Johannesburg - Retail chain Spar Group’s share price increased more than 3 percent in early trade yesterday after the company reported a 22.1 percent rise in headline earnings per share for the year to September 30.
The company, which has been entrenching its foothold in the global retail market through high-profile acquisitions, grew turnover by 23.8 percent from R73.3 billion in the same period last year to R90.7bn.
In 2014, Spar recorded a R54.5bn turnover pointing to a steady increase in the company’s fortunes over the past few years.
The group reported an increase in headline earnings per share of 22.1 percent to 1 020c. Total operating profit rose 12.3 percent to R2.6bn.
The company said its Irish operations increased operating profit by 41.4 percent to R433.4 million.
While southern Africa rose 6.2 percent impacted by higher marketing and information technology costs, contributions to closure costs of the Zimbabwe operation of R19.3m and net debt impairments, which increased by R15.7m.
Profit after tax was up 27.7 percent to R1.8bn.
Spar declared an annual dividend of 665c per share.
Spar, which is essentially a wholesaler and distributor of goods and services to the independently owned Spar retail stores, said yesterday that following international expansion, revenue streams were more geographically diversified, with 32 percent of total turnover being generated in foreign currency.
Two years ago, Spar acquired an 80 percent interest in BWG Group, which owns the Spar brand in Ireland and south-west England.
And this year, the group bought a 60 percent stake in Spar Switzerland for R909.7bn.
“The (Spar Switzerland) transaction is an attractive opportunity for Spar to invest in an established business in a stable market with growth potential,” the company said.
The increase in the group's profits comes against the World Bank predicting lacklustre growth for sub-Saharan Africa’s economies.
The Bank’s Africa’s Pulse document, released last month, said economic growth in the region would decline to 1.6 percent this year - the lowest in over two decades - after slowing to 3 percent in last year.
The bank attributed the lower growth to a combination of low commodity prices, tight financial conditions, which had been exacerbated by policy uncertainty, droughts, as well as political and security concerns.
Chris Gilmour, an investment analyst at Barclays Wealth and Investment Management, said the company had embarked on a deliberate move to diversify the business.
“It started about two years ago with the acquisition of BWG Group in Ireland. This continued this year with the acquisition (of Spar Switzerland). Obviously this diversification brings foreign currency benefits. That was very clever,” Gilmour said.
According to Spar, BWG was the largest company in the Irish convenience retail market by market share.
Interestingly, Spar had not followed its retail peers, such as Shoprite, Massmart and Pepkor, in their expansion into the rest of Africa, he said. “If you had asked me two years ago if that put them at a disadvantage, compared to their competitors, I would have said yes. But the oil and commodity price slump has affected a number of African countries.”
Spar shares were 3.94 percent higher yesterday at R182.
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