Connor said the group was in a good space consider- ing the growth in the local market and the opening of new stores.

“It is not easy for consumers, especially in areas where we have opened stores. We will fight and support our consumers,” said O’Connor.

Alex Sprules, a junior research analyst at Imara SP Reid, believed that the group’s international expansion was positive.

“We believe that this will be positive for Spar as it not only diversifies its earnings stream but provides a second engine for growth, with the South African market offering limited opportunity due to lowgross domestic product growth (around 2 percent) and the consumer under strain due to increased electricity and fuel costs.”

Tops at Spar maintained growth with sales increasing by 19.6 percent to R4bn.

Tops stores increased to 639 with the launch of 21 new stores in the period under review.

The group opened four SaveMor stores and four Pharmacy at Spar stores, bringing the total number of stores to 32 and 49 respectively for each brand.

A convenience store in the Park Station development was opened.

Spar shares on the JSE ended 0.56 percent lower at R189.20.