KwaZulu-Natal Correspondent

DURBAN The Spar group will bring another 130 branded stores on-stream in the current financial year, while investing R190m in a Western Cape distribution centre and extending its Nelspruit and KwaZulu-Natal facilities.

Chairman Mike Hankinson and CEO Peter Hughes said that through these ventures and the upgrading of another 140 facilities, the newly listed group sought higher revenue and improved operating margins.

Spar's annual report, released yesterday, said the new stores would include Spar supermarkets, Tops bottle stores and Build it home-improvement facilities.

Food giant Tiger Brands unbundled and separately listed Spar on a one-for-one basis last October .

Hankinson and Hughes said that the group had bedded down its north and south Rand distribution centres .

The R350m paid to Tiger last September for Nelspruit Wholesalers reduced cash resources and would mean Spar earned "only a small (amount of) interest" this year compared with R8,9m last year. But the group remained "a strong cash generator", and would offset last year's cash outflow by next year.

The directors expected Spar to generate R350m before this year's dividend payments and would retain a 2,25 times dividend cover. Dividends will be paid six-monthly.

Hankinson and Hughes said Spar would focus on a new marketing campaign that emphasised "guarantees" in terms of price, value and service, while its customer service campaign would enter "phase two".

Build it recently flighted its first television advertisements. Tops is to set up 50 new stores during the year.

The 2%-3% growth in food inflation, countered by an 11% revenue growth, meant Spar achieved an 8% real growth last year.

Hankinson said this was ahead of the market and, when including Nelspruit Wholesalers, saw Spar lift revenues nearly 20%.

Looking ahead, the directors said the favourable exchange rates and lower interest rates boded well for the retail market, but cautioned that food consumer spending did not "change dramatically" with economic shifts.

"The food business has also been affected by low inflation and even deflation in some product categories.

"Additionally, the market is exceedingly competitive and is hotly contested by several major chains," they said.

Competitors had also expanded into franchising, meaning Spar now competed for retail members.