Spar FY profit up, mulls share buy back

South African grocery chain Spar Group posted a 29% rise in full-year profit as lower interest rates and economic recovery slowly boost consumer demand.

Spar, which runs namesake grocery chains, liquor and building materials stores, said on Wednesday headline earnings per share totalled 506,3 cents in the year to end-September, compared with 392,1 cents.

Headline EPS is the main profit gauge in South Africa and strips out certain one-off and non-trading items.

Spar said sales rose 9% to R34,8-billion.

Retailers in Africa’s biggest economy, which emerged from a recession in the third quarter of last year, have been squeezed as their customers battle with unemployment and high debt.

Signs of improvement
But the slow economic recovery and interest rates, which are at their lowest in 30 years, have inspired some retailers to make upbeat calls for consumer demand in the coming year.

Spar said it expects consumer spending to remain under some pressure.

“However the impact of lower interest rates, improving economic activity and a gradual increase in food inflation are positive signs for an improvement in trading,” it said in a statement.

The company also said its cash generation is expected to improve as capital expenditure is reduced, adding that where appropriate, surplus cash would be used to buy back shares.

Shares in the company have gained 39% so far this year, compared with a 13% rise in the Johannesburg’s all-share index.—Reuters


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