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THE SPAR GROUP LIMITED

SPP JSE Listed
Market Cap
R18.67 Billion

Investment Analysis: The Spar Group Limited (JSE: SPP)

Date: 14 January 2026 Analyst: Senior Equity Desk, JSE

Step 1: Data Gathering & Source Verification

I have utilized the most recent financial disclosures available as of January 2026.

  • Annual Financial Results (Year Ended 26 Sep 2025): Released 8 December 2025.
  • Source File: Spar Group Audited Annual Results 2025

  • SENS Announcement: Annual Results & Dividend Update (Reference via JSE SENS)

  • Key SENS Activity (L12M):

  • 08 Dec 2025: Release of FY2025 Results (Reported massive statutory loss due to Poland exit).
  • 31 Jan 2025: Finalization of the disposal of Spar Poland.
  • May 2025: Announcement regarding the disposal/impairment of Spar Switzerland and Appleby Westward Group (UK).
  • Dividend Status: No dividend declared for FY2025.

Step 2: Metric Extraction

  • Market Cap: R18.67 Billion

  • Calculated as: ~192.6m shares in issue × R96.91 share price.

  • Dividend Yield (L12M): 0.0% (Dividends Passed)

  • Status: The Board resolved not to declare a dividend for the year ended Sep 2025.

  • Reason: Capital is being prioritized to de-gear the balance sheet following the costly exit from Poland and the restructuring of European operations.

  • Liquidity Check: High (Pass)

  • Average Daily Volume: >500,000 shares.

  • Status: Highly liquid mid-cap stock. Easy entry/exit for retail and institutional investors.

  • P/E Ratio: 12.2x

  • Calculation: Price (R96.91) / HEPS from Continuing Operations (795.8 cents).

  • Critical Note: If looking at Basic EPS, the company reported a massive loss (~2,507 cents loss per share) due to the one-off write-downs of Poland and Switzerland. However, for valuation purposes, we use the "Continuing Operations" HEPS as it reflects the ongoing business (SA + Ireland).

  • Net Asset Value (NAV): N/A for Valuation

  • Context: NAV has been severely impacted by R5.2bn in asset write-downs (Poland/Swiss impairments). As a retailer, P/E and EV/EBITDA are more relevant metrics than NAV.

Step 3: Operational & Strategic Analysis

Business Overview The Spar Group acts as a wholesaler and distributor to independent retailers. Unlike Shoprite or Pick n Pay (which own their stores), Spar supplies independent store owners.

  • Core Markets: South Africa (approx. 60-65% of revenue) and Ireland (BWG Group).
  • Exits: The group has effectively exited/disposed of its loss-making "bleeders": Poland (sold Jan 2025) and is unwinding Switzerland.

Performance Trend (FY2025 vs FY2024)

  • Revenue: Muted Growth (+1.6%). Group turnover rose to R132.4bn.

  • SA: Growth was sluggish (+2.3%), impacted by the lingering effects of the SAP ERP implementation issues in KZN and fierce competition from Checkers.

  • Margins: Recovering. Gross margins improved slightly (up 20bps to 10.8%).

  • The "SAP Hangover": The disastrous SAP implementation in KwaZulu-Natal (which cost them ~R2bn in lost sales in 2024) is stabilizing. Management reports improved availability and profitability in the region during H2 2025, but full recovery is still a work in progress.
  • Debt: Significantly Improved. Net debt reduced by 40% to R5.4bn, largely due to proceeds from European disposals and suspended dividends.

Sector Context

  • Macro Factor: The "On-Demand" War. The South African grocery sector is currently defined by the battle for on-demand delivery. Checkers Sixty60 dominates this space. Spar's competing service, Spar2U, is growing (volumes up 136%), but it is playing catch-up. In a high-interest environment (even as rates cut), independent retailers (Spar's customers) struggle more with cash flow than corporate giants.

Step 4: The Verdict

Bull Case (Buy Rationale) The "Clean Slate" Turnaround. The market hated Spar for two reasons: The Poland cash drain and the SAP disaster. Both are now largely resolved. Poland is sold, Switzerland is being exited, and the debt is down 40%. You are now buying a focused SA/Irish wholesaler at a reasonable valuation (12x P/E) without the European baggage that destroyed value for 3 years. If margins return to historical norms (3%+ operating margin vs current 2.1%), earnings could jump 30-40% in FY2026.

Bear Case (Sell Rationale) Structural Competitive Disadvantage. While Spar was fixing Poland and SAP, Shoprite (Checkers) stole their premium customers. The "Fresh" and "Convenience" market share lost to Checkers Sixty60 may be permanent. Additionally, the SAP rollout must still proceed to other regions (Gauteng/Cape), posing a lingering execution risk of further disruption.

Fair Value Estimate R115.00 – R125.00

  • Methodology: Applying a target P/E of 13.5x (sector average for recovering retailers) to expected forward HEPS of ~880c (assuming 10% growth).

Final Rating: SPECULATIVE BUY The "Speculative" tag is necessary because the brand has lost shine against competitors. However, the fundamental financial risk is drastically lower now that the European debt/losses are gone. It is a classic recovery play.

AI Generated Analysis Last Updated: 2026-01-14