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Spar FY profit boosted by strong Irish unit

‘We’ve just entered into a joint venture in Sri Lanka, which will deliver returns in due course’ – Graham O’Connor – CEO, Spar.

SIKI MGABADELI:  Spar Group reported a 22.1% rise in full-year profit, boosted by strong growth from its Irish unit. Headline earnings per share came in at 1020c for the year to end-September. That’s compared to 835.5c a year ago. And their full-year turnover was up 23.8%. Spar also operates liquor chain Tops and hardware chain Build It here in South Africa.

Graham O’Connor is CEO and joins us now. Graham, thanks so much for your time today. That’s fantastic growth. We’ve had tears from most retailers. Was the growth across all your units?

GRAHAM O’CONNOR:  Siki, pleasure. Thank you for taking the time to chat to me. Ja, we were delighted with our results; very strong results in South Africa in a tough economy. Outstanding results in Ireland and really coming to perishables, so that was really exciting.

We had really strong Tops results, we had really strong Build It results and really strong Spar results. So all round a solid performance with a great team effort from all concerned.

SIKI MGABADELI:  And what does that team effort in the South African environment involve, because we know right now all of us are pretty much price-sensitive – the things that I used to buy and having to find substitutes. I don’t know about the customers in your stores. Are you finding they are having to do that?

GRAHAM O’CONNOR:  Yes, most definitely. They are going for more and more promoters’ lines and looking for the shop prices. But we concentrate also on our customer service, on our drive to the fresh element, where our ratios continue to increase. And the fact we’ve got such a large footprint across the whole range of the economy helps enormously.

SIKI MGABADELI:  How are you managing your in-store food inflation?

GRAHAM O’CONNOR:  In-store food inflation is taking a bit of an uptick. It went to 6.2% for the year; it had started the year at 4.5%. So we are trying to keep the prices down to the consumers. We are managing that pretty well.

SIKI MGABADELI:  And do you think we can stabilise as we go through the worst of the drought? We are not completely out of the woods yet, but it looks like we might be at least stating to see an improvement.

GRAHAM O’CONNOR:  There is no question that the rainfall that’s come will help the agriculture and that helps the economy enormously. And with our footprint that has a big impact on us. So we are very positive about the rains that have come and we are very positive about the year ahead.

SIKI MGABADELI:  And talking about the footprint, what’s the extent of your store network right now, and are you planning further expansion?

GRAHAM O’CONNOR:  Well, our footprint is very strong. We’ve got 890 Spar stores around the country and 692 Tops stores. So there is some scope for the Tops stores to open more. And we’ll look to open new sites. I think we’ve got 37 sites earmarked for the new year on the Spar side.

But our core focus is on organic growth and helping our entrepreneurial retailers grow their businesses – that’s key for us. So store revamps are really the main area of focus.

SIKI MGABADELI:  And what’s happening in Zimbabwe? You’ve had to close your distribution centre there.

GRAHAM O’CONNOR:  It’s a sad state of affairs that the economy – we kept saying it’s going to come right, it’s going to come right, and it just hasn’t. So we were struggling and took the view, with payment difficulties, stock difficulties and the like, to bail out of Zimbabwe, unfortunately.

SIKI MGABADELI:  And looking further afield, you’ve further entrenched your position in offshore markets – that 60% stake in Spar Switzerland. That became effective from April 1. Is that accounted for in these numbers?

GRAHAM O’CONNOR:  It is accounted for, but we had very poor results for the six months from Switzerland. We’ll rectify that in the year ahead. There were some issues from a managerial point of view which weren’t addressed and those will be addressed. We are confident about that. It is a solid business which can deliver us good results as we go forward.

SIKI MGABADELI:  All right. And what’s your outlook, then?

GRAHAM O’CONNOR:  The outlook for South Africa is very positive. Our outlook for Ireland is also. The outlook for Switzerland also. So at least we’ve got three legs which are very positive and we’ve just entered into a joint venture in Sri Lanka which will deliver returns in due course. It won’t have an impact in 2017 but certainly thereafter it will.

SIKI MGABADELI:  We’ll leave it there. Thanks for your time, Graham O’Connor, CEO of the Spar Group.

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