SPAR’s H1 2024 Earnings Drop by Up to 13%

    • Earnings Decline: SPAR's earnings from continuing operations are expected to decline due to higher costs and IT issues.
    • Discontinued Operations Impact: The classification of SPAR Poland as a discontinued operation led to a significant asset impairment.
    • Banking Support: Despite challenges, SPAR maintains strong banking support and is not in breach of any covenants.

SPAR Group Limited has issued a trading statement for the six months ended March 31, 2024. The group is finalizing its interim results for this period. The company operates primarily in South Africa, excluding its Polish operations.

Earnings from Continuing Operations

SPAR’s earnings from continuing operations are expected to show a decline. The anticipated earnings per share (EPS) and headline earnings per share (HEPS) are detailed below:

MetricExpected Range (%)Expected Range (Cents per Share)Previous Period (Cents per Share)
HEPS-13.0 to -3.0437.9 to 488.2503.3
Diluted HEPS-13.0 to -3.0437.7 to 488.0503.1
EPS-12.0 to -2.0426.7 to 475.2484.9
Diluted EPS-12.0 to -2.0426.5 to 475.0484.7

Key Factors Influencing Earnings

Several factors have impacted SPAR’s earnings from continuing operations during this reporting period:

  1. Operating costs were well managed but slightly exceeded lower-than-expected turnover growth.
  2. Ongoing IT system issues at the KwaZulu-Natal distribution center resulted in lost gross margin, affecting Southern African profitability.
  3. Prolonged high interest rates caused a significant increase in Group net finance costs.

Discontinued Operations: SPAR Poland

SPAR Poland is now classified as a discontinued operation. This follows the criteria set by the International Financial Reporting Standards (IFRS 5). The evaluation of SPAR Poland led to a material impairment of assets held for sale.

Earnings Including Discontinued Operations

For total earnings, including discontinued operations, EPS and HEPS are expected to fall within the following ranges:

MetricExpected Range (%)Expected Range (Cents per Share)Previous Period (Cents per Share)
HEPS-12.0 to -2.0394.2 to 438.9447.9
Diluted HEPS-12.0 to -2.0394.0 to 438.7447.7
EPS-98.0 to -88.08.5 to 51.0425.3
Diluted EPS-98.0 to -88.08.5 to 51.0425.1

Impact of Discontinued Operations

The classification of SPAR Poland as a discontinued operation has significantly impacted overall earnings. A material impairment of the Polish assets has been recognized. Further updates will be provided at the results presentation next week.

Banking Facilities

SPAR assures that all financiers remain supportive of the Group. Amendments to banking covenants have been agreed upon. As of March 31, 2024, SPAR is not in breach of any financing covenants.

Results Presentation

SPAR’s results for the six months ended March 31, 2024, will be published on SENS by 08:00 on Wednesday, June 12, 2024. A results webcast presentation, hosted by SPAR management, will follow at 09:30 on the same day. Additional details can be found on SPAR’s corporate website.

Conclusion

SPAR Group Limited faces challenges with its IT system issues and high interest rates impacting profitability. The exit from the Polish market and related impairments further strain overall earnings. However, the group has managed operating costs effectively and maintains strong banking support. The upcoming results presentation will provide further insights into SPAR’s financial health and strategic direction.


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