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Spar’s IT system failure has cost the company R1.6 billion

| Retailer trading results

By: IOL News

Local retailer Spar has been hit hard this financial year and said on Thursday that it will have to withhold a final dividend to save cash after a huge IT system failure this year.

In September, Spar informed its shareholders that the software system blunder had cost the company R1.4 billion.

Spar moved to a new SAP software system and started rolling it out at their KwaZulu-Natal distribution centre earlier this year.

The system cost R1.8 billion, according to Spar, and negatively impacting distribution operations in KZN.

“The impact of the SAP implementation at KZN amounted to an estimated loss of turnover to the Group of R1.4 billion for the period, being approximately R786 million for the six months ended March 31, 2023 as previously reported, and an additional R638 million for the five months to August 2023,” the company said back in September.

NEW STATEMENT

In a new statement, Spar said that it had failed to implement the resource planning system in the KZN distribution centre.

This resulted in a 47% drop in annual operating profit, according to the retailer and this in turn led to a R1.6 billion loss in turnover and R720 million loss in profit.

Spar did acknowledge that the worst is now over as it relates to the faulty IT system, and said it has not rolled out the system anywhere else in SA.

Spar's new CEO Angelo Swartz, said that the system in KZN is stable and performing consistently, but they will not roll it out throughout SA until management is satisfied with the optimisation of the system.

In September, Spar did note that despite this major financial blow, SAP is still “a supportive partner” to the retailer.

SAP COMMENTS ON THE ISSUE

James Wilson, head of communications Africa for SAP told IOL News in September that SAP was aware of the challenges with the implementation of SAP solutions at Spar’s KZN distribution centre. He noted that implementing a system of this magnitude has many facets, and the issues that were experienced were not related to the SAP Software itself.

“A team of SAP experts and support staff have worked hand-in-hand with Spar’s team and resolved the adoption challenges, ensuring that the Spar Group can benefit in full, from both their investment and the efficiency gains of its new SAP solution,” Wilson concluded.

SHARE PRICE

The share price has not been impacted by this loss in profit. At 8.30am Spar’s share price was trading at R116.50. It should be noted that over a one year period, the share price has been down by 11.23%

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