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SPAR held back by Polish losses
SPAR held back by Polish losses
Published Date: 2020-05-22 | Source: Stephen Gunnion | Author: Stephen Gunnion
The retailer and wholesaler says Covid-19 has delayed the restructuring of its Polish supermarkets and is likely to lead to higher food prices.
SPAR's recent acquisition of Polish supermarket chain Piotr i Pawel has weighed on first-half earnings. But the retailer and wholesaler says its other operations did well, growing combined normalised headline earnings by 8.2% in the six months to end-March.
SPAR bought Piotr i Pawel last November due to its optimism about the region's medium to long-term prospects. However, it is currently loss making as it undergoes a restructuring and reorganisation. The process has taken longer than expected and the finalisation of the legal administration of the chain of stores was impacted by Covid-19 as a result of the suspension of court activity.
The group's Southern Africa business contributed growth in wholesale turnover of 7.8% for the six months, despite a challenging start to the reporting period and against internally measured food inflation of 4.1%. In Ireland, the BWG Group delivered solid euro-denominated results, with turnover positively impacted by recent acquisitions and the addition of several corporate retail stores. SPAR Switzerland recovered from a weak performance last year, growing its network after independent chain PAM joined the group. Notwithstanding its challenges, SPAR said its business in Poland made good progress in the first half of the year.
Group turnover rose 10% to R59.7 million, with the bulk still generated by its stores across Southern Africa. Operating profit declined by 3.4% to R1.33 billion and headline earnings per share (HEPS) fell 22% to 408c. Normalised diluted HEPS came in 13% lower at 452.7c and it has lowered its interim dividend by 30% to 200c per share.
SPAR said the licence for Poland had been officially transferred to the group, allowing 157 existing SPAR retailers to join the new business. Nine existing Piotr i Pawel stores were converted into SPAR stores and a new distribution centre in Czeladz, near Krakow, had commenced operations. The total store network in Poland stands at 219 stores, including 53 Piotr i Pawel stores.
Towards the end of its reporting period, SPAR said its markets began to experience the onset of the Covid-19 pandemic in the form of lockdowns and reactive consumer behaviour. In Southern Africa, its liquor and hardware retailers were impacted by the closure of stores due to lockdown measures. While the enforced closure of the hospitality industry affected its Irish business, the closure of borders sent more shoppers to its stores in Switzerland.
It expected high levels of uncertainty to remain across all its markets and trading conditions would remain challenging. Food prices were expected to rise, and consumer spending would experience unprecedented levels of pressure.
SPAR's shares rose 6.3% to R178.90 yesterday.
Spar issues results. Badly affected by polish acquisition which is loss making. Acquisition also held up by lockdown. If excluded earnings would have been up 8%-- Wayne McCurrie (@WayneMcCurrie) May 21, 2020