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JOHANNESBURG - Listed Kaap Agri yesterday said it expected better second half results despite current difficult trading conditions as a result of persistent drought in the Western Cape province.

The company said that recent rains in the province had provided some optimism in its agricultural division.

Chief executive Sean Walsh said the drought is showing signs of dissipating, with the company expecting the rains to continue into the winter season.

“Although the current year remains challenging, our growth strategies are firmly on track to deliver superior returns in line with our strategic medium-term plans and we remain optimistic that the coming agricultural seasons should improve,” Walsh said.

Walsh said the continuous improvement in consumer confidence would remain key to the company's fortunes.

He said Kaap Agri would continue to invest in revenue and cash generating capital expenditure. The group operates in general retail, agricultural-related retail and fuel retail.

Increased revenue

In the six months to end March, Kaap Agri reported a 7.2percent increase in recurring headline earnings per share to 223.12cents a share, up from 208.05c, and a 5.4percent increase in revenue to R3.4billion from R3.2bn as compared to last year.

The group attributed the increase to the ongoing retail and fuel diversification strategy, which offset the negative performance of the agricultural retail, particularly in the Western Cape.

However, the group said grain handling revenue was significantly curtailed due to reduced harvests. Non-agri retail revenue growth continued to outperform agri revenue growth, with similar trading profits being generated by both income channels.

“As part of the retail fuel expansion, The Fuel Company (TFC) owned and managed sites have grown fuel volumes by 40.5percent and additional TFC site acquisitions are at various stages of conclusion,” the group said.

Kaap Agri has Zeder Investments as its biggest investor, with a 40.9percent stake. It made its debut on the JSE in June last year. The group has more than 190 operating points located in eight provinces as well as Namibia.

Profit for the period increase by 7.93percent to R156.19million, up from R144.71m. The group declared an interim dividend of 32c a share, up by 8.8percent as compared to last year’s 29.4c.

Walsh said improved revenue growth is anticipated for the next six months as consumer confidence shows signs of recovery and store upgrades and expansions contribute more significantly. He said investment into expansions, upgrades and acquisitions continued during the period, resulting in a R86.5m increase in property, plant and equipment.

Kaap Agri said it planned to take advantage of its extensive footprint and diverse service offerings to maintain its strong organic growth and to focus on the acquisition of new business opportunities.

Kaap Agri rose 7.4percent on the JSE yesterday to close at R42.97.