Slide 1: Interim Results Presentation
THE SPAR GROUP LTD INTERIM RESULTS PRESENTATION THE SPAR GROUP LTD for the six months ended 31 March 2021 INTERIM RESULTS PRESENTATION 2021 1
Slide 2: Presentation Outline
PRESENTATION OUTLINE OVERVIEW Brett Botten, CEO FINANCIAL REVIEW Mark Godfrey, CFO OPERATIONAL UPDATE OUTLOOK Brett Botten, CEO QUESTIONS THE SPAR GROUP LTD INTERIM RESULTS PRESENTATION 2021 2
Slide 3: Overview
OVERVIEW Brett Botten, Chief Executive Officer THE SPAR GROUP LTD INTERIM RESULTS PRESENTATION 2021 3
Slide 4: Review of the Period
REVIEW OF THE PERIOD • Group o Strong performance during disruptive times o Mixed base effect due to March 2020 lockdowns • South Africa o Core business impacted by COVID-19 dynamics o Retailer loyalty remains strong o Liquor business heavily impacted o Excellent performance from Build it REDUCED VO
Slide 5: Review of the Period continued
REVIEW OF THE PERIOD continued • BWG Foods (Ireland & South West England) o Strong performance despite the impact to hospitality and foodservice businesses o Brexit impact well managed • Switzerland o Exceptional performance o Acquired Store Service AG (SSAG) o 60 petro-forecourt stores • Poland o S
Slide 6: Financial Highlights
FINANCIAL HIGHLIGHTS +7.5% +28.1% Group turnover Operating profit R64.2bn R1.7bn +34.4% +40.0% Normalised* diluted Dividend per HEPS share 608.3 cents 280 cents *Headline earnings adjusted for fair value adjustments to, and foreign exchange effects on financial liabilities, and business acquisition
Slide 7: Elevating the Role of ESG
ELEVATING THE ROLE OF ESG ENVIRONMENTAL SOCIAL GOVERNANCE • Our environmental goals • Our purpose is to • Committed to adhering include the commitment inspire people to do to the highest towards reporting openly and be more. Our standards of corporate and transparently on our social focus is on gove
Slide 8: Well Positioned
WELL POSITIONED OUR PURPOSE To inspire people to do and be more OUR VISION To be the first-choice brand in the communities we serve OUR VALUES ENTREPRENEURSHIP FAMILY VALUES PASSION ADAPTABILITY, AGILITY AND RESILIENCE WITH COMMUNITY AT THE HEART THE SPAR GROUP LTD INTERIM RESULTS PRESENTATION 2021
Slide 9: Financial Review
FINANCIAL REVIEW Mark Godfrey, Chief Financial Officer THE SPAR GROUP LTD INTERIM RESULTS PRESENTATION 2021 9
Slide 10: Salient Features
FINANCIAL OVERVIEW SALIENT FEATURES Change R million H1 2021 H1 2020 % Turnover" 64 240.5 59 749.4 7.5 Gross profit 7 566.1 6 728.5 12.4 - Gross profit (%) 11.8% 11.3% Operating profit 1 710.2 1 334.9 28.1 - Operating margin (%) 2.7% 2.2% Profit after tax 1 151.8 713.8 61.4 Headline earnings per sha
Slide 11: Impact of Polish Losses on Headline Earnings
FINANCIAL OVERVIEW IMPACT OF POLISH LOSSES ON HEADLINE EARNINGS Change R million H1 2021 H1 2020 % Headline earnings 1 195.0 785.0 52.2 Adjusted for fair value adjustment to, and foreign exchange effects on financial liabilities, and business acquisition costs (19.7) 89.3 Normalised* headline earnin
Slide 12: Effect of IFRS
FINANCIAL OVERVIEW EFFECT OF IFRS 16 Pre IFRS 16 As reported As reported R million H1 2021 IFRS 16 H1 2021 H1 2020 Net operating expenses (7 236.8) 125.5 (7 111.3) (6 549.4) Operating Profit 1 584.7 125.5 1 710.2 1 334.9 - Operating Profit % 2.5% 2.7% 2.2% Other non-operating items (3.9) (3.9) (99.6
Slide 13: Key Regional Metrics
FINANCIAL OVERVIEW KEY REGIONAL METRICS Group Southern Switzer- excl. R million Africa Ireland land Poland Poland Group Income statement Revenue – sale of merchandise 41 472.2 14 428.8 7 064.7 62 965.7 1 274.8 64 240.5 Gross profit 4 193.6 1 916.9 1 263.1 7 373.6 192.5 7 566.1 Gross profit % 10.1% 1
Slide 14: Turnover by Region
FINANCIAL OVERVIEW Southern Africa TURNOVER • Reflects weaker consumer spend and disruptions to the liquor Change business R million H1 2021 H1 2020 % • Core grocery +1.4% excl. tobacco SPAR – core grocery business 31 911.9 31 648.5 0.8 • SPAR Encore included for only one month in the base TOPS/Liqu
Slide 15: Turnover – Trading Dynamics in SA
FINANCIAL OVERVIEW TURNOVER – TRADING DYNAMICS IN SA SPAR excluding TOPS at SPAR sales Dec Jan Feb Mar 2021 2020 2019 THE SPAR GROUP LTD INTERIM RESULTS PRESENTATION 2021 15
Slide 16: Regional Turnover Contribution
FINANCIAL OVERVIEW REGIONAL TURNOVER CONTRIBUTION Turnover generated in foreign currency: Southern Africa Ireland Switzerland Poland (H1 2021: 35.5%) 64.5% 22.5% 11.0% 2.0% (H1 2020: 32.6%) (H1 2020: 67.4%) (H1 2020: 21.3%) (H1 2020: 9.7%) (H1 2020: 1.6%) H1 FY21 H1 FY20 R1.3bn R1.0bn R7.1bn R5.8bn
Slide 17: Inflation: H1 and Looking Ahead
FINANCIAL OVERVIEW INFLATION: H1 AND LOOKING AHEAD Southern Africa H1 2021 H1 2020 • SPAR wholesale, estimate moderate • Dry groceries 5.4% SPAR 5.2% 4.1% increase of 5.0% to 5.5% • Sugar 5.9% • Building materials estimate Liquor 2.8% 3.9% • Meat 7.6% of c.3.6% - 4.5% for 2021 Build it c. 4.5% c.3.4
Slide 18: Gross Margins
FINANCIAL OVERVIEW GROSS MARGINS H1 2021 H1 2021 H1 2021 H1 2020 R million Turnover Gross margin (GP%) (GP%) Southern Africa 3 797.0 9.3 9.1 S Buys 50.7 8.9 9.1 SPAR Encore 345.9 14.5 16.2 Total Southern Africa 41 472.2 4 193.6 10.1 9.3 Ireland 14 428.8 1 916.9 13.3 13.5 Switzerland 7 064.7 1 263.1
Slide 19: Operating Expenses
FINANCIAL OVERVIEW OPERATING EXPENSES H1 2021 H1 2020 % % % R million Expenses of sales Expenses of sales increase South Africa 3 009.5 7.4 2 800.7 7.1 7.5 S Buys 50.2 8.8 53.0 9.7 (5.3) SPAR Encore 225.7 9.4 34.1 7.2 + Total Southern Africa 3 285.4 7.9 2 887.8 7.2 13.8 Ireland 1 776.9 12.3 1 674.3
Slide 20: Finance Income and Costs
FINANCIAL OVERVIEW FINANCE INCOME AND COSTS H1 2021 H1 2020 R million Finance income Loans 22.7 55.6 Bank deposits 8.9 10.7 Trade and other 31.6 29.8 Lease receivables – IFRS16 221.2 215.8 284.4 311.9 Finance costs Loans 70.0 70.9 Bank overdraft 39.1 58.6 Deposits and other 8.2 5.3 Lease liabilities
Slide 21: Currency Impacts (vs ZAR)
FINANCIAL OVERVIEW CURRENCY IMPACTS (VS ZAR) EURO/SWISS FRANC VS RAND OCT 2020- MAR 2021 21 20 19 18 17 16 15 14 EUR:ZAR CHF:ZAR Linear (EUR:ZAR) Linear (CHF:ZAR) Ireland (€) Switzerland (CHF) H1 2021 H1 2020 H1 2021 H1 2020 Closing spot rate 17.35 19.72 15.68 18.61 Average rate 18.41 16.78 16.98 15
Slide 22: Currency Impacts (vs ZAR) – PLN
FINANCIAL OVERVIEW CURRENCY IMPACTS (VS ZAR) PLN VS RAND OCT 2020- MAR 2021 4.6 4.5 4.4 4.3 4.2 4.1 4 3.9 3.8 3.7 3.6 PLN:ZAR Linear (PLN:ZAR) Poland (PLN) H1 2021 H1 2020 Closing spot rate 3.74 4.32 Average rate 4.05 3.88 THE SPAR GROUP LTD INTERIM RESULTS PRESENTATION 2021 22
Slide 23: Comparative Trading (ZAR)
FINANCIAL OVERVIEW COMPARATIVE TRADING (ZAR) TURNOVER (Rm) OPERATING PROFIT/LOSS (Rm) 964 H1 2020 H1 2020 Poland 1 169 H2 2020 -305 H2 2020 Poland -166 1 275 H1 2021 H1 2021 -222 40 240 1 267 SA 38 366 SA 1 306 41 472 1 313 12 737 286 Ireland 693 Ireland 17 160 399 14 429 87 5 809 Switzerland 275 Sw
Slide 24: Comparative Trading in Local Currency
FINANCIAL OVERVIEW COMPARATIVE TRADING FOR FOREIGN REGIONS IN LOCAL CURRENCY TURNOVER (‘m) OPERATING PROFIT/(LOSS) (‘m) 248 H1 2020 -79 H1 2020 Poland 267 H2 2020 Poland -35 H2 2020 315 H1 2021 -55 H1 2021 759 17 Ireland 874 Ireland 36 784 22 374 6 Switzerland 428 Switzerland 16 416 13 H1 2021 Growt
Slide 25: Balance Sheet Regional Key Metrics
FINANCIAL OVERVIEW BALANCE SHEET REGIONAL KEY METRICS Southern R million Africa Ireland Switzerland Poland Group Balance sheet Property, plant and equipment 2 784.5 2 122.3 2 825.2 297.3 8 029.3 Right-of-use asset 883.4 2 401.6 3 243.4 421.4 6 949.8 Finance lease receivable – Non-current 4 032.1 130
Slide 26: Liabilities Overview
FINANCIAL OVERVIEW FINANCIAL LIABILITIES OVERVIEW R million H1 2021 FY 2020 Group summary Balance at beginning of year 2 152.2 2 204.4 Finance costs recognised in profit or loss 22.2 131.7 Net exchange differences arising during the period (23.6) (25.6) Fair value adjustment - 255.6 Settlement of fi
Slide 27: Group Net Debt
FINANCIAL OVERVIEW GROUP NET DEBT R million H1 2021 H1 2020 FY2020 Bank overdrafts 3 612.5 2 867.2 1 210.4 Total borrowings 7 542.6 7 013.4 7 055.9 Financial liability* – minority buy out 50.0 1 930.5 2 152.2 Bank balances - SPAR (1 469.1) (746.4) (1 670.7) Total 9 736.0 11 064.7 8 747.8 *Irish and
Slide 28: Cashflow
FINANCIAL OVERVIEW CASHFLOW Restated R million H1 2021 H1 2020 Cash flow from operating activities (adjusted for non-cash items) 2 763.3 2 306.8 Working capital changes : (1 254.3) (803.2) - Increase in inventory (136.2) (343.3) - Decrease/(increase) in trade and other receivables 188.0 (1 460.3) -
Slide 29: Cashflow continued
FINANCIAL OVERVIEW CASHFLOW continued • Cash generated from operations R1.5bn – in R million line with prior period • Dividends of R1.3bn paid to shareholders • Net borrowings of R1.4bn largely represents funds raised for the settlement of Swiss and Irish minority interests • Business acquisitions o
Slide 30: Capital Expenditure
FINANCIAL OVERVIEW CAPITAL EXPENDITURE R million H1 2021 H1 2020 Investing to expand operations (388.1) (474.1) Investment to maintain operations (258.6) (217.0) Replacement of property, plant and equipment (284.5) (233.7) Proceeds on disposal of property, plant and equipment 25.9 16.7 Acquisition o
Slide 31: Capital Expenditure continued
FINANCIAL OVERVIEW CAPITAL EXPENDITURE continued Regional capital expenditure R million Expansion Replacement H1 2021 Southern Africa 194.0 121.9 315.9 Ireland 117.4 69.1 186.5 Switzerland 68.3 93.5 161.8 Poland 8.4 - 8.4 388.1 284.5 672.6 Southern Africa • Investment in commercial vehicles, plant a
Slide 32: Reconciliation of Normalised HEPS
FINANCIAL OVERVIEW RECONCILIATION OF NORMALISED HEPS* Change R million H1 2021 H1 2020 % Reported headline earnings 1 195.0 785.0 + 52.2 Adjusted for: Fair value adjustment to financial liabilities - 87.9 Foreign exchange gain on financial liabilities (23.6) (10.4) Business acquisition costs 3.9 11.
Slide 33: Reconciliation of Dividend
FINANCIAL OVERVIEW RECONCILIATION OF DIVIDEND R million H1 2021 Reported headline earnings 1 195.0 Adjusted for: Forex gain on financial liability measurement – non-cash related (23.6) Adjusted headline earnings 1 171.4 Shares ranking for dividend at declaration date (million) 192.4 Adjusted headlin
Slide 34: Salient Features – In Closing
FINANCIAL OVERVIEW SALIENT FEATURES – IN CLOSING Change R million H1 2021 H1 2020 % Turnover" 64 240.5 59 749.4 7.5 Gross profit 7 566.1 6 728.5 12.4 - Gross profit (%) 11.8% 11.3% Operating profit 1 710.2 1 334.9 28.1 - Operating margin (%) 2.7% 2.2% Profit after tax 1 151.8 713.8 61.4 Headline ear
Slide 35: Operational Update
OPERATIONAL UPDATE Brett Botten, Chief Executive Officer THE SPAR GROUP LTD INTERIM RESULTS PRESENTATION 2021 35
Slide 36: Southern Africa
SOUTHERN AFRICA SPAR WHOLESALE & RETAIL SALES GROWTH SPAR CORE TOPS LIQUOR BUILD IT % % % Wholesale +0.8 -7.8 +26.2 Retail +0.4 -16.8 +19.6 Retail LFL +0.2 -17.4 +18.7 • Internally measured food inflation (wholesale) o Groceries – 5.2% (FY20 H2; 3.9% & FY20 H1; 4.1%) o Building materials – 4.45% • W
Slide 37: Southern Africa – Drive Organic Growth
SOUTHERN AFRICA Progressive store-upgrade programme 159 upgrades across all formats, including 76 SPAR stores Innovative in-store concepts Continued roll out of Chikka Chicken, Beantree, SPAR Natural etc. Continued marketing support Strategic change to marketing executive role Growing private label
Slide 38: Southern Africa – Build it
SOUTHERN AFRICA BUILD IT Strength of supply chain High fulfilment rate of essential building materials Focus on retail execution Agile retailers; quick to react to consumer needs Organic growth through store upgrades 42 upgrades during the period MAXIMISING THE OPPORTUNITY THE SPAR GROUP LTD INTERIM
Slide 39: Digital Transformation
DIGITAL TRANSFORMATION SHARED VALUE ECO-SYSTEM SPAR VOLUNTARY TRADING SPAR WHOLESALE MODEL RETAIL • Driving modernisation and greater systems efficiencies o Group-wide SAP implementation • Business model underpinned by shared value eco-system between wholesale and retail • Solutions that serve our S
Slide 40: BWG Foods (Ireland & SW England)
BWG FOODS (Ireland & SW England) Brexit impact Service levels to retail customers maintained to date Community retailer credibility Strong retail brands asserting position in the convenience space Business readiness for hospitality Foodservice & hospitality businesses well positioned for when indust
Slide 41: SPAR Switzerland
SPAR SWITZERLAND Focus on neighbourhood convenience Ultimate convenience with quality fresh offering Positioning SPAR as a key partner Acquisition of SSAG – 60 stores TopCC cash and carry Remains well positioned for hospitality to pick up THE SWISS CONVENIENCE BRAND OF CHOICE THE SPAR GROUP LTD INTE
Slide 42: SPAR Poland
SPAR POLAND Stabilising the business Piotr i Pawel business rescue now finalised Driving retailer loyalty growth Retailer loyalty improving and at 25% (March 2021) Focused on achieving breakeven Behind on targets due to pandemic-related setbacks 25% March 2021 1% March 2020 EXCITING OPPORTUNITY FOR
Slide 43: Outlook
OUTLOOK Brett Botten, Chief Executive Officer THE SPAR GROUP LTD INTERIM RESULTS PRESENTATION 2021 43
Slide 44: Outlook – Trading Dynamics
OUTLOOK TRADING DYNAMICS April 2021 April 2020 • Liquor trading • Liquor c.10% banned • Build it trading • Build it c.10% closed • Cigarettes & HMR slow recovery • Cigarettes and HMR c.5% closed • Economy has opened up; • Beneficiary of increased home RSA restaurants open consumption, market share g
Slide 45: Outlook continued – Turnover Growth
OUTLOOK continued Turnover growth in local currency Indicative growth for month Indicative growth for month April 2021/April 2020 April 2020/April 2019 RSA +18% to +19% -12% to -14% IRE +7% to +8% -1% to -2% flat to +1% +22% to +24% SWZ -5% to -8% +2% to +3% Down on original forecast POL for April 2
Slide 46: Benefits of Diversification
OUTLOOK continued Benefits of diversification • Multiple geographies IRELAND POLAND • Multiple revenue streams • Greater exposure to opportunities SWITZERLAND • Robustness against adverse cycles SRI LANKA REDUCED VOLATILITY THROUGH (Joint venture) DIVERSITY DURING UNCERTAIN TIMES SOUTH AFRICA THE SP
Slide 47: Disclaimer
DISCLAIMER This presentation contains forward-looking statements about the company’s operations and financial conditions. They are based on SPAR Group Limited’s best estimates and information at the time of writing. They are nonetheless subject to significant uncertainties and contingencies, many of
Slide 48: THE SPAR GROUP LTD INTERIM RESULTS PRESENTATION 2021
THE SPAR GROUP LTD INTERIM RESULTS PRESENTATION 2021 48