The Spar Group said yesterday for the six months ended March 31, 2023, it had opted not to declare a dividend due to high interest rates, inflationary cost pressures, and difficulties with a new IT system.
In its interim results for the six months ended March 31, 2023 released on Wednesday, the group said in light of the challenges, the board of directors believed it prudent not to declare an interim dividend.
Turnover for the group increased by 7.9% to R72.9 billion. Over the past 12 months, all regions have come under considerable inflationary cost pressures.
“The cost pressures, coupled with SAP software go-live challenges at Spar’s KwaZulu-Natal distribution centre and subsequent loss of turnover during the latter half of the period, which resulted in a decline in operating profit of 17.5% to R1.5bn.
“Due to rising interest rates across all geographies, finance costs on debt and overdrafts have increased relative to the prior comparative period,” it said.
For the period under review, the group said diluted headline earnings per share declined by 30.2% to 447.7 cents as it reported lower sales in South Africa and Switzerland.
The group’s core South African business reported an increase in turnover of 5.6%, which was negatively impacted by a constrained consumer environment exacerbated by high levels of electricity load shedding, the high base effect of liquor sales in the prior comparative period.
Spar Group executive chairman Mike Bosman said: “We estimate the added cost of diesel incurred by our retailers required to run generators during the period amounted to more than R700 million.
“If load shedding continues at these high levels, this could amount to well over R1 billion this year. Helping to ensure food security in South Africa is also top of mind for us as a national imperative, and we take our role in this very seriously,” he said.
Spar Southern Africa was also affected by the loss of turnover from the SAP software go-live challenges at its KwaZulu-Natal distribution centre, as well as a weaker trading performance from Build It.
Spar’s core grocery business reported sales’ growth of 7.9% against internally measured wholesale price inflation of 10.8%. Spar’s on-demand shopping platform, Spar2U, was available in 234 sites at the end of March 2023, the group said.
The group flagged that Tops at Spar liquor business reported a decline in wholesale turnover of 1.9% for the period, against extraordinary growth of 41.6% in the prior comparative period.
“On a combined basis, core grocery and liquor turnover increased by 6.5% for the period. Build It reported a decline in turnover of 3.8%, which is reflective of the intense slowdown in the building sector, with the manufacturing of building materials severely impacted by the increased levels of electricity load shedding,” Spar said.
Its pharmaceutical business delivered strong sales performances by both Pharmacy at Spar and Scriptwise specialised pharmacy delivering 20% turnover growth.
Spar’s BWG Group in Ireland and South West England, increased turnover by 8.8% for the period in Euro terms, and 15.1%% in rand terms. Turnover for the Swiss business, however, declined by 4.3% in Swiss franc-terms and increased by 6.9% in rand terms, against the prior comparative period. Spar Poland delivered turnover growth of 4.5% in PLN-denominated currency and 9.3% in rand terms, the group said.
Looking ahead, the group said in Southern Africa management remained focused on strategic growth areas to drive turnover, and have seen a positive uptick in sales post the period end.
“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,” it said.
The group said it was launching its new strategy for its private label, while resolving all outstanding SAP software implementation challenges.
BUSINESS REPORT