Review is aimed at maximising returns and group CEO has failed to rule out exits in places where it cannot do so
In a call, Angelo Swartz, group chief executive officer of The Spar Group, told analysts the Johannesburg-listed business was carrying out a review of its European operations – including Ireland. He also said the head of its Irish subsidiary, BWG Group boss Leo Crawford, was retiring at the end of the year.
On the review of its European operations, which also includes its Swiss business, Swartz was asked if The Spar Group could completely exit from the continent. While he said there was “no indication” of a complete exit from Europe, he failed to rule out exits should it find it can’t increase returns.
CEO of Spar’s Irish subsidiary BWG Leo Crawford is to step down at the end of the year
“I think… from an executive director point of view, we need to make sure that we maximise the return on capital allocated, and that’s really the point of the review,” he said. “That doesn’t imply necessarily [that Spar] will buy itself an exit from the market.
“It also talks to taking decisive action in each of those markets to drive up return. I think that can be demonstrated in the Swiss business where we are seeing a substantial increase in operating profit, and we’re going to continue to drive that.
“Having said that, if we – if our view is that we can’t increase return to significantly above our working weighted average cost of capital, exits aren’t off the cards either,” he added.
However, senior sources with knowledge of the matter have told the Sunday Independent that Spar’s Irish operations under the BWG Group are not being considered for any potential sale.
BWG has over 1,000 Spar, Eurospar, Mace, Londis and XL stores
The source added that the South African group had no interest in selling the Irish business as it was operating significantly above Spar’s working weighted average cost of capital, which can be used to help value a business.
The Irish operations have been performing strongly, said the source, and the business was “safe as houses”.
The Spar Group owns BWG, which has built a substantial business with over 1,000 Spar, Eurospar, Mace, Londis and XL stores.
The Spar Group first invested in BWG when it paid €55m for an 80pc stake in 2014, with shareholders in BWG sharing significant payouts worth tens of millions of euro when selling the remainder of their shares in recent years.
Spar’s results presentation included a timeline of key priorities and has a target for its “Europe strategic decisions” to be completed by next June. Spar is also in the process of exiting its Polish operation.
Chief commercial officer John Moane is due to take over as BWG boss
Swartz discussed the increase to the minimum wage in Ireland and its effect on the business. He added that the Irish operation had reacted swiftly and put in place measures to cut costs.
Separately, Swartz told analysts that BWG CEO Leo Crawford was set to retire from the business at the end of the year. He added that John Moane, BWG’s chief commercial officer, would be appointed as the new CEO.
In correspondence seen by the Sunday Independent, Crawford shared his plans with retailers and business partners earlier this month.
Crawford wrote that Moane would be appointed interim CEO designate from October 1 and take over as group CEO at the beginning of next year. He is to remain on the board as a non-executive director.