Poland takes the shine off Spar

• Re­tailer ex­pects strug­gling Piotr i Pawel busi­ness to turn around by 2023

Business Day - - FRONT PAGE - Katharine Child Re­tail Writer childk@busi­nesslive.co.za

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%

/Jackie Clausen/Fi­nan­cial Mail

Gro­cer: Spar CEO Gra­ham O’Con­nor.

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