Spar boss owns ‘strategic errors’
New CEO of Spar Angelo Swartz says the company is looking to complete its exit from the Polish market by September, in a move that will free up about R500m in yearly core earnings to shore up its domestic business.
This is as the company battles to recover from the botched rollout of SAP software in its key KwaZulu-Natal market. Swartz admitted that testing the software on it biggest market was a “strategic blunder”.
During a frank and extensive interaction with the media in Johannesburg on Thursday, Swartz admitted to past “own goals” by the group, which resulted in a 53% plunge in the company’s share price in the past five years.
He outlined key priorities for the business moving forward, with the foremost being completing the exit from Poland, fixing the group’s balance sheet and optimising the SAP system.
He talked about what initially attracted the group to the Polish market, resulting in it raking up debt along the way. Part of the attraction was Poland’s similarity to the SA market.
HOME MARKET
However, the deal did not meet expectations, and Spar in September announced the sale of the loss-making business.
Swartz said the imminent deal to dispose of the business will allow the group to invest more in its SA business.
“The exit from Poland frees up about R500m in earnings before interest and taxes (ebit); R500m has been our average ebit loss. What that does for us is to make us R500m more a year ... and we focus more on our home market,” Swartz said.
Proceeds from the sale are also expected to reduce debt.
Spar made its foray into
Poland in 2019. It bought an 80% stake in ailing Polish retailer Piotr i Pawel and converted the existing stores to Spar-branded outlets.
Swartz assumed leadership responsibilities in October after a shake-up that saw Megan Pydigadu appointed as COO. Before his current role, Swartz was the divisional MD of Spar, KwaZulu-Natal.
One issue Swartz and his leadership team are grappling with is the rollout of the SAP software, which has hurt its KwaZulu-Natal business.
The SAP system was introduced in Spar’s biggest region of KwaZulu-Natal, causing major disruptions to the supply chain, forcing retailers to order directly from individual suppliers instead of using the software.
Spar incurred additional expenses in servicing KwaZuluNatal from warehouses in other provinces. Swartz said that in hindsight, it was a “strategic mistake” to roll out the programme there first.
In December, Business Day reported that three directors at Spar ignored a whistle-blower’s concerns about the botched rollout.
This failure saw the company lose out on R1.6bn in sales and about R720m in profit for the year to end-September.
COST IMPLICATIONS
The group has now opted to engage a different service provider to roll out its warehouse system. It expects the search for a new provider to be concluded within a few weeks, but that might see it spend more than initially budgeted for.
“Going with a different warehouse system will definitely have cost implications,” Swartz said, adding that Spar was in discussions with SAP in how the programme was rolled out.
In a trading update in February, the retail group said that while the system was functioning as designed, the group’s ability to predict demand and manage availability of stock was not yet optimal.
ANGELO SWARTZ RUES THE ROLLOUT OF SAP SOFTWARE AND POLISH EXCURSION, WHICH IS BEING SOLD OFF