The SPAR Group did well to lift taxed profit 20.9% to R1.6 billion off turnover that grew by only 4% in the year to September 30, despite ongoing challenges arising from an SAP system rollout and tough consumer operating environments.
Turnover for the South Africa, Ireland, Switzerland, and Poland franchise grocery store group reached R152.3bn. Headline earnings per share increased 11.1% to 917.9 cents. The dividend was passed again.
“The group made significant strides in its strategic… SPAR’s continuing operations have demonstrated a resilient performance,” directors said in the results yesterday.
SPAR’s chief operating officer Megan Pydigadu said generally, revenues were lower in the second half as inflation had trended lower, but grocery market shares and margins were being maintained.
She said in an interview the pharmaceutical businesses in South Africa continued to show good growth, while there had also been, post-financial year-end, strong top-line growth in Build it, which the group believes is due to the Two-Pot pension system payout.
Pydigadu said that since Checkers was taking on Woolworths for the upper end of the consumer income grocery market in South Africa, SPAR had in the past year grown particularly well at the lower-end of the market, and she envisaged that more of the group’s discount chain, Savemore, would be opened in the new financial year.
Over the past year, strategy wins included finalising the sale of SPAR Poland, reducing debt and stabilising the balance sheet, resolving SAP issues at the KZN distribution centre, and working towards a 3% operating margin in Southern Africa, a target that remained intact.
The European strategic review was underway. In the past 18 months, the group management had been distracted with issues such as the SAP rollout and sale of the Polish business, but these were largely behind them and there would be more focus on the South African operations, said Pydigadu.
No dividend was declared due to challenges over the past 18 months and work to ensure financial stability, and position the group to take advantage of growth opportunities. The decision on a dividend would be reconsidered in the future.
Over the past year, turnover growth slowed in the second half across all geographies from the strengthening of the rand, increased competition, and cost-of-living constraints among consumers. Gross profit margins were stable at 11.9%.
Gross profit margin for SPAR South Africa, including SPAR, Tops, and Build it, decreased from 8.7% to 8.5%.
BWG Group, comprising the Ireland and England businesses, increased gross profit margin to 15.2% from 15.1%, driven by better category mix.
Improved margin management in the wholesale and TopCC cash and carry business saw SPAR Switzerland’s gross margin improve to 18.3% from 17.8%.
Group operating expenses increased 3.5% to R18.7bn, underpinned by focus on cost management and efficiency initiatives.
Group net borrowings reduced by R2bn, from R11.1bn as at March 31, 2024, to R9.1bn at September 30, 2024.
SPAR Southern Africa reported a 3.7% increase in turnover in the high inflation, high interest rates, and low economic growth environment.
Core grocery and liquor turnover rose 3.6%, with SPAR private label growing by 7%. Wholesale price inflation was measured at 5.5%. Build it grew turnover 2.3%, improving from a 4.3% decline in the previous year.
Pharmacy at SPAR saw 14.5% turnover growth after a strong performance from Scriptwise.
The SPAR2U on-demand shopping app expanded to 525 sites by the end of September, with order volumes increasing 380% year-on-year.
Operating profit in the Southern African segment, excluding non-recurring items, increased 26.1%.
“SPAR South Africa has arrested recent market share declines and stabilised its share amongst its key customer base over the past year with monthly market share, according to NielsenIQ, staying flat since February 2024,” directors said.
Turnover in Ireland and South-West England, represented by BWG Group, grew by 2.8% in EUR terms and 6.7% in rand terms. Both markets faced persistent higher living and operating costs.
The UK business, Appleby Westward group, reported a steep decline in turnover as UK retailers struggled throughout the year. The summer trading months were particularly weak, affected by very poor weather.
The Swiss economy showed little signs of recovery for consumers, leaving them opting for cheaper alternatives locally and abroad. SPAR Switzerland’s turnover declined 6.2% in CHF terms and down 0.3% in rand.
The sale of its interest in SPAR Poland was approved by Polish anti-monopoly authorities on November 19, 2024. A final due diligence was underway.
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