BWG Group, the owner of the Spar franchise in the Republic, plans to sell off as much as €90 million worth of property, mostly in Dublin, to its franchisees. The company expects to complete the exercise by September as it cashes in on the real estate boom to focus on its core wholesale and retail distribution business.
Sales of convenience stores helped boost BWG's operating profit by 26.4 per cent last year, the company's earnings report showed yesterday. Profit climbed to €61.7 million in 2005 from €48.8 million the previous year, after BWG booked a one-time gain of €6.8 million from property disposals and benefited from higher revenue.
BWG said in September that it would give franchisees an opportunity to buy their retail premises from the company as part of its strategy to dispose of non-core assets. Operators of 40 retailers took up the offer, leading BWG to reduce its estate by one-third in value terms, according to Leo Crawford, the company's chief executive.
The company's property division currently owns or leases 167 Spar shops in Ireland run by franchisees.
"As franchisees become more successful, they want to own their property, especially if they want to pass on an asset to their family," Mr Crawford said. "The cost of acquiring the store is partly compensated by no longer paying a franchise fee."
BWG is slimming down to its core business amid expectations that majority owner Electra Partners will sell its 65 per cent stake by 2007, five years after it funded a management buy-out of the group from drinks maker Pernod Ricard in 2002.
BWG agreed in January to sell the Cheshire-based off-licence chain Bargain Booze to British private equity firm ECI Partners for €93 million.
The company will use the proceeds from the sale of the property and its off-licence business in the UK to reduce its level of borrowings and to acquire its own stores and open others with independent retailers, Mr Crawford said.
The group intends to add 39 new Spar outlets this year and about 35 next year, as well as 11 new Mace stores in 2006. By the end of last year, BWG's retail network included 428 Spar outlets and 138 Mace stores.
"All the major multiples and convenience operations are focusing on getting new stores, and the competition for new sites is very intense," Mr Crawford said.
New store openings and rising demand from cash-rich, time-poor consumers helped retail sales at Spar outlets to top the €1 billion mark last year for the first time.
BWG hopes to stimulate further growth by extending a new store format from a pilot programme in operation in shops in Dublin and Castlebar to up to 200 Spar outlets over the coming year.
The pilot shops offer a new food and beverage range in partnership with cafe chain Insomnia, Canadian doughnut brand Tim Hortons, and Sunshine Juices.
