<\/p>\n
You can also listen to this podcast on iono.fm here.<\/p>\n
JIMMY MOYAHA: This morning we received the announcement that the Spar Group\u2019s chairperson and deputy chair have both tendered their resignations.<\/p>\n
Read: Spar chair and deputy resign with immediate effect<\/p>\n
We\u2019re going to look at this in greater detail with senior investment analyst at Anchor Capital, Stephan Erasmus, who joins me on the line now to see what we make of these developments.<\/p>\n
Stephan, lovely having you on the show. Thanks so much for taking the time. Very interesting timing of these two resignations, following the abrupt exit of the Spar chief executive officer a little while ago. What do you make of these latest announcements?<\/p>\n
STEPHAN ERASMUS: Thanks for having me. Yes, they are keeping us on our toes at Spar, it seems.<\/p>\n
I think the moves are probably a step in the right direction.<\/p>\n
If you consider the corporate governance concerns \u2013 or at least issues that have been raised over the past couple of years \u2013 the body representing the largest Spar retailers called for the resignation of the chairperson in May, I believe.<\/p>\n
This has kind of been hanging over the board for a while. I think the results of Spar in the first half added more pressure.<\/p>\n
And, as you rightly pointed out, the CEO\u2019s resignation wasn\u2019t expected. So put all of that together, and you have a balance sheet that\u2019s under pressure \u2013 and these kinds of abrupt changes do happen.<\/p>\n
JIMMY MOYAHA: Stephan, can we perhaps take a look at Spar in relation to some of the other retailers in South Africa?<\/p>\n
We know that Pick\u00a0n\u00a0Pay has been going through its own challenges. Spar, as of the recent set of numbers in the previous reporting period, has confirmed that they\u2019ve exited markets like Poland. They\u2019ve downsized their focus to come back to focusing on the South African market in greater detail.<\/p>\n
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Let\u2019s just look at the South African retail landscape, particularly where it relates to the grocery retailers in South Africa. Some are struggling, some are trying to navigate difficult internal problems. And some, like the Shoprite Group, which gave us a trading statement just last week, don\u2019t seem to have any of these problems.<\/p>\n
STEPHAN ERASMUS: Yes, it\u2019s quite a variety of situations you\u2019ve got in terms of the investment cases.<\/p>\n
I suppose I\u2019ll start with the ones that I prefer.<\/p>\n
I would say Shoprite is really a case of I think taking market share at the expense of the likes of Pick\u00a0n\u00a0Pay and Spar.<\/p>\n
So where they\u2019ve been tripping up, Shoprite has been expanding at quite a rapid rate and taking up market share.<\/p>\n
I was having a look at Sixty60\u2019s numbers. Their revenue number is R25\u00a0billion. That\u2019s half of Woolworths Food\u2019s revenue, so it is becoming quite a juggernaut in its own right.<\/p>\n
Read: Excluding Sixty60, Checkers is stagnant<\/p>\n
And then you\u2019ve got Boxer, which also again has been doing quite nicely \u2013 really priced for that lower LSM market but expanding nicely into white space opportunity.<\/p>\n
And then you have, I suppose, the two kinds of entities that have had their well-publicised problems \u2013 Spar and Pick\u00a0n\u00a0Pay.<\/p>\n
With the Spar Group, unfortunately, today\u2019s events won\u2019t do anything to sort of settle the investment case, I think.<\/p>\n
But, as I said, I think it is a step in the right direction in terms of starting afresh with hopefully a chairperson who can get on \u2013 or at least with whom the retailers are happy with. That\u2019ll help the Spar investment case.<\/p>\n
And then Pick\u00a0n\u00a0Pay. They\u2019ve unfortunately deferred their break-even guidance twice. I think it\u2019s now for FY\u00a02029. They are busy going through a Section\u00a0189 labour process, which is not ideal for the group. But without that cost base [being] restructured, it\u2019s very difficult to see Pick\u00a0n\u00a0Pay return to break even.<\/p>\n
So at a very high level that\u2019s my analysis of the different investment cases.<\/p>\n
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JIMMY MOYAHA: Stephan, you mentioned that these resignations could be beneficial for the Spar Group. I want to take a look at how a group like Spar then restructures from a governance point of view. We\u2019ve touched on the exits that you\u2019ve seen, we\u2019ve touched on the other challenges that the Spar Group has faced in the past. How then does a restructuring at this point look \u2013 or how should it then look if we are to restore investor confidence in the investment case for the Spar Group?<\/p>\n
STEPHAN ERASMUS: I think what it comes down to is performance.<\/p>\n
At the end of the day, Spar is a wholesaler that supplies independent retailers.<\/p>\n
As we\u2019ve seen, the Spar numbers have not been great. By definition the retailers\u2019 numbers haven\u2019t been great either.<\/p>\n
So if you can kind of reset the relationship between the wholesaler and the retailers, and you get a chairperson with whom the retailers are happy, et\u00a0cetera, that immediately changes that relationship.<\/p>\n
I think it\u2019s kind of starting with a clean slate. But again, it\u2019s key that the retailers are happy with that appointment.<\/p>\n
And I think it\u2019s also quite telling that in the announcement the board made mention that they are looking for skill sets of extensive retail experience as well as independent retail experience. So in a way that is saying, okay, we definitely need more of that kind of skill on our board.<\/p>\n
I think the takeaway for me is it\u2019s kind of an opportunity to reset the relationship and try to get into a sort of scenario where both parties are winning.<\/p>\n
Because ultimately they do depend on each other. If one does well, the other one does well. So it is in their interest to sort it out, I suppose.<\/p>\n
JIMMY MOYAHA: Sudden resignations at the Spar Group are potentially providing an opportunity to reset relationships between the group and its retail network. We\u2019ll have to see if that reset does indeed take place and how the Spar Group moves forward from this point on.<\/p>\n
For now, there is interim leadership in place to continue with the business\u2019s day-to-day operations. There\u2019s an interim chair who has over seven years on the Spar board, so the business does still have leadership in various respects. We\u2019ll see how this develops from this point forward.<\/p>\n
For now we\u2019ll leave the conversation on that note. Stephan Erasmus, senior investment analyst at Anchor Capital, joined us to look at the resignations at the Spar Group and how those could potentially affect the retailer.<\/p>\n
#Spar #turnaround #faces #test #board #resignations<\/p>\n","protected":false},"excerpt":{"rendered":"
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