Latest news with #R52-million
Daily Maverick
4 days ago
- Business
- Daily Maverick
Spar's reset continues – but dividends remain off the table
Spar shareholders might still be waiting for a dividend, but with a strategic retreat from Europe and a renewed focus on local markets, there's hope for payouts by 2026—if it can navigate the consumer pressure back home. There is still no dividend for Spar shareholders, almost three years after the last payout. But the tide may turn by the end of 2026. Spar chief financial officer Reeza Isaacs told Daily Maverick this week that while no dividend had been declared for the interim period, the company was modelling scenarios to possibly resume payouts within the next 18 months. 'We were a dividend-paying share,' Isaacs said, 'and I think our investors expect us to get back to paying dividends.' Spar is retreating to familiar territory after burning a few bucks in Europe and is preparing to face a battered consumer back home. The company is scaling back on its operations in Europe and keeping its eye on the markets it believes it can count on during this 'strategic reset'. 'We completed our exit from Spar Poland in January this year and finalised the restructure of our southern African debt in March,' Spar group CEO Angelo Swartz said. 'The decision to exit Switzerland and the UK was taken after a strategic review of our European footprint. These actions align with our long-term commitment to focus on our core geographies.' Trouble in the Alps and rain over Devon This move back to core markets comes after heavy losses and operating headaches in Europe. Spar's Swiss and UK ventures, once part of a grand international expansion, have been declared discontinued operations. The Swiss arm posted an operating loss of CHF2.4-million (R52-million), after a cyberattack in March cost the company an estimated CHF2.5-million (R54-million) in profitability, Swartz said. Concerning the sale process of Spar's UK and Swiss operations, Isaacs told Daily Maverick that it was 'still in negotiation'. Poland: A 'necessary' loss Between impairments, foreign exchange translation losses, and debt repayment costs, Swartz said the exit from Spar ventures in Poland alone delivered a R531-million blow to Spar's income statement. He framed the loss as necessary: 'This transaction was a key enabler of our balance sheet optimisation strategy,' he said, noting that there were no further cash exposures linked to the now disposed of Polish operations. In the meantime, management insists the strategy is working. 'We are building a stronger, more profitable foundation. Our cost discipline, margin management and pricing strategy are working,' Swartz said. 'We're making more from each rand we earn,' Schwartz said. How does this affect you? Spar's exit from Europe means its attention, energy and cash are now concentrated at home. That could mean more promotion, investment in delivery and better competition against heavyweights such as Checkers and Pick n Pay. But it's also a sign of the pressure consumers are facing. Spar's data shows that customers are doing more small shops and sticking to budget-friendly items. Back from the brink in KZN Stabilisation of Spar's KwaZulu-Natal distribution centre, which previously experienced significant issues with its SAP system, contributed to an improved operating margin. Isaacs called KZN's recovery 'a strong turnaround with a marked improvement in profitability'. But Swartz was candid about the ambitions of the group's revenue. 'Let's be candid: sales growth was below expectations. The southern African consumer is still under severe pressure.' For a while now, South Africans have been price conscious, said Prof Ronald Goldberg, associate professor in marketing management at North West University. This is even more prevalent in 2025 due to rising fuel prices, inflation and limited disposable income, he noted. In Ireland, Spar's revenue fell marginally amid store closures and volume declines driven by inflation, Isaacs said, and added that high-cost categories like cacao and coffee took a hit, while tobacco sales dipped from the previous year. According to McKinsey's 2024 State of Grocery Retail report, retail media networks (RMNs) are boosting retailers' bottom lines in Europe and North America and could offer similar gains in South Africa. (Graph: McKinsey) Cost, convenience, and playing catch-up The company is relying on a few strategies to win back market share. These include improving its price perception, scaling online and on-demand fulfilment, and supporting store level execution through retailer rebates, Swartz said. SPAR2U, the company's online grocery delivery service and app, saw delivery volumes surge to 174% year on year and operates in 580 locations. Spar's new partnership with UberEats is also expanding its reach without the cost of new retail space. Offering multiple platforms to a consumer is a complex task and could hold increased risk for any retailer if not implemented with caution, Goldberg said. 'For a retailer like Spar, the implementation of a multi-platform approach could enhance brand presence as well as diversify their value proposition.' Isaacs said that even though they were 'playing catch-up' when launching SPAR2U, the growth they had seen from the service had been exponential, which showed that consumers preferred online grocery shopping. 'Many customers are becoming increasingly motivated by convenience,' Goldberg said and added that before the pandemic, South Africans were sceptical about online shopping. 'Since then, consumers have now become so used to shopping for anything anywhere by pushing a few buttons on a device.' According to Swartz, Spar's customer loyalty remains strong at nearly 80%. But he has ambitions to improve on this figure: 'We're just on 79% right now. I'd like to see a 12-month rolling average over 80%,' he said. Brand loyalty still exists, but it's no longer unconditional. 'Consumers weigh price and convenience heavily, while brand loyalty is earned through sustained performance and relevance,' said Goldberg. Spar and brand equity With retailers such as Checkers investing heavily in innovation and customer experience, Goldberg says that Spar's continued relevance will depend on: Its ability to standardise core brand values; Leveraging its localised strengths; and Continuing to offer increased value and reasons for customers to shop at its stores. Shifts in consumer choices The average basket size of Spar consumers remains stable, but the frequency of shopping has changed. Schwartz noted smaller, more frequent shops, particularly in its lower-income stores, which grew more than 6% as top-end clusters declined. 'This affirms our strategy to deepen the value offer,' Schwartz said, referring to SaveMor, Spar's private budget-conscious label. Goldberg agrees. 'Consumers are opting to buy value items instead of luxury items. I believe the majority of the South African market constitutes a cost-sensitive market currently, where success in selling products depends on the perceived value-for-money equation.' Spar COO Megan Pydigadu added that any divestment decision in Switzerland would prioritise continuity and sustainability. 'We want to make sure we are disposing of the business in the best manner for our employees in Switzerland, for our retailers and also our suppliers,' she said. Looking ahead, the company is focusing on operational execution, strategic partnerships and margin discipline to turn the tide. 'We understand this environment,' Schwartz said. 'We've taken steps to shield the business from the worst of it, and we are now better positioned to capture upside when the consumer turns.' DM
Daily Maverick
06-05-2025
- Business
- Daily Maverick
Renergen defends its financial position against wild social media claims
Energy company Renergen has responded to Daily Maverick queries and directly denied social media claims suggesting the company lost control of assets due to a default on its Standard Bank loan. 'There has never been property ownership through the Standard Bank financing,' Renergen said via email, describing the claim as misinformation circulating online. 'The SBSA Loan is secured by a third-ranking pledge of Tetra4's assets and shares held by Renergen in Tetra4, and further by Mr Nicholas Mitchell and Mr Stefano Marani pledging shares in Renergen as security.' There is truth to claims that Renergen breached several loan covenants as at 28 February 2025, involving facilities from the Development Finance Corporation (DFC), Industrial Development Corporation (IDC), and Standard Bank South Africa (SBSA). However, as Renergen pointed out in a response to Daily Maverick, these defaults were temporary and resolved shortly after the reporting period. As detailed in its preliminary financial statements released on 30 April 2025: note eight of the report discloses that Renergen 'did not meet certain loan covenants as at 29 February 2024', which included the required asset cover ratio for a key loan facility. Although the company did not consider these breaches to have a material impact on its going concern status, it noted that the lenders 'have provided waivers subsequent to period end,' which is confirmed in note 18. Importantly, Renergen stresses that these waivers 'effectively addressed the immediate concern', and no creditors have called in loans or taken possession of assets. Proof is in the production pudding Contrary to claims that the company is far off its production goals, Renergen's figures show significant progress: Liquefied natural gas (LNG) production rose 70% year-on-year to 4,885 tonnes. LNG sales increased 74.2% to 4,633 tonnes. Liquid helium (LHe) commissioning was completed in the second quarter of the current financial year. Liquid helium sales began on 14 March 2025, shortly after the reporting period. Despite this, costs associated with commissioning the helium train – without immediate helium revenue – contributed to a deeper annual loss. Renergen reported a R236-million loss after tax and a gross loss of R28-million, down from a R10-million gross profit the year before. Revenue, however, increased by 79.7% to R52-million, largely due to LNG sales. The company chalks the larger loss up to high depreciation, rising input costs and the timing mismatch of helium revenue recognition. Litigation risk not imminent Concerns also remain around the unresolved litigation with Molopo Energy, which alleges that Renergen's sale of a 5.5% stake in Tetra4 triggered a loan acceleration. The company disputes this, saying that even in a worst-case scenario, the liability would be limited to a R50-million repayment. Looking ahead, Renergen is banking on additional funding. It has secured a $10-million inflow in April 2025 from an undisclosed third party, with the potential for a further $20-million. It is also pursuing a Nasdaq IPO aimed at raising R2.9-billion ($150-million) and expects to finalise a $795-million loan package from the DFC and SBSA – part of which will refinance existing debt. Strained, not sinking Renergen is under pressure, there's no denying that. Losses have widened, debt covenant breaches legitimately occurred, and the success of its financial restructuring is wholly reliant on external funding and market confidence. But the bright spots of its operational progress and continued lender support suggest a company navigating the turbulence typical of complex energy infrastructure roll-outs. The narrative of 'serious trouble' may overstate the case. Investors would do better to track helium and LNG output in the months ahead – as well as progress toward the planned IPO – to assess whether Renergen can turn the corner from startup stress to stable operation. DM
