Spar maintains dividend policy despite exceptional performance.

Spar, the wholesale and retail distribution leader based in Pinetown, Durban, announced on Thursday that it will not be issuing dividends for the second consecutive year, despite revealing a ‘resilient performance’ for its 2024 financial year.

The company communicated to the market that dividend payouts are currently not feasible as it focuses on its turnaround strategy and aims to strengthen its position in the fiercely competitive South African retail sector.

Read: Despite slowing sales growth, Spar says strategic refocus is paying off

This choice to forgo dividends is likely to be disappointing for shareholders, especially since they received 400 cents per share in dividends for FY2022, and over twice that amount in FY2021.

Following the release of its recent results, the group’s share price dipped more than 3% during morning trading.

Spar’s share price

“The group has concentrated on tackling various challenges over the past 18 months to ensure financial stability, enhance balance sheet resilience, and improve its capacity to exploit growth opportunities,” Spar stated in its financial results report.

“While substantial progress has been achieved, work is still in progress in these areas. As a result, the board has deemed it wise not to declare a dividend for the year ending 30 September 2024 [2023: 0 cents per share],” it indicated.

“This decision will be reassessed based on forthcoming macroeconomic and operational conditions. Enhancing capital allocation, including returns to shareholders, remains a priority for the board,” it noted.

Key financial highlights (continuing operations)

• Group turnover of R152.3 billion, an increase of 4%
  Earnings before interest, tax, depreciation, and amortization (on a pre-IFRS 16 basis) R3.8 billion, a rise of 13.9%
  Net borrowings R9.1 billion (decreased by 8.9%)
  Net borrowings/EBITDA* 2.41x (2023: 3.02x)
  Earnings per share 855.9 cents (up by 24.5%)
  Profit after tax R1.6 billion (a 20.9% increase)

*Earnings before interest, tax, depreciation, and amortization calculated on a pre-IFRS 16 basis

SALIENT FEATURES – CONTINUING OPERATIONS

Year ended
Year ended 30 September
30 September 2023
R million 2024 Represented* % change
Turnover(1) 152 337.5 146 461.0 4.0
Operating profit 2 895.5 2 516.7 15.1
Earnings per share (cents) 855.9 687.2 24.5
Headline earnings per share (cents) 917.9 826.0 11.1
Diluted headline earnings per share (cents) 917.5 825.7 11.1

Stay updated with Moneyweb’s comprehensive finance and business news on WhatsApp here.