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THE SPAR GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1967/001572/06)
JSE Code: SPP
ISIN: ZAE000058517
(“SPAR” or the “Group”)
TRADING UPDATE AND TRADING STATEMENT FOR THE SIX MONTHS ENDED
31 MARCH 2023
TRADING UPDATE
The following information pertains to the Group’s trading for the six months ended
31 March 2023 (the “period”).
SPAR increased turnover by 7.9% to approximately R72.9 billion.
SPAR Southern Africa
• Total turnover growth of 5.6%
o Combined core grocery and liquor turnover growth of 6.5%, with grocery and
liquor sales both impacted by the SAP software go-live challenges
experienced at the KwaZulu-Natal (KZN) distribution centre (DC)
SPAR grocery wholesale business increased sales by 7.9%
TOPS at SPAR liquor sales declined by 1.9%, primarily impacted by
the high level of sales experienced in the prior comparative period, due
to the easing of COVID-19 liquor trading restrictions in September
2021
o Despite the continued slowdown in the building sector, Build it continues to
lead the market and delivered a credible performance with turnover declining
by 3.8%
BWG Group (Ireland and South West England)
• Both markets continued to record strong performances with turnover increasing by
8.8% (EUR-denominated)
SPAR Switzerland
• Delivered a decline in turnover of 4.3% (CHF-denominated), due to the continued
decline in volumes across the market, exaggerated by the loss of retail sales due to
the transfer of a group of corporate stores to independent retailers during 2022
SPAR Poland
• Turnover increased by 4.9% (PLN-denominated), despite this business having
terminated contracts with 58 retailers in July 2022
The table below summarises the sales growth by business segment (ZAR-
denominated):
Six months 18 weeks Six months
ended ended ended
31 March 2023 28 January 31 March
(% change) 2023 2022
(% change)* (% change)
Wholesale grocery business 7.9 9.7 4.6
TOPS/Liquor sales (1.9) 1.6 41.6
Combined grocery and liquor 6.5 8.5 8.5
Build it (3.8) (2.8) 1.4
S Buys - pharmaceutical business 20.0 18.1 6.8
Southern Africa 5.6 7.4 7.6
BWG Group (Ireland and South West 15.1 11.1 2.9
England)
Switzerland 6.9 4.4 (2.8)
Poland 9.3 4.6 (0.7)
Total Group 7.9 7.8 5.2
*Per the trading update for the 18 weeks ended 28 January 2023 published on SENS on
14 February 2023 (“February Trading Update”)
SPAR SOUTHERN AFRICA
Total turnover in Southern Africa increased by 5.6%, adversely impacted by a challenging
consumer environment, the high base effect of liquor sales in the prior comparative period,
the loss of turnover arising from the SAP software go-live challenges experienced at the KZN
DC, as well as a weaker trading performance from Build it.
SPAR wholesale grocery
Against a backdrop of increasing pressure for South African consumers, exacerbated by
higher inflation, the SPAR wholesale grocery business reported sales growth of 7.9% against
internally measured price inflation of 10.8% and turnover growth of 4.6% in the prior
comparative period. This performance is encouraging, despite the loss of turnover due to the
SAP implementation challenges during the months of February and March 2023.
TOPS at SPAR liquor
TOPS at SPAR liquor business reported a decline in wholesale turnover of 1.9% for the
period, as liquor volumes began to normalise from the 41.6% growth seen post the lifting of
the COVID-19 liquor trading restrictions in September 2021.
Build it
Build it reported a decline in turnover of 3.8%, which is reflective of the intense slowdown in
the building sector, with the manufacturing of building materials severely impacted by the
increased levels of electricity loadshedding. Despite the decline, Build it continues to lead
the market as the leading building materials business in Southern Africa.
SPAR Pharmaceutical
The pharmaceutical business, S Buys Pharmacy at SPAR, continued to deliver excellent
sales performances from both Pharmacy at SPAR and Scriptwise (specialised pharmacy),
delivering 20.0% turnover growth for the period. The strong performance was driven by
growing rates of retailer loyalty and an increase in the number of high-value prescriptions.
Impact of loadshedding
South Africa experienced unprecedented levels of electricity loadshedding during the period.
This had a direct impact on the trading performance and profitability of our retailers. Higher
levels of loadshedding are expected to impact retailer profitability due to the additional energy
costs associated with back-up solutions required during loadshedding hours. Our retailers
have experienced a significant increase in operating costs, primarily driven by the increased
cost of diesel required to run generators during the higher levels of loadshedding, coupled
with higher repairs and maintenance costs, and product wastage, as generators occasionally
fail under extended periods of usage. SPAR estimates the added cost of diesel incurred by
our retailers required to run generators during the period, amounted to more than R700
million. The SPAR retailers have access to funding for generators, batteries and other
machinery through the SPAR Guild development fund and other SPAR arranged funding.
SPAR’s distribution centres continue to benefit from modern solar energy installations. This
equipment has assisted in the management of energy costs, however it is not sufficient to
deal with the full impact of loadshedding. During the period, SPAR’s costs for diesel, to run
generators, more than tripled when measured against the prior comparative period, albeit
nowhere near the costs borne at retail. Whilst the SPAR retailers carry the majority of the
loadshedding-related costs, the wholesale business is impacted by the resulting financial
pressure experienced by our retailers.
BWG GROUP (IRELAND AND SOUTH WEST ENGLAND)
The BWG Group delivered turnover growth of 8.8% for the period in EUR terms, and 15.1%
in ZAR terms. This is another excellent trading performance for the group. The strength in
Irish business performance was driven by strong performances across all retail brands, a full
recovery of the hospitality sector, which was restricted for parts of the prior comparative
period, and the successful integration of recently acquired small wholesale businesses. In
the United Kingdom, Appleby Westward reported solid growth across its wholesale business,
and the corporate retail division benefitted from the acquisition of stores during the period.
SPAR SWITZERLAND
Turnover for the Swiss business declined by 4.3% in CHF terms (increased by 6.9% in ZAR
terms) against the prior comparative period. Food retailers across Switzerland remain under
pressure due to the ongoing loss of volumes relative to the extraordinary gains experienced
during the pandemic when the Swiss borders were closed. The decline in turnover was also
impacted by the transfer of a group of petro-convenience corporate stores to independent
retailers over the course of 2022 and subsequent loss of retail turnover from these stores in
the period versus the prior comparative period. Wholesale turnover increased by 2.0% (in
CHF terms), partly in response to the transfer of this business. Turnover from the TopCC
cash and carry business declined by 2.6% (in CHF terms), due to the contraction of the local
restaurant industry.
SPAR POLAND
SPAR Poland delivered turnover growth of 4.9% in PLN terms (9.3% in ZAR terms),
compared to the prior comparative period. This trading performance should be viewed
against the loss of 58 retailers whose contracts were terminated in July 2022. Although these
retailers had relatively low levels of loyalty, they represented 11.7% of SPAR Poland’s
turnover for the six months ended 31 March 2022. SPAR Poland’s corporate stores delivered
turnover growth of 8.9% in local currency. SPAR’s strategy to invest in price, thereby
improving wholesale pricing for its retailers, has been well received against the backdrop of
very high inflation which continues to place pressure on consumer disposable income.
TRADING STATEMENT
In terms of paragraph 3.4(b) of the JSE Limited Listings Requirements, issuers are required
to publish a trading statement as soon as they are satisfied that, with a reasonable degree
of certainty, the financial results for the current reporting period will differ by at least 20.0%
from the financial results of the previous corresponding period.
SPAR is currently in the process of finalising its financial results for the period (“Results”)
and shareholders are advised that the Group expects to report lower earnings per share
(“EPS”) and headline earnings per share (“HEPS”), falling within the ranges provided below.
Six months Six months Six months
ended 31 ended 31 March ended 31
Reported earnings March 2023 2023 March 2022
Expected range Expected range Cents per
% cents per share share
HEPS -35 to -25 417.7 to 482.0 642.6
Diluted HEPS -35 to -25 416.7 to 480.8 641.1
EPS -35 to -25 393.6 to 454.1 605.5
Diluted EPS -35 to -25 392.7 to 453.1 604.1
Shareholders are referred to the February Trading Update wherein the Group announced
that, inter alia, all its markets continued to experience inflationary cost pressures.
The following factors impacted profitability during the period:
• Across all regions, cost increases could not be restricted in line with lower-than-
expected turnover growth
• In Southern Africa, fuel and distribution costs increased by 27%. Due to the execution
of strategic imperatives, IT costs increased by 52% and marketing costs increased
by 19%
• Profitability in the European regions has been negatively impacted by increases in
fuel, labour and energy costs
• Rising interest rates have caused a significant increase in net finance costs in all
businesses
• The launch of SPAR’s new ERP IT system (SAP), at the KZN DC resulted in lost
sales during the period. This also resulted in higher warehouse labour and IT
consultancy costs, as every effort was made to keep the supply chain operational and
to address the issues identified from the new system deployment
The SAP implementation challenges are being urgently addressed and are limited to SPAR’s
KZN region only. The roll out of SAP has been delayed in other regions until all issues at the
KZN DC have been completely and satisfactorily resolved. In the interim, SPAR’s Eastern
Cape, South Rand and North Rand regions will continue to assist with the fulfilment of orders
to impacted stores within the KZN region.
Shareholders are advised that this announcement does not constitute an earnings forecast,
that the financial information provided herein is the responsibility of the directors, and that
such information has neither been reviewed nor reported on by the Group’s auditors.
RESULTS PRESENTATION
The Results are expected to be published on SENS by 08h00 on Wednesday, 14 June 2023.
The Results webcast presentation, hosted by SPAR management, will follow at 09h30 on
the same day. Please refer to SPAR’s corporate website for more information -
https://thespargroup.com/.
By order of the Board
Pinetown
31 May 2023
Sponsor
One Capital
Corporate Broker
Rand Merchant Bank, a division of FirstRand Bank Ltd
