Financial performance

Reported group turnover grew to R95.5 billion (2016: R90.7 billion).

Tough overall trading conditions in Southern Africa led to a 4.5% growth in turnover to R64.5 billion (2016: R61.7 billion) in the region. The BWG Group contributed R20.5 billion (2016: R23.1 billion) to group turnover, reflecting a very positive 1.5% euro-denominated growth. However, the euro’s approximate 10.0% weakening against the rand over the year eroded the strong trading performance in Ireland. SPAR Switzerland, contributed 10.9% of the group’s turnover for its first full period of consolidation.

SPAR’s gross margin continues to be buoyed by its offshore businesses, which service the higher margin convenience sector, increasing to 10.1% (2016: 9.3%) during the year to finish at R9.6 billion, of which 45.3% was generated in the northern hemisphere. In line with its strategy, SPAR Southern Africa continued to support its retailers through better pricing, and gross margins declined marginally to 8.17% (2016: 8.24%). In Ireland, the contribution from Gilletts (acquired July 2016), as well as increasing perishables volumes, contributed to higher margins. The Swiss business enjoys higher gross margins of 18.0%, as a result of its market position in the convenience sector.

The SPAR Group reported a total operating profit of R2.6 billion, up 0.2% from the previous year (2016: R2.6 billion). In Southern Africa, operating profit decreased 2.5% as tough trading conditions eroded margins and additional costs were incurred relating to stores acquired and subsidised. SPAR Ireland contributed R508.2 million, representing an increase of 4.2%. SPAR Switzerland added R69.0 million, after adjusting for an IFRS pension charge of R26.2 million.

The group’s profit before tax was up 1.0% to R2.5 billion (2016: R2.4 billion). The Southern African operations benefited from net interest income of R75.9 million (2016: R44.5 million) while lower finance costs in Ireland also had a positive impact. The group’s profit after tax improved marginally by 0.3% to R1.8 billion (2016: R1.8 billion), impacted by an increased effective tax rate. Reported headline earnings were flat at R1.8 billion, but increased 1.2% on a normalised basis after adjusting for the fair value adjustment and foreign exchange adjustments to financial liabilities.

The issue of shares to fund the Irish and Swiss acquisitions, as well as to settle the BBBEE share scheme that vested in August 2016, resulted in an increased effective number of ranking shares in the current year. The weighted average number of ordinary shares (net of treasury shares) in 2017 was 192 555 203 vs 179 703 184 in 2016. This impacted the headline earnings per share causing it to decrease 6.6% to 952.5 cents (2016: 1 020.0 cents). The board approved a final dividend of 435 cents per share, resulting in a total annual dividend of 675 cents per share representing a growth of 1.5%.

SPAR’s ongoing focus on working capital management supported cash generation from operations which increased 1.3% to R3.3 billion. Overall cash flow was, however, negatively impacted by weaker operating profit performance in Southern Africa, but this was offset by cash inflows from operations in Ireland, as well as proceeds from borrowings in Ireland.