Spar says it expects food prices to rise in changing world

21 May 2020 | Economic factors

The Spar Group has published its interim results for the six months ended March 2020, with the group noting that the Covid-19 pandemic has had a significant impact on its business.

Group turnover for the period increased by 10.1% to R59.7 billion, while operating profit was down 3.4%, as a result of the group’s Polish business which was acquired in this reporting period.

Excluding the Polish result, normalised headline earnings increased by 8.2%. Normalised diluted headline earnings per share declined 13.4%.

Spar Southern Africa contributed growth in wholesale turnover of 7.8%, despite a challenging start to the reporting period and against internally measured food inflation of 4.1%, it said.

The Tops liquor brand reported weak wholesale turnover growth of 3.9%, impacted by the move of certain products to direct sale and a loss of retail loyalty. Build it delivered a resilient performance in a weak sector, with wholesale turnover down 2.4%.

“In Southern Africa, our liquor and Build it retailers have been impacted by the temporary closure of stores, due to lockdown measures,” it said.

Spar’s Southern Africa store network grew to 2,402 stores, with 53 net new stores opened across all formats. The group completed 163 store upgrades.

Covid-19

Commenting on the impact of the global Covid-19 pandemic, Spar said that high levels of uncertainty are expected to remain across all its markets and trading conditions will remain challenging.

“Food prices are expected to rise, and consumer spending will experience unprecedented levels of pressure.

“Given the important role we play in food wholesale and retail, contingency plans are essential to ensure the robustness of our supply chains and our management are actively focused on this.

“There is no doubt that the world is changing and against the backdrop of this pandemic, our businesses will continue to adapt to changing consumer behaviour.”

The group said that at this stage, it is not possible to estimate the full economic or business impact of the pandemic.

Management will have greater visibility as the situation progresses and will continue to monitor the developments on an on-going basis.

“Owing to the uncertainty, the board has declared a conservative interim dividend and will consider the annual dividend at year-end, when there is more clarity.”