Today and welcome to the SPAR Group's interim results presentation for the 26 weeks ended 28 March 2025. I'm Angelo Swartz, the Group CEO, and I'm joined by our CFO, Reeza Isaacs. Our presentation today will cover four main areas. I'll begin with a brief overview of our performance and progress against key strategic priorities. I'll then provide a deeper operational update, after which Reeza will walk you through the financial review. We'll close off with a strategic outlook, where I'll highlight our focus areas in the near term. In the past year, we've made deliberate progress against the milestones we set to simplify and strengthen our business. We completed our exit from SPAR Poland in January this year and finalized the restructure of our Southern African debt in March. The decision to exit Switzerland and the U.K. was taken after a strategic review of our European footprint.
These actions align with our long-term commitment to focus on our core geographies, where our voluntary trading model and scale give us competitive advantage. We will now focus on the rollout of SAP to the other Southern African DCs, now that we have stress-tested the system and learned key lessons. Then, of course, we are working on making progress towards our margin and leverage goals. Our 2025 interim results reflect the early traction of our recovery strategy, with clear evidence that we are building a stronger, more profitable foundation. Adjusted to reflect our revised 52 and 26-week reporting period, Group operating profit from continuing operations increased by 1.6%, and in Southern Africa, operating profit grew 5.5%. Group EBITDA increased by 1.7%, with Southern Africa growing at 5.9%. This is a significant result, especially in the context of 1.6% sales growth. It confirms that our margin-focused initiatives are working.
We're making more from each rand we earn. Gross margin improved to 10.7%, up from 10.6% last year. This improvement is driven by better product mix, enhanced procurement, and tight promotional management. It's a tangible sign that we are turning in the right direction toward our stated target of 3% EBIT margin in Southern Africa by 2026. Our cash generated from operations sits at ZAR 1.4 billion for the six months, and net debt has decreased, with leverage at 2.1 times in Southern Africa and 1.9 times in Ireland, well within our covenant limits. This balance sheet strength is a prerequisite for long-term value creation and, importantly, positions us to resume dividends when appropriate. Let's be candid: sales growth was below expectations.
The Southern African consumer is under severe pressure, and we saw specific softness in our inland regions, and the performance of our core grocery banner further impacted by the timing of Easter. Ireland experienced modest sales declines, mostly due to planned store closures and Easter timing. In both markets, we are not standing still. We're actively intervening. In South Africa, we're enhancing our price perception, investing in on-demand fulfillment, and supporting store-level execution through retailer rebates and flex promotions. In Ireland, we're refining our value proposition and expanding our own brand penetration to win back market share. Growth in sales is a central focus of our operational playbook for H2 and beyond. We're zooming in on underperforming clusters, refining our formats, and scaling what works. To summarize, this is a story of disciplined profit growth, margin recovery, and financial control in a tough trading environment.
While revenue growth remains a challenge, it is our strategic priority. Our focus is firmly on returning to growth, but doing so without sacrificing margin or sustainability. That's the balance we are striking. Macroeconomic volatility, cybersecurity risks, and shifts in consumer behavior all tested our agility. We responded through a mix of proactive cost control, strategic realignment, and renewed retail execution. Trading post-March showed encouraging sales momentum, evidence that our mitigation efforts are bearing fruit. This progress was not without challenges. We're operating in an undeniably challenging environment. In South Africa, consumers are still under pressure. Unemployment remains stubbornly high, and while inflation has eased somewhat, it hasn't translated into a broad-based consumer recovery. In Ireland and the U.K., cost of living pressures persist, and shifts in purchasing behavior continue to favor discount formats.
We've faced specific internal challenges over the past year or so: disruptions from the SAP implementation, strengthening our balance sheet, and the operational complexity of managing held for sale businesses. But here's the message we want to land today: we have not stood still. We've acted decisively and proactively to manage these headwinds, and we're already seeing the impact of those interventions in our numbers. For example, in South Africa, we delivered 5.5% operating profit growth despite modest revenue growth, proof that our cost discipline, margin management, and pricing strategy are working. We've strengthened our balance sheet, refinancing ZAR 9 billion in SA and removing structural impediments like the Swiss covenant. We've restructured our European portfolio, exiting Poland and initiating the disposal of Switzerland and AWG, enabling sharper focus on our core, higher return markets.
These actions are what allowed us to deliver profit growth, improved gross profit margin, and enhanced operating leverage, even with sales pressure. So yes, we are realistic about the headwinds, but we are also clear-eyed and action-oriented. We understand this environment. We've taken steps to shield the business from the worst of it, and we are now better positioned to catch our upside when the consumer turns. The positive developments you're seeing, improved cash generation, expanding operating margins, are not accidental. They are the outcome of focus, alignment, and execution across the group. Our exit from Poland was finalized in January 2025, a significant milestone in our ongoing simplification of the group and realignment to focus on our core, higher return markets. We worked through a rigorous disposal process, including the fulfillment of various suspensive conditions, which were all met prior to the final closing in January.
As part of this process, we also drew on the remaining bridge loan to settle the Polish working capital facility and fully repay the associated debt. You'll note in the table below that the finalization of these conditions resulted in adjustments to disposal proceeds and transaction costs. These adjustments reflect changes in working capital balances, professional fees, and debt settlement mechanics that crystallized once all the conditions were met and the final closing accounts were agreed. This is not unusual in cross-border transactions and was well managed from a group, treasury, and legal perspective. The total reported loss on disposal was ZAR 531 million, which includes a non-cash translation loss of ZAR 161 million related to the foreign currency translation Reeza. The final cash outflows, including repayment of the Polish liabilities, were completed by the end of January 2025. There are no further cash exposures linked to this business.
Importantly, this transaction was a key enabler of our balance sheet optimization strategy. It reduced ongoing complexity and management bandwidth, and it allows us to reallocate capital. Debt restructuring was a critical milestone. We now have a more stable funding profile and manageable maturities. In South Africa, we have refinanced ZAR 9 billion in funding and removed the Swiss covenant. ZAR 3.5 billion of committed facilities support our liquidity, and we've maintained ample headroom in covenant levers, putting us in a strong position for future growth. We've created the conditions to resume dividends in the medium term. With the SA debt refinanced, the Swiss covenant removed, and ample liquidity from committed GBFs, we're structurally in a better place. We've proactively managed maturities and now have a funding profile that supports execution. We concluded our review of the European operations as announced in our trading statement last week.
The decision to divest SPAR Switzerland and U.K.'s Appleby Westward Group is about to focus. Our capital allocation framework is clear: invest in markets where our model thrives and our scale delivers a competitive advantage. These divestments are intended to unlock value and streamline our structure. Both businesses have potential to grow under new owners with the geographic expertise and capital commitment to realize that growth. This step is aligned with our strategic roadmap, supporting balance sheet optimization, focusing on core markets, and ensuring capital is working where it delivers the best return. The value unlock isn't just financial. It's operational too. Our wholesale, grocery, and liquor business in Southern Africa delivered a performance that reflects the reality of the trading environment, as well as the timing of Easter this year, with sales growth of 1.1%, which is not where we want to be.
Retail sales were directionally positive, with 1.9% growth and 1.6% like-for-like growth. Store closures had a slight impact but were well contained at under 0.5%. We're working closely with retailers and marketing teams to address the gaps, particularly around price competitiveness, promotional effectiveness, and improving value perception across our banners. In liquor, we saw strong growth in LADs and RTDs, which helped offset softness in spirits and wine. The timing of Easter trading this year impacted sales growth, but seasonality aside, we continue to refine the liquor assortment to match evolving demand. We saw growth in our stores in LSMs one to three, with other customer segments lagging. This reflects how the current economic pressure is affecting middle and high-income consumers more acutely and how important it is that we adapt our offer accordingly.
Loyalty remains strong at nearly 80%, and on-demand via SPAR2U is scaling up rapidly, up to 174% in volumes year on year and now present in over 580 sites. Our partnership with Uber Eats, launched in quarter one, is already live in 130 stores, enabling us to reach new customers with no physical footprint expansion. These are significant steps in enhancing customer access and experience. We saw operating profit growth and margin expansion. Gross margin improved, helped by better category mix and tighter promotional execution. On the cost side, fuel and delivery savings helped offset higher marketing and digital investment, allowing us to absorb strategic costs without margin dilution. In summary, sales performance is not where we want it to be, and we are actively working to reshape our offer and improve loyalty. The building works are in place.
We now need to accelerate growth through sharp execution, better pricing, and improved customer engagement at store level. Our performance KPIs in Southern Africa, particularly for grocery and liquor, provide important insight into trading conditions on the ground and how our network is responding. Average basket size remained stable, while our footfall, the number of total point transactions, was under pressure in some segments. What we're also seeing is the changing nature of consumer basket. Promotional sensitivity is high, and smaller, more frequent shops are becoming the norm in lower segments. This is part of the reason why clusters one to three posted over 6% growth, while the top-end clusters declined. It affirms our strategy to deepen the value offer, especially through Save Mor and core grocery stores in high-footfall areas. We're actively addressing the drivers beyond weak footfall in certain segments.
We've launched targeted campaigns via Flex, with tailored promotions now reaching over 65 million customers. We're repositioning SPAR2U and Uber Eats to strengthen our convenience value proposition, and we're working with retailers to sharpen in-store pricing, merchandising, and local Build it continues to perform even in a constrained environment. Unseasonal rainfall impacted some trade, but the team delivered best-in-class results. We launched our Build it strategy at the 2025 convention, and the response from retailers has been overwhelmingly positive. The upgraded rewards program is currently being rolled out, with new cards and systems in active distribution. SPAR Health delivered strong top-line growth of nearly 14%. Growth was driven by wholesale and Scriptpharm, particularly in the specialized medication segment. Own brand traction continues to build, and loyalty is up to 58%, and we're seeing early success in driving volume through the wholesaler.
Student enrollment in our accredited pharmacy assistant course has grown alongside the expansion of our training facilities, further bolstering the long-term pipeline. Ireland's operating profit dipped slightly, but gross margin improved. Strong performances in convenience, especially from Mace, and good execution on acquisitions made in the last two years helped offset pressure from wage and energy costs. We've begun implementing our new SPAR and Eurospar strategy in H2. Ireland's performance was stable despite the tough consumer environment and the impact of Easter timing, with top-line declining modestly by 0.6% in local currency. Firstly, gross profit margin improved, driven by a favorable product mix in particular, a shift towards higher margin non-tobacco and impulse categories. This was supported by pricing discipline and strong execution from the Irish team. Importantly, this margin uplift cushioned the bottom line against volume softness and inflationary pressure.
The segment did absorb higher employment costs, largely from national minimum wage increases introduced in January, but these were partially offset by operational savings, particularly in delivery and transport costs. Mace, in particular, performed well, reaping the benefits of store refits and expansions completed in the prior year. This is a strong example of how BWG is delivering return on capital through targeted investment. We also made meaningful progress integrating acquisitions from previous years, which are now fully embedded in the operational model and contributing positively to volume and loyalty. This reinforces the message that BWG is not just delivering short-term results but building long-term capability. Consumer behavior in Ireland has shifted. Value seeking is more entrenched. Basket sizes are tighter, and frequency patterns have changed.
So while sales growth is currently constrained, the margin-led performance, cost discipline, and strategic agility shown by the BWG highlight its role as a stable, earnings-accretive business in the group. It continues to deliver high-quality, defensible profit and is well placed to pivot back to growth as the macro conditions improve. Our joint venture in Sri Lanka continues to show exciting growth. We've seen double-digit revenue gains and expansion in both corporate and independent stores. Footfall is up 14%, and we're preparing to roll out SPAR2U in this market. It's a small operation, but it shows what the model can do with the right partner and the right conditions. SPAR Switzerland has been classified as held for sale and is now treated as a discontinued operation. The Swiss retail and wholesale sectors continue to be highly competitive, exacerbated by cross-border shopping trends due to a strong Swiss franc.
Our retail footfall is stabilized, with loyalty indicators showing positive year-on-year growth in January and in February. This momentum was disrupted by a cyber attack in March, which materially impacted wholesale and Top CC volumes. While we preserved supply chain continuity, the estimated impact on profitability was around CHF 2.5 million. Operating costs increased due to rising labor and energy costs, and necessitated aggressive pricing efforts, resulting in EBITDA declining to CHF 1.6 million compared to CHF 13.5 million in the prior year. We're currently in discussions with a well-established entity with deep retail and distribution expertise in Europe. The disposal process is progressing, and we are focused on securing a partner who can ensure continuity for staff, retailers, and customers while unlocking value for the group. AWG, our business in southwest England, has also been classified as held for sale and treated as a discontinued operation.
This region has been impacted by the U.K.'s cost of living crisis. Footfall was dampened by adverse weather, and retail volumes are constrained by sustained discounting in the broader U.K. grocery market. Tobacco and vape legislation continues to pressure margins in the convenience channel, with a shift in consumer behavior away from these categories. We're in exclusive discussions with a reputable U.K. buyer that is well positioned to grow AWG and serve the southwest region sustainably. Now I will hand over to Reeza to take you through the financials.
Thank you, Angelo, and good morning, everyone. Before I get into the numbers, as Angelo has outlined, we're on a journey to simplify, strengthen, and grow this business. From a finance perspective, our focus has been on margin expansion, operational discipline, and efficient capital allocation. There have been some significant changes over the prior year.
Firstly, the realignment of the reporting periods to the retail calendar. We will now be reporting on 26 and 52 weeks' earnings. We have also treated the Swiss and U.K. operations as discontinued ops for the reasons touched in the SENS and also by Angelo, and we consequently have impaired the carrying value of those businesses. Please bear this in mind when considering the results. I will be touching on the statutory results for the period, but the focus will really be on comparable results from continuing operations adjusted for the alignment of trading days, as this is the best indication of underlying performance. The first part of the slide sets out the impact of moving to a retail calendar. Essentially, this restated half has been adjusted by three days at the start and also at the end of the period.
We have done the same adjustment for last year's competitors and will do the same for the second half of the year. I n summary, it is 182 days for each half and 364 days for the retail calendar. Part two deals with discontinued operations and the payments related to this. As disclosed in our SENS, the board has taken the decision to divest from these businesses. We are in discussion with parties, and we have written down the carrying value of these businesses. These parts of the business are not and have not been performing, as you can see from this set of results. They do not generate the required returns and do not fit our investment thesis. Total impairments of approximately ZAR 4.2 billion were recognized, including ZAR 3 billion in Switzerland and ZAR 1.2 billion in respect of AWG, our U.K. business.
Apart from the impairments, the earnings have now been split from continuing operations, and the assets and liabilities have also been separately shown as held for sale. Group cash flows are not split between that of continuing and discontinued operations and reflect the cash flows from the total group. In addition, the disposal of the Polish business, which was concluded in January, resulted in a further loss on disposal during the period. This takes into account the trading losses between year-end and January when the sale was concluded, including the fulfillment of certain suspensive conditions that were pending at year-end. Angelo covered this in a fair amount of detail earlier.
In summary, there's a lot to digest here, but we have three bases on which we are reporting earnings: earnings and headline earnings from total operations, from continuing operations, and from continuing operations adjusted for the shift to the retail calendar. If we move on to some key financial highlights, Angelo would have touched on this a bit earlier, but it is worth repeating: a set of results reflective of the tough trading conditions in the various geographies, with the focus on protecting margins, managing costs, and cash flows. The turnover from continuing operations is up 1.1% in constant currency. There's been strong margin management in continuing operations. SA GP was up 20 basis points, and Ireland was up 30 basis points.
SA operating profit is up 5.5%, up 7.8% if adjusted for one-off SAP implementation costs, and the Ireland PBT was up 20.7%, a strong performance from the Irish team. Working capital and cash flows were well managed during the period, with CapEx also tightly managed. SA gearing was at 2.1 times, and just remember, this is post the transfer of the Poland debt onto the SA balance sheet. Ireland gearing is at 1.9 times, and the group is on a clear pathway to further de-gearing. We have also restructured our SA debt and have more than sufficient headroom in our facilities, and we had the Swiss net debt to EBITDA covenant removed. The Ireland parent guarantee was also removed, and we have also commenced dividends from Ireland. HEPS is marginally up, but when considering HEPS growth, bear in mind two things.
Firstly, the translation effects, about a 5% negative impact on the Ireland earnings when translated into rand. And secondly, the Polish debt transferred to SA came at a higher funding rate, which obviously increased the group's interest costs. If we move on to the group income statement as reported, this slide is not really of much relevance, but I will present it for completeness' sake. This is what is in the press release and the SENS, but it is 179 days of trade in this period versus 182 days of trade in the comparative period. And for obvious reasons, does show a result that is worse than the underlying performance, which I will touch on next. I don't think there will be too many questions on this particular slide.
If we move on to the group income statement adjusted for the retail calendar, and I'm going to emphasize the point, all the numbers and segmental analyses that follow reflect the retail calendar results, and the prior year adjustment have also been amended for that, so it's fully comparable. Group turnover is marginally down on last year. However, this is after translation effects, and as I mentioned previously, on a constant currency basis, group turnover is up 1.1%. We have seen margin expansion during the period. Gross margin was well managed in a tough trading environment, and it is up 1.4% or 20 basis points, and net operating expenses is up 2.1%, which is below inflation in our South African and Ireland geographies. There are a few positives and negatives in there, but generally, costs have been very well managed across the group.
Operating profit is up 1.6%, which is marginally better than the GP growth of 1.4%, and of course, net finance cost is up 13.5% due to the high interest costs on the Poland debt assumed in South Africa, and then we had some extraordinary items relating to the disposal of an ATM business and the revaluation of a post-retirement fund liability in Ireland, and that offsets the impairment on a piece of land that we own in the West Rand. If we move on to the segmental results, starting with South Africa, the SA segment delivered modest top-line growth of 1.65% on a 26-week basis, while GP and operating profit maintained solid momentum at 4% and 5.5% respectively. The KZNDC continued its positive trajectory, reflecting a strong turnaround with a marked improvement in profitability.
This performance, together with the focus on cost discipline, translated into a modest operating margin expansion of 10 basis points to 2%. The core SPAR business saw overall growth of 1%, high single-digit growth in the lower end, and the upper end showing a decline, reflecting the really competitive nature of the SPAR end of the market, and then turnover growth in the core business was really affected by a few things: low inflation in key categories, Easter falling really into the second half, we haven't spoken about that much, but that was a reality, the loss of closure of 13 stores in the south end and the Mozambique looting during the post-election unrest, and of course, the floods in north end, so that sounds like a bit of a laundry list, but it is a reality.
And then just to reflect, our retailers are keeping up with the market, but are doing it without us to an extent. W e have some work to do on loyalty and availability, and also with the upper LSMs and in on-demand. Angelo also touched on this a bit earlier. We also had a different approach to pricing and promotions over the festive season, which was more targeted but wasn't optimal. On a positive note, we saw stronger growth in Build it of 4% and pharmacy of 13.6%. And GP was up 20 basis points to 9.8% despite a higher proportion of drop shipment and liquor sales, which is generally margin dilutive. Other revenue and income was up due to higher marketing contribution by suppliers, and this should be seen in conjunction with operating expenses, where marketing expenses really sit.
On a combined basis, operating expenses net of this revenue and income is up 4.6%. We have seen a decrease in warehousing and distribution expenses due to the lower fuel price and a focus on efficiencies. And then central and head office costs were also down on last year, which highlights the focus on costs. O verall operating profit, I've mentioned this before, up 5.5%, operating margin up 10 basis points to 2%. And then, of course, we incremental SAP costs this year. And if one were to adjust for this, then the operating margin would be 2.2% and an operating profit growth of 7.8%. Finance costs, I've mentioned this before, also up due to the Poland debt. However, cash generation was strong with EBITDA up 6% and gearing as well within covenants. I will touch on this a bit later when I get to the balance sheet.
Moving on to Ireland. Ireland delivered a resilient performance in a really challenging environment with improved GP and operating margins, as well as lower interest expenses driven by lower gearing. Ireland's revenues essentially flat compared to last year's figures, which underscores a few points. A really very competitive convenience sector, as I've mentioned before. The loss of closure of a few stores, including two Eurospar. These were in the budget and planned for. It is a very mature market with stores occasionally coming up for sale for various reasons, including succession. We are taking a careful look at these stores and the returns that they generate, and we have to decline some of these if they do not meet the hurdle rates. High inflation in certain categories like cocoa and coffee affected volumes, and then tobacco sales were also down on the previous year.
However, as I mentioned before, gross margin was well managed to a GP up 30 basis points to 13.5% with higher non-tobacco sales. Working capital and cash flows has been, and consequently debt has been well managed, with net finance costs down 24%. This, together with some extraordinary items, means that PBT was up a healthy 20.7% for the year. EBITDA is flat on last year, a function of operating profit, but still a healthy EUR 31 million. The U.K., as I mentioned also before, is presented as a discontinued op, and I will touch on that a bit further on. T alking of discontinued operations, if we look at Switzerland, revenue down 5.1%, really reflective also of the tough trading conditions in that geography. High cost of living has affected consumer confidence, and then cross-border shopping has continued despite the introduction of new limits.
Our business suffered from a lack of scale, and the bigger players have really been investing also in price. And then we also had a cyber incident, which we had to contend with, which affected the top line and margins. GP showed an improvement of 50 basis points over the prior year, with the team really focused on product mix, SKU optimization, and rationalization, and also optimizing promotions. A s you know, Switzerland is a very expensive operating environment, and despite the best efforts of the team, net operating expenses was up 3.3%.
Now, we've seen negative leverage through the income statement, resulting in a decline in operating profit from CHF 6.4 million in the prior year to a loss of CHF 2.4 million in the current period, with EBITDA down substantially from CHF 13.5 million in the prior year to CHF 1.7 million in the current year. April has seen improved momentum in sales, with the business focused on significant turnaround efforts, and Angelo will touch on that a little bit later. Moving on to the U.K. and AWG, not a pretty picture either. Sales down 7% for the period in local currency, a really tough trading environment with highly price-sensitive consumers and a cost of living crisis in the U.K. And bigger players like Asda are moving into the convenience space and investing in price, which makes it really, really tough.
And on top of that, we've had adverse weather, which also affected food and, therefore, convenience. GP was up 50 basis points, but obviously not enough to offset the declining sales. And then expenses were up 4%, resulting in an operating loss for the period of EUR 3 million versus a small profit in the prior year. The business made an EBITDA loss this year versus an EBITDA surplus of EUR 800,000 last year. N ot a great result. Moving on to the balance sheet. Our balance sheet really reflects the reshaping of the group, and what we have shown here is the balance sheet from continuing operations, but also adjusted the 2024 numbers to make it more comparable. The balance sheet obviously has been impacted by translation at closing. It's about 2% on the Irish numbers, and working capital was really well managed in the period.
Stock was up 4.7%, really due to Easter build-up and softer than expected trade. And then receivables marginally down, but well managed. And then payables relatively stable, benefiting somewhat from an earlier cutoff. Reducing gearing obviously is a priority for the group, and group gearing is generally lower over September than it is in March. March is really a higher working capital utilization period ahead of Easter. And then equity is significantly reduced to ZAR 6.5 billion, which is of course not a bad thing. And this is post the impairments and offset somewhat by the earnings generated during the past 12 months. Moving on to net borrowings, total debt is down from ZAR 11.1 billion to ZAR 9.7 billion. All covenants have been met with adequate headroom across the facilities. And as I mentioned earlier, the refinancing of SA facilities was finalized at the end of March.
There was really good appetite for the term debt and general banking facilities, and at good margins. The SA leverage is stable. I mentioned this before as well, despite the inclusion of the ZAR 2 billion Polish debt this year, which really underscores the strong cash generation ability of the business. Ireland gearing is also well under control and should be at a constant 1.8-1.9 times at the end of March, dropping to about 1.5 times by September, I'm comfortable with that, and then with Switzerland, a debt-to-EBITDA covenant was not really appropriate with the higher level of property assets and mortgage debt. This has of course now been removed, and then it should be noted that group borrowings really reduces to ZAR 6.6 billion if one were to exclude Switzerland debt from total group debt, and then cash flows for the period.
Cash flows, cash from operations is down last year, but remember cash flows include that from discontinued operations, and then working capital has really been the standout, really well managed despite the Easter inventory build-up and slower than expected trade, free cash flow for the period, including discontinued operations and off the CapEx, was over ZAR 900 million for the six months, substantially up on the prior year. This really strengthens our ability to support reinvestment into high return areas, as well as paving the way for dividend resumption when appropriate. Okay, moving on to CapEx. A really simple slide there shows you the CapEx for the first six months of the year, really down due to phasing of spend, and there will be some possible carryover to 2026.
This is a high-level forecast, but in the long term, we expect CapEx to settle at an annual spend of around 1% of turnover for the group. We are maintaining capital discipline and prioritizing high-impact investments that really support margin growth, system modernization, and retailer capability. We will share more detail on this with you at year end. Moving on to EPS and EPS. We've disclosed these numbers in the SENS, and as I've mentioned before, it's fairly stable, down 0.4%, but currency effects had a negative impact on the translated Ireland results and also bear in mind the increased interest costs on the Poland debt transferred to South Africa. And then return metrics. Our focus on disciplined capital allocation is starting to deliver results. Return on invested capital is strong across the board, with group ROIC at 20.4%. And these are, of course, pre-2016 figures.
Then we remain committed to ensuring that every rand that we deploy earns its return, and we're seeing that reflected in these numbers. We have invested to support future growth while maintaining profit delivery. In closing, we have a number of moving parts in these numbers, and I will admit that it is a bit noisy, but this is a function of where we are as a group, which is in the midst of a strategic reset. If you were to take a step back and really look through the noise, while trade is not where we want it to be, we are making progress on a number of fronts in a really short space of time. We have restructured our debt. We are firmly focused on strengthening the balance sheet and resuming dividends.
We have either sold or in the process of selling parts of the group that detract from our investment thesis. And these entities is lower returns, increase leverage, and risk, and take up an enormous amount of management time. We are on a path to streamlining the group and bringing the focus and attention to our core operations in South Africa and Ireland, where we believe enormous opportunity exists in supporting independent retail. And this period really reflects a deliberate shift, streamlining our portfolio, improving margins, and managing capital with discipline. Thank you, and I'll hand back to Angelo.
Thank you, Reeza. With the European review behind us, our attention turns to the final two strategic priorities: completing the SAP rollout and reaching a 3% EBIT margin in Southern Africa by H2 26.
The SAP implementation is well underway, with the next DC set to go live by Q1 calendar year 2026. These are foundational projects critical to operational efficiency, visibility, and margin optimization. We are approaching a peak investment phase in SAP, with two DCs going live in 2026. Enhanced procurement and automated forecasting will unlock significant gains in working capital and gross margin. It is a key enabler of our future operating model. Let me now walk you through how we plan to deliver our forecasted EBIT margin for FY 2025. From our 2024 base slide of 1.5%, we see three key contributors. First, improved performance from our wholesale and DC network, which adds around 50-60 basis points. Second, continued improvements in procurement, private label penetration, and store loyalty. And lastly, while not a significant contributor, cross-discipline and product mix enhancements across corporate stores will support quality of earnings.
Taken together, these levers will drive a steady path to 2.1%-2.3% by the end of FY 2025 and closer to our 3% margin goal. On the legal front, there are no material developments affecting our continuing operations. The Swiss sanctions hearing was held in May, and we expect a decision by the end of September. Should the outcome be unfavorable, we will pursue an appeal on both the merits and the size of the fine. The Giannacopoulos matter remains pre-discovery and may take time to resolve. Post-March, we've seen continued momentum in operating profit, supported by further cost-saving initiatives. Easter trade was strong, and early April data shows positive signs across Southern Africa. While macro uncertainty persists, we believe the business is well positioned to deliver on its own growth ambitions. SPAR is a global group, but our strength lies in our local execution.
Across Southern Africa, Ireland, and Sri Lanka, we serve about 4,000 stores and generate ZAR 150 billion in annual turnover. But beyond scale, it's our relationships, our retailers, and our operating discipline that drive results and positions us well for growth from the strong base we have now established. This slide brings together the practical levers we are deploying to reignite top-down growth while maintaining cost discipline. Across Southern Africa, we are focused on winning the consumer through more relevant and accessible formats, driving loyalty and basket value through targeted pricing and private label, improving operational efficiency to protect margin while we grow. Let's break it down. We're scaling formats that meet consumers where they are. SaveMor for value shoppers, Gourmet for the top end, and Build it, too, for convenience in the building sector.
These are backed by regional partnerships with a mix of BEE and supported by improved category and consumer insights, which move us from blanket discounts to targeted personalized offers through Flex. On-demand and digital access are a major priority. SPAR2U is growing up 174% in volume year on year and now live in over 580 sites. We've also launched with Uber Eats, which expands our reach without the capital intensity of physical stores. From a margin perspective, we're sharpening the mix, expanding our private label ranges, which offer better value to the consumer and better margin to the business. This is paired with overrider and rebate schemes that align incentives with our independent retailers. In Build it, we're focusing on expanding the category mix, improving promotional pull-through, and onboarding more retailers into the upgraded reward system.
SPAR Health is scaling up a dual focus on consumer health and pharmacist training, growing both our consumer base and our credibility in the market. In Ireland, BWG is expanding own brand penetration, investing in food and beverage innovation, building logistics and warehouse capacity to support volume growth efficiently. Cost discipline is core to our growth model, and this is where we've delivered the most traction in the first half. DC optimization is a key enabler as we progress with a SAP rollout. We're improving DC procurement planning, enhancing stock forecasting, and driving more efficient dispatch. This is already helping reduce wastage and minimize overstocking, and we'll scale further as new DCs come online in FY 2026. We've also treated bad debt management as a strategic cost lever, enhancing credit vetting, tightening terms, and improved collections without compromising relationships with our retailers.
Where needed, we support retailers to protect their own cash flow because financially healthy retailers are so critical to a stable wholesale network. T o summarize, we're growing through relevance, access, and data-driven pricing. We're protecting margin through smart category mix, DC efficiency, and tighter financial discipline. And we're managing working capital with intent because strong cash flow gives us the flexibility to keep investing for growth without overextending. We're working closely with our independent retailers, not only to grow sales, but to create joint savings through shared insights, logistics, and technology. W hile sales performance in H1 was not where we wanted to be, this slide shows that we are practically and measurably setting up to grow revenue in a way that is margin-aware, data-led, and execution-driven. This is not theoretical. These are the levers that are already in motion, and the early signs are promising.
As we have seen with our stronger cash generation and improved operating leverage, execution will be key, and we have the people, platforms, and accountability mindset to deliver. At the heart of our business are independent SPAR retailers. Their profitability and success is our success. That's why we remain focused on collaboration, competitive business models, and long-term sustainability. The voluntary trading model remains our differentiator, and we will continue to support it with investment, innovation, and operational discipline. In summary, SPAR is making real progress. We've made the tough calls, delivered against key milestones, and now have a clear line of sight to improve profitability and capital returns. Our focus remains on execution in our core markets with our retailers and in support of long-term value creation. Thank you for your continued support. We'll now move to questions.
Thanks, Angelo.
I think let's maybe start off with a few questions on Switzerland. It seems to be a popular topic. I have a question, just wanting to understand if we're in a position to give any updates on Switzerland, who we are in talks with and timing thereof. Megan?
Thanks, Zinzi. And morning, everyone. I think from a Switzerland perspective, we are in an exclusive process, and it's very sensitive at this point, we wouldn't want to comment much more than what we've commented in the presentation. That being said, whatever decision we make, we want to make sure that we are disposing of the business in the best manner for our employees in Switzerland, for our retailers, and also our suppliers, and ensuring an ongoing sustainable business.
Thanks, Meg. A question from Nedbank.
Can you elaborate on the Swiss business moving into an operating loss so quickly, and why was it not guided?
In terms of the loss that Switzerland has made, it's largely as a result of a cyber attack we had in the business. And just from a why we didn't guide, Switzerland is such a small portion of the group that we didn't deem it necessarily material to guide on that specifically in the trading statement and trading updates.
Thank you, Meg. Moving on to questions around South Africa. What is the outlook for South Africa growth and operating margins for the full year given fairly weak revenue growth momentum?
Thanks, Zin. There's a bit of momentum in sales. I think post-period sales have picked up quite nicely, not to the level that we'd wanted to, but significantly up from where we were in the first half.
But beyond that, I think we've demonstrated in the first half, even with weak sales, that we're able to see margin expansion. Our previous guidance for the full year was between 2.1%-2.3% operating margin. I think at this stage, I would guide that we would still be in that range, probably towards the bottom end of that range for the full year.
Thanks, Angelo. Please, can you give us an update on the Giannacopoulos litigation process, and have you made any provision in the accounts for potential settlement?
There's really been no movement on the Giannacopoulos matter since our last investor relations roadshow, and we're in the same place. We're awaiting going into discovery. At this stage, no provision has been made for settlement.
Thanks, Angelo.
Do you think SPAR can reduce net debt for the full year, assuming disposals are not finalized by year-end Reeza?
Thanks, Zin. I think if you look at our debt situation this year versus last year, net gearing is essentially flat. But what you have to bear in mind in getting to the 2.1 times, we've actually taken over the Polish debt onto the SA balance sheet. And to land at a position which is exactly similar to last year, I think demonstrates the cash generation ability of the SA business despite the weak top line. And we are confident we can reduce gearing irrespective of the sales of those two businesses.
Thanks, Reeza. And what was the wholesale internal inflation for H1 period, and what was it post-period?
I've got numbers for the first six months.
Wholesale internally was about 2.8% for the groceries and liquor business, and about 3.5% for Build it.
Thank you, Reeza. You suggested that you were on the trajectory towards achieving a 3% margin in SA. You mentioned medium term. Do you have a timeframe in mind as to when you believe this will be achievable? And could you confirm that the 3% is the margin on the entire SA business, or is it a target for just wholesale grocery business? Sorry.
From a margin perspective, as I said, we expect to operate within the range that we guided between 2.1% and 2.3% for the full year this year. The guidance that we had previously given around reaching 3% in the second half of next year is, at this stage, achievable, but will be a stretch for the business. We still think it's achievable in the medium term.
Still possible in the second half of next year, but it's going to mean that we have to accelerate our sales momentum. The second part of the question, confirmation that we...
Is it those are margin on the entire SA or SA wholesale?
Yes. A t this stage, the SA grocery margin is substantially higher than the 2% that we show. And the intention is to get the whole of the SA business to 3%, not just the grocery and liquor sector. Yeah.
Thank you, Angelo. Reeza, for you, what are the appropriate markers that suggest dividend resumption is likely? What policy is this likely to be at?
I think if you look from our perspective, we've guided to a gearing range of between 1.5 and 2 times. I think for both the SA business and for the Irish business. I think the...
I mean, we are currently busy with the three-year sort of forecast and a modeling exercise. But we believe that in about 18 months, the possibility of a dividend is, well, the probability of a dividend is high, obviously depending on cash flow and our de-gearing efforts. Yeah. But that's essentially what our key guide, gearing ratio.
Thanks, Reeza. For you, Angelo, are you seeing loyalty levels increasing or flat post-year end?
Loyalty levels have shown, on a short-term basis, a slight increase. Over the full year, roughly flat for this financial year.
Okay. And just to follow up on that, on loyalty, sorry, what is your ambition for this metric over the next 12 months?
I think I'd like to get over 80%. W e're just on 79, slightly over 79 right now. I'd like to see a 12-month rolling average over 80%.
Okay.
A question on SAP. How does SAP resumption implementation potentially impact the achievement of the 3% EBIT margin target? Is any bit of the 3% margin target premised on efficiencies being attained from the implementation of SAP?
The 3% target is not presumed on broad efficiency in SAP, given that by the end of next financial year and the second six, we would probably have two grocery DCs online and not all six. And then one, our Build it wholesale as well. I think SAP implementation at KZN has been stabilized. We've been profitable in every single month this year in KZN, which is really positive news. But there's still some way to go to get back to normalized margin in KZN. I think we're probably at about 65%, between 65% and 70% of normalized margin in KZN. T here is further upside in KZN.
Thank you, Angelo.
A question on our JV in Sri Lanka. Can you give an indication on the profitability of this business?
Yes. The business is slightly positive from a profitability point of view. I think our share of operating profit is roughly ZAR 2.5 million in the first six, and we are a 50% shareholder. But that business has fairly ambitious growth goals. As we enter independent retail, we're now up to 10 independent retailers in that business, and there's a fairly aggressive rollout plan over the next 12 months to get that number up higher, and it will grow over time.
Thanks, Angelo. Question on Ireland. Can Ireland hold the operating margin given negative revenue growth at present?
Yeah. Look, I think the Irish business is operating in a mature market. It's a mature business, very diversified with a very strong management team.
And we believe that at around the 2.9-3.1% margin, it can definitely maintain that. And I mean, there's scope in that business for operating efficiencies if top line is a bit tough to achieve. But yeah, and debt in that business is also fairly well managed. I think we're confident that we can achieve that margin.
Thank you, Reeza. Just scrolling down here. Can you share how many shoppers have signed up for the rewards program?
We're up about 10 million now.
Okay. Up 3 million.
Up 3 million.
Yeah. Okay. A lot of questions again around SPAR Switzerland, and the potential or the disposal of it. But again, maybe you need to reiterate, Megan, because the questions keep coming in around timing and yeah.
Again, just to reiterate, we are really at a sensitive place in terms of looking at disposing of Switzerland, and we don't want to prematurely give any indications around timing closing or who those parties are. We will update the market when we've made further progress and keep you informed.
Thanks, Megan. Your strategic ambition is to dispose of loss-making corporate stores. However, during the period, you acquired another four SA stores with annualized losses of ZAR 10 million. Can you update on what total annualized losses are for loss-making stores that are included in the potential disposal group, and who would be a natural buyer of these stores?
We've indicated that we want to sell the loss-making stores, the significantly loss-making stores. At this stage, that's a cohort of about 12 stores, between 10 and 12 stores. We're making progress in that space.
The buyers at this stage are probably a confined set of grocery retailers in the country, and we've spoken to a number of them. In terms of the acquisition of the four stores, they're mainly defensive in nature, and we are looking at moving as many of those stores on as we can. Yeah, that's...
That's fine. Reeza, I'll give you this one. Given that these results are unaudited and the onerous clause is required for discontinued operation classification in accordance with IFRS 5, have your auditors approved the classification for Swiss and Southwest England assets?
Our auditors have certainly looked at it. We've consulted them, and we have, clearly, this required audit committee sign-off as well. W e've been through. I'm comfortable that we've been through a thorough process of looking at the treatment, and I don't expect anything different at year-end.
Thank you, Reeza.
Trying to scroll past Switzerland questions. What was the inflation in SA and Ireland, and what is management's expectation for the period ahead?
I think we answered the inflation for SA. There was 2.8% for groceries and liquor and 3.5% for Build it. I think Ireland inflation was a bit higher. It was certainly above 3%. Y eah, that.
And then following up on that, what were the closing store numbers across the brands? And another question on Switzerland, but let's stick to the closing store numbers.
I don't have the exact number on hand, but our closing store numbers were roughly flat with where we were last year. A slight loss of stores in Ireland and flat in SA.
Okay. I think that is it. Just refresh one last time here. Of the 10 million reward program cardholders, what is the core number of clients?
We keep our rewards database fairly refreshed, and we recognize active users as users who've used the card in the last three or six months. Beyond that, we don't consider them active users, and at the moment, we have the 10 million as an active user number.
Thank you. A question just came in. Can you comment on retailer sales? The first 18 weeks, plus 3.4%, and H1, 1.9%, implies a negative of 1.5% over the last eight weeks.
I don't think that's eight weeks. It would be the last 13 weeks of H1, and that was heavily impacted by the timing of Easter, and that rebounded nicely in April. January was a fairly positive month at retail. February was poor, and then March was decent when considering the base return off of Easter, and then we had a nice rebound in April.
April was at retail was plus 7%, I think, 7.5%.
Thanks. Angelo, I think the last one now is, does defensive store acquisition, does that term relate to franchisee stores in financial trouble that you take control of in order to protect your security given outstanding debt?
I think at times it does, but in the main, it would be either franchisees who want to move on and retire, or we were defending against opposition who've made offers against those stores.
Thank you, Angelo. I think that's it for now. I'll just hand over to you to close us out.
Thank you. Thank you, Reeza. Just a closing comment from me. I think it's been a tough six months, as you can see from a sales point of view. I'm very proud of our teams, both in SA and in Ireland, in a very muted sales growth environment.
To deliver operating profit growth in local currencies is no mean feat, particularly in SA, where we saw soft sales at approximately 1.6-1.7% sales growth, delivering operating profit growth of 5.5%. And when we take into account one-off expenses for the preparation of the SAP implementation at Build it, that number grows to 7.5%, which is some really positive momentum. Also, nice to get the business in H1 over that 2% operating profit in SA, carrying the full group cost, which is also a really, really positive step. I think the business is positioning itself really well for the future with the disposal of Appleby Westward and SPAR Switzerland. In both cases, talks are fairly advanced, and we are comfortable that we're making the right decision for the future of the group.
I'm looking forward to trimming down the profile of the group and being a lot more focused with the group than just focusing on the Swiss and South African operations and to some extent on Sri Lanka. I think our focus areas will be narrow, and we'll be able to really accelerate momentum on the recovery of SPAR. I'm really encouraged by the first six months despite the impairments. I think the management team have done a credible job in managing this business over the last while. I also want to thank Reeza. This is his first set of results with us and some really incredible leadership shown in terms of managing working capital and debt and getting our debt restructure in play.
And since then, the level of comfort and headroom we have in our facilities is something that I think is really a lot of it down to Reeza's strong leadership in that space. I'm looking on the other side to Megan, who has navigated a very difficult space moving on from the Poland transition and closing out that transaction and now leading our exit from Switzerland and has done a great job in terms of managing and making sure the business gets the best value for shareholders. And I really do want to highlight that the decisions we make are to ensure that we get the best shareholder value over time, and we really are focused on that.
And then to our operational teams in South Africa and Ireland, as I say, credible performances in both businesses and a lot of focus in H2 in terms of getting sales momentum going again. And then to our businesses in the U.K. and Switzerland and the management teams there, navigating a really tough environment with uncertainty in those businesses as we've announced the sale of them. Our focus, as Megan says, beyond our first focus, delivering shareholder value, and the second is ensuring certainty for our suppliers, our people, most of all, in those businesses, and then to our lenders in those environments. Thank you, everybody, for dialing in, and we look forward to the engagements we'll have with many of the investment community over the next few days unpacking the detail in even more detail.
I'm enthused for the second six months of this year, and I think we will deliver a strong performance in H2. Thank you, and thank you, Zinzi, for arranging.