‘Hangover’ for Spar as group declares no interim dividend

Grocery and DIY wholesale group Spar decided not to declare an interim dividend for its latest half-year to the end of March, as its turnaround plan is still in the early stages.

Spar also did not declare an interim dividend last year.

“The group faced several challenges over the past year, leading the board to decide against declaring a dividend for the period ended 31 March 2024 [2023: 0.0 cents per share],” it said in a Sens results statement on Wednesday.

“The board will revisit this decision based on future macroeconomic and operational conditions. Despite the current stance, the board prioritises improved capital allocation and aims to resume declaring dividends to shareholders when appropriate,” it added.

This comes as Spar’s bungled SAP software rollout in SA and its failed expansion into the Polish market continue to affect the group.

However, the loss-making Polish business is regarded as a discontinued operation and is up for sale. The group expects to exit this business by September this year.

The operating loss in its Poland business came in at R720 million, while overall group finance costs also affected the company’s overall earnings.

In a separate results media release and a Sens statement on Wednesday, the group confirmed that it has “reached a significant milestone in signing key salient terms with a party to purchase the Spar Poland operations”.

It did not name the buyer. However, the group added that “the interested party has expressed their commitment to continue operating the Spar brand in Poland”.

Spar’s share price shot up 7% in morning trade, lifted by the update around the imminent sale of its Polish operations.

Spar Group CEO Angelo Swartz said the company has made significant progress “in respect of the priorities for the group” – essentially its turnaround plan.

“This includes staying on track with our timeline to dispose of the group’s interests in Spar Poland, and we expect to have finalised this process by September this year,” added Swartz.

Commenting on the group’s overall results, he said: “While the trading performance has been mixed, we are pleased to report that the group delivered an increased operating profit of R1.6 billion for our continuing operations… The continuing operations generated cash of R1.4 billion for the period, an increase of more than 50% against the same period last year, with a reduction in net debt year-on-year.”

Despite a 7.9% increase in group turnover (from continuing operations), Spar reported a 7.6% decline in its diluted headline earnings per share for the half-year. Operating profit came in marginally higher (+0.2%) at R1.57 billion.

“Spar’s continuing operations delivered a mixed performance despite the challenging operating environments. Turnover for the continuing group operations consisting of Southern Africa, Ireland, South West England and Switzerland increased by 7.9% to R77.2 billion,” the group’s Sens said.

High interest rates

“All regions have been dealing with inflationary cost pressures and prolonged higher interest rates placing pressure on consumers and business alike,” noted Spar.

“This, coupled with the hangover of system issues in South Africa [SAP rollout] has impacted the results for the first six months of the year.

“While the continuing group delivered an operating profit of R1.6 billion with a marginal positive improvement on the prior comparative period, net finance costs negatively impacted profit before tax which declined by 11.2%. Consequently, diluted headline earnings per share declined by 7.6% to 464.8 cents,” it said. – moneyweb.co.za