Spar shares closed 1.22 percent higher on the JSE on Wednesday. File Photo: IOL

DURBAN – The double-digit growth in turnover of the Tops and S Buys pharmaceutical wholesale businesses were the highlights of Spar’s “muted” results for the year to end-September.

Tops achieved retail turnover of 11.3 percent and S Buys Group reported turnover growth of 13.4 percent during the period.  

The S Buys pharmaceutical wholesale business was acquired with effect from October 2017, and the revenue and profit were consolidated for the first time this year. 

Spar said the S Buys Group reported a turnover of R929 million for the period. 

“This performance was driven by impressive increases of 17.1 percent in the Scriptwise business, catering for high-value speciality scripts, and 11.7 percent in wholesale sales, which were largely attributed to increased procurement by Spar pharmacies,” the group said. 

However, the group said the profitability of the business was impacted by a lower-than-expected government regulated price increase of 1.3 percent, compared with 7 percent last year.

The pharmacy continued its growth trajectory by adding 26 new stores. At the end of the period, there were 101 pharmacies in Spar stores.

Spar’s liquor division, Tops, increased its retail turnover by 11.3 percent to R11.2 billion, up from R10bn. 

Spar’s overall turnover increased by 5.9 percent to R101bn, while Switzerland saw turnover declining to R9.8bn, down from R10.4bn. 

The group’s profit after tax improved by 0.4 percent to R1.83bn, marginally up from R1.82bn, due to a slightly lower effective tax rate in Ireland.

Headline earnings per share (Heps) increased by 1.4 percent to 965.7 cents a share, up from 952.8c. 

The board approved a final dividend of 729 cents a share, up by 8 percent compared with last year’s 675c. 

Jordan Weir, a trader at Citadel, said the muted growth in Spar’s results could in part be attributed to a slowdown in consumer spending, specifically in Switzerland and Europe. 

“With the ability to easily traverse the Swiss border, residents who have begun to feel the pinch of the global economic slowdown have opted to rather travel to retail stores, which offer the same goods and services as Spar, but at cheaper prices,” Weir said. 

Weir added that on local shores the recent strategical purchase of S Buys, as well as a year-on-year increase in liquor store sales, had helped Spar’s South African segment remain stable during a slowing economy.

Ron Klipin, a senior analyst at Cratos Capital, said the results, on balance, appeared to be rather mundane. However, there were a number of positives.

“Tops liquor sales showed a buoyant increase of 11.3 percent in sales, with Build It increasing by 7.5 percent. Total South African turnover was up by 6.7 percent, and it seems to be a respectable figure in a highly competitive market with internal inflation a negative 1.4 percent compared to 6 percent in 2017 financial year,” Klipin said. 

He added that expansion in Ireland seemed to be progressing well, with turnover now 22.3 percent of the group. “However, Switzerland has proved to be a challenging market,” Klipin said. 

Spar shares closed 1.22 percent higher on the JSE on Wednesday at R177.33.