IT system, high costs keep up pressure on profit for South Africa's SPAR (updated)

Spar

12/06/2024 07:00

(Adds details)
       JOHANNESBURG, June 12 (Reuters) - South Africa's
second-biggest supermarket retailer, SPAR Group  SPPJ.J ,
reported a 7.6% decline in half-year earnings as cost increases
grew more than the management's lower-than-expected turnover
growth, while IT system issues hit gross margin.
    The grocer said profit before tax from continuing operations
fell by 11.2% to 1.1 billion rand ($59 million) in the six
months ended March 31 due to high finance costs.
    Consequently, headline earnings per share declined to 465
cents, with the board deciding against declaring a dividend.
    The Group's turnover, which also include operations from
Ireland, South West England and Switzerland, rose by 7.9% to
77.2 billion rand. The South Africa core grocery business
delivered turnover growth of 4%. 
    "All regions have been dealing with inflationary cost
pressures and prolonged higher interest rates placing pressure
on consumers and business alike," SPAR said.
    "This, coupled with the hangover of system issues in South
Africa has impacted the results for the first six months of the
year." 
    Operating expenses for the group rose by 9.6% to 9.2 billion
rand.
    Last year, the Group struggled to successfully implement a
SAP resource planning system at its KwaZulu-Natal (KZN)
distribution centre, which impacted distribution operations in
the province. 
     Owing to gross margin management issues arising from the IT
system challenges, SPAR Southern Africa's gross profit margin
declined to 9.6% from 10%.
    As a result, the Group's gross profit margin remained flat
at 11.9%, it said. 
     
($1 = 18.5647 rand)

 (Reporting by Nqobile Dludla; Editing by Muralikumar
Anantharaman and Janane Venkatraman)
 ((nqobile.dludla@thomsonreuters.com; +27103461066;))