SPAR showing signs of life

SPAR has made progress in turning its business around as it recovers from a R1.6 billion loss from the botched integration of a SAP enterprise resource planning (ERP) system.

It said that it managed to limit the impact of the failed integration at its distribution centre in KwaZulu Natal in the first half of 2024 and has made significant upgrades to the system.

As part of its two-year plan to to reshape its balance sheet, SPAR said it will complete a restructuring of its debt by the end of the year.

The company also said it is reviewing its European businesses after it announced it would dispose of its Polish business. 

This was revealed in the company’s trading update for the 47 weeks to 23 August ahead of its full-year financial results being released at the end of November. 

SPAR’s total turnover remained under pressure during the period, only growing by 4.1%, and was negatively impacted by exchange rate fluctuations as well as inflation. 

Its core Southern African business grew sales by 3.5%, below the company’s internally measured price inflation of 5.8% – potentially eroding its margins. 

Crucially, the company said it had made significant progress in stabilising the impact of its botched enterprise resource planning (ERP) implementation at its distribution centre in KwaZulu Natal. 

It said it had made upgrades to the system, with early indications being positive and normal margins should be achieved in the near term. 

SPAR will begin rolling out the new system at its other distribution centres throughout the next financial year. 

Build it benefitted from reduced inflation and interest rates as it grew sales by 1.2% after a decline in the first half of Spar’s 2024 financial year. 

The UK and Ireland business performed well in rand terms, with sales growing by 7% in rand terms. This growth in euro terms, however, was a mere 2.6%. 

In Ireland, BWG Foods delivered a solid performance with increased turnover, whilst the Appleby Westward Group in the South West of England experienced a decline in volumes. 

SPAR said its Appleby business is highly seasonal and dependent on a good British summer, which was moderate this year. The UK business is also feeling the effect of structural changes in the economy as a result of the full effects of Brexit being felt.

The company’s businesses in continent Europe continued to be a drag on performance, with the Swiss business’ sales declining by 5.8% in CHF terms. This is a 0.8% increase in rand terms. 

The Swiss market remains challenging, with volume declines across the sector. The cash and carry business was most severely impacted as the market continued to favour cross-border shopping and convenience shopping. 

“We continue to assess our Swiss business and how it is positioned in the market to ensure we optimise returns,” SPAR said. 

Sales at its Polis business declined by 6.5% in local currency terms but increased by 3.7% in rand terms. 

SPAR attributed this to the loss of a net 13 retailers and a slight reduction in retailer loyalty following the announcement of its intention to divest from the Polish market.

The company announced the sale of its Polish business earlier this month and has made significant progress regarding the sale’s regulatory requirements. 

However, to dispose of the business, SPAR will have to recapitalise it to the tune of R2.7 billion and settle any remaining debt. 

“Our journey into Poland is coming to an end. However, this deal further solidifies our renewed strategic intent,” CEO Angelo Swartz said at the time. 

“Our continued focus is on harnessing our strengths, driving efficiencies, profitability and excellence.”