Bloody nose for Spar as Europe write-offs top R7.5bn

Getting out of Poland, Switzerland and England didn’t come cheap …

The Spar Group, which withdrew from its operations in Poland in September 2024 and disposed of its Switzerland operations a year later, has paid a hefty price to do so.

It has also announced its intention to exit its UK regional distribution business in the South-West of England, Appleby Westward Group (AWG).

The impairments or write-downs of the values of these assets over the past three years now total more than R7.5 billion.

Poland

In 2023, it impaired its investment in its then-Poland subsidiary by R1.267 billion.

At the end of the financial year (30 September), that unit was in a negative equity position with assets of R2 billion and liabilities of R3.3 billion. This had not materially improved by the end of September 2024, when assets were R1.05 billion and liabilities R2.14 billion.

Read: Spar close to buying controlling stake in Polish chain [May 2019] Spar surges as group expects Poland exit by September [Jun 2024] Spar’s Poland misadventure: Spend €1 to lose R4.2bn  [Sep 2025]

At the end of its 2024 financial year, it fully impaired its “further investment in the Poland subsidiary”, with an additional write-off in the subsidiary of R1.654 billion.

The sale process of the Polish operation was finally concluded in January 2025.

Switzerland

In May 2025, Spar announced that it would recognise additional impairments and impair its Switzerland operations by R3 billion, following its decision to dispose of this business.

At that time, it impaired the AWG business by R1.2 billion. It said these impairments “take into account the fair value of the disposal groups less costs to sell”.

Last week, the group said in an update to the market that its investment in AWG was “further impaired” in the second half of the financial year. This has seen an additional impairment of R400 million, to now total R1.6 billion.

ADVERTISEMENT CONTINUE READING BELOW Read: Now Spar Group wants to sell its Switzerland business [May 2025] Spar sells Swiss unit for R1bn [Sep 2025]

That takes total impairments of these three operations to just over R7.5 billion since 2023.

Importantly, this excludes far smaller impairments of goodwill in these operations which the group has recognised over time.

SAP

The total amount also excludes write-offs of R107 million for the discontinuation of its SAP project in Ireland and Poland (R94.1 million in 2023) and Switzerland and Sri Lanka (R13.1 million in 2024).

The original plan was to roll out the SAP enterprise resource planning (ERP) system across all of the group’s operations.

Following a disastrous implementation in its KwaZulu-Natal distribution centre, it has scaled back this project dramatically.

In 2023, go-live and integration issues resulted in a loss of wholesale turnover of R1.6 billion for the group. Along with this, it saw an estimated loss of profits of R720 million.

Between February and July, the group was forced to supply a not-insignificant number of stores in that region from other distribution centres in the Eastern Cape, South Rand (Jet Park) and North Rand (Clayville).

Cash payments and debt

While impairments are accounting entries that impact assets and equity, these do not affect cash flow.

To exit Switzerland, The Spar Group made a cash payment totalling R683 million. The bulk of this (R430 million, or 19.5 million Swiss francs) was an injection into the business to allow a portion of the debt which had arisen from its acquisition to be extinguished.

Listen/read:
Who moved Spar’s cheese?
Spar turnaround still a work in progress

ADVERTISEMENT: CONTINUE READING BELOW

The total debt in the Swiss business was 66.3 million Swiss francs at the date of the transaction announcement (56.3 million Swiss francs for the acquisition of the remaining 40% of the business in 2021, plus 9.8 million Swiss francs in interest). The unit had an equity value of 46.5 million Swiss francs. The injection would essentially extinguish the difference. Also included in the payment was 11.5 million Swiss francs (R253 million), ring-fenced for a fine the Switzerland business had received from the Swiss Competition Commission.

Read: After Polish misadventure, Spar pays R683m to exit Switzerland

This amount pales in comparison with what it effectively paid to exit Poland.

In the end, The Spar Group paid a total of R2.67 billion to exit the eastern European country.

This “recapitalisation payment” included an amount of R185 million, and a further R909 million that would cover all restructuring costs and expected losses for the Poland operations for 12 months, with the bulk of the amount being used to get the net asset value of Spar Poland to zero. An amount of around R1.9 billion was needed to settle the debt in the subsidiary.

In practical terms, Spar ‘brought’ the Polish debt of R1.966 billion ‘back’ to South Africa and sourced new facilities from local lenders.

It funded the remainder of the cash outflow to get out of Poland from its available cash and other existing facilities.

As it refocuses on its Southern African operations under CEO Angelo Swartz, who has led the effort to clean up the mess in Europe, the group has said that it will retain its Ireland operations, for now.

(It will also book an impairment of R600 million in the second half for corporate-owned stores in South Africa. Given the intense competition in the market, this likely says quite a lot about how underlying trading at its stores is going.)

Read: Spar to up its private label game

Spar Group share price

Follow Moneyweb’s in-depth finance and business news on WhatsApp here.