Spar tech blunder hits hard – wipes out dividend

 ·30 Nov 2023

Spar has not declared a dividend in its annual financial for the year ended 30 September 2023 due to a strained consumer environment and some major SAP implementation blunders.

Spar Southern Africa increased turnover by 5.1%, but the group said that trading was severely impacted by the strained consumer environment and continued load shedding.

Core grocery and liquor turnover increased by a combined 6.1% during the period.

“Core grocery turnover, including SPAR Encore, increased by 7.1% and reflects the ERP system challenges experienced during the reporting period,” the group said.

The group’s building materials business, Build it, saw a decline in turnover of 4.3% due to changes in consumer spending towards basic living costs and the overall struggles of the building sector, which has been severely impacted by load shedding.

The pharmaceutical business performed well to push sales from both Pharmacy at SPAR and Scriptwise (specialised pharmacy), delivering 19.2% turnover growth.

Notably, the group’s distribution centre in KwaZulu-Natal was the first to launch with SAP, limiting the risk to the rest of the regions.

The go-live in KwaZulu-Natal has several go-live and integration issues, severely impacting distribution operations in the province.

The overall impact of the botched SAP implementation amounted to an estimated loss of turnover of R1.6 billion and an estimated R720 million loss of profits for the financial year.

“Furthermore, as a result of the change in approach towards the SAP implementation roll-out for the foreign regions, a write-off of R94.1 million in respect of the SAP ‘asset under construction’ has been recognised,” the group said.

The BWG Group (Spar’s operations in Ireland & South West England) saw 8.1% (EUR-denominated) turnover for both markets, increasing by 8.1% due to strong performances across the retail brands a full recovery of the hospitality sector and successful integration of acquisitions made in Ireland.

However, Spar Switzerland saw turnover decline by 3.3% (CHF-denominated) due to the difficult market environment and the transfer of a group of corporate stores to independent retailers during 2022, negatively affecting retail sales growth.

Although Spar Poland saw turnover increase by 5.0% (PLN-denominated), the group said in September that it is in its best interest to engage in a process to sell its interests in Poland.

Looking at the group’s overall financials, turnover increased by 10.1% to R149.3 billion (FY22: 135.6 billion)

However, the group’s headline earnings per share dropped by -47.7% to 606.6 cents per share (FY22: 1,160.5).

Amid the group’s various challenges, it decided not to declare a final dividend for the year ended 30 September 2023.

Outlook

Despite the group saying that it is making progress within its strategic focus areas amid major changes at the executive and board levels, it still expects the consumer environment to remain constrained.

“However, SPAR’s private label strategy is well placed to offer better value for our independent retailers and SPAR shoppers,” it said.

“While the SAP solution is stable and performing consistently at the KZN DC, the roll-out of SAP has been delayed in other Southern African regions until management is satisfied with the optimisation of the system at the KZN DC. The learnings during this transition phase have been immense.”


Read: 9 foods that have seen massive price hikes in South Africa

Show comments
Subscribe to our daily newsletter