Spar (SPP): Acquisition-fuelled debt burden

SPP’s strong 1H21 results were mostly driven by its offshore businesses. We assess the impact of the foreign acquisition strategy on the capital structure of the group. The acquisition strategy moved SPP from an ungeared position in FY13 to amassing R7.5bn interest-bearing debt by FY20. Spar SA’s grocery business underperformed over the past six months, which is concerning. Build-it’s surge in turnover is surprising, but we do not think the increased spend here is supported by a sustainably stronger consumer wallet.