Good day, and thank you for joining us as we present SPAR's annual results for the financial year ended September 2025. This year was defined by deliberate focus. We concentrated on strengthening our core, simplifying our portfolio, and building the foundations for future growth. We made tough decisions, navigated uncertainty, and most importantly, we remained committed to our independent retailers, who, through their resilience, grow our brands in the communities they serve. I'll start with a brief overview of the year and our strategic progress. Megan and I will then take you through the operational performance across Build it, and SPAR Health, followed by Reeza with a financial review. I'll return towards the end to discuss our strategy, our outlook, and the roadmap we're executing against. This financial year required disciplined execution. We were operating in a context of shifting consumer behavior, margin pressure, and the aftermath of legacy issues.
We responded by focusing relentlessly on what we know best: distribution excellence, retailer enablement, and local partnerships. You will see that the performance is modest, but the direction of travel is unmistakably positive. We serve more than 2,000 entrepreneurs across Southern Africa, Ireland, and Sri Lanka. We are not a chain. We serve a network of independent entrepreneurs tied to their communities, and our role as a group is to empower them to succeed. The value of our independent retailers is that they can adapt faster, they localize, and they protect their customers. Our portfolio is balanced across premium, value, and emerging retail channels. That balance matters in a world where affordability and convenience are defining consumer choices. Where markets are volatile, when affordability shifts, and when formats change and capital costs increase, the model that survived is the model that's closest to the consumer.
Across our territories, trading conditions were mixed. Inflation, consumer strain, and format disruption continued. In Southern Africa, macroeconomic conditions have shown some improvement. Food inflation eased to 4.5% in September, down from 5.1% in June, primarily due to lower fuel prices and greater energy stability. These positive shifts have also helped reduce logistics and distribution costs. Meanwhile, consumer behavior is evolving, with a noticeable move towards value-driven purchasing and an increased preference for online grocery platforms. Ireland's macroeconomic outlook remains positive, with GDP growth projected at 9%. The environment is stable, characterized by a low unemployment rate of 4.5% and a 25-basis-point interest rate cut implemented in June 2025. Nevertheless, consumer confidence is subdued, reflecting ongoing cost-of-living pressures. In Sri Lanka, reform and IMF support stabilized the macro environment.
With GDP improving and consumer confidence returning, this is an early-stage market with strong growth potential that requires disciplined capital and local partnership. These are not headwinds we shy away from. These are the realities we are actively responding to, with new formats, digital models, and private label growth. Our story in 2025 is simple. We went back to our core: distribution excellence that empowers independent retail. We simplified the group through strategic disposals. We reduced debt and removed distractions. Despite tough trading conditions, momentum across our brands improved, supported by clear execution. We delivered growth in adjacencies, proving our ecosystem can expand without losing focus. Our partnerships with independent retailers remain our greatest asset, and everything we do is designed to help them win in their communities.
Through disciplined cost and capital management, we strengthened the balance sheet, and this translated into strong free cash flow, reflecting the working capital improvements we put in place. This is the foundation we take into 2026: focused, disciplined, and positioned for the future. Group turnover increased 1.6% to R 132.4 billion, operating profit improved by 2.3% to nearly R 2.8 billion, and importantly, cash generation strengthened materially, up 13.4% to nearly R 5.5 billion. Group leverage reduced to 1.74 times, a material step forward, HEPS declined, reflecting higher financing costs and a higher effective tax rate. We made the decision to address impairments proactively and transparently. The group's balance sheet has been cleaned. Our non-financial indicators reinforce the same story. Retailer loyalty has started to recover, digital adoption accelerated, and our commitment to job creation and social impact increased. We added jobs through our rural hub model, and we increased our CSR investment.
We were pleased to have been recognized in the year, a testament to our partnerships, execution, and the trust our customers place in us. The Advantage Group International recognized Build it as the number one retailer in hardware and DIY, and SPAR Brands as the leading private label player in the country. In Ireland, BWG Foods was named National Food Service Supplier of the Year. Southern Africa turned the corner in the second half of the year. Wholesale revenue grew 2.3% year-on-year. Grocery and liquor growth was modest but improved materially through H2, growing 2.9% compared to the 1.1% in H1. Build it delivered a solid performance, and SPAR Health outperformed, demonstrating the resilience of essential categories. Megan will unpack these a little later. Retail sales in grocery and liquor grew 2.1%, with like-for-like growth of 2.2%.
Transactions were slightly down, but baskets grew 3%, showing the consumer is more intentional in value seeking. In liquor, retail revenue increased 3.8%, and we maintained a healthy gross profit mix. This shift in category mix, particularly into low-alcoholic drinks, helped defend volume while protecting pricing power. In omnichannel, our approach is very deliberate. SPAR and TOPS 2U is now active in 636 sites, and Uber Eats at over 300 sites. The Uber Eats integration created immediate convenience revenue without adding complexity to store operations, and it is working. Total order volumes are up 136% year-on-year, demonstrating real consumer adoption, not promotional spikes. We also integrated SPAR Mobile fully into SPAR Rewards. That has unlocked a powerful data ecosystem with 11.4 million loyal members, up 33% year-on-year. This scale gives retailers the ability to personalize offers, target baskets, and defend share in price-sensitive communities, and finally, Flex continues to gain traction.
Over 1,400 stores are actively using the platform, while investing in omnichannel. These are platforms that support independent retailers and protect our market share. The dual-platform strategy that we have adopted is starting to pay dividends, and e-commerce numbers are beginning to become far more meaningful. The introduction of SPAR and TOPS on Uber Eats has driven positive incremental growth without eroding the 2U business in any way. It's important that we allow the customer to choose not only the digital channel they shop in, but also to make sure that we differentiate clearly between 2U and Uber Eats. The focus on SPAR and TOPS on the 2U app will be differentiated mainly by enabling the personalization of your store on the app.
This will start with unique landing pages, category callouts, and larger store unique ranges, evolving and becoming shaped by you as our retailer and the nuances of your community. This really brings to life the concept of MySPAR and offers us a unique value proposition versus purely speed and price. We offer on-demand deliveries within 60 minutes, scheduled delivery, as well as click-and-collect options. Uber Eats is a pure convenience play and aligns nicely with SPAR's original value proposition of convenience. With 6.5 million active users, the focus is largely on immediate demand. We're aligning the branding and design principles on the Uber Eats app with what consumers see on SPAR2U. The intention is to offer a smaller range of between 2,000 and 3,000 SKUs, with delivery times between 15 and 45 minutes. SPAR Mobile, SPAR Rewards, and Flex are not simply apps. They are digital infrastructure.
They deepen engagement. They create new revenue streams and build data assets that help retailers make smarter decisions. Flex usage continues to scale as more stores take up usage to manage digital orders, stock accuracy, and customer engagement. Since its launch in March 2025, SPAR Mobile has reached over 700,000 subscribers and integrated with SPAR's retail systems, linking mobile services to point-of-sale loyalty apps and promotions to trigger instant discount and data rewards at checkout. Managed by Ignition Group and powered by MTN, subscriber verification and reward performance are supported by real-time reporting. To date, over 7.5 million baskets have included data-linked purchases, and the platform has continued to grow through eSIM readiness, new bundles, and broader coverage. A critical part of our turnaround is format discipline. Gourmet is designed for higher-frequency, premium convenience shopping. It guides differentiated in-store experiences: fresh bakery, deli food to go, coffee, café culture.
It attracts discretionary spend that is less elastic to price. SaveMor sits at the other end of the spectrum and offers affordable, simplified, capital-light retail with fast stock turn and strong cash generation in lower and middle-income catchments. Both formats expand their addressable market and retain retailers at risk of migrating to value-only competitors. Shopper attention today isn't won at the top. It's won through relevance. Our online SPAR offerings like Food Stall, Chicka Chicken, Fire & Grill, and Bean Tea create reasons to enter the store, not just reasons to pay. We've made payments seamless with digital vouchers and gift cards, now active in 1,300 stores, catching spend before a shopper even walks in. Through GuestCX, we're standardizing the in-store experience across more than 1,000 retailers that protects the brand and converts visits into repeat behavior.
Coffee continues to be a powerful footfall catalyst, whether through Vida e Caffè or our own Bean Tea solution, and Frozen For You gives us premium convenience available in-store and on SPAR2U, meeting shoppers where they are and how they shop. Vida e and Frozen For You are two proudly South African brands, and we pride ourselves in partnering with local, quality brands and local entrepreneurs. I'll now hand over to Megan, who will take us through Pharmacy and Build it.
Morning, everyone, and thanks, Build it continued to grow in line with the markets, with retail sales growing at 4.3% and on a like-for-like basis at 6%. The business has benefited from a strong performance at retail, and the continued supply of microloans to consumers by finance houses assisted most notably by Capitec. We ended the year with loyalty at 67.8%, slightly down from 68.4% in the prior year.
Our loyalty results reflect the combined effects of retailer stock efficiencies in freeing up cash flow, intense competition in the wholesale markets, and cross-border forex complexities impacting Build it stores in neighboring countries. Subsequent to year-end, we have exited Mozambique with a retailer who operated the brand. We will be looking at alternatives and how we reposition the brand in Mozambique, as well as ensure supply into the territory. We saw the launch of Build it Rewards in September, which is a fully funded retailer customer rewards program and is based on retailers opting in. Currently, we have 87 stores signed up. We have finalized the first phase of development for the Build it 2U mobile application. The public launch will follow once we have achieved critical mass in retail store onboarding, with rollout expected in the first quarter of 2026. We have also been focused on costs and profit optimization.
This has resulted in us reviewing our imports warehouse, which is largely for our house brands and accounts for 7% of our revenue. This has historically been a loss leader. As a result, we have streamlined our lines and cut back from 3,700 SKUs to 1,500 SKUs. Ultimately, we are looking at more cost-effective measures to serve our retailers while still maintaining the Build it house brand sea of red in stores and will be effecting changes in how we do this. Lastly, from a strategic perspective, we have reviewed our strategic model both from a wholesaler and retailer perspective. It is key for our retailers to make sustainable margins and profits and that we grow our market share and store footprint. Historically, our business has been heavily weighted towards wet and building materials.
We are now gradually repositioning retail to increase the contribution from categories three and four, which is general hardware, finishes, plumbing, electrical, and decorative items, which carry higher gross profit margins. This does not mean we will reduce focus on our wet trade. On the contrary, our ambition is to maintain and grow wet trade volumes while simultaneously strengthening our category three and four contributions at retail. Moving on to SPAR Health. Our SPAR Health business continued to make good progress, with the wholesaler growth at 8.6% and Scriptwise continuing to go from strength to strength and growing at 20%. Our loyalty was at 60%, an improvement from the prior year where loyalty was at 55%. Key to unlocking our loyalty and growth outside of pharmacies and into the hospital networks is ensuring we have a national footprint.
We have made good progress with the recent conclusion of our Theacor in the Western Cape, which will allow us to reduce our cost to serve and enable us to grow our footprint and loyalty in the region. We are on track to establish a distribution center in KZN in H2 of the 2026 calendar year and then also have a solution for the center of the country via Bloemfontein. Our business has been built on the pharmacy and script part of the business, and we have seen chronic scripts up more than 25% in our pharmacies. We are looking at the development of the front of store and how we position ourselves in the wellness space. We have big ambitions for our health business and believe we bring a differentiation to the market for independent pharmacists and customers who want to have a connection to their pharmacist.
Moving on to the fun bit. Core to what we do is build brands and support independent retail. From concept to launch, we created PetStori within nine months, and it's a store with a difference. The ethos of the brand is warm and fun and encouraging pet owners to bring their pets into stores. We saw a gap in the market where independent retailers don't have the power of a single brand behind them, nor the purchasing power to ensure they can compete with the corporate chains. We have created PetStori as a franchise brand, and with the purchase of Pet Masters and the launch of a few franchise stores, we have 12 stores currently operating. We have seen significant interest and take-up for PetStori and have a very healthy pipeline, especially amongst our retailers. Thank you, and back to Ange.
Thank you for that, Meg.
Ireland continues to validate the strength of the independent retailer model. This is one of our most mature portfolios, and it continues to demonstrate the strength of the independent retailer model. Turnover reached EUR 1.7 billion, and wholesale revenue grew despite a competitive market. When you look at the segment and category, 62% of the revenue is retail, supported by strong in-store execution and high-frequency shopping. Food service now contributes 13% of turnover and continues to grow exceptionally strongly. On the category side, groceries are the anchor, while tobacco continues to decline structurally, a trend the business has already priced into strategic decisions. The takeaway is this: Ireland is not dependent on a single lever. Its resilience comes from channel diversity, disciplined pricing, and a strong network of retailers. At an operational level, the recovery in the second half was meaningful.
Retail performance improved with food inflation normalizing and strong summer weather. The new SPAR strategy rolled out well, and Mace refits and new stores are already delivering results. We also launched the Bean Tree coffee brand, which is now in 30 stores, a good example of how we're driving incremental basket value and high-margin convenience. On wholesale, performance reflects disciplined execution. Gross profit margins improved, driven by category mix and pricing discipline. Overheads were tightly managed, and we saw clear benefits from distribution and fuel efficiencies. Service levels from the depots remained exceptionally strong at 97.6%, and the food service channel continues to be a standout. Hospitality-led sales increased significantly year on year, underpinning wholesale growth. Overall, food service volumes are growing ahead of the market, and we continue to invest in infrastructure and fulfillment to support that trajectory.
In short, this is a portfolio that is performing well, investing appropriately, and positioned for continued expansion. Sri Lanka is a genuine growth story. Footfall increased 15%, items sold 6%, and we grew our network by 12 stores: one corporate and 11 independents. Currently, we have 42 stores in Sri Lanka: 13 SaveMors, 11 SPARs, 8 TOPS stores, 3 SPAR Express, and 7 pharmacies at SPAR. Private label and SPAR2U adoption is growing, and SPAR Rewards launched in November. This may be a smaller portfolio today, but it is one with the right fundamentals: trust, convenience, and retail entrepreneurship. Reeza, I'll take you through the financials.
Thank you, Angelo, and good morning, everyone. Before I get into the numbers, just some housekeeping matters as far as the results are concerned. I've covered some of this at interim, but let me run over it again.
Firstly, the realignment of the reporting periods to the retail calendar. We are now reporting on 52 weeks' earnings rather than 365 days. Prior year comparatives in the presentation have been adjusted. We have disposed of the Swiss operation and continue to treat the UK as held for sale, which we have impaired to fair value. In addition, we have reassessed the carrying value of the corporate store portfolio in SA. Previously, the designated CGU was the distribution centres through which we serviced and acquired these stores, and we have changed the way we manage the portfolio and have designated the CGU to be the store. This has resulted in the impairment of around ZAR 585 million during the year, which is shown as an adjustment to headline earnings.
For earnings per share and headline earnings per share, we have a few numbers: earnings from total ops, from continuing ops, and from continuing ops normalized for 52 weeks. The important number is, of course, HEPS growth from continuing operations on a 52-week comparable basis. Please bear this in mind when considering the results. The statutory results will be disclosed in the AFS, but the focus in this presentation is on comparable 52-week results from continuing operations, as this is the best indicator of underlying performance. Group cash flows are not split between that of continuing and discontinued operations. However, I do have a separate slide showing the free cash flow from continuing operations. Just moving on to financial highlights. Some key financial highlights here. Angelo would have touched on this earlier, but it is worth repeating.
A set of results reflective of the challenging and competitive trading conditions in the various geographies. In a muted top-line environment, our focus has been on protecting margins, managing costs, and improving cash flows, and of course, strengthening our balance sheet. Turnover from continuing operations is up 1.8% in constant currency, with 2.6% growth in the second half. There's been strong margin management in both SA and Ireland. SA is up 4.4%, with Ireland up 2.2%, both reflecting positive draws with higher-than-sales growth. The SA operating profit is up 6.8%, 8.8% in the second half. This is also very encouraging. We have work to do in getting to our margin targets, and Angelo will cover this a bit later, but the trajectory is in the right direction. Our Ireland operating margin came in at 3.3%, and Ireland PBT is marginally up on last year.
Working capital and cash flows were well managed during the period, with CapEx also tightly controlled. Then moving on to net borrowings. Net borrowings are reduced by 40% over the year, with SA gearing at 1.75 times. And this is post the outflows for the exit of Poland and Switzerland as part of the sale of those businesses. Ireland gearing at 1.7 times, marginally up on last year due to the UK EBITDA losses this year. And when considering headline earnings per share growth, which is down on last year, please bear in mind that the interest costs and the associated tax, which I will expand on a little bit later, these impacts should dilute as we settle the SA facilities used to exit our offshore operations.
And then return on capital employed at 14% for the year adjusted for impairments, above our weighted average cost of capital and up on last year, reflecting our commitment to the most efficient use of capital. Then moving on to the group income statement, continuing operations adjusted for the retail calendar. Group turnover is 1.6% up on last year. However, this is after translation effects, and I will unpack the SA and Ireland results separately, with the second half sales coming in stronger for SA. We have seen margin expansion during the period. The group managed an increase of 1.7% or 20 basis points despite a muted top line. Net operating expenses are up 3.9%. There are a few increases and decreases in year, and the growth in expenses should also be seen in the context of other revenue and income growth, which was up 6.6%.
And also the investment in transformational initiatives in South Africa, rising wage costs in Ireland, offset by lower supply chain and logistics costs. But generally, costs have been very well managed across the group. The cost disciplines at our DCs are exceptional, and as we progress through our transformation journey, we invest in additional capacity and capability at the centre like we have this year. Operating profit is up 2.3%, which is marginally better than the GP margin growth of 1.7%. Net finance cost was up significantly at 19.1% due to the high interest costs on the offshore debt assumed in South Africa. And then extraordinary items are significant at almost ZAR 750 million, but relate mostly to the corporate store impairments and the write-down of a piece of land that we own in the West End.
So before moving on to the segmental analysis, I just wanted to connect the dots from the operating profit improvement of 2.3% to the HEPS decline of 8.9%. So as we alluded to, this is in the main due to interest cost growth and a high effective tax charge, both of which have grown in excess of operating profit, which gives us the negative leverage. Interest costs was up 19.1%. I mentioned that before from settling the Poland offshore debt from SA, and we expect to see less of an impact as we de-leverage going forward. The same goes for the tax line.
On unproductive or non-productive interest, not a commonly understood concept, but interest incurred on payments made in cases like Poland to settle offshore debt is deemed not to be in the production of income in South Africa from a tax legislation point of view and therefore is not tax deductible. So the impact in 2025 was to increase our effective tax rate by 4.2%, and we expect it to still have an impact on our blended group rate over the next two years, albeit declining as we deleverage. The Ireland corporate tax rate is, of course, 12.5%, and SA is at 27%. All right, moving on to segmental results, starting with the Southern Africa income segment. The Southern Africa segment delivered top-line growth of 2.3% on a 52-week comparable basis, while GP and operating profit maintained solid momentum, up 4.4% and 6.8% respectively.
The core SPAR business saw overall modest growth, high single-digit growth in the lower end and the upper end showing a decline, reflecting the competitive nature of the SPAR end of the market. Turnover growth in the core SPAR business was also affected by low inflation in key categories. The loss and closure, I've mentioned this before, of 13 stores in the South End, the Mozambique looting, and also the floods in the North End. The second half saw a marked improvement in sales, with SA up, which is a significant shift from H1, still not where we wanted to be. Loyalty remained stable and availability improved, and on-demand again grew exponentially off a low base, with very strong take-up in Uber Eats. Build it sales was muted in H2 with adverse weather. However, SPAR health saw strong growth driven by Scriptwise sales.
GP margin was up 20 basis points to 9.7% despite the high proportion of dropshipment and liquor sales within our groceries and liquor business. So this is generally margin dilutive. And other revenue income was up due to higher contribution from suppliers and also value-added services. We have seen lower warehousing and distribution expenses due to the drop in the fuel price and also with a focus on efficiencies. And the central and head office costs were up due to the investment in new initiatives and transformation. We incurred incremental SAP costs this year, as well as investments made in back-office systems and to strengthen our digital and tech capabilities. And from a DC point of view, the KZN DC continued to turn around, going from a loss last year to a profit this year.
Although I have to say there is still a lot of work to be done to get the DC to normalized profit levels. So this overall performance, together with continued focus on cost discipline, assisted in a modest operating margin expansion of 10 basis points to 1.7%. Angelo will cover the road to the 3% margin, which we have done extensive work on. Then moving on to Ireland, our consistent performer in the portfolio continues to deliver in a mature and highly competitive market with improved GP and stable operating margins, as well as lower finance costs through the effective working capital and cash flow management. So Ireland top-line revenue is essentially flat on last year, but I want to highlight a few things. This is a very, very competitive convenience sector in Ireland.
We also saw the loss of a few stores, including two EUROSPARs, which were planned for, and then the second half growth, as I mentioned before, was stronger, with Easter and a longer summer with higher impulse buying from consumers. We've also seen high inflation in certain categories like cocoa, coffee, and protein, which affected volumes, and then tobacco is a big but also declining category, so we saw less tobacco sales, and as I mentioned, it's a mature market with store opportunities occasionally coming up with owners, for example, wanting to retire, and we are taking a careful look at these stores and the returns they generate before we acquire them, and we declined some of them this year as they do not meet the required hurdle rates.
Gross margin was up, helped by non-tobacco sales, and other operating costs were up, but driven by higher legislated minimum wage costs and IT investments, which resulted in a marginal decline in operating margin, but still a healthy 3.3%. And then, as I mentioned before, working capital, cash flows, and consequently debt has been well managed, with net finance costs down 20%. This means that PBT before extraordinary items was up 1.3%, and EBITDA is down on last year due to the losses in the U.K. business. I'll show that when we get to free cash flow. And then, of course, the U.K., we present as a discontinued operation, which I will expand on a little bit later.
And then moving on to discontinued operations, just to touch on Switzerland, we consolidated this business results up to the 8th of September, which is the date on which we completed the sale. Just to run through the income statement very quickly, sales was down 3%, reflective of the tough trading conditions. High cost of living affecting consumer confidence. We've seen cross-border shopping continue. And then the Swiss business also suffers from a lack of scale and bigger players investing in price. And then we also had the cyber incident, which we had to contend with, which was very disruptive to sales. But having said that, sales momentum did improve from the third quarter, and GP actually showed an improvement of 50 basis points. And as part of the turnaround, the team focused on product mixed SKU rationalization and optimizing promotions.
It really is an expensive operating environment, and despite the cost efforts of the team, net operating expenses were up 4.3%, also impacted by new stores, which we had committed to acquiring previously, and these came online during the year. So this resulted in a decline in operating profit from CHF 11.8 million to a loss in this year. As I mentioned, EBITDA was also down substantially. And however, the third and fourth quarters did see improved momentum with the focus on the turnaround. Moving on to the UK, and again, just touching on this very, very quickly, also touched about as a discontinued operation, but a really tough year for this business. Sales down 7.6%. The second half also showed better momentum this summer, but it was still down on last year. Tough trading environment, highly price-sensitive consumers.
There are also bigger players moving into the convenience space and investing in price, and of course, the impact of the single-use vape legislation, which came into effect in June, affected sales in this business quite substantially, actually, and then gross margin was down 60 basis points, and this together with the lower sales means that GP was down 9.5% for the year. Expenses was up 1%, resulting in an operating loss for the period of EUR 6.2 million, and this business made an EBITDA loss this year. Moving on to the group balance sheet, what we have shown here is the balance sheet from continuing operations for 2025 and adjusted 2024 for discontinued operations to make sense of the movements in key balances, so the balance sheet was impacted by translation, about 1% on closing rates, especially obviously on the Irish numbers. Working capital was well managed.
Stock was marginally up, but was in plan. Receivables also higher, impacted by the earlier close on the 26th of September. Payables benefited a little bit more from the earlier cut-off. I mentioned this before, reduced gearing was a priority for the group, and this was largely achieved. Gearing was down from ZAR 9.1 billion to ZAR 5 billion. We've also seen equity reduce substantially by ZAR 5 billion due to the impairments, which was partially offset by earnings growth during the period. Just to cover impairments recognized during the year, obviously significant at ZAR 5.2 billion. With Switzerland, we're out of ZAR 3 billion ahead of the disposal. That was processed at the half year.
The AWG and the UK write-down of the assets was about ZAR 1.6 billion, a further ZAR 4 million in the second half to reflect the most recent estimate of carrying value. Then, of course, the SA corporate stores. In the second half, we changed the way we defined the CGU related to SA corporate stores from being part of the distribution centre cash generating unit to the lowest level of CGU being the store itself, resulting in that ZAR 585 million impairment. We move on to group borrowings. Total debt is down from ZAR 9.1 billion to ZAR 5.4 billion. I've said that a few times, but that is a significant achievement, which we are quite proud of. All covenants have been met with adequate headroom across all facilities. As mentioned previously, the refinancing of our SA facilities was finalised at the end of March.
There was good appetite for the term debt and the GBFs, and at really good margins, very competitive margins. And of course, I mentioned this before, the SA leverage has reduced despite the offshore outflows, which reflects the strong cash generation ability of our business. Working capital benefited from the earlier close, and we are carrying some of the 2025 planned CapEx into 2026. And Ireland, I've covered this before as well, is well under control and has been constant, slightly up on last year, but that's mainly due to the lower EBITDA coming out of the UK. All right, moving on to free cash flows. So I've opted to do free cash flows a little bit differently this time, essentially because of the discontinued operations and also the cash flows from SA out in respect of the offshore operations. So we start with EBITDA, CapEx, interest, tax.
Then look at Group EBITDA, which is marginally down on last year. Ireland includes the U.K. It wouldn't be correct to exclude the U.K. as it's from one funding pool, and the cash flow is effectively treated as one. Working capital has shown a substantial inflow, obviously benefiting from the earlier close, but also good working capital management. Then free cash flow for the period was about ZAR 2.2 billion. Then post that, we show the outflows relating to international operations. For 2025, this amounted to about ZAR 2.3 billion, and that, of course, includes the transaction costs. So significant outflow, and the net use of cash in 2025 was ZAR 133 million. As mentioned, the above working capital benefited from the earlier close, and CapEx was somewhat underspent.
But however, if one were to exclude the offshore outflows and adjust it for the working capital and CapEx, our net debt would still be substantially lower than what we have shown in the table, which reflects the strong cash flow generating capability of this business. And I'll leave you to make some of those calculations. No doubt we'll get some questions on that. Then moving on to CapEx, total CapEx was lower than planned due to the phasing of spend this year, but this is expected to increase with rollovers into 2026. So we've given you a forecast of 2026 and 2027 and 2028, but these are high-level forecasts. But we do, and I've said this before, we do expect CapEx to settle at an annual spend of about 1% of turnover as we have guided to previously. Maintenance and SAP CapEx at more or less stable levels.
We've shown you what we've spent this past year, and SAP is expected to fall away after 2028. So on closing, we have a number of moving parts in these numbers on both the income statement and the balance sheet. And I'll admit that it is a bit noisy, not easy to unpack, but hopefully we've done a decent job in cutting through the noise. But this is also a function of the year that we've had with disposals, discontinued operations, and also impairments. So with the exception of the U.K., which we continue to hold as discontinued ops, we would have done most of what I call the cleanup in 2025. And next year, both the balance sheet and the income statement should be easier to digest. But we are fundamentally a different group than we were a year ago.
Just in closing, just reflecting on the reporting period, I think we've made significant progress, especially from a finance perspective. Firstly, the sale of Poland and Switzerland has resulted in a simply much simplified group. These businesses did not fit the investment thesis of the group and were dragged on not just capital and returns, but also management time. We will focus our valuable capital and our time on South Africa and Ireland going forward. These offshore businesses also came with not just getting exposure to the SA business, but also parent guarantees, bank guarantees, legal regulated exposures, and of course, reputational risk. In the case of Switzerland, this manifested itself in the form of the Comco fine, which we settled as part of the sale.
Just in terms of the refinancing of the SA facilities, Angelo also touched on this, and the reduction of the SA debt levels. Again, just want to remind you, this is despite the significant outflows this year relating to the international operations and the sale. Then we've also proactively cleaned up the balance sheet, and we have taken ZAR 5.2 billion worth of impairments this year, including the write-off of goodwill and the lease assets related to the SA corporate store portfolio. The balance sheet is now a better reflection of the underlying values of assets and also the capital structure of the business now and going forward. I think working capital disciplines have always been strong in this business, but the position continues to improve and the disciplines continue to improve. We have a capital allocation framework, and this is also being embedded within the business.
Then on the 3%, this is very important to investors. We have done extensive work on the pathway to 3% operating margins in South Africa, both in terms of identifying initiatives, setting KPIs, as well as realistic timelines for achievement. This is in terms of growth initiatives, margin improvements, as well as costs and efficiencies. Stretch targets will be set internally and additional opportunities identified, which will give us the best chance to get to the 3%, and hopefully we exceed it by 2028. Performance will be tracked and executive scorecards will be aligned. I believe this is eminently achievable, and our aim is to underpromise and overdeliver here. Then just finally, we have previously committed to dividends and/or returns to shareholders in the form of share buybacks over the short to medium term.
We fundamentally, I believe, that our shares are undervalued, and investing in our own shares in the short term might be the best way to create value for shareholders in the interim before we commit to a longer-term dividend policy. Thank you very much, everyone. I will close here, and I will now hand you back to Angelo.
Thank you, Reeza. Our foundation is solid, a resilient network of independent retailers, trusted brands, and teams committed to disciplined execution. We have clear strategic goals: grow the retailer base and retailer loyalty. Loyalty is not a marketing mechanic. It is a mechanism for stability, purchasing power, and network resilience. Expanded adjacencies that naturally complement our core: healthcare, pharmacies, Scriptwise, pet store. These are EBITDA positive, defensible growth nodes, not distractions. Rebuild the balance sheet and protect capital discipline. We removed complexity. We exited non-core geographies. We reduced debt, and we reset expectations internally and externally. Deliver a Southern Africa operating profit of 3%, not through price increases alone, but through supply chain efficiency, SAP normalization, centralizing procurement, loss reduction in our corporate stores, and monetizing digital media. We are focused on sustainable, measurable growth through solid operational execution.
This slide is important because it demonstrates the path to a 3% operating margin in Southern Africa. We have analyzed every lever in the value chain: supply chain, distribution, retail operations, procurement, and margin expansion, and assigned measurable actions with timelines. The 2025 base of 1.76% is our starting point. The target is clear: 3.35% for gross rand decline by 2028 and 3% for the Southern African segment. Incremental growth before efficiencies and centralization. We stabilize our base and grow where we already compete. This is delivered through KZN business stabilization, supply chain enhancements to improve efficiency and reduce out-of-stocks. Importantly, this growth is organic, not dependent on acquisitions or pricing actions that erode competitiveness. The next meaningful driver comes from improving non-product flows through the business. We are optimizing non-trade procurement, reducing corporate store losses, and streamlining accounts payable and the dropshipping process.
These actions hit the cost base directly and free up working capital. They are measurable and already in execution. Centralization and efficiency. This is where economies of scale become meaningful. Normalizing SAP costs, unlocking the benefits from CSNx, and running standardized processes across regions will deliver structural savings. We are also implementing enterprise cost discipline, group and head office efficiencies that reduce fragmentation and duplication. This is a cultural shift. Every hand must work harder. GP expansion and other income. The margin opportunity is not only cost. Top-line profitability matters. Centralized merchandise ensures we negotiate once at scale across categories. Value-added services and private label are increasingly material contributors. These are asset-like revenue pools that enhance our return on capital. These levers deepen retailer loyalty and create new monetization avenues without inflating consumer prices.
Cumulative impact is a disciplined climb to 3.35% in gross margin line and aligned with our ambition of 3% for the Southern African business. We are not relying on one silver bullet. It is a portfolio of improvements, each accountable, sequenced, and owned by specific leaders in the business. This is how we protect and expand the earnings base and how we deliver long-term value creation for shareholders. Loyalty in our world is not a marketing mechanic. It is a way of life. It protects revenue certainty, stabilizes input pricing, aligns retailer behaviors to the network, attractive procurement rebates, private label, and digital ecosystems on the mechanisms we are utilizing to grow and maintain loyalty rates. These are structural mechanisms that improve retailer profitability and shopper stickiness. We have learned painful lessons on systems transformation. We have completely reset our approach.
The next phase of our ERP rollout is harmonization across finance. Wholesale transformation will follow phased sequence deployment, beginning with Eastern Cape and concluding across all DCs by the first quarter of FY28. We are not chasing speed. We are prioritizing stability and accuracy. Technology is no longer a cost center. It is a multiplier of retailer profitability, stock accuracy, logistics efficiency, and working capital discipline. The next year is about execution, not reinvention. We will strengthen omnichannel integration, grow private label, support retail economics, and unlock procurement efficiency. We will scale SPAR Mobile and monetize digital reward ecosystems. We will complete the integration of health assets and scale our adjacent categories. Our strengthened balance sheet gives us optionality. As we stabilize margin and earnings, we will return value to shareholders in a disciplined manner, not at the expense of long-term resilience. Governance has improved immeasurably.
Accountability has sharpened, and leadership teams across the group are aligned. Thank you for your time today and your continued confidence in the SPAR Group Limited. We welcome your questions and feedback.
Thank you, Angelo, Reeza, and Megan for that. Now we jump straight into Q&A. Reeza, we noticed we didn't see any EBITDA numbers. Can you maybe give us an overview of EBITDA for the 2025 year?
Thank you. Thank you, Reeza. The total group EBITDA was about ZAR 3 billion, and in terms of continuing operations, SA was ZAR 1.8, ZAR 1.78, and Ireland delivered EUR 62 million of EBITDA. Ireland includes the EBITDA losses from AWG, though.
Thank you, Reeza. Another one for you. Can you clarify the sequence of capital allocation? Is the first step likely to be buybacks, dividends, or a combination, and what determines that order?
Look, we have hinted at returns to shareholders over the short to medium term. I think our gearing position and the improvement in our gearing positions demonstrate that we can actually achieve that. Currently, our share price, we believe, is substantially undervalued. I mean, the usual sequence of things would be to recommence dividends once you've been, especially if you've been a dividend-paying share. However, in our case, the buying back of shares might be the best way to create value for shareholders before we commit to a dividend policy over the long term.
Done on debt reduction. Sorry. Can you provide some color on post-period trade in SA and BWG? Angelo will give that to you. A follow-up question is, what inflation are you seeing?
Thanks, Zihle. We've had fairly positive post-period trade. October was weaker than we'd like, but November has been exceptionally strong. The week of October, I think, clearly reflects a very, very strong September, and so over the three months, positive, broadly in line, probably slightly ahead of H2. The second question for BWG, BWG has also been broadly in line with the second half, slightly weaker, but broadly in line, and then for inflation, we've seen in South Africa in particular, we've seen lower inflation in the last few months. So the inflation number, these are, I think, 3.5% for the year, but we have seen weaker inflation substantially below that in the months of September and October.
Thank you, Ange. In SPAR SA, what are the upward pressures on costs that we could potentially see in FY26?
From a cost perspective, we are obviously investing in initiatives to, as we transform the business, our SAP operating expenses does ramp up at peaks in 2026, but we are busy with a number of efficiency initiatives. Obviously, we're very focused on getting to the 3% operating margin, and I think, I mean, that spans a range of activities, as Angelo expanded on in the presentation itself, and that encompasses growth, cost reduction, and operational efficiencies in the business.
Thanks, Reeza. How much of the net debt improvement was aided by working capital cut-off support? Without the cut-off support, could you tell us how much net debt would have been?
Yeah, I think in the free cash flow table that I've shared with you, the working capital position does improve quite substantially. And I would say that the improvement due to the earlier cut-off was probably about ZAR 800 million - ZAR 1 billion. However, I think you've got to also bear in mind that the cash flow that we've shared with you, £2.3 billion of non-operating cash flows actually left the business with the disposal of Poland and Switzerland. So I think you've got to look at those two in conjunction when looking at the net gearing position at the end of the day. And as I said in the presentation, I'll leave that to you to make your calculations, but it does show that we are a strong cash-generating business.
Thank you, Reeza. Could you unpack what happened with the SA margin? What led to the margins in SA ending at 1.7% versus the previously guided 2.1%-2.3% range?
Reeza, or at me?
Give that to you, Ange.
Thank you. Yeah, I think partly the business is seasonal. There's a little bit of seasonality in the business. And the second half is generally softer than the first half. So we come out of the first half at 2.1, which is under 2.1. In the second half, it was impacted slightly by three bad retailers. So ECL provisions increased. We had two large groups and a Build it store that impacted that number. And the second was KZN, while still profit-making, was weaker in the second half than in the first. And those are probably the two major factors.
Thank you, Ange. Still on the SA margin, with the 3% being pushed out to FY 2028, what is the expected glide path from the current 1.7%? Are we talking 2% in 2026, 2.5, 2027, etc.?
I think that's a fairly good way of looking at it from a glide path point of view, having said that there will be a higher level of spend on SAP implementation as we go through 2026 and 2027, and that will impact that glide path slightly. I'd estimate that to be around R15 or so in the two years, but those are non-recurring costs once the distribution centers have been brought online.
Thanks, Ange. Good morning. Could you please explain the reason behind the difference in revenue and gross profit between the presentation slides and the income statement in the AFS? Please, I'll give that to you.
Yeah, the AFS obviously prepared on a statutory basis, and the results are prepared on the comparable 52-week basis. So yeah, last year ended on the 30th of September, this year on the 26th of September. But from a statutory perspective, we don't make that adjustment.
Thank you, Reeza. SPAR held back with paying a dividend, and I know groups scrapped them at an interim stage in 2023 because of the challenges it was grappling with. With more than ZAR 5 billion in impairments in the second half related to Switzerland, the UK, and some corporate stores in SA, is the worst over now for SPAR? And when does the group see themselves paying dividend again? The impairments hurt HEPS from total operations, but with these out of the picture now, does the outlook look more positive, Reeza?
I think from a balance sheet point of view, we have done a significant reset in terms of the impairments process this year. I think, and that was from the investments that we carried in respect of Switzerland and AWG, as well as the store impairments in South Africa. I think we've done quite a thorough exercise in respect of that, and I don't, barring, obviously, any significant deviation from our glide path, I don't see any significant impairments going forward.
Maybe just explain a little bit on the impairments impact on HEPS, Reeza, for the general costs.
Impairments are excluded from HEPS, so it's an adjustment to HEPS, so it's effectively added back.
Thanks, Reeza. How many corporate stores in South Africa currently, and what was the growth? And finally, are you still looking on selling these corporate stores, Ange?
Yes, so just over 50 corporate stores in SA, including two Build its or three Build its now. We are still planning on exiting those. At this stage, we have planned closures of four stores in the next year. And I think in some ways, the impairments of the corporate stores allow us to move a lot more swiftly in that space. And so the plan is to try to accelerate that as far as possible.
Thank you, Ange. Meg, I'll give this one to you. What percentage of SPAR's South African retail sales is online delivery, and how do delivery fees work for SPAR2U and Uber Eats, respectively?
Thanks, Zihle We haven't disclosed the percentage, but what I will say is this past year, we've seen growth of 136%. Post-year end, we've actually seen an acceleration of that growth, which has been good and shows that our partnership with Uber Eats and SPAR2U is working well. In terms of delivery fees, from a SPAR2U perspective, we charge on a very similar basis as our competitors do, and it's based on price. Then on Uber Eats, there is a markup in the price that's sold through a no delivery fee.
Thank you, Meg. Two questions for you, Reeza. What sort of drop in net finance costs should we expect in FY26? And do you expect the tax rate to normalise to 27% in FY26?
I'll start with the second one first. So on the tax rate, we've actually provided a table where we've reconciled HEPS growth to operating profit growth. And in there, we've indicated that the effect of blended tax rate actually drops over the next two years. So Ireland, obviously, 12.5%, South Africa at 27% statutory rate. So the blended rate is actually disclosed in that particular table. And then with regard to finance costs, we expect for next year to remain more or less at the same level as it was this year. Our absolute debt from a gearing point of view, not a gearing ratio point of view, if gearing ratio comes down, but absolute level of debt does more or less remain the same because of the outflows, especially the Switzerland outflow towards the end of the year.
Thank you, Reeza. Ange, I'll give this one to you. How is the sales process of AWG going? Given the losses, will you need to pay the buyer to exit this business?
Yeah, the process has been slower than we'd like, although we're starting to make progress in the last week or two again, and so we expect to conclude that process sometime early in the new year. At this stage, the initial price is something that remains open and probably the biggest point of contention from a pricing perspective. We do not expect to pay in. We expect to be slightly positive, although we have impaired the business down to zero. We think there's some value in the business, and so no, I don't think we'd be paying in.
Thank you, Ange. What cash flows still need to occur relating to the Switzerland sale?
None.
Zero, short and simple.
Except for the potential turnout at the end of two years, we've all cash flows have exited South Africa.
Thank you, Ange. How far is the KZN DC from normal profitability, halfway or more?
Less than halfway.
Thanks, Ange. Sorry, just a couple of repeat questions, trying to go through them. Can you expand or explain the comment of SAP falling away in 2028?
Oh, we expect to complete the rollout of SAP in the first quarter of 2028. So when I say SAP falling away, it refers to the implementation costs that will be non-recurring costs beyond Q1 28.
Thank you, Ange. Can we double back on the working capital cycle going forward? Given you do not have Poland and Switzerland in the base anymore, and you've changed to a retail reporting cycle, how are you anticipating the inventory accounts payable and accounts receivable days will change in the coming years?
I think from an overall point of view, you can, I mean, there was obviously a bit of a reset this year with the cut-off being earlier. That continues for the next few years, and I think the assumption is that the working capital cycle is neutral effectively for the next few years.
Thanks, Reeza. Can you please clarify when the 3% margin will be achieved in SA? Is it 2028 or 2030?
2028.
Thanks, Ange. Another question about finance costs. Hi, guys. Thank you for the roadmap to 3%. What are the like-for-like assumptions in that margin waterfall? If we assume a sub-3% like-for-like, is 3% margin still achievable?
We've based the bridge on the assumption that we grow the business slightly at inflation or slightly ahead. The majority of our assumptions are controllables, and particularly on the cost and margin lines as opposed to the sales line, and so our focus is really to focus on the things we can control.
Thank you, Ange. Megan, this one's for you around PetStori. I remembered the launch of PetStori. It was said that you were targeting 25-30 PetStori stores by the end of this year, with a plan to have a minimum of 100 stores by the end of next year. Can you please just tell us a little bit more about that, given that the expansion seems to have been drastically slowed down?
I don't think it's been drastically slowed down. I think if you look at the fact that within nine months, we've brought a concept to market. We've already got 12 stores. We've got another three stores launching this week. So we should finish up at about 15 stores for December. And then we have a significant interest in PetStori from our retailers. And so there's a very healthy pipeline. So it's really a matter of us keeping up with demand and rolling up the stores in the new year.
Thank you, Meg. Okay. Please talk us through EC contribution to SA volumes and value. Which DCs follow thereafter?
Eastern Cape is the second smallest DC. It contributes about 10% to the SPAR SA volume. Thereafter, the plan is to go to the Lowveld towards the end of next year. And then we'll go into the three bigger divisions that are left over in 2027. And so that will be North Rand and South Rand because of how they're located. They're all quite close to each other in Western Cape.
Thank you, Ange. What are your thoughts on Walmart launching in South Africa? How is SPAR planning to support retailers? Should traction be attained in the everyday low pricing model that Walmart plans to leverage?
That's a very difficult question to answer. It remains to be seen how South African shoppers adapt to the everyday low price model. One would assume then that should that happen and that consumers migrate towards an everyday low price model, that the cost of promotion reduces, and so we would be, if that becomes a preferred method for the South African shopper, which I think is unlikely but possible, we would have to adapt our model, reduce the percentage of promotional goods that we sell, and even out the margins rather than do the high low as we do in South Africa. I think a lot of focus will have to be, as Walmart does in all the other operations, is reducing the cost of getting goods to store and reducing the cost of sales and running stores to support the lower EDLP model.
And so all of those things, I think, particularly the ones related to cost are things that we're already working on quite hard. As you can imagine, reducing cost is a focus area for us, regardless of what competitors are up in the market. And so the model from a promotion point of view will be customer-led, I think.
Thank you, Ange. Should we regard the increase in working capital as structural, or should we expect some reversal of the payables related inflow for FY26? I've got a follow-up question, Reeza, but I'll let you answer that again.
I think I've answered that previously. I think there was a bit of a reset in 2025, and I think you can assume a neutral working capital cycle going forward for the next few years.
What would need to happen for you to consider a reinstatement of dividend for FY26?
I think the outlook, from a margin perspective, obviously, we are working towards the 3%. We still have some lumpy SAP costs coming through from a cash flow point of view. We've got CapEx that we're carrying over from 2025 into 2026. But we are highly cash-generative, and we are reducing our gearing. I think that's why we're saying we would probably consider a share buyback in the short term before committing to a longer-term dividend policy.
Thank you, Reeza. SA loyalty, retail loyalty, has declined by circa 60 basis points. Could you please elaborate on the change and where you expected to get and where you expected to get to over the medium term?
Yeah, I think over the full year, the 60 basis points is true, but H2 was significantly stronger than H1, and what we saw was a growth of 1% in loyalty in H2, which we are obviously quite happy about. Some of that is related to seasonality and with Easter falling into H2, but by and large, I think we have started to turn loyalty around now, and I think we continue to see loyalty trend upward. I'd say in the short term that we continue in the range of 79% with the aim of getting to 80% in the next 12 to 18 months or so.
Thank you, Ange. Another one for you. Any specifics you can point out on Black Friday trade?
Black Friday trade was exceptionally strong for us. We were quite aggressive as a group. We had a fairly early break in Black Friday, so we broke with our first Black Friday deals in the second week of November, and I think you did an exceptional job in terms of both communicating that promotion and then also delivering on prices that got consumers excited. We had an exceptionally strong first Black Friday, or what we call Black Friday 1, which was the second week of November. We followed that up with a second strong promotion in the last week of November, and so over the course of those days, Black Friday was exceptionally strong: six days, really, three on Black Friday 1, three on Black Friday 2.
In both instances, on average, we saw retail turnover up over those days above 30%, and in some stores, double that, but really exceptionally strong Black Friday. Much stronger in food than on liquor this year, having said that we come off a fairly strong base, but liquor being very strong last year, so very pleased with Black Friday, and yeah, I think it's our team executed exceptionally well on that.
Thanks, Ange. For you, Reeza, I assume your 52-week on 52-week segmentals exclude impairments. But what about the movement in the ECL provisions?
The movement in the ECL would be included in the 52-week.
Segment.
Yeah. Actually, the ECL, I mean, the way we looked at that as costs, it's ECL write-offs and changes in provision.
Thank you, Reeza. A couple of questions on what top line do you think you need in order to maintain the glide path to your margin targets?
Yeah, I think I've mentioned that before. We're looking at inflation between inflation and inflation plus.
Thanks, Ange. Are we going to see any future developments in the SPAR Rewards program similar to other large retailers in SA?
I think you want to take that.
Okay, sure. I think this is definitely something that we are looking at, and we're looking at how we can use behavioral economics really to drive loyalty and change behavior. So definitely something on the horizon.
Reeza, just a thing you need to reiterate. Can you quantify SAP costs in 2025 and 2026 until the final rollout?
I think the, look, as I said, 2026 SAP costs peak, both from a CapEx perspective and an operating cost perspective. I don't think we, I mean, what I can say is that the delta on operating expenses is about ZAR 150 million for 2026 on 2025. And then I think that delta on CapEx is a bit more than that, actually. It's about ZAR 200 million for 2026 on 2025.
I would add one thing, though, just to push. We are going to start seeing elevated depreciation costs as the asset gets depreciated in the year. So the 150 relates to SAP implementation costs. And then we do see slightly elevated depreciation costs on our IT assets.
That's correct.
Thank you both. Good morning, everyone. The figures on slide 32 concerning Switzerland are the figures for 2024 per end of September 2024 and the 2025 figures per September 8, 2025.
That's correct. Yeah. We've consolidated it effectively until we displayed.
Effective date. Yeah. Thank you, Reeza. Referring to note 33, you've acquired a further two retail stores in H2 and run rate losses in the six acquired stores during FY25 is ZAR 61 million. What is the rationale for acquiring heavily loss-making stores when your stated strategy is to exit company-owned stores?
The two stores in H2 are one older store related to the bad debt issue. Thankfully, that store on its own is profit-making, and we plan to spin that off. I think the sale and purchase of corporate stores in a broader SPAR ecosystem is a normal part of our day-to-day operations. Ideally, we want to turn over those stores and sell them on as quickly as possible. For the six stores for the year, something that we want to be clear on is that generally, not generally, we apply the view of the value chain. And so what we disclose in the financial statements is the standalone profit outlook for those stores as required by IAS and IFRS, but they do not take the value chain into account.
So we do look at the total value chain for us, how much we make on the wholesale end versus how much we lose on the retail end. But this doesn't mean any deviation from our strategy to dispose of loss-making corporate stores. We remain focused on doing that. And those stores would certainly be on that list.
Thank you, Ange. Another question on KZN profitability. How much did the KZN DC profitability improve by? It was at a ZAR 300 million loss last year, and it's now profitable. Can you confirm the level of profitability? Can you confirm, sorry, what the level of profitability is versus a normalized level?
It's a bit noisy because we've changed the accounting policies internally. I'd prefer we haven't disclosed that separately, but it was a material increase on us, yeah.
Sorry. Last question on the platform. Was there a more tax-efficient way to have done the Polish refinance, perhaps through Ireland?
I think I don't think there is a more tax-efficient way to do it. I mean, the funds flow from South Africa in respect of those entities. Unfortunately, the interest on that funding is deemed to be non-productive. So I don't think there was any other alternative to actually do that.
We have come to the end of the questions, no more questions on the platform, so Ange, I'll ask you to close us out.
Thank you, Z, and thank you to the investment community and shareholders who've taken their time to go through our results with us today. We thank you for your ongoing interest. We also thank our shareholders for the patience in terms of capital returns and the return of dividends. As stated, it's a priority for us to consider some form of return to shareholders in the short to medium term. And so I just want to thank our shareholders and investors for that. Just from me, I think 2026 has been, or 2025 has been a very important year in SPAR's history. We've managed to execute on a number of our key priorities. First, to exit Poland and complete that exit, I think, just to take shareholders back.
That business was one that was losing us ZAR 500 million a year, and we were funding it by ZAR 750 million a year. And so the exit of that business and the closure of that chapter in our history is one that was achieved this year and something that we are very proud of. Secondly, Switzerland and the closing of that Swiss deal is as swiftly as we have, as the market would recall. We announced our intention to dispose of that business towards the end of May, early June this year. And we've managed to conclude that transaction and exit that business by the end of August. What that has made from a business perspective in terms of our debt has been significant.
The next priority that we achieved this year, which I think we should be exceptionally proud of, is the reduction in our gearing, the dropping of net debt by 40%, and the levels of headroom we've created in the business. I think, is something we're exceptionally proud of. We've managed to navigate all of these things without a capital raise. And that was a question that was asked of us for some time with how confident we were about being able to do that. And I think we've now demonstrated that the business is cash-generative and that there was no need for a capital raise. So as hard as it was to go through, I'm exceptionally proud that we've been able to achieve that both for our shareholders without diluting them and then for the business itself.
I think our two big continuing operation businesses, Ireland and South Africa, both have something to be proud of. And the Irish business continues to deliver above 3% operating profit in a very difficult Irish environment and very competitive Irish environment, particularly with the multiples looking for growth and coming after the convenience channel, which is one where we remain a market leader. And in that convenience channel, the business has done exceptionally well. To John and his team in Ireland, well done for a really excellent year. We look forward to 2026 and a new chapter in Ireland, some exciting initiatives happening there. Within the Southern African business, we've managed to grow our hardware business and pharmacy business and to make Jeremy Harvey and the teams in Pharmacy at SPAR and Build it really well done from really in both those environments, operating above market and gaining share.
In the Southern African grocery and liquor business, a soft year. In the first six months, in particular, quite soft, but we've gained momentum in the second six months. Really proud of growing loyalty in the second six months, and we want to see that continuing, and to deliver across the Southern African business, 7% growth or 6.8% growth in operating profit is something that we're very proud of, and just to thank you to the Southern African business and their teams, Reeza and your team, for delivering a set of financial statements. As noisy as they were with discontinuing operations, changes in reporting periods, etc., really to you and your team, well done. To our teams in all our businesses, I miss one, which is the starting of PetStori, a new chapter in the life of SPAR, something very exciting.
I'm actually going to a launch of a PetStori on Thursday at the Hillcrest, which is going to be exciting. So to Robyn and Renier and the PetStori team, just well done and welcome to the SPAR family. I have no doubt we're going to grow that business fairly rapidly. And then to all our teams in SPAR Southern Africa. I know it's been a hard year. I've been very proud of the efforts that our teams have made and on executing on our priorities. I'm very, very proud of what our teams have produced. And then to end off, I think we're very clear on what our strategy is. And our strategy is focused on our retailers. And those are the last people I want to thank. Our retailers, they've remained loyal to the SPAR brand.
They are right behind us and encouraging us to do better, and for them, I think, just to all of our retailers across all brands, both in Southern Africa, Build it, pharmacy, our new retailers in PetStori, and our various retailers in the Irish business and Sri Lanka, our Sri Lankan business. We're excited about 2026, and we think we can make some really great progress. It's going to be another defining year for SPAR where now that we've cleaned the balance sheet and we are able to focus on operational execution and delivery of SAP into the next two distribution centers is something that's very important for this year. It's going to be another transformational year. I look forward to 2026, and I look forward to our investors and engaging with you over the next few days. Thank you very much.
Thank you, Reeza, for putting the whole show together and for the results announcement today. I wish you all a very happy Christmas and a good break. I'm sure you all deserve it. Ciao.