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Cape Town - Kaap Agri’s interim results are encouraging despite difficult agricultural conditions specifically in the Western Cape, the JSE listed company announced on Monday.
During the past six months the group has seen low consumer and business confidence and the spending power of customers, specifically in the Western Cape agriculture sector, has being constrained.
These constraints are a result of the dry conditions and the impact of a strengthening rand on exporters, particularly in the fruit industry. In addition, lower disposable income has also spilled over into the retail fuel sector.
The largest impact on Kaap Agri’s revenue has been experienced in Wesgraan and the affected trade regions where agri sales have been constrained. Grain handling revenue was significantly curtailed due to reduced harvests.
Although growth in the retail sector in general has been slow, the group’s range expansion and improvement has allowed for strong retail growth in non-agri categories. This allowed for sustained positive growth in revenue.
CEO Sean Walsh said its ongoing retail and fuel diversification strategy continues to bear fruit despite the negative impact of adverse agricultural conditions in the province.
Zeder, with its specific focus on the agri, food and beverage sectors, is biggest investor in Kaap Agri, which made its debut on the JSE in June last year. Kaap Agri has over 190 operating points located in eight of the nine South African provinces, as well as in Namibia.
Kaap Agri's recurring headline earnings per share increased by 7.2% to 223.12 cents in the six months to 31 March 2018 and revenue grew by 5.4% to R3.4bn.
An interim dividend of 32.0 cents per share was declared, compared to 29.4 cents per share in 2017, representing an increase of 8.8%.
“Although the current year remains challenging, our growth strategies are firmly on track to deliver superior returns in line with our strategic medium-term plans and we remain optimistic that the coming agricultural seasons should improve," Walsh said in a statement.
“Continuous improvement of our customer’s engagement experience is key and we will continue to invest in our people and into revenue and cash generating capital expenditure."
Improved revenue growth anticipated
He said improved revenue growth is anticipated for the next six months as consumer confidence shows signs of recovery and store upgrades and expansions contribute more significantly.
The comparable revenue growth from like-for-like stores increased by 2.9%, which to Walsh reflects the health of the group’s core businesses.
This was driven by a 17.1% increase in the number of transactions, indicating more customers are visiting stores. Also of note, to him, is that total product inflation amounted to an estimated 3.7% and -0.5% excluding fuel.
Non-agri retail revenue growth continued to outperform agri revenue growth with similar trading profits being generated by both income channels.
As part of the group’s retail fuel expansion, The Fuel Company (TFC) owned and managed sites have grown fuel volumes by 40.5%. Additional TFC site acquisitions are at various stages of conclusion and the business continues to explore expansion opportunities.
Expenditure was well controlled during the period and the business continues to invest in people and infrastructure to accelerate the growth initiatives underpinning the group’s strategic medium-term plan, according to Walsh.
He said that, despite the challenging trading environment, investment into expansions, upgrades and acquisitions continued, resulting in a R86.5m increase in property, plant and equipment since the previous financial year end.
“Kaap Agri remains well positioned to take advantage of its extensive footprint and diverse service offerings to maintain its strong organic growth and to focus on the acquisition of new business opportunities," said Walsh.
"The group attributes its consistent growth to a strong culture of performance and accountability, with its people who are at the heart of the business, all fully aligned to key objectives.”
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