SPAR’S shares rocketed 13% higher yesterday as the market cheered the retailer’s announcement that it had finally decided to dispose of its loss-making Polish operations.
Spar’s share reached an intra-day high of R114.79 on the news.
Spar also said it estimated a loss of turnover of R1.4 billion due to the challenges of the rollout of the SAP IT system.
In its trading statement for the 47 weeks to August 25, the group said: "Shareholders are again referred to the interim results wherein shareholders were advised that the board was considering various strategic business options in Poland and would announce its decision in due course.
"Having evaluated and considered all options, the board believes that it is in the best interests of the group and shareholders to engage in a process to dispose of its interests in Poland. Additional information will be provided as the process progresses," it said.
Spar bought 80% of the ailing Polish retailer and wholesaler, Piotr i Paweł, in 2019, which owned 77 delicatessens and supermarkets. The business was affected by the reduced footfall in mall-based stores because of the Covid-19 lockdowns. Spar never made a profit from the Polish business.
In the reported period, Spar’s Polish turnover increased by 5.0% (PLN-denominated), positively impacted by improved retailer loyalty but offset by the loss of stores in the prior comparative period.
In South Africa, the group said the transition to SAP had resulted in various go-live and integration challenges, negatively impacting distribution operations in KwaZulu-Natal.
"The impact of the SAP implementation in KZN amounted to an estimated loss of turnover to the group of R1.4bn for the period, being approximately R786m for the six months ended March 31, 2023, as previously reported, and an additional R638m for the five months to August 2023," it said.
Spar said, however, SAP remained a supportive partner throughout the project. After months of collaboration to resolve the issues and drive success, management was satisfied to report that the KZN distribution centre was once again servicing all stores in the region.
"The SAP solution is stable and performing consistently. Overall, service levels are approaching the levels at which they were prior to the SAP implementation.
"The learnings during this transition phase have been immense, and there is a sense of positivity about the system as the KZN region continues to adapt to it," it said.
A recalibrated roll-out plan was under way and management said it remained confident that modernising the business through this solution would deliver significant benefits to Spar and its independent retailers.
The retailer said it had delivered a strong trading performance with turnover increasing by 10.6% for the period, amid higher cost of living challenges for consumers across all regions of operations, and business disruptions in the local market.
In Spar Southern Africa, it posted a total sales growth of 5.9% with mixed performances from the various business units. Spar wholesale grocery business increased sales by 8.1% with internally measured wholesale price inflation for the period of 10.1%
"TOPS at Spar liquor sales declined by 0.6% as sales normalised after the extraordinary growth of 43.0% in the prior comparative period due to the easing of the Covid-19 liquor trading restrictions in September 2021," it said.
On its breached leverage covenant, the group said the various challenges impacting profitability in the first six months of the financial year had persisted into the second half of the 2023 financial year.
In June, Spar said it had breached debt covenants with banks, due to the weakening of the rand and translation of foreign debt into reporting South African currency.
"Extensive and ongoing engagements are being held with all financiers who remain supportive of the group, and no covenant breaches are expected at year-end," it said.
BUSINESS REPORT