Fast-moving consumer goods (FMCG) company CA Sales Holdings has acquired a 49% stake in South Africa rural and informal sector focused retail and merchandising company Roots Sales, boosting its distribution channels after posting a 28% rise in headline earnings to R464.8 million for the year to end December 2023.
CA Sales completed the acquisition of Roots Sales last week, it said yesterday, describing the acquisition of the company which services the informal market in South Africa, as “a channel-broadening” strategy for the company.
CA Sales’ headline earnings per share (Heps) rose 25.3% to 97.97 cents. In February, CA Sales attributed the rise in Heps to “good organic growth from all the operations as well as the successful onboarding” of new clients.
It also said its earnings per share – which went up by 59.5% to 125.22c – had surged by a larger margin than Heps mainly as a result of a gain on bargain purchase entry of R123.6m arising from the January 2023 acquisition of the T&C Group in Namibia. This acquisition had been excluded from headline earnings in the reporting period.
CA Sales’ “positive top-line growth together with the gain on bargain purchase” had contributed to a 40.7% increase in operating profit for the period for the group to R747.3m.
The company, which also has operations in Zimbabwe, Namibia, eSwatini and Botswana, yesterday declared a dividend of 19.56c, about 27.4% higher compared to the year earlier payout.
Its revenue for the full-year period was 19.4% stronger at R11.32 billion, driven by organic growth, acquisitions, expansion into new regions as well as the onboarding of new clients to the group’s portfolio.
Currently, about 85% of the group’s revenue originates from its warehousing and distribution while 15% emanates from the sales and merchandising businesses. However, the company plans to bump up the contribution from warehousing and distribution to 70%, with retail services seen contributing 30% by then.
In the full-year period under review, CA Sales also acquired Taeuber and Corssen, which together with T&C Group were settled for a consideration of R65m, helping it expand its footprint in the southern African country. The T&C Group is a distribution and retail execution business based in Namibia.
CA&S also acquired MarketMax for R11.5m, with contracts acquired including those with clients who retail their brands in the pharmaceutical channel.
“This acquisition is in line with the group’s channel broadening strategy.
Additionally, CA Sales increased its shareholding in Smithshine Enterprises to 100%, in exchange for CA&S shares, to the value of R3.8m.
This has helped to bump up total assets for the company by 26% to R5.2bn “due to the increase in fixed and intangible assets as a result of business combinations as well as increased working capital due to increased” revenue.
Stronger cash flows generated from operations contributed to a healthy increase in cash resources from R735.8m to R1bn as at the end of 2023. Shares in CA Sales traded 1.74% stronger on the JSE yesterday.
Despite the challenging global economic landscape, marked by adverse conditions and persistent inflation, CA Sales is keen to pivot on its resilience and strategic market positioning.
“With a robust balance sheet, a widespread geographical footprint across Africa, as well as a portfolio marked by diversification, the group is poised to deliver favourable results for the year ahead,” the company said.
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