Companies buckle under virus pressure

The Spar Group has taken a knock in its business operations as a result of the Covid-19-induced lockdown in South Africa.

During its interim results presentation on Thursday, the giant retailer said its heavily-impacted businesses in southern Africa are the Build it and Tops at Spar retail chains, which were required to close in accordance with the lockdown measures.

It says that for the prior financial year, these combined businesses represented 21% of southern Africa turnover.

“The pandemic has created a real risk to retail sales, and to our wholesale business,” said Spar CEO Graham O’Connor. “This situation will be further aggravated by [the] expected economic slowdown, possible increases in unemployment and additional pressure on already financially-constrained consumers.”

With a high level of uncertainty expected to remain across all its markets, trading conditions will continue to be challenging. “Food prices are expected to rise, and consumer spending will experience unprecedented levels of pressure,” it says.

At this stage, the group cannot estimate the impact of the pandemic, but will continue to evaluate developments on an ongoing basis.

The numbers

Group turnover for the six months ended March 2020 increased by 10.1% to R59.7 billion, while operating profit was down 3.4%.

It says this is as a result of the group’s Polish business (a controlling stake in the Piotr i Pawel group was completed in October last year).

The group saw a 13.4% decline in its normalised diluted headline earnings per share, while its normalised headline earnings increased by 8.2% (excluding Poland).

It took a “conservative approach” and cut its interim dividend by 29.6% to 200c.

It will consider the annual dividend at year-end, when there is more clarity on the full economic and business impact of the pandemic.

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%.

Its Tops liquor brand reported weak wholesale turnover growth of 3.9%.