Spar shares slide after low rise in sales

THE SPAR GROUP share price slid more than 3 percent after the retailer only saw a slight increase in sales for the 18 weeks to end January 31, with a challenging start to the year.

The group reported a 5.4 percent increase in sales to R39.79 billion during the period, up from R37.75bn compared to last year.

Spar Southern Africa increased its sales by 4.9 percent, with the group stating that this reflected the weaker consumer spend, while its core Spar business reported sales growth of 6.1 percent, with same store sales increasing by 4.6 percent.

“Internally measured price inflation of 4.2 percent reflected the upward movement of prices in a wide range of grocery and perishable items.

“The liquor business delivered a somewhat disappointing performance with growth of 4.5 percent in an increasingly competitive retail sector,” the group said.

Build It reported a 3.4 percent decline in sales, reflecting the weak state of the building materials’ market.

The share price declined to R186.44 a share in the afternoon after the release of the trading update, before closing at R186.50.

In Ireland, Spar said growth was reported across all of its retail and wholesale divisions in a challenging economic environment impacted by Brexit consumer concerns.

“In euro-currency terms, this business increased turnover by 0.7 percent, which was assisted by the two recently acquired wholesale businesses.

“Combined with a slightly weakened rand this business reported sales growth of 1.5 percent,” the group said.

Its business in Switzerland continued to reflect the negative local market conditions and its turnover declined by 1.9 percent in Swiss franc currency terms.

“While still disappointing, this performance tracks ahead of the reported Swiss retail market. In rand measured terms this business reported an increase in turnover of 2.6 percent.

“Management remains satisfied that the implemented strategies will continue to show positive results,” the group said.

In Poland Spar concluded the acquisition of the majority stake in the Polish retail business, Piotr i Pawel, on October 1, 2019.

Piotr i Pawel has 77 stores and supermarkets as well as a distribution network in Poland.

The group said the trading performance of this business had been in line with its expectations as the debt restructuring activities continued.

“These proceedings should soon be concluded, and management remains very positive about the prospects of this business,” the group said.

The group added it had signed an agreement confirming its exclusive status as the sole operator of the Spar brand in Poland.

The group will release its half-year results to end March on or about May 13.

EDWARD WEST

GLOBAL maritime transporter Grindrod yesterday announced a number of transactions to acquire an additional 33.25 percent stake in its IVS Bulk joint venture.

Chief executive Martyn Wade said the consolidation of the joint venture’s (JV’s) financial results into Grindrod’s financials was a critical step in the growth and development of the company. “We will have reduced the number of vessels accounted for under unconsolidated joint ventures, from 19 to one, a core focus of ours, which simplifies the company’s financials and operations,” he said.

Subsidiary Grindrod Shipping (GSPL) would acquire the 33.25 percent ordinary and preferred equity shares for $44.1 million (R662.07m), increasing its stake to 66.75 percent.

The ordinary equity portion would be acquired for $35m, while the preferred equity component would be acquired for $9.1m.

The acquisition would be funded with cash on hand, proceeds from a refinancing of the IVS Bulk capital structure, and a new loan at GSPL.

GSPL would enter into a revised shareholders agreement extending the partnership for 12 months and would result in GSPL controlling key aspects of corporate governance of the JV.

IVS Bulk’s financials would be consolidated into the financial statements of Grindrod, rather than the equity accounting method, as was previously the case.

IVS Bulk would refinance with its lenders to optimise its capital structure.

The two existing credit facilities would be refinanced with two new senior secured loans totalling $127.3m, representing an approximate 55 percent loan-to-value at draw-down, with maturity scheduled for 2025.

A portion of the proceeds of the new loans would be used by IVS Bulk to repay existing shareholder loans in the JV, and redeem a portion of the preferred share capital of IVS Bulk pro rata. In addition, GSPL had agreed to new financing of $35.8m with an affiliate of the remaining partner in IVS Bulk. This financing matured in June 2021 and was secured by GSPL’s equity stake in the JV.

Grindrod’s shares declined 0.45 percent on the JSE yesterday to close at R4.39.