February 21, 2017 / 12:00 PM / 9 months ago

UPDATE 2-Shoprite profit provides reassurance after merger scrapped

* Interim profit jumps by 15 percent

* Earnings come day after Steinhoff merger plan ditched

* Pace of store openings to slow in Nigeria (Adds CEO comment on Nigeria, analyst comment)

JOHANNESBURG, Feb 21 (Reuters) - South African retailer Shoprite reported a 15.5 percent jump in half-year profit on Tuesday, buoyed by sales growth in Angola and Nigeria, reassuring investors after a merger with Steinhoff foundered.

Shoprite, which mainly sells 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, more focused on furniture, 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.

“Shoprite shareholders would have given a sigh of relief, the synergies between the two businesses were certainly dubious,” said Sasfin Wealth analyst Alec Abraham, adding that the results validated investors’ apprehension over the deal.

The grocer is attractive in its own right as a defensive stock in volatile African economies, Abraham said.

But its expansion in Nigeria will face hurdles this year, new Chief Executive Pieter Engelbrecht, who took the reins from stalwart Whitey Basson in January, told Reuters.

Though sales in Nigeria was 60 percent higher than a year ago in the six months to the end of December, the firm has scaled back its store openings in Africa’s most populous nation.

“We expected that we would be able to open between 11 and 13 stores in the next 15 months, and now we are down to two,” Engelbrecht said, citing a dearth of new shopping centres.

He still sees long term growth on the continent and said Shoprite is best placed to be the grocer of choice for Africa’s 2.4 billion people by 2050.

“The speed at which it happens, that I don’t know.”

Sales in Angola, the other important growth market for the retailer, surged 155 percent from a year ago, despite a shortage of foreign exchange as oil revenues remained under pressure, affecting economic growth.

“It was exceptional growth and we must be cautious because to continue at 150 percent is unlikely,” Engelbrecht told an investor briefing.

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).

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

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 2.8 percent after the results on Tuesday, at 193.19 rand by 1355 GMT. Johannesburg’s benchmark Top-40 index was flat. ($1 = 13.0708 rand) (Reporting by TJ Strydom; Editing by Susan Fenton and Keith Weir)

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