COMPANY COMMENT: Offshore ventures not going well for retailers
South African retailers that have gone offshore in search of earnings diversification are not doing as well as initially expected
One such company is Spar, which is trading at a 12-month low of R153 following the recent release of disappointing results from its European operations. The share price is back to where it was in late 2014. At that stage, investor excitement about the recently acquired Irish-based BWG group, which owned the Spar brand in Ireland, was on course to push the share price to a record high of R209, reached in March 2016. A month later, new shares were placed at R185.Spar SA was something of a white knight for the Irish operation following its difficulties with Irish banks after the banking crisis in that country drastically reversed the previous easy credit environment. While the purchase price was relatively low, Spar had to provide a €220m guarantee to the Bank of Ireland to cover the term debt on BWG’s balance sheet. Although Ireland’s growth rate has topped EU rankings, this is largely due to the strength of the country’s financial and export-orientated sectors and does not reflect co...
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