Categories: Business NewsNews
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2023-11-30 9:46 AM

Spar’s Tech Blunder Rocks Profits, Dividend Wiped Out

By Miriam Matoma


Spar’s fiscal year concluded on September 30, 2023, without a dividend due to a faltering consumer climate and substantial SAP implementation errors.

The Southern Africa arm of Spar witnessed a 5.1% turnover spike. However, trading took a severe hit due to a strained consumer environment compounded by ongoing power outages.

Notably, core grocery and liquor sales surged by a collective 6.1% during this period.

The group cited challenges with the ERP system, noting a 7.1% increase in core grocery turnover, including SPAR Encore.

Contrarily, Spar’s building materials segment, Build it, encountered a 4.3% decline in turnover. This downturn stemmed from altered consumer spending habits favoring essential expenses. Moreover, the building sector struggled significantly amid power outages.

On a positive note, the pharmaceutical division experienced commendable growth, with both Pharmacy at SPAR and Scriptwise contributing to a 19.2% sales upswing.

The SAP launch in KwaZulu-Natal became operational but grappled with various integration issues, causing severe disruptions in distribution operations within the province.

Overall, the faulty SAP implementation led to an estimated loss of R1.6 billion in turnover and an approximate R720 million decline in profits for the fiscal year.

Moreover, a write-off of R94.1 million for the SAP ‘asset under construction’ was acknowledged due to a change in approach for SAP implementation in foreign regions.

While Spar’s BWG Group in Ireland and South West England recorded an 8.1% (EUR) turnover rise, Spar Switzerland encountered a 3.3% (CHF) decline due to market challenges and store transfers.

Despite a 5.0% (PLN) turnover increase in Spar Poland, the group is contemplating divesting its Polish interests.

The overall turnover for the group rose by 10.1% to R149.3 billion, but headline earnings per share plummeted by -47.7% to 606.6 cents.

In light of multiple challenges, Spar opted not to announce a final dividend for the fiscal year ending September 30, 2023.

Outlook

Spar remains focused on strategic progress despite executive and board-level changes but anticipates continued constraints in the consumer environment.

The group believes its private label strategy will offer better value to independent retailers and customers.

While the SAP system at the KZN DC remains stable, its rollout in other Southern African regions has been delayed until the management ensures optimized performance. The learning curve during this transition has been invaluable.

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Miriam Matoma

Miriam is a freelance writer, she covers economics and government news for Rateweb. You can contact her on: Email: miriam@rateweb.co.za Twitter: @MatomaMiriam

Tags: Spar's Tech