Slides
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My SPAR, Our Tomorrow Business & Strategic Overview Angelo Swartz - Group CEO
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Southern Africa • R96 billion turnover* • 8 distribution centres • Retailers in South Africa, Namibia, Botswana, Mozambique, Eswatini and Lesotho Ireland and South West England • R41 billion turnover* o Ireland R35 billion | UK R6 billion • 3 distribution centres o Ireland 1 | UK 2 Switzerland • R16 billion turnover* • 1 distribution centre • 11 Cash & Carry Sri Lanka (joint venture) • Joint venture with Ceylon Biscuits Ltd • R0.8 billion turnover* SPAR at a glance *FY 2024 2
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The Evolution of The SPAR Group Ltd Formed 1963 Voluntary Trading Model (the only one in SA) Wholesaler business model (merger of 6-8 independent wholesalers) – formed to compete against corporate retail chains Core competitive advantage derives from: Origins in Grocery, which extended to Liquor, Building Materials and Pharmacy • Warehousing/ distribution/ supply chain mastery • Retail relationship management • Brand Strength – consistency, creativity and customisation International expansion: BWG Group (2014) SPAR Switzerland (2016) Sri Lanka JV (2017) & SPAR Poland (2020) Portfolio review underway 3
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Competitive positioning in major retail categories # As at end January 2025 Grocery (61 years) Liquor (20 years) Building/ DIY (30 years) Pharmacy (7 years) Ireland & South-West England (11 years) Switzerland (9 years) Brands • SPAR • KWIKSPAR • SUPERSPAR • SPAR Xpress • SaveMor •Tops! •SaveMor Liquor • Build it • Build it Plus • Pharmacy at SPAR • Consumer Health • Non-SPAR Medical • ScriptWise • SPAR • EUROSPAR • MACE • Londis • XL • Value Centre • SPAR • EUROSPAR • SPAR Express • Maxi • TopCC Adjuncts • Encore (Private Label) • Engage (Sales & Merchandising) • Engine (Manufacturing) • Enpack (Packaging) • Encork (Private Label) • Academy • BWG Foodservice DC (logistics & delivery) KwaZulu-Natal | Western Cape (incl. Namibia) | Eastern Cape | North Rand | South Rand | Lowveld (incl. Mozambique, eSwatini) Build it/Imports DC – Pinetown Drop shipment primary Carletonville (Future: 3-6 dedicated) Kilcarbery | Saltash | Cullompton St Gallen Retail Stores# 1 090 939 400 121 1 472 300 Retailer Loyalty# 80% 72% 67% 60% 4
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My SPAR, Our Tomorrow Update on Swiss sanction process
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Switzerland – intention to sanction Further procedural steps ~ 2-3 months ~ 2-4 months 30 days ~ 2-4 years 30 days ~ 1-2 years Spar: Comments to SOB: - February 2025 Hearing before COMCO: May 2025 Issuance of decision of COMCO Spar: Appeal to Federal Administrative Court Decision of Federal Administrative Court Exceptionally: Substantial revision of SOB → must be provided to parties for additional comments Spar: Appeal to Federal Supreme Court Decision of Federal Supreme Court
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My SPAR, Our Tomorrow The future of SPAR 7
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Where we come from.. • A constrained macro-environment across territories • High debt leverage • Significant costs and operational disruptions from SAP implementation 124,3 127,9 135,6 146,5 152,3 2,8% 2,7% 2,5% 1,7% 1,9% 0,0% 0,5% 1,0% 1,5% 2,0% 2,5% 3,0% - 20,0 40,0 60,0 80,0 100,0 120,0 140,0 160,0 2020 2021 2022 2023 2024 Revenue (R’m) & Operating Profit Margin (%) Revenue OP margin Over the past two years, SPAR has faced market and operational challenges 8
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KZN has returned to profitability Retailer experience improved - delivering fulfilment rates >90% Margin visibility addressed CSnx chosen as warehouse management system for Southern Africa Several post-implementation reviews conducted SAP Steering Committee has been overhauled Business Transformation Committee established to oversee the entire implementation process Next implementation will begin with Build it warehouse (< 1% of group sales) KZN DC Update Progress to date Ongoing monitoring and governance structures in place to ensure a smooth and successful transition in future rollouts. Future Rollouts & Risk Mitigation 9
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European Strategic Review Review ongoing – to be completed June 2025 Guiding principle • Maintaining positive ROIC-WACC spread essential for long term sustainability • Where returns are not justified in the capital allocated, need to review operational and investment strategies Review focused on UK & Switzerland 10
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Our formula for future success We are good at SUPPORTING independent retailing • +60 year track record across 4 categories (Grocery, Liquor, Building, Pharmacy) • Collaboration – relentless focus on retailer success • Expertise We are UNIQUELY POSITIONED • Only voluntary trade model • Don’t compete with our retailers (they are our primary focus) • Provide retailer freedom to customise We support OUR COMMUNITIES • Wealth creation for the business owners • Investment in upskilling (academy) – future business owners • Employment creation Our Ambition: Unleash the Power of Independent Retail IMPLICATIONS FOR STRATEGIC FOCUS Harden protect the Flagship SPAR position Grow identify categories and areas for expansion Clarify refine responsibilities and supporting structure Execute prioritise and drive delivery 11
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But first we need the building blocks in place.. Enabling growth Progress • Poland exit complete • European strategic review underway – to be completed June 2025 • Reduction of net debt to R9 billion • Multiple levers underway to further reduce debt and reach targeted gearing of 1.5-2.0x for SA • Enhanced capital allocation framework – Board approved Disposals Capital structure Capital allocation discipline 12
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Key Priorities Harden SPAR Profitability Retail profitability IT transformation Grow Format & Brand architecture Store expansion Driving SPAR 2U Launch of VAS* (Flex, SPAR Mobile, Retail Media *Value Added Services ^Target Operating Model Execute! Clarify Portfolio review Culture Review of TOM^ and Group structure 13
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My SPAR, Our Tomorrow Q&A 14
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My SPAR, Our Tomorrow Financial Overview Reeza Isaacs - Group CFO
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SPAR Group CMD 2025 Agenda Capital Markets Day Strategic priorities Recent results Balance sheet optimisation Capital allocation framework 2 2
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My SPAR, Our Tomorrow Strategic Priorities 3
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SPAR Group CMD 2025 SPAR strategic priorities A core focus area for SPAR over the short to medium term has been de-gearing and balance sheet optimisation: SPAR Poland exit SAP system rollout next DC South African profitability Debt restructure Europe strategic decisions 1 4 5 3 Completion date: 31 January 2025 Target date: March 2025 Target date: June 2025 Target date: September 2025 Target date: September 2026 Complete In progress In progress In progress • Regulatory approval: the sale was approved by Polish anti- monopoly authorities (“Anti- Trust”) on 19 November 2024 • Finalisation and closing of disposal: All conditions precedent set out in the Sale and Purchase Agreement were fulfilled on 31 January 2025 and as such the disposal became wholly unconditional as at that date • The key focus areas of the balance sheet optimisation strategy are as follows: ‒ Decision to sell interests in Poland ‒ Consideration of debt structuring options ‒ Improved capital allocation discipline - review of investments RoIC) ‒ Improving working capital management ‒ Preserve cash and reduce net debt • Key recent achievements: ‒ Removal of Ireland parental guarantee & Poland exit ‒ Successful restructure of SA debt • European portfolio review concluded for both SPAR Switzerland and BWG Group • Remediation alternatives considered • Rationale: Shifting focus to capital allocation and maximising SPAR’s capital efficiency • Indicative impacts on capital allocation: ‒ Management focus ‒ Group debt and leverage ‒ Creating improved shareholder returns • Significant progress made in resolving SAP system issues since its implementation in Feb-23 at the KZN DC: ‒ Pricing visibility, service levels, trading margins, logistic metrics and retailer loyalty have seen positive improvements • Key target: Commence roll- out to other DC’s post KZN issues being resolved (Sep- 25) • Operating drivers requiring focus: ‒ Revenue not at expected levels (being remedied) ‒ Gross margins negatively impacted by SAP implementation at KZN ‒ Increased cost discipline - progress in terms of cost savings ‒ Disposal of loss-making corporate stores to improve base • Operating margin recovery plan: 3% EBIT target, operational efficiencies, disposal of loss-making corp. stores, sustainability initiatives and SAP resolution 2 Complete 4
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My SPAR, Our Tomorrow Recent results reflection 5
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SPAR Group CMD 2025 Reflecting on FY24 results Solid year of recovery with progress on key metrics FY 2024 Continuing Operations Southern Africa ZAR’m Ireland EUR’m Switzerland CHF’m Turnover 95 997.1 2 019.7 745.2 EBITDA (pre-IFRS 16) 1 798.7 75.2 22.3 Operating profit 1 461.0 60.4 10.4 Profit after tax 739.5 41.8 3.2 Key Metrics Gross Profit Margin (%) 9.5% 15.2% 18.3% Operating Profit Margin (%) 1.5% 3.0% 1.4% Southern Africa Turnover • SPAR & TOPS combined growth of 3.6% • Liquor sales recovery 9.4% across all divisions • Build it sales increased 2.3% on prior year with recovery in H2 • S Buys - strong growth of 14.5% driven by wholesale and Scriptwise Gross profit • Gross profit in Southern Africa has been flat year-on-year. • SPAR SA GP% declined due to aggressive promotional activity & slow KZN recovery • Encore reported a strong housebrands performance • S Buys margin declined due to strong growth in Scriptwise business Ireland Turnover • EUR terms +2.8% • Strong growth in BWG Foods +5.7%, with challenging UK market • Successful consolidation of recent acquisitions Gross profit • Gross profit margin slight increase due to change in sales mix with growth in convenience food, drinks & confectionary categories Operating profit margin recovery in SA (1.5% vs prior year 1.3%), with ongoing focus on gross profit margins & cost mitigations to achieve long-term EBIT target of 3% Operating profit margin recovery in Ireland (3.0% vs prior year 2.8%) 6 0,0% 1,0% 2,0% 3,0% 2020 2021 2022 2023 2024 SA Operating Profit Margin Switzerland Turnover • CHF terms -6.2% • Continued market volumes decline • Consumers seeking value at large supermarkets and cross border Gross profit • Overall gross profit margin increased despite lower volumes due to improved margin management within Retail and TopCC
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SPAR Group CMD 2025 January 2025 trading update Disappointing topline performance, but margin improvement continues Southern Africa R’m Ireland EUR’m Switzerland CHF’m Turnover growth (local currencies) -1.6% -5.2%1.6% 0.6% 1.9% 7.3% 13.3% Despite lower sales due to constrained consumer spending in all our regions, the Group demonstrated resilience and has seen continued positive momentum in improving operating margin levels through focused cost control and promotional activities, continuing to make progress towards our 3.0% EBIT margin target Southern Africa Turnover • Retail sales grew 3.4%, with robust growth in lower-income grocery stores • Sales growth impacted by planned closure of 13 grocery stores in South Rand Region, lower promotional activity and erratic supply into Mozambique • SPAR’s on demand shopping platform, SPAR2U, delivered solid growth off a low base • Good Build it performance with 7.3% growth and robust growth in pharmaceutical business of 13.3% attributable to Wholesaler and Scriptwise • KZN has experienced a positive recovery with improvements in loyalty levels Operating profit • Improved performance from corporate grocery and liquor stores with closure of non-performing stores • Continued focus on cost control and margin management to mitigate muted top line growth • Improvements in KZN contributing to margin recovery Ireland Switzerland • Sales decrease of 1.6%, primarily impacted by decreased consumer spending in response to increased living costs (minimum wage increase from 1 January 2025 will support future spending) • Operating expenses were well managed despite the increase in minimum wage from 1 January 2025 • Margin improvements driven by better sales mix • Sales affected by increased living costs and intensifying competition 7
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My SPAR, Our Tomorrow Balance sheet optimisation 8
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SPAR Group CMD 2025 Balance sheet optimisation Balance sheet is a priority, with debt reduction plans and a targeted gearing of 1.5 to 2.0x for SA Key FY 2024 metrics Southern Africa R’m Ireland EUR’m Switzerland CHF’m Cash Generated from Ops 1 714.9 101.9 57.8 Net working capital changes (651.2) 7.5 0.0 Net Borrowings 3 368.9 111.9 138.8 Leverage ratio* 1.9x 1.4x 6.0x • We have successfully agreed a restructure of our SA debt, bolstering the SPAR balance sheet for the implementation of our strategic priorities • Our underperforming international operations (South-West England and Switzerland) are under strategic review as part of our capital allocation and deleveraging framework, and we have successfully removed the Swiss debt covenant • Strategic delivery of improved EBIT margin will increase business cash generation in the longer term • We have reviewed our group capex spend and reconsidered key projects within the group to ensure controlled and directive investment aligns with deleveraging plans • Alongside the above, a review and identification of optimization of our non-core assets continues with positive progress to date • We have focused improvements in our working capital management, with identified optimization of creditor payment terms and a review underway for opportunities to refine our debtor management strategies • Our Irish business continues to demonstrate strong cash generation and has deleveraged in recent years, enabling the removal of our parental guarantee as well as an agreed repatriation of dividends, with a 25% payout ratio • System investment opportunities identified for improvements in efficiencies across our finance & reporting structures, as well as our business insights analytics Poland exit Irish Guarantee removal Non-core asset optimisation progress Key achievements since September 2024 year-end SA debt restructure Switzerland debt covenant removal *SA leverage ratio for FY24 excludes Poland flows post year-end 9
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My SPAR, Our Tomorrow Capital Allocation Framework 10
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SPAR Group CMD 2025 Capital allocation principles & targets Our principles support our growth ambitions, whilst also seeking to satisfy our targeted gearing structure and shareholder growth aspirations RoCE > WACC + 3% Gearing 1.5 -2.0x Positive operating leverage Real mid- single digit revenue growth CAPITAL ALLOCATION IS DRIVEN TOP-DOWN AND TIGHTLY ALIGNED TO GROUP STRATEGIC PRIORITIES What we aspire to deliver Balance sheet stabilisation & strengthening • Group is cash generative but currently highly geared • Targeted leverage differs by region and cost of borrowing however we are targeting the following for our major subsidiaries: o 1.5 - 2.0x for SA o 1.0x - 1.5x for Ireland Continued growth and investment Meeting shareholder return aspirations • Group is focused on debt reduction in the short term • Pathway to dividend resumption in next 18-24 months • SA and Ireland dividend prioritised at normalised payout ratio ALLOCATION OF CASH SEEKS TO BALANCE: • Source and allocation of cash based on strategic outlook for each business • Capex spend driven top down - after maintenance spend we are focused on organic and strategic growth • Inorganic opportunities subject to strict size and investment criteria 11
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SPAR Group CMD 2025 SPAR capital allocation flow Allocation of capital guided by considered measurable criteria, through the cycle performance whilst optimising sources of funding and maximising shareholder returns Excess capital is determined as follows: • Net operational cash flow • After: ensuring balance sheet integrity • After: providing for required capex • After: servicing dividends to shareholders Net operational cash flow Maintenance capex plus priority projects (as part of capex budgeting) Balance sheet integrity (current and targeted) Ordinary dividend (dividend policy requirement) Satisfy balance sheet strategy and maintenance & priority capex requirements Special dividends Return capital to shareholders If excess capital and/or no high- conviction investment options Investment Inorganic growth options returns > WACC + 3% Investment Organic growth options returns > WACC + 3% Share Buy-backs Theoretical risk adjusted return Allocation of “excess capital” available High conviction capital allocation options If consistently excess capital and no high conviction investment options, option to increase pay-out ratio Priority projects that are imperative to SPAR’s growth story Low conviction capital allocation options 12
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My SPAR, Our Tomorrow Outlook 13
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SPAR Group CMD 2025 In conclusion Current environment and our response • Volatile global backdrop with Trump administration taking anti-SA stance • Despite this, we have a reasonably stable outlook given the working GNU, loadshedding under control, low inflation and a return to modest growth • We are feeling positive about the SA consumer as households are less geared, and interest rates are lower Outlook • Strong focus on our balance sheet • Addressing operational issues to better support our retailers • Focusing on becoming a simpler, but still diversified, centering on our core businesses in SA and Ireland • Improving our capital allocation and resuming dividends Response 14
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My SPAR, Our Tomorrow Q&A 15
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My SPAR, Our Tomorrow SPAR Southern Africa Grocery & Liquor Max Oliva – SA CEO
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SPAR Group CMD 2025 Purpose & Vision SPAR Southern Africa 2
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SPAR Group CMD 2025 Retail Grocery & Liquor Stats BillionStores YTD January 2025 3
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SPAR Group CMD 2025 Challenger Brand SPAR Southern Africa 4
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SPAR Group CMD 2025 Executive Team SPAR Southern Africa Max Oliva Chief Executive Officer 6 Divisional MD’s North Rand South Rand KwaZulu-Natal Western Cape Eastern Cape LowveldBrett McDougall Tech Services Executive Gerhard Ackermann Merchandise Executive Tony Mun-Gavin Marketing Executive Ed von Gericke Retail Operations Executive Keegan Alicks Advertising & Promotions Executive Thami Silwana Liquor Executive Brigitte Da Gama HR Executive Bruce Hughes Private Label Executive Blake Raubenheimer Omnichannel Executive Adheesh Maharaj Finance Executive TBC – National Logistics Executive 5
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SPAR Group CMD 2025 SPAR Southern Africa YTD January 2025 DC Turnover Split • Warehouse • Dropshipment 65% 35% Model • DC Profitability • Retail Profitability Target 3.0% 3.75% Retail Turnover R47.96bn • SPAR Southern Africa is a division of The SPAR Group Ltd • A grocery and liquor wholesaler • Voluntary trading model with independent retailer membership of: • SPAR Group Ltd • The National Guild of Southern Africa NPC • Retailer Member Support • 6 Divisional Distribution centres • 1 Private Label Distribution Centre • Central Office • Stats • 24/7/365 • 5 478 staff members • 253 857 m2 warehouse space • R3.1bn average stockholding • 33.4 million km’s per year • 223.6 million cases per annum 6
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SPAR Group CMD 2025 Retail Grocery & Liquor Stats SPAR’s Store Network in SA & Cross Border by Country YTD January 2025 Format South Africa Namibia Botswana Eswatini Mozambique 376 6 9 4 3 330 22 29 9 11 127 0 0 1 2 84 5 0 0 0 61 6 0 3 2 849 27 33 9 0 19 0 0 2 0 Total 1846 66 71 28 18 • SEM 1-3: 25% store footprint / 30% sales / growth 8.61% • SEM 4-7: 46% store footprint / 39% sales / growth 2.26% • SEM 8-10: 29% store footprint / 31% sales / growth 0.03% SaveMor is well positioned within the lower income market segment with 67% of the total format trading within this segment of the market reporting exceptional growth of +11.04% 7
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SPAR Group CMD 2025 Retail Stores YTD January 2025 8
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SPAR Group CMD 2025 SPAR Retail Performance YTD January 2025 • Total Southern African supermarket formats reported growth in retail sales of +2.84% (LFL +2.64%) • SaveMor & SPAR Express formats continue to show strong growth of +11.04% & +11.2% • Retail sales across our South African business grew by +2.45% (LFL +2.36%), accounting for 92% of total supermarket sales to retail • Retail sales across our foreign countries, namely Namibia, Botswana, Eswatini, and Mozambique reported an increase in sales of +6.89% (LFL +5.61%) • Transactions at retail across our supermarket stores grew by 0.54% nearly 300 million transactions • Average basket spend increasing by +2.29% 9
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SPAR Group CMD 2025 TOPS Performance YTD January 2025 • Liquor performance was pleasing achieving growth of +6.23% (LFL +5.07%) • Retail sales within our South African borders increased by +6.02% (LFL +4.89%), with cross border countries increasing by +11.81% (LFL +9.89%) • Liquor transactions grew by +5.49% with 50 million transactions processed • Average basket size up by +0.70% 10
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SPAR Group CMD 2025 Stores Launched YTD January 2025 • Store movement for the financial period was a net gain of +3 stores • A total of 26 stores were launched, comprising of 11 supermarket stores & 15 liquor stores • Reinvestment by SPAR retailers: • 33 major refurbishments • 51 minor refurbishments • Total spend of R211 million • Net store selling area increase of 1 017m² • Increase from 1 387 706m² in Sep 2024 to 1 388 723m² in Jan 2025 11
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SPAR Group CMD 2025 Focus Areas SPAR Southern Africa MORE MORE MORE MORE The Goals: 12
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SPAR Group CMD 2025 Focus Areas SPAR Southern Africa • Strong sales focus and promotional programme to drive retail sales • Improve retailer loyalty & implementation of refreshed retailer overrider and rebate scheme • Improve fresh offering through vertical integration • New store expansion and revamps including SaveMor & Gourmet format launches • Appointment of a Managing Director for corporate stores to drive profitability/rationalisation of stores • Grow Rewards programme membership from 8 million to 12 million, increase Rewards basket size, and build partnership ecosystem to enhance customer value • Loyalty ecosystem partnership expansion 13
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SPAR Group CMD 2025 Strategic Initiatives Grocery & Liquor Digital Transformation: SAP Digital Transformation: VAS & Loyalty Digital Transformation: Space & category management Digital Transformation: SPAR Mobile, SPAR2U & Retail Media Centre Led & Shared Services Design 14
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SPAR Group CMD 2025 Distribution Centres SPAR Southern Africa SOUTH RAND 64 000 m² 53 317 m² NORTH RAND 15
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SPAR Group CMD 2025 Distribution Centres SPAR Southern Africa KZN – DRY GOODS KZN - PERISHABLES 40 000 m² 10 000 m² 16
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SPAR Group CMD 2025 Distribution Centres SPAR Southern Africa MTHATHA EASTERN CAPE 6 400 m² 46 084m² 17
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SPAR Group CMD 2025 Distribution Centres SPAR Southern Africa WESTERN CAPE LOWVELD 40 405m² 22 415m² 18
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SPAR Group CMD 2025 Distribution Centres SPAR Southern Africa ENCORE – PRIVATE LABEL 16 000m² 19
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SPAR Group CMD 2025 Southern African Strategy Grocery & Liquor Southern African 20
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SPAR Group CMD 2025 Southern African Strategy Grocery & Liquor PURPOSE: (our ‘Why’ we exist as a business): STRATEGY: (‘What’ are we doing to achieve our goals) Ref: Simon Sinek’s Golden Circle Model VISION: (‘How’ are we going to achieve our purpose): 21
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SPAR Group CMD 2025 Southern African Strategy Grocery & Liquor Customer driven engines of growth Future fit retail partnerships Organisational transformation Sustainable supply chain 22
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SPAR Group CMD 2025 Southern African Strategy Grocery & Liquor Future fit retail partnerships Build a continuous pipeline of successful retail partners Strategic Goals Retailers Partner Focus Vision: First choice brand in the communities we serve Purpose: To inspire people to do and be more • Retailer profitability • BBBEE retailer growth • Store optimisation Outcomes/Measures 23
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SPAR Group CMD 2025 Southern African Strategy Grocery & Liquor Customer driven engines of growth Focused brand innovation, geographies and presence Strategic Goals Customers Partner Focus Outcomes/Measures • Market share growth • Discounter/SaveMor growth • Private label growth • Competitive share of voice • Brand equity improvement • Loyalty programme growth
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SPAR Group CMD 2025 Southern African Strategy Grocery & Liquor Vision: First choice brand in the communities we serve Purpose: To inspire people to do and be more Future-fit, sustainable organisation Employees Organisational transformation 1. Centre-led design 2. Digital transformation and value realisation 3. ‘Ubuntu’ values, culture and mindset Strategic Goals Partner Focus How Outcomes/Measures 25 • Market share growth • Discounter/SaveMor growth • Private label growth • Competitive share of voice • Brand equity improvement • Loyalty programme growth
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SPAR Group CMD 2025 Southern African Strategy Grocery & Liquor Vision: First choice brand in the communities we serve Purpose: To inspire people to do and be more Sustainable supply chains Suppliers & ESG Stakeholders Sustainable supply chain 1. Long term supply security 2. Energy solutions Strategic Goals Partner Focus How Outcomes/Measures 26 • Market share growth • Discounter/SaveMor growth • Private label growth • Competitive share of voice • Brand equity improvement • Loyalty programme growth
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My SPAR, Our Tomorrow SaveMor SPAR Southern Africa – Grocery & Liquor 27
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SPAR Group CMD 2025 SaveMor SPAR Southern Africa Target Market: • Informal and lower SEM 1-3 customers Objectives: • Low-cost profitable retail model • Structured format with clear guidelines • Standardised design and Opex model Marketing / Merchandise: • Specific and focused Marketing plan • 3500-4000 SKU’s • Product development specific to SaveMor • Value added services • Range and assortment rationalisation • SaveMor Liquors 28
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My SPAR, Our Tomorrow SPAR Southern Africa – Grocery & Liquor 29
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SPAR Group CMD 2025 Gourmet SPAR Southern Africa Target Market: • SEM 7-10 customers. • Site opportunities – High-end residential, urban, transient sites. Objectives: • Create ‘reasons to shop’ inclusive of key strategic partnerships • Standardised design and brand philosophy. • High margin retail model Marketing / Merchandise: • Differentiated ranges and bespoke product offerings through Private Label SPAR Signature Selection range and strategic supplier partners. • Fresh arena implementation • Range and assortment specific to targeted consumer base. 30
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SPAR Group CMD 2025 SPAR Gourmet SPAR Southern Africa 31
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SPAR Group CMD 2025 32
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My SPAR, Our Tomorrow Private Label SPAR Southern Africa – Grocery & Liquor 33
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SPAR Group CMD 2025 SPAR Southern Africa Private Label Global Trends “Private Label’s significance is growing all over the world with 35% of all groceries sold in Europe, and 23% in the US being a private label product.” SPAR SA 23% Private Label penetration and 5169 SKU’s. Competitive Edge • Affordability - Value has become increasingly important for consumers squeezed by cost-of-living pressures • Profitability – Retailers have vertically integrated their procurement to enhance retail margins • Quality - Private label products now share comparable quality to propriety brands • Innovation - Product innovation / speed to shelf is quicker than propriety brands • Availability – Retailers now control their own supply chains, allowing them to forecast and predict their own requirements • Point of difference – Retailers using private label as their point of difference – create the demand through our “Only @ SPAR” positioning 34
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SPAR Group CMD 2025 SPAR Southern Africa Private Label Our Private label branding is built around the “as good as the best for less” promise and a “double your money back guarantee”, ensuring quality that meets or exceeds national brand standards. 35
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SPAR Group CMD 2025 SPAR Southern Africa Private Label SKU’s 36
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SPAR Group CMD 2025 SPAR Southern Africa Private Label Butchery Destination Bakery Destination Fresh Destination 37
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SPAR Group CMD 2025 Private Label - Confined & Agile Label SPAR Southern Africa 38
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SPAR Group CMD 2025 Private Label – Focus Areas & Innovation SPAR Southern Africa • Dedicated private label in-store activation team focused on increasing forward share • Private label marketing team actively promoting our private label products to consumers • Product Development team ensuring continuous innovation and fast product launches • A focus on global market trends and agility to swiftly bring innovative offerings to market 39
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SPAR Group CMD 2025 Private Label SPAR Southern Africa 40
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SPAR Group CMD 2025 Private Label – Wine Segment SPAR Southern Africa • Private Label contribution c.6% share • Private Label target 20% share • Europe Private Label contribution > 50% 41
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SPAR Group CMD 2025 Private Label - Wine SPAR Southern Africa • Wine accounts for only 14% of total legal alcohol consumed in SA, compared to 56% Beer and 20% Spirits. • 63% of regular still wine drinkers are female and 83% of these are 25 and older. • Of all the alcohol categories – wine has the highest occasion footprint with food. 42
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SPAR Group CMD 2025 Private Label – Exclusive Wines SPAR Southern Africa 43
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SPAR Group CMD 2025 Private Label – Exclusive Wines SPAR Southern Africa 44
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SPAR Group CMD 2025 Private Label – Exclusive Wines SPAR Southern Africa 45
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SPAR Group CMD 2025 Private Label - Wines SPAR Southern Africa 46
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SPAR Group CMD 2025 Q&A 47
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My SPAR, Our Tomorrow Competitive Positioning and Industry Consolidation Trends 2025 Thami Silwana - National Liquor Executive
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My SPAR, Our Tomorrow Tops Overview 2
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SPAR Group CMD 2025 The Maverick brand that pioneered the modern liquor store! Our History… 3
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SPAR Group CMD 2025 The history of TOPS THEN NOW • We identified a gap in the market • Female friendly niche • Close to current shopping • Clean, bright and visibly safe • Launched 2003 with 16 stores We identified a gap in the market… Female friendly Close to current shopping Clean, bright and visibly safe stores A cheeky sense of humour Launched 2003 with 16 stores 4
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SPAR Group CMD 2025 TOPS continues to lead the market in footprint #1 We have the largest ZA footprint 874 819 483 396 317 288 167 157 TOPS Shoprite Checkers PICK N PAY BLUE BOTTLE OVERLAND Group LIQUOR CITY Boxer ULTRA LIQUORS NUMBER OF OUTLETS - TOP 8 5
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SPAR Group CMD 2025 Our Value Proposition for Retailers • A strong distribution network collective power of DCs nationally • Wholesale pricing for Independents • Entrepreneurial flexibility within a structured brand • All promotional activity driven by data and market trends 6
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My SPAR, Our Tomorrow Industry overview 7
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SPAR Group CMD 2025 Key industry trends Industry Consolidation SAB Miller and AB InBev Distell and Heineken Shifting consumer preferences Premium spirits, craft beverages, LADS* and RTD^ products Growth in corporate-owned liquor chains Challenging independent retailers E-commerce Increased demand for online liquor ordering and delivery services Rise in illicit & counterfeits Illicit & Counterfeit liquor now contribute ~22% of Liquor sales Regulatory environment Considerations for more stringent alcohol laws 8 *LADS – Low Alcoholic Drinks ^ RTD – Ready to drink
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SPAR Group CMD 2025 Data Trends has seen major consumption and purchasing changes Post-COVID Sales mix Economy wines, Bag-In-Box Muted Competitive Pressure Trending towards value! growing ahead of total market growing ahead of total market The big rand bankers like whisky are An extremely market Causing gross profit LADS* 9*LADS – Low Alcoholic Drinks
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SPAR Group CMD 2025 Shifting consumer preferences Consumer Purchasing behaviour: 1. Price-Sensitive Consumer prices 20% higher now than in 2020 2. Seeking out more value for money, e.g. Beer Quarts, Bag-in-Box 3. Switching to more affordable options when necessary (e.g. Private Labels, Prop & Sub Proprietary) ✓ Showing interest in premium brands for special occasions! 4. Shopping on convenience Online 5. Younger demographics more inclined towards ready-to-drink 6. Alcohol-free and low-alcohol product trends – Dry Jan Movement 10
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SPAR Group CMD 2025 Becoming Responsible Agents WE CAN BECOME A RESPONSIBLE ALTERNATIVE! Accounts for 14-22% of the liquor market. ILLICIT/COUNTERFEIT ALCOHOL ABUSE 59% of drinkers in SA classified as binge drinkers. Homicides, Road Accidents, Violent Crimes. DANGEROUS TO SOCIETY FISCUS IMPACT Liquor 3% of GDP, alcohol- related harms 12% of GDP 11
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SPAR Group CMD 2025 We are committed to leading with responsibility We run responsible marketing campaigns We belong to organizations such as DFSA and AWARE.ORG We don’t employ or sell to under 18’s We don’t tolerate drinking/loitering outside of the stores All Liquor store managers are registered Our advertising is in accordance with the rules stated by AWARE.ORG We trade within the laws as determined by the National Liquor Act (NLA) We don’t market to children, churches, schools etc. 12
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My SPAR, Our Tomorrow Strategy Overview 13
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SPAR Group CMD 2025 The liquor retail environment has changed… 14
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SPAR Group CMD 2025 Who are we targeting? 15
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SPAR Group CMD 2025 Liquor Audiences SPIRITS DRINKERS SEM 1-3 SEM 4-7 SEM 8-10 FEMALEMALE olderolder younger WINE DRINKERS BEER DRINKERS TAVERN DRINKERS 28% 46% 26% 21% 39% 40% TOPS TOPS 60% 33% = 25-34 31% = 35-49 TOPS 40% 33% = 25-34 31% = 35-49 16
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SPAR Group CMD 2025 #1 #2 #3 More affluent More influential More Inspirational “I look at them to see what I need to know and do” Experience driven Brand driven Occasions Driven “I look at them to see what I need to drink” SEM 7-10 More male Younger Professional Go getters “I aspire to be like them” Anchoring the brand on an Aspirational Persona 17
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SPAR Group CMD 2025 Strategic Direction… Making a GREAT story, EPIC… 18
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SPAR Group CMD 2025 5 point priorities Organic led growth Redefine the TOPS Value Proposition Grow through Loyalty Expand Private Labels Purpose Led… Lead with Responsibility 1. 2. 3. 4. 5. 19
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Q&A 20
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Hawie du Preez Managing Director
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The of • Build it, a division of The SPAR Group Pty Ltd. • A building materials and hardware merchant (DIY/BIY/Contractor) • Business model based on the SPAR Voluntary trading model with independent retailer membership to: - The SPAR Group Ltd. - Build it National Guild of Southern Africa NPC • Retail sales: - 65% yard/ 35% store - 60% Contractor & 40% Walk in • Retail Purchases (Wholesale sales vs. Direct): • Retail Member Support: - 6 x Regional offices, Central Office and an Imports Warehouse (Housebrand product) Dropshipment Direct Build it store purchases 70% (7% Imports warehouse) 30% SPAR Group CMD 2025 2
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Our 40 year journey 1985 KZN 1998 Inland 2000 Eastern Cape 2002 Western Cape 2002 South Rand 2002 North Rand 2003 Lowveld 2003 Eswatini 2004 Lesotho 2005 Namibia 2010 SIW & Mozambique SPAR Group CMD 2025 3
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Primary Competition Secondary Competition Specialist Retailers Independent Traders Buying Groups (Wholesale) SPAR Group CMD 2025 4 The competitive
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322 Stores (+6;-2) R11 bn | Total +3% | LFL +2% The competitive (July 2023 –June 2024; *52wks) 399 Stores (+7;-8) R18.1 bn | Total 1.38% | LFL 2.16% SPAR Group CMD 2025 5
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The competitive (July 2024 –Dec 2024) 318 Stores (+3;-7) R6.1 bn | Total +5% | LFL +4% 401 Stores (+8;-5) R9.97 bn | Total 4.57% | LFL 4.7% SPAR Group CMD 2025 6
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Marketsegments 29 107 87 99 114 151 79 56 0 20 40 60 80 100 120 140 160 Urban Country Township Rural Store Segmentation 2024 3,44% 4,22% -0,83% 3,25% -2,00% -1,00% 0,00% 1,00% 2,00% 3,00% 4,00% 5,00% Urban Country Township Rural Organic Retail Sales Growth - per segment (YTD Sept 2024) 7SPAR Group CMD 2025 The competitive
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SPAR Group CMD 2025 8
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SPAR Group CMD 2025 9
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CAT 4 14% CAT 3 23% CAT 2 21% CAT 1 42% Builders Merchant CAT 4 35% CAT 3 40% CAT 2 15% CAT 1 10% DIY DIY Contractor/ InfrastructureWet trade, cement, metals and fencing, roofing Structural timber, flat sheets and boards, openings Decorative, garden & outdoor, wall and floor, rainwater goods Electrical, Plumbware, general hardware, tools SPAR Group CMD 2025 10
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CAT 4 14% CAT 3 23% CAT 2 21% CAT 1 42% Builders Merchant Growth CAT 4 14% CAT 3 23% CAT 2 21% CAT 1 42% Builders Merchant SPAR Group CMD 2025 11
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2025+ 12
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SPAR Group CMD 2025 Build Strategy Winning Aspiration Being the first-choice brand for Southern Africans who want to build, maintain and improve "things" of enduring value. Strategic Issue Creating new rules of the game that will help us to achieve our strategic ambition. The shift in Consumer control and influence. Where to Play From professional to end customer How to Win To be the easiest & biggest retailer Making it easier and more accessible for more Southern Africans who are serious about realizing their significant building, improving and maintenance projects, dreams and ideas. 13
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KZN (RSA 79) Eastern Cape (RSA 47) Western Region (RSA 39 & Namibia 23) South Rand (RSA 70 and Lesotho 2) North Rand (RSA 61) Lowveld (RSA 31, Eswatini 8, Mozambique 40) Group (RSA 327, Neighbouring 73) SPAR Group CMD 2025 14
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35 100 150 270 320 387 398 400 400 400 410 0 50 100 150 200 250 300 350 400 450 2000 2002 2005 2011 2015 2018 2021 2022 2023 2024 2025 SPAR Group CMD 2025 16
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Technological SPAR Group CMD 2025 16
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My SPAR, Our Tomorrow Overview Pharmacy at SPAR SPAR Health Jeremy Nicol - MD
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SPAR Health (“S Buys Group”) 380+ employees. Wholesaler (Pharmacies, Hospitals, Doctors + non-Medical customers) Scriptwise Specialised Pharmacy Academy [120+] SPAR Pharmacies incl. Park Pharmacy 2
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SPAR Group CMD 2025 The business of SPAR Health Wholesaler • Pharmacies, Hospitals and Doctors. • SPAR: Pharmacies and Supermarkets (non-Schedule health & personal care products). Scriptwise Specialised Pharmacy • Patient-named Scripts delivered directly to the patient/doctor/clinic. • High-value medicines for High-Risk patients. Chronic = Repeat Scripts. . Renal Dialysis, Ophthalmology, Autoimmune Diseases, Neurology, Transplant, Rare Diseases. • Stakeholders - Specialist Doctors, Medical Schemes, Pharma Suppliers. • Patient Support Programmes - education, funder & specialist compliance = treatment adherence. Academy • Key Pharmacy Support Personnel - Pharmacist Assistant courses (Basic and Post-Basic). . transition to Occupation-based training (QCTO - Quality Training for Trade and Occupations). • Dispensing Licenses for Doctors and Nurses. • CPD compliance for Pharmacists (‘Continuing Professional Development’). 3
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SPAR Group CMD 2025 SPAR Health FY2025 Performance tracking well • Strong sales support from Pharmacy at SPAR and Scriptwise. • Substantial opportunity for non-SPAR wholesaler sales (pharmacies, hospitals, doctors). • Academy Sales gaining traction. Pharmacy at SPAR • Ongoing positive traction on key metrics - retail turnover & negative trading stores, wholesaler purchases per pharmacy, own brand sales, medical scheme compliance & script count, transaction count & basket spend. • While loyalty has plateaued at 60%, better than 2024 and will increase as the key strategic initiatives roll-out. Strategic Initiatives • Wholesalers - regional expansion. • Pharmacy Recruitment • Training Laboratories - regional expansion on track. • Consumer Health • SPAR-connect - ongoing active engagement. 4
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as per the SPAR model .. driven by the strength of entrepreneurial pharmacists, independent pharmacies & their staff - at the heart of their communities. 5
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SPAR Group CMD 2025 Network - Pharmacy at SPAR Target 300 Pharmacies 6 11 29 9 13 25 34 Network – Split by DC Eastern Cape KZN Lowveld North Rand South Rand Western Cape Current 121 Pharmacies Historically Disadvantaged Owned stores Women owned stores 45% 37%
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SPAR Group CMD 2025 Pharmacy business - the moving parts Marketing NATIONAL 7 Marketing Doctors Medical Aid Suppliers Pharmacy Dispensary Frontshop Clinic Marketing IN-store Precinct
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SPAR Group CMD 2025 PAS 2025 Focus Retail Operations 1. Dispensary - scripts, formulary management 2. Frontshop - range, price, private label 3. Clinic - primary healthcare, wellness 4. Marketing & Merchandising . in-store, precinct, community . SPAR Rewards 5. Alignment - SPAR Group & Regions Growing COMPETITIVENESS … working with Retail Ops and using the Dashboard Support • Pharmacy Committee (Guild) • New Business - plugging the gaps • Inclusion of SPAR Retailers 8 Growth: Pharmacy-by-Pharmacy
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SPAR Group CMD 2025 Retail - Pharmacy at SPAR 9 30% 41% 55% 58% 80% FY 2022 FY 2023 FY 2024 FY 2025 Regional Wholesaler Loyalty
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SPAR Group CMD 2025 Dashboard Store-by-Store Turnover, GP. Trading Density Growth & Loyalty Sales - per EE, per hour, per day Dispensing Fees, Medical Schemes, Doctors, Script Counts (chronic_acute) Split: Disp/Fshop/Clinic, Top-products, Own Brand, Promotions. Negative GPs. Transaction & Foot count, Basket Size. Customer Profile
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SPAR Group CMD 2025 Understanding the Competition 11 Community Pharmacies Independents* 1 936 48% Corporate 2 116 52% Clicks 740 18% Alpha* 310 8% Dischem 286 7% TLC 230 6% Medirite 144 4% Arrie Nel 127 3% SPAR* 121 3% RingPharm 158 4% Total 4 052 100% UPD 5 Alpha 6 CJ 3 Transpharm 3 Pharmed 3 S Buys 1 City Medical 4 Wholesaler - Facilities SPAR - committed to Independent Pharmacy Independent Pharmacy: 60% - footprint (#stores) 40% - market share (rands) [470+] pharmacies added since 2021, +13% [R7bn] scheduled med sales added (private) since Dec 24, +13,6% *True independent 62% 2 525
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SPAR Group CMD 2025 The Market-leaders 12 Pharmacies 121 Clinic coverage 74% PAS Dispensary growth 9%+ Split 68% Market Share 3%+ Frontshop growth 6%+ Own Brand growth 23% Wholesaler compliance 58%+ 2 key competitors 280+ to 720+ 30% to 100% 5%+ to 8%+ 27%+ to 37%+ 48%+ 6%+ to 10%+ 13%+ 90% to 98%+)
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My SPAR, Our Tomorrow Q&A 13
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My SPAR, Our Tomorrow Key Takeaways Angelo Swartz - Group CEO
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SPAR Group CMD 2025 Key Achievements Strategic Exit from Poland Operations Renegotiation of Banking Arrangements in Ireland Reduction of Total Group Debt Addressing Underperforming Assets Proactive Measures in Challenging Trading Conditions ERP Rollout Improved overall efficiency Enhanced cash flow management Strengthened financial position Reduced from R12 billion to R9 billion Plans to reduce further “Fix or exit” strategy to optimise performance Disciplined capital allocation strategy Elimination of unnecessary costs Balanced with protecting profitability KZN stabilised and generating profits Plotted path for risk mitigated future rollouts 2
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SPAR Group CMD 2025 Leadership transition Successful Leadership TransitionAppointment of Angelo Swartz | Group CEO Megan Pydigadu | Group COO Reeza Isaacs | Group CFO Natasha Andrykowsky | Group Strategy Executive Brigitte Da Gama | Group HR Executive Zihle Nonganga | Group Investor Relations Executive Thami Silwana | National Liquor Executive Gerhard Ackerman | National Merchandise Executive Successful Leadership Transition Further Leadership Appointments Commitment to A strong, diverse, and inclusive leadership culture 3
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SPAR Group CMD 2025 Building Financial Resilience Key milestones achieved in balance sheet optimisation • SA debt restructured & Ireland parental guarantee removed • Focus on further reducing debt and responsibly allocating capital Cost Optimisation Measures • Operational efficiency improvements • Workforce optimisation and training • Better supply chain management and procurement strategies Strategic Growth Initiatives • Plans for long- term expansion 4
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SPAR Group CMD 2025 Switzerland – intention to sanction Further procedural steps ~ 2-3 months ~ 2-4 months 30 days ~ 2-4 years 30 days ~ 1-2 years Spar: Comments to SOB: - February 2025 Hearing before COMCO: May 2025 Issuance of decision of COMCO Spar: Appeal to Federal Administrative Court Decision of Federal Administrative Court Exceptionally: Substantial revision of SOB → must be provided to parties for additional comments Spar: Appeal to Federal Supreme Court Decision of Federal Supreme Court 5
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My SPAR, Our Tomorrow SPAR SA 6
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SPAR Group CMD 2025 KZN Rebounding Successful Integration of SAP • Key areas of the business have seen efficiency improvements • Enhancements in processes, inventory management, and reporting KZN DC returned to profitability Enhanced governance with SAP Steering Committee & Business Transformation Committee Risk mitigated rollout plan • Prudent and cautious approach, balancing the need to mitigate risks while ensuring the completion of the rollout to support broader digitisation efforts 7
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SPAR Group CMD 2025 Progress made on cost containment measures – driving top-line is key Driving SA top-line performance Continued investment in driving awareness of SPAR 2U Retailer loyalty improvement initiatives including revised retailer overrider and rebate scheme Enhanced fresh offering Retail partnerships New store expansions – SaveMor & Gourmet Accelerating new store openings & revamps 8
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RESULTS PRESENTATION 2025 Looking forward 9
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SPAR Group CMD 2025 Unwavering focus on Retailers Our Ambition: Unleash the Power of Independent Retail Key Focus on Profitability & Success of our retailers Independent SPAR retailers crucial for long-term growth Management Collaboration with retailers Ensuring a competitive business model Efficiency and Sustainability • Maintaining efficiency in operations • Promoting sustainable practices • TOM* *Target Operating Model 10
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Key Priorities Harden SPAR Profitability Retail profitability IT transformation Grow Format & Brand architecture Store expansion Driving SPAR 2U Launch of VAS* (Flex, SPAR Mobile, Retail Media *Value Added Services ^Target Operating Model Execute! Clarify Portfolio review Culture Review of TOM^ and Group structure 11
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SPAR Group CMD 2025 Q&A 12
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My SPAR, Our Tomorrow Thank you