Financial review


Rmillion 2018 2017  Change (%)
Turnover 101 018.0 95 373.1* +5.9
Operating profit 2 779.3 2 576.1* +7.9
Earnings per share (cents) 948.9 945.5* +0.4
Headline earnings per share (cents) 965.7 952.8* +1.4
Normalised headline earnings per share# (cents) 1 063.2 976.0* +8.9
Diluted headline earnings per share (cents) 958.9 946.6* +1.3
Dividend per share (cents) 729.0 675.0 +8.0
Net asset value per share (cents) 3 692.2 3 407.0* +8.4
* The prior year figures have been restated. Please refer to note 42 of the notes to the annual financial statements for further details.
# Headline earnings adjusted for fair value adjustments to, and foreign exchange losses on financial liabilities, and business acquisition costs


The SPAR Group (the group) reported a pleasing performance for the year under review, with turnover increasing by 5.9% to R101.0 billion, despite continued challenging trading conditions. The result has again been positively impacted by improving contributions from the European businesses and the group increased operating profit by 7.9% to R2.8 billion. Profit before taxation of R2.5 billion was adversely impacted by the fair value adjustments to, and foreign exchange losses on financial liabilities, together with increased interest expenditure resulting from cash outflows for acquisitions.

SPAR Southern Africa contributed growth in wholesale turnover of 6.7%. This includes turnover reported by the pharmaceutical business, S Buys, acquired during the year. Excluding S Buys, SPAR Southern Africa produced wholesale turnover growth of 5.3% and stable gross margins, in a tough market environment. The TOPS liquor brand delivered an impressive result with wholesale sales growth of 13.0%. Despite a generally weak building materials sector, Build it increased sales by 7.5% enabled by strategic marketing efforts and grew market share. The SPAR Southern Africa store network increased to 2 236 stores, with 145 new stores opened across all brands. The group completed 276 store refurbishments across all brands, compared to 259 refurbishments in the prior year.

The BWG Group (SPAR Ireland) has continued to deliver strong euro-denominated results. The BWG Foodservice business reported impressive double-digit turnover growth, while all retail brands enjoyed positive sales growth in local currency. The Kilcarbery distribution centre saw warehouse turnover increase by 6.9% as more product was directed through the facility. During May 2018, BWG completed the acquisition of 4 Aces Wholesale Limited which operates three cash-and-carry businesses in central Ireland. This business has been successfully integrated into the BWG Group’s wholesale operations. SPAR Ireland’s store network increased by a net 41 stores to finish the year at 1 371 stores.

SPAR Switzerland has made significant progress in addressing the overall business performance, despite the difficult Swiss retail environment. While the reported turnover growth has remained negative, this was largely due to the strategic closure and sale of corporate retail stores during the year. However, this had a marked positive impact on the profitability of the overall business. The core wholesale business continued to record improvements in profitability. SPAR Switzerland’s store network grew by the addition of 46 new stores to a total of 315 stores.

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.


Turnover of the SPAR Group increased by 5.9% to R101.0 billion (2017: R95.4 billion), with 31.9% (2017: 32.5%) of total turnover generated in foreign currency. The comparable Southern African business, with reported turnover growth of 5.3%, continued to be impacted by tough trading conditions. The turnover of the BWG Group increased by 4.2% in euro-currency terms. The continued depreciation of the rand against the euro over this period contributed to the 9.6% overall increase in reported turnover to R22.5 billion (2017: 20.5 billion). SPAR Switzerland contributed turnover of R9.8 billion (2017: R10.4 billion) with sales continuing to decline in an extremely difficult retail environment.

Gross margin on a restated basis increased to 10.7% but remained stable year-on-year at 10.1% on a pre-restated basis. SPAR Southern Africa increased its comparable gross margin slightly to 8.3%, despite the competitive market, as it continued to drive more product through its facilities – in particular, fresh and perishable categories. The BWG Group and SPAR Switzerland, which both operate in the higher margin convenience sector, reported comparable gross margins of 12.2% (2017: 12.1%) and 17.9% (2017: 18.0%) respectively.

Group operating expenses were well managed during the year, increasing by 5.6%, or 6.3% on a pre-restated basis, a noticeable improvement on the prior year. Excluding the S Buys business (acquired effective 1 October 2017), the group expenses increased by 4.7%. The expense movement was positively impacted by the reduction in costs in the Swiss business of 4.7% through management initiatives and the disposal, or closure, of corporate stores. In Southern Africa, comparable operating expenses were up 7.8%. This was again attributable to increased marketing and promotional expenditures, higher transport and distribution costs (impacted by fuel cost increases of 17.9%) and further investment in IT infrastructure. The BWG Group’s expenses grew by a well-controlled 4.4% in euro terms and continued to be impacted by increased depreciation charges and higher staff costs.

Profit before tax has remained flat year-on-year at R2.5 billion (2017: R2.5 billion), but was impacted by a net interest expense of R23.6 million, compared with net interest income of R17.1 million in the prior year. The negative interest effect was further compounded by a significant foreign exchange loss of R43.5 million recognised on the translation of the South African euro-denominated financial liability to purchase the Irish and Swiss minority interests. Based on an improved Irish profit projection, this liability was also increased by a fair value revaluation of R139.5 million which also impacted profits.

Profit after tax improved 0.4% to R1 827.2 million (2017: R1 820.6 million), due to a slightly lower effective tax rate in Ireland.

Headline earnings per share increased by 1.4% to 965.7 cents (2017: 952.8 cents). The board approved a final dividend of 729 cents per share (2017: 675 cents per share), an increase of 8.0% year-on-year.

Cash generated from operations totalled R4.0 billion (2017: R3.3 billion) and reflected a strong improvement over the prior year due to reduced working capital levels. This was largely attributed to increased levels of trade payables due to payment cut-offs. The SPAR Group’s cash flow from investing activities showed an outflow of R1 453.3 million, including total net capital expenditure of R772.3 million (2017: R1 090.9 million). During this period the group concluded two major acquisitions in South Africa: a controlling interest in the S Buys pharmaceutical wholesaler for R74.4 million and the Knowles Shopping Centre for R165.7 million. The BWG Group finalised the acquisition of the 4 Aces Wholesale business for R90.9 million. Taking into account the impact of a net R252.0 million outflow to reduced borrowings and a further R281.1 million for share repurchases, the group still closed the year in a net cash position of R1 598.2 million (2017: 1 472.0 million).



In Southern African, the group’s capital expenditure during the period included operational investments of R256.1 million. This comprised primarily transport and logistics requirements as well as additional investment in IT infrastructure upgrades and software development. The BWG Group’s capital expenditure amounted to R365.9 million, the majority of which was warehouse equipment, but did also include additional investments in retail property and IT technology. Capital expenditure in the Swiss operations of R149.1 million was incurred, including further store refurbishments and ongoing technology upgrades to enhance the retail offering. The group made further investments of R107.7 million to acquire ten corporate stores, defending strategically located retail locations in South Africa, the United Kingdom and Ireland.

The budgeted capital expenditure for the year ahead in Southern Africa, amounting to R383.4 million (2017: R666.0 million) is expected to reduce to more normal operating levels, as no further property acquisitions are planned and construction plans for the previously announced distribution facilities have been placed on hold. In Ireland, budgeted capital spends of €32.0 million will continue to address a wide range of retail development commitments, while SPAR Switzerland has CHF25.0 million budgeted for further retail investments and additional improvements to own facilities and infrastructure. It is again anticipated that the foreign subsidiaries will fund all capital expenditure from their own cash flows.



The turnover of SPAR Southern Africa increased 6.7% to R68.8 billion (2017: R64.4 billion restated), but was positively influenced by the inclusion of the S Buys. Excluding S Buys, the comparable business increased turnover by 5.3% (2017: 4.5%), reflecting the continued tough retail market which remains underpinned by weak consumer spend. This result was positively boosted by strong liquor turnover growth of 13.0% and a very pleasing increase in the building materials business of 7.5%. The latter remains contrary to a weak building sector performance and reflected increased retailer loyalty and the results of strong marketing investments. Combined food and liquor wholesale turnover growth was recorded at 5.0% and needs to be viewed against internally calculated food inflation of 1.4%. This inflation measure has continued to decline from the 1.9% measured at half year and the 6.0% reported in 2017.

Case volumes handled through the seven distribution centres continued to reflect the constrained market and increased 3.2% to 231.7 million cases (2017: 224.5 million cases). This positive volume growth reversed the decline in cases delivered recorded in the comparative year.

The retail turnover of SPAR stores increased 4.2% to R79.7 billion (2017: R76.5 billion) and recorded like-for-like retail growth of 2.3%. The combined food and liquor retail sales, which allow for a better industry comparison, increased by 5.1% and should be viewed against the significant decrease in food price inflation over the year. Wholesale turnover grew 4.1% to R53.7 billion, continuing to reflect the independent retailers’ support of the group’s voluntary trading model. Impacted by the material deflation recorded in certain commodity categories, total house brand turnover increased by 4.3% to R10.7 billion. Demand for SPAR-branded products was stronger at 5.8% for the year, with sales reaching R8.5 billion. The SPAR-branded private-label products continued to offer real consumer value and quality and remain a shopping differentiator for our retailers.

The group maintained the strong organic growth focus of existing retailers to drive profitability. Total retail space recorded exceptional growth of 3.8% (2017: 1.7%) and was attributed to a number of large new stores. In addition, 170 SPAR stores were refurbished during the period to ensure they continued to provide retail offerings to exceed consumer demands. A net 34 stores were opened, bringing the total SPAR store numbers to 937 by 30 September 2018.

The retail turnover of TOPS at SPAR increased by an impressive 11.3% to R11.2 billion (2017: R10.0 billion), as strong marketing initiatives and a refresh of the brand image attracted consumer spend. Like-for-like turnover growth amounted to 7.5% for the period. Wholesale turnover tracked ahead of the retail performance and grew by 13.0% to R6.5 billion (2017: R5.8 billion). During the period, the TOPS at SPAR store network increased by 41 stores on a net basis to 774 stores, while 53 stores were refurbished. The total retail liquor space increased 6.7% during the year.

Build it’s retail turnover growth increased by 9.7% for the year, significantly higher than the building sector’s calculated inflation of 3.8%, and against the backdrop of a challenging trading environment. This performance was underpinned by strong product and brand marketing and an added focus on retail execution to differentiate the brand. Like-for-like store growth was 7.4%. The group’s buying teams drove increased retailer loyalty through improved product pricing. The influence of cement, which is a significant component of Build it’s overall sales, continued to impact the turnover, as the continued oversupply has resulted in low category inflation of 0.5% over the year. Retail activity in the neighbouring countries continued to report strong growth totalling 11.9% for the year, which was positively influenced by improvements in both the Namibian and Mozambican stores. At wholesale level, turnover increased 7.5% to R7.6 billion (2017: R7.1 billion), reflecting still further opportunities to grow retailer loyalty. Build it’s house brand and imports showed solid growth of 11.0% for the year. At the year-end, Build it’s store network totalled 376 stores, having opened a net eight stores during the year.

The S Buys pharmaceutical wholesale business was acquired with effect from 1 October 2017 and the revenue and profit were consolidated for the first time in this year. This strategic investment provides a full pharmaceutical wholesale service for the Pharmacy at SPAR retailers and management are actively working to convert their purchases to this wholesaler. S Buys reported turnover of R929.0 million for the period, which amounted to a pleasing growth of 13.4%. This performance was driven by impressive increases of 17.1% in the Scriptwise business – catering for high-value speciality scripts – and 11.7% in wholesale sales, which were largely attributed to increased procurement by SPAR pharmacies. The profitability of the business was, however, impacted by a lower than expected government regulated price increase of 1.3% compared to the 7.0% in 2017.

The Pharmacy at SPAR business continued its growth trajectory adding 26 new stores and reporting an increase in retail turnover of 44.3% to R961 million. The retail organic growth was a healthy 17.2% and reflects the marketing and innovation benefits being enjoyed by these retailers. At the end of the period there were 101 Pharmacy at SPAR stores.


The BWG Group continued to deliver strong results for the year and reported euro-denominated turnover growth of 4.2% to €1.5 billion. This number was boosted by the inclusion of the 4 Aces business from May – if adjusted, the comparable group grew by 2.8%. Exchange rate weakness over the latter half of the year saw reported turnover grow 9.6% to R22.5 billion (2017: R20.5 billion). Price measures over the financial year indicate that the grocery food and non-alcoholic drinks category declined 2.2%, while alcohol and tobacco increased by 3.2%. (Source: Irish Central Statistics). Both the extreme weather conditions experienced in March and the above average warm summer brought significant sales benefits to the convenience sector as consumers bought larger quantities of food and beverages.

The hospitality sector remained strong and again boosted the sales of the BWG Foodservice and BWG Wines & Spirits divisions, which reported turnover growths of 14.7% and 5.5% respectively. Compared with last year, all retail brands recorded positive growth, with the Londis brand increasing turnover to 4.9%, MACE growing by 4.4% and XL reporting growth of 4.5%. It was just as pleasing to report that all retail brands reported positive like-for-like growth.

The group’s distribution volumes continued to show strong increases and record case movements continued to be handled in the Kilcarbery distribution centre which reported a sales increase of 6.9%. A real highlight for this business during the year was the recognition received through a number of prestigious logistics and transport awards, including the Irish Logistics Company of the Year award.

In South West England, BWG Group’s Appleby Westward business reported an increase of 2.7% in sterling-denominated turnover. The slight improvement of the sterling decreased the turnover result in reported euro terms to 1.2%. This business represents approximately 12.2% of the consolidated BWG Group.

BWG Group’s euro-denominated margin remained stable at 12.2% in highly competitive market conditions. Operating profit grew 13.0% to R574.4 million (2017: R508.2 million) while profit before tax increased 15.5% to R537.9 million (2017: R465.8 million).

The total number of stores across BWG Group’s store formats at 30 September 2018 was 1 371 with 105 new stores added during the year.

Subsequent to the reporting period, the BWG Group announced the completion of the acquisition of Corrib Food Products, a leading independent wholesaler with a significant presence in the chilled and frozen food sector in Ireland, along with being one of Ireland’s leading suppliers of poultry products. The acquisition complements BWG’s market-leading position in food distribution. It is also consistent with the group’s strategy for growth and follows the successful acquisition of 4 Aces Wholesale earlier in the year.


The region reported turnover of R9.8 billion for the year (2017: R10.4 billion). Operating profit increased 80.6% to R124.6 million (2017: R69.0 million), while profit after tax increased by 17.5% to R67.1 million from a previous year profit of R57.1 million. This result was adversely impacted by finance costs, including foreign exchange impacts, relating to the valuation of the financial liability for the minority purchase obligation of R17.2 million (2017: a net gain of R23.4 million).

The turnover performance of SPAR Switzerland continued to be negatively impacted by low economic growth in the retail market. While minor inflationary trends have been noted, with prices of food and non-alcoholic beverage products increasing by 1.5%, alcoholic beverages being 0.7% higher, and a slight appreciation of the Swiss franc against the euro, these have been insufficient to slow the attraction of cross-border shopping that exists in Switzerland. SPAR Switzerland reported a decline in local currency measured turnover of -5.1%. However, this result continued to be negatively influenced by the strategic decision to exit from unprofitable corporate retail stores. If the effect of these corporate stores was adjusted for, the local currency turnover decline would have been -0.8%. SPAR Switzerland launched 46 new stores during the year, including a large group of 41 stores in the west of the country that are now being supplied. At the end of the year there were 315 corporate and independent retailers serviced.

The cash-and-carry business, trading as TopCC, reported a disappointing decline in turnover for the year which was largely attributed to business closures in the Swiss restaurant and hospitality sectors. The group is investigating upgrade opportunities in the fresh offerings of these stores, as this area is offering growth which can be further maximised.

Warehouse turnover increased by a pleasing 1.5% for the year, reversing the declines previously reported, as SPAR retail activity was positively influenced by innovative marketing campaigns, including the launch of a consumer loyalty card. Store delivery frequency, fleet optimisation as well as store ordering initiatives were implemented during the year, which have resulted in significant improvements in logistics efficiencies, productivity and overall costs.

Despite the decline in overall turnover, the business succeeded in improving margins and reducing costs.


Ireland (€) Switzerland (CHF)
  2018 2017 2018 2017
Year end rate 16.46 15.96 14.44 13.95
Average rate 15.56 14.81 13.40 13.59


At year-end the group had external banking facilities in South Africa totalling R3.6 billion of which Rnil (2017: Rnil) was drawn down. Committed facilities totalled R2.4 billion while the group had access to R1.2 billion of uncommitted facilities.

The BWG Group has access to €60.0 million of revolving credit and overdraft facilities.

SPAR Switzerland has confirmed credit lines and facilities of CHF62.2 million.

The decrease in net borrowings from the prior year was largely the result of improved working capital management by the foreign operations.

The net borrowing position at year-end:

Rmillion 2018 2017
Long-term borrowings 3 976.5 4 160.4
Current portion of long-term borrowings 433.6 364.4
Bank overdraft 8.7 268.5
Total borrowings 4 418.8 4 793.3
Less: cash and cash equivalents (1 377.6) (1 565.6)
Net borrowings 3 041.2 3 227.7
(Decrease)/increase in funding (186.5) (97.8)


A summary of the group’s capital expenditure and approved capital commitments as at 30 September 2018 is set out below:

  2018 2017
Rmillion Contracted Approved not
Total Contracted Approved not
South Africa 80.4 93.4 173.8 341.9 88.7 430.6
Ireland 89.4 34.2 123.6 143.6 6.1 149.7
Switzerland 30.7 15.9 46.6 64.3 64.3
Total 200.5 143.5 344.0 549.8 94.8 644.6


The identification of sustainability and financial risks for the group forms part of the enterprise risk management process. During the course of the year this was again updated by management and these risks were reviewed by the internal audit team. The group is typically exposed to inflation, interest rate, liquidity and credit risks, the latter specifically impacting trade receivables. No additional risks were identified and management are satisfied that these risks are being continuously and proactively managed.


The annual financial statements have been prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council and the requirements of the Companies Act, 71 of 2008, as amended. The group has considered and adopted all new standards, interpretations and amendments to existing standards that are effective as at the year-end.

The JSE’s 2017 report on the proactive monitoring of Annual Financial Statements was also considered in preparing the 2018 integrated report.

The annual financial statements have been prepared using accounting policies that comply with IFRS that are consistent with those applied in 2017.

In preparation for the new IFRS 15 standard, the group assessed all income streams from suppliers. This evaluation revealed that certain rebates and income had been incorrectly accounted for. These amounts have been reclassified and the 2017 comparative corrected. Refer to note 42 to the annual consolidated financial statements for more detail.


The board has formally considered the going concern assertion of the group and is of the opinion that it remains appropriate for the forthcoming financial year.

Mark Godfrey
Group Financial Director

13 November 2018