The Spar Group share price fell more than 4% yesterday after it forecast sharply lower earnings for the year to September 30, with the failure of a new SAP information technology system largely to blame.
The grocery store group said in a trading statement yesterday that it expected diluted headline earnings per share (Heps) to fall by between 53% to 43% for the year. The share price was last seen trading at R112.56. The price has fallen in a steady trendline by 42.5% over three years.
The group’s management said diluted Heps were expected to fall to between 544.8 to 660.7 cents compared with 1 159.1c at the same time last year. Turnover growth was lower than expected, and input costs rose faster than expected, across all regions, they said.
Operating profit of between R1.6 billion and R2bn (R3.4bn) was expected after the challenges that the group dealt with in the first half persisted into the second half of the 2023 financial year.
The board also announced previously it planned to sell its interests in Poland.
The unsuccessful launch of Spar’s new ERP IT system (SAP) at the KwaZulu-Natal distribution centre had “impacted the KZN trading performance severely, causing a loss of group turnover estimated at R1.6bn”. The operational impact amounted to R720 million in profit loss for the region.
A further write-off of R94m for the SAP asset was recognised due to a change in approach towards the SAP roll-out for the foreign regions.
The group also made further impairments of business assets of R120m as a result of a change in operational strategy towards on-site meat processing in the Irish business.
An evaluation of Spar Poland, following the decision to sell it, also gave rise to impairments of associated goodwill and assets of R440m.
The group’s earnings would also be impacted by rising interest costs of R433m, due to the higher interest rate across all the markets where it operates.
BUSINESS REPORT