The SPAR Group at a glance

The SPAR Group Limited listed on the JSE in 2004, and today operates six distribution centres and one Build it distribution centre. The distribution centres supply and service 1 864 independently owned SPAR, TOPS at SPAR, Build it, Pharmacy at SPAR and SaveMor stores in Southern Africa. The group has a presence in South Africa, Mozambique, Zimbabwe, Swaziland, Botswana, Lesotho, Namibia and Angola – and recently in the Republic of Ireland and South West England as well. Goods are distributed to the stores by a fleet of trucks and trailers, which are owned by the SPAR Group.

The SPAR brand has been part of the South African food retail landscape for 51 years. Each SPAR has its own personality, offering consumers products that are unique to their local store. This results from a “voluntary trading” model, which supports our retailers in taking full advantage of sourcing specific goods from local traders, as well as utilising SPAR’s trading power.

OUR PURPOSE

To provide expert leadership and support to retailers to enable them to run sustainably profitable and professional businesses.

OUR VALUES AND CULTURE

During the past year, the SPAR Group followed a process involving a broad spectrum of management and employees throughout the organisation to review its values. For each of the three values, a definition was developed, behaviours identified and we determined the ways in which to measure whether we are effectively living these values. These values are our ethical and moral compass and decisionmaking foundation. The values will be integrated into the performance management process.

OUR VISION

Our vision is to be the first choice brands in the communities in which we operate

The three values are:

VALUE WHAT IT MEANS
Passion
Unrelenting commitment to our customers (consumers and retailers), suppliers, brand, job and colleagues
Displaying authentic positive energy and attitude
Enthusiasm
Wanting to do what you currently do and enjoying it in the process
Family values
Creating a sense of belonging to the SPAR family, particularly with our people and our retailers
Supporting and embracing every person’s contribution
Personalising work and business relationships
Working together for the greater good of the company – putting personal agendas aside and demonstrating true teamwork.
Entrepreneurship
Creativity and innovation
Problem solving, taking ownership and responsibility for outcomes
Visionary leadership and the ability to take calculated risks
Long-term focus vs short-term gain

 

Our vision, purpose and values determine how and where we want to position the group to be able to create value over the long term. Read about our strategy, which sets out the short- to medium-term plans to achieve this, in the Investment case section.

KEY STATISTICS

  % change 2013* 2014
Turnover** +15 R47.8 billion R55.0 billion
Headline earnings per share** +12.5 694.8c 781.8c
Annual dividend** +11.3 485 c/share 540 c/share
Total number of retail stores +2.6 1 817 1 864
Cases dispatched (per annum) +3.6 203.5 million 210.8 million
Number of employees at year-end +3.6 3 886 4 025
Disabling injury frequency rate -10 0.19% 0.17%
Total carbon footprint -13 101 254 t 87 634 t
* Restated
** Include BWG
   
spar

A key business highlight for the SPAR Group in 2014 was the acquisition of 80% of the shares in BWG, a leading food retail and wholesale distribution company which owns the SPAR brand in Ireland and South West England.

BWG has a turnover of more than €1 billion, generated through a network of approximately 1 200 SPAR, EUROSPAR, SPAR EXPRESS, MACE and XL symbol stores and up to 10 000 direct customers through its 23 Value Centre Cash & Carry outlets. BWG employs more than 1 000 people, with about 20 000 jobs created by its retail network. It has an estimated 35% share of the Irish convenience store market.

BWG’s profitability has been under pressure in the past few years, partly due to a subdued trading environment, and the after effects of the 2008 economic crash. BWG plans to roll out a five-year internally funded capital investment programme to expand its wholesale and retail operations in Ireland and in South West England.

For the SPAR Group, this was a value accretive acquisition opportunity, with the additional benefits of creating a geographically diversified revenue stream, foreign currency diversification, enhanced scale and critical mass.

The transaction is fully aligned to the SPAR Group’s vision and purpose, as both groups have been members of SPAR International for 50 years (their membership applications were approved by the international body within six months of each other). Although the SPAR Group’s strategic expansion to date has been chiefly focused on Africa for the past few years, there are clear strategic fit and benefits in this transaction. A further advantage is the commitment of the BWG management team to further grow the business and explore synergies.

The SPAR Group’s focus will be predominantly on governance of the expanded group, while the management of BWG operations will be retained and supported through the current structures. Four SPAR executive directors have joined the BWG board.

   

OWNERSHIP PROFILE

SPAR has a broad range of shareholders, none of whom hold more than 21% of the total shares. As at September 2014, almost 40% of SPAR shares were held by offshore investors.

  2013
%
2014
%
Government Employees Pension Fund 20.5 19.0
First State Investment 7.5 4.7
Government of Singapore Investment Corporation 4.9 1.6
Coronation Fund Managers 3.3 3.3
BNP Paribas 3.2 2.4
Vanguard 2.9 2.4
iShares 2.3 2.3
Other 55.4 64.3

UNDERSTANDING OUR VOLUNTARY TRADING MODEL

One of SPAR’s key differentiators is its system of voluntary trading. The concept of voluntary trading is almost a century old and is based on co-operation between the independent wholesaler (SPAR) and its retailers, to the mutual benefit of both parties. SPAR, therefore, is not a franchise business nor do we operate chain stores. We are essentially a wholesaler and distributor of goods and services to our independently owned SPAR retail stores.

Our voluntary trading agreement allows our retailers to access our various brands and support structure, including the procurement and planning services of the group, but also grants them the option to stock their stores from any supplier they choose. This way, each SPAR store has its own personality, offering consumers products that are unique to their local store.

As a wholesaler and distributor of products, our primary source of income is through the sale of goods to these independently run stores. We work hard to earn their business and continued loyalty. We offer purchasing convenience and cost-effective products due to the group’s large-scale procurement processes and superior warehousing and distribution facilities. Despite the voluntary nature of our trading relationship, on average 84.2% of goods sold out of our retailers’ stores during the 2014 financial year came from SPAR (2013: 82.9%).

THE SPAR AND BUILD it GUILDS OF SOUTHERN AFRICA

SPAR adopted the voluntary trading model from SPAR International, the owner of the SPAR brand, which grants licences to member countries.

SPAR, together with all the independent retailers trading under the SPAR brands, are members of either the SPAR or the Build it Guilds. The SPAR and the Build it Guilds of Southern Africa are non-profit companies, their purpose being to serve as custodian of the SPAR and Build it brands, to drive growth in South Africa and to grant membership.

The guilds are made up of two types of members: independent retailers and representatives of The SPAR Group Limited.

All retailer members contribute a percentage of turnover as well as an administrative fee to run the guilds. The SPAR Guild currently has 875 members and the Build it Guild has 294 members (2013: 873 and 298 respectively).

The SPAR Guild pays a membership fee to SPAR International, and the Group CEO represents SPAR South Africa on the board of SPAR International. As a member, the group benefits from the sharing of best international practice, information and know how within the international SPAR network. There is a current licence agreement between SPAR International and SPAR South Africa.

In South Africa, the SPAR Guild operates within six geographic areas, each with its own regional guild of retail and distribution centre members. It is a model that works effectively to unite the organisation in its ongoing drive to remain at the forefront of food retailing in Southern Africa. The Build it Guild of Southern Africa follows the same model and distributes imported goods through one warehouse on a national basis.

VISUAL TOOLS:

Selected icons have been used throughout the report as reference points and to improve connectivity. In the value chain section and business model, the following icons apply:

ref

ref

“We have a solid understanding of BWG’s business model, with SPAR International and the SPAR retail model as well as the SPAR brands being at the foundation of both businesses … We will bring to bear our track record in migrating SPAR stores to larger store formats in South Africa, to assist in evaluating expansion opportunities that arise. We will also contribute our demonstrated capabilities in logistics, warehousing and distribution, an area in which BWG has relied heavily on third party providers to supplement the capacity of its existing distribution centre. We believe that the efficiencies that we have delivered in our South African business could be replicated in BWG to unlock long-term value.”

– Graham O’Connor
SPAR Group CEO, South Africa

 

“This is a very positive and exciting development for BWG. In SPAR South Africa we have secured a major international retail player as a strategic partner and a long-term investor in our business. We have known SPAR South Africa for many years and they are a great fit for BWG. We look forward to working with their team to accelerate the expansion of our operations, and the growth of our wholesale and retail business in Ireland and South West England.”

– Leo Crawford
BWG CEO, Ireland