BWG Group, the owner in Ireland of the Spar and Mace chains, delivered a 41.4 per cent surge in first-half operating profits as sales grew in a competitive market and it benefited from its purchase last year of ADM Londis.
The profit increase to 170 million South African rand (€9.5 million) helped its Johannesburg-based parent, the Spar Group, post a 13.8 per cent earnings increase in the six months to the end of March, to 1.26 billion rand. The Irish contribution also benefitted strongly from a devaluation of the rand against the euro.
"We are very pleased with our first-half performance and the 5.4 per cent organic growth in our business was ahead of the market in what continues to be a highly-competitive grocery sector," said Leo Crawford, chief executive of BWG.
Combined sales
“The integration of Londis has progressed well and their stores are now benefiting from being part of a group with combined retail sales of over €1.75 billion.”
The Spar Group in South Africa bought an 80 per cent stake in BWG in 2014 for €55 million, in a deal that resulted in more than €70 million being wiped from the Irish retail group's debt levels. Mr Crawford and other directors, John Clohisey and John O'Donnell, retained a 20 per cent holding in the business.
Sales at BWG increased to 11.1 billion rand in the first-half, with like-for-like euro-based turnover gaining 5.4 per cent. This occurred against the backdrop of a 0.5 per cent price fall in food and non-alcoholic prices in Ireland and a 0.4 per cent rise for alcohol and tobacco products.
The €23 million purchase of Londis last year contributed almost 18 per cent to the Irish company’s turnover growth, while the euro’s rise against the rand resulted in a further 22 per cent boost.
Still, BWG’s gross margins declined marginally to 10.3 per cent from 10.4 per cent amid strong competition in the food market.
Ahead of budget
The Spar Group said in a statement to the Johannesburg Stock Exchange that BWG performed ahead of budget for the six months.
"In particular, the performance of Eurospar showed encouraging signs of improving after management interventions to counteract heightened competition in the supermarket sector," it said.
The results for Londis, bought in June 2015, were in line with internal forecasts, it said, adding that the final phase of integration of the business into BWG will be completed by the end of the financial year. Further “cost efficiencies are anticipated” from the takeover, it said.
