The SPAR Group’s financial results for the year under review were modest, with turnover increasing by 5.3% and profit before tax by only 1.0%. These results reflect the weak state of consumer buying power and confidence, which has been exacerbated by retrenchments, political uncertainty and climatic challenges in South Africa. Increased price competition among retailers is evident. Despite these challenges, the group is encouraged by the strong performances from our business in Ireland and the early positive signs of the turnaround in Switzerland. Continued rand strength against the euro substantially eroded the European results on final consolidation.
SPAR Southern Africa experienced a significant slowdown in sales which, together with cost pressures, resulted in net margin contraction. The core SPAR business reported muted sales growth of 4.2% in difficult trading conditions. Liquor sales continued to achieve double-digit growth, despite an increasingly competitive retail sector. The building materials business reflected the performance of the whole industry and reported wholesale sales growth of 2.1%.
The group’s operations in Ireland weathered deflationary pressures, with solid operating profit growth and market share gains across most of its retail brands. The SPAR and XL brands reported strong sales growth, while the successful integration of the Londis business into the BWG (SPAR Ireland) supply chain is reflected in the 4.6% growth experienced by that brand. The Gilletts acquisition in South West England late last year further contributed to the impressive Irish result.
SPAR Switzerland reversed a half-year loss as a result of early gains from implementing its plans to improve the retail offering. The results of this business are recognised for the full financial year, but only from the 1 April 2016 acquisition date in the comparative.
The purpose of this review is to provide additional information on the trading performance and financial position of the group, and should be read in conjunction with the annual financial statements, together with the notes thereto.