SPAR Group, South Africa's grocery retailer, has agreed to sell its underperforming Polish division to local company Specjal for R185m ($10m). 

The announcement indicates a strategic shift for the group. 

The divestiture is part of SPAR's broader review of its European operations, aiming to provide certainty for investors and to remove the loss-making segment from its financial statements.  

The sale requires SPAR to recapitalise the Polish business at an estimated cost of R2.7bn, primarily by settling the business's funding debt.  

Following the news, SPAR's shares fell by 6.79% to R117 by 1220 GMT.

"For SPAR Poland to become earnings-generative and value-accretive to the group, significant time and investment would be required," the company stated. 

SPAR's Polish assets include 200 retail stores, three distribution centres and one production facility.  

The divestment will enable SPAR to concentrate on its core operations in South Africa and seek new growth opportunities. 

SPAR Group CEO Angelo Swartz said: "This also gives clarity to our dedicated employees in Poland, who now have the potential to expand the business under the ownership of Specjal, a company with the requisite resources, scale and capacity to take these assets to the next level." 

The completion of the sale is contingent on regulatory approvals, and the recapitalisation amount may be adjusted to ensure a net asset value of zero for Spar Poland Group at the effective date of the sale. 

Angelo Swartz added: “Our journey into Poland is coming to an end. However, this deal further solidifies our renewed strategic intent. Our continued focus is on harnessing our strengths, driving efficiencies, profitability and excellence.” 

SPAR operates in 11 countries, with its core South African business contributing to around 60% of the group's sales.