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Spar has offloaded its loss-making operations in Poland to local retailer Specjal for R185m, marking the end of a costly venture that has drained the group’s resources since 2019.
The sale will see Spar settle the firm’s funding debt, amounting to an estimated R2.7bn.
The group said it viewed the disposal as a necessary step to restore confidence among investors and to remove a considerable financial burden from its balance sheet.
The move, announced on Wednesday, is part of a strategic shift to stabilise and refocus on Spar’s faltering operations in SA.
“As previously advised to shareholders, and having evaluated and considered all available options, the board believes that it is in the best interests of the group and shareholders to dispose of Spar Poland, due to, inter alia, the significant funding requirements Spar Poland has placed on the group since acquisition together with the earnings pressure Spar Poland’s ongoing financial losses have created for the group,” the group said.
“For Spar Poland to become earnings generative and value accretive to the group, significant time and investment would be required. The board believes that the group can deploy resources in other areas that will result in more meaningful returns for shareholders.”
Spar’s ill-fated entry into the Polish market began in 2019 with the acquisition of an 80% stake in the struggling Polish retailer Piotr i Pawel.
The decision was driven by the perceived similarities between the Polish and SA markets. However, the venture quickly turned sour, with Spar’s Polish operations bleeding cash and racking up debt as the company struggled to turn the business around.
Spar Poland’s assets include 200 retail stores, three distribution centres and a production facility. However, the financial losses were staggering, with the book value of the net assets of Spar Poland reported as negative R1.45bn on March 31 2024.
For the six months ended on the same date, the division recorded a loss of R813m.
The troubles in Poland were compounded by a series of strategic missteps closer to home. Chief among these was the botched rollout of SAP software in Spar’s key KwaZulu-Natal market, a decision that CEO Angelo Swartz, who took the helm in October last year, has since described as a “strategic blunder”.
The SAP system, intended to streamline supply chain operations, instead caused disruptions. Retailers were forced to order directly from suppliers rather than through the intended system, leading to logistical headaches and added expenses.
This mishap contributed to a R1.6bn shortfall in sales and a loss of about R720m in profit for the year ending September 2023.
Swartz, previously the divisional MD for Spar KwaZulu-Natal, has been candid about the company’s past mistakes and is steering the company through a critical period of recovery.
With the sale of the Polish business, Spar is set to redirect its efforts and resources towards reviving its SA operations.
Swartz previously confirmed that the exit from Poland could free up about R500m in annual earnings before interest and taxes, providing much-needed financial relief.
Spar operates in 11 countries, with SA accounting for about 60% of group sales.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Spar pays hefty price to exit Poland venture
Spar has offloaded its loss-making operations in Poland to local retailer Specjal for R185m, marking the end of a costly venture that has drained the group’s resources since 2019.
The sale will see Spar settle the firm’s funding debt, amounting to an estimated R2.7bn.
The group said it viewed the disposal as a necessary step to restore confidence among investors and to remove a considerable financial burden from its balance sheet.
The move, announced on Wednesday, is part of a strategic shift to stabilise and refocus on Spar’s faltering operations in SA.
“As previously advised to shareholders, and having evaluated and considered all available options, the board believes that it is in the best interests of the group and shareholders to dispose of Spar Poland, due to, inter alia, the significant funding requirements Spar Poland has placed on the group since acquisition together with the earnings pressure Spar Poland’s ongoing financial losses have created for the group,” the group said.
“For Spar Poland to become earnings generative and value accretive to the group, significant time and investment would be required. The board believes that the group can deploy resources in other areas that will result in more meaningful returns for shareholders.”
Spar’s ill-fated entry into the Polish market began in 2019 with the acquisition of an 80% stake in the struggling Polish retailer Piotr i Pawel.
The decision was driven by the perceived similarities between the Polish and SA markets. However, the venture quickly turned sour, with Spar’s Polish operations bleeding cash and racking up debt as the company struggled to turn the business around.
Spar Poland’s assets include 200 retail stores, three distribution centres and a production facility. However, the financial losses were staggering, with the book value of the net assets of Spar Poland reported as negative R1.45bn on March 31 2024.
For the six months ended on the same date, the division recorded a loss of R813m.
The troubles in Poland were compounded by a series of strategic missteps closer to home. Chief among these was the botched rollout of SAP software in Spar’s key KwaZulu-Natal market, a decision that CEO Angelo Swartz, who took the helm in October last year, has since described as a “strategic blunder”.
The SAP system, intended to streamline supply chain operations, instead caused disruptions. Retailers were forced to order directly from suppliers rather than through the intended system, leading to logistical headaches and added expenses.
This mishap contributed to a R1.6bn shortfall in sales and a loss of about R720m in profit for the year ending September 2023.
Swartz, previously the divisional MD for Spar KwaZulu-Natal, has been candid about the company’s past mistakes and is steering the company through a critical period of recovery.
With the sale of the Polish business, Spar is set to redirect its efforts and resources towards reviving its SA operations.
Swartz previously confirmed that the exit from Poland could free up about R500m in annual earnings before interest and taxes, providing much-needed financial relief.
Spar operates in 11 countries, with SA accounting for about 60% of group sales.
goban@businesslive.co.za
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.