The SPAR Group (SPP) H1 2024 earnings summary

Executive summary

• Group turnover from continuing operations rose 7.9% year-over-year to ZAR 77.2 billion, with operating profit stable at ZAR 1.6 billion and cash generated from operations reaching ZAR 1.4 billion.

• Poland classified as a discontinued operation, with exit process and asset disposal underway; impairment of ZAR 720–721.1 million recognized.

• Strategic priorities include exiting Poland, restructuring the balance sheet, reviewing European operations, and restoring South African profitability.

• Operating profit was flat at ZAR 1.6 billion; profit before tax declined 11.2% due to higher finance costs.

• Diluted headline earnings per share fell 7.6%, and no interim dividend was declared.

Financial highlights

• Turnover grew 7.9% to ZAR 77.2 billion; operating profit up 0.2%; profit after tax declined 10.2%.

• Gross profit margin stable at 11.9%, with a 0.05% decline; operating margin at 2.0–2.04%.

• Headline earnings per share fell 6.8% to 451.7 cents; net asset value per share decreased 4.6% to 5,317.1 cents.

• Finance costs up 28%, net finance costs up 56% due to higher interest rates and working capital pressures.

• Group net debt at ZAR 11.1 billion, leverage ratio at 3.07x, within covenant limits.

Outlook and guidance

• On track to exit Poland by year-end; debt restructure review completed and implementation underway.

• Targeting 3% operating margin in South Africa by end of FY 2026; leverage ratio goal of 1.5x net debt/EBITDA.

• CapEx for FY24 expected to be ZAR 700–800 million below initial ZAR 2.2 billion guidance.

• SAP system fixes in KZN to be implemented by September 2024, with margin recovery expected in Q1 FY25.

• Management expects improved profitability in the second half, driven by cost-saving initiatives and system improvements.