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SPP - The Spar Group Limited - Audited results for the year ended 30 September
2011 and cash dividend declaration
THE SPAR GROUP LIMITED
REGISTRATION NUMBER: 1967/001572/06
ISIN: ZAE000058517 JSE share code: SPP
("SPAR" or "the company" or "the group")
AUDITED RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2011 AND CASH DIVIDEND
DECLARATION
* UP 10.4% Turnover
* UP 7.8% Operating profit
* UP 3.9% Headline earnings per share
* 377 cents Annual dividend declaration per share
Condensed consolidated statement of comprehensive income
Audited Audited
Year ended Year ended
% September September
Rmillion Change 2011 2010
REVENUE 38 819.6 35 159.6
Turnover 10.4 38 458.7 34 844.2
Cost of sales (35 336.6) (32 083.7)
Gross profit 13.1 3 122.1 2 760.5
Other income 360.9 315.4
Operating expenses 17.4 (2 065.7) (1 759.6)
TRADING PROFIT 1 417.3 1 316.3
BBBEE transactions (12.9) (13.0)
OPERATING PROFIT 7.8 1 404.4 1 303.3
Interest received 18.2 24.6
Interest paid (24.7) (20.9)
Share of equity accounted associate 6.7 0.4
Profit before taxation 7.4 1 404.6 1 307.4
Taxation (452.0) (391.6)
PROFIT FOR THE YEAR
ATTRIBUTABLE
TO ORDINARY SHAREHOLDERS 4.0 952.6 915.8
OTHER COMPREHENSIVE INCOME
Exchange differences from
translation of foreign operations 0.1 0.1
TOTAL COMPREHENSIVE INCOME 952.7 915.9
EARNINGS PER SHARE
Earnings per share (cents) 3.7 555.6 536.0
Diluted earnings per share (cents) 521.4 506.2
SALIENT STATISTICS
Headline earnings per share (cents) 3.9 557.1 536.1
Diluted headline earnings
per share (cents) 3.3 522.8 506.3
Dividend per share (cents) 4.1 377.0 362.0
Net asset value per share 1 450.5 1 278.8
Operating profit margin (%) 3.7 3.8
Return on equity (%) 40.7 44.4
HEADLINE EARNINGS
RECONCILIATION
Profit for the period attributable
to ordinary shareholders 952.6 915.8
Adjusted for:
Loss on sale of property,
plant and equipment 3.4 0.1
Tax effects of adjustments (0.9)
HEADLINE EARNINGS 4.3 955.1 915.9
Condensed consolidated statement of financial position
Audited Audited
September September
Rmillion 2011 2010
ASSETS
Non-current assets 2 123.8 2 006.0
Property, plant and equipment 1 550.4 1 521.0
Goodwill 381.9 299.7
Operating lease receivables 119.3 139.1
Investment in associate 22.1 17.0
Other investments 1.5 1.5
Loans 34.8 23.0
Deferred taxation asset 13.2 3.2
Other non-current assets 0.6 1.5
Current assets 6 177.8 5 522.9
Inventories 1 135.0 959.2
Trade and other receivables 4 867.8 4 412.0
Prepayments 26.6 28.6
Operating lease receivables 36.7 25.7
Loans 15.3 2.2
Taxation receivable 10.0
Bank balances - Guilds 96.4 85.2
TOTAL ASSETS 8 301.6 7 528.9
EQUITY AND LIABILITIES
Capital and reserves 2 489.5 2 187.2
Share capital and premium 49.6 33.4
Treasury shares (27.8) (10.8)
Currency translation reserve (0.1) (0.2)
Share based payment reserve 292.0 261.8
Retained earnings 2 175.8 1 903.0
Non-current liabilities 216.5 209.5
Deferred taxation liability 0.6
Post retirement medical aid provision 85.5 75.1
Operating lease payables 130.4 134.4
Current liabilities 5 595.6 5 132.2
Trade and other payables 5 391.5 4 565.0
Operating lease payables 37.0 29.9
Provisions 11.6 5.8
Taxation payable 40.6 0.4
Bank overdrafts 114.9 531.1
TOTAL EQUITY AND LIABILITIES 8 301.6 7 528.9
Condensed consolidated statement of changes in equity
Share Currency Share based
capital and Treasury translation payment
Rmillion premium shares reserve reserve
Capital and reserves
at 30 September 2009 23.3 - (0.3) 231.1 1
Total comprehensive income 0.1
Share capital issued 10.1 (10.1)
Recognition of share
based payments 18.3
Take-up of share options 187.4 (120.5)
Transfer arising from
take-up of share options 120.5
Share repurchases (188.1)
Dividends declared
Recognition of BBBEE
transaction 12.4
Capital and reserves
at 30 September 2010 33.4 (10.8) (0.2) 261.8
Total comprehensive income 0.1
Share capital issued 16.2 (16.2)
Recognition of share
based payments 17.8
Take-up of share options 97.0 (55.2)
Transfer arising from
take-up of share options 55.2
Share repurchases (97.8)
Dividends declared
Recognition of BBBEE
transaction 12.4
Capital and reserves
at 30 September 2011 49.6 (27.8) (0.1) 292.0
Attributable
Retained to ordinary
Rmillion earnings shareholders
Capital and reserves at 30 September 2009 686.2 1 940.3
Total comprehensive income 915.8 915.9
Share capital issued -
Recognition of share based payments 18.3
Take-up of share options 66.9
Transfer arising from take-up of share options (120.5) -
Share repurchases (188.1)
Dividends declared (578.5) (578.5)
Recognition of BBBEE transaction 12.4
Capital and reserves at 30 September 2010 1 903.0 2 187.2
Total comprehensive income 952.6 952.7
Share capital issued -
Recognition of share based payments 17.8
Take-up of share options 41.8
Transfer arising from take-up of share options (55.2) -
Share repurchases (97.8)
Dividends declared (624.6) (624.6)
Recognition of BBBEE transaction 12.4
Capital and reserves at 30 September 2011 2 175.8 2 489.5
Condensed consolidated statement of cash flows
Audited Audited
Year ended Year ended
September September
Rmillion 2011 2010
CASH FLOWS FROM OPERATING ACTIVITIES 737.7 238.9
Operating profit before: 1 404.4 1 303.3
Non cash items 169.1 153.6
Loss on disposal of property, plant and equipment 3.4 0.1
Net working capital changes 204.3 (257.5)
- Increase in inventories (175.9) (106.1)
- Increase in trade and other receivables (452.2) (700.9)
- Increase in trade and other payables and provisions 832.4 549.5
Cash generated from operations 1 781.2 1 199.5
Interest received 17.1 23.6
Interest paid (24.7) (20.9)
Taxation paid (411.3) (384.8)
Dividends paid (624.6) (578.5)
CASH FLOWS FROM INVESTING ACTIVITIES (254.2) (281.0)
Investment to expand operations (118.0) (169.3)
Investment to maintain operations (36.6) (34.3)
- Replacement of property, plant and equipment (41.5) (36.3)
- Proceeds on disposal of property, plant and equipment 4.9 2.0
Acquisition of subsidiaries (82.2) (54.1)
Net movement on loans and investments (17.4) (23.3)
CASH FLOWS FROM FINANCING ACTIVITIES (56.1) (121.3)
Proceeds from issue of share capital and premium 16.2 10.1
Proceeds from exercise of share options 25.5 56.7
Share repurchases (97.8) (188.1)
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 427.4 (163.4)
NET OVERDRAFTS AT BEGINNING OF YEAR (445.9) (282.5)
NET OVERDRAFTS AT END OF YEAR (18.5) (445.9)
Notes to the condensed consolidated financial results
1. BASIS OF PRESENTATION AND COMPLIANCE WITH IFRS
The condensed financial information has been prepared in accordance with the
framework concepts and the measurement and recognition requirements of
International Financial Reporting Standards (IFRS), the AC 500 standards as
issued by the Accounting Practices Board and the information as required by IAS
34: Interim Financial Reporting. The report has been prepared using accounting
policies that comply with IFRS which are consistent with those applied in the
financial statements for the year ended 30 September 2010.
In compliance with the disclosure requirements of the Companies Act 71 of 2008,
the annual financial statements have been prepared by Mr MW Godfrey CA(SA) on
behalf of The SPAR Group Limited.
Audited Audited
Year ended Year ended
September September
Rmillion 2011 2010
2. SHARE CAPITAL AND PREMIUM
Authorised
250 000 000 (2010: 250 000 000) ordinary shares of
0.06 cents
(2010: 0.06 cents) each 0.2 0.2
30 000 000 (2010: 30 000 000) redeemable, convertible
preference shares of 0.06 cents each (2010:
0.06 cents) each - -
Issued
171 936 604 (2010: 171 170 013) ordinary shares of
0.06 cents (2010: 0.06 cents) each 0.1 0.1
18 911 349 (2010: 18 911 349) redeemable convertible
preference shares of 0.06 cents (2010: 0.06 cents) each - -
Share premium account 49.5 33.3
Balance at beginning of year 33.3 23.2
Issue of shares 16.2 10.1
Total share capital and premium 49.6 33.4
Issued share capital amounts to R103 162, consisting
of 171 936 604 ordinary shares. 766 591 ordinary shares
were issued during the year ended 30 September 2011.
Issued redeemable, convertible preference share
capital amounts to R11 347, consisting of 18 911 349
(2010: 18 911 349) shares issued at par during the
financial year ended 30 September 2009.
The weighted average number of ordinary shares (net
of treasury shares) used in the calculation of earnings
per share and headline earnings per share was 171 444 814
(2010: 170 862 375).
Diluted earnings and headline earnings per share
were based on a weighted average number of ordinary shares
(net of treasury shares) of 182 689 548 (2010: 180 912 511).
3. CONTINGENT LIABILITIES
The company has guaranteed the finance obligations
of certain SPAR retailer members to the amount of: 415.6 366.0
4. OPERATING LEASES
Operating lease costs charged against operating profit
Immovable property 35.2 10.0
- lease rentals 337.6 274.5
- sub-lease recoveries (302.4) (264.5)
Plant, equipment and vehicles 13.9 7.5
Operating lease commitments
Future minimum lease payments under non-cancellable
operating leases 2 924.5 2 324.2
- land and buildings 2 917.2 2 318.4
- other 7.3 5.8
Future minimum sub-lease receivables under
non-cancellable property leases (2 569.4) (2 119.1)
Net commitments 355.1 205.1
5. CAPITAL COMMITMENTS
Contracted 130.3 168.0
Approved but not contracted 16.1 23.0
Total capital commitments 146.4 191.0
6. SEGMENTAL REPORTING
The group operates its business from distribution centres situated throughout
South Africa. The distribution centres individually supply goods and services of
a similar nature to the group`s voluntary trading members. The directors are of
the opinion that the operations of the individual distribution centres are
substantially similar to one another and that the risks and returns of these
distribution centres are likewise similar. As a consequence thereof, the
business of the group is considered to be a single geographic segment.
7. EVENTS AFTER THE REPORTING DATE
No material events have occurred subsequent to 30 September 2011 which may have
an impact on the group`s reported financial position at this date.
Review of trading results
TRADING OVERVIEW
Trading for the year under review continued to be challenging with consumer
spending under pressure, low levels of food inflation for most of the period and
a highly competitive retail environment. The group has, nevertheless, produced a
satisfactory set of results, with a pleasing improvement in performance in the
second half of the year. Turnover growth of 10.4% included exceptional
performances from our liquor and building materials businesses. Food inflation
through our distribution centres averaged 3.3% and was impacted by a significant
increase in the last quarter. Volumes handled by our facilities showed a healthy
growth of 6.6%, which continues to reflect the underlying health of the
business. Operating profit increased by 7.8% for the year and by an encouraging
11.8% in the second half.
SPAR wholesale turnover of R31.9 billion increased by 8.6% and reflects good
real growth. Retail trading space was up by 3% with the opening of 25 new
stores. At year end the group serviced 859 SPAR stores.
TOPS enjoyed another successful year and store numbers increased to 501 with 48
new stores opening. Liquor sales remained extremely strong with wholesale
turnover reaching R2.6 billion and showing an impressive growth of 19.9%. This
brand can now confidently claim to be the number 1 liquor brand in the country.
Build it has again had an excellent trading year with 21 new stores opening and
wholesale turnover growing by 18.2% to R3.9 billion. The new Build it imports
warehouse has shown encouraging growth over the year and we expect this
operation to be in a profitable position by 2013.
The group`s retail division added, as planned, a further 5 SPAR retail stores
during the year under review, bringing the total SPAR stores owned to 10. The
trading performance of these stores is not satisfactory, with a loss of R29.9
million incurred for the year. Considerable effort and focus will ensure an
improvement in this division`s performance in the new year.
The focus on our independent retailers` profitability continued to put pressure
on our gross margins and core margins declined slightly to 7.8% (2010: 7.9%).
The impact of the retail division and the building materials wholesale operation
has positively countered this reduction and resulted in a net improvement in
overall margin from 7.9% to 8.1%.
Operating expenses, up by 17.4%, continued to be affected by the retail division
and building materials wholesale operation as these two new initiatives have no
full base year comparative. Comparable group expenses increased by 9.6% and were
significantly impacted by high diesel prices which contributed to delivery costs
increasing by 19.9%.
Headline earnings per share increased by 3.9% which was mainly influenced in the
current year by a reduced tax benefit arising from the take up of share options
Cash generation remained strong and was impacted by reduced levels of capital
expenditure this year of R160 million, the purchase of retail stores for R94
million, and the buy back of company shares amounting to R98 million. The
extension to the perishable facility at the Eastern Cape distribution centre was
completed in September 2011 at a cost of R39.7 million.
The dividend cover was maintained and a final dividend of 235 cents per share
was declared. Dividends for the year amounted to 377 cents representing a 4.1%
increase over last year.
The group has no long term borrowings and, when necessary, funds its operations
from overdraft facilities. These facilities are adequate for forecast
requirements and are subject to annual review.
PROSPECTS
The group expects 2012 to be a challenging year with consumer spending remaining
under pressure and an increasingly competitive trading environment. We are,
nevertheless, positive about the opportunities for the business and will
continue to focus on improving the performance of the new business initiatives,
driving retail growth and realising further cost savings through improved
operating efficiencies.
The group is confident that the capital expenditure in 2012 will not exceed R190
million.
Cash generation is expected to remain positive as capital expenditure is closely
controlled and the effective dividend cover is maintained. Where appropriate,
surplus cash will be utilised to buy back shares.
Mike Hankinson Wayne Hook
Chairman Chief Executive
AUDIT OPINION
The auditors, Deloitte & Touche, have issued their opinion on the group`s
financial statements for the year ended 30 September 2011. The audit was
conducted in accordance with International Standards on Auditing. They have
issued an unmodified audit opinion. These provisional financial statements have
been derived from the group financial statements and are consistent in all
material respects, with the group financial statements. A copy of their audit
report is available for inspection at the company`s registered office. Any
reference to future financial performance included in this announcement, has not
been reviewed or reported on by the company`s auditors.
DECLARATION OF ORDINARY DIVIDEND
Notice is hereby given that a final dividend of 235 cents per share has been
declared in respect of the year ended 30 September 2011.
The salient dates for the payment of the final dividend are detailed below:
Last day to trade cum-dividend Friday 25 November 2011
Shares to commence trading ex-dividend Monday 28 November 2011
Record date Friday 2 December 2011
Payment of dividend Monday 5 December 2011
Shareholders will not be permitted to dematerialise or rematerialise their share
certificates between Monday, 28 November 2011 and Friday, 2 December 2011, both
days inclusive.
By order of the board
KJ O`Brien
Company Secretary
Pinetown
8 November 2011
DIRECTORATE AND ADMINISTRATION
DIRECTORS: MJ Hankinson* (Chairman), WA Hook (Chief Executive),
MW Godfrey, DB Gibbon*, PK Hughes*, RJ Hutchison*, MP Madi*,
HK Mehta*, P Mnganga*, R Venter, CF Wells* * Non-executive
COMPANY SECRETARY: KJ O`Brien
REGISTERED OFFICE: 22 Chancery Lane, PO Box 1589, Pinetown, 3600
TRANSFER SECRETARIES: Link Market Services South Africa (Pty) Limited
PO Box 4844, Johannesburg, 2000
AUDITORS: Deloitte & Touche, PO Box 243, Durban, 4000
SPONSOR: One Capital, PO Box 784573, Sandton, 2146
BANKERS: First National Bank, PO Box 4130, Umhlanga Rocks, 4320
ATTORNEYS: Garlicke & Bousfield, PO Box 1219, Umhlanga Rocks, 4320
WEBSITE: www.spar.co.za
Date: 09/11/2011 07:05:27 Supplied by www.sharenet.co.za
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