The SPAR Group Ltd (SPP) Earnings Call Transcript & Summary

Good afternoon, everyone. Welcome to our interim results webcast, and thank you for joining us today. I'm Brett Botten, the CEO of SPAR Group. Our CFO, Mark Godfrey, is joining me today to present the results. For our presentation today, I will begin with a brief overview. Mark will then present our financial results for the period and thereafter. I'll provide an operational and strategic update as well as an update on our outlook. So starting with the overview. For the first half of the year, the Group has delivered a, what we call a robust performance. In South Africa, our core grocery business has shown a meaningful improvement as life returns to a new normal post the pandemic. Liquor growth has rebounded strongly post the liquor bans experienced last year. Our Build it business has been solid. Despite the slowdown, this business continues to deliver growth against extraordinary levels of growth in the prior period. Looking at our European regions. BWG Group has delivered impressive growth and delivered a strong performance despite the ongoing trade and cost headwinds. As expected, the core wholesale business in Switzerland has seen a slowdown with pandemic restrictions being fully eliminated now. I'd like to remind you though that turnover growth in the prior year or prior period was 11.1%. So we are really feeling the effect of that high base now. Making Poland profitable remains our top priority. Turnover growth is disappointing, but operating losses have reduced considerably, however, not quickly enough and we will have greater clarity in the coming weeks. Looking at the financial highlights for the Group. In summary, turnover was up 5.2% to ZAR 67.6 billion. Operating profit increased 7.1% to ZAR 1.8 billion. Diluted headline earnings per share increased 3.7%. And we are pleased to declare an interim dividend of ZAR 1.75 per share, in line with our revised dividend policy, which Mark will cover shortly. So thanks, I'd like to hand over now to Mark for the financial review.

Thank you, Brett. Good afternoon, ladies and gentlemen. I do understand that we have a number of folks joining us on the webcast this afternoon from our various European geographies. So if you don't mind, I'd like to greet our Swiss friends [Foreign Language] to our Polish friends, [Foreign Language] and to our friends from Ireland and Leo, please excuse my dialect, it's not what it should be. But [Foreign Language] to all of you. Before I ask to turn the slide, I just would also like to point out, Kerry has chosen for us a great image on the left-hand side of my presentation. It's actually taken in Switzerland. Our partnership with petro-convenience operator, Avia. But what I actually want to highlight to you is -- and for those of you that don't read any German like I don't, but the messaging on that vehicle is actually in German and refers to the fact that, that is a hydrogen-powered vehicle, one of our fleets of trial vehicles that we are working with in Switzerland. So great for our ESG expansion work. Again, before I ask to turn the slide, I'd also like to just make a couple of comments on the results, if you like, these are my Gauteng policy notes in advance. Most importantly, and I guess to allow you, there's going to be no frustrating Gauteng standards in these results. There have been no new standards implemented in this period. The IFRS 16 leases are now solidly entrenched in the base. So I will not be adjusting for IFRS 16 as we've done in the past. The impact of IFRS 16 in this period is a very small increase in profits as a result of some of the lease modifications. The second matter, which I know is frustrated a number of folks over the years, is that we will not be disclosing or calculating any form of normalized earnings. I'll remind that in years past, we used to adjust for the financial liability Gauteng for the minority buyouts. Fortunately, those were all settled in FY '21. So there's been no need for any further, I know that as our Chairman refers to it, Gauteng confusion, but there's been no necessity for any normalization. And then thirdly, I think it's also appropriate that we are not going to be presenting any results today in a format that adjusts for Poland. The Polish business is part of our group. It is in the base and we will be reporting our performance against the improved result. So with that, if I could ask to turn the slide. Brett has largely covered or touched on our salient features, so let me just refresh some of the detail. Our turnover, growing by some 5.2% to ZAR 67.6 billion, what is actually very impressive about that is that it's been led by the South African business, which has largely been slowed in the previous year, but we see a normalization starting to kick back in. And unfortunately, the European business is off to some very, very strong pandemic impacts. And influences on their business in this period have been the region of our business that has actually slowed. Gross profits, ZAR 8 billion. In fact, a decimal point on the gross margin has, in rounded terms, 11.9%, 11.8%. There's a very, very small impact there. And considering the regional effects, considering the turnover or sales mix effects that have influenced our performance over the 6-month period, a phenomenal result to actually hold margins as consistent as that. Operating margins have increased ever so slightly by 0.05% and will impact some of the components. Profit after tax grows by 4.1% to just under ZAR 11.2 billion (sic) [ ZAR 1.2 billion ]. Earnings per share, and I need to highlight this, is actually declining by 1.8%. There is a significant impact on our earnings per share attributable to ordinary shareholders in that a year ago, our Polish business had a minority interest. We had partners in our venture into Poland. So consequentially, in the Gauteng, the partner picked up their attributable share of the losses. We have bought out those partners, so we now carry the full Polish loss in our consolidated results and that is effectively why you see the profit after tax reducing. Fortunately, the headline earnings bounces back to 3.5%, ZAR 642.6 per share, and the diluted headline earnings just slightly up on that. Brett has alluded to the dividend per share at ZAR 1.75, and I will unpack that in more detail in the slides to follow. And the net asset value growing by some 10.4%. Please turn the slide. We provide for information, just the key regional metrics of our business across our 4 geographies. I'm not going to unpack each of the regions for you other than to very broadly say the South African business is now generating some 66% of the total turnover or total revenue from sale of merchandise. That has seen the European businesses decline ever so slightly, and I think we'll unpack those when we talk to turnover specifically. But again, just to give you a sense across our 4 geographies of the gross profit performance, you can see that the European businesses are significantly higher than the South African core business largely because of their exposure to higher-margin components like the hospitality and the food service business. And then there is a large exposure to corporate retail in both the Irish business, the Swiss and, to a lesser degree, the Polish business. The indication of the profits by pre- and post-tax. And then on the right-hand side, just before the group number, you can see that the Polish business, albeit showing an improvement in its profit performance for the period by some just under 20% on this comparative period incurring losses of just over ZAR 183 million. And then just again for information, we provide you the details by segment of the various geographical contributions to the overall performance. If we could turn the slide, we could probably spend most of the afternoon talking about the turnover of the business. There have been an incredible number of impacts on, not just the overall business, but also the various regions. So I'll try and keep it concise and try and provide you the key themes or the key headlines. So if we start in South Africa, Brett has alluded to the increase in our core business. It's positive to see that, that has grown by 4.6% to just over ZAR 33 billion for the 6-month period. But again, there were some extreme outliers in that number. We saw our core grocery business grow by 8.5%. We saw a bounce back in our cigarette business, a category that we believe was really decimated by the pandemic. But cigarettes growing by just over 5%, perhaps not material, but significant in its recovery. Converse to that, we've got the perishable section of our business, which performed exceptionally well during the initial COVID lockdowns, but perishables growing by some 3%. So if you can gauge, fairly wide range of overall category performances. Our liquor business, against the base of restriction and large trading bands, growing by some 41.6%. We lost a substantial number of days in the base. We were very fortunate that the restrictions were lifted in late September, early October of 2021. So we were able to trade uninterruptedly for the full 6-month period and hence, the exceptionally strong performance in our liquor business. And I think it's positive to look at the SPAR and TOPS combined, the figure on the slide in bracket or in the little box, because I think it gives a sense of how our retailers will be competing, albeit that these are wholesale numbers, that combined number of some 8.5% clearly illustrative of the fact that we are now performing strongly back in the market, albeit that it is a wholesale number. I think just by reference, a year ago, it was very difficult to actually present these numbers because the combined SPAR and TOPS business for the 6-month comparative period, it only increased by 0.2%. So I think an indication of how strong that recovery has been as life in South Africa has normalized over the last year. Build it, still in positive territory. I think we've guided previously that we expected the Build it business to slow. I think the extraordinary base effect of how Build it performance was really bolstered as we came out of lockdown people investing in their homes, a lot of home improvement being done. But not to say it was only home improvement, there was lot of a building that was taking place as well. A year ago, for a comparative, Build it had grown by 26%. So the fact that it remains in positive territory when the industry is going negative, I think also speaks volumes of our Build it team and our retailers. So the South African business growing by some 7.7%. The other 2 subsidiary businesses in South Africa, our pharmaceutical wholesale business, a solid 6.8% driven off their strip wise or specialty strip business. So to Jeremy and the team, another strong result. And then the Encore business, and this is not a true reflection because the turnover figures represented here is after adjusting for the business that they do with SPAR, so this is third-party business reflecting a slight decline. And again, representative of this business still suffering a number of their suppliers that had been closed or disrupted following the July looting effects in South Africa. So Southern Africa growing by some consolidated 7.6%. The Irish business in ZAR terms are up 2.9%, but that's very unfair on that business. And the FX effect is quite dramatic. Because in euro terms, that business grew by 8.3%, a very, very strong number. As we see the COVID restrictions easing, we see the bounce back of food service and the hospitality sector in Ireland. And license trade, following suit, very, very strong attractions for consumers now to no longer consume at home. And we have seen correspondingly the retail brands decline in the strong growth that they've posted a year ago, but still all as a group remaining in positive growth. So very strong overall Irish performance in local currency terms. The Swiss business, I guess, a disappointment for a lot of folks that the Swiss business did turn negative. A year ago, I remind that this business was up over 11%. And I think if we consider that the net effect over the 2 years is still almost a double-digit growth is a phenomenal new base for this business. The effect of the period sees the Cash & Carry business bounce back positive. Hospitality is reopening. The restauranting in Switzerland is slowly reopening. And we did expect the slowdown in our wholesale business, it wasn't exactly matched by the retail element. And as you can see in Swiss terms, just under 2% down, but a solid overall performance by this business off its base. The Polish business, in zloty terms, a solid 6.5%. And again, disappointing when you adjust for the foreign exchange translation, suggesting that the Polish business is actually negative top line performance when, in fact, in local currency grew by some 6.5%. There has been a sharp increase in wholesale in Poland. That's up over 9%. And that's shown off the base of a loyalty increase. We are still driving loyalty. It is still slow, but there has been some loyalty gains. And offsetting against that wholesale performance, a decline in retail as we have continued to either sell or close certain of the corporately-owned retail stores in Poland. So the total group growing after taking all of that into account by some 5.2%. FX influencing our foreign businesses and unfairly presenting their numbers in rands. And I say it fair to the extent that I think a great deal of very, very good work has been done by our teams in Europe, and it doesn't reflect when you adjust the foreign exchange. But let's move on. So if we could turn the slide. What we have presented for you on the next slide is just the regional split or the regional contribution of the various geographies, the South African business increasing slightly to 66%. That's the red portion of your pie chart. The Irish business is represented in green, slightly down from a year ago, but still 22%, a solid contribution to the group. The Swiss business, as we intimated earlier, a decline result for the period, but just over 10%. And in ZAR terms, the Polish business roughly in line with where they were to go contributing 2%. If we could turn the slide. Our guess at the moment, something that is very topical to a lot of people, not just in South Africa but across the European global markets is inflation. What we presented on this slide is just some insights and, firstly, what we have or have reported in the South African business and just some insights into our European geographies as well. You can see the core SPAR grocery business, and this is at wholesale. I just need to make the point that the core wholesale business growing or showing inflation of some 5%, slightly down, interesting enough on where they were a year ago. Liquor at 3.9%. And I think that is also a representative of a more normalized liquor market. And Build it, still showing some fairly strong 5.8% inflation trends over the 6-month period. I do ever need to make the point because these numbers might surprise, to one extent, on the upside against certain other peer reportings, and I just need to make the point that these are wholesale numbers. The retail numbers can be substantially impacted by the extent of promotional activity and also retail sales mix. But on the other hand, I think there is an expectation that there is a very significant increase in inflation being experienced in South Africa. So against that backdrop, let me just guide that. In the month of March, our core SPAR business showed an increase of inflation for the month of 5.9%. In April, that had already increased to 6.9%. And in May, that number was even higher at just under 7.5%. So very definitely, we are seeing significant inflationary pressure in the South African environment. And I think as we are all aware, that remains a real challenge for us going forward. Below that, we have provided some insights into what inflation experiences in Europe at the moment, significant in the Irish business. In fact, significant across Europe, there is very sharp increases in inflation. So the Irish are reporting alcohol in the back of over 7%, core food at plus 3%. Now I think you need to put this into context that as the South Africans on the call, those numbers might be what we are standardly expecting. But I think you need to just put it into context against a year ago when food inflation in Ireland was 0. It was not an event at all. And we are seeing dramatic spikes in inflation of food stuffs in the European market. The outlook looking forward, interestingly enough, from trading economics looks a little on the soft side at 3.1%. But I think there is an expectation that inflation will start declining towards the latter half of the year. By comparison, the Swiss appeared to be a little bit more resilient than most in Europe. The number is still relatively benign. But I think it's fair to say that even at a 1% increase, that is fairly significant in a market that's used to 0 inflation. And by comparison, Poland is seeing probably the most significant inflation, double-digit numbers coming through in that market. The expectation that inflation will fall back to, I say fall back to 6% might be the cause of some raised eyebrows considering what is actually happening in the country at the moment. But again, those are official projections looking forward. So just to give you some color on the inflationary aspect that is facing retail and wholesale across all our geographies. We will turn the slide, please. Just talking to the gross margins and what we've done is just given you some insights and color into the various regions. The core South African business, gross margin down by roughly 0.2%, and that is fundamentally a sales mix change. As liquor has grown as significantly as we've just shown on the turnover slides, our liquor business trades at between 6% and 6.25%, so down on the circa 9s. So that will have a dilutionary effect. Offsetting that is the fact that building materials or Build it trades fundamentally on a drop-shipment basis in South Africa. And we make only a commission of circa 4% to 4.5% on building materials. So the net offset of those has been that slight dilution. The pharmaceutical business, very consistent, 8.9%. The Encore business, as a result of some product mix change, again, fairly consistent. If we look to the Irish business, we have seen that margin change, and I need to make the point that, that is significantly a mix change as food service has driven the increased contribution there. It is a category that we trade at -- to a higher margin on. And then in addition, we are seeing the impulse categories, the confectioneries and soft drinks as consumers venture back into the convenience space also driving that up. Switzerland showing a mix change as well. And unfortunately, this does sound like an Gauteng default to use the expression mix, but I think it is very, very real of what we are seeing in all of our geographies. Retail in Switzerland showing a higher contribution. The petro-convenience stores are driving that number up, albeit by 0.7%. And then the Polish number actually increasing quite positively, and we're quite comfortable with that number. That is not so much a profiteering number. That is very much a supplier-contributed improved terms number. We are getting to grips with our supplier negotiations in Poland as the business settles. And obviously, that has been allowed to improve that. But I think it's also fair to talk to an improved front margin or an improved retail margin that we're also achieving in that business. I think against the backdrop of all of those mix changes, all of those significant changes that are taking place against the geographies, I think you start appreciating how consolidated group number, which is literally a decile point against a year ago, is actually a significant performance. So congratulations to the business, if I may, on that outcome. Right, if you can turn the slide, let's get into some of the costs of the business. Again, this is rather a busy slide. I'm just going to pick out the expense growth. So really just talking to the right-hand side, the detail by segment and also the -- for illustration purposes, their expense ratio to sales is for information. But against the right-hand side, the South African business saw an increase in cost of just on 8.2%. At face value, somewhat disappointing if you consider that the South African revenue growth or turnover growth was slightly down on that. But I think it also speaks to the rising cost pressures that we are facing in this country. But just to highlight some of the key players in that. In the note at the bottom, we have seen a significant increase in South Africa and IT costs, all largely linked to the SAP project. There are operational costs which will not be capitalized as part of that SAP build, so largely driving IT costs up by more than 30%. In addition, our marketing costs have increased by in excess of 50% in this period. Some of that is timing because of investment in the Easter holidays. There were some competition spent -- competition spend that took place slightly earlier, but again, a significant and positive investment. And then I guess the inflationary pressure starts coming on fuel where we've seen our diesel costs increased by in excess of 40%. We've seen our truck hire cost. We haven't noted this, but we've seen truck hire increase by more than 30%. And that also speaks to the increased volumes in our warehouse, particularly servicing the liquor growth. And our cross-border, which is the business that we do into neighboring South Africa or Southern Africa into the territories of Namibia, Botswana and Mozambique, those costs have increased by more than 13%, again, underpinned by fuel. So some significant major cost drivers. But against that, there has been a strong focus on mitigating cost, on managing costs. And I think the one that, as a business, we've done rather well at over the period is keeping our labor cost below 5% despite the settlements that have been achieved, speaking to efficiency gains and speaking to managing productivity. If we move to Ireland in euro terms, that number up 16.9%. And again, you will see a very common theme coming through in our European businesses: wage inflation as a result of labor pressure; fuel and energy costs as a result of sharp spikes that are taking place in both of those aspects of the supply chain. And I think without trying to put the entire blame at the Ukrainian conflict, it's no doubt that what has taken place in the Ukraine has had a significant impact on fuel and both gas and the electricity cost in Europe. So significant impact on the Irish business. In ZAR terms, obviously, the FX mitigate somewhat against that. The Swiss business, up circa 10%. And again, underlying similar cost pressures. But in addition to that, the acquisition of the retail group that we made last year at the beginning of March, also now in the full 6-month base of this period is also skewing that number to some degree. It's not a like-for-like comparison. And then Poland, I think it's a complement to our Polish colleagues that they've actually managed to pressure their costs down by some 3.3%, and that is in local currency terms. So I think there is a very strong focus on managing and the profitability drive in that business. That was attributable to the disposal of certain loss-making stores in the period. And also, as we've referred to, as reducing the cost base. The disposal of retail stores will obviously reduce the cost base. But obviously, the whole emphasis in that region is on cost. If we can turn the slide, I've just included in the presentation just a very high-level view of finance income and finance cost for twofold. The first one is because these numbers against any of you that are modeling the business will be dramatically impacted by the IFRS 16, finance income or more importantly, finance cost element. And obviously, in the SPAR context, because we do have such a large proportion of our head leases sublet to corporate -- or to retailers, not corporate retailers, but to retailers, there is a recovery. So just for those of you that are analyzing the finance income and costs, you can get a sense of what the IFRS 16 contribution is to that. I think the other takeaway from this is in the previous years, we always had a finance cost element relating to the financial liabilities. That was the Gauteng for the minorities. That has now obviously disappeared. We've got a very small remaining balance for the very last amount, but fundamentally, that now removes. And then I guess in the middle of that page, you can see that there has been an increase in our finance costs as a result of our bank funding in South Africa. We have invested in stock, and that has caused us to increase overdrafts and there has been a cost to that. Right. If we can turn the page and really on the next 2 pages to follow. So let's just focus on the first one. We've just given you a sense of the foreign exchange effects, trading in the European market. Obviously, we're exposed to both the euro and the Swiss franc. So what we've done on this slide is giving you a side-by-side snapshot of how those 2 currencies have performed from October to March '21 and the corresponding current period from March '21 to March '22. But more importantly, and I guess at the bottom, what you can see is that in both of the years, the rand is actually weak -- sorry, the rand has strengthened against both of those currencies. And you can see it very clearly on the table at the bottom. From an income statement point of view, we've seen the exchange rate average in '22 strengthen to ZAR 17.49. A year ago, it was ZAR 18.41. Obviously, that doesn't have a very positive impact on the income statement for us. But on the converse side, the closing spot rate seeing the rand strengthen quite substantially. And we will see that when we look at the group's exposure to debt in particular. Similarly, adjacent to that, you've got the Swiss franc numbers. And interestingly enough, it's only the closing rate where the rand weakened ever so slightly. But again, throughout the period, the rand was, on average, quite strong against its corresponding period. And if we turn the slide, we've also just presented exactly the same information for our Polish business. It's a very interesting observation. On the right-hand chart, you can actually almost see the impact on that Ukrainian conflict or crisis in February of this year as the zloty against the rand or the zloty against the European currencies obviously reacted quite dramatically as you would expect with tensions that mounted in that region. And again, at the bottom, you can actually see that the average rate as a result of the rand strengthened. It's been quite significant, which is unusual because the zloty as a currency has been fairly constant for many, many years, and seeing this kind of volatility is actually rather unusual. So those 2 slides largely presented for information for anybody looking to understand the foreign exchange impact just visually over the 2 periods. If we can turn the slide, what we've then presented to you is just a comparative trading. The first slide is in rand terms. We also do present it on the following slide in local currency, but just to focus on rand. And what we've done on this slide is we've given you the last 3 quarters -- or sorry, the last 3 halves ended March, so March '20, March '21 and March '22 stacked on that basis. And the reason we've also wanted to illustrate this is just to show in some of those geographies the very meaningful growth of those businesses, albeit that in the most recent period, there might be some slowdown or some decline, but that of the base of effectively 3 years ago that those geographies are actually showing a new base almost as those businesses have grown. So the first slide, South Africa, as you can see, over the 3-year period cumulatively. And this is not compounded, but cumulatively, has just grown by some 10.9%. The Irish business growing by some 16% over that period in ZAR terms, and the Swiss business by a very strong 18%. I think most impressively near the bottom of the Polish business of some 31%. On the right-hand side, again, we do the exercise from an operating profit point of view to give you a sense. I think it probably would be fair to say that it would be more meaningful to look at these numbers in local currency. So if we could turn the slide, please. In local currency, I think it really dramatizes the extent of that growth. The Irish business turnover from 3 years ago growing by what is almost EUR 100 million, very, very strong performance. The Swiss business growing by some 9%, and that's almost their new base. Rob, just please take note. And then the Polish business, as much as that growth might not be at the trajectory that we had wanted, I think where that business was 3 years ago, we've seen a compound or a simple growth over the 3-year period of more than 30% and a very, very strong performance. But obviously, a long way to go and we acknowledge that. Operating profits, down the right-hand side. The Irish business over 3 years, operating profits growing in euro terms by 29%. The Swiss business and despite the fact that there might be some unhappiness or some negativity around their performance in the current period, I'd just remind that from an operating profit point of view, they have grown their operating profit by more than 80% against the base of 2020. And again, to the Swiss team, your new base is double digits. And then to the Polish team, yes, we are clawing back those losses. We have not yet broken even in that business. But considering the 3 years ago, we lost almost PLN 79 million in that area, now to be at minus PLN 44 million, that increase is a 44% improvement. And not for a second am I suggesting that we are satisfied with that, but we are making progress and improvements. If we can turn the slide, we start getting into the balance sheet part of this presentation. And again, I'm not going to unpack each of the geographies and each of the various asset types. But just to give you a sense of what the balance sheets of those various regions do look like. Third from the top, we've created a small grouping of what is effectively the IFRS 16 impacts, the right-of-use asset, the finance lease receivable, and that is in the context of subleasing that we do on some of those properties. On the right-hand side, you'll see that the combined quantum of that is some ZAR 12.6 million. And then right down at the bottom, you'll see the corresponding match to the extent that it is largely matched. We've got finance lease payables of some ZAR 12.3 billion. So that ZAR 12.6 million asset, offset largely by the corresponding liability. The goodwill figure of some ZAR 6.7 billion has increased specifically in South Africa because under the intangible asset section in South Africa, we would have added the work-in-progress investment on the SAP IT build. So that has increased the Southern African ZAR 1.6 billion intangible and goodwill figure. And then current assets, current liabilities at group level, largely in line as have been. Down at the bottom in the red box, and it just occurs to me that box wasn't put in red for any particular reason. It could have been in black. But just to highlight that the long-term borrowings of some ZAR 6.3 billion. And I think at this point, let's turn the slide and unpack that because there has been discussion in the past about the group debt. So what we have provided for you on the following slide is just a summary of the group debt. We highlight bank overdrafts and bank cash. But more specifically, just talking to total borrowings, the end of the current period, there were some ZAR 6.7 billion worth of ZAR-denominated total borrowings. ZAR 6.3 million of that was long term and some ZAR 460 million was short term. Against the corresponding period and perhaps if we just look to financial year end '21, i.e., in the last 6 months, when that number was some ZAR 7.6 billion, in fact, what you would then suggest is a ZAR 860 million reduction in total borrowings. And just for information, the capital repayment component of that was some ZAR 470 million. And the foreign exchange effect was ZAR 392 million. So as we've spoken previously, the exposure that we have on our debt is that it is largely European denominated. There's very, very small debt in South Africa. So as the currency fluctuates and as there is any volatility in currency, it can have impact on our borrowings. However, that is mitigated. I won't suggest it's hedged. But it is mitigated against the fact that those debts are ring-fenced in geographies and are serviced by those geographies. And down at the bottom, we are just providing for your information the analysis of that ZAR 6.7 billion worth of debt across the various geographies. And also just indicating that there have been repayments made in this period in accordance with the amortization schedules that are in place. If we could move on and turn the slide, we present to you the cash flow of the business. I guess the most significant is that the business generated some ZAR 1.9 billion worth of cash in the period, basically 1/3 of the way down after dealing with the working capital changes. The allocation of that cash was to pay taxation of roughly ZAR 450 million across the geographies, paid dividends to shareholders of just over ZAR 1 billion and then to invest some ZAR 750 million in capital expenditure. I'll focus on that in a wrap-up slide to follow. Further on, we've got the offsetting effect of lease receipts and lease payments. They do not contra exactly because, obviously, in our European geographies, we do have quite significant leased assets as part of our corporate asset base. Whereas in South Africa, those are largely head and subleases that match. And then as I've already touched on, the second to last line, net borrowings repaid, servicing some just under ZAR 500 million worth of both borrowings and also there's a number net of repayments, ZAR 700 million, and borrowings raised to ZAR 200 million. And that gives us the net cash outflow of some ZAR 1.7 billion against the comparative period where that outflow was some ZAR 2.5 billion. And I think, as I indicated earlier, the most significant is the healthy cash generated by the business from its operations. If we could turn the slide, we present exactly the same information, albeit slightly combined in what I guess you would refer to as the conventional waterfall graph, and that balances to the closing bank balance of the group at some ZAR 2.478 billion. Down the right-hand side, I've touched on the strong cash generation. The capital investment, specifically for SAP, just over ZAR 200 million; the business acquisitions, which were largely corporate stores across our geographies of just under ZAR 100 million; and the closing bank overdraft, for information. If we could turn the slide, I suggested I would just give some information on the group's capital expenditure. Under the headings of expand operations, some ZAR 570 million worth of spend in the period. And then to maintain operations, net of the proceeds of any disposals, ZAR 182 million. So the 3/4 of ZAR 1 billion, ZAR 751 million worth of investment in the business. Below that, we have the acquisitions. I've referred to retail stores in both SA and more strategically in the United Kingdom as part of the Appleby Group, some ZAR 95 million. And then there was a single store sold and, hence, the small proceeds. But I think if we just turn the slide, we can just unpack some of those perhaps from a more geographical basis. So if we would turn to capital expenditure continued, we provided the same analysis for you across our various geographies. In South Africa, I've referred to the investment in SAP and particularly trucking replacements. The Irish investment largely in plant and equipment and also some property. Switzerland has been largely retail as has Poland. And again, you can gauge -- you can take an assessment of where that has been spent. Just by way of guidance, the budget for the 2022 CapEx group spend was just on ZAR 2.5 billion. We are, at this point in time, comfortable that we will finish within that budget spend. And then the outlook for '23, just on ZAR 2.1 billion to ZAR 2.2 billion. If you would turn to the slide, usually, we felt the need to provide a dividend reconciliation fundamentally because of all the normalization adjustments that we did to headline earnings. Obviously, what this now illustrates is that there is no further adjustment. We are not adjusting for anything headline earnings as reported becomes the dividend base. That figure of ZAR 1.236 billion. The number of shares ranking for dividend, ZAR 192.4. And that then what is described as an adjusted headline earnings per share, in fact, is pure headline earnings per share of ZAR 6.426. As far as the dividend cover is concerned, the comparative period had a dividend cover of 2.17. It was a very conservative application in March 2021 because of the uncertainty that still existed. Our historical H1 or interim dividend cover has been 1.85, and then we adjust that in the final to reach the Board's 1.45 historical dividend. But I've used the 1.85 in recommending to the board the dividend cover. It actually mitigates, to some extent, against the dividend reduction. So if we use the revised cover that has been approved by the Board, of 3.62% of the base of 1.85 over the dividend that was declared and approved by the Board of ZAR 1.75 per share. And if we could turn the slide again and really just to wrap up the finance section of this afternoon's presentation, which you close on the salient features. Turnover of 5.2% to ZAR 67.6 billion. Gross margin, basically showing ever so slight increase, not improvement, but possibly increase largely as a result of mix. Holding the operating margin positively upward, albeit by perhaps 0.05%. Profit after tax, increasing by 4.1%. Headline earnings, a solid 3.5% and the dividend in accordance with the adjusted dividend policy. Before I hand back to Brett, if you would just once again allow me the opportunity to express my thanks and appreciation to our finance teams across all our geographies, to the Irish team, Jayden; to the Swiss team, Reto; in Poland, to Jakob and his team and in South Africa to all of our divisional finance directors. And then I guess it would be unfair of me not to recognize the team that holds the whole group together, to Mags, to Abby, to Nina, to Tiara, guys, fantastic effort once again, to all of you. So thank you for all the effort to allow us today to present these numbers as I've been able to do. Thank you very much. Brett, back to you.

Thank you, Mark. Delivered, Mark, the financial section in your usual detailed professional manner with even a bit of a human touch there, which I really like. So thanks, Mark. Turning to our operational strategic update. I'll now provide you with an update on each of our markets. So we're going to start with our European regions for a change. Looking at BWG Group, which is our business in Ireland and Southwest England, this team delivered another solid performance amid management changes and abnormal labor, fuel and energy cost pressure, some of which Mark has referenced earlier. Turnover was impressive, supported by our food services, which rebounded strongly after the fears of the Omicron variant subsided earlier this year and as pandemic-related restrictions were then eliminated. Retail have delivered an overall robust performance with Europe impacted by the shifts in in-home consumption to other channels as restrictions have lifted. Appleby with our business in Southwest England has delivered a solid performance, too, supported once again while the acquisition of a number of new stores adding 12 corporate stores during the period on a net basis. All things considered, our Swiss business has delivered a commendable performance. As expected, with pandemic restrictions being completely eliminated, support for local neighborhood stores has been less concentrated. However, the team is confident it will recover some lost ground over the summer months as we move into those now. The private label 3-tiered strategy with the #1 core and premium food product focus, which appeals to a range of consumer budgets, is gaining traction. In Switzerland, private label contributed just under 16% of our turnover for the period. The SSAG group of stores, which we referred to in the past, located on the Avia fuel courts, has contributed positively during the period. And these stores are in the process of being transferred to independent retailers as was always our plan. TopCC Cash & Carry business has made a strong recovery as restrictions have been lifted and restaurants reopened and Mark referenced that as well. This business remains very well positioned for the summer months. Turning now to Poland. So in Poland, we are making progress. We closed certain loss-making corporate stores during the period, and 10 new independent stores were opened, including the EUROSPAR that you see pics of on the slide that you can see in front of you. Retail loyalty for the retailers in the South of the country, which we referred to often in the past, has improved marginally to 31%, up from 30% since we last reported to you in January. During the period, 91 retailers in the South of the country were served notice on the existing contracts. These new contracts with minimum loyalty levels and increased rebate structures will become effective in July. We have guided breakeven in the month of December 2022. However, it's unlikely that we'll meet this target. We will provide an update when we have certainty on the outcome of the contract negotiations. Rationalization of our distribution centers have been a necessary step in reducing costs and creating efficiencies. We have bolstered our logistics expertise on the ground and have appointed a Managing Director and Logistics Director at our distribution center in Telit in the South. We remain very excited about the opportunity in the market, and we are encouraged by all of the efforts in country to reestablish the SPAR brand. In April this year, we hosted a group of Polish retailers for a look and learn, visited South Africa to experience our South African business from a distribution perspective as well as to observe our ability to provide leadership to convenience and supermarket retail. This trip was planned for 2 years ago. But unfortunately, with COVID, we couldn't accommodate the trip. But these retailers spent about a week here with us, and they're left feeling inspired and excited about their journey with SPAR ahead. So turning now to our Southern Africa business. Our core business has improved as daily activities have returned to normal. Liquor has rebounded very strongly. Unrestricted liquor trading has had a positive impact on our grocery stores, and case volumes for the period were up 4% against another growth of about 23.5% in the prior period. Build it has still delivered growth in the current period, which really is a commendable performance given the slowdown in home improvements as life returns to normal. The difference between SPAR retail turnover or total retail turnover growth and retail like-for-like growth is largely due to the number of stores that still remain closed as a result of the civil unrest experienced mainly in KZN and Gauteng last year in July. Our retailer loyalty for our core SPAR business remains strong. Relative to total growth, retail like-for-like growth across all categories is pleasing and obviously is a testimony to the health of our independent retailer base. We launched our new SPAR2U on-demand shopping app spot to you during the period. Our retailers are very enthusiastic to adopt the platform. And we are broadly on track to deliver the original, ambitious, targeted number of stores by year-end. 144 stores were upgraded during the period, which speaks to the business confidence and the willingness of our retailers to invest in the brand, understanding the importance of staying relevant and fresh for our consumers. The vertical integration of SPAR Encore into the business has been a strong move. This business assists us with driving overall house brand strategy and growth by managing the procurement, the packaging and distribution of products from independent manufacturers to our distribution centers. SPAR Encore and our own merchandising team are doing an excellent job of driving innovation through house brands. Our house brands continue to grow ahead of the business, growing some 5.3% to ZAR 8.1 billion, representing just over 24% of core turnover. This has been assisted by growth in home meal replacement. And within that, included within house brands, our SPAR private label turnover increased by 5.3% to ZAR 5.3 billion (sic) [ ZAR 8.1 billion ]. This is a good performance given that 3 of our private label suppliers still had factories closed for most of the period. Pleasingly, though, all 3 were back to full capacity in March 2022. And as a result of that, we are well placed for a strong second half. During the period under review, we refocused our attention in line with what our consumers are telling us with regard to our stores. While SPAR is a wholesale and logistics company, we pride ourselves on providing inspiration and innovation at retail by putting the consumer at the heart of what we do. Combining some external research with our own consumer feedback studies, the top 5 qualities consumers are looking for at supermarkets in no particular order are: quality of fresh product; quality of the fresh destinations; consistency; price and overall value for money; and lastly, but not least, store experience. With all of our consumers' priorities -- or top priorities in mind, we have reassessed the quality and taste of our fresh and convenience food products. We have completely refreshed the branding of our house brand fresh offering, including SPAR fresh line, bakery and grocery products. And we have launched a new range of convenience meals, all of which will be housed under the banner of our exciting new in-store concept called The Food Stall at SPAR. The Food Stall concept was launched during the period, and we have had very positive feedback from our retailers in embracing this new concept. Moving now to Build it. In 2020, our Build it materials business entered top spot as the #1 brand in Southern Africa by a measure -- turnover measure and has managed to retain this position to date. True to its brand essence of, 'Yes we can', the Build it team delivered commendable growth of 1.4%. This also includes the impact of 7 Build it stores, which were damaged during the civil unrest in July 2021 last year and remained closed at period end. On a 2-year basis, this business has delivered growth of just over 28%, which is really a phenomenal performance. Retail like-for-like turnover for the period increased by 3.1% and is tracking well ahead of industry peers. So turning now to our outlook, starting with SAP. The SAP rollout commences later this year. We have a CapEx budget of ZAR 1.8 billion over 2 years. For us, risk mitigation is key. Please note that this is a wholesale system implementation only. The retail implementation will be a separate excise all together, and we are currently exploring options for retail. We have adopted a phased approach that will be in place before going live. And we're in the quality assurance phase at the moment. We will not go live until we are completely satisfied with the quality. At a DC level, KZN is going first. One division at a time will ensure risk are mitigated appropriately. Training commenced during the period and is progressing well. This morning, we made some announcements about our leadership structure within the SPAR Group. Over the past 8 years, SPAR has grown from a South African company to an international group with 3 European operations as well as a joint venture in Sri Lanka. The group has evolved, but the leadership architecture hasn't. With that in mind, today, I've announced a new leadership structure effective the 1st of October 2022. From a strategy point of view, I will be focusing on group initiatives that require more of my attention, and we are appointing a new CEO for our Southern Africa or South Africa. This role will be assumed by Max Oliver, who currently runs our division in KwaZulu-Natal. Max has been with SPAR for 27 years. He has served as Logistics Director in both South Rand and KwaZulu-Natal. He was seconded to Ireland for 2 years to head up supply chain for BWG Foods in 2015 before being pulled back to South Africa and appointed as Managing Director of our division in KwaZulu-Natal. Our 6 regional managing directors and our Build it Managing Director will all report into Max. Max will drive strategic implementation in the regional distribution centers, providing greater agility and alignment across the regions. Today, we've also announced a new group executive function to drive greater collaboration and alignment across the group with dedicated executives looking or overlooking group strategy, information tech and ESG. In terms of our outlook by region, greater collaboration, cost reduction and driving efficiencies are key areas of focus for us in the group. In South Africa, we are in the quality assurance phase in preparation for the go-live date at KZN later this year. This is the necessary step in the digital transformation of the group, and we are well prepared for it. We will continue to expand the reach of our online offering, bringing consumers their favorite SPAR store online. Our new fresh offering and in-store concept was launched during the period, and we will drive this at retail in the months ahead. In Ireland and Southwest England, cost control projects continue with logistics, logistics staffing remaining a challenge. Irish food service and Cash & Carry businesses are well placed for growth post the pandemic. The Swiss team is focused on driving core wholesale growth and will convert the remaining SSAD stores to SPAR Express as well as transferring those stores or these stores to independents. The 3-tiered private label offering is progressing very well, and we will continue to drive this. In Poland, the coming weeks will involve finalizing the new contracts for the retailers in the South of the country, which will be a key part of us determining the next steps for the business. New business is also key to growth, and our retail operations team is driving new opportunities, including petro-convenience. The changes to the DC and the South of the country will be completed in the second half. With inflationary pressure facing consumers, we will drive exceptional value through our house brand offerings across all of our geographies and all of our divisions. In May this year, last month, I attended and presented at the SPAR International Congress in Amsterdam and also at the Build it convention at Sun City. And it really was special to be interacting with delegates from fellow member countries and our Build it retailers in person again. The return to what we call normal activity as COVID restrictions have been lifted is widely welcomed. SPAR is a people business. Freedom of movement and socialization are essential for relationship building across our communities. Our SPAR values and our SPAR culture help us to remain true to our purpose of inspiring people to do and be more. There is a great what we call push-pull dynamic between wholesale and retail. And now more than ever, we need to be enhancing collaboration and innovation to compete and win in what we do. The SPAR brand is embedded within the heart of its communities. We will continue to provide an excellent service to our independent retailers and to make a difference within the communities that we serve. So Mark, that was what we had from a presentation perspective. But obviously, we are available now to take some questions, and Kerry is going to be posing those questions to Mark and I.

Good afternoon, everyone. The first question, SPAR has been slow to move into the online food delivery space. How is the pilot store doing in Johannesburg was [ far ] to you?

So quite right, we launched our pilot store 1 month or 2 ago. We were in 2 stores at the moment in Johannesburg. The initial phase of the pilot was very successful. In fact, the basket -- the basket size that we enjoyed through the online shopping app was 3x the standard basket in the store. So really a strong result coming out of the pilot. Great excitement and enthusiasm across our different regions. And we're starting to scale up rapidly now. And again, we remain broadly on target to reach our ambitious target by year-end in terms of number of stores, which will be offering our online solution.

What is the target percentage of total stores offering deliveries?

That's hard to say because what we've said is we're inviting retailers to be part of the solution. And there's a very strict list of criteria, which they need to comply with and abide by in terms of them being part of our solution only because of the disciplines required at retail and what we are expecting from an image -- brand image perspective, disciplines in store and the like. So we think we can probably get to somewhere between around about 150, 200 stores that would be SPAR stores in the not-too-distant future.

Could you please discuss the impact on the business of high fuel prices?

We can certainly do that. So obviously, as we -- as Mark and I have mentioned in our presentation, the fuel pricing is affecting our businesses across all of the geographies. In South Africa, Mark touched on the diesel price -- diesel expense increasing by some 40%. Part of that, interesting enough, is actually as a result of the load shedding. So the high fuel pricing affecting our delivery fleet, our volumes are up 4%, so certainly, more deliveries to stores. What we try and do in this particular instance is we try -- and we can do this because most of our costs are in our distribution centers are pretty much fixed. But we have one of the costs, obviously, which is variable is fuel. We engage with our retailers from a delivery frequency perspective and also with our suppliers, where we've done a lot of work in the last few years with regard to one-way deliveries and backhauls. And that we're just trying to ramp up our efforts in that space because obviously, we can only mitigate the price of -- the increase in fuel through reduced deliveries or sharing of some of the savings on the inward-outbound [ lease ].

How are you mitigating risks of looting, violence and lawlessness in South Africa?

So what we've done in the past few years is we had a couple of initiatives at play. We have -- all of our distribution centers in South Africa, we have retail risk teams in place, which work closely with the Consumer Goods Council risk initiative and also with the local authorities from a law perspective or a SAP perspective. We also have engaged in a spot -- in an involvement with a public-private partnership in KwaZulu-Natal specifically where there's a lot of work being done by an organization with regard to intelligence gathering and keeping in sync with or in tune with the local authority so that we are as far as possible of receiving advanced notice of any suspected or planned uprisings or action. We've had 1 or 2 of those more recently, which we've been able to be prepared for, nothing like we saw last year in July. But we have certainly ramped up our efforts in terms of trying to be more prepared for any such incident going forward.

Are you starting to see signs of strain in the consumer? Have shopping patterns changed?

I think we're all concerned about the SA consumer with what we're seeing inflation numbers coming through. And some of the inflation figures we're seeing on food prices in basic commodities are significant. For instance, cooking oil, up 60%. Maize, up 20%. Wheats, flour, up 30%. So certainly, the gas consumer in the lower end of the market really under pressure with those kind of prices coming through. On top of that, the price of fuel, obviously, and that impact on their own transport. So I think every one in South Africa is concerned about that consumer. And we just need to be sharp in terms of our promotional activity and our drive into the private label space, which we've touched on earlier today when we talk about our private label growing ahead of the rest of our business or Encore business. Because the private label, especially the SPAR brand really presents our consumers with a top quality offering at a reduced price. So certainly, for us, our weighted promotional activity drive in the fresh space, quality product and in our private label. That's what we're trying to do. Also, what we have done in our distribution centers is we have made some investment in stock. We're carrying additional stock in our DCs, all of our DCs, in fact, to try and as far as possible where we can try and mitigate against some of the price increases coming through. So hold some prices and try and offer some deals out to the market to offset some of the effects of the inflation that we're seeing.

And following on from that, how is the acceleration in inflation into April and May '22 impacted volumes in South Africa and the consumers' appetite to absorb?

At this stage, post first year -- post half year, we are seeing the same. The trends are broadly in line with where they were in the second -- in the latter part of our H1 performance. So we haven't seen an impact on volumes, a significant impact on volumes as a result of the inflation, which Mark referred to earlier, which is definitely picked up post the end of March.

Next question. We have seen a big focus on investment in online grocery from your competitors. Is this a significant risk for you? Or do you think you can compete with a similar offering?

We always said that our offering in SPAR would need to be a little different because of our independent retailer model. We've designed what we call a shared value ecosystem, which is a bit more complex because we're dealing with, obviously, individually owned stores. And we had to win it, design and build the model, we needed to take that into account. We believe that we have with our tagline of your favorite SPAR now online, we believe that we can compete with the competitors in the marketplace. But we've acknowledged that we needed to get to a situation where we have scale and the ability to market the offering, and we believe we'll be in that space towards the second half of this calendar year.

Next question, how is retailer loyalty in Poland trended post period end?

The retail loyalty is more or less in line with where it was at the end of March as reported the 31% that we referred to earlier.

Okay. Next question is on Build it. With growth of 1.4%, is this a reflection of a further cooling in the so-called homebody economy as more people go back to work in the office?

We believe that's the case. And I think what needs to see, as we, both Mark and I have referenced, needs to see that performance over a 2-year period. So 1.4% doesn't sound like a great performance. But coming off actually 2 years part of that of extremely high level of growth. And we also need to see that 1.4% against the competitors in the market, and that number is well ahead of our competitors.

Brett, can I just add to the short -- just in response to that question, just to make it very clear that the Build it growth hasn't really been in the DIY space. Build it predominant business model is supplying basic home building materials. So as much as there has been a great increase attributable to, as we refer to the home improvements, in the early phases of the pandemic, Build it actually experienced quite a lot of investment by consumers in their properties by actually building on, so additional rooms, additional space. It's not just the so-called redecoration aspect, which a number of other retailers would have spoken to. So interesting enough, Build it have actually seen a decline in categories like cement, which you wouldn't expect if it was just purely DIY. So I think it's a balance between the 2. I think it's not just purely DIY reduction.

Thank you. With respect to South African employment costs, how should we think about H2 in the context of an environment where general inflation, including your own in the early months is running much higher than the 3% in H1?

I think, obviously, the issue that we do face going into H2 is the fact that in a unionized environment we are facing wage negotiations. We have not yet commenced those negotiations, albeit that there have been some initial indications from the union as to expectations. So in the weeks ahead, we will formally enter into negotiations. And I guess to answer the question, it's going to largely depend on that outcome. The expectation of CPI-like inflation numbers when there's this dramatic increase in pressure will obviously drive the narrative of that conversation or those negotiations. And I guess, like any employer in South Africa, we would like to ensure that our staff are being paid in line with at least to match inflation, but at the same time, it's a cost element of our business that we need to mitigate against. So we structure our wages around efficiencies and opportunities for staff to maximize earnings through productivity schemes and incentive schemes. But it's going to be, I'm sure, like a lot of other employers in South Africa, a period of tough negotiations, as you would expect. I expect that wages will be inflationary increased over the next 6 months. We will only implement those settlement arrangements towards the latter half of the financial year. So it will really roll into the '23 financial year.

What are the milestones that you are used to determine whether to pursue Poland or to exit the territory? And what is the total exposure to Poland in terms of investment to date and guarantees that are being provided?

I think I'll answer the first part of the question and ask Mark to talk to the investments. So for us, this period that we're in until the end of June when we have finality on the new contract negotiations with the retailers in the South is critical for us. At the end of June, we'll have a good feel for how many of our -- of the southern retailers will be remaining with SPAR. We have built a sophisticated forecasting model, which we will then use to -- with the retailers that we have with us. And then on top of that, build the new store rollout program, which we have planned, and use that forecasting model, which we will then assess on a quarterly basis as to our progress. I need to say it, too, though, that if you consider where we were 2 years ago or just over 2 years ago when we entered the market, what we've done and what we've built on the ground is actually phenomenal, given the pandemic, given the restrictions and given the latest challenge of the Ukrainian crisis, we have really come a long way. We acknowledge that we're not where we need to be, but we still believe strongly in that opportunity. So once we have these contracts finalized in the South and we build our model, we will track our progress against that on a quarterly basis and make judgment calls along the way.

To answer the second part of the question, the Polish business has got just over EUR 100 million of debt structure. That is structured between term debt and working capital facilities or revolving credit facilities. The split between the 2 is approximately EUR 65 million of term debt and the balance being working capital and/or revolving credit. The SPAR Group has stood parental security or guarantor for that full amount. As far as cash injections, we've only invested some EUR 4 million of equity into that business as part of the minority buyout. So effectively, our bankers have funded across 3 banks that EUR 105 million.

Next question, how's the Sri Lanka joint venture going?

It was going very well until -- obviously, we all know about the strife in the country itself. We were over there recently and remarkable what progress we've made. 10 stores open now. Our first independent retailer opened a small SPAR store and their rivals all at the airport. We broke even for the first time 1 month or 2 ago. But obviously, now with the country really under big pressure from a foreign currency perspective, lack of fuel, massive political upheaval. But we expect that to normalize in the medium term, and we'll get back on to our growth trajectory there. Although having said that, given that there's a lot of supply chain issues in Sri Lanka, our stores are performing exceptionally well because obviously, people need to eat and our retail offering is the best on the island. I've seen all of the stores that we have opened and some of the competitors, too. So we've really made our mark there, and we remain excited about the potential in Sri Lanka.

Concerns continue to exist in the market surrounding a rights issue. Please, could you provide some insight to the probability of this occurring?

Everybody is pointing at the FD. I can state categorically that the Board are not planning a rights issue or any equity play at this time.

Okay. Next question. Please let me know what percentage of stores are internally owned by the SPAR Group?

What percentage?

Yes.

In South Africa, we own 45 of just under 1,000 stores. So really, it's a very, very significant percentage in South Africa. In Ireland, more specifically in the U.K. subsidiary, there is a strategic focus on corporate store expansion. They've done exceptionally well through the groups that they've acquired. So that there is a far higher corporate ownership there. Brett alluded to some of the strategy in Poland and Switzerland to on-sell to independents. So the percentages in Continental Europe have reduced. But in South Africa, we own 45 of just under 1,000 stores in significant percentage.

The PSB exponential growth in vouchers sold over the networks that have traditionally sold airtime, what trends are you observing? And how important have these income streams become the SPAR and the franchisees?

I think that the whole area of value-added services or products that are sold in line in our stores, be they vouchers, be they airtime tickets is an increasing category in our stores. We are geared up for that. We've been for a while. And we expect that to continue to grow. So we are prepared for that. And most of our stores are offering various solutions or various products within that category.

Okay. Next question, what's the like-for-like volume growth for SA in this period?

4.5%.

In retail, 4.5%, yes, right. Sorry, if we consider from a retail perspective, like-for-like, 4.5%.

Okay. And what has been the impact on your business of the recent floods in KZN?

Fortunately for us, from a store perspective, very small. We were -- had a couple of stores affected, but they were up and trading within 24 hours. I think of greater concern, obviously, has been damaged to infrastructure and people -- and people's lives and livelihoods. But from a retail perspective, our own stores, very minimal destruction.

Okay. Next question. What are the loyalty rates in Poland of the wholesale business?

It's a function -- so in the Northern stores, the old Piotr i Pawel stores, our loyalty is about 65%. And then in the South, we have obviously a bit lower than that. But the total together would be in the region of 48% to 50%.

And when do you expect the Poland business to become profitable?

At this stage, until we have an outcome of those contract renegotiations that we referred to, we don't have a better outlook to share with you at this stage. Once we have finalization of those contracts, which will be at the end of June, early July, we'd be in a better position to put that number -- that target on the table, which we'll do when we next talk to the market.

A few more questions on Poland. In Poland, you mentioned 19 stores are closed, where these Piotr i Pawel stores? Was the intention not to convert these stores?

The stores that we closed, some of them were -- they're all Piotr i Pawel stores. But these are stores that we believe were not going to be profitable for us or for independent retailers going forward. So there were strategic decisions to close those stores.

Poland has been in the country to receive most of the Ukrainian refugees. What do you think the impact will be on the grocery sector?

The number of refugees have come across from Ukraine as is rightly stated. We don't know exactly what that number is. And there has been a positive impact on the grocery market in Poland. It's being felt more on the eastern side of the country and also in the discounters or the big box retailers, which is not really where our stores are positioned. So we are, as we all know, in the convenience sector of the market. We've obviously seen a small uptick but nothing significant.

Okay. And moving back to South Africa. What is the negative contribution from the civil unrest on core South African sales?

I think if the question is trying to notionally estimate how much revenue we've lost, I don't think we really want to try and speculate on that. I think as Brett has alluded to, we have some 23 SPAR and TOPS stores that remained closed. We were able to open a number of stores during this reporting period. But at the end of March 23, stores still remain closed. Unfortunately, within that number, there are a number of very big stores, which obviously has hurt our performance. And there are also some 7 Build it stores, which remain to open. So we prefer not to start speculating on notional upsides. Otherwise, you can start predicting any kind of number. As I say, we can talk to the number of stores, but they are significant, and we are looking forward to reopening those stores as soon as possible.

Can you talk to the Swiss revenue and operating expenses on a like-for-like basis?

We try and strip out SSAG. I don't have that information available. I'm happy if you ever has raised that question, you can contact me off-line. Obviously, the Swiss business in the current period is quite dramatically impacted. There are 60 of the Piotr i Pawel stores, which are either over the 6-month period, corporately owned or were in on franchise to retail. Whereas in the prior period, there were only 1. And at the same time, we've got moving effects of the Cash & Carry business. So rather than trying to speculate on like-for-like, I'll happily take the question offline.

What is SPAR plan for the ZAR 400 million short-term borrowings? And how does it plan to fund the CapEx of around ZAR 2 billion in the coming years?

The short-term borrowings will simply be settled in the various geographies. So that number is the factor largely attributable to the Irish and the Swiss. That is well managed within their cash flow, so there's no expected additional funding required to settle it. That's already been planned for as part of the budgeted cash outflows for the 2022 financial year. Kerry, if you'd repeat the second part of the question, please?

Actually, deleted the question.

The CapEx, funding of the CapEx.

Funding of the CapEx of ZAR 2 billion over the next 2 years.

Well, a large portion of that ZAR 2 billion spend is obviously attributable to the SAP implementation that we've already addressed to the market as far as the dividend adjustment goes. But I'll remind the audience that the SPAR Group, including all geographies, CapEx spend of circa ZAR 1.4 billion to ZAR 1.6 billion is fairly normal. We absorb it without too much disruption out of our normal operations. So there should be no need -- there's no extraordinary CapEx in that projection going forward other than SAP.

Thank you, Mark. What have trends been in key markets since period end?

Across all of our markets, we see the trajectory that we saw towards the end of the period being maintained. So no significant changes from what we saw towards the end of H1.

H2 2021 was heavily impacted by KZN rights. Does this provide a comparably weak base for the South African operations?

Definitely does, but how significant that would be, would be hard to say because those stores, we had circa 160-odd stores affected initially, but some of them got up and running quite quickly. And it was a staggered approach to those stores. So certainly, the base would definitely be affected, but it would be difficult to say exactly what that impact would be in 2022, but there will be a positive impact in KZN and also in Gauteng.

We strategically bought in inventories ahead of anticipated price increases. Do you envisage passing this on to your retailers? Or should we expect some stock profits in the profit ahead -- in the period ahead?

Typically, when we do that, we share the margin with our retailers. So we will -- we call that role. We will bind against price increase. We will make a bit of role and then allow retailers to do the same or pass on the pricing to consumers. So certainly for us, we would -- can expect to make a bit of role on those investments.

Next question, does management feel they have regained lost market share over the past 6 months?

In South Africa, we certainly believe that on our current performance on the core business side, we are definitely holding our own. And we gain share with you which we might have lost in the prior period. If you look at the strong liquor sales as well, certainly, we have done that.

What is the outlook on gross profit margins? And please, could you speak to the sustainability of the GP margins across the geographies? When could we expect improvements or pressure from these levels?

Interesting note, if you go back a year and look at where the gross profit was a year ago, when we made the acquisition into the Encore business, we spoke to gross margins in the -- particularly the Southern African region moving up from circa 9.2%, 9.3% to over 10%. So the fact that the Southern African region is largely holding its own against the 10%, I think is the base case going forward. I think the Irish business at 14% is obviously benefiting from some of the mix changes. Likewise, the Swiss business. The overall number coming out at 11.8%, 11.9%. I think to answer your question by geography or by category is a fairly extensive answer. The short-term version would say between 11.8% and 11.9% is where I think the market -- or our market should settle it.

I would like to see SPAR commenting more on problems in our society, e.g., correction, unemployment and violence. Do you believe you have a role to play?

We definitely do. And we were involved with in many forum for instance, on the Board of the Consumer Goods Council of South Africa. And there are some subcommittees within that, the one being the CGR, which is a consumer goods risk initiative. And then from a social investment perspective, we are actively involved, and we have a very strong end gender-based violence campaign, which you'll be aware of. And we encourage you to have a look at what -- how much work we've done, how much money we have spent in trying to deal with this horrific incidences in our country. So certainly, we have a role to play, and we are actively playing a role. Our Chairman, Graham Connor, is also involved in some local forums here in KZN. So certainly for us, we, as a big corporate, we need to be making our presence felt and we are doing that.

Do you hedge the fuel and currencies in hedging activities?

There's no hedging activity on fuel. And as far as currencies are concerned, because we don't have any of the foreign currency-denominated debt in South Africa, we don't have the opportunity to hedge against that. So no, we don't.

Okay. Have you seen any games in membership to the rewards loyalty program?

Yes, we definitely have. We've continued to onboard in the region of 100,000 new members per month. That's been the trajectory over the last couple of months and years. So certainly, we have people signing up all the time to become new rewards members.

And that's it for the -- on the questions front.

Okay. Thank you very much, Kerry. Thank you, Mark. So that's it from us. I think we really do appreciate you taking the time to join us today. All of the best to you all, and goodbye from us here at SPAR.