Poland takes the shine off Spar
• Retailer expects struggling Piotr i Pawel business to turn around by 2023
Spar, which recorded a drop in half-year profit, expects its struggling Polish business to break even in two years.
In 2019 Spar bought 80% of the ailing Piotr i Pawel Polish retailer and wholesaler, which runs 77 delicatessens and supermarkets, for €1.
Spar, which recorded a drop in half-year profit, expects its struggling Polish business to break even in two years.
In 2019 Spar bought 80% of the ailing Piotr i Pawel Polish retailer and wholesaler, which runs 77 delicatessens and supermarkets, for €1. The lossmaking business, which is being restructured into Spar-branded stores, has been affected by the reduced footfall in mall-based stores because of the Covid-19 lockdowns. The Piotr i Pawel retailer was also hampered by the closure of the courts, making it impossible to complete business rescue proceedings.
Spar in Poland had to invest €80m (R1.5bn) to stabilise and run the Piotr i Pawel business, and buy a distribution centre and pay creditors and landlords that were owed money. It expects turnover from its Polish businesses to increase from €160m in 2021 to €280m in 2022 and to €400m in 2023.
Retail analyst Chris Gilmour said Poland “has got great prospects. Its GDP is growing at almost 4%. I think Spar is nicely placed in Poland.”
Many listed SA businesses have struggled abroad. For example, Woolworths has written down R6bn of its R21bn investment in David Jones clothing retailer in Australia.
Spar CEO Graham O’Connor said during a webcast that there is a gap in the Polish market amid strong competition.
In a presentation O’Connor said Poland has low unemployment, positive rates of consumption and a good macroeconomic environment.
In the six months to the end of March, overall turnover from Spar’s Southern Africa, Ireland, Switzerland and Poland businesses was up 10% year on year to R59bn, and operating profit dropped 3.4% to R1.3bn.
HEADLINE EARNINGS
Its headline earnings per share, excluding the Polish business, were up 8.2% for the six months to end-March to 567.1c.
Overall headline earnings per share were down 22.1% to 523.6c.
The group issued an interim dividend per share of 200c, lower than it would have been were it not for the uncertainty of the coronavirus pandemic.
Speaking about the impact of coronavirus-related lockdowns, O’Connor said that it had seen benefits in Switzerland as borders are closed, forcing the Swiss to shop at home rather than cross the borders to shop in France and Germany, which are usually cheaper.
In SA, turnover after the halfyear period is down 20%-25%. This is because Tops liquor stores are closed during lockdown, leading to a reduction of income by 10%, while Spar’s Build It hardware stores were closed in April, leading to a further drop of 10% in group turnover.
Spar says there has been a 5% drop in turnover from the ban on cigarettes and hot food sales in SA.
In Southern Africa wholesale turnover for the six months to March grew 7.8%.
In SA Spar has completed its purchase of food manufacturer Monteagle, which makes private-label goods. It has seen year-on-year growth of 11% to R5bn in sales and continues to be a source of growth locally.
Spar’s share price gained 6.32% to close at R178.90.
TOPS LIQUOR STORES ARE CLOSED DURING LOCKDOWN, LEADING TO A REDUCTION OF INCOME BY 10%