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Johannesburg - Spar Group CEO Wayne Hook has raised the prospect of running a "tighter, more efficient" company in the new financial year amid lower margins - a function of South Africa's receding food inflation rate.
"We've got to manage our business more tightly and efficiently," said Hook in an interview with Fin24.com.
He was commenting following publication of the food retailer's full-year results in which it posted a 19.5% increase in headline share earnings to 484.8 cents per share, excluding the transaction cost of the group's recent empowerment deal.
Hook said the year under review was a tale of two halves owing to the way in which food inflation fell throughout the year.
In the first half, the group saw a one-quarter rise in turnover when food inflation was at 16%. But that was reversed in the second half, when food inflation dipped to about 9%. This resulted in a sharp shrinking of second-half turnover.
Food inflation was expected to continue running at lower levels in the first six months of the group's 2010 financial year, Hook said.
Coupled with continuing low trading activity, this would put the group's growth margins under pressure, he said.
The group's dividend cover was reduced once more and a final dividend of 200c/share has been declared, making a total dividend for the year of 322c.
BoE Private Clients retail analyst Shanay Narsi commended the group's performance and said the results were above market expectations. They reflected Spar's cost control efficiency, he said.
Tops making headway
Spar's efficient distribution networks had also benefited the group: "That is their core focus; they are more about getting stuff into stores for their partners," said Narsi. "Spar is very technologically minded."
Spar opened 47 new stores in its supermarket division during the period and revamped another 137. There are also plans to open more than 30 in the current year.
The rapidly growing liquor division, Tops, opened 75 new stores. The group plans to add another 35 stores and grow trading space by 23.6%.
The build it division was, however, negatively affected by the slowdown in domestic building activity. Nonetheless, it managed to grow sales 13.4% to R2.8bn. Fifteen new stores were expected to be opened in the current financial year.
The group intended to place a strong focus on driving new business, organic growth, cost controls and securing greater operating efficiencies throughout the business.
"A growth strategy for Spar would be Tops, by getting attached to existing stores. There is still considerable growth there," said Narsi.
- Fin24.com
