This article first appeared on GuruFocus .
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Turnover:ZAR67.5 billion, up 2.1%.
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Operating Profit:ZAR730.7 million, margin of 1.1%.
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Headline Earnings Per Share (HEPS):ZAR2, down 55.9%.
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Free Cash Flow:Negative ZAR2 billion.
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Net Debt:ZAR7.3 billion, gearing improved to 2.75 times.
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SA Operating Margin:Approximately 1%.
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SA Grocery and Liquor Loyalty:78.2% as of April.
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Build It Retail Sales Growth:6.1% organic growth.
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SPAR Health Revenue:ZAR1.2 billion, up 26.1%.
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Ireland Sales:EUR856 million, up 2.2%.
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Ireland Gross Margin:Increased by 20 basis points to 13.7%.
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Net Interest in Ireland:Fell 23% to EUR3.8 million.
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Total Assets:ZAR44.8 billion.
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Cash and Cash Equivalents:ZAR1.1 billion.
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Fuel Spend:ZAR254.6 million, liters consumed down 3.5%.
Release Date: June 10, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Spar Group Ltd ( SGPPY ) has made meaningful progress in strengthening its balance sheet, reducing net debt from ZAR9.8 billion at its 2022 peak.
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The company has successfully exited its operations in Poland and Switzerland, simplifying its international portfolio and removing offshore cross guarantees.
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Ireland's performance was strong, delivering top-line growth and a 3% operating margin despite a challenging consumer environment.
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Build It returned to growth at retail, and SPAR Health adjacency grew by 26%, indicating positive momentum in these segments.
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The leadership team has been strengthened with new appointments, bringing in a mix of deep SPAR, retail, and turnaround experience.
Negative Points
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Headline earnings per share are down, with the SA operating margin significantly below the prior year at approximately 1%.
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The company faced two significant operational missteps: the KZN DC underperformance and overinvestment in Black Friday, impacting operating profit.
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Retailer loyalty in South Africa has been under pressure, particularly due to SAP-related disruptions, with loyalty figures below the 88% target.
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Free cash flow was negative ZAR2 billion, largely driven by working capital movements related to trade creditors.
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The company did not declare an interim dividend, consistent with the prior year, due to earnings pressure and elevated gearing.
Q & A Highlights
Q: Please talk to retailer loyalty at present and how are you looking to improve this metric? A: As I covered in the presentation, we haven't seen any significant shifts in loyalty. Our challenge remains in KZN. Overall, loyalty in South Africa is close to 80%, but we need to work on certain areas, particularly KZN. We aim to stabilize operations, improve service levels, and focus on the basics.
Q: Please talk to the rise in fuel prices and how that will impact expenses in H2 in SA? A: We realize fuel costs are a headwind. We've been transparent about the liters we consume and the cost of diesel. Despite this, we expect an uptick in margins due to improvements in fuel efficiency, optimizing routes, and negotiating surcharges with suppliers.
Q: What percentage of the SA debtor's book is fully up to date with payment terms? A: Our debtors book overdue portion is 16%, meaning 84% is in terms. We've been conservative with provisions, increasing from around 50% to close to 67% provided on overdues.
Q: Can you quantify the recovery in KZN in terms of revenue margin loyalty relative to the pre-disruption baseline? A: KZN was an unwelcome surprise, but we've made improvements. We've changed the team and delivered three months of profit in January, February, and March. The focus is on stabilization and sustainable changes, with encouraging signs in top line growth and GP margin management.
Q: With regards to the original 3% operating margin target, is that no longer on the table? A: In the past six months, our margin was closer to 1% than 3%. We are focusing on improvement areas and execution. We will share targets and timelines with the market when ready, but for now, we are focused on improving the business.
Q: Can you provide some color on the difference in performance between inland and coastal regions? A: Coastal regions showed higher growth from a top line perspective, although KZN impacted GP margins. Inland businesses had less growth, slightly positive, with coastal regions carrying the business.
Q: What's the current private label contribution, and what's the medium target for SPAR? A: Currently, private label contributes about 22% of total sales. Our target is closer to 30%. We see this as a big opportunity and are working on integrating our Private Label business more effectively into the core Groceries and Liquor business.
Q: Can you comment on the articles around adverse findings by a BDO report? A: The BDO report was a distraction. It was a review of one store valued at ZAR4 million, not an investigation. Our auditors, PwC, found no reportable irregularities. We are ensuring our accounting and governance are in order.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
