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Slide 2: Presentation outline
Presentation outline 1 2 3 4 Overview Operational review Financial review Priorities looking ahead Mike Bosman Angelo Swartz Mark Godfrey Angelo Swartz Chairman Group CEO Group CFO Group CEO THE SPAR GROUP LTD 2 RESULTS PRESENTATION 2023
Slide 3: Overview
Overview Mike Bosman Independent Non-Executive Chairman THE SPAR GROUP LTD 3 RESULTS PRESENTATION 2023
Slide 4: Overview: SPAR Group for the year ended September 2023
Overview The SPAR Group Limited for the year ended 30 September 2023 R149.4bn R1.8bn 4 579 10 512 turnover operating profit stores employees +10.1% (47.0%) +79 Net new +231 Southern Africa Ireland and South West England • R92.6 bn turnover • R38.1 bn turnover • 2 523 stores • 1 485 stores • 8 distri
Slide 5: Adjusted group operating profit for significant once-off items
Overview Adjusted group operating profit for significant once-off items R’million 94.1 3 193.3 120.7 442.2 720.0 1 817.0 Reported SAP operating Impairments Impairments SAP write-off Adjusted operating operating profit impact Poland Ireland (Foreign only) profit THE SPAR GROUP LTD 5 RESULTS PRESENTAT
Slide 6: Regional contribution to the Group
Overview Regional contribution to the Group Turnover R2.9bn R92.6bn R2.4bn R88.1bn (1.9%) (62.0%) (1.8%) (65.0%) R15.7bn R13.8bn (10.5%) (10.2%) R38.1bn R31.3bn (25.5%) (23.1%) FY23 FY22 R149.3 billion R135.6 billion Southern Africa Ireland and SW England Switzerland Poland (BWG Group) THE SPAR GROU
Slide 7: Progress made
Overview Progress made Allegations • Being independently investigated and dealt with swiftly • Transformation, diversity and independence Board composition • Enhanced governance Appointment of Group • Angelo Swartz as Group CEO CEO and COO • Megan Pydigadu as Group COO Poland • Board’s decision to s
Slide 8: Board of directors today
Overview Board of directors today Mike Bosman Shirley Zinn Pedro da Silva Mark Godfrey Lwazi Koyana Independent Non-Executive Independent Non-Executive Independent Non-Executive Group CFO Independent Non-Executive Chairman Deputy Chair Director Executive Director Director Group CEO Trudi Makhaya San
Slide 9: Group executives
Overview Group executives Megan Pydigadu Angelo Swartz Mark Godfrey Group COO Group CEO Group CFO THE THESPAR SPARGROUP GROUPLTD LTD 9 RESULTS PRESENTATION 2023
Slide 10: Country heads and ESG Executive
Overview Country heads and ESG Executive Max Oliva Leo Crawford Rob Philipson Kevin O’Brien Southern Ireland and SW England Switzerland, Poland ESG Africa (BWG Group) & Sri Lanka THE SPAR GROUP LTD 10 RESULTS PRESENTATION 2023
Slide 11: THE SPAR GROUP LTD RESULTS PRESENTATION 2023
THE SPAR GROUP LTD 11 RESULTS PRESENTATION 2023
Slide 12: Operational Review
Operational Review Angelo Swartz Group CEO THE SPAR GROUP LTD 12 RESULTS PRESENTATION 2023
Slide 13: Southern Africa
Southern Africa Core grocery & liquor • 1 102 supermarkets across all formats; 896 TOPS stores • 38 net new stores • 217 store upgrades • SPAR2U On demand in 356 sites (+269 sites in FY23) • SPAR Private Label; +11.0% turnover growth to R18bn • representing 25.3% of core turnover (FY22: 24.6%) • Who
Slide 14: Southern Africa
Southern Africa • Complete overhaul of SPAR’s marketing plan Marketing • New PR manager and agency appointed recalibration • All new campaigns reflect new positioning – SPAR “More for Sho” campaign • New sponsorship strategy launched Customer & format • Customer segmentation analysis completed segme
Slide 15: Southern Africa
Southern Africa • New omnichannel strategy developed • SPAR2U On demand platform has reached scale Omnichannel • Relaunched SPAR Rewards • Customer and category insights hub being developed • Launched programme to drive consistent customer experience in stores Retail excellence • Guild completed ali
Slide 16: Southern Africa: New range launched H2 FY23
Southern Africa New range launched H2 FY23 Trusted quality As good as Premium Best priced the best for less SPAR brand THE SPAR GROUP LTD 16 RESULTS PRESENTATION 2023
Slide 17: Southern Africa: Build it
Southern Africa Build it • 400 stores (4 net loss) • Industry impacted by load shedding • Intensely competitive environment • inflationary pressures persists • Entry of substandard products • Quality of supply chain and quality of product positions business well Wholesale and retail turnover growth
Slide 18: Southern Africa: Pharmacy
Southern Africa • S Buys and Pharmacy at SPAR 1) Wholesaler to Pharmacy at SPAR stores • Network clean up initiated Dispenses > 50% of the highly specialised • 125 stores (-20 net new stores) medicines in these • Front end retail operations refreshed speciality areas 2) Courier pharmacy (Scriptwise)
Slide 19: BWG Group (Ireland & SW England)
BWG Group (Ireland & SW England) • 1 485 stores stores (+46 net new stores) • Ire: 1 147 / UK: 338 Ireland • All retail brands performing strongly • Full recovery of hospitality sector driving food services growth • Wholesale acquisitions further supporting growth • EUROSPAR strategy in place • Incr
Slide 20: SPAR Switzerland
SPAR Switzerland • 363 stores; 2.7% market share • Experienced continued volume declines across the market • House brands; 20% retail turnover • Go24 unmanned stores launched • Piloting SPAR2U on demand shopping offering • TopCC Cash and Carry impacted by industry contraction • Revised fresh strateg
Slide 21: SPAR Poland
SPAR Poland • Decision to sell interests in this market • 208 world-class stores (+28 net new stores) • 1 central office - Warsaw • 2 distribution centres – Poznan and Czeladz • Restructured distribution • Expansion of Czeladz launched Jan 2023 • Food production facility THE SPAR GROUP LTD 21 RESULT
Slide 22: SPAR Sri Lanka
SPAR Sri Lanka • Joint venture with Ceylon Biscuits • Business environment remains stable • 26 corporate stores across all formats • Agreeing on best plan of expansion • Exploring opportunities with current retailers interested in partnering with SPAR THE SPAR GROUP LTD 22 RESULTS PRESENTATION 2023
Slide 23: Financial review
Financial review Mark Godfrey Group CFO THE SPAR GROUP LTD 23 RESULTS PRESENTATION 2023
Slide 24: Salient features
Financial overview Salient features Change Rmillion 2023 2022 % Turnover¹ 149 324.3 135 609.1 10.1 Gross profit 17 945.7 16 299.0 10.1 - Gross profit (%) 12.0% 12.0% Net operating expenses 19 413.1 15 896.5 22.1 Operating profit 1 817.0 3 428.7 (47.0) - Operating margin (%) 1.2% 2.5% Profit after ta
Slide 25: Adjusting for abnormal items in FY23
Financial overview Adjusting for abnormal items in FY23 Abnormal items impacting FY23: Abnormal Change R million 2023 items Adj. 2023 2022 % ERP system related Turnover¹ 149 324.3 1 600.0 150 924.3 135 609.1 11.3 • Turnover - R1.6bn Gross profit 17 945.7 553.2 18 498.9 16 299.0 13.5 • Gross profit -
Slide 26: Decision to sell interests in SPAR Poland
Financial overview Decision to sell interests in SPAR Poland Reasons for not disclosing as discontinued operation / held for sale at year end • Decision to sell interests in Poland announced 28 September 2023 • Criteria required as at 30 September for classification (IFRS 5 – Non-current Assets Held
Slide 27: Key regional metrics
Financial overview Key regional metrics Southern Switzer- Rmillion Africa Ireland land Poland Group Income statement Revenue – sale of merchandise 92 611.9 38 137.5 15 711.6 2 863.3 149 324.3 Gross profit 8 828.5 5 756.5 2 792.9 567.8 17 945.7 Gross profit (%) 9.5 15.1 17.8 19.8 12.0 Operating expen
Slide 28: Southern Africa turnover
Financial overview Southern Africa Turnover • SPAR and TOPS combined growth of 6.1% Change • Liquor sales -0.1%; extraordinary base effect R million 2023 2022 % • Excluding KZN, liquor +4.1% SPAR - core grocery business* 71 168.7 66 457.8 7.1 • Build it sales down 4.3%; slowdown in building TOPS/Liq
Slide 29: Inflation
Financial overview Inflation Southern Africa • 2024 inflation estimate of 4.9% 2023 (%) 2022 (%) • CPI for the period +5.4 +7.8 • Food +8.0 +12.0 SPAR Southern Africa • Non- alcoholic beverages +8.6 +8.5 Internally measured • Alcohol and tobacco +5.2 +6.1 wholesale inflation FY23 FY22 Ireland • 2024
Slide 30: Gross margin
Financial overview Gross margin Southern Africa • Decline due to change in sales mix as a result of the challenges faced by SAP implementation 2023 2023 Gross 2023 Change 2022 • Categories with higher GP margin shifted to R million Turnover margin (GP%) (bps) (GP%) dropshipment (with lower GP margin
Slide 31: Net operating expenses
Financial overview Net operating expenses % Warehousing and distribution expenses Rmillion 2023 2022 increase • Fuel and outsourced transport costs +13.4% Warehouse and distribution 5 873.1 5 184.5 13.3 • Energy costs +16.3% Marketing and selling 7 907.1 6 971.8 13.4 Marketing and selling expenses •
Slide 32: Net operating expenses continued
Financial overview Southern Africa Net operating expenses continued • Strategic imperatives driving employee costs +11.8% and IT costs +52.2% 2023 2022 • Fuel & distribution costs +12.8% % % % • Marketing costs +19.5% Rmillion Expenses of sales Expenses of sales increase Ireland (EUR) South Africa 8
Slide 33: Finance income and costs
Financial overview Finance income and costs Rmillion 2023 2022 Average interest rates on borrowings (%) Finance income FY23 FY22 Loans 43.9 45.0 Bank deposits 46.6 24.6 Southern Africa 6.9 6.2 Trade and other 66.3 64.1 Ireland 4.2 1.7 Lease receivables – IFRS16 450.3 465.3 607.1 599.0 Switzerland 2.
Slide 34: Effective tax rate reconciliation
FINANCIAL OVERVIEW Effective tax rate reconciliation Rmillion 2023 2022 South African current income tax rate 27.0 28.0 Temporary differences relating to share plans 0.5 0.2 Other exempt and non-deductible items 3.1 0.6 Impairments 12.0 0.2 Write-off of SAP asset under construction 1.2 - Unutilised
Slide 35: Currency impacts (vs ZAR)
Financial overview Currency impacts (vs ZAR) EURO & SWISS FRANC / ZAR PLN / ZAR 4,9 OCT 2022 - SEP 2023 22,5 OCT 2022 - SEP 2023 22 4,7 21,5 4,5 21 20,5 4,3 20 19,5 4,1 19 3,9 18,5 18 EUR : ZAR 3,7 17,5 CHF:ZAR 3,5 17 22 22 22 23 23 23 23 23 23 23 23 23 22 22 22 23 23 23 23 23 23 23 23 23 /1/20 /1/2
Slide 36: Comparative trading (ZAR)
Financial overview Comparative trading (ZAR) TURNOVER (Rm) OPERATING PROFIT/(LOSS) (Rm) 1 480,1 ( 642,2) POL 1 383,2 POL ( 57,5) 45 510,1 SA SA 194,8 47 101,8 1 022,8 21 035,1 625,6 IRE IRE 17 102,4 436,7 8 374,5 H2 2023 126,8 SWZ SWZ 110,0 7 337,1 H1 2023 2023 Growth 2023 Growth YoY YoY Southern Af
Slide 37: Comparative trading (foreign regions in local currency)
Financial overview Comparative trading (foreign regions in local currency) TURNOVER (‘m) OPERATING PROFIT/(LOSS) (‘m) POL ((151.4) 151,4) 328,4 POL 328.4 ((14.6) 14,6) POL POL 352.2 352,2 31,2 31.2 11 041,9 041.9 IRE IRE IRE IRE 23,6 23.6 923,5 923.5 6.1 6,1 402.7 402,7 SWZ SWZ SWZ SWZ 5.9 5,9 H2 H2
Slide 38: Balance sheet regional metrics
Financial overview Balance sheet regional metrics Southern Rmillion Africa Ireland Switzerland Poland Group Balance sheet Property, plant and equipment 2 937.8 2 894.7 4 251.2 294.4 10 378.1 Right-of-use asset 745.6 2 967.0 4 834.7 426.9 8 974.2 Lease receivable – Non-current 4 046.0 122.9 - 395.2 4
Slide 39: Group net debt
Financial overview Group net debt Rmillion 2023 2022 WEIGHTED AVERAGE MATURITY (Total borrowings) Years Southern Africa 1.65 Bank overdrafts 3 157.9 3 013.0 Ireland 3.25 Total borrowings 8 265.2 7 596.6 Switzerland 2.82 Financial liability - 54.4 Poland 1.59 Bank balances (1 421.7) (862.0) Total net
Slide 40: Group covenant measurement – leverage ratio
Financial overview Group covenant measurement – leverage ratio Rmillion 2023 2022 NET DEBT Total* 10 001.4 9 802.0 Rmillion 2023 2022 Operating profit 1 817.0 3 428.7 Share of associates (7.0) 7.3 Impairment and write-off of assets 724.3 - PRE-IFRS16 EBITDA Depreciation & amortization 2 266.3 1 994.
Slide 41: Cashflow
Financial overview CASHFLOW Rmillion 2023 2022 Cash flow from operating activities (adjusted for non-cash items) 4 996.1 5 816.6 Working capital changes : 1 156.2 (789.7) - Decreased/(increased) in inventory 262.0 (1 049.0) - Increase in trade and other receivables (868.1) (2 196.4) - Increase in tr
Slide 42: Cashflow continued
Financial overview CASHFLOW continued Rmillion • Cash generated from operations 4 996,1 of R6.2 bn -268,2 -12,7 -106,0 • Increase in CAPEX across all -56,0 -63,7 -298,7 geographies, with investment in SAP a significant portion -788,2 • Business acquisitions -540,8 of R307.4m (SA and UK retail -436,6
Slide 43: Capital expenditure
Financial overview Capital expenditure Southern Africa • Investment mainly in software, as well as plant Rmillion 2023 2022 equipment and vehicles Investing to expand operations (1 269.3) (1 190.8) Investment to maintain operations (666.8) (454.8) Ireland Replacement of property, plant and equipment
Slide 44: Salient features
Financial overview Salient features Change Rmillion 2023 2022 % Turnover¹ 149 324.3 135 609.1 10.1 Gross profit R3 195 million 17 945.7 16 299.0 10.1 excl. once off items - Gross profit (%) 12.0% 12.0% Net operating expenses 19 413.1 15 896.5 22.1 Operating profit 1 817.0 3 428.7 (47.0) - Operating
Slide 45: Priorities
Priorities Angelo Swartz Group CEO THE SPAR GROUP LTD 45 RESULTS PRESENTATION 2023
Slide 46: Priorities
Priorities Priority 1 Priority 2 Priority 3 Priority 4 Poland Balance sheet SAP ERP system Southern Africa Management of sale Optimal structure System optimisation EBIT margin recovery THE SPAR GROUP LTD 46 RESULTS PRESENTATION 2023
Slide 47: Priority 1 – Poland
Priority 1 – Poland Priority Progress Key result • Polish exit management • Process underway • Best possible outcome for all stakeholders • Advisors appointed • A lot of interested parties • Will continue to support the business as we find the most appropriate “new home” • Target exit, end of FY24 T
Slide 48: Priority 2 – Balance sheet
Priority 2 – Balance sheet Priority Progress Key result • Optimal balance sheet • Decision to sell interests in • Optimise debt structure structure Poland • Get back to net debt / EBITDA • Considering debt structuring ratio of 2.75x by FY25 options • Capital allocation discipline • Improving working
Slide 49: Priority 3 – SAP ERP system
Priority 3 – SAP ERP system Priority Progress Key result • SAP ERP System optimisation • Move away from global • Modernise the business and template to local optimisation derive efficiencies • New SA IT executive • Keep business disruption to a appointed 1 July minimum • System is stable in KZN • Av
Slide 50: Priority 4 – Southern Africa
Priority 4 – Southern Africa Priority Progress Key result • South African EBIT margin • Strategic inflection point • Get the SA business back to recovery 3% operating margin by FY25 • Defining the future shape of the business and the transition plan • Improved retailer profitability • Address struct
Slide 51: Disclaimer
Disclaimer This presentation contains forward-looking statements about the company’s operations and financial conditions. They are based on The SPAR Group Limited’s best estimates and information at the time of writing. They are nonetheless subject to significant uncertainties and contingencies, man
Slide 52: SPAR brands and website
SPARIQ) . SaveMor Sean Build it @ Pharmacy @ S.Buys Pharmacy [EUROSPARIO [ VALUE CENTRE ] mae WWW.THESPARGROUP.COM