The Spar Group share price surged by more than 6 percent on the JSE yesterday, despite the retailer reporting a double-digit fall in its earnings for the six months to end March.
The group’s normalised diluted headline earnings per share declined by 13.4percent to 452.7cents a share, down from last year’s 522.5c, negatively impacted by its Polish business that was acquired last year. The group said, as expected, the Polish business was currently loss-making, as it continued to be restructured and reorganised.
Without the impact of its Polish business, Spar said its normalised diluted headline earnings per share would have increased by 8.5 percent.
Spar acquired the supermarket chain Piotr i Pawel last year as part of efforts to expand in Europe.
However, the group said despite its challenges, the business in Poland has made good progress in the first half.
“The Spar licence for Poland has been officially transferred to the group. This allowed 157 existing Spar retailers to join the new business. Nine existing Piotr i Pawel stores have been converted into Spar stores. The total store network in Poland stands at 219 stores, which includes 53 Piotr i Pawel stores,” the group said.
In the overall results, Spar reported a 10.1percent increase in turnover to R59.75billion, while operating profit declined by 3.4percent to R1.33bn.
The group declared an interim dividend of 200c, down by 29.6 percent compared to last year’s 284c.
Spar Southern Africa contributed growth in wholesale turnover of 7.8 percent and Tops liquor brand reported weak wholesale turnover growth of 3.9 percent, impacted by the temporary closure of stores due to lockdown measures.
The group said Build It delivered a resilient performance in a weak sector, with wholesale turnover down by 2.4 percent.
Spar Southern Africa grew its store network to 2 402 stores, with 53 net new stores opened across all formats.
Looking ahead, the group said considering the global Covid-19 pandemic, it expected high levels of uncertainty to remain across all its markets and trading conditions would remain challenging.
“Food prices are expected to rise and consumer spending will experience unprecedented levels of pressure,” the group said.
Lulama Qongqo, an investment analyst at Mergence Investment Managers, said the market was not expecting the reported profit decline prior to their trading update on May 15.
Spar’s share price closed 6.32 percent higher at R178 on the JSE yesterday.