Spar said on Wednesday that it had breached some of its debt covenants with banks due to the weakening of the rand, and translation of foreign debt into reporting South African currency.
In a statement, the group said its financiers had waivered the breached covenants. Spar said in September, 2022 the bank covenant measures remained well within the levels required by SPAR’s financiers.
“However, on March 31, 2023 owing to the weakening of the rand and translation of foreign debt into reporting currency (ZAR), coupled with lower than expected profitability due to, inter alia, cost increases that could not be restricted in line with lower-than-expected turnover growth, there was a breach of the group’s leverage (pre-IFRS 16 net debt/Ebitda) covenant.
“Our financiers have approved a waiver of SPAR’s breach of the group leverage covenant,” the group said.
Spar said the group’s net debt for covenant purposes totalled R12.8 billion. As of September 30, 2022 the group’s net debt totalled R9.8bn.
“The increase in net debt of R3.0 billion between year-end and the interim period-end reflects the increase in the net overdraft position in South Africa of R1.7 billion, predominantly relating to the working capital cash-flow impact of SAP go-live challenges at the KwaZulu-Natal distribution centre and financial support extended to SPAR Poland,” it said.
The group said the increase in net debt, also reflected an increase in foreign-denominated borrowings of R1.3bn due to the foreign exchange impact upon translation of the foreign-denominated borrowings into reporting currency, and increased foreign debt to fund capital expenditure in Switzerland as well as acquisitions in Ireland.
“The group’s net debt includes group borrowings of R8.5 billion (2022: R7.6bn). Most of the group’s borrowings are foreign currency denominated, with 60.4% EUR-denominated and 37.8% CHF-denominated, in ZAR terms,” it said.
BUSINESS REPORT