THIS ISSUE: 21 May - 27 May
YOUR NUMBERS THIS WEEK
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SPAR The Luck of the Irish
Verdantly-logo’d retailer SPAR has just had a tidy little half, and no mistake: revenue up a whacking 41% to 36.4billions of rand, with profit up 22%, and net income rising to R784million. In part, of course, we attribute this to canny trading and an eye on expenses. SPAR have, after all, been bringing the punters in with deeper discounts in these trying times, and profiting handsomely from the sale of more private label gear, up 21% in value to R3.2billion. But substantially, the jump is due to the acquisition last year of the BWG Group, which owns SPAR in Ireland and southwest England, markets which are unencumbered by the worries back home. For the first time, results there were included. Next up for SPAR might be acquisitions in Zambia, where the brand has been operating under local ownership since 2003, then a similar transaction might be on the cards in Ghana and Kenya
Comment: An incredible model for growth, available only to SPAR, and which must be causing other retailers (coughshopritecough) to gnash their gleaming white teeth.
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Pick n Pay Stagecraft
In 2013, you may recall, Pick n Pay was in a heck of a shape: costs were out of control, profit was falling, and wild-haired executives were roaming the corridors, clutching at each other’s sleeves and asking: “Is Longmeadow working?” Two years down the line, different picture. According to cool-headed pommie CEO Richard Brasher, stage one of the recovery is well over, with four subsequent reporting periods of rising profits safely tucked away, for a total of 74% growth, and stage 2 is steaming ahead nicely, with a more efficient operating model in place, trading expenses down and employee costs tracking well below inflation. Significantly, gross profit margin is up from 17.5% to 17.8%, while trading margin is up 1.6% to 1.9% – below Shoprite levels, say, but clawing its way back. Like-for-like turnover is up 3.6%, with growth in new space at 5.2%. Customers grew 2.4% and the average basket size grew 4%. And Phase 3 – which will see an investment of R5billion in store openings and refurbs – is more than just a gleam in the Ackermens’ eyes.Comment: Pick n Pay was never going to drop off the map. But in our tightly contested retail environment, even a small decline can read as catastrophic. Encouraging stuff from The Big Blue.
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Massmart Gaming the system
In recent years, Massdiscounters – the division which includes Game and DionWired – had become something of a drag on the well-oiled Massmart system, to be glossed over at results time and hurriedly pushed under the coffee table when visitors came in from, oh, Bentonville, say. No more: as you may recall, divisional sales for the year to December grew 8.1%, much of that, we are told, from the fresh offering sold under its Foodco store-within-a-store brand. Foodco has since been scrapped in favour of Walmart’s Marketside brand under which the total food drive will now fall, signalling Massmart’s ambition to take on the other majors where it hurts. The idea with food is not so much to attract new customers, but to convert existing ones, giving them a reason to visit the stores on a more regular basis.
Comment: With Walmart’s buying power and Massmart’s established distribution capability, “a new power is rising,” as Saruman the White might have said.
MANUFACTURERS AND SERVICE PROVIDERS
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Pioneer Foods Shurely shum mishtake
Here’s a conundrum for you: Under a headline which reads “Pioneer Foods H1 profit declines 9.7%” we read this: “South Africa’s Pioneer Food Group posted a 39% growth in half-year profit on Monday”, with headline earnings per share up to 451 cents in the six months to end-March from 325 cents a year earlier. Other writers have it slightly differently. According to Business Day, however, earnings declined R627.2m in the six months ended March 31, or R3.41 a share, from R694.9m last year. What everyone seems to agree on, however, is that group revenue was up a grinding 8% to R9.45billion, weighed down by losses in Pepsico, which as you now is set for disposal by the Group, and by a charge relating to a BEE transaction for Quantum Foods, the chicken producer that Pioneer unbundled last year.
Comment: This said, Pioneer remains a darling of the markets, where the share price has increased 26% this year.
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SoftBev Fizzically fit, fizzically fit, fizzically, fizzically, fizzically fit!
The hard men of packaging, Bowler Metcalf, have announced that they will be listing newly-minted bottling business SoftBev within the next three years. Bowler, you will recall, now own 43% of SoftBev stock after the merger of Quality Beverages and Shoreline. Rumour has it that SoftBev might be in line to grab the Pepsi bottling contract from Pioneer, where it has caused endless headaches and had a depressing effect on the old bottom line. They’re also in the process of hammering out a deal with Capri-Sun, which could add R3 to R4million profit-wise in the short term, and eventually as much as R8million. The pouchy/juicy brand was previously distributed by Clover. SoftBev are currently worth around R1.2billion per annum.
Comment: An exciting new business, with some amazing prospects. Will they have the gas to successfully bring the troubled Pepsi brand to market, though?
TRADE ENVIRONMENT
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Interest Cool and steady and easy
In a case of man fails to bite dog, or vice versa, firm-but-fair Reserve Bank governor Lesetja Kganyago (“The Guv”™) has announced that with things being the way they are and all, he’s going to let the dear old repo rate stay where it is for the mo, holding steady at 5.75% where it’s been since last July. But don't settle too deeply in Grafton E-Zee-Boy Recliner/Rocker: he has warned that should petrol and electricity prices continue on their graceful upward arc, inflation will follow as day follows night, and he will have no choice but to up the rate. Here’s the great thing though: he’s also mentioned that henceforward and from now on, any hike in the rate will be pre-empted by a forecast, together with its underlying assumptions, in the Monetary Police Committee statement. Previously, the Committee in their dramatic scarlet robes had remained in a locked room for the duration of their deliberations, announcing their intentions vis-á-vis the rate with a puff of smoke from the ritual chimney: black for down, white for up and a delicate dove-grey for unchanged.
Comment: The new way is much better.
IN BRIEF
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SABMiller Damn, we’re good.
Last week, you will recall, we predicted that with the flattening of SABMiller’s sales in the developed world, they would soon be jumping on the craft beer bandwagon. Which this week, they have done, with the announcement that they will be buying Britain’s Meantime Brewing Company, a pioneer in the sector. Our next prediction is that such acquisitions will be ultimately fruitless: for the artisanal toper, the independence of the operation from corporate control is easily as important as the flavour of the beer itself. We take no pleasure in this; it’s just how it is.
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Aspen A simple remedy
Another week, another Aspen deal. This time they’re flogging a portfolio of 130 branded and generic drugs to Strides Australia and a mini-folio of six goodies to Strides Singapore, for a combined value of $301million. This as part of Aspen’s ongoing programme to simplify the business and focus on areas where they can best add value. Next up, they tell us, might be the acquisition from an undisclosed source of a baby-food business.
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