Spar franchise owner BWG reports 29% profit rise

Spar franchise owner BWG Holdings has reported a 29 per cent rise in operating profits to €48.8 million last year on the back of €1.62 billion in sales.

The group has also started the process of selling its Bargain Booze off-licence franchise in England. The franchise, which could realise £70-£80 million (€105-€120 million), is being sold in advance of the likely exit within the next two years of BWG's 65 per cent owner, Electra Partners, the British venture capital group.

BWG's net profit of €28.4 million in 2004 was down from €28.9 million the previous year, although the 2003 figure was boosted by an exceptional profit of €18 million on the sale for €42 million of four cash-and-carry businesses in Britain that year.

The absence of revenues from those operations contributed to a decline in overall sales to €1.62 billion from €1.84 billion. However, turnover from continuing operations grew 11.2 per cent year-on-year. Net profit margins were 1.76 per cent, down from a net margin of 1.88 per cent in continuing businesses. The overall net margin in 2003 was 1.57 per cent.

BWG repaid a €110 million 8.5 per cent loan note by refinancing on the Dublin market during 2004. This contributed to a €6 million reduction in its net interest charge from €18 million in 2003.

Shareholders include a management team led by chief executive Leo Crawford, who holds 15 per cent of the equity, and former shareholders of Newhill Ltd, whose chain of 115 Spar stores was acquired at the time of the venture capital-backed buy-out in 2002. The buy-out valued BWG at €220 million and Newhill at €45 million.

The fastest growth last year was at Appleby Westwood, the group's Spar franchise in south-west England, where sales grew 20 per cent to €252 million.

With Bargain Booze sales growing by 10.5 per cent to €484 million at 550 outlets, sales in the group's Irish operations grew 9.3 per cent to €882 million.

The Irish sales represent the contribution from 547 Spar and Mace outlets, 140 of which the company owns and operates with the remainder run as franchise operations, and 26 food service cash-and-carry outlets.

Mr Crawford said sales last year at the Irish Spar stores, including franchised outlets, reached €960 million, a figure he said was a year ahead of target.

The group opened 57 new outlets last year - 10 of them in the larger Eurospar format - but Mr Crawford expects the annual rate of new openings to decline to 35 over the next few years.

With a total investment of €100 million and 600 new jobs, the 35 new outlets this year will include 10 Eurospar stores.

"We'd still be optimistic about the future in terms of our expansion opportunities," Mr Crawford said.

In advance of the likely exit of Electra, BWG is expected to use the money raised by the sale of Bargain Booze to pay its outstanding debts of €90 million.