Spar Group takes action to restore its bottom line
|Published
The Spar Group enjoyed good turnover growth in its year to September 30 and its management has also addressed the problems that resulted in the headline earnings a share falling by more than 45%.
The group lifted turnover 10.1% to R149.3 billion for the year off the back of strong performance from the Irish business, while Southern Africa increased wholesale grocery turnover by 7.1%, despite various challenges.
Group profitability was negatively impacted by the IT system implementation challenges, operating losses in Poland, certain non-recurring items, and higher debt costs due to rising interest rates. This led to diluted headline earnings per share falling 47.7% to 606.3 cents.
The group had, however, acted with the announcement to sell its interests in the Polish business, and it had a review of the digital transformation programme done by an independent assurance provider, and as a result had repurposed the programme to ensure delivery of a return on investment.
The debt structure was being reviewed. No final dividend was declared.
In terms of the contribution to operating profit by region, Poland reported a R699.7 million operating loss, Switzerland a R236.8m operating profit, R1.06bn profit was generated in Ireland and England, while Southern Africa reported R1.22bn operating profit.
Newly-appointed group chief executive Angelo Swartz said in a statement yesterday he was optimistic about the future as several strategic interventions take hold, built around modernisation, good governance and maximising SPAR’s strengths.
“This result reflects some of the tough decisions the group has had to make to reposition itself as a stronger organisation. We are confident about the future of our business and are set to benefit from positive momentum going into 2024,” he said.
He said it had been a challenging year in all the regions where the group operates due to inflationary cost pressures and tough trading environments, while South Africa also had to deal with load shedding.
“Through our private label offering we are trying to ensure we deliver best value for our independent retailers and our Spar shoppers. Our private label turnover in South Africa increased by 11% to R18bn through the year,” said Swartz.
Loss-making Spar Poland would continue to receive support until a new buyer was found.
“In the year ahead we will harness our strengths, navigate risks and focus on growth in the areas that have made us such a well-loved brand in the markets and communities we serve,” he said.
In terms of resolving the IT issues in KwaZulu-Natal, actions were taken through the year to improve supply to the retail stores, including servicing the stores from the Eastern Cape, South Rand and North Rand distribution centres, as well as increased use of supplier drop shipment channels.
The KwaZulu-Natal distribution centre had resumed servicing all stores in the region from August 2023. The rollout of SAP [system application and processing software] had subsequently been delayed in other Southern African regions until management was satisfied with the optimisation of the system at the KwaZulu-Natal distribution centre.
BUSINESS REPORT