Trading update for the 47 weeks to 25 August 2023 and changes to the board and board committees

The SPAR Group Limited
(Incorporated in the Republic of South Africa)
Registration number: 1967/001572/06
Share Code: SPP
ISIN: ZAE000058517
(“SPAR” or the “Group”)

TRADING UPDATE FOR THE 47 WEEKS TO 25 AUGUST 2023 AND CHANGES TO THE
BOARD AND BOARD COMMITTEES

This announcement provides an update on:

    •   The Group’s trading performance for the 47-week period from 1 October 2022 to
        25 August 2023 (the “period”)
    •   The SAP implementation at the KwaZulu-Natal (KZN) distribution centre in Southern Africa
    •   SPAR Poland
    •   Banking facilities
    •   Key changes to the SPAR board of directors (the “Board”) and certain Board committees


TRADING UPDATE

The Group delivered a strong trading performance with turnover increasing by 10.6% for the period,
amidst higher cost of living challenges for consumers across all regions of operations, and business
disruptions in the local market.

SPAR Southern Africa
  • Total sales growth of 5.9% with mixed performances from the various business units
  • SPAR wholesale grocery business increased sales by 8.1% with internally measured
     wholesale price inflation for the period of 10.1%
  • TOPS at SPAR liquor sales declined by 0.6% as sales normalised after the extraordinary
     growth of 43.0% in the prior comparative period, due to the easing of the COVID-19 liquor
     trading restrictions in September 2021
  • Combined core grocery and liquor turnover growth of 7.0%. If adjusted for the estimated
     loss of turnover due to the impact of the SAP implementation, the combined turnover growth
     would have amounted to 9.0%
  • Build it saw a decline in turnover of 3.6%, reflective of the slowdown in the building sector
  • The pharmaceutical business, S Buys, delivered 19.9% turnover growth, with both channels
     (wholesale to Pharmacy at SPAR and Scriptwise) performing strongly
BWG Group (Ireland and South West England)
  • Combined turnover for both markets increased by 8.5% (EUR-denominated) boosted by
     strong performances across the retail brands, a full recovery of the hospitality sector and
     successful integration of acquisitions made in Ireland
SPAR Switzerland
  • Turnover declined by 3.4% (CHF-denominated), due to the extremely challenging market
     environment, and the transfer of a group of corporate stores to independent retailers during
     2022 which negatively impacted retail sales
SPAR Poland
  • Turnover increased by 5.0% (PLN-denominated), positively impacted by improved retailer
     loyalty, but offset by the loss of stores in the prior comparative period
ZAR turnover growth %

                                                                       Six months
                                     47 weeks                          ended              Year ended
                                     ended                             31 March           30 September
                                     25 August 2023                    2023               2022
                                     (% change)                        (% change)         (% change)
 Wholesale grocery business          8.1                               7.9                5.3
 TOPS/Liquor sales                   (0.6)                             (1.9)              42.6
 Combined grocery and liquor         7.0                               6.5                9.2
 Build it                            (3.6)                             (3.8)              3.1
 S Buys - pharmaceutical business    19.9                              20.0               9.9
 Southern Africa                     5.9                               5.6                8.4
 BWG Group (Ireland & South West     21.8                              15.1               3.2
 England)
 Switzerland                         13.6                              6.9                (1.1)
 Poland                              19.1                              9.3                1.0
 Group                               10.6                              7.9                6.0


SAP IMPLEMENTATION UPDATE

SPAR shareholders (“Shareholders”) are referred to the unaudited condensed consolidated
interim results for the six months ended 31 March 2023 (“Interim Results”) published on SENS
on Wednesday, 14 June 2023 wherein Shareholders were advised that the transition to SAP had
resulted in various go-live and integration challenges, negatively impacting distribution operations
in KZN.

The impact of the SAP implementation at KZN amounted to an estimated loss of turnover to the
Group of R1.4 billion for the period, being approximately R786 million for the six months ended
31 March 2023 as previously reported, and an additional R638 million for the five months to
August 2023.

SAP has remained a supportive partner throughout the project. After months of collaboration to
resolve the issues and drive success, management is satisfied to report that the KZN distribution
centre is once again servicing all stores in the region. The SAP solution is stable and performing
consistently. Overall service levels are approaching the levels at which they were prior to the SAP
implementation.

The learnings during this transition phase have been immense and there is a sense of positivity
about the system as the KZN region continues to adapt to it.

A recalibrated roll-out plan is underway, and management remains confident that modernising the
business through this solution will deliver significant benefits to SPAR and its independent retailers.


SPAR POLAND UPDATE

Shareholders are again referred to the Interim Results wherein Shareholders were advised that
the Board was considering various strategic business options in Poland and would announce its
decision in due course. Having evaluated and considered all options, the Board believes that it is
in the best interests of the Group and Shareholders to engage in a process to dispose of its
interests in Poland. Additional information will be provided as the process progresses.


BANKING FACILITIES

As stated in the Interim Results, at 31 March 2023 SPAR breached its Group leverage covenant,
influenced by the weakening of the rand and translation of foreign debt into reporting currency
coupled with decreased profitability. At the time, the Group’s financiers approved a waiver of
SPAR’s breach of the Group leverage covenant. The various challenges impacting profitability in
the first six months of the financial year have persisted into the second half of the 2023 financial
year. Extensive and ongoing engagements are being held with all financiers who remain supportive
of the Group and no covenant breaches are expected at year end.


CHANGES TO THE BOARD AND BOARD COMMITTEES

Shareholders are referred to the announcements published on SENS on:

   •   Friday, 28 July 2023, advising of the appointments of the Group Chief Executive Officer,
       Angelo Swartz, with effect from 1 October 2023 and Group Chief Operating Officer, Megan
       Pydigadu, with effect from 1 November 2023 (“Executive Appointments”); and
   •   Wednesday, 30 August 2023, advising of the appointment of Trudi Makhaya as an
       independent non-executive director, with effect from 1 September 2023 and the resignation
       of Marang Mashologu as an independent non-executive director with effect from 30
       September 2023 (“Board Changes”).

Due to the abovementioned Executive Appointments and Board Changes, the Board wishes to
notify Shareholders of the following changes to the composition of the Board and Board
committees:

   •   Mike Bosman will reassume the position of Independent Non-Executive Chairman of the
       Board, with effect from 1 October 2023
   •   The discontinuation of Lead Independent Director role on the Board, with effect from
       1 October 2023, as a result of the recent appointment of Dr Shirley Zinn as Independent
       Deputy Chairperson and Mike Bosman reassuming his role as Independent Non-Executive
       Chairman
   •   The appointment of Lwazi Koyana as Chairman of the Risk Committee, with effect from
       1 October 2023
   •   The appointment of Angelo Swartz and Megan Pydigadu as members of the Risk
       Committee with effect from 1 October 2023 and 1 November 2023, respectively
   •   The appointment of Trudi Makhaya as a member of the Risk Committee and the Social,
       Ethics and Sustainability Committee, with effect from 1 October 2023


PRE-CLOSE CALL WITH INVESTORS

Management invites all interested stakeholders to join them for a pre-close call today, Thursday,
28 September 2023 at 11h00 (SAST). Interested parties that would like to join the call should
please email Desiree Friend at: desiree.friend@rmbmorganstanley.co.za.


ANNUAL RESULTS

The financial results for the year ending 30 September 2023 will be released on SENS on or about
Thursday, 30 November 2023.


Shareholders are advised that this announcement does not constitute an earnings forecast, that
the financial information provided herein is the responsibility of the directors, and that such
information has neither been reviewed nor reported on by the Group’s auditors.
By order of the Board


Pinetown
28 September 2023

Sponsor
One Capital

Corporate Broker
Rand Merchant Bank, a division of FirstRand Bank Ltd

Date: 28-09-2023 09:00:00
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