The SPAR Group (SPP) CMD 2025 summary

Strategic direction and business review

• Refocusing on core South African operations after challenges in European expansion, with a strategic review of Switzerland and the UK businesses underway and a decision expected by June.

• Emphasis on supporting and empowering independent retailers as the primary customer, leveraging the voluntary trading model to compete with corporate chains.

• Strengthening the balance sheet by reducing net debt from ZAR 12 billion to ZAR 9 billion, targeting a leverage ratio of 1.5–2x net debt/EBITDA.

• Prioritizing cost optimization, digital transformation, and disciplined capital allocation to restore profitability and enable future growth.

• Commitment to transparency, improved governance, and leadership renewal following recent corporate governance issues.

Operational performance and financial guidance

• Group turnover grew from ZAR 124 billion to ZAR 152 billion over four years, but operating profit margin dropped from 2.8% to 1.7% in 2023 due to Polish losses and SAP implementation issues in KZN.

• KZN distribution center has returned to profitability, with fulfillment rates above 90% and gross margins normalized; further productivity gains expected with CSNx system rollout.

• Retailer loyalty declined from 81% to 79.5% year-on-year, with efforts underway to restore it through enhanced promotional activity and a new rebate scheme.

• Build it and pharmacy segments showed strong growth at 7.3% and 13.3% respectively, while Switzerland and Ireland faced top-line pressure.

• Targeting a return to 3% EBIT margin in South Africa within 18–24 months, with a focus on driving top-line sales and retailer profitability.

Business model evolution and growth initiatives

• Launching new store formats: SaveMor for low-income, small-format expansion, and SPAR Gourmet for high-end, niche markets, with plans to double SaveMor stores in 2–3 years.

• Centralizing property, IT, and select shared services to improve efficiency, while maintaining a center-led approach for commercial functions to preserve retailer relationships.

• Expanding digital and on-demand platforms, including SPAR2U and a partnership with Uber Eats, to capture convenience-driven growth.

• Private label and value-added services are key levers for retailer loyalty and margin improvement, with a focus on innovation and exclusive offerings in both grocery and liquor.

• Pharmacy business aims to double its network to 250–300 stores, supported by regional distribution centers and a strong independent pharmacy model.