Primaresearch - Spar Group Limited (135K) Spar (SPP) - The Weakest Link

Report

Primaresearch

Shamil Ismail

EUR 173.18 For Business Accounts Only

Spar (SPP) - The Weakest Link

Summary

SPP’s FY17 results were disappointing and we are concerned about the impact which a protracted low topline growth environment may have on its individual franchisees. Through a series of scenarios, we assess which levels of turnover growth would swing the profitability of a franchise store into an operating loss. We find that franchisees that are geared may be vulnerable to the current low levels of turnover growth, and considering the periodic refurbishment of stores, we think that a substantial portion of the SPP franchisee base may be leveraged.

We also note an interesting trend in the recent results of the large food retailers which suggest that independent retailers may be regaining market share.

22/11/2017 10 EN

Underlying

Spar Group Limited

Spar Group is a wholesaler and distributor of goods and services to SPAR and SaveMor supermarkets, Build it building materials outlets, TOPS at SPAR liquor stores and Pharmacy at SPAR pharmacy and healthcare outlets.Co.'s distribution centres provide goods and services to retail stores in South Africa, Swaziland, Botswana, Lesotho, Mozambique, Zimbabwe and Namibia. In addition, SPAR wholesales goods to independent SPAR stores in Zambia and Malawi.

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ZAE000058517 Johannesburg Stock Exchange South Africa

Provider

Primaresearch

Primaresearch is an independent, sell-side, equity research firm based in Cape Town, South Africa. We focus our research on consumer-facing companies as we have credible experience in this space. The name “primaresearch” invokes both high quality (prime) as well as “primary” research – being novel and offering value-add investment insights for our clients.

Our Vision

Our vision is to be the leading independent sell-side research firm in Africa. While we start with South Africa, we are looking into providing our clients with comprehensive, Africa-wide consumer-facing company and market research. Africa is poised to emerge as a significant consumer market, for which investors in South Africa and abroad will require thorough research and insights on. We aim to be the “go-to” research firm for these investors.

Our Culture

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Analysts

Shamil Ismail

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