Marc Hasenfuss Editor-at-large

Kaap Agri, the highly profitable farming community retailer, says its upcoming listing on the JSE will prepare the company for game-changing transactions in the future.

Kaap Agri has cast off its dusty agricultural co-operative status with its Agrimark stores, which are now a well-known retail brand in farming areas throughout SA. Its retail business has in recent years grown to include liquor retailing, convenience stores, fuel retailing and building supplies.

Bottom-line profits in 2016 topped R216m — an astounding growth rate, considering that in the 2005 financial year profits were just R31m and in 2011 only R78m.

With PSG-controlled Zeder as a major shareholder in Kaap Agri, there is an expectation that a JSE listing might be the forerunner to energetic corporate action.

An investment presentation last month at the Vunani @SmallTalk conference outlined a "4M period" for Kaap Agri: "More places, more clients, more products, more margin".

But Kaap Agri MD Sean Walsh stresses that while further diversification does counter the cyclicality of the agricultural sector, the company does not need corporate activity like mergers and acquisitions to spur profit growth.

"A listing will make it easier for us to grow into the merger and acquisition space, but it’s our medium-term focus on existing operations that will spur growth," he says.

One of Kaap Agri’s most rewarding initiatives has been fuel retailing — an effort that has warranted the creation of a subsidiary company, the unimaginatively named The Fuel Company.

The fuel sales initiative has, arguably, already been a game-changer for Kaap Agri. In 2012 it had just two fuel sales forecourts. This has grown to 37.

The total amount of fuel sold has grown from 146m litres in 2014 to 187.5m litres last year — a compound annual growth rate of more than 16%.

Walsh is confident the double-digit growth in fuel sales will continue.

While the regulated fuel price might contradict Kaap Agri’s major focus on margins — which already run at enviable levels compared with those of listed supermarket retailers — service stations create opportunities to open its Expressmark convenience stores, which traditionally trade at higher margins.

Please sign in or register to comment.