Spar has ruled out a rights issue to reduce its R9bn debt pile, saying it is focused on operational improvements and disciplined capital management to strengthen its balance sheet.
The retailer recently sold its headquarters for R150m, with the proceeds going to reduce its liabilities.
Still, CFO Reeza Isaacs said the sale had not made a material difference to the balance sheet, adding that the group’s “best opportunity to reduce debt is through operational cash flow, and that’s what [they] have achieved in this period”.
Isaacs said Spar had refinanced about R8.8bn of its SA debt in the six months to end-March, and managed to maintain a net debt-to-ebidta ratio of 2.1 times. The group is targeting a ratio of 1.5 times in Ireland and between 1.5 and 2 times in SA, with the aim of resuming dividend payments within the next 18 months, he said.
Despite the high debt levels, Spar said it is not considering a rights issue. “There is really no need for us to issue equity,” Isaacs said.
Beyond the head office sale no other large asset disposals are planned, he said. The potential sale and leaseback of its fleet in SA is under consideration, but would only proceed if it made financial sense.
The group’s key lever for growth in SA remains restoring margins and improving trading efficiency. Spar is operating at a 2% margin in the region and is targeting 3%. To that end the group will drive sales growth, expand its private label range, sharpen promotions and pricing, improve logistics efficiency and reduce losses at corporate stores.
Isaacs acknowledged that online and on-demand shopping trends have disrupted the higher-income market, particularly in KwaZulu-Natal, where the group lost market share after the implementation issues with its SAP enterprise resource planning system. He confirmed that its SAP systems rollout remains on track for completion by 2027.
To retain and grow its middle- and upper-income customer base, he said Spar is planning to roll out a premium format and is scaling up its on-demand offering, now live in 500 of its 2,500 stores.
“Sixty60 [Shoprite’s express delivery system] has obviously stolen the march on us, having an impact on everyone, but where we’ve introduced online, the uptake shows strong demand,” Isaacs said.
The retailer on Wednesday reported headline earnings per share for the 26 weeks to end-March eased 0.4% year on year to 405.1c. Group revenue from continuing operations was stable at R66.1bn — R66.2bn in the comparable prior period — while operating profit before extraordinary items rose by 1.6% to R1.46bn.
Earnings before interest, tax, depreciation and amortisation (ebitda) increased by 1.7% to R1.72bn, and the gross profit margin expanded slightly to 10.7%.
The SA segment reported a 1.7% rise in wholesale turnover, supported by growth in grocery and liquor revenue. Spar’s on-demand platform, SPAR2U, delivered strong growth in delivery volumes, up 174%, bolstered by a new partnership with Uber Eats.
No interim dividend was declared.
Spar exited noncore markets in the review period, concluding the sale of its Polish operations in January and announced its intention to divest from Switzerland and the UK’s Appleby Westward Group (AWG). These businesses recorded post-tax losses of R4.4bn, including impairments of R4.2bn.
Update: June 4 2025
This story contains new information throughout
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