Wholesaler Spar expects to report a drop in profit when it releases its interim results on Wednesday as the botched IT rollout at its key KwaZulu-Natal distribution centre and high interest rates eat into earnings.
Headline earnings per share (HEPS), a key measure of profit in SA, for the six months to end-March will fall as much as 13% from the same time in 2023.
In a trading update published on Thursday afternoon, the company, valued at about R18.5bn on the JSE, said cost increases that outstripped turnover growth had contributed to the decrease in earnings.
“The ongoing IT system issues at the KwaZulu-Natal distribution centre resulted in lost gross margin, impacting Southern African profitability; and prolonged high interest rates have caused a significant increase in group net finance costs,” Spar said.
In February, Business Day reported that the retail group was battling to optimise SAP’s enterprise resource planning (ERP) system at its distribution centre.
The ailing system, which destroyed millions in profit in 2023, is still not working optimally a year after its rollout. The system affects earnings from continuing operations by impeding the group’s ability to predict demand and manage availability of stock.
On the exit of its Polish business, the group said it would provide an update at the results presentation next week. Due to that business’ poor performance, however, the company had to institute a material impairment of the assets held for sale in Poland.
Spar opted to exit Poland in 2024 because four years after its purchase it was still not profitable.
By market close on Friday Spar’s share price had gained 1.15% to R96.48. It peaked at R225 in February 2022 before governance issues and an ailing economy took their toll.
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