Africa-Press – South-Africa. Spar has scrapped its interim dividend amid a double-digit decline in profit as the company struggles with rising costs, high interest rates and difficulties with a new IT system.
The JSE-listed retailer reported on Wednesday that its operating profit fell almost 18% to about R1.5 billion for the six months to end-March 2023. Its diluted headline earnings per share fell more than 30%.
“Go-live challenges” with new SAP software – or enterprise planning software – at its KwaZulu-Natal distribution centre resulted in lost turnover, the group said.
At the same time, rising interest rates hiked finance costs on its debt. Its costs have also increased across the world. Outside of SA, it operates in Poland, Switzerland, the UK and Ireland.
In light of these challenges, Spar decided it was “prudent” not to declare a dividend.
The group, valued at about R20 billion on the JSE, flagged the fall in profit in a trading update about two weeks ago, with its shares falling more than a fifth over two days as a result.
Its Spar Southern Africa division reported an increase in turnover of almost 6%, with sales impacted by a “constrained consumer environment” exacerbated by load shedding.
Revenue at its Tops liquor stores declined from the previous year, when brisk sales were seen after the easing of Covid-related bans on alcohol sales. Its building division Build it also saw a weaker performance.
Volumes also appeared to go backwards with the Spar grocery business reporting sales growth of 7.9% against price increases of 10.8%.
However, Spar reported a “positive uptick” in sales since March.
“While conditions are expected to remain tough, management is taking action to reduce the impact thereof, and will continue to attract consumers through real value house brand offerings.”
The group is launching new strategy for private label products and said the SAP implementation issues “remains an urgent priority for the business and our retailers in the KZN region”.
Its Swiss operation’s turnover fell by 4.3% in Swiss francs, though it increased 7% in rand terms. “Food retailers across Switzerland remain under pressure due to the continued loss of volumes,” Spar said.
But Spar’s Ireland and UK business increased turnover by almost 9% in euros (15% in rands). Its Polish operation also saw turnover growth of 4.9% in local currency terms and 9.3% in rands.
It said that the coming summer period in Europe is traditionally positive for retail trading and hospitality sector growth.
Spar CEO Brett Botten stepped down in January, and the board said the process to find a new group CEO was well underway, admitting that it was “conscious of the uncertainty caused during this period”.
Shares in Spar were up about 3% in early trade on Wednesday but have still fallen by more than a fifth over the past one year. Click here for details of the group’s shares as well as other info.
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