SPAR INTERIM RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 - - PowerPoint PPT Presentation

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SPAR INTERIM RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 - - PowerPoint PPT Presentation

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SPAR INTERIM RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 MARCH 2018 AGENDA INTRODUCTION: SPAR GROUP PERFORMANCE SUMMARY Graham OConnor, CEO SALIENT FEATURES BUSINESS ENVIRONMENT FINANCIAL OVERVIEW Mark Godfrey, CFO OPERATIONAL

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SPAR INTERIM RESULTS PRESENTATION

FOR THE SIX MONTHS ENDED 31 MARCH 2018

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AGENDA

INTRODUCTION: Graham O’Connor, CEO SPAR GROUP PERFORMANCE SUMMARY SALIENT FEATURES BUSINESS ENVIRONMENT FINANCIAL OVERVIEW Mark Godfrey, CFO OPERATIONAL OVERVIEW Graham O’Connor, CEO PROSPECTS QUESTIONS

SPAR INTERIM RESULTS PRESENTATION 2018

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INTRODUCTION

GRAHAM O’CONNOR CEO

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SPAR GROUP: FACTS AND FIGURES SPAR International: Present in 48 countries with 242 distribution centres and serving 13.5 million customers every day

  • 12 777 stores €34.5bn p.a. global turnover
  • South Africa is the second biggest SPAR country by turnover
  • Ireland is 10th biggest SPAR country by turnover
  • Switzerland is 15th biggest SPAR country by turnover

Southern Africa: Balanced portfolio of 2 184 stores across eight brands with H1 F2018 R53.7bn retail turnover

  • Groceries + fresh produce, liquor, pharmaceuticals and building materials
  • Offering spans consumer sectors from high to low LSMs
  • Seven distribution centres: 287 000m³ warehousing space
  • Handle 70% of SPAR’s turnover + 30% directly from third party suppliers
  • 115.4m cases dispatched in H1 F2018
  • Distance travelled 16.1m km in H1 2018 (vs 16.0m kms travelled in H1 F2017)

Source: SPAR International: Annual Review 2017

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SPAR GROUP: FACTS AND FIGURES (continued) Ireland/South West England: BWG services >1 330 stores across six brands, €681.5m (ZAR10.5bn) wholesale turnover in H1 F2018

  • Wholesale and distribution of groceries + fresh produce, liquor to

retail/catering/hospitality sectors

  • Dominant brands in the convenience market
  • 22 300m² stocking 4 600 ambient SKUs, 884 alcohol SKUs and

2 200 in chilled SKUs Ireland*

Support to independent retailers

  • Relationships, marketing and branding, product development,

systems support, property management, retail operations and training

  • Financial: Trade credit and access to funding

* Kilcarbery facility only, excludes Appleby Westward SPAR INTERIM RESULTS PRESENTATION 2018

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SPAR GROUP: FACTS AND FIGURES (continued) Switzerland: SPAR Switzerland services 289 stores across three brands + 11 Cash & Carry outlets, CHF365.0m (ZAR4.8bn) wholesale turnover in H1 F2018

  • Responsible for operation of 40 corporate stores + 249 independent retailer stores
  • Modern logistics centre supplying 6 500 ambient and chilled SKUs

and total area of 33 000m2

  • Top CC: 11 Cash & Carry outlets with total selling area of 44 000m2

SPAR INTERIM RESULTS PRESENTATION 2018

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SPAR GROUP: FACTS AND FIGURES (continued)

Wholesale Specialised Courier Pharmacy Training Academy

  • National pharmaceutical wholesaler
  • Pharmaceutical, frontshop, surgical & consumables and medical devices
  • Key customer channels: Pharmacies, hospitals and doctors.
  • National delivery of highly specialised medication to high-risk patients

and doctors

  • Renal, Ophthalmology, Rheumatology, Oncology, Transplant, ARVs,

Neurology Training programmes for pharmacy sector across SA Monthly facts and figures:

  • Pharmacy, hospital and doctor supplies: >1000 wholesale customers
  • Chronic medication: >20 000 patients
  • Training: >2 000 people in pharmacy sector (pharmacy assistants)

SPAR INTERIM RESULTS PRESENTATION 2018

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PERFORMANCE SUMMARY

  • The SPAR Group reported strong performance and turnover increased to R50.0bn
  • SPAR Southern Africa grew wholesale turnover by 6.8%, impacted by early timing of Easter
  • S Buys pharmaceutical wholesale business acquired October 2017 and trading results included for 6 months
  • SPAR SA turnover was further influenced by dramatic reduction in measured food inflation – c.6.3%
  • Local perishable business impacted severely by Listeriosis outbreak – remains affected
  • Impressive sales growth in wholesale liquor business of +12.6%
  • Building material sales recovered strongly through loyalty gains and marketing interventions
  • Solid €-based organic turnover growth from SPAR Ireland despite flat economy
  • SPAR Switzerland reported improved profits, partly by closure of 5 unprofitable corporate stores
  • Continued capital investments in wholesale capacity and retail offering across three geographies
  • Total retail footprint rose to 3 803 stores: Southern Africa, Ireland, South West England and Switzerland

SPAR INTERIM RESULTS PRESENTATION 2018

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372,0 455,5 480,0 475,5 541,2 430,3 504,3 445,1 509,1 H1 2014 H1 2015 H1 2016 H1 2017 H1 2018 Normalised H1 H1 1 876,9 1 821,2 2 002,0 3005,6 3334,7 H1 2014 H1 2015 H1 2016 H1 2017 H1 2018

PERFORMANCE SUMMARY

NET ASSET VALUE PER SHARE (CENTS) HEADLINE EARNINGS PER SHARE (CENTS)

SPAR INTERIM RESULTS PRESENTATION 2018

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SALIENT FEATURES

Rmillion H1 2018 H1 2017 Change (%) Turnover 50 026.6 47 353.4 +5.6 Operating profit 1 316.2 1 206.8 +9.1 Profit before tax 1 345.9 1 229.7 +9.4 Earnings per share (cents) 533.7 471.6 +13.2 Headline earnings per share (cents) 541.2 475.5 +13.8 Dividend per ordinary share (cents) 270.0 240.0 +12.5 Net asset value per share (cents) 3 334.7 3 005.6 +10.9

SPAR INTERIM RESULTS PRESENTATION 2018

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BUSINESS ENVIRONMENT

SOUTH AFRICA IRELAND

  • Positive changes in

economic and political landscape

  • Muted 1.7% GDP expected

for 2018

  • Constrained consumer

spending continues

  • Tough trading landscape
  • Internally measured food

inflation: 1.9%

  • Irish grocery market remains

deflationary

  • 5.7% GDP growth projected

for 2018

  • CPI measured at 0.2%

(Mar 2018)

  • Unemployment continues

trending down: 5.9% (April 2018)

  • Continued impact of £

devaluation on UK sales

  • Economic uncertainties due

to Brexit remain SWITZERLAND

  • Improving economic

indicators

  • Private local consumption

remains negative – cross border economic migration

  • Country retail turnover down

1.8% y-y (March 2018)

  • GDP on track to grow 2.0%

in 2018

  • CPI 0.8% (March 2018)
  • Steady unemployment rate:

3.0% (March 2018)

SPAR INTERIM RESULTS PRESENTATION 2018

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FINANCIAL OVERVIEW

MARK GODFREY CFO

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FINANCIAL OVERVIEW: KEY REGIONAL METRICS

Rmillion Southern Africa Ireland Switzerland SPAR Group Income statement Turnover 34 706.8 10 487.9 4 831.9 50 026.6 Gross profit 2 846.9 1 266.7 854.6 4 968.2 Gross profit % 8.2% 12.1% 17.7% 9.9% Operating expenses 2 119.1 1 236.5 1 209.9 4 565.5 Profit before tax 1 095.7 202.5 47.7 1 345.9 Profit after tax 802.0 184.2 41.5 1 027.7 Earnings per share (cents) – by segment contribution 416.5 95.7 21.5 533.7 Headline earnings per share (cents) – by segment contribution 420.6 95.3 25.3 541.2

* - adjusted for inter-group charges

SPAR INTERIM RESULTS PRESENTATION 2018

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FINANCIAL OVERVIEW: TURNOVER

  • Foreign turnover contribution: 30.6% of total Group turnover (2017: 31.4%)
  • Southern Africa continued to be impacted by constrained consumer spending
  • BWG Group delivered +2.9% euro-denominated growth in a flat economic environment
  • SPAR Switzerland continued to be impacted by disappointing decline in retail sales -5.3% in CHF - partly

by strategic decision to close/sell corporate stores Rmillion H1 2018 H1 2017 Change (%) SPAR/TOPS 30 606.7 29 125.0 +5.1 Liquor sales (SPAR/TOPS) 3 366.7 2 989.2 +12.6 Build it 3 661.7 3 373.2 +8.6 Southern Africa (comparable base) 34 268.4 32 498.2 +5.4 S Buys – Pharmaceutical business 438.4

  • Total Southern Africa

34 706.8 32 498.2 +6.8 Ireland 10 487.9 9 636.7 +8.8 Switzerland 4 831.9 5 218.5

  • 7.4

Total Group 50 026.6 47 353.4 +5.6

SPAR INTERIM RESULTS PRESENTATION 2018

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FINANCIAL OVERVIEW: TURNOVER | continued Ireland: Sales analysis of growth

H1 2018

%

H1 2017 Ireland (BWG Group) ZAR9.25bn +9.5 ZAR8.45bn S-W UK (Appleby Westward Group) ZAR1.23bn +3.4 ZAR1.19bn Total Sales ZAR10.48bn +8.8 ZAR9.64bn Ireland (BWG Group) 9.5% Performance of core business 3.6% Currency (EURO strengthens: ZAR) 5.9% S-W UK (Appleby Westward Group) 3.4% Performance of core business (0.2%) Currency (Sterling weakens to EURO) (2.3%) Currency (EURO strengthens: ZAR) 5.9%

Effect of exchange rate

SPAR INTERIM RESULTS PRESENTATION 2018

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FINANCIAL OVERVIEW: TURNOVER | continued Switzerland: Sales analysis of growth

H1 2018

%

H1 2017 Ex-warehouse ZAR2.02bn (2.2) ZAR2.07bn TopCC ZAR1.94bn (4.0) ZAR2.02bn Corporate retail ZAR0.87bn (23.0) ZAR1.13bn Total Sales ZAR4.83bn (7.4%) ZAR5.22bn Total Ex- Warehouse Top CC Corporate retail Total sales decline (7.4%) (2.2%) (4.0%) (23.0%) Performance of core business (5.3%) (0.1%) (1.9%) (20.9%) Currency (2.1%) (2.1%) (2.1%) (2.1%) Currency (CHF weakens to EURO) (8.0%) (8.0%) (8.0%) (8.0%) Currency (EURO strengthens) 5.9% 5.9% 5.9% 5.9%

Effect of exchange rate

SPAR INTERIM RESULTS PRESENTATION 2018

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FINANCIAL OVERVIEW: INFLATION PER SEGMENT

1. SPAR Southern Africa: Inflation expectations for remainder of 2018: › Current trend (regional ranges) +1.8% - 3.1% › Real risk of inflation increasing in the short term › Building material inflation budget at c. 4.4% for 2018 – current trend well down on this 2. SPAR Ireland: Irish grocery market remains deflationary 2018 2017 › Irish CPI for the period +0.2% +0.7% – Food and non-alcoholic beverage (0.2%) (2.6%) – Alcohol and tobacco +0.1% (0.5%) 3. SPAR Switzerland: › Swiss CPI for the period +0.8% +0.4% – Food and non-alcoholic beverage +0.9% (0.8%) – Alcoholic beverages and tobacco +0.4% (0.8%) – Overall inflation estimated to increase to +0.9% (2017:+0.5%) in the short term H1 2018 H1 2017 SPAR wholesale business 1.9% 8.2% Liquor 3.9% 5.7% Build it c.3.4%

  • c. 3.3%

SPAR INTERIM RESULTS PRESENTATION 2018

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FINANCIAL OVERVIEW: GROSS MARGINS

Rmillion H1 2018 (GP%) H1 2018 Turnover (Rm) H1 2017 (GP%) Southern Africa (Comparable base) 8.2% 34 268.4 8.1% S Buys 9.3% 438.4

  • Total Southern Africa

8.2% 34 706.8 8.1% Ireland 12.1% 10 487.9 12.2% Switzerland – supplier income renegotiated as product rebates 17.7% 4 831.9 13.9% Total Group 9.9% 50 026.6 9.6% Southern Africa Stronger ex-warehouse sales: H1 2018 H1 2017 H1 2016 Warehouse (excl. Build It)

  • Dry

47.0% 46.8% 46.8%

  • Perishables

16.9% 16.4% 16.0% 63.9% 63.2% 62.8% Dropshipment (excl. Build It) 36.1% 36.8% 37.2%

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FINANCIAL OVERVIEW: GROSS MARGINS | continued

Ireland

  • GP% performance reflected slight decline which was attributable to:
  • Decrease in the margins of Gilletts corporate stores
  • Positive trading performances from BWG Foods – growth in perishable business

Switzerland

  • GP% increase attributable to
  • Renegotiated supplier income as specifically attributable to product purchasing
  • Adjusting for this affect, core margins of all three divisions remained comparable

SPAR INTERIM RESULTS PRESENTATION 2018

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FINANCIAL OVERVIEW: EXPENSES

H1 2018 H1 2017 Expenses (Rm) % of Sales Expenses (Rm) % of Sales Increase (%) Southern Africa (Comparable base) 2 078.9 6.1% 1 909.3 5.9% +8.9% S Buys 40.2 9.2%

  • Southern Africa

2 119.1 6.1% 1 909.3 5.9% +11.0% Ireland 1 236.5 11.8% 1 144.7 11.9% +8.0% Switzerland 1 209.9 25.0% 1 305.2 25.0% (7.3%) Total Group 4 565.5 9.1% 4 359.2 9.2% 4.7%* * Comparable expenses up 3.8% (excluding S Buys)

SPAR INTERIM RESULTS PRESENTATION 2018

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FINANCIAL OVERVIEW: EXPENSES | continued

Southern Africa

  • S Buys consolidated for the first time: Contributed 2.1% to the increase
  • This business has inherently high cost ratio due to pharmaceutical distribution
  • Warehouse & distribution expenses contributed 2.9%
  • Employment costs – Impact of wage settlements at CPI +
  • Vehicle Expenses - majority being the effect of increased fuel prices, together with maintenance

and vehicle hire costs

  • Marketing & Selling expense contributed 4.6%
  • Increased advertising & promotion costs - 55th Birthday Promotions
  • Additional costs attributed to corporate retail stores – 1.9% of total cost increase
  • Including increased rent, employment costs, electricity and security
  • Admin & IT contributed 1.4%
  • Continued investment in IT platform, including hardware and software development

SPAR INTERIM RESULTS PRESENTATION 2018

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FINANCIAL OVERVIEW: EXPENSES | continued

SPAR Ireland

  • Expenses grew by 2.1% in EURO terms – Once again very well controlled
  • Major drivers were: Depreciation +7.9% and Staff costs +5.5% - Retain key staff and additional

Gilletts stores

  • Partly offset by reduction in corporate store costs
  • Up 8% in ZAR as a result of exchange rate translations

SPAR Switzerland

  • 5.2% decrease in CHF base-currency operating expenses
  • Reduction in number of corporate stores
  • Higher recovery of overheads from further franchising of stores
  • Staff costs have reduced 7.3% in base-currency
  • Logistic operations highly cost effective
  • Down 7.3% in ZAR as a result of exchange rate translations
  • Abnormal IAS19 pension credit adjustment +R7.7 million to expenses

SPAR INTERIM RESULTS PRESENTATION 2018

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FINANCIAL OVERVIEW: CASH FLOW

Rmillion H1 2018 H1 2017 Cash flow from operating activities (adjusted for non-cash items) 1 672.2 1 488.8 Working capital changes (1 643.9) (1 380.5)

  • Increase in inventory

(250.9) (139.7)

  • Increase in trade receivables

(399.6) 252.0

  • Decrease in trade payables

(993.4) (1 492.8) Cash generated from operations 28.3 108.3 Interest paid (net) (30.2) (8.6) Taxation paid (320.8) (301.1) Dividends paid (837.8) (789.5) Capital expenditure (384.9) (505.5) Acquisition of businesses (313.9) (111.1) Proceeds from disposal of businesses 15.1 8.0 Disposal of assets held for sale 16.4 31.3 Loans/share repurchases (204.6) (360.9) Borrowings repaid/ raised (216.8) 274.8 Net cash movement (2 249.2)* (1 654.3)

* Includes negative foreign currency translation adjustment of (R73.6m)

SPAR INTERIM RESULTS PRESENTATION 2018

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FINANCIAL OVERVIEW: CASH FLOW (continued)

  • Cash generated from
  • perations: down to R28.3m

› Significantly decreased payables in South Africa (payment timings) › Increased inventories across all operations (Easter timing)

  • Acquisition of businesses -

R313.9m

  • Capex of R384.9m
  • Share repurchases of R231.4m
  • Closing net overdraft: R850.8m

1,472 1,316 346 10 (1,644) (30) (321) (838) (385) (314) 32 90 (63) (231)

(217)

(74) (851)

SPAR INTERIM RESULTS PRESENTATION 2018

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CURRENCY IMPACTS (VS ZAR)

Average rate: ZAR/€ H1 F2017 F2017 H1 F2018 14.54 14.81 15.39

12,00 12,50 13,00 13,50 14,00 14,50 15,00 15,50 16,00 16,50 17,00 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17

ZAR/€ exchange rate: October 2016 - March 2017

12,00 12,50 13,00 13,50 14,00 14,50 15,00 15,50 16,00 16,50 17,00 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18

ZAR/€ exchange rate: October 2017 - March 2018

Closing Spot Rate 14.57 Closing Spot Rate 14.29

SPAR INTERIM RESULTS PRESENTATION 2018

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EARNINGS AND HEADLINE EARNINGS PER SHARE

Rmillion H1 2018 H1 2017 Change (%) Profit for the period attributable to ordinary shareholders 1 027.7 908.0 +13.2 Adjusted for: Net loss on disposal of property, plant and equipment 7.7 13.3 Impairment of goodwill 4.5 5.3 Loss / (Profit) on disposal of business 2.2 (3.8) Profit on disposal of assets held for sale (7.3) Headline Earnings 1 042.1 915.5 +13.8 Earnings per share (cents) 533.7 471.6 +13.2 Headline earnings per share (cents) 541.2 475.5 +13.8 Weighted average number of shares 192 561 398 192 544 937 Shares in issue 31 March 2017 192 602 355 31 March 2018 192 602 355

SPAR INTERIM RESULTS PRESENTATION 2018

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FINANCIAL OVERVIEW: RECONCILIATION OF NORMALISED HEPS

Rmillion H1 2018 H1 2017 Change (%) Reported headline earnings 1 042.1 915.5 +13.8 Adjusted for:

  • Fair value adjustment (not considered necessary in this period)
  • Foreign exchange (gain) on minority liability

(65.5) (58.4)

  • Business acquisition costs

3.8

  • Normalised headline earnings

980.4 857.1 +14.4 Normalised headline earnings per share (cents) 509.1 445.1 +14.4 Weighted average number of ordinary shares (millions) (net of treasury shares) 192.6 192.5

  • SPAR INTERIM RESULTS PRESENTATION 2018
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FINANCIAL OVERVIEW: RECONCILIATION OF DIVIDEND DECLARATION

Rmillion H1 2018 Reported headline earnings 1 042.1 Adjusted for:

  • Forex gain on financial liability measurement (non-cash related)

(65.5) Adjusted headline earnings 976.6 Dividend cover (consistent with H1 2017) 1.88 times Dividend declared (total payable Rm) 520.0 Shares ranking for dividend at declaration date* (‘000s) 192 561 Dividend per share (cents) 270.0

SPAR INTERIM RESULTS PRESENTATION 2018

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FINANCIAL OVERVIEW: KEY REGIONAL METRICS

Rmillion Southern Africa Ireland Switzerland SPAR Group Balance sheet Property, plant and equipment 2 648.1 1 476.8 2 210.2 6 335.1 Goodwill and intangible assets 647.5 3 004.1 288.4 3 940.0 Current assets 10 879.9 3 756.8 1 695.2 16 331.9 Current liabilities (9 657.3) (4 094.0) (843.1) (14 594.4) Long-term liabilities (1 328.1) (2 474.1) (2 735.6) (6 537.8) Net asset value per share (cents) 2 869.7 926.1* 360.0* 3 334.7

* Ignores the effect of consolidation entries

SPAR INTERIM RESULTS PRESENTATION 2018

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CAPITAL EXPENDITURE: INCREASING DISTRIBUTION CAPACITY

  • SPAR Southern Africa: R124.5m

› Western Cape Distribution Centre expansion (final costs) and investments in new corporate stores › Continuing IT infrastructure upgrades and software development

  • SPAR Ireland: R179.7m

› Primarily warehouse equipment R99.3m, and further investments in retail stores

  • SPAR Switzerland: R102.4m

› Ongoing store refurbishments and further technology upgrades to enhance retail offering

  • Business acquisitions:

› R74.9m to acquire S Buys and R165.0m to acquire Knowles property › R70.6m to acquire seven corporate stores in strategic retail locations

Rmillion H1 2018 H1 2017 Investing to expand operations (221.5) (299.9) Investment to maintain operations (163.4) (205.6)

  • Replacement of property, plant and equipment

(185.1) (208.9)

  • Proceeds on disposal of property, plant and equipment

21.7 3.3 Acquisition of business/subsidiaries (313.9) (111.1) (698.8) (616.6)

SPAR INTERIM RESULTS PRESENTATION 2018

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REGIONAL CAPITAL EXPENDITURE

Rmillion Expansion Replacement Total South Africa 67.5 56.8 124.3 Ireland 108.3 61.6 169.9 Switzerland 45.7 45.0 90.7 221.5 163.4 384.9

SPAR INTERIM RESULTS PRESENTATION 2018

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SUMMARY OF SALIENT FEATURES

Rmillion H1 2017 H1 2016 Change (%) Turnover 50 026.6 47 353.4 +5.6 Gross profit 4 968.2 4 538.2 +5.6 Gross profit (%) 9.9% 9.6%

  • Operating profit

1 316.2 1 206.8 +9.1 Profit after tax 1 027.7 908.0 +13.2 Headline earnings per share (cents) 541.2 475.5 +13.8 Normalised headline earnings per share (cents)* 509.1 445.1 +14.4 Dividend per ordinary share (cents) 270.0 240.0 +12.5 Net asset value per share (cents) 3 334.7 3 005.6 +10.9

SPAR INTERIM RESULTS PRESENTATION 2018

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OPERATIONAL OVERVIEW

GRAHAM O‘ CONNOR CEO

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OPERATIONAL REVIEW: RETAIL PERFORMANCE: TURNOVER

  • Continued uptake of SPAR house brands by consumers seeking value: Private label sales up 2.9%
  • TOPS benefited from strong marketing initiatives
  • Build it turnover driven by innovative marketing and focus on retail execution

Total growth Like for like SPAR 4.9% 2.9% TOPS 12.8% 8.6% Build it 10.4% 5.4%

SPAR INTERIM RESULTS PRESENTATION 2018

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OPERATIONAL PERFORMANCE SOUTHERN AFRICA: SPAR

38,5 40,4 26.1 27.2 H1 17 H1 18 H1 17 H1 18 RETAIL TURNOVER WHOLESALE TURNOVER TURNOVER ANALYSIS Rmillion

▲4.2% ▲4.9%

Retail turnover remains under pressure with weak consumer spend

  • Combined food & liquor retail sales: +5.7%
  • Same store retail turnover: +2.9%
  • Internally measured food inflation: +1.9%

Wholesale turnover up 4.2%

  • Retained independent retailers’ loyalty
  • Perishable sales growth outstripped

ambient categories

  • Strong demand for fresh produce, bakery

and frozen products SPAR-branded private label products up 2.9%

  • Continue to offer value and quality

Organic growth focus to support retailer profitability

  • 80 store revamps
  • 24 new stores: 921 stores in total

SPAR INTERIM RESULTS PRESENTATION 2018

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OPERATIONAL PERFORMANCE: TOPS AT SPAR

5,2 5.8 3,0 3,4 H1 17 H1 18 H1 17 H1 18 RETAIL TURNOVER WHOLESALE TURNOVER TURNOVER ANALYSIS Rmillion

▲12.6% ▲12.8%

Retail turnover impacted by strong marketing initiatives and brand continued to attract consumers

  • +12.8% increase in retail turnover
  • +8.6% same store retail turnover growth
  • Wholesale turnover up +12.6%

25 new stores: total of 754 stores 29 stores revamped

SPAR INTERIM RESULTS PRESENTATION 2018

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OPERATIONAL PERFORMANCE: BUILD IT

5,9 6,5 3,4 3,7 H1 17 H1 18 H1 17 H1 18 RETAIL TURNOVER WHOLESALE TURNOVER TURNOVER ANALYSIS Rmillion

▲8.6% ▲10.4%

Sector leading sales growth performance. Increased retailer loyalty through improved pricing

  • Retail turnover growth: +10.4% in South

Africa

  • Building sector inflation: +3.4%
  • Wholesale turnover up 8.6%

Build it house brand sales up +10.7% Eight new Build it stores opened: 371 in total

SPAR INTERIM RESULTS PRESENTATION 2018

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OPERATIONAL PERFORMANCE: SPAR IRELAND (BWG GROUP)

BWG Group strong performance with EURO-denominated growth of 2.9%

  • Recent deflation trends have slowed and reversed in certain product categories
  • Food and non-alcoholic drinks declined 0.2%, while alcohol and tobacco increased 0.1%
  • Despite economic growth in the country, consumer spending remains elusive
  • Hospitality sector remains strong and boosted sales of BWG Wines & Spirits and BWG Foodservice

divisions

  • All retail brands in positive growth – with Londis (+6.2%) and XL brand (6.3%) showing strongest

performance

  • The Gilletts corporate stores in SW England delivered strong growth of 7.4% in Sterling
  • BWG recently recognised as Irish Logistics Company of the year

Store network comprises 1 330 with 26 new stores opened

SPAR INTERIM RESULTS PRESENTATION 2018

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OPERATIONAL PERFORMANCE: SPAR SWITZERLAND

Retail sales continued to be negatively impacted by low economic growth. Slight inflationary trends noted – prices of food and non-alcoholic beverages increased by 0.9% and alcoholic beverages up 0.4%

  • In EURO terms, sales of this business declined by 5.3% - largely in corporate retail performance
  • Five unprofitable corporate retail stores were closed during the period

TopCC achieved modest sales performance in tough economic environment

  • CATMAN rollout continues throughout TopCC stores

Warehouse turnover improved due to several innovative marketing campaigns and programmes

  • Consumer loyalty card and a Win-a-car competition, which was well received by public

Store network comprises 289 with 6 new stores opened

SPAR INTERIM RESULTS PRESENTATION 2018

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PROSPECTS

GRAHAM O‘ CONNOR CEO

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PROSPECTS

The trading environment in Southern Africa is expected to remain largely unchanged in the medium term

  • Recent political changes have resulted in increased consumer and business confidence but this is

yet to translate into economic growth

  • Current levels of food price inflation are at risk to increase due to movements in fuel price and

foreign currencies.

  • Consumers will remain under pressure and become even more price sensitive.
  • SPAR’s independent retailers remain suitably positioned to address these challenges
  • Supported by an extensive distribution capability and market leading brands

The BWG Group’s outlook, despite Brexit uncertainties remains positively cautious

  • Management’s proactive response to market changes will deliver result in line with expectation
  • The acquisition of 4 Aces wholesaler after this period will further strengthen the Irish group’s growth
  • bjectives

The Swiss business will maintain its focus on driving identified strategic initiatives to improve overall performance

  • But management recognise that these plans will take time to realise – early signs, however point to

positive change.

SPAR INTERIM RESULTS PRESENTATION 2018

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Q&A

SPAR INTERIM RESULTS PRESENTATION 2018

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DISCLAIMER

This presentation contains forward-looking statements about the company’s operations and financial conditions. They are based on SPAR Group Limited’s best estimates and information at the time of writing. They are nonetheless subject to significant uncertainties and contingencies many of which are beyond the control of the company. Unanticipated events will occur and actual future events may differ materially from current expectations due to new business opportunities, changes in priorities by the company or its joint ventures as well as other factors. Any of these factors may materially affect the company’s future business activities and its ongoing financial results.

SPAR INTERIM RESULTS PRESENTATION 2018