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Inflation, Cost Increases Impact SPAR Group's Performance In First Half

By Steve Wynne-Jones
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Inflation, Cost Increases Impact SPAR Group's Performance In First Half

Inflationary cost pressures, high interest rates and infrastructure issues in its home market of South Africa were all factors that impacted SPAR Group in the first half of its financial year, with the business reporting a 17.5% decline in operating profit in the period.

Group turnover rose 7.9% to R72.9 billion (€3.68 billion), however a 30.2% decrease in diluted headline earnings per share means that the group is not declaring an interim dividend.

SPAR Group operates the SPAR franchise in Southern Africa, as well as Ireland, south west England, Switzerland and Poland.

'Commendable Performance'

'SPAR delivered a commendable trading performance amid challenging environments,' it said in a statement 'Over the past 12 months, all regions have come under considerable inflationary cost pressures.'

These pressures were compounded by SAP software go-live challenges at its KwaZulu-Natal distribution centre, it noted, as well as rolling blackouts in that necessitated an increase in diesel fuel purchases to power generators.

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“Despite high food inflation lifting turnover in most of its key markets in H1 2023, SPAR’s operating profit was heavily restricted by a combination of inflationary cost pressures, high interest rates in all countries and software difficulties in Southern Africa," commented Joe Dawson, retail analyst at GlobalData.

Read More: South Africa's SPAR Group 'Making Progress' In Search For New CEO

European Performance

In Ireland and south west England, the group's BWG Foods business reported 'another strong trading performance with turnover increasing by 8.8% for the period in local currency terms, and 15.1% in ZAR terms.

SPAR Switzerland's turnover declined by 4.3% in CHF terms, increasing by 6.9% in ZAR terms, with the business still feeling the impact of tough comparatives with the pandemic period, when shoppers were forced to shop locally, boosting SPAR's coffers.

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Elsewhere, SPAR Poland made 'considerable progress' during the period, the group said, delivering turnover growth of 4.9% in PLN terms (9.3% in ZAR terms). This was boosted by the extension of its distribution centre in Czeladz, and improved retailer loyalty.

“Poland has been a difficult market for the retail group to tap into, as the country has been deeply affected by the war in Ukraine, causing a surge in inflation over the last two years," GlobalData's Dawson noted. "The most recent results show some improvement."

© 2023 European Supermarket Magazine – your source for the latest Retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.

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