Spar (SPP) – Minority Buy-Out and IFRS 16 Matters

With the first tranche payment by SPP to BWG Ireland minorities imminent, we analyse SPP’s investment in BWG and show their initial investment in BWG could grow to ZAR3.4bn when the minorities are finally bought out in 2021. We consider the impact that IFRS 16 may have on SPP and find that the treatment of head leases with back-to-back subleases as Finance Lease Receivables could soften the impact of IFRS 16 significantly, especially on SPP’s debt metrics.