Spar Group result's 'solid', but not 'spectacular'

Group turnover for the six months ended March was at R21.7 billion compared to R19.1 billion during the previous period.

Although trading in the first half was slightly better than expected, the food retail environment remained challenging, the company said.

Consumers are under pressure as a result of escalating utility, food and transport costs, and a lack of job creation in Africa's biggest economy.

There is also strong competition in the sector from the other retailers.

"There is lots of change taking place, it's very competitive, we're not talking about any monkeys out there - they are all good operators," Hook told I-Net Bridge/BusinessLIVE.

Global giant Wal-Mart acquired a 51% stake of local consumer goods distributor Massmart (MSM) last year.

Its entrance into SA has local players scrambling to step up efficiencies amid the biggest competition shakeup the South African retail space has seen.

On Wednesday, Spar Group reported diluted headline earnings (HEPS) per share of 283.6 cents compared with 262.1 cents a year ago. HEPS were up 9.1% to 305.4 cents.

The company largely acts as a wholesaler and distributor of goods and services to the independent members that operate under its brand. The group services 867 Spar stores, of which ten are corporate stores.

Although its liquor division Tops, saw an increase in wholesale turnover for the period of 19.7% to R1.6 billion, the group felt the effect of the six-month moratorium on new liquor licences in Gauteng.

"We have issues with getting licences in Gauteng. We are concerned, but having said that we opened something like 25 Tops stores in the first six months of the year.

"We are having to work with the liquor board. There are new guys involved and they are looking at the whole thing - it's not handled like it was in the past," Hook told I-Net Bridge/BusinessLIVE.

The moratorium was imposed in August last year after it was revealed that employees at the Gauteng department of Economic Development had been issuing fraudulent licences.

Spar's DIY and building material division, Build It reported wholesale turnover growth of 19.2% to R2.25 billion.

The retailer's total operating expenses increased by 11.5%, with fuel costs up 38% being a major contributing factor, and the once-off KwaZulu-Natal distribution centre strike costs adding a further R12 million.

"It was the first strike we've had in 17 years - it was only in KwaZulu-Natal and it was about wages. It took five weeks to resolve it, but things are back on track now.

"We negotiate on a decentralised basis so it was only that distribution centre that was affected. We believe it was more union inspired than our staff - they were led a little by the nose," Hook said.

Looking ahead, Hook said he did not anticipate that market conditions would change significantly over the remainder of the financial year.

Competition from other retailers, he said, was likely to remain intense, food inflation was likely to remain at around current levels and the recovery in the economy would remain slow and protracted.

The Pinetown-based company will spend around R180 million on transport and material handling equipment and improvements in its IT systems.

"We will open about 25 Spar stores this year, 40 Tops stores, about 20 Build It stores and another 15 pharmacies," Hook commented.