Spar declares no dividends, despite ‘resilient performance’

Group says it has ‘made significant strides’ in its turnaround, but wants to further optimise operations to ‘position itself to take advantage of growth opportunities’.

Spar – the wholesale and retail distribution giant headquartered out of Pinetown in Durban – declared no dividends for a second year on Thursday despite reporting a ‘resilient performance’ for its 2024 financial year.

The group let the market know that payouts are currently off the table as it prioritises its turnaround plan and repositions to grow its share in the highly competitive SA retail market.

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Read: Despite slowing sales growth, Spar says strategic refocus is paying off

However, not paying dividends will still be a tough pill for shareholders who got 400 cents a share in FY2022 and more than double that in FY2021.

The group’s share price fell over 3% in morning trade following the release of its latest results.

Spar’s share price

“The group has been focused on addressing various challenges over the past 18 months to ensure financial stability, balance sheet resilience and maximise its ability to position itself to take advantage of growth opportunities,” Spar said in its financial results filing.

“Whilst significant progress has been made, work remains ongoing in these areas. Consequently, the board believes it is prudent to not declare a dividend for the year ended 30 September 2024 [2023: 0 cents per share],” it pointed out.

“This decision will be reconsidered based on future macro-economic and operating conditions. Prioritising improved capital allocation, including shareholder returns, remains important to the board,” it added.

Key financial highlights (continuing operations)

• Group turnover of R152.3 billion, up 4%
• Ebitda (earnings before interest, tax, depreciation and amortisation on a pre-IFRS 16 basis) R3.8 billion, up 13.9%
• Net borrowings R9.1 billion, down 8.9%
• Net borrowings/Ebitda 2.41x (2023: 3.02x)
• Earnings per share, 855.9 cents, up 24.5%
• Profit after tax of R1.6 billion, up 20.9%
• Operating profit, R2.89 billion, up 15.1%
• Headline earnings per share at 917.9 cents and diluted headline earnings per share of 917.5 cents – both up 11.1%

“The group has made significant strides in its strategic priorities as it aims to optimise operations and achieve its growth objectives,” said Spar.

“Amidst navigating a challenging trading environment and addressing consumer pressures across various territories, together with the ongoing impacts of the SAP system implementation in South Africa, Spar’s continuing operations have demonstrated a resilient performance.

“Turnover for the group’s continuing operations in Southern Africa, Ireland and South West England [BWG Group], and Switzerland increased by 4% to R152.3 billion.

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“Turnover growth slowed in the second half of the financial year across all geographies,” added Spar.

It said this was influenced by the ZAR (rand) “translation impacts of the foreign subsidiaries” due to the currency’s strengthening, slowing levels of food inflation, increased competition across all markets, and consumers facing continued cost-of-living constraints.

The group is finalising its exit from Poland, which is expected to be complete by January 2024.

SAP debacle update

Meanwhile, Spar said interventions to resolve the SAP software implementation impacts in the KwaZulu-Natal region are well underway but that “it will take some time for the full effects to be felt and for the overhang on gross margins to be eliminated”.

The group noted that its gross profit margin for Spar South Africa (including Spar, Tops and Build it) decreased from 8.7% to 8.5% in FY 2024.

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It said group-wide gross profit margins “remained stable at 11.9%” compared to the previous financial year.

“Our journey towards future-proofing Spar and solidifying our status as the retailer of choice has gained strong momentum in recent months,” declared Spar Group CEO, Angelo Swartz. “Through disciplined financial management, we have successfully reduced our debt, enabling us to achieve growth where it counts and create greater stability moving forward,” he added.

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