The SPAR Group (SPP) H2 2024 earnings summary

Executive summary

• Turnover from continuing operations rose 4% to ZAR 152.3 billion, with operating profit up 15.1% to ZAR 2.9 billion and EBITDA up 14% to just under ZAR 3.8 billion, reflecting strong cost control and operational improvements.

• Headline earnings per share increased to 917.9 cents, and return on invested capital reached 12.8%.

• Net borrowings reduced by ZAR 2 billion to ZAR 9.1 billion, improving the net debt-to-EBITDA ratio to 2.41x, and the group remains within covenant limits.

• The group is exiting Poland, with the sale expected to close by January 2025, and is reviewing its European portfolio, particularly the Swiss and UK businesses.

Financial highlights

• Southern Africa contributed ZAR 95.9 billion in turnover (up 3.7%), with a flat margin at 9.5% and operating profit of ZAR 1.5 billion.

• Ireland delivered ZAR 40.6 billion turnover (up 6.7% in ZAR, 2.8% in EUR), with operating margin just under 3% and profit before tax over ZAR 900 million.

• Switzerland reported ZAR 15.7 billion turnover (down 0.3% in ZAR, -6.2% in CHF), with operating profit of ZAR 217 million at a 1.4% margin, impacted by a CHF 1.7 million one-off actuarial charge.

• Group gross margin increased to 11.9%, with Southern Africa at 9.5%, Ireland at 15.2%, and Switzerland up to 18.3%.

• Cash generated from operations was ZAR 5.4 billion, up 7.8% year-over-year.

Outlook and guidance

• Targeting 3% operating margin in Southern Africa by H2 FY26, with FY25 margin expected between 2.2%-2.3%.

• CapEx guidance for FY25 is ZAR 1.3 billion, with an additional ZAR 900 million earmarked for potential business acquisitions.

• Dividend payouts expected to resume in 18-24 months, prioritizing South Africa and Ireland.

• Strategic review of European portfolio underway to maximize capital efficiency.

• Net debt/EBITDA targeted at 1.5-2x for South Africa and 1-1.5x for Ireland.