JOHANNESBURG (Reuters) -South Africa’s second-biggest supermarket retailer, SPAR Group, reported a 7.6% decline in half-year earnings as cost increases grew more than the management’s lower-than-expected turnover growth, while IT system issues hit gross margin.
The grocer said profit before tax from continuing operations fell by 11.2% to 1.1 billion rand ($59 million) in the six months ended March 31 due to high finance costs.
Consequently, headline earnings per share declined to 465 cents, with the board deciding against declaring a dividend.
The Group’s turnover, which also include operations from Ireland, South West England and Switzerland, rose by 7.9% to 77.2 billion rand. The South Africa core grocery business delivered turnover growth of 4%.
“All regions have been dealing with inflationary cost pressures and prolonged higher interest rates placing pressure on consumers and business alike,” SPAR said.
“This, coupled with the hangover of system issues in South Africa has impacted the results for the first six months of the year.”
Operating expenses for the group rose by 9.6% to 9.2 billion rand.
Last year, the Group struggled to successfully implement a SAP resource planning system at its KwaZulu-Natal (KZN) distribution centre, which impacted distribution operations in the province.
Owing to gross margin management issues arising from the IT system challenges, SPAR Southern Africa’s gross profit margin declined to 9.6% from 10%.
As a result, the Group’s gross profit margin remained flat at 11.9%, it said.
($1 = 18.5647 rand)
(Reporting by Nqobile Dludla; Editing by Muralikumar Anantharaman and Janane Venkatraman)
