AUBURN HILLS, Mich. - SPAR Group, Inc. (NASDAQ: SGRP), a global merchandising and marketing services provider, has announced the divestiture of its majority stake in South Africa's Meridian Group and its Brazilian subsidiary SGRP Brasil Participações Ltda. The transactions, approved by the company's board, are expected to generate combined cash proceeds of approximately $22 million USD and are slated to close in the second quarter of the year.
The sale of the South African unit to minority shareholder Lindicom will bring in R181 million, while the Brazilian subsidiary will be sold for 58.9 million BRL to its minority shareholder. This move follows SPAR Group's strategic review of its operations and structure, with a focus on the quality of earnings within each segment.
Mike Matacunas, CEO of SPAR Group, stated that the company has completed a thorough evaluation over the past 18 months, which led to the conclusion that growth through joint venture partnerships and repatriating cash from such ventures was complex. To enhance long-term shareholder value, the company has taken steps to streamline its operating structure and focus on a strategy that leverages its brand equity and capital to maximize market opportunities and return on invested capital.
In addition to the divestitures, SPAR Group has secured software as a service (SAAS) agreements with Australia's Meridian Group, ensuring the continued use of SPAR's proprietary technology.
SPAR Group, known for providing a range of merchandising, marketing, and distribution solutions to retailers and brands, aims to simplify its operations and finances through these divestitures.
The information for this article is based on a press release statement from SPAR Group, Inc.
InvestingPro Insights
As SPAR Group, Inc. (NASDAQ: SGRP) refines its business strategy with the divestiture of its South African and Brazilian units, a glance at the company's financial health through InvestingPro data may provide investors with a clearer picture of its current standing. With a market capitalization of $22.53 million USD, the company's value reflects its global footprint in the merchandising and marketing services industry. However, it is important to note that SPAR Group is trading at a negative P/E ratio of -31.06, indicating that it has not been profitable over the last twelve months as of Q1 2023.
The company's gross profit margin stands at a modest 20.59%, which may be a point of concern as it suggests weak gross profit margins relative to the industry. This is echoed in one of the InvestingPro Tips, which highlights that SPAR Group suffers from weak gross profit margins. Furthermore, the company's revenue growth has been tepid, with only a 2.2% increase in the last twelve months as of Q1 2023, and a slight quarterly decline of -3.58% in Q1 2023. This could be a reflection of the challenges faced in certain segments of the business that the company is now addressing through its strategic divestitures.
On a positive note, another InvestingPro Tip points out that SPAR Group's liquid assets exceed short-term obligations, suggesting that the company maintains a healthy liquidity position. This is crucial as the firm navigates through the restructuring of its operations.
For investors keen on further insights, InvestingPro offers additional tips on SPAR Group, shedding light on aspects such as revenue valuation multiples and dividend policies. To access these insights and more, investors can visit InvestingPro and use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, uncovering a total of 5 InvestingPro Tips that could guide investment decisions regarding SPAR Group.
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