We update our forecasts and Target Price following the surprise management changes at SPP and the release of its trading update. The recent developments are disappointing, as the turnaround of SPP over the past two years was commendable (including reducing debt by 46% and simplifying operations from five countries to two). We thought the reset would allow management to refocus on the core SA business and expand its franchise base. In our view, the abrupt changes in management put this at risk.
The comments about the GP margin decline in the trading update are also worrisome. While sales growth has picked up momentum in some areas, the scale of the uplift does not seem to justify a margin sacrifice, in our view.