The SPAR Group Ltd (SPP) Earnings Call Transcript

Good morning, everyone, and welcome to SPAR's results presentation for the year ended 30 September 2023. My name is Mike Bosman, and I'm back to being the Independent Non-Executive Chairman of SPAR, and I'll be providing a brief overview this morning before handing over to my colleagues. I was previously the Executive Chairman of the group from the 1st of February 2023 until the 30th of September when Angelo Swartz, our new group CEO, took over from me. In a few minutes, Angelo will provide a brief operational review. Mark Godfrey, the Group CFO of SPAR, will then be presenting the financial results. And thereafter, Angelo will take you through some of our new strategic thinking. We'll finish off today's webcast by answering any questions that you might have. We'll kick off with a little snapshot of the group. We operate in 11 countries, in South Africa, Namibia, Botswana, Mozambique, Eswatini, Lesotho, Ireland, England, Switzerland, Poland, and Sri Lanka. Our operation in Sri Lanka is a joint venture arrangement where, as you know, we have 26 stores across various formats. The group delivered almost ZAR 150 billion in turnover this year, with ZAR 1.8 billion in operating profit. We have over 4,500 stores and more than 10,500 employees in our 11 countries. As you would have seen in the SENS announcement, we are reporting ZAR 1.8 billion of operating profit for the year, and we've had almost ZAR 1.4 billion of mostly nonrecurring costs during the year. These costs relate to only 3 issues SAP, Poland and Ireland impairments. Adjusting for the effects of just these 3 matters, the operating profit for this year would have been ZAR 3.2 billion compared to last year's profit of ZAR 3.4 billion. This would suggest that the underlying core business is in pretty good shape. Angelo and Mark will go into all of this in detail a little bit later. Cash generated this year was at ZAR 6.2 billion compared to ZAR 5 billion last year. This slide sets out each country's contribution to our group's turnover, 2023 on the left and 2022 on the right. In FY '23, SPAR in Southern Africa contributed 62% of the group's turnover, an amount of ZAR 92.6 billion. Ireland continues to perform exceptionally well and contributes 25.5% of the group's turnover, an amount of ZAR 38.1 billion. Switzerland generates 10.5% of our turnover in an amount of ZAR 15.7 billion. So in total, our international operations contributed 38% towards our total turnover when combined. We've had a very busy year. Besides all of the very hard work that's gone into our core business, we've had many issues to deal with. At the end of last year, the group was facing some very serious allegations in the press, and these issues include allegations of poor corporate governance, racism, unresolved disputes with black retailers. This year's dispute was one of our largest independent retailers, the Giannacopoulos family. We've attended to these matters as quickly and as efficiently as was possible. I've mentioned before that an extensive investigation by the law firm, Harris Nupen Molebatsi found that there was absolutely no basis for any of the claims of racist behavior by SPAR. All 10 of the disputes with the black retailers were amicably resolved as were further 5, with other retailers. During the year, the composition of the Board changed significantly, and I'll discuss this in more detail in a moment. We have successfully appointed a new Group CEO as well as a new group Chief Operating Officer for SPAR. The Board of SPAR has made a decision, as you know, to sell its interest in Poland, and we moved quite quickly into this process, as you'll hear about later. The SAP implementation process has unfortunately been a disaster. Having said that, we've now got to the point where the system is stable and functioning well. We've completed several deep dive reviews of what went wrong, and we'll take the learnings from that. We also have new IT leadership in place in the group, and we've assigned a leading external assurance partner to provide assistance to us with the necessary independent guidance going forward. We're working well with all of our banks, and we have their support. We're also in the process of putting into play a plan that will reduce group long-term debt and design an optimal capital structure for the group. This is the makeup of our Board currently. 6 directors have retired or resigned this year. The company appointed 4 new Independent Non-Executive Director, Shirley Zinn, Pedro da Silva, Trudi Makhaya, and me. Shirley Zinn was appointed Deputy Chairman of the Board in June. We now have 3 executive directors, shown in red, and 6 Independent Non-Executive Directors. Shirley is the Deputy Chair of the Board and Chair of the Remuneration Committee. She has adopted an education from Harvard and is highly experienced in the HR, people leadership and culture part of the business. As she was previously appointed an Independent Non-Executive Director of our group in February 2023. Pedro da Silva was also appointed in February this year as an Independent Non-Executive Director, he's highly respected national and international retail, and he headed up as we've mentioned before, the Biedronka Group in Poland for 18 years. So it's been incredibly helpful in our Polish discussions. Lwazi Koyana is a chartered accountant, has served as a SPAR Director for several years. He chairs our Risk Committee, and he serves as our interim Audit Committee Chairman. Trudi Makhaya was appointed to the Board with effect from the first of September this year. She was the former senior economic adviser to the President of South Africa. She has 3 master's degrees, one from Wits and 2 from Oxford, where she was a Rhode scholar. She is the Chairman of our Social Ethics and Sustainability Committee. Finally, Sandeep Naran is a qualified CFA and retired banker. He's also been on the board for a few years and was formerly with RMB in Johannesburg. And finally, Shana Ashokumar, is our Company Secretary and was appointed during the year. In terms of executive directors, I'd like to welcome Angelo Swartz, the new group CEO, to his first results presentation. It took over, as I mentioned, from me, on the first of October. And many of you will be meeting him and talking to him for the first time today. While I was the Executive Chairman and Angelo was heading up the KZN distribution center. I had the privilege of working with him very closely on a number of projects. And I'm very excited about the future of SPAR and his leadership as group CEO, and both worked very hard over the past couple of months to ensure that we have what has so far been a seamless transition to him. As I mentioned, we've also appointed a new Group Chief Operating Officer, Megan Pydigadu, who was appointed on the first of November. She's a highly experienced executive and listed company director and we extend a very warm welcome to her as well. The third member of our group ExCo team is Mark Godfrey, our long-serving CFO. Our other top executives are Max Oliva, our CEO for SPAR Southern Africa, who took up his role in August 2022. Leo Crawford, the CEO of the BWG group in Ireland and Southwest England, who's been part of the management team driving this wonderful success of that business for many, many years. Rob Philipson, he's the CEO for Switzerland, who has driven so much of our international business, and he's also responsible for Poland and Sri Lanka. Kevin O'Brien was previously SPAR's Company Secretary, now he heads up our group ESG. He is fully dedicated towards guiding SPAR on this journey. And hopefully, that will drive the long-term sustainability of the group. Finally, I'll end of with a the picture here showing some of the retailer stores, and I'll now hand over to Angelo Swartz, our new Group CEO for an operational update for the period.

Good morning, everyone. Thank you, Mike, for that warm welcome and introduction. It's a great pleasure to be presenting to you today. I took up my new position as CEO of the group on the first of October 2023. Before Mark presents the results, I will provide a brief operational update on each of our markets. After Mark's presentation, I would like to share the key priorities of SPAR in the short to medium term. Looking at our core grocery and liquor business in SPAR Southern Africa, we've opened 82 new stores during the period across the SPAR and TOPS formats. That's a total of at least 2,200 new jobs created by our retailers in the communities of SPAR. A total of 217 stores were operating, considering the economic environment currently. It's very encouraging to see the retailers firmly committed to offering in and shopping experiences to their community and shows the faith they have in the SPAR plan. We have made significant progress in respect of our on-demand shopping presence in stores, with SPAR2U now available at over 350 sites in total. We have 87 sites at the end of September 2022, an impressive progress has been made. Our SPAR private label business reported excellent growth of 11% for the year, increasing to ZAR 18 billion in sales, and representing 25.3% of core gross in turnover. That's up from 24.6% contribution in the prior year. The tables provided a comparison between our reported wholesale growth versus what our retail has reported. Wholesale growth in the current period has made a recovery against the prior period with strong retail growth and like-for-like sales growth. Grocery, retail growth ahead of wholesale growth speaks to the issues we've been having with SAP. If you add back the SAP impact, retailer loyalty is flat on the prior year. As a reminder, SPAR launched SAP in KZN during the months of February and March 2023. This has been a very difficult time for us and the retailers in KZN in particular. However, the system is stable and all retailers in KZN are being serviced by the KZN distribution center again. Retailer loyalty levels have come back nicely, which speaks to the resilience of the SPAR model. The liquor table reminds us of the extraordinary effect in the prior year with the return of liquor sales post the COVID-19 liquor restrictions, growing at plus 40% in the prior year. Our liquor performance in the current year is, to some extent, a normalization of the sustained period of market-leading growth. Operationally, our Southern African team has made a lot of progress in respect of the 6 key focus areas as set out in the next 2 slides and share with the market last year, and a new marketing leadership, SPAR's marketing plan, which has been completely overhauled and this will position the business well for 2024. A new PR manager and PR agency has been appointed. Working closely with the marketing team to assist in creating a unified and consistent brand voice. All our campaigns reflect the new positioning, as well as a hard push towards single-minded consistent execution across the divisions. One brand, One voice. We have just launched our new festive season campaign called SPAR's More for Sho campaign, with affordability at its core, helping shoppers afford a better festive season than they might have anticipated. As a little teaser, and one of these associated adverts we'd like to share with you. [Presentation]

In line with the 3 pillars of our sponsorship strategy: Nutrition, Education and Women's Empowerment. The hard decision was taken to give notice to sponsorship beneficiaries not aligned with these areas and a new sponsorship strategy has been launched. We're exceptionally proud of the SPAR proteas our national netball team. The World Cup hosted by South Africa with SPAR as a lead sponsor was a great success. These women are our incredible ambassadors for our brand and our country. They're also role models for millions of young women across our country.. Moving to the second area of focus, and extensive customer and format segmentation analysis project has been completed, helping to identify key gaps and opportunities in the market. At a customer and retail level, during 2023, we crafted a retail segmentation strategy that will start rolling out in 2024. We are confident that the work done in this area will resonate with consumers. In respect with Fresh, we completed the rebranding of our private label, fruit and vegetable, bakery, butchery and home meal replacement ranges. The rebranding of much of our product and packaging has been well received by retailers and consumers. Improved quality and shelf life of product has also resulted in a reduction in food waste, which is beneficial to retail margins, but more importantly, is a key focus for the group as a responsible corporate citizen. In respect of omnichannel, SPAR2U, SPAR's on-demand shopping platform has reached scale. This is the rapid progress considering the independent nature of our operating model. During the year, we also relaunched SPAR Rewards, which has been very well received by customers. We saw the benefit of this just last week, with a record Black Friday promotional weekend, which is largely executed by our rewards platform. Lastly, in respect to omnichannel. We are building a customer insights hub. This has been previous had previously been outsourced, but we are reshaping this business unit by in-housing critical data science capabilities, and we'll integrate this team with our merchandising and retail operations teams. We launched a SPAR CX program to deliver a consistent customer experience in our stores. The Guild completed the alignment and improvement of the SPAR Guild development fund. This is critical to supporting the investment in our stores to drive retail organic growth. In most regions, we have now doubled the value of capital funding available to retailers through this fund, specifically for existing store development, keeping our stores relevant for consumers. We have completed the first phase of a center-led alignment for our retail operations departments across all distribution centers. During this period, the Comcom also approved acquisition of the remaining stake in Encore, effective 1st of April 2023. This exciting deal streamlines the structure of our private label business, and the teams have now been fully integrated at one Encore office. The development of new private label tiering strategy was completed and launched. This has been aligned to our customer segmentation work. Innovation and speed to market is an essential competitive advantage and we've reduced the average research and development time for new products from 12 months to 6 months, Concept of shelf. I'm sure you'll agree that's an impressive feat. In terms of our new private label tiered approach, this slide showcases how the tier's complete. Our trusted quality, best price range, leverages our underutilized discount and saving. Our middle-tier product is in line with the familiar SPAR of private label strategy as good as the best for less. This will remain our core thing. Our premium range is our SPAR Signature selection and is completely new to SPAR shops. Moving on to Build it. During my 16 years at SPAR, I spent some time in the Build it business,as divisional Build it executive in the Eastern cape. This is a great business. We have 400 stores across the country and the new leadership, together with the rebranding and store refurbishments in recently has raised the profile of our Build it business. With retail sales growing ahead of wholesale, our building materials loyalty has declined. This reflects our challenge in the building materials sectors sparring the current macroeconomic bidet. With disposable income stayed, consumer spending has shifted towards covering the basic costs of living. This shift has negatively impacted discretionary consumer spend in various sectors. And the hardware and building material sector has been particularly hard hit. The building industry has been impacted by lowered sharing, especially the manufacturing sector, given the reduced consumer demand and inflationary pressures caused by low share in -- customers have been forced to compromise often compromising on quality as a means to an end. Despite Build it having had a challenging year, it remains the #1 building materials retailer in Southern Africa and has shown market-leading growth. The quality of Build it building materials offered through its supply chain have ensured its dominance in the sector and will remain a key differentiator. A year has passed since the decision made to consolidate our pharmacy at SPAR business under the leadership of Jeremy Nicol. This decision is to refocus the direction of this business, which has delivered a strong trading performance. The new structure is working well, consisting of a wholesaler to pharmacies, a courier of pharmacy for highly-specialized medicines and a training academy. For our wholesale business, the team have made a tough but necessary decision to withdraw the membership of some pharmacies where loyalty levels were low, reducing the store network to 125 stores. The team also refreshed brand and retail operations support by broadening and deepening the pharmacy advice services and other services offered to our pharmacies. Scriptwise specialized pharmacies is a leader in renal dialysis and ophthalmology, dispensing the delivery of over 50% of the highly-specialized medicines in these specialty areas. Last year, we're very pleased with the progress our category is making in respect of development on necessary specialist skills in South Africa. We're especially proud of our pharmacist assistance program. The S Buys Training Academy is the largest of pharmacy support personnel across South Africa, turning over 50% of all pharmacists, assistant learners across the country. BWG Group has once again delivered a very strong result despite various challenges across both markets. The group has a very strong presence in the Irish convenience food retail space with its EUROSPAR, SPAR, MACE, XL and Atlantis brands. All these brands delivered positive growth during the period, notwithstanding difficult trading conditions with increased regulation, staff shortages, rising ops cost and very strong competition. Our recovery in the hospitality sector from March last year continued to boost our food service performance during this period. The Irish team have implemented their new strategy for the EUROSPAR format during the period, competing in the supermarket sector. The focus of the new strategy is to drive average shopper value by increasing fresh departmental participation and improving value in the grocery bucket list. Better use of data and digital as well as investment in the shopper experience and growing the store estate are also a part of our strategic ambitions, EUROSPAR competes in the supermarket sector, which is highly competitive and dominated by a few large players. However, our team believes its new strategy is realistic and focused on enabling EUROSPAR retailers to take profitably. U above Westwood in Southwest England, where we have 338 stores delivered another solid performance. The Swiss market has continued to experience volume declines as we contended with the dynamics of a post-pandemic marketplace with consumers looking for better pricing under cross-border or locally with discounts. The TopCC Cash & Carry business has been impacted by a contraction in the customary sector, coupled with consumers eating out less. During year, we launched four Go24 concept stores. These stores are completely unmanned and open to consumers 24 hours a day. The software used to enable this concept has performed exceptionally and management are confident that in time, we can utilize this platform to extend shopping hours in selected AVIA food courts and neighborhood SPAR stores. It's early days. However, this does present a great opportunity within this market, especially in respect of access to Sunday trading hours when many stores are closed into Switzerland. We're also trialing our SPAR2U on-demand shopping and thereby extending our customer reach through our improved omnichannel offering in this country. Management are acutely aware of the need to get that positive leverage, and are focused on strategic enablers to drive growth in this market, including a revised fresh strategy to drive increased footfall to its neighbor's stores. As mentioned before, we are looking to sell our interest in this market, and I will talk to this later in the presentation. SPAR Poland has 208 stores, 1 central office and 2 distribution centers and a food production facility with good food service potential. During the year we added 28 net new stores. The distribution centers are based in the north and the south of the country. We've laid the foundations for solid distribution facilities to support these stores. Retailer loyalty continued to improve during the period, which is encouraging for any interested buyers. Sri Lanka has a population of more than 22 million, mostly young people and a predominantly informal retail environment. We believe it offers huge potential and is perfectly suited to the SPAR model. We have a joint venture arrangement with a local company called Salon Biscuits Limited. CBL (sic) [ SBL ] is a leading local biscuit and food manufacturer and exporter in Sri Lanka and understands the local market well. Despite political and economic uncertainty in the recent years, the business environment remains stable currently. We are slowly growing the number of stores there, with 26 stores across a few formats at the year-end. The team are considering the best plan for expansion and exploring opportunities with existing retailers interested in partnering with SPAR. I'll now hand over to Mark for the financial review.

Thank you, Angelo. Good morning, ladies and gentlemen. And after Mark and Angelo's presentation to you, it's left up to me to convert that into numbers. So I'm sure most of you have seen the numbers that have been released. So let's start with the salient features. The SPAR Group reported turnover of ZAR 149.3 billion, an increase of 10.1%, and interesting enough, a stronger second half from a turnover perspective. At H1, we were up some 7.1%. It's also reflective of the fact that our European businesses generally have strong -- what would be our second half that would be their high seasons, and we definitely saw that coming through. Gross margins at ZAR 17.9 billion, 12.02%. In fact, if you go to the second decimal for both financial years, we were exactly the same despite a tumultuous year of lots of moving parts. I think our marketing teams have done an exceptional job. The big ticket item on the income statement. Net operating expenses growing by 22% to some ZAR 19.4 million. We will unpack it in detail. There's significant inflation pressure coming through there, but also a number of strategic adjustments or rather strategic investments. And then from an adjustment point of view, we did recognize some fairly material impairments, and I will unpack those in a bit more detail as well. Operating profit declined some 47% to ZAR 1.8 billion. And it's a margin of a number that, I guess, we will not refer to, again, of 1.2% because the business is clearly more focused on driving that number back towards the 2.6% and 2.7% range. Profit after tax, ZAR 442 million. If we adjust the headline earnings, recognizing the impairments, that number increases to ZAR 606.06 cents (sic) [ ZAR 606.3 cents ]. And again, you can see that 47.7% declines more closely aligning with the operating profit. The most significant number for logically, I'm sure is the fact that the Board's decision not to declare a dividend for the financial year significantly because of the immediate operating short-term cash flow requirements. There is still a great deal of uncertainty, particularly in our South African business around the SAP implementation, but just from a prudence point of view, it was felt most appropriate at this stage to take that approach. The Board are still extremely committed to returning capital and dividends to shareholders and as soon as those profits start reversing, as we've already guided, we expect them to do, we will return to a dividend policy. The next slide I'd like to share with you, I do this with some caution because we're not intending to reconcile the issues away. But I think both Mike and Angelo have made reference to the extraordinary adjustments that the business has suffered during the course of the year. And I think it's only pertinent that we display them for you so that you get a sense of the numbers and really what we are meaning. So on the left-hand side, the results as we've reported, I've introduced a column, which I've headed at normal items, and I'd prefer not to get into a technical accounting debate as to extraordinary or abnormal let's -- for purposes of the exercise, just consider them as abnormal. And at a turnover level, we have estimated a notional loss of turnover as a result of the KZN SAP implementation to the group of ZAR 1.6 billion. That is a net number because the KZN distribution center, in fact, suffered an estimated ZAR 2.7 billion worth of losses. But fortunately, the operational interactions between our distribution centers allow us very quickly to call on the neighboring DCs to assist, and we definitely need to recognize the incredible support that was provided by us, the South Rand, the Eastern Cape and the North Rand distribution centers to our retailers in KZN as we needed their support. So there was a gain to those distribution centers of approximately ZAR 1.1 billion, but leaving us with this net estimated loss of ZAR 1.6 billion. The gross margin loss. And again, they're somewhat notional exercise being done here. It's not just the margin times by the standard gross profit because, obviously, there was other forms of income. There were other rebates lost, and we estimated that number at some ZAR 553 million, a significant number. And as you can see, it would have effectively notionally driven the gross profit to quite a high level for the group. But I think the most significant impact sits in our net operating expenses, where there were some fairly are significant one-offs, and we speak specifically around impairments, both in Poland and in Ireland, and those were some ZAR 640 million. And then we also took a write-off of some ZAR 94 million relating to the work that had already been done in our ERP platform design specifically for the foreign businesses. So we are not impairing or writing down the SAP investment. We have only identified those elements or those costs that had been incurred for the system that would have been deployed to both Ireland and Poland because the Board have agreed that those business units be allowed to implement what we are describing as best-of-breed systems. So as a consequence, that investment cost is no longer relevant. We've expensed ZAR 94.1 million. So if we adjust, again, those significant one-off operating cost of ZAR 825 million, the increase in operating expenses. And as I said at the outset, not attempting to reconcile away the impact to the business. But operating expenses would have then grown by just under 17%, an improvement of nearly 6% on where we did report. And I think, as has been referenced by both Mike and Angelo previously, the impact on operating profit is quite substantial, some ZAR 1.3 billion worth of extraordinary reduction, we would have seen operating profits more in the region of ZAR 3.2 billion. Yes, it would have still been a decline on the previous years, and we would have focused on issues as we will do around inflationary cost and some of the significant costs of the business has incurred, but I think it would have been a far more reflective number of the underlying health of the business and how strong some of our regions actually did perform. As I said, I'm going to leave that slide with you just for illustration purposes, it is not the intention to reconcile away the performance of the business. There might be questions around the decision of the Board to dispose of the interest in Poland and why we haven't reflected Poland as a discontinued or an asset held for sale. This is very much a technical decision. As you well know, the Board announced on the 28th of September that the decision to dispose of or to commence a process to dispose of our interest in Poland was going to be undertaken. In terms of technical accounting standards, and this is specifically the IFRS 5 standard, there are 2 hurdles that we needed to get through. The first one, fundamentally was had we started the process by the end of the financial year. And the second one was how probable was the sale or effectively, could we with certainty be able to make a statement that, that sale would be completed within 1 year. Neither of those 2 points had been concluded or satisfied by the 30th of September. So hence, we will continue in this year to report Poland as a consolidated business, we are not then valuing it in terms of the standard on a disposal value or a value less disposal costs. But what we have done is review very carefully the carrying value and despite the fact that our Polish colleagues seem to believe that this largely resulted into the impairment there were impairments then taken around the goodwill and the intangibles. We have commenced a process. We have appointed professional advisers. We have had significant positive interest but we will cover that, I'm sure, under further conversation during the presentation. On the right-hand side, I've included in the presentation. And I guess you could call it a buyer's teaser. Just to give any interested parties a sense of what that business really does look like at a balance sheet perspective. We've got noncurrent assets in Poland of some ZAR 1.3 billion. That does include capitalized leases and lease receivables. We've got current assets of just under ZAR 700 million. These figures are in ZAR. And effectively, we've got assets in Poland of just over ZAR 2 billion. So it's not an insignificant business. We do recognize that there are fairly significant liabilities, excluding debt of some ZAR 1.4 billion and then debt and overdrafts of ZAR 2 billion and included in the debt, as has been well covered in the past, the parent has provided guarantees to that debt. So part of the process will be restructuring the group's balance sheet to the extent that there's any shortfall on the disposal to cover the debts and the overdrafts. I guess at this point, I would like to say if there are any interested parties on the call, you can contact our Chief Operating Officer. Her e-mail address will appear at the end of the presentation. So Megan will tee you up for that. Right. If I move forward and really, I'm not going to unpack this in a great lot of detail, but just to share with you the business from a regional perspective. And this is the income statement on the right-hand side that we've spoken to the ZAR 149 billion, profit after tax of ZAR 442 million and then basically just running from right to left, we start with the Southern African business, ZAR 92.6 billion worth of turnover, some 62% of the business. That number has shrunk a little bit, a year ago, we were 65% and clearly, the KZN impact coming through there. The South African business gross profit did decline by 50 basis points. And again, the KZN impact coming through, but also recognizing the performance stress on the business. Operating expenses, and really, the SAP and impairment issue sits across all of the operating expenses, and I haven't attempted to strip them out. These are the numbers as the business performed. But you can see the South African business is profit after tax of ZAR 628.4 million. And those of you that are immediately looking to the right, yes, you are correct, the Irish business at a reported perspective, reported more profit than South Africa did. So I've got no doubt that Leo Crawford and the Irish team who will be following this presentation at this point in time are celebrating. I just want to remind them that the Webb Ellis trophy is in South Africa. The Irish turnover have was fantastic, ZAR 38 billion, a strong gross margin at 15.1%, very strong performance coming through from both retail and across all of their sectors. The Swiss business, 15.7%, a disappointing performance I think there was a far higher expectation that the Swiss business would hold on to a lot more of the COVID growth that they enjoyed. But that said, we also need to recognize that Europe is going through a macroeconomic crisis at the moment with inflation levels that a lot of Europeans have not seen before, and interest and inflation levels in Switzerland, in particular, are exceptionally high. Now when I say to you that inflation in Switzerland is 3%, that might sound like I've left off a digit or two, but the reality is that the Swiss have -- are not used to inflation of anything above zero. So there's a great deal of focus in Switzerland on shopping for price, and as a consequence, it is becoming an incredibly competitive market, but still a performance that we know the Swiss team were disappointed with the Polish business, ZAR 2.9 billion worth of revenue, yes, it was loss-making. The loss is exaggerated by the impairments taken. Those were quite significant in the period. In fact, if you strip out the impairments, the business was largely flat at an operating loss level. Let's move on to turnover. And again, a very busy slide. I'm not going to attempt to talk you through all of the detail perhaps just to focus on some of the more pertinent points. The SPAR South African business at a core grocery level, growing by some 7.1%. And I appreciate that it's always dangerous to start talking to notional adjustments. But if we were to recognize the impact that the KZN business suffered during the year. The South African core grocery business would have actually increased 9.1% almost in line with inflation, suggesting that there would have been 0 volume growth, which I guess a lot of retailers and wholesalers in South Africa can't claim credit too. Unfortunately, the TOPS business declined by 0.1%. And as we spoke to at interim, there is an extraordinary base effect. In the previous year, we saw liquor growing by some 40-odd percent as we came out of the COVID pandemic, but again, if we recognize the KZN disruption, that number and by simply excluding KZN, without trying to do any adjustments. If we just look at the balance of the South African business, our liquor business grew by plus 4%, there clearly is a lot of pressure in the liquor trade at the moment. There's a lot of competitive activity taking place. It is not a number that we are comfortable with, but it is a number that is a lot more understandable against the backdrop of our markets. If we combine the 2, which gives you at least a sense of liquor and groceries combined, plus 6%, and again, in the box at the bottom, if we were to notionally recognize the disruption to the business, that would have been in excess of 8%. Build it, a disappointing year in black and white, but in truth, a strong performance against the sector that is incredibly impacted at the moment by consumer spending pressure and also load shedding, which is affecting the entire building sector. The South African business growing by 4.9%. We need to call out to our Pharmaceutical subsidiary, S Buys, an incredibly strong number at 19%, great growth in wholesale and their specialized business. Scriptwise, really strong, taking the Southern African business to 5.1%. The Irish in ZAR terms is just under 22%. And Leo, I'll take back the Webb Ellis comment because that is a fantastic turnover growth, and in euro terms, 8.1%, a very strong number. We've seen a strong recovery in the hospitality sector, the consolidation of acquisitions at all of the brands in Ireland performing strongly. Switzerland in ZAR, 13.6%, declined in Swiss francs by just over 3%, and quite a significant part of that was the transfer out of a number of the remaining corporate stores into the hands of independents. In fact, if we exclude the impact of the retail adjustment, the Swiss business would have been just marginally negative. Poland growing by just under 20%, in zloty terms by 5%, and quite positively seeing an improvement in loyalty, just under 60%. We are getting that number up towards the levels that we expected. And I think that also speaks to what the team in Poland have done, particularly in the South to improve the range, the assortment and the pricing to our retailers. So a very busy slide, lots of information into it, but I think the overarching comment is some very strong performances in a number of our territories. The next slide, and again, I don't prefer to be an economist and really, this is just by way of guidance. We've previously just given you a sense of what inflation levels looked like in the various territories. I know a lot of you don't cover the European market. So inflation might be relevant in your view of those performances. But I think what you can see, if we start with Ireland, incredibly strong inflation numbers that business has experienced. In fact, the country has experienced over the last year. Food and nonalcoholic beverages are double digits, just under 13%, again, I speak to Switzerland. And in a territory that inflation has been historically 0% to 1%, I think when you start seeing anything between 3.5% and 7%, you start understanding how that economy is being disrupted at the moment. Poland also experiencing very high double-digit numbers. I think what is positive in all of the geographies is that, as you can see, the estimates for the year ahead, we are seeing significant tail-off on inflation, so as much as there are a number of macro factors impacting Europe at the moment, they are expecting inflation to start reversing and start trajectory more towards a more normal level. South Africa is still experiencing some very high numbers. The projection for the year ahead of just under 5%, maybe stats are a little optimistic because we're still seeing some very strong numbers in food and liquor. On the right-hand side, those are our internally measured numbers. Food for the year, 9.7%, and liquor slightly down on a year ago at 6.4%. But we are definitely seeing a cool off of inflation in South Africa just by way of guidance, in the month of November through the inflation in our business had reduced all the way to 7.5%, and liquor to under 3%. So we are seeing a slowdown. If we just touch on gross margins very quickly. And again, lots of information on the slide. The South African business declined by 49 basis points to 9.5%. There was an impact on sales mix as a result of the SAP implementation challenges, what we were forced to do was move a number of the product categories on to drop shipment, which is direct supply delivery where we only earn a smaller commission just to ensure that we were able to get product to our retailers and that sales mix change probably impacted the KZN distribution center, some 1.5% to 1.8%. If you track that through, you get very close to what the South African business lost overall. Ireland, an exceptionally strong performance and this is also impacted by mix interesting lift. We've spoken previously around how particularly the tobacco business in Ireland has been impacted by the Brexit legislative changes. But as our Irish CFO keeps reminding me, where we are seeing strong growth in that business is in categories of higher margin, so particularly convenience food, drinks and confectionery, all of which carry a higher margin. So the decline in the tobacco volumes, albeit impacting revenue is actually having an inverted dilutionary effect, if I can use that expression. Switzerland negative. And again, the impact on the retail stores moving out, the wholesale business was actually quite positive. And then Poland is showing a very strong improvement in their margin, significantly improved supplier terms and also the corporate stores showing a strong recovery. So lots of moving parts in the group's gross margin. And as I said, almost incredible to consider that we got to exactly the same decimal point overall of 12.02%. I'm going to move into operating expenses next. Yes, it is a significant driver of the performance of the business. So at a category level, and this is very much as you would have seen it on the face of the income statement, just to get a sense of where those big moves were. In our core warehouse and distribution business across the group, some 13.3% increase, impacted by volumes in Ireland and Poland, but significantly impacted by fuel costs and energy costs in all of the regions, double-digit increases 13% and 16%. Fortunately, we are seeing, particularly in Europe, a slowdown in those and a lot of the energy costs are reverting back to more normalized levels, but still a very significant pressure point in all of our businesses, marketing and selling costs up 13.4%, a significant contribution coming from South Africa, where that number grew by 27%. There were a number of impacts in that in the South African business, ranging from the support that we provided and the marketing that we extended to the KZN region to try and support those retailers over the last 8 months, but also some investment in building operational growth structures for the business. We are expanding into areas like omnichannel and value-added services, and we are putting resources and investing in operational spend to secure those and to drive those new opportunities for the business going forward. So yes, there are what you might refer to as once off or more extraordinary costs as we set those new departments and bases in play, but the revenue streams and the growth opportunities come in the future and they are critical for the growth of the business. Admin and IT, just under 50% significant costs coming through in the IT spend and not just localized to South Africa. South Africa was up some 53%. A big portion of that was the SAP and the consultant support that had to be provided to the KZN region. Obviously, once we realized that there was a serious issue with the implementation at KZN, the accounting rules, unfortunately, kick in, and all of the support costs provided thereafter become operational expenditure. There's no longer a capitalization because effectively what your resources and what your consultants are doing is supporting the business as opposed to building the new system. So a large impact of that cost coming through, and in our European business, particularly in Ireland, we've also started investing in IT spend as we look to secure and grow those businesses. Then we look at the start of -- or at least the big ticket item, the impairment of assets, ZAR 632 million. On the right-hand side, just a quick note. So the Polish goodwill and other assets, effectively, the bulk of that is the intangibles. So in performing the assessment of the economic value of that business, there was a great deal of discussion around growth trajectories, forecasts and obviously, expectations for the business going forward. We've had to take a -- I wouldn't say a cautious view, let's call it, a realistic view on what that business will achieve going forward. And as a consequence of that, we felt it only necessary to expense all of the carrying goodwill so ZAR 210 million. The intangibles, which largely relate to the investment that was made in acquiring the license rights for Poland and also certain other IT investments. We expensed or impaired ZAR 172 million, and then the exercise also gave us a carrying value of the business, which was then still less than the reported book values, we then identified right-of-use assets and certain PPE of some ZAR 59 million. And in total, some ZAR 442 million of the Polish assets were impaired in this result. The balance of the ZAR 632 million relates specifically to the Irish business. 2 years ago, we acquired a business called Heaney Meats since been rebranded William's Gate. And the strategy around that business was to implement and expand into meat processing. There has been a challenge in that strategy. There's a belief that, that business will be more focused on wholesaling and the investment that has been made and the carrying value of that business was reassessed, and we expensed in this period. Some of the production capacity that was invested in some ZAR 54 million, and we also wrote down the carrying value of the investment and goodwill by ZAR 67 million. So a significant impact on the result of ZAR 630 million worth of impairments, but we are comfortable that those are the necessary one-offs that needed to be taken in ensuring the assets of the business were fairly valued. The second line simply refers to the movement in the credit loss allowance, so this is the provision. We have seen a reversal, particularly coming out of Poland on that number, but overarchingly, the group's credit management is still a high focus for us. We are well aware of the fact that a number of our retailers across geographies are facing extreme challenges at this time, and it is an area that we are applying much attention to going forward. The slide that follows just basically pivots this information and looks at it by geographic. And again, I'm not going to effectively rehash a lot of the explanation provided. But just to give you a sense of how the various geographies of increased cost. If I just start from the bottom, the Polish number does look excessive. But again, I remind you that included in the ZAR 1.3 billion is ZAR 442 million worth of impairments. If we exclude that, the Polish in zloty terms, actually saw a decline in the operating expenditure of 16.1%. There's been great focus on reducing cost and efficiencies and optimizing particularly the logistics system in Poland, we've seen that reduce. But offset against that, it is a country that has seen energy and gas costs increased by more than 16%. The Swiss number, and again, perhaps is more relevant to look to their local currency. In Swiss francs, the net expenses actually declined by 0.1%. I'll remind you that that's on the back of a turnover decline of 3.3%. So there was a significant impact as a result of us transferring out some of the retail stores. We no longer have those costs, but there is a great deal of pressure on that number as well. In Ireland, costs growing by 16% in euro terms. If we exclude the impairments that the Irish business took some 13.9%. It's a lot more realistic number, but still against the top line turnover growth of 8.1%. We are aware that there is pressure on costs, labor, in particular, both volumes and as a result of living wage adjustments, increasing in that business by 15%. Energy costs up by 9%. And again, I've touched on some of the IT spend that, that business has made. And that leaves the South African business growing or Southern African business growing by 16%. I've touched on some of the strategic imperatives that are driving cost, particularly around new people coming into the business, fuel and distribution costs up nearly 13%. And again, I've touched on the increased marketing costs incurred over the year. So if we move into another significant impact on the income statement. We haven't touched on it in the earlier salient features. But clearly, finance costs have increased in the period. Finance income has been largely flat, and I realize this might look a little constructed because it does include the lease, our IFRS 16 consequences of financing. But even with those numbers, you will see that the finance income is largely flat over the 2 years. The significant costs have come through in the area of loans and debt particularly in the European business, where we've seen interest rates rising quite substantially over the last year. Those of you that do track the Euro bar, for example, in January of '23, that number was 1.8, and we finished the year at nearly 4 and significant increases coming through. And likewise, in the Swiss business, we've also seen increases in bad debt. The bank overdraft increase is largely the South African business, and as I've alluded to, a ZAR 2.6 billion working capital disruption as a result of the turnover, yes, if you net it out at ZAR 1.6 billion, all of that significantly impacted the South African business over the last 8 months. We were carrying increased levels of stock for large periods of time. We were increased accounts receivable, particularly in KZN as we were required to support those retailers and those all had a large impact on our cash flows, our working capital and the related interest. A lot of that information, we did share at the interim because we were already starting to see it. And at the interim, you will also be reminded that we saw the covenant breaches. On the right-hand side, just to give you a sense of the average interest rates across the period, the South African interest rate is a blended rate. We do appreciate that Prime is a lot higher than that. In Ireland, that dramatic increase. And likewise, in Poland, and then just below that for information, just the impact from a sensitivity point of view, if there were to be a 50 basis point increase in interest rates in the various geographies, what that would do from a swing perspective on the cost of debt. It's obviously going to be very necessary to do an effective tax rate recon. I mean, critically, if you look at the tax rate, it suggests that our effective tax rate is some 54%. And fundamentally, that has been impacted by, again, a lot of what I've spoken to earlier, impairments, one-off write-offs and some of those SAP under construction assets. So what we've done is a detail for those of you that like the detail. This is the full recon. The big ticket items are the impairments. So if you start with those understanding the South African tax rates reduced to 27%. It's inflated by the impairments, nearly 12%. The write-off is another one included in the write-offs were also and the next 2 line items relate specifically to Poland where we don't recognize the tax losses quite simply because there's no basis to do that. So there's a consequence of that business being loss-making. And secondly, the assessment of the businesses forecast over the next couple of years also caused us to reverse a deferred tax asset that we'd raise in Poland, and that also had the consequence of driving up the tax cost. All of those percentages around tax losses and the impact of tax assets are exaggerated by the fact that the underlying profit is so much lower than normal by almost 1/3. And if you take those into account, you will reconcile. I think the most important number is still that second or third from the bottom and the fact that the tax differential in the European geographies should cause our effective tax rate to be at least 4% lower, excluding the likes of timing and permanent differences. So if you're still looking for a projection on our tax rates, I've previously guided 26% to 27% and I still believe that number in a normalized environment is what we should be targeting in any of your projections. Just to illustrate, currency moves, we're all aware of the fact that the rand has weakened significantly over probably the last 2 to 2.5 years. But in the last 12 months, we've seen on the left-hand side, this is a Swiss franc and euro overlay graph, almost tracking exactly. But starting the year at just over [ ZAR 17.8 ] and the rand weakening all the way to some [ ZAR 20 ] at the closing spot rate, we've seen a 12.5% weaken in the currency. But we've seen a similar move in the average rate. So you would suggest that at least we are seeing comparative move in the translation of currencies. The point being, however, that significant parts of the South African debt is in Europe, where we don't earn a matched large income component. On the right-hand side, a similar trend from the Polish zloty and again seeing the rand devalue against this zloty by more than 18%. I think this slide, particularly the right-hand side of this slide is going to be interest to a number of you, particularly those of you that were making projections on our H2 performance. And the first 2 horizontal charts being Poland and South Africa, no doubt of the most significant causes of potentially how your projections and how our actual numbers are going to be out of sync. Firstly, Poland, ZAR 642 million, a significant part of that was the impairments. If we adjust for the impairments, Poland would have been effectively minus ZAR 200 million. So yes, it was still significantly down in the second half. The South African business contracting or declining substantially. And I'd just remind that the first half, we had effectively gone live in KZN on the first of February. So there's a 2-month effect in H1, but that really covered almost entirely the second 6 months. There were significant improvements towards the end of the financial year into the months of July, August and September. But the SAP impact was really a 6-month impact in H2 versus a 2-month impact in H1 and fundamentally impacting on the South African business quite substantially. The left-hand side, just the turnover performance, again seen the majority of the European business is contributing quite strongly in H2. That is very much expected, but the South African business contracting, and as I mentioned, the SAP impact coming through very strongly there. Looking at the European businesses. For those of you that just want to get a sense of the discounted foreign exchange effect. If we just look at their currencies in local measured euros and Swiss francs. And again, a similar trend, very strong performances in turnover coming through from the Swiss and the Irish in particular, and Poland being impacted by the write-offs that they suffered. The balance sheets of the geographies, again, I don't intend unpacking them in a lot of detail. I think a lot of you have studied these. But just to highlight from the top, the business does have significant lease obligations and right-of-use assets, particularly in the European geographies, Ireland and Switzerland, some ZAR 3 million worth of capitalized leases in Ireland and just under ZAR 5 million in Switzerland. South Africa largely owns the corporate investments. And then lease receivables, which in the South African context, is largely matched against the lease liability right down at the bottom in the red box, because we do have a number of matched head and sublease arrangements as we support our retailers to secure sites. Goodwill and intangibles, that number has obviously declined in the period in Poland, but fairly significant investment in Switzerland, a very large investment in Ireland through the acquisitions that business has made over the years but all of that has once again been tested and very, very adequately valued. So we are comfortable with the carrying value of our Google and intangibles in all of our geographies. Current assets and liabilities, again, just for illustration. And then just setting out the group's long-term borrowings, specifically in Ireland and Switzerland, and there is a portion of both long- and short-term borrowings in Poland. The group's debt has been a focus. And just to share with you the makeup of the debt. So on the left-hand side, starting at the top, bank overdrafts fairly flat against a year ago, largely in the Polish business. Borrowings are up ever so slightly. There were minor increases in borrowings. That's largely an FX effect and bank balances did improve quite substantially, albeit that's a figure in brackets, that's cash holdings. So some ZAR 560 million increase in the closing cash at the end of the year, and we recognize the Irish and the South African business that did a lot of good working capital management over the last quarter to deliver that. Below that, just setting out in local currency to give you a sense of where that ZAR 8.2 billion worth of debt is placed. I do respond to make one point, I think our Irish and our Swiss teams are sometimes unfairly judged against the extent of their debt. If you consider that in Ireland, there's EUR 165.2 million of debt, some EUR 104 million of that amount is effectively the debt that was raised to fund the minority buyouts in Ireland. We housed it in Ireland in a structured arrangement because of the interest saving and also because we had the accumulated cash headroom in that business. So that is not debt that has been raised specifically for return in Ireland, but it's group debt, which is housed in that business. And likewise, the Swiss number of CHF 167 million includes CHF 56 million for exactly the same reason. So there's some 160 -- approximately CHF 160 million and euro debt of the European debt that technically could or should be relocated to South Africa where those investments would have been funded from. We just used the stronger retained cash flows of those 2 geographies. And also, managed to save substantial financing costs by doing that. On the right-hand side, just to give you a sense of age to maturity. So the South African debt is largely the mortgage of the Knowles property, the investment we made adjacent to our head office. Some of our subsidiaries have got small amounts of debt. The Irish debt has still got 3.3 years to revolve. And as I say, revolve, the intention would be to refinance and roll that debt over. Switzerland, again, just under 3 years on a refinancing arrangement. And then as a result of the decision in Poland, we are already in discussions with bankers around the refinancing of the debt in Poland, which effectively was to be refinanced at the end of the calendar -- of the financial year '24. Down on the bottom side, we do acknowledge that some of the European debt has got fixed rates. I must just point out that this is a measurement at the 30th of September. We actually do fix a far larger portion of the debt, we have the ability on some of the revolving credit facilities to fix that debt, and that number is generally a lot higher than only 1.5% of the debt. The other matter which, again, was topical at half year quite simply because the group had reached its covenants. We provided the explanations at the half, particularly the covenant that was relevant was the leverage ratio, which is the relationship of debt-to-EBITDA. EBITDA being as I'm sure you're all aware, the most indicative number of your cash flow profit. So the intention of the measurement is just to track how your cash flow profits would be able to cover your debt. And the target that we had was 2.75. As you can see in 2022, we would have comfortably been under that number, albeit with reducing headroom. But at the end of the year, we were actually over the 2.75. However, we were able to renegotiate or get consent from all of our bankers to give a short-term exemption on that. We've increased that cover to 3.5x until March of next year, and we will remain in contact with our bankers as we are regularly doing. Should there be any risk that by the end of March, that number wouldn't be tracking back towards the 2.75. As we reported, the group was not in breach of any covenants at year-end, albeit against an increased measurement. And our bankers are all very, very comfortable to continue to engage with us on that basis. An extract of the cash flow statement, I think the number, I really want to target is about 1/3 of the way from the top. The cash generated by operations, over ZAR 6 billion worth of cash generated. There were some strong reversals in working capital management, particularly from what we reported at H1. We did see a reversal in both South Africa and Ireland and in the stock levels and a specific call out to the Irish team on managing their stock, both in Ireland and in the U.K. And then on all of the businesses, a very, very strong focus on debtors and creditors and all of which have contributed to a strong reversal in working capital and underpinning that strong cash generation. Capital expenditure of ZAR 1.9 billion largely included the SAP spend but also the normal increase in assets as we replace and expand. There were some minor acquisitions, particularly in retail stores in both Ireland and in the U.K. The Irish also invested in 2 additional Cash & Carry businesses. And then grouped together, as we are required to do are the leases. So that's the IFRS 16 lease receipts and payments. Being basically grouped and then down at the bottom, just some treasury activity, some minor share repurchases. And then we settled the remaining balance of the pharmaceutical buyout, and we made the first investment into purchasing the Encore business, which we reported at the last year. And all of the performance of the year resulted in a net positive cash flow movement. Just graphically exactly the same format, and I'm not going to dwell on this any longer. I know a lot of you take great interest in looking at the waterfall impact of the cash flows. A very, very strong contribution from operating profit before working capital, but also a strong contribution from working capital, driving that generated number to over ZAR 6 billion. The capital expenditure incurred in the year of just over ZAR 2 billion. A large portion of that was obviously software. But across all of the geographies, there was ongoing focus on replacing and maintaining our core business, which is trucking, it's equipment, and it's our vehicles. And down at the bottom on the left-hand side, we've just given an early stab and I must say this number will no doubt be subject to a great deal of focus during the year because included in the South African number of ZAR 1.1 billion is some ZAR 228 million for the ongoing SAP project and as I'm sure you can well appreciate, there is a great deal of discussion going on around how that will continue, exactly what that will look like and what the pace of that rollout will be. So there might well be a quite significant change in that. I don't expect it to be necessarily largely upward, but I think it might be more conservatively downward as we assess that over the new year. The Irish and the Swiss businesses, Ireland, in particular, and Swiss, for that matter, largely underpinned by some of the investments in retail that they make and the Polish business having a small adjustment coming through as we recognize that as well. Ladies and gentlemen, really, I've taken a lot of time to present the numbers. I know there's been a lot of significant issues in the numbers. We needed to focus on our OpEx. We needed to focus on some of those significant commitments. I'll leave you with the same slide. I'll start with the salient features. The group reported a turnover increase of 10.1%. I'm taking the liberty of dropping in the ZAR 3.2 billion worth of notional operating profit had we excluded those numbers. And yes, the operating profit would have still been a slight negative, but it would have been far more palatable to a lot of you against the performance of this business. Before I hand back to our CEO and our Chairman, I would just like to take this opportunity to recognize our finance teams around the group. This was a difficult year. It was a pressured year with a lot of operational disruption. It was a year that we were forced to deal with a number of very technical issues, impairments and valuations. And if I may, I'd just like to specifically call out the head office team under Meg's leadership. I think you guys have done an incredible job posting these numbers today. My thanks and appreciation, not only to the South African team, but to our teams around all our geographies. Thank you very much. And on that, I'm going to hand back to Angelo. Thank you, ladies and gentlemen, for your time.

Thank you, Mark, for the thorough analysis. Moving on to our key priorities. This slide goes up very nicely what our key priorities are going forward. The areas of focus are: one, the strategic sale of our interest in SPAR Poland must be our key priority in the immediate short term. Two, optimizing our capital structure through debt restructuring; three, completing the much-needed modernization of our ERP system in South Africa to enable us our strategic goal and reshaping our business and becoming future fit. Four, recovering of the EBIT margin in our home territory and the heart of our business is core to the long-term sustainability of our business, but needs to be delivered in the short to medium term. In respect of Poland, as you know, the Board has decided to sell our interest in this market. As tough a decision as it was, it is one that I was involved in, and the Board and management are completely aligned. The process is well underway. We are working towards managing this process as swiftly as possible. There are a lot of interparties and some parties who are interested in keeping the SPAR brand, which we are delighted about. I'd like to stress that we continue -- that we will continue to support this business until we have found the most appropriate new home for it. We are seeking the best possible outcome for all stakeholders and in particular, the many dedicated staff and the retailers in Poland. Moving on to our balance sheet. Group net to EBITDA ratio is not where we want it to be. Finance costs from high levels of debt by placing a stainless fast profitability. By aiming to find the right balance between long-term and short-term debt and implement the most appropriate facility structures to enable the group the flexible needs to reduce costs while enabling growth. By in the process of considering the best possible debt structure for the group. Capital allocation discipline is a key area of focus was going forward, and we will be holding local management teams accountable to set targets. Working capital management requires greater attention across the group. In Southern Africa, our cash flow has been impacted by the issues in KZN. However, there are significant opportunities to reduce capital tied up inventory. Improved disciplines related to trade debtor collections and to more deliberately manage our trade credit balances. In short, I believe there are opportunities in all 3 elements related to working capital management which can significantly improve the group's free cash flows. All regions have been given a directive to preserve cash and reduce debt. We are aiming to get back to our previous covenant ratio of debt to EBITDA of 2.75x by 2025. The SAP implementation in Southern Africa has not got to plan. We have decided to move away from a global template and to focus on local optimization and a best-of-breed strategy. The source business is already using SAP, and we'll optimize the version of the system they're currently use it. Our Irish operations have commenced the development of their best-of-breed framework, which will save this business significant CapEx. In Southern Africa, the rollout has been paused until we are satisfied with the design of the system and our KZN distribution center. We have new leadership in this area of the business, and we are engaging with new independent assurance partners as well as implementation specialists to reduce the risks of future rollouts. The key result is to ultimately modernize the business and drive the business to higher levels of efficiency. We want to minimize any further disruption to the business and our retailers and avoid more losses in doing so. We remain committed to the modernization of our entire value chain, and we see significant opportunities to be derived from the increasing efficiency of our operations, including improved overall profitability and remeasuring what our supply chain is capable of. Our SAP business has experienced a deterioration of its EBIT margins for a few years now. This is a key area of focus for us. I believe that we are at a strategic inflection point. In each cycle balance between centralized control and decentralized decision-making. For a very long time now, one of our key things as a business has been our ability to make decisions at that outpace through the strategic placement of our distribution centers. While we want to retain that flexibility, as the business has grown in scale and complexity, 2 optimists has led to disparate decision-making. But a point in the life cycle of our business where balance needs to lead towards a more center-led approach. We believe this is the potential to unlock value and to reduce costs. A large part of the increase in costs has been necessary in terms of securing future revenue streams. It is critical in that we actively invest time and resources within areas that will help define the future shape of our business. Furthermore, improved retailer profitability will be key in supporting SPAR with disparity. SPAR's bad debts have worsened in recent years. Our retailers are under increasing financial pressure with rising fuel and industry costs exacerbated by high levels of below chain. Our retail has done an incredible job of managing the challenges, especially in the larger groups. However, many stores are struggling, and this means that we will have to test this fundamental enabler of our business. There's been rapid growth in the costs in some areas of our business to the extent that some of these have become structural in nature to the extent that some of these costs have not supported better margin outcomes for the group that will be addressed and we will have to be disciplined at moving any cost that do not add value. It's important to mention the Southern African team has changed considerably over the past 2 years. Max Oliver has been CEO since last August. And we have reduced the ambiguity between the Southern African and the group role. This has created clarity of focus and combined with the recruitment of some seasoned and highly experienced new executive is helping us to see things differently and laying the necessary foundations for an exceptionally bright future in our home market. Thank you, everyone. We will now answer any questions you have.

Good morning, everyone. Thanks, Ang. Right. We have roughly 15 minutes for questions this morning, so we're going to move through them fairly quickly. The first question is, can you tell us how the handover has gone or the transition from the Executive Chairman to the new CEO?

Okay. Perfect. So Angelo took over from me on the first of October. And I must just say very big well done to Angelo because even, we put in an incredible amount of effort in the months leading up to him starting to get up to speed with everything. And of course, he knows the retail business way better than me. As I've mentioned, I think it's been a pretty seamless transition, and it's been a pleasure to see him in action with the staff, and as I've mentioned many times, a very well-respected leader within the group and amongst our retailers and suppliers. So I actually think it could not have gone better. That's my view. And I'm happy to have a bit of my life back.

Yes, it's been a busy few months. But most of all, I think the transition has been really smooth. Mark and I spent quite a bit of time to get them the leads and the weeks leading up to the handover. And since then, he has really let go of the reins and let me run the show, which I really appreciate. And he's always available for the quarter. I think it's been really great actually.

Great. Thank you. Next question, your financial statements referenced whistleblower reports. Please could you elaborate on this?

Yes. During the course of this year, we've received a number of whistleblower reports. Some of those was actually referred to whistleblower reports. Obviously, also during the course of this year, I had access to whistleblower reports that we knew about from last year and before that. And so what we've done at the group is simply distilled all of the issues that are mentioned in those visible reports, and we just tackle them one by one. We take whistleblower reports extremely seriously. We are -- never dismissive of them. And as I say, we just prioritize what needs to be looked at and we've also stopped dealing with whistleblower reports on a sequential basis. So what we've rather chosen to do is to pick a few service providers such as EY PwC, [ Ebensburg ] KPMG and others, and just allocated assignments to each of them to investigate and report back to us. And so we've really made great headway in dealing with many of those issues.

Is there any legal recourse to recover funds from SAP? Or was it all own goals?

Look, SAP is a highly respected international system. And as I've said before, we wouldn't have been implementing SAP if we didn't think it was a terrific system. I think that there were a number of own goals. And I think the question of recourse is something that is still being discussed.

Okay. Next question has the Giannacopoulos retail issues been resolved?

Yes, I'll pick that one up, Katy. I think in the main issues have been resolved. There were a number of smaller issues, which have now contactually been resolved, which really leaves us for the one big issue, which is the claim that they've put in against SPAR. Our agreement with that is that it will either go to court or to arbitration and we're still busy discussing with them what the best route forward is in that space.

What is the plan to reduce long-term debt? And how confident are you that you really won't need to do a rights issue?

We're very confident at this stage that we -- there's no prospect of a rights issue. As the investors will know, the majority of our long-term debt sits in Europe and is either Swiss franc-denominated or euro-denominated plans in the short term is to focus on cash generation in those territories and pay down debt in local currency. And then we also having a look with 2 of the local banks, really just analyzing our balance sheet. So that can shape it in the most appropriate manner going forward. We think there is some -- there's a lot of room for us to optimize the shape of the balance sheet.

Thank you, Ang. Will Poland be held for sale going forward? Will it be loss-making in FY '24? And should we assume a disposal by end of FY '24?

Let me take the projections. The Polish budget for the full 12 months of FY '24 has been prepared. There is a loss that the business is projected to make. There's no real significant improvement. So the loss will be fairly comparable to the current year at an operating profit point of view. As far as the process at disposing Poland, perhaps let me hand this over to our newly appointed Chief Operating Officer. Megan, who's managing the process. Megan, welcome to SPAR.

So from a project perspective, we have already appointed advisers, and we've had a lot of inbound interest on the asset. And our expectations are that we would want to have disposed of it in the next 12 months. And then just further to add to the question in terms of what Mark was talking about losses. We have also set aside funding of just over EUR 20 million -- EUR 20 million to fund the Polish business over the course of the next 12 months.

Thank you both. How confident are you that the last ZAR 720 million of operating profit in SA will be recouped in the current year? Surely, there is further execution risk on ERP implementation.

Hearing right now, we've paused the rollout of the SAP program, which naturally reduces the short-term execution risk. We're relooking at the plan going forward to significantly reduce that. We've brought in an outside independent assurance partner as well as a specialist assurance partner into the program. So we're relatively confident going forward that we've minimized or mitigated execution risk. In the short term, we believe that we're going to bounce back quite strongly from the SAP issues that happened in the current year. There is going to be a little bit of a hangover, but not much. And as we stand, things are operating as normal. And we're really excited about where the SA business is headed in the next 24 months.

Should I just add -- sorry, Katy. Just to interject, your question was recoup, suggesting that we're going to get it back. I think it's fairly clear that what is -- that has been lost, we can't. There's no opportunity to resell to those retailers. So the loss has been incurred. I think the question probably intended to say the [ 720 ] recovered as opposed to recoup, there's no opportunity to make it back.

One thing that could be interesting and for you to comment on is to what extent you've seen loyalty that come back as a result of those.

Yes, I think we've been really, really encouraged by our loyalty as bounceback particularly in KZN. Local levels have recovered to this to preset levels largely in KZN, which is really encouraging. Overall, across the business, again, if you exclude the SAP impact, low levels are flat on the prior year, which is also encouraging in the South African grocery business.

Great. Thanks, Ang, that was actually my next question. Okay, moving on. Have the online delivery businesses such as Sixty60 and Woolies Dash undermine the SPAR convenience offering? And how do you counter this threat?

Look, I'm not -- I really don't want to comment on what our competitors are doing. Oddly enough, at this stage, our smaller formats across the group probably the fastest-growing format which indicates that there's a resilience in that business. And bear in mind, we have also now gotten to scale on our SPAR offering. So we feel relatively confident in this space.