May 15, 2019 / 7:56 AM / 5 months ago

UPDATE 1-South Africa's Spar close to buying controlling stake in Polish chain

(Adds results, details, share reaction)

JOHANNESBURG, May 15 (Reuters) - SPAR Group Ltd is in the final stages of talks to buy a controlling stake in Polish deli and supermarket chain Piotr i Pawel group, the South African retailer said on Wednesday, part of efforts to expand in Europe.

SPAR, a grocery chain which also sells building materials and medicines in southern Africa, already has operations in Ireland, southwest England and Switzerland.

A deal with Piotr i Pawel - which operates 77 delicatessen and supermarket stores plus a wholesale distribution network - would expand its presence to Poland, which is enjoying a period of robust economic growth and record low unemployment.

SPAR said it had been awarded a licence to operate its brand in Poland. It did not give details on the value of the deal, which is subject to regulatory approval.

SPAR, which has more than 4,000 stores, said headline earnings per share (HEPS) fell by 3.4% to 523.6 cents for the six months to the end of March from 542.1 cents a year earlier.

On a normalised basis, HEPS grew by 7.5%. These are adjusted for finance costs, which included significant foreign exchange effects on the translation of liabilities to acquire minority interests in the Irish and Swiss businesses, it said.

Revenues rose 9% to 54.3 billion rand, in tough trading markets, it said.

In Southern Africa, its biggest market, sales excluding the S Buys pharmaceutical business rose 7.6%, hurt by weak consumer spending and low inflation levels. But the results were boosted by revenue growth of 19.3% in the liquor business and 8.3% in the building materials business, the retailer said.

South African retailers have struggled to significantly lift sales and profit at home to double-digit numbers as elevated household debt, higher fuel prices and an increase in value-added tax squeezes consumers’ income.

At market open, shares in SPAR were down 2.52 percent to 192.80 rand. (Reporting by Nqobile Dludla; Editing by Shreejay Sinha and Deepa Babington)

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