The SPAR Group passed the interim dividend and was also unlikely to pay a final dividend in the interests of preserving cash and to reduce debt, CEO Angelo Swartz said yesterday.
The share price shot up over 10% to R109.78 by late yesterday afternoon on the JSE despite the absent dividend and the 7.6% decline in headline earnings per share to 465 cents that was reported for the six months to March 31.
Swartz said consumers were struggling globally, with high inflation and interest rates and low growth and while first half trading was weaker than expected, an improvement was anticipated in the second half.
He said in an interview that while the grocery warehousing and distribution group that supplies independent retailers using the SPAR brand produced a mixed bag of operating results for the six months, good progress was made on strategy to stabilise operations and reduce debt, including an agreement to sell loss-making SPAR Poland. Spar had struggled last year due to IT problems and the subdued consumer environment.
Total turnover of continuing operations, excluding SPAR Poland, increased 7.9% to R77.2 billion in the six month. Swartz said market research showed that their retailers had held onto, and in many cases slightly increased, market share over the past 12 months.
The interested buyer of SPAR Poland planned to continue operating the SPAR brand in that country. The group owns the SPAR retail brand in South Africa, Switzerland, South West England, Ireland, Poland and via joint venture in Sri Lanka.
He said they were using the Savemor brand in Sri Lanka, with a slightly different operating model than SPAR uses in other countries - the 27 corporate owned stores in Sri Lanka was to initially establish a foothold for the brand, and to pilot the trading of the business.
The plan was to increase the independent ownership of the store to 10 by the end of the financial year.
Group operating profit improved marginally to R1.6bn but higher finance costs negatively impacted profit before tax, which declined 11.2%. As a result, diluted headline earnings per share fell by 7.6% to 464.8 cents.
Swartz said the focus for the next six months would be on the performance of SPAR Southern Africa, and getting the right level of returns from Spar Switzerland.
In the past six months continuing operations generated cash of R1.4bn, an increase of more than 50%, with a reduction in net debt year-on-year.
“There is a new wave of energy across the business, focused on shifting the culture towards executing at speed with greater accountability,” said Swartz.
SPAR Southern Africa delivered strong grocery retail sales performance of 7.1% and good growth of 13.5% for its liquor business, TOPS at SPAR.
“A resilient retail performance is indicative of the strength and relevance of the SPAR brand,” said Swartz.
Sales from SPAR’s Southern Africa private label business increased 7.6%, with the offering being tiered to match consumer’s budgets.
In South Africa, SPAR’s on-demand shopping offering app, SPAR2U, was available in 420 sites at the end of March, up from 356 sites in September 2023. On demand sales volumes increased by 463%.
S Buys Pharmacy at SPAR delivered double-digit sales growth of 15%. Build It saw a marginal positive uptick in trading reflecting the subdued construction industry.
BWG Group in Ireland and South West England delivered a solid trading performance, he said.
“SPAR’s tiered private label approach is well placed to offer better value for all shopping budgets. Agreeing on the target operating model, improving profitability and finalising the system modernisation roll-out plan are key focus areas for the months ahead,” he said.
Effective cost management had been a good feature of the interim results, said Swartz.
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