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

Good morning to all our stakeholders. Thank you for joining us for the presentation of the SPAR Group Limited's annual results for the financial year-ended 30 September 2024. My name is Angelo Swartz, Group CEO, and I'm delighted to present an overview of our performance, strategic progress and future outlook. Despite operating in a challenging environment, SPAR continues to deliver value to our stakeholders, driven by the resilience of our operating model and the commitment of our independent retailers. I'd also like to recognize the dedicated efforts of individuals across all our formats and regions whose significant contributions have led to the accomplishment of these results. Today, we will give you an update on our operational and financial performance as well as unpack the progress we have made against our stated key priorities. Joining me today will be Megan Pydigadu, Group COO; and Mark Godfrey, Group CFO. Let's start with an overview of our business. Our business model highlights the strong collaboration between wholesaler and retailer and how the relevance of SPAR within the communities it serves from farmers and suppliers we rely on to provide us with products to the independent retailers we service through our distribution centers to the end customer. SPAR Glance provides a snapshot of the company's operations across different regions, including Southern Africa, Ireland and Southwest England, Switzerland and our JV in Sri Lanka. Southern Africa is the biggest contributor to the group from a sales and profit perspective, followed by our operations in Ireland. In the year under review, we have navigated the challenging trading conditions with ongoing inflationary pressures in food, fuel and energy, though these slightly eased in some areas towards the end of the period. Cost of living challenges remain severe and geopolitical issues continue to impact our operating environment and consumer behavior. While some challenges were global, others were specific to individual regions. A few callouts. In SA, while the macroeconomic environment has remained tough for most of the year, consumer confidence index improved marginally in Q4, driven by more stable power supply, lower inflation and reduced fuel costs, benefiting lower and middle-income consumers. Retail growth in our business exceeded wholesale growth, demonstrating a big opportunity for our wholesale business to grow. The recent elections and changing government resulting in the formation of the GNU have brought optimism for the future with progressive policies expected to support ongoing economic growth. In Ireland and Southwest England, from an operator perspective, the minimum wage increases early in the year have had an impact on our cost base. Further, consumers continue to shift their buying patterns towards value-driven shopping. In Switzerland, consumers dealing with rising insurance premiums, medical levies and housing costs increasingly sought value at larger supermarkets and engaged in cross-border shopping. However, reduced inflationary pressures in food specifically is a positive for consumers. Turnover for the group's continuing operations increased by 4% to ZAR 152 billion, underpinned by Southern Africa and Ireland. Turnover growth slowed in the second half of the year, largely due to the ZAR translation impacts of the foreign subsidiaries as well as reducing levels of inflation across all regions and a slowdown in the SA trade. This remains a solid trading performance given the ongoing challenging conditions across all our operating environments. Operating profit was ZAR 2.9 billion, reflecting growth of 15.1%, primarily driven by the execution of our cost control initiatives, particularly in Southern Africa and Switzerland, which helped control operating cost growth. Our operating profit margin improved to 1.9% from 1.7% in FY '23. We generated ZAR 5.4 billion in cash, up 7.8% from the prior period. And our headline earnings per share stood at ZAR 9.17, a testament to the work put in to navigate economic pressures while managing profitability. We were happy with our return on invested capital achieved at 12.8%, particularly given the difficult period we have operated in. Stabilizing our balance sheet has been a key priority for us, and we were able to reduce group debt borrowings by ZAR 2 billion from ZAR 11.1 billion at 31 March 2024 to ZAR 9.1 billion as at 30 September 2024, resulting in a net debt-to-EBITDA ratio improving to 2.41x. From a nonfinancial perspective, we opened 179 stores across the group and have now rolled out SPAR2U to 525 sites in Southern Africa. A key focus remains on retailer loyalty. Retailer loyalty reported for the period was 78.7%, which reflects a decline of 1.2 percentage points down from FY '23, which was 79.9%, but importantly, an improvement of 0.66% since the last quarter due to our ongoing focus. Some of the recognition we have received this year includes a bronze award for our private label tiering project, an award for our 2024 Valentine's Day campaign and Gold and Silver Awards for excellence in packaging. On to the operational update, where we'll give you insights into our regional performance. The Southern African wholesale grocery business reported a turnover growth of 2.8% for the year-ending 30 September 2024 compared with the previous period. This performance was influenced by strong competitive activity and decreased retail loyalty due to SAP issues in KZN. While sales remain a key focus area for our teams, our SPAR Express and SaveMor formats continue to show robust growth alongside our liquor segment, which remains a vital contributor to SPAR's overall market position. Gross margins were impacted by challenges in KZN and increased competitor activity. However, KZN service levels now consistently exceed 90%, resulting in improved retailer loyalty in the region. Encore, our private label business delivered a solid performance in 2024 despite challenges in late 2023 related to reduced capacity for importing cargo, raw materials and packaging through the port. Private label growth was driven by the addition of a new bakery category, market share gains in key categories and preferential pricing initiatives on essential commodities. SPAR2U continues to gain traction, expanding its availability from 420 sites at half year to 525 sites with volumes increasing by 380% year-on-year. Additionally, wholesale cases rose by 3.1% from the previous year, reaching 230 million cases compared to 118 million cases in H1. SPAR South Africa has arrested market share declines from prior periods and achieved stabilization over the past year. Since February 2024, monthly market share according to Nielsen has either remained flat or grown year-on-year, particularly in the liquor segment, which continues to be a significant contributor to SPAR's overall market position. Here's a snapshot of our retail KPIs in Southern Africa. Footfall measured by total transactions rose by 7.7% for TOPS at SPAR and 0.5% for SPAR supermarkets, resulting in a combined increase of 0.6%. Average basket size grew by 4.2% with tops at SPAR up by 1.4% and SA Supermarkets up by 4.5%. Megan will now discuss performance in Build it and our pharmacy segments.

Good morning, everyone, and thanks, Ange. Our Build it business posted a solid performance given the tough economic conditions experienced throughout the year as well as having to deal with governance issues related to certain suppliers in our imports warehouse. At a wholesale level, we saw growth of 2.2%, which was slightly behind growth of 2.5% at a retail level. If we only look at our South African retail sales and exclude other static countries, we saw growth of 3.92% in South Africa, which is largely on par with inflation of 4% in the Build it business. Our gross profit margins remained resilient despite a very competitive market. The new leadership team has been focusing on engaging with retailers and managing our loyalty, which is in the region of 68% and very similar to the prior year. We have 400 stores, of which 40 went through revamps during the year. Post year-end, we have seen good positive momentum at a revenue level and attribute this to the 2 pot system. Our pharmacy business had a good year with a focus on consolidation and driving loyalty amongst our pharmacies. Overall, our pharmacy business grew turnover by 14.5%, which was off the back of strong performance in our wholesale and Scriptwise business. Our wholesale business posted double-digit growth of 10.1%. This was as a result of a focus on driving loyalty with our pharmacies who purchase from the wholesaler, which saw loyalty improving from 41% to 55% this year. We also saw excellent growth in our Scriptwise business of 18.4%. Our Scriptwise business manages high-value specialty medicines for high-risk patients on behalf of medical aids and doctors. We also have a training business, the Training Academy, where we train pharmacy assistants and train more than half the pharmacy assistants in South Africa. The pharmacy assistant program is transitioning from the previous FET-based training course to the occupation-based training course. We are looking at rolling out further training academies across the country with currently only one training academy in Gauteng. Looking forward, we are planning to expand our wholesaler nationally. We currently only have a wholesaler in Gauteng and are looking at KZN and the Western Cape for future expansion. With that, back to Ange.

Thank you for that, Meg. Our operations in Ireland showed strong growth despite inflation affecting consumers and increasing operating costs. This environment drove consumers towards own brands and private labels. Recent acquisitions have expanded our key areas, creating synergies and new customer channels with operational efficiency focusing on profit leverage. In Southwest England, major supermarkets entering the convenience sector affected volumes, leading to cost-cutting measures. Legislative changes in tobacco and vaping impacted sales, along with 2 minimum wage increases reducing profitability. In Switzerland, consumer purchasing preference driven by cost of living increases continue to affect volumes. Retailers observed a decline in core convenience departments, which is a strategic focus area along with the fresh food segment as they aim to mitigate the impacts of cross-border shopping. Improved profitability has been achieved through cost-saving initiatives, although a one-off actuarial valuation of long service awards impacted operating profit by approximately CHF 1.7 million. Regarding our JV with Ceylon Biscuits Limited. SPAR currently operates 27 stores in various formats, including 25 corporate retail stores in Sri Lanka. The business and consumer sentiment in this developing market is positive with strong double-digit growth year-on-year. Some of the key milestones this year include the successful transition to a new ERP system and the launch of the first SPAR SaveMor for independent retail store in March. The focus remains on leveraging local partnerships to expand our presence. Now I'll hand over to Mark, who will take us through a detailed financial review.

Thank you, Angelo, Megan. Ladies and gentlemen, good morning to you, and we released our results this morning, and it's going to be up to me to take you through those and perhaps add some color to the results that you received today. I'm going to start with our salient features. And just looking at the slide, I think the designers have immediately subliminally given us an indication that 2024 is definitely better than 2023, simply in the colors used. The very first line, turnover growing by 4% to ZAR 152.3 billion. And I'll pack the 4% because I'm sure there's going to be questions raised in some of your minds around the fact that at half year, we were 7.9%. That does suggest a slide in the second half of the year. Unfortunately, that was largely due to our foreign businesses, but I'll unpack that on the slide to come. We've included EBITDA in our salient feature because of the fact that there's so much focus on the debt structure of the business and also its ability to service that debt and EBITDA is a great proxy for that. As you can see, EBITDA just under ZAR 3.8 billion, growing by 14% in the period. Net of depreciation, our operating profit grew by some 15%, a sterling outcome considering that these exclude the Polish business and are really the results of our continuing operations. So operating profit at just under ZAR 2.9 billion at a margin level of 1.9%, and I'm sure that will flag some interest as well. And I can assure you that's not the margin that the group is satisfied with, and there's a lot of effort to drive that number back well over the 2% to 2.25% in the short term. Profit after tax, ZAR 1.6 billion, growing by 20% despite 11.1% rise in interest costs in the period. There were some benefits in our taxation charge, particularly out of the Irish business as a result of certain timing benefits that we enjoyed in this period. Headline earnings and earnings per share, both reporting double-digit growth, earnings per share of 24, headline earnings up 11.1%. And that really just speaks to the adjustments that we had in the prior period for impairments, but still double-digit growth in both of those categories. Our net borrowings actually declined from ZAR 10 billion to ZAR 9.1 billion. And in fact, this is the first time that you'll see a percentage change in negative that actually deserves a round of applause and really a solid contribution, particularly from our Irish colleagues who really drove down their cash holdings. In fact, they reversed their overdraft facilities and focus very much on their stock holdings in the period. So to Leo and the team, our heartfelt thanks. Our leverage ratio is another new introduction into the salient features, and we've added it because of the concerns around SPAR's covenants and particularly our relationship with our bankers, I can assure you that is very solid at the moment and a very impressive 2.41 for the period when general leverage covenants were set to 2.75. In fact, for the period, our bankers gave us a relaxation to 3. And through some very, very careful cash management over the last quarter, we actually report a number at 2.41%. Net asset value, a solid proxy for the underlying strength and value of the business growing by some 1.4%. But let's move into the income statement or profit and loss on a regional basis, just to give you a sense again of how the business is performing across the various geographies that we operate in. And again, I must just stop at this point and highlight the fact that perhaps sublimally, there's no real reason why Southern Africa should be in red. I guess the Irish claimed their national color. But if we start with the South African business, ZAR 95.9 billion, let's call it ZAR 96 billion worth of turnover, their margin at 9.5%, holding flat and operating profit in that business at some ZAR 1.5 billion. Therein lies the real opportunity for this business going forward, particularly coming out of the KZN business where we are still struggling to get that profitability back to a normal level. The expectation for the group is that Southern Africa will be back over 2% and move back towards its 2.25% targets in the very near future. Financing costs, a net ZAR 360 million resulted in the South African business posting a profit before taxation of ZAR 1.1 billion. If we move to the column adjacent to them, we talk to the Irish business in rand terms, ZAR 40.6 billion worth of turnover, a fantastic profit contribution of 15.2%, in fact, slightly up on where they were a year ago, about 10 basis points, speaking largely to mix changes in that business as their tobacco business has declined. But a very, very impressive operating margin. Almost need to remind Leo that 10 years ago, when we suggested the business could get to 2.5, he frowned us. But in fact, in this period, they reported just under 3, incredible performance from our Irish colleagues in a very tough trading market. Financing cost is just under ZAR 300 million. And in fact, that business reported a profit before tax of just over ZAR 900 million. The Swiss business, ZAR 15.7 billion worth of turnover, a business that is struggling in a very tough macro economy at the moment. Their margins at 18.3%, slightly up on where they were a period ago. Operating cost at 14.1%, and that business contributing some ZAR 217 million worth of profit at a margin of 1.4%. I just want to stop or pause for a second here very quickly and just point out that this business did take in this period a rather extraordinary provision for long service awards, which we introduced as part of a policy. Under the IAS 19 standard, they recognized some ZAR 34 million worth of charge in the period. If we give them the credit for that abnormal adjustment because it's largely extraordinary. If we do resize that business, the operating profit would have moved up closer to ZAR 1.6 billion would have been roughly in line with where they were a year ago. So the business really holding its own under the tough trading conditions. We've introduced at that stage, a subtotal being continuing operations. You can then balance that back to the income statement that we produced, the ZAR 152.3 million and profit after tax of some ZAR 1.6 billion. We've given you the full income statement of the Polish discontinued operation. I'll remind you that we have not consolidated Poland under the IFRS 5 rules, Poland is treated as a discontinued operation and an asset held for sale. What you will see on the face of the income statement is a single one line introduction being the loss of the Polish business of ZAR 1.3 billion. But the Polish business did achieve ZAR 2.9 billion worth of sales in ZAR terms at the gross margin of some 22%. We do just need to flag that included in those operating expenses are some ZAR 945 million worth of further impairments as we've written down the value to the sale arrangements. So the business has recognized those impairments. If we were to adjust that, the Polish business actually showed a marked improvement, albeit in a loss, but a marked improvement in their performance for the period. And then on the right-hand side, again, somewhat a notional number is the total group. And the number that you really will flag is that second from the bottom is the ZAR 351.9 million, which is the profit that we have reported for the period. If we move to the turnover, and I'm sure there will be a lot of interest in this slide. So let me just quickly unpack some of the key focus areas for us. The SPAR core business, which is our grocery business growing by some 2.8%. At half year, that number was 4%. So it definitely suggested a slowdown in the second 6 months. And that's largely attributable to a very tough consumer environment out there. It speaks to the fact that the KZN business has not recovered at the speed that we had expected it to, and there are definitely still some opportunities in our loyalty space to recover retailer business in that area. But it also speaks to a sliding inflationary environment as inflation has cooled off over the second 6 months. The TOPS business, I think you need to recognize is a really standout performance. A year ago, TOPS reported a flat turnover performance. In fact, it was down 0.1%. So growing at 9.4% is actually a phenomenal achievement considering the tough economy that we are struggling with, particularly in the South African environment. And I think we've said this before, but it speaks to the adage that no matter how tough it is in South Africa, there's always some spend available for alcohol. Not sure that, that's a comment we want to necessarily make with much positivity, but a strong performance. What is a standout in the category is how strong the Lidl business has been. And in fact, with some of our beer suppliers, we've reported record sales in this period. TOPS and SPAR is a proxy for the core business, and that grew by some 3.6%, albeit at wholesale. And then the Build it business is another number, which, to some extent, almost defies the expectation because of the tough building economy, there's very little structural development taking place. And in fact, our cement business is down by some 3.5% in the period. But despite that, Build it has clawed back from a substantially negative performance a year ago to report a positive growth of some 2.3%. And I think that is a great complement to what the Build it team have done, both at a wholesale level and also our Build it retailers because their retail performance is very much in line with that as well. So the South African business growing by some 3.5%. The S Buys business, the pharmaceutical business grew by some 14.5%. And once again, very strongly underpinned and supported by the Scriptwise business, that is the specialty drugging business that they are almost market leaders in and a very strong contribution from their wholesale business as well. So to Jeremy and the team, a great contribution and a great performance. So the Southern African business growing by some 3.7%. This is where, at this point, the real slowdown in the top line numbers are influenced because the Irish business, despite in rand terms growing by some 6.7%. I just remind that at half year, that number was 16% and the Swiss business in ZAR terms for the full year growing at minus 0.3%. At half year, that number was just under 9%. Now that doesn't speak to a local substantial collapse in performance. It speaks more to the strengthening of the currency over the last 6 months, which has quite significantly impacted the overall performance. On the right-hand side, we've added some notes, particularly relevant is the Irish business in euro terms grew by some 2.8% and that's a standout number in a very tough market, speaks very well to what Leo and the team have done, particularly in BWG Foods, where our turnover is up 5.7%. And that's also been very successfully impacted or supported by the recent acquisitions that they've made and consolidated into that business. The negative, unfortunately, is the U.K. subsidiary, which for the period actually reported a significant decline in performance, speaking to the United Kingdom's macro economy being under real pressure. And I guess it sounds like the finance team have run out of reasons when they suggest that it was also because of a shocking summer trading period where Appleby Westward down in the South West of England is heavily reliant on the tourist sector and the bad weather that they experienced over the summer months definitely didn't attract the shoppers. The Swiss business in Swiss franc terms grew negatively at minus 6%, a very, very tough market at the moment, a consumer that's really under severe stress, particularly in areas of utility costs, health insurance and the like and that is definitely, from our experience, seeing a cross-border shopping increase as consumers are looking for value in neighboring countries. But the overall performance of the group, plus 4%. We're just going to share very quickly some indicative inflation. I think our regional geographies require that you just get a sense of how inflation is impacting their business. Let's start with the right-hand side, the gray box, the Southern African business, our grocery business, inflation for this financial period measured at 6.1%. That number is falling dramatically. By the month of October, that was already under 3%, our liquor business declining as well from 6.4% to 4.5%. The 4.5% continues to decline, but I think that doesn't take anything away from the liquor business' overall performance. Build it has been roughly at similar levels, 4% to 5% inflation in that space. And the total South African business or Southern African business inherent in their top line performance is inflation of some 5.5%. The left-hand side is more the official numbers just to bench against how we perform. I particularly want to call out the Irish numbers. They've seen a substantial decline in food and nonalcoholic or in fact, even the alcoholic categories as well over the last year. But despite that, we are not seeing the elasticity of volume activity. What we are seeing is the consumer being far more cautious and far more careful in where they shop, and there's still a lot of focus on the discounters and the big box retailers attracting the average consumer. Switzerland has also seen a marked reduction or marked decline in their inflation. In fact, if you look at the Swiss numbers, from a South African perspective, you might frown at 3.8%. I think we would take 3.8% in this country. But in the context of Switzerland, those are quite significant numbers. But again, we've seen an improvement in those over the year. Moving on to the gross profits. And in fact, at face value, if you look at the slide, it actually looks rather boring. And I'm expecting to get a lot of backlash from our marketing and merchandise teams with that remark. But if you simply look at the 2 consecutive years, Southern Africa, flat at 9.5%. Ireland basically flat at 15.2%. The Swiss business showing a slight increase. And down at the bottom, it almost looks like a typo that a group of ZAR 152 billion worth of sales can actually hold their gross margin to within a second decimal of 11.9%. But in all honesty and with the greatest of sincerity, there is an incredible amount of work that goes into maintaining this performance at the wholesale level across all of our geographies. The gross profit in South Africa, despite being flat, has been significantly impacted by the loss of margin in the KZN distribution center. We are down roughly 40 basis points in that business alone. So there is a great opportunity to continue clawing that back. We have seen marked improvements over the last 2 months. The system enhancements are in place, and we expect that to very rapidly start normalizing. The Encore business was, in fact, the contributor to how we've managed to stabilize Southern Africa because their strong improvement, particularly in the category of house brands and private label has allowed us to maintain and manage that 9.5%. In the Irish business, there has been a mix move as tobacco has declined quite rapidly. There's been a move towards vaping, which is a very much lower margin category for us. But the offset against that has been the sharp increase in the sales performance of categories such as food, drinks and confectionery where there is margin upside for us. So well-managed margin performance overall and a slight improvement of 10 basis points. The Swiss business is really about managing rebates and focus on the improved margins in the Cash & Carry business and at retail. And as I say, it allows us to report a gross margin of 11.9% I've elected today to present to you the operating expenses from 2 perspectives: the first one by major categories, the second one by geography, just to give you a sense of how the various contributors or views of operating expenses actually influence the business. So from continuing operations, our warehouse and distribution business increased by 6.4% to just under ZAR 5.9 billion. That's across all 3 of the geographies. The big-ticket item in that, in fact, was the fuel and transport cost, which declined by 1.7%. And that is, firstly, the slowing volumes, but also the sharp decline in fuel prices that we are experiencing across all of the geographies, coming off some very, very high numbers, particularly in Europe over the last 2 years. Repairs and maintenance has been managed exceptionally well at roughly 1% and the energy costs continue to be a drain on our overall cost, particularly in the European businesses where they are still experiencing rather high energy costs. Marketing and selling costs growing by 9.5%. What might look like an oddity is that the narrative refers to a decline in the expense. But what we are seeing, particularly in this category is a shift. We're seeing a shift from conventional marketing in paper leaflets to more digitalized space. We're seeing a shift in the nature of our marketing operations as we move into the omnichannel space. We are seeing a more online investment, which is a people investment as opposed to a paper investment. And I think our marketing teams are in a very good space at the moment across all of the geographies. Admin and IT. In fact, IT probably needs to lead off the definition, actually is down, but our IT costs across the greater group, we still see a continued investment in IT spend. As the slide indicates, up 5%. We are focused particularly on the other areas of opportunity. And as indicated, a lot of focus on costs like travel, we've been able to enjoy quite a significant reduction. The impairment of assets is a single line item. And I'll just remind, this is at a continuing operations line. So this does not include the Polish business. Those are really small numbers in the current year and fundamentally related to the revaluation of the SPAR head office here in Pinetown and the adjacent property. So just a nominal impairment there. And then the line item we introduced below, some of you will remember, 3 years ago, there was a significant increase in our ECL or expected credit loss provision. That number continues to decline in the period, down some 36%. But I think what is just as impressive is if you factor in the bad debt cost, which is not included in this number, that ECL plus bad debt cost is actually down by some 50%. So I think it speaks well to the health of our retailer base. It also speaks well to us having recovered a lot of the issues that the business had experienced in previous years. And as I said, I'm presenting operating expenses from the second perspective, which is by geography. I think it's unfortunate the way that the number presents Ireland at some 6.1%. And I'll start there because it's probably the number that does jump out. But in truth, the Irish business have done an exceptional job on managing the cost. This number is largely influenced by the FX translation. In local currency terms, costs are up 2.2%. And I'll remind that's on the back of a substantial labor cost increase of 8.2%. Leo and the team have really focused on efficiencies, on optimizing cost. And I think it speaks volumes that they've managed to hold their operating costs at 2.2% with the top line growing at 2.8% and obviously generating a much improved operating margin. Moving back up to Southern Africa, 2.3%. I think that's a standout performance by Max Oliver and the South Africa team, a lot of focus on cost management in the South African business, not that the business has historically been, let's say, fat in the area of cost, but I think there's been a lot of focus on efficiencies and driving out operational effectivity. And even though we've seen an increase in employee costs, and I'll remind, I was talking earlier to the omnichannel and the investment in the marketing space, largely underpinning that number, we have seen sharp decreases in other areas of the business as we continue managing those costs. And then to finish up with the Swiss business in rand terms, plus 2.6%. In local currency, it actually decreased by 3.4%. There's been a lot of focus on people cost. And included in that number, again, I referenced the long service provision that we actually made of some ZAR 34 million. Had we adjusted for that, the true employee cost or normalized employee costs actually showed a reduction. And then there have been in this market, in particular, a strong focus on the reduction of marketing spend around the move from paper to digital. Let's move to below the operating line, so to speak, and just focus on our finance income and costs. So we present at the top half, a rather busy slide of finance income, giving you the breakdown of the various categories. And at an income level, largely flat, ZAR 600 million pays ZAR 577 million. The finance cost is where there is a sharp increase, particularly in the area of the bank overdraft. There's some ZAR 80 million worth of increase there. It speaks to in the South African business, an increase in the overdraft usage over the period, largely as a result of the support that was made to the Polish business. And there is a great deal of focus on cash flow management in the South African business, in fact, in all of our businesses going forward. Below this, we actually give you the same information by regional geography, just to give you a sense of how that is allocated. The big finance cost increase in Southern Africa going forward will be the fact that we will onboard and in fact, have already onboarded the Polish residual debt, and you can expect the finance cost in the Southern African business to increase quite sharply in the years ahead. The comment on the right-hand side, yes, there have been higher interest rates. They are prolonged, but they are declining, particularly in Europe, we are seeing quite a sharp decline in the various base rates, and in fact, South Africa recently has also started that downward trajectory. So the expectation is that financing costs don't necessarily in the SPAR's context need to be such a sharp increase. What we have reflected in the bottom right-hand side is just an indication of the average interest rates. And just to call out that the Southern Africa rate moving from 6.9% to 10.2% really just speaks to the fact that a year ago, the only debt that we had in the Southern African business were 2 mortgages where we had rates of under 7%. Going forward, the ZAR 2 billion worth of debt that we brought back by way of debt funding from South African lenders to service the Polish exit, that debt will be at a JIBAR rate of 2.5%. So the expectation is that the South African or Southern African debt will be more indicative at the 10% range. We provided an effective tax reconciliation just to highlight the continuing businesses tax performance in the period, 22.1%. The 2 standouts I just want to flag the most significant one is purely the tax differential, the effect of the foreign income tax rates for the geographies of Ireland and Switzerland, which are almost 50% lower than in South Africa. So that effect does dilute the overall tax rate at a group level. And then secondly, in the period, there were some exempt or nondeductible items. And in fact, those have given us the benefit of a further nearly 1%. Adding back the small impairments have also contributed as well. So the South African or the group, be group effective tax rate, 22.1%. I would guide that going forward, that number probably will move towards the 24 percentile range. There will always be that effective margin differential on the foreigns. We've just given you visually an impact of the currency. looking at the screen on your left-hand side, that's the last 12 months. Basically, the rand has been fairly stable against both currencies, the euro and the franc. Over the last quarter, in particular, we've seen a sharp strengthening of the rand. So on the one hand, it benefited the balance sheet valuation, in fact, yes, it did benefit the balance sheet valuations at year-end. But on the other hand, it has had an averaging effect on the income or costs over the year. The right-hand side graph just gives you a sense of the comparative year where we saw a sharp weakening of the rand all the way up to the levels that we closed at a year ago of some 20.6 and over 20 in the euro. What we've done is just provided you with the comparative trading of the various geographies, and these numbers are measured in ZAR terms, largely an illustrative version of the turnover and operating profit we've touched on previously. So if we look to the left-hand side, the turnover, you can see the green bar representing the current year. The Southern African business, it's rounded up to ZAR 96 billion, growing by some 3.7%. The Irish business growing in ZAR terms at ZAR 6.7 billion to just under ZAR 41 billion and the Swiss business at just on ZAR 16 billion, albeit slightly negative in ZAR terms. The right-hand side is the operating profit contribution. You can see the sharp increase of the Southern African business, up 20%, the Irish business 14.5% and the Swiss business, unfortunately, with that top line negative going negative at 8.1%. But I guess it's probably just as relevant to look at the European businesses in local currency. So again, the same information reported in both euros and Swiss francs. The Irish business growing their top line, as I've already mentioned, by 2.8%. The Swiss business, unfortunately, a negative 6.2%. And then operating profits, a very strong Irish contribution and a growth of 10.2% and the Swiss business, unfortunately, continuing to be negative, but there were some extraordinaries in the period. What we've done at this stage is just present you a visual of the Polish business, the discontinued operation. This is their performance for the last 12 months. As I mentioned, in ZAR terms, their revenue did grow by 3%. Unfortunately, in Polish zloty, it was a negative 6.7%, which was largely the consequence of the announcement we did have a number of retailers exit the banner and very tough trading in the uncertainty that, that business has been in. But the business is in good condition to be disposed of, and we are very positive that, that deal will take place very shortly. Gross margin up slightly. That was strongly managed in country. And the operating expense is, in fact, increasing in ZAR terms by some 3.7%. We've expressly removed the impairments, just to give you a sense that, in fact, the contribution or the loss of the business, in fact, has improved by nearly 40%. So there's been a lot of focus despite the fact that the business is going to be sold to try and ensure that the business that we sell is in a good state. And in fact, the team have done a great job holding the business over the last year. The next slide just gives you an indication of the extent of the discontinued operations influence on the cash flows. I'll remind that the discontinued operation is embedded in the cash flows. It is not represented. So the Polish business' cash flows will impact on the cash flow statement at a line item level. The operating loss of minus ZAR 1.1 billion, yes, the impairment was ZAR 945 million, we add that back, the net cash outflows for the Polish business from operating minus ZAR 359 million. Moving down, the big-ticket item really is the fact that there was a net repayment of their borrowings. And that before the end of the 30th of September, we actually settled the Polish term debt, utilizing the bridge facilities that our lenders had made available to us in South Africa. So we settled the ZAR 1.3 billion worth of the Polish debt, and that debt has now been moved on to the South African balance sheet. And down at the bottom, just for those of you that want to unpack the group's bank overdraft, we give you the split as at the end of September. The second presentation slide is really just the breakdown of IFRS reported discontinued operation. In fact, if you look at the statement of the balance sheet, you will see that we disclose both a discontinued asset and a discontinued liability by their very nature. That's the makeup. So under the discontinued operation asset, there's just over ZAR 1 billion. The big-ticket items really are their working capital, which will be disposed of and the lease receivable. And then secondly, the liabilities that we will not take responsibility for likewise, are their lease receivables and the trade payables. So just to give you a sense of what that business at a balance sheet level looks like at the 30th of September, you will see that the core fixed assets, property, right-of-use assets and also the goodwill have all been impaired to 0 as there will be no value obtained or received from those on disposal. To look at the group balance sheet, and again, under the colored headlines, we presented it to you in an abridged format. It's not intended to balance or cast in a vertical sense. We've just really flagged the most relevant or the big-ticket items for the various geographies. In the Southern African business, our property, plant and equipment valued at some ZAR 2.7 billion. The IFRS 16 assets, the right-of-use asset and the lease receivable, that refers to our sublease with our retailers. So roughly ZAR 4.9 billion goodwill on the South African balance sheet of ZAR 2.1 billion relating inherently to the Lowveld acquisition back in 2003 and then more recently to some of the retail stores. Current assets at ZAR 16.8 billion, current liabilities at ZAR 19.2 billion. And I just want to flag that included in the current liabilities is, in fact, the short-term debt raised to settle the Polish business. So that is not just trade debt that does include the short-term Polish funding, and that will be termed out in the next 3 months and converted into a short-term loan. Noncurrent liabilities on the South African balance sheet at this point in time really are just the lease liability, and there was a very small balance left on the mortgage bond. The Irish business, a similar level of property, plant and equipment. Obviously, asset base in Europe much higher than in South Africa. The Irish business do have a substantial goodwill and intangible asset valuation on their balance sheet through the acquisitions that they've made to date. That number has been very well tested for impairment by audit and the business, and we are very comfortable that, that number at ZAR 5.3 billion remains fairly valued and stated. The current assets at some ZAR 6.8 billion, current liabilities at ZAR 7.7 billion, again, speaking to the terms of credit and the fact that the business generally is always in that net credit liability position as our credit funding funds both the assets and the business. And then in their case, their debt borrowings at some ZAR 2.2 billion have been reduced substantially, as I referred to earlier, over the period, and they also hold quite a large IFRS 16 valuation. The Swiss business, ZAR 4.1 billion of assets, a very highly valued asset base, some very valuable assets in the Swiss business. Goodwill is a slightly lesser number. Current assets at ZAR 2.9 billion, liabilities at ZAR 2 billion. And again, in the Swiss business, we can see long-term borrowings at ZAR 2.8 billion with a similar lease liability of just under ZAR 4 billion. We've given you the Polish assets and the reason that those are included is those are largely cash and liquid assets that we are required to take over. So the ZAR 728 million for Poland really represents the bank overdraft or bank short-term funding, which will be settled out of the balance of the ZAR 2 billion from South Africa. Just to give you a sense and a breakdown of group net borrowings, as I mentioned, there has been a sharp decline in this, both over the last 6 months. Our trend in SPAR, particularly in Europe, is that at March, we generally see an increase in borrowings because we build up stock for the summer trading period. So a sharp decline of some ZAR 900 million from March. But I think if we look year-to-year, again, you see a decline, the first comment was ZAR 2 billion from March and ZAR 900 million from September to September. And I've already called out the contribution from our Irish team, but also the South African business made a great effort to manage their overdraft facility. So the business at the end of September, ZAR 9.1 billion worth of debt broken down geographically, if we take the total borrowings. And as you can see, the South African business now moves into the borrowing space. A year ago, ZAR 130 million worth of debt. It was a single mortgage, now some ZAR 1.3 billion. And likewise, the Polish business' debt appears to have been extinguished. It simply moved to Southern Africa. On the right-hand side, we've given you just indicatively the weighted average of the remainder of those debt structures. Southern Africa, 2.8. That's simply an indication of the conversion of the current bridging arrangements for the debt. The expectation is that, that will be converted into a roughly 3- to 5-year short-term loan. In Ireland, their facilities renew in December 2026, so roughly 2 years of that facility. The Swiss have got roughly 3 years on their debt. And obviously, the Polish debt is imminently to be settled. I think the overarching comment around the decline in the debt bottom right-hand speaks to we serviced all of the amorts during the period, both in the Swiss business and in the Irish business. There was a repayment of the Polish debt. And then likewise, the Irish managed to settle their entire RCF facilities at the end of September through the close and tight management of stock. We've also again included the leverage ratio simply because there was some concern about SPAR's covenants. We've actually gone so far as to give it to you by geography now. So if we start at a group level, I've already spoken to the fact that our debt-to-EBITDA ratio has actually been measured at 2.41% or 2.41x, a sharp improvement on where we were at interim of just over 3. And in fact, a year ago, we were just over 3 as well, 3.02. So have been a very well-managed business. And as the profitability of the business continues to improve going forward, that number will continue to improve and give a lot more comfort to our ability to service the debt and remove any concerns around SPAR's potential covenant breaches. Again, as I've indicated just to the right-hand side, we've given you the same calculation by geography, taking into account their debt. What is relevant is the very strong measure in the Irish business. And likewise, as South Africa takes on additional debt, the South African number will slowly increase towards 2 to 2.25 as that debt is taken on board. Just to focus on the cash flows for the period. And again, I'm not going to work through the entire document just to pick out some of the key focus areas. So cash flows from operating, ZAR 5.3 billion, a good improvement on where we were a year ago when it was just over ZAR 5 billion. The working capital movement does appear to be a sharp reversal, but it really just speaks to the measurement at a point in time. The 30th of September '24 was a Monday. The 30th of September '23 was a weekend. That does allow us to get some relief from trade payables. And obviously, that is indicative here a year ago, there was a sharp increase. This year, those payables were serviced. And likewise, we've seen a similar improvement in our receivables. Just running further down capital expenditure, an improvement of some ZAR 800 million. There's been a sharp focus on CapEx expenditure over the period and particularly in the European businesses, a small acquisition or acquisitions that were largely relating to a number of corporate stores that were acquired and a small wholesale business in Ireland. We focused and extracted for you just the IFRS 16 consequence, and that box refers to the capital elements, not the funding cost, but just to get a sense that IFRS 16 is impacting the cash flow and is measured for you in that way. And then the net borrowings repaid. In fact, this has been balanced to a cash movement. So that refers to the repayment of the Polish debt. Obviously, that was funded by raising a corresponding amount of liability in South Africa. So we see net cash movement of just under ZAR 600 million. And in fact, if we look at that at a waterfall or graphic level, you can see the gross ZAR 5.3 billion worth of fund inflow through operations. The big ticket items of the outflow in borrowings, ZAR 1.4 billion. Further on the interest expense of just under ZAR 1 billion and then the lease repayments offset. In fact, that's the net number offset by the receivables, giving you a net ZAR 1.3 billion, finishing up just under ZAR 600 million. In fact, we've added on this the foreign exchange consequence that takes it to the ZAR 625 million level. The capital expenditure, as I've indicated, definitely down in the period, down by some ZAR 800 million. We've given you the detail. We've also, in the same slide, actually unpacked for you the acquisition of businesses and the proceeds from a small disposal. So on the right-hand side, those acquisitions, 5 stores in South Africa, nominal value, 4 in Ireland with a small wholesaler. That was just the contingent consideration payments, and then there was a group of retail stores in Poland that we needed to secure for a nominal payment there as well. And then just by region, the allocation between expansion and replacement. And as you can see, roughly ZAR 700 million worth of spend on expansion. The bulk of the focus will remain on replacement. We will ensure that we sweat the assets, but at the same time, we ensure that those assets are well used. Just at this point, I'm going to throw out the number because I'm sure there's going to be an interest on guidance on what the CapEx looks like looking forward. The early indication is that our operational CapEx will be roughly in the region of ZAR 1.3 billion across all of the 3 geographies. There is roughly a further ZAR 900 million worth of commitment, which has not yet materialized from an obligation point of view, but ZAR 900 million worth of business acquisitions being corporate stores that we would look to not necessarily take on board, but yet we would prefer to do back-to-back sale transactions back into the market. But at an operational level, ZAR 1.3 billion would be the guidance for 2025. And then really, just to wrap up, the salient features, turnover 4%, a very strong year overall, EBITDA growing by just under 14%. Operating profit, considering the negativity of the last 2 years, operating profit at plus 15%. The margin nowhere near where we wanted to be, but we are moving strongly in the right direction back towards 2% for the period, 1.9%. Borrowings declining. And yes, that number is going to be a focus going forward, but we are very comfortable that we will continue to manage that and headline earnings growing by 11%. The key number is earnings per share growing by 24. Yes, I realize it's off an exceptionally low base, and exceptionally weakened base as to what happened in the business in 2023. But I think you can take a lot of comfort that the business is very, very strongly moving back to that recovery position of where we expect it to be. Before I hand back to Angelo, I would just like to, at this stage, make a couple of thank yous, if you just indulge me, particularly to the finance teams across the entire business in the South African business across our 6 distribution centers, to our international colleagues in Ireland, just a call out to Aiden, to Karen, to Carl, to Jen, all I can say to you, Shlan, to our colleagues in Switzerland, to Reto and his team, all I can say is Dunky Bayer, as I would enfrekance in German, I'll leave it up to you. And then to our Polish colleagues to Jakob and his team in Poland, Gindrabre, it's been an incredible experience. It hasn't worked the way that we would have wanted it to work for a lot of reasons, but it was never at fault for what the finance team in that business had done. And then lastly, to my group team, who was slightly weakened for the finalization. But to Abby, Kiara, to Rui, to Maria and to Ash, an incredible effort by you all to get the business to be able to report the way that we've done. And Meg, it's great having you back and your leadership in the last couple of days has once again just exemplified how strong that team is. This has been my 15th result presentation. What I would like to say is really you can be very fortunate in life if your job is not something that feels like work. And going to that job every day doesn't feel like a grind. I've been incredibly blessed and benefited by the SPAR Board and its management allowing me the opportunity to act as your CFO for that period and I wish you all well. I know that the succession is strong. And as a last comment, all I would just like to say is thank you, Steve. At this stage, I'd like to hand back to Angelo. Thank you very much.

Thank you, Mark. Progress on key priorities. This year, we made significant strides in advancing our strategic priorities, which I will provide an update on. Over the last year, we have set key priorities as we focus on optimizing operations and achieving our growth objectives. To revisit, we said we would exit SPAR Poland and stabilize our balance sheet by the end of 2024, which we have achieved. For '25, we will wrap up the European strategic review, complete the SAP system rollout and focus on achieving our target of 3% operating profit margin in SA by 2026. As stated in our recent trading update, Polish antimonopoly authorities approved the sale of SPAR Poland on 19 November 2024. The buyer is finalizing due diligence expected within 30 business days. We anticipate completing the exit from Poland by early January 2025 with closing happening at the end of the month. There's been significant progress made in addressing issues and optimizing the SAP system for better performance. including improving visibility of pricing and subsidies for buyers and addressing the warehouse management inefficiencies that increased labor and transport costs through the selection of a new warehouse management system. We are now at a point where service levels achieved are currently in excess of 90% within KZN and loyalty rates currently at 70.9% in Q4 from 68.6% in Q2. We're working to regain customer loyalty by improving products, enhancing service and implementing targeted marketing. These efforts aim to build stronger relationships and ensure long-term loyalty to the SPAR brand. We have initiated a comprehensive review of our international portfolio to align with our strategic objectives. Recognizing the importance of focused capital allocation and enhanced capital efficiency, we are evaluating the relative returns of each business unit in comparison with the capital invested. This evaluation will guide our decisions on capital deployment, identifying where to increase investment as part of our growth strategy and where to reconsider our current business models or potential exits. This refined approach to capital allocation will enable us to concentrate management efforts on initiatives that generate sustainable value for stakeholders. Additionally, it will improve our group debt and leverage profile, providing the flexibility to capitalize on future growth opportunities. We have consistently prioritized strengthening our balance sheet in the short to medium term. In this regard, we're pleased to report significant progress. As of year-end, we've successfully reduced our net borrowings by ZAR 2 billion to ZAR 9.1 billion, resulting in a marked improvement in our leverage ratio to 2.41x. Additionally, in September 2024, the group secured a ZAR 2 billion bridge facility, of which ZAR 1.2 billion was utilized to partially settle Polish funding in accordance with the sale terms. Several strategic levers are available to us, and we continue to degear the balance sheet. Our business remains cash generative, and we have placed a strong emphasis on working capital management and prudent capital expenditure deployment. Cash generation will be further supported by efforts to advance the recovery of our Southern African operations. We are also exploring additional options for the repatriation of funds to South Africa. The disposal of noncore properties has yielded positive results from both a cash and earnings perspective. Our approach is centered on ensuring that any actions taken preserve long-term shareholder value. We possess valuable assets and will not consider disposal at valuations that do not align with our strategic objectives. Overall, we remain within our covenants and have had productive engagements with our lenders who have expressed confidence in our growth plans. This slide highlights where we are currently generating value and where returns are not justifying the capital allocated. We must scrutinize our operational and investment strategies to enhance overall performance. Maintaining a consistently positive ROIC to WACC spread is essential for long-term sustainability in our highly competitive and margin-sensitive industry. Everything we have discussed thus far leads us to the crux of our strategy, our capital allocation principles. These principles are designed to fuel our growth ambitions while maintaining a sound financial structure and delivering shareholder value. Our goal is to achieve real single-digit growth, positive operating leverage and returns above our weighted average cost of capital. We are targeting a group leverage ratio of between 1.5x and 2x with specific targets of 1.5x to 2x for South Africa and 1x to 1.5x for Ireland. In our pursuit of growth, we adopt a strategic approach to sourcing and allocating capital. CapEx is driven from top down, prioritizing maintenance first, followed by an organic and strategic growth initiatives. Inorganic opportunities are considered based on the strict size and investment criteria. Returning value to our shareholders is a top priority. As such, we are focused on debt reduction in the short term, aiming to position ourselves to resume dividend payouts within the next 18 to 24 months. Our goal is to prioritize dividends from South Africa and Ireland at a normalized payout ratio. In summary, our refined capital allocation strategy is designed to stabilize our balance sheet while investing in growth opportunities and maximizing shareholder returns. The Southern African margin recovery plan is on track, aiming to restore 3% operating margin by 2026. This will be achieved through several strategic initiatives. including enhancing operational efficiency, disposing of underperforming corporate stores, implementing sustainability measures and resolving the ERP integration issues we've faced. Our unwavering focus on cost discipline has already started improving operating expense management, mitigating some profit impacts. Further, with SAP resolution almost complete, this will be a catalyst in the short term. Excluding the challenges in KZN, the broader business remains close to the 3% target. With determined management and focused efforts, we are confident in achieving this goal. This slide demonstrates the business margin potential of Southern Africa when excluding KZN, where the SAP issues are present. It clarifies the expected profitability once this particular challenge is resolved. Another perspective on the profitability of the Southern African business is to consider the operating profit without including nonrecurring items, primarily costs related to the KZN SAP cleanup, approximately ZAR 118 million. Excluding these nonrecurring items, the operating profit in the Southern Africa segment increased by 26.1%. We are in a transition, addressing challenges, refining our operations and setting up for sustainable growth. The last 12 months have offered us a chance to reassess our goals and build a stronger long-term strategy. The approach shown on this slide is a foundational framework, not a finalized strategy, though it has been approved by the Board for further development. As we refine it, we will prioritize current initiatives across the group. Our strategy has 4 pillars: harden. This means safeguarding SPAR's market position through profitability and digital transformation in our home market and abroad. Grow. This means we are looking to expand by targeting specific categories and growth areas that make sense within the framework of the SPAR model. Clarify. Establish a clear organizational framework with enhanced accountability, governance and culture alignment. Finally, execute. Ensure effective implementation of strategic initiatives with KPIs, regular progress reviews, improved communication, and leveraging the transformation, all enabled by financial resilience and a disciplined capital allocation practice. As we look ahead, we are refocused on the core of our business. We envision each customer as a unique segment, and our efforts are dedicated to refining our market positioning through a clear format and brand architecture. In a consolidating market with evolving consumer preferences, our strategy of forging strategic partnerships will position us for success alongside store expansions and tailored formats. An integrated supply chain strategy is essential for our sustainable growth. We're currently reassessing the group structure to establish an optimal operating model while streamlining supply chain operations with a robust focus on efficiency. Our omnichannel initiatives designed to connect deeply with our consumers are particularly exciting. In a world brimming with choices, we aim to ensure hyperpersonalization, delivering a comprehensive and holistic shopping experience that meets the individual needs of each customer. This approach will not only enhance customer satisfaction, but also drive our competitive edge in the marketplace. In closing, I want to express my gratitude to our retailers, suppliers, employees and you, our shareholders, for your trust and support. Together, we remain committed to delivering sustainable growth and long-term value. I now open the floor for questions. Thank you.

The first one is, can you please provide more detail on the Swiss intention to sanction?

So the Swiss business has been served notice by the Swiss ComCom authorities relating to their involvement and relationship with a service and trading cooperative, a very well-known and multinational operating cooperative in Europe. This is a matter that's been under investigation for more than 3 years now. It's not a surprise to us. But we've now stepped it forward to this notice to sanction, and we are currently working with our legal team in Switzerland to present our defense. We believe that there's no claim, but the matter will obviously serve its course through the various courts in that. So it's an ongoing matter. And at this stage, there's no indication of what potential final sanction might be. And hence, we've referenced it as a contingent liability.

There is a question on CapEx forecast, but you did talk about it in the presentation. Perhaps to build on that, there's a question about providing more detail on the ZAR 900 million of business acquisitions. Is this SPAR buying stores from retailers and converting them to corporate stores? What is the reason for this? Is SPAR moving from a wholesaler to a retailer?

So of the ZAR 900 million, roughly ZAR 400 million has been identified in South Africa. A portion of that, roughly ZAR 150 million relates to the existing store base that we've got of the some 55 stores and talks to some of the upgrades and revamps to those stores. We obviously want to ensure that the corporate stores that we hold are operating in optimum state and condition. There is a balance in the South African business relating to an option agreement that was put in place with a single retailer. We are just finalizing the terms of that. Our intention is not to hold those stores. It is a capital commitment per se, albeit that we are showing it in the CapEx spend. The intention will be to onsell those stores back into retail, and we've already received a lot of interest. And then the balance of roughly ZAR 450 million relates to what our Irish colleagues have flagged as potential CapEx spends in that business. They haven't given us definite allocated names. It's probably more defensive budget allocation at this stage. But I can assure you that any CapEx spend on any acquisitions are very carefully analyzed before any approval is given. So it's perhaps a pure guidance number as opposed to a committed number at this stage.

Can you please talk to the outlook for SPAR Southern Africa growth and operating margins? How quickly will the operating margin get to a 3% target? And will the OpEx cost margin in SA come down to help get the business to 3%?

Yes. As we've communicated, our target is to get to 3% operating profit in SA by the second half of FY '26. I think in the year ahead, FY '25, we expect to make material gains in that direction, and we probably end up or we are targeting to end up between 2.2% and 2.3% for the year. The second part of that question is clear?

Will the OpEx cost margin in SA come down to help get the business to 3%?

Yes. Our view is that we will tighten up on OpEx, but the move will move in both directions. There will be a downward pressure on OpEx as a percentage of sales as well as upward pressure on GP margin. So a slight ratchet in both.

Are you looking to sell the Swiss business given the poor return on invested capital? When last were the assets valued? And what is a realistic NAV?

Meg, I think you've got an idea for NAV. Just in terms of general guidance for Switzerland. As we flagged, we have gone through a review of our European operations. And as I've guided, we're targeting to make a decision there by the end of June '25. We have had some inbound interest on the Swiss business, but we are very cautious in terms of considering any interest right now. Our view of value in that business is quite strong, and we want to make sure that we get the best value for shareholders. So we're not in a rush. In terms of the NAV valuation, I think we probably see NAV at around CHF 170 million.

Yes. And just included in there is about CHF 140 million of debt.

I would like to better understand the continuing operations net finance cost. You only secured the bridge financing to settle Polish debt during September. So there's limited impact in your reported numbers, while FY '25 will see the full impact of the ZAR 2 billion drawdown.

That is true. We drew down roughly ZAR 1.2 billion on the bridging facility of ZAR 2 billion just before the end of September to settle medium-term debt in Poland, which we did. The full ZAR 2 billion will come on balance sheet, the additional ZAR 800 million by the end of this calendar year. We obviously expect that to impact the cost of interest. We expect the cost of interest for the year ahead to increase by about 16%, I think, Mark.

Please confirm that the net debt of ZAR 9.1 billion includes the ZAR 2 billion taken over from Poland.

It does. So just for clarity, as I mentioned earlier, we brought about ZAR 1.2 billion of the debt from Poland onshore to SA just before financial year-end. There was an additional amount of ZAR 700 million or just over ZAR 700 million left as working capital facilities within Poland. Those working capital facilities will be extinguished by the end of the calendar year. But the full ZAR 2 billion was in the ZAR 9.1 billion.

Can you please explain why wholesale is still lagging retail growth in SPAR Grocery?

As indicated at half year and at our pre-close call, we've struggled with loyalty in the SA business, largely due to the impact of SAP in KZN, but also some drop in loyalty in the rest of the divisions. We have seen that narrow in the second 6 months. We ended the year at 1.2% down in loyalty, and we have a plan to correct that over time. It's not something that's going to be fixed overnight. There are a number of causes, but it is something that we are aggressively working on to get right.

Do you think the operating margin of 2.9% for the Irish segment is sustainable?

You would have seen from the presentation, the Irish business on its own is now well over 3%. We think that's sustainable, but it's probably the range in which it operates in the long term, somewhere between 2.9% and 3.1%. We think that is the long-term range that the Irish business will operate. We had a disappointing result in the U.K. this year. And obviously, there has to be some work in terms of fixing the U.K.

On the U.K., what do you estimate will be the impact of the increased national insurance employers' cost from April 2025 onwards?

We're still busy quantifying that cost. That legislation changed fairly recently, and we're still trying to quantify what that will be. But there will be some exposure, particularly given the number of retail employees who operate in that business, given that that's the only business in our stable where we own upward of 40% of the retail estate and a large number of individual employees.

Can you please provide some color on post-period trade in SPAR SA TOPS and Build it?

We've seen the momentum in TOPS and Build it continue as well as softer sales in the SA grocery business at wholesale. So largely a similar result or a similar momentum to what we had in the second 6 months of the year. That's continued, although we do think that we are well positioned to increase that growth over the Christmas period, having had a soft Christmas last year.

Back to CapEx. How much CapEx is needed for SAP and IT investment across the remaining DCs?

We've spent about ZAR 1.2 billion of the SAP CapEx of around ZAR 2 billion, so about ZAR 800 million to go spread over 4 years.

You disclosed the KZN loyalty rate at 70.9% for Q4. What do you get in other regions? And what do you think is possible for KZN in FY '25?

Over the last 10 years, the group has operated at slightly over 80% loyalty on average. KZN has always been one of the regions that has lagged behind in terms of loyalty. So KZN's historical loyalty is around 75%, although that had tapered off pre-SAP. So in KZN, we are about 2% lower than we had been pre-SAP. And then for the rest of the business, we target to end up just between 81% and 82%.

What was the loss from corporate stores in FY '24? Can you eliminate this in FY '25?

The loss was around ZAR 200 million in FY '24, bearing in mind that doesn't take into account the profits we make on wholesale as we sell goods into those stores. So it's isolated to just the corporate stores. We do think we can reduce that number, although there might be some impairments in the year as we look at selling stores on. So we think we can make significant progress. And I'd expect that number from a budget perspective, Mark, I think we expect that number to be somewhere around ZAR 30 million or ZAR 40 million less than this year.

Back to debt, I think it's maybe worth unpacking again. From ZAR 11 billion half year to ZAR 9 billion, but the group took on Polish debt. Is the reduction due to the Irish business paying down the debt or the exclusion of the Polish debt? Secondly, the Swiss debt has a leverage ratio of 6x sounds very concerning. Can you just elaborate on that situation?

So Beck, I think the first thing to understand is that whilst we raised the facility, we didn't take on any new debt. It was simply a transfer of debt from Poland into SA. So that's the first place to start. There's no new debt taken on. It was simply a transfer. I think we have focused hard on reducing debt, but we also benefited from the strengthening of the rand in this scenario. We have made an effort to pay down debt and we'll continue to pay down debt over the next while to get within our target ranges and our target range is really being to get South Africa to operate between 1.5% and 2% in 18 to 24 months' time and to get Ireland operating between 1% and 1.5%. The Swiss number is a concern at 6%. Having said that, the Swiss debt is largely asset-backed with around CHF 90 million being mortgage debt that is asset-backed, which obviously expands the number quite a bit.

Still on debt. When SPAR had to increase the debt covenants, this came at the price of higher interest rates. Now that the gearing has declined, will the interest rates come down?

We are in the process of negotiating extended facilities. And certainly, as our gearing level drops, there will be a ratchet down in those interest rates.

Can you define what SPAR considers as noncore assets?

I think primarily, we see the future of the group being stable in 2 divisions and the home markets of the group being South Africa and Ireland. As we've stated quite openly, we are reviewing the other European assets. We have had a look at the whole host of European assets we hold, but we're very comfortable that Ireland remains part of the South African stable for the long term. We are looking at the U.K. and Switzerland and considering the future within the group.

Maybe talk a bit about KZN DC, how it's traded post year-end and how the margin post year-end is doing and trending.

We've only had one official month close since year-end was very positive. KZN made a substantial profit in the month of August, back to normal levels of profit. I do want to flag, however, that whilst we expect this to continue there, we would say to the market just exercise caution around that as we have only implemented the new solution for the last month, and there might be some unknowns as we go, although we doubt it. But KZN had a very, very positive October. And in fact, the whole of the Southern African region did from a profit perspective.

Can you please reconcile the ZAR 8.5 for so in segment continuing ops versus the ZAR 917 million continuing HEPS number?

Let's just start off. The starting point was reconciled HEPS to HEPS or vice versa.

So please can you reconcile the ZAR 8.5 in segment continuing ops versus the ZAR 917 million continuing HEPS number?

So effectively, all that we are doing in the HEPS number is adding back any of the impairments that the business has taken. And that is fundamentally the difference between the ZAR 855 million and the ZAR 917 million. So earnings per share is effectively the profit attributable to shareholders divided by the number of shares, giving you the ZAR 855 million. We then add back in the HEPS some impairments, which are actually set out in the financial statements under the note. They are probably in the region of ZAR 200 million, and that will increase your HEPS. So the difference is purely the add-back of the impairments.

I want to make it clear that the impairments were added back in both periods as they should be. So impairments this year versus impairments last year, which gives rise to an increase in this year. Those impairments largely are attributable to the loss of sale on assets, in particular, the 2 buildings we sold that make up about ZAR 50 million. There was about a ZAR 40 million impairment on a SAP write-down on an investment in Sri Lanka and a number of other losses on disposal and smaller impairments that make up that number.

SA H2 margins were very disappointing. At half year results, you suggested a 1.9% margin is attainable. What happened in the interim?

The way we set out our financial statement sometimes isn't as helpful as it should be. In particular, all those impairments happen within the Southern African segment. If we remove the ZAR 200 million worth of impairments in SA that really strictly speaking didn't impact operations and a provision taken against gross margin in KZN, the number moves up to about ZAR 1.84 billion for the full year and H2 at around ZAR 1.7 billion. We made some corrections in the KZN gross margin number in the second half, which impacted that number, and that's how you can reconcile back to the ZAR 1.9 billion. Having said that, one can reconcile yourself, you can reconcile anything as Mark often tells us. The operating performance was weaker than we would have liked, largely impacted by KZN. But what we believe now was rightsizing the KZN profit number and sets us up for strong future profits.

A few months ago, you suggested the cash outflow to get the Polish deal done would be ZAR 2.5 billion. Now it's ZAR 2 billion?

I think that's a misunderstanding. So the cash outflow is the repatriation of the Polish debt of somewhere around just over ZAR 1.8 billion, ZAR 185 million, Meg, and then further recapitalization in that business. will take that number up to around the ZAR 2.5 billion. We maintained that number despite the fact that we've hung on to the business probably 3 months longer than we'd like to, and we see exiting at the end of January.

With regards to the comment about stabilizing market share in SA, is that on grocery only or does that include liquor?

That includes liquor. Our outlook in groceries and market share is based on our retail sales and the sales of our retailers. On that basis, we probably gained market share in the last year in liquor and held steady with liquor and groceries combined.

Can you say how much SA like-for-like sales growth has to grow by to achieve the 3% margin target?

I think that there's so many moving parts there. We are assuming growing at roughly 6% in the SA business CAGR over the 3 years since we took over. So from 1 October '23 to the end of September '26. And bear in mind that we have qualified that it will be aiming to operate at 3% in the second 6 of FY '26, not for the full year.

Still not 100% certain. After the exit from Poland, will there be any additional interest-bearing debt coming on board?

That's a bit of a wide question. But once we exit Poland, and I'm assuming that this refers to the Polish transaction, there will be no further debt coming on board once we've paid down the ZAR 2.5 billion.

Can you give an update on CSNX, please, progress?

So we're making good progress in terms of our warehouse management system. We are looking at taking Build it live first on CSNX, and we're expecting that to happen in July. If that all goes well, we will then take one of the DCs in the SPAR business live as well before the end of the financial year next year.

Your NAV for Switzerland being ZAR 170 million translates to ZAR 3.4 billion. On Page 42 of your apps, the Switzerland NAV is carried at ZAR 2.95 billion. Does that mean there is a possible profit of ZAR 450 million on the possible disposal of Switzerland if done at your ZAR 170 million NAV?

Yes. I didn't expect to get to that technical level. But at this stage, we are quite bullish about what we can get out of Switzerland as we sell or if we do sell. And we do expect to bring some funds onshore. But to be honest, one won't really know until we go to market. Having said that, as I mentioned, we have had some inbound interest. So there is some interest in the business, which bodes well for the pricing on the business if we do sell it.

Just to confirm, group loyalty is down 1.2% year-on-year, while KZN improved. Why is that?

As I mentioned, we have had some loyalty issues around the country for a number of different reasons. I think, particularly in a tight economy, it is natural for our retailers to shop around for the best deals. We see that play out through the economic cycle. And as the cycle improves, loyalty improves. So it's not an unusual occurrence. KZN improved in the latter 6 months, but over the full year was contributed to the 1.2% loss in loyalty. So I wouldn't say KZN was moving in a completely different direction to the rest of the business. But it is good to see KZN getting back up above 70%.

West Rand property, how much is it worth?

It's around ZAR 100 million.

How could the registration of Sparzas impact the SPAR's SaveMor brand?

There are a number of things implied, so I might get this wrong. But I think as we've seen in the last couple of weeks, government have shown an intention to regulate Sparza shops and I assume that what the question imposes that you might see a decline in the Sparza shop in that sector in the townships. I wouldn't say that, that would necessarily impact only the SaveMor brand, although our SaveMor format is a format we intend to grow. We have a large exposure to township and rural stores through the primary SPAR and super SPAR formats. And I would think that, that clamp down should benefit those stores. And it depends on government's appetite in that sector, but we also see a large number of building material stores playing out in that informal sector. So depending on government's appetite and how far and wide that they throw the net, that could positively impact our Build it business as well.

I think the last one to throw at you now is where can we expect net debt to land in FY '25 in a normal working capital cycle given the ZAR 1.6 billion working capital benefit this year?

Mark, I think we project to end around 2.2x.

At the covenant level, yes. I think if the question related to the absolute value of debt, I think there will be obviously subject to what exchange rates do. I think our expectation is a decline in the ZAR 9.1 billion that we reported in this period. And as Angelo has alluded to, a forecast covenant of roughly 2.225.

And that's all we have time for. Thank you, guys. Angelo, do you want to say anything to close this out?

Yes. So just to the investment community out there, it's been a very challenging year for SPAR but I think at the end, it's been a gratifying year to show earnings growth of, I think, 26% at an EPS level and operating growth of 15% in a very tough global environment is something that we're quite proud of. I want to thank our shareholders and our investors for showing patience with the SPAR Group and believing in what is being done is a turnaround story, although for us, we're just seeing it as steadying the ship. And then from me to our teams in Ireland, Switzerland, South Africa, Sri Lanka, thank you for the amazing effort that you've put in, in the last year. We're very grateful for the efforts of everyone as we've pulled together in what has been a tough 2 or 3 years for SPAR. I want to say a very big thank you to Leo Crawford. Leo retires at the end of the year. and will be succeeded by John Moone. John, really excited to have you on board. John has been in that BWG business for a long time and will no doubt continue the great success that Leo has set him up for. But Leo, just thank you for everything you've done for SPAR South Africa and for the SPAR Group Limited and the greater SPAR family. You've been an inspiration to all of us. I want to thank Rob Philipson, who's moving back from Switzerland, having spent 8 years in Switzerland moving back into SA into an exciting position here. Thank you for your time there, and welcome Gary into the position of CEO for SPAR Switzerland. And then as I look to my left, I really want to say a great thank you to Mark for just about 30 years of loyal service to the SPAR brand and in particular, 15 years as Group CFO and really being someone who has guided me in the last year. And Mark just from all of us. I know we got to say this personally the other evening, but thank you. And we hope that you could spend much time with Chantelle, enjoying the next few years. And then to Meg. Meg has come on. She's been in the group for a year now, although she tells me it feels like 15. And yes, Meg has really been at Trojan. I think the patience she's had to close out the Polish deal has been phenomenal and the amount of professionalism and strength she's shown in leadership in the last year has really been something phenomenal and a great addition to the group. I want to thank our Board for their support over the last year and the amount of guidance they've given us in terms of navigating a difficult period for SPAR. And then Zihle to you, thank you for putting this together. Zihle's first set of results taking over from Kerry. You have been stellar. So thank you to you, Zihle. And then to all our teams, again, our South African team who are knee-deep in getting the business back to where it should be, thank you for everything you've done. The Irish team who have really cemented their reputation as solid performers and then to the Swiss team operating in a very difficult trading environment in Switzerland and the exciting work that the team in Sri Lanka are doing, which we really see kicking off next year and a very exciting period that will go into Sri Lanka just from the 3 of us. Thank you to everybody. And then we welcome Lisa to the team. I'm sure Lisa is sitting and watching this broadcast. Welcome, Lisa, and we really look forward to what the professionalism you will bring as you join the group. And from all of us, thank you. See you soon.