The SPAR Group, which is divesting of some of its businesses in Europe, plans to grow in Southern Africa by enhancing its retail segments, leveraging partnerships with Uber Eats and Vida e Caffè, and increasing private label product penetration.
The retailer outlined its strategy for Southern Africa at the release on Wednesday of its interim results for the 26 weeks to March 28, which showed headline earnings a share falling by 0.4% to 450.1 cents. Revenue was flat at R66.1 billion (R66.2bn). Operating profit before extraordinary items grew by 1.6% to R1.46bn. South African operating profit increased by 5.5%, with the operating margin improving to 2%, up from 1.9%.
The interim dividend was passed due to the ongoing restructuring and in line with capital allocation priorities, directors said. Following a board decision to realise value from operations in Switzerland and the UK, these were now classified as discontinued assets in the results.
In Southern Africa, investment in customer convenience was being stepped up with the continuing rollout of its on-demand digital platforms, SPAR2U and Build it 2U. The partnership with Uber Eats, launched in the first quarter, was live in 130 stores, and SPAR Group CEO Angelo Swartz said this has enabled SPAR to reach new customers and enhance customer experience.
Investment in pharmacist training facilities is underway to support the growth of SPAR Health, with the aim of doubling the pharmacy network by 2028.
“Over the period, we made deliberate progress against the milestones we set to simplify and optimise our portfolio and strengthen our balance sheet,” said Swartz. He said the results showed continued margin recovery, strong cost discipline, and further progress on portfolio optimisation.
“This positions us well to harness future opportunities. Looking ahead, our focus is on further margin improvement, executing effectively in our core markets, and delivering on the remaining elements of our strategic reset,” he added.
Revenue growth in South Africa was 1.7%, while in Ireland it was -0.6% in local currency, reflecting the pressure on consumer spending, compounded by low food inflation and the timing of Easter, which fell in the second half of the financial year. The growth that there was, was underpinned by strong momentum in the lower-income customer segment.
The Build it and SPAR Health businesses gained traction. Build it, one of South Africa’s largest building materials retail brands, increased sales by 4.1% and retail like-for-like growth of 5.4%, despite the tough economic conditions and unseasonal rainfall.
SPAR Health grew revenue by 13.7%, driven by strong gains in Wholesale and Scriptwise. Loyalty improved to 58%, up from 53.2% in the year to September 30, 2023.
Swartz said they drove profitability through category mix optimisation and private label growth, with improved efficiencies. He expected continued margin improvement in the second half as efficiency initiatives gain further traction.
In Ireland, BWG Group was expanding its own-brand offering, sharpening everyday value, and growing its food services business. This was supported by range and pricing optimisation in high-margin categories, increased logistics capacity, modern store formats, and targeted acquisition opportunities.
“We’re well-equipped to navigate future challenges – and capitalise on new opportunities,” said Swartz. SPAR Group’s share price gained a sturdy 2.1% to R114.12 on Wednesday morning after the release of the results, indicating additional investor confidence given that the JSE’s All Share Index was up by only 0.85% at the same time.
BUSINESS REPORT
Visit: www.businessreport.co.za
