Spar Group Limited (JSE:SPP) News - Voluntary announcement: Update on SPAR Poland strategy

The SPAR Group Limited
(Incorporated in the Republic of South Africa)
Registration number: 1967/001572/06
Share Code: SPP
ISIN: ZAE000058517
(“SPAR” or the “Group”)
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VOLUNTARY ANNOUNCEMENT: UPDATE ON SPAR POLAND STRATEGY
_________________________________________________________________________

SPAR shareholders (“Shareholders”) are referred to the interim results for the six months
ended 31 March 2022 published on SENS on Wednesday, 8 June 2022, wherein the Board of
Directors (the “Board”) advised Shareholders that during the said reporting period notice was
served to a group of SPAR retailers in the south of Poland.

SPAR invested in the recovery of the group of SPAR stores in Poland in February 2020 after
it acquired the SPAR wholesale licence to operate in Poland. The process to remove the
acquired business, Piotr i Pawel, from business rescue and to gain support from the banks
and suppliers was completed in the second quarter of the 2021 financial year. Whilst Poland
was under COVID-19 lockdown, the business remained under care and maintenance without
the ability for SPAR management to commence the recovery, although significant planning
and strategising were done. With the lifting of COVID-19 restrictions in June 2021, the local
team was able to commence formal execution of the turnaround plan, however the Russian
invasion of Ukraine has caused further disruption to the Polish economy.

Most significantly, the turnaround plan included the termination of contracts with the
abovementioned group of SPAR retailers and the restructuring of the distribution centres. Both
actions have now been executed.

Of the group of 91 retailers to whom notice was served, 58 retailers elected to leave SPAR
Poland on 1 July 2022, representing 11.7% of the turnover for SPAR Poland and 0.2% of
Group turnover for the six months ended 31 March 2022. While these exits may appear to be
a temporary setback, management strongly believes that the new contracts with the retailers
that have elected to remain will help the business achieve the desired levels of retailer loyalty
required. The Polish management team remains open to possible renegotiations should the
retailers who left change their view and are confident that some of this lost business may be
recovered as SPAR’s wholesale capabilities within Poland are further expanded and continue
to be improved upon.

SPAR Poland currently operates from three distribution centres. Management has taken action
to close the Warsaw distribution centre from November 2022. This will streamline logistics,
increase efficiencies, and reduce unnecessary costs, since the operations in Poland will now
focus on two regional distribution centres. The distribution centre in Poznan will service the
retailers in the north of the country and the distribution centre in Czeladz will service the
retailers in the south of the country. The Czeladz distribution centre is currently undergoing an
expansion, undertaken by the landlord. The expansion will allow for an increase in the range
of dry and perishable groceries and will enhance the overall service levels for SPAR retailers.
The expansion will be completed by mid-October 2022.

The Board has confirmed the restructuring of the executive leadership, with Max Oliva being
appointed as the CEO for SPAR Southern Africa. This will provide the Group CEO, Brett
Botten, with the additional capacity to, inter alia, oversee the execution of the turnaround
strategy for SPAR Poland.

In addition, a working group of the Board has been convened to monitor the strategy execution
for the Polish business recovery. Whilst the Board remains convinced that the opportunity for
SPAR in Poland remains significant, the progress made against the plan will be closely
monitored in the months ahead.

As at 31 March 2022, SPAR Poland reported a store portfolio of 208 stores and turnover of
R1.3 billion, representing 1.9% of Group turnover. Taking all subsequent store movements
into account, there were 164 stores as at 30 June 2022.

Shareholders are advised that the financial information contained in this announcement is the
responsibility of the directors and has not been audited, reviewed or reported on by the Group’s
auditors.


By order of the Board


Pinetown
12 August 2022

Sponsor:
One Capital

Corporate Broker:
Rand Merchant Bank, a division of FirstRand Bank Ltd
Date: 12-08-2022 01:25:00
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