South African food and liquor retailer Spar Group has said that first-half profit jumped 22 per cent after the business acquired its Irish counterpart and sold more lower-priced own-brand products.
Net income rose to 784 million rand ($65.8 million) in the six months through March from 643 million rand a year earlier, Durban-based Spar said in a statement. That growth was more than double the 9.4-per-cent gain posted in the first six months of fiscal 2014.
The company bought BWG Group, the owner of the Spar brand in Ireland and south-west England, for 800 million rand in August, in an effort to boost growth outside its home market. In South Africa, Spar has been enticing shoppers with regular discounts, as consumers battle high unemployment, increasing household debt and rising interest rates.
Own-brand goods are “paying dividends in the current environment, where cash-constrained consumers favour products that offer value for money,” the retailer said.
First-half revenue jumped 41 per cent to 36.4 billion rand, with sales from Spar-label products increasing 21 per cent to 3.2 billion rand. The company raised the interim dividend 23 per cent to 2.39 rand a share.
Spar rose as much as 2.5 per cent to 195 rand and was trading up 0.7 per cent. The stock has gained 19 per cent this year, the best performance on the FTSE/JSE Africa Food & Drug Retailers Index.
While Spar is forecasting continued pressure on consumer spending in South Africa, the Irish retail market “continues to show encouraging signs of recovery”, the company said. Business in the seven weeks since the end of March “has remained strong” and Spar “remains confident that it is well positioned to maintain this growth in the second half of the year”.
A plan by BWG to buy Irish convenience-store and supermarket operator ADM Londis is undergoing antitrust review after receiving shareholder approval, Spar said. The company said that it’s confident that the €23 million deal will be completed by June.
News by Bloomberg, edited by ESM
