Kaap Agri, the JSE-listed retailer specialising in agricultural, fuel and related retail markets in Southern Africa, has achieved significant growth in its market share during the six months to March 2019. Revenue increased by 28.7%, amounting to R4.4 billion against R3.4 billion in the previous comparable financial period with like-for-like comparable sales growing by 10.7%.
Growth in the value of business transactions increased by 23.6% to R5.5 billion, driven by a 21.9% increase in the number of transactions. Product inflation, excluding the impact of fuel inflation, was estimated at -0.5%.
The group’s financial performance was nevertheless impacted by a slower than anticipated recovery in agricultural conditions in the Western Cape and the continued drought conditions in the Northern Cape.
Recurring headline earnings grew by 5.2%, while recurring headline earnings per share increased by 3.2% to 230.3 cents.
An interim dividend of 33.5 cents per share (2018: 32.0 cents) was declared, representing an increase of 4.7% compared to the 2018 interim period.
Although consumers remain under pressure, the group’s range expansion and supply chain improvements have generated strong retail growth in non-agri categories.
The largest impact on revenue came from The Fuel Company (TFC), specifically in newly acquired and non like-for-like sites. Group fuel volumes increased by 9.2%, of which TFC owned and managed sites have grown fuel volumes by 9.5%. The TFC’s revenue grew by 45.0% and operating profit before tax by 24.7%.
Growth in fuel site convenience and quick service restaurant retail operations has exceeded fuel volume growth. Continued strong growth in this division is expected.
The addition of the Forge business in KZN as well as market share gains in the inland region have positively impacted the group’s trade division. Revenue from the newly acquired Forge business is included in the results as from 1 October 2018.
Revenue from the Agri & Retail trading division, which includes the Agrimark retail branches, Pakmark packaging material distribution centres, Forge, mechanisation services and spare parts increased by 24.1% with operating profit before tax increasing by 0.7%.
Excluding the impact of the recently acquired Forge business, non-agri retail sales have performed well, growing by 3.9% compared to the previous comparable period.
Wesgraan, which includes grain handling and storage of grain and related products, seed processing and potato seed marketing, grew revenue by 26.6% off improved wheat harvests in the Western Cape, resulting in a 16.8% increase in operating profit before tax. The full impact of the Wesgraan recovery is weighted to the second half of the current financial year.
Revenue from Irrigation manufacturing decreased by 5.3% due to the lingering drought related impact on capital investments and upgrades. Operating profit reduced by 27.9%.
Announcing the results, Kaap Agri CEO Sean Walsh said: Given that there is still uncertainty about land reform, a general lack of business confidence and consequently less investment in the run-up to the election, the results can be considered pleasing.
“With the election behind us, more certainty in general terms can be expected. This should give room for a recovery in business confidence and more investment. More private investment is paramount, as investment by government alone will not bring an economic recovery.”
“From an agricultural point of view certainty about land reform and water regulations is needed to build confidence for normalised investment in the sector. More confidence and positivity is also needed in the retail environment for growth.”
Regarding Kaap Agri, Walsh said that the second half of the year will remain challenging and improved performance will be dependent on normalised weather patterns and increased consumer confidence.
The recovery in Wesgraan, store upgrades and expansions, as well as the revenue from new TFC sites will contribute more significantly during the next six months.
“We remain committed to achieving our strategic medium-term growth targets through continued investment in our people, selective footprint expansion, revenue and cash generating expansion and acquisition opportunities,” Walsh concluded.
Note to editors
Kaap Agri employs over 3 000 people and has a footprint of 200 business units across South Africa and Namibia, which includes the retail trading brand Agrimark. Other brands in the Kaap Agri stable include Wesgraan (grain handling and agency services), Pakmark (packaging material supplier and distributor), Liquormark, as well as Agriplas, which focuses on the manufacturing of irrigation products. The company’s retail fuel operations are grouped within The Fuel Company (TFC), which also operates the forecourt convenience brand, Expressmark.