South African retailer Shoprite, which scrapped plans to merge with Steinhoff International on Monday, reported a 15.5 percent jump in half-year profit, buoyed by sharp sales growth in Angola and Nigeria.
Shoprite, which sells mostly groceries, has grown rapidly outside its home market with sales in other African countries now accounting for more than a fifth of the retailer’s total.
A merger with Steinhoff International would have created an African retail giant but the plan was called off after minority shareholders complained that the proposed deal would offer little value for Shoprite. Some analysts said there were no obvious synergies between the two businesses.
Shoprite reported diluted headline earnings per share of 460 cents for the six months to end-December, in line with forecasts and compared with 398.2 cents a year earlier.
Sales in Angola surged 155 percent from a year ago, while Nigerian revenue jumped 60 percent.
Both are important growth markets for the retailer, but experienced a shortage of foreign exchange as oil revenues remained under pressure, affecting economic growth.
However, Shoprite said it was able to fund its stock requirements from its external balance sheet and kept shelves stocked while many traders in the region struggled.
“It was exceptional growth and we must be cautious because to continue at 150 percent is unlikely,” Chief Executive Pieter Engelbrecht, who took the reins from stalwart Whitey Basson in January, said in an investor presentation.
In South Africa, still the largest of the retailer’s 15 African markets, sales grew 14 percent to 71.3 billion rand ($5.5 billion), while sales outside its home market advanced 32.2 percent to 12.9 billion rand.
Africa’s most advanced economy is expected to grow at a faster pace in 2017, but Shoprite said that will have a minimal effect on its South African customers.
“The high levels of unemployment are bound to persist with continued consumer indebtedness and shrinking disposable income,” Shoprite said.
The retailer, which also runs the Checkers and OK Furniture chains, mostly targets lower to middle income shoppers with its no-frills Shoprite and USave stores and has boosted promotional activity to support sales, it said.
Shares in Shoprite jumped more than 8 percent on Monday after the merger was called off as analysts said the details of the tie-up had been unclear.
Shoprite shares were up another 0.9 percent after the results on Tuesday, at 189.76 rand by 1042 GMT. Johannesburg’s benchmark Top-40 index was down 0.4 percent. ($1 = 13.0708 rand) (Reporting by TJ Strydom; Editing by Amrutha Gayathri and Susan Fenton)