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THE SPAR GROUP LIMITED - Audited results for the year ended 30 September 2012 and cash dividend

Release Date: 14/11/2012 07:05
Code(s): SPP     PDF:  
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Audited results for the year ended 30 September 2012 and cash dividend

The Spar Group Limited 
("SPAR" or "the company" or "the group")
RegistRation number: 1967/001572/06
ISIN: ZAE000058517      JSE share code: SPP

AUDITED RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2012
AND CASH DIVIDEND DECLARATION

12.2%          10.6%                    14.1%             430 cents
Turnover       Headline earnings        Annual            Annual dividend
               per share                dividend          declaration per share

Condensed consolidated statement of comprehensive income

                                                                                  Audited        Audited
                                                                               Year ended     Year ended
                                                                          %     September      September
Rmillion                                                              Change         2012           2011
Revenue                                                                          43 560.2       38 819.6
Turnover                                                                12.2     43 166.0       38 458.7
Cost of sales                                                                   (39 721.3)     (35 336.6)
Gross profit                                                                      3 444.7        3 122.1
Other income                                                                        394.2          360.9
Operating expenses                                                      12.1     (2 315.7)      (2 065.7)
Trading profit                                                                    1 523.2        1 417.3
BBBEE transactions                                                                  (13.0)         (12.9)
Operating profit                                                         7.5      1 510.2        1 404.4
Interest received                                                                    32.8           18.2
Interest paid                                                                       (27.8)         (24.7)
Share of equity accounted associate                                                   3.5            6.7
Profit before taxation                                                   8.1      1 518.7        1 404.6
Taxation                                                                           (459.8)        (452.0)
Profit for the year attributable
  to ordinary shareholders                                              11.2      1 058.9          952.6
Other comprehensive income
Exchange differences from translation of foreign operations                                          0.1
Total comprehensive income                                                        1 058.9          952.7
EARNINGS PER SHARE
Earnings per share                                          (cents)     10.8        615.7          555.6
Diluted earnings per share                                  (cents)                 570.6          521.4
SALIENT STATISTICS
Headline earnings per share                                 (cents)     10.6        616.3          557.1
Diluted headline earnings per share                         (cents)      9.3        571.2          522.8
Dividend per share                                          (cents)     14.1        430.0          377.0
Net asset value per share                                   (cents)               1 649.8        1 450.5
Operating profit margin                                        (%)                    3.5            3.7
Return on equity                                               (%)                   39.8           40.7
HEADLINE EARNINGS RECONCILIATION
Profit for the year attributable to ordinary shareholders                         1 058.9          952.6
Adjusted for:
Loss on disposal of property, plant and equipment                                     1.5            3.4
Tax effects of adjustments                                                           (0.4)          (0.9)
Headline earnings                                                      11.0       1 060.0          955.1

Condensed consolidated statement of financial position

                                           Audited      Audited
                                         September    September
Rmillion                                      2012         2011
ASSETS
Non-current assets                         2 222.5      2 123.8
Property, plant and equipment              1 588.0      1 550.4
Goodwill                                     391.0        381.9
Operating lease receivables                  112.7        119.3
Investment in associate                       40.0         22.1
Other investments                             20.9          1.5
Loans                                         59.0         34.8
Deferred taxation asset                       10.9         13.2
Other non-current assets                                    0.6
Current assets                             7 672.8      6 177.8
Inventories                                1 415.6      1 135.0
Trade and other receivables                5 341.1      4 867.8
Prepayments                                   35.8         26.6
Operating lease receivables                   34.3         36.7
Loans                                          4.4         15.3
Bank balances  SPAR                         752.4
Bank balances  Guilds                        89.2         96.4

Total assets                               9 895.3      8 301.6
EQUITY AND LIABILITIES
Capital and reserves                       2 837.6      2 489.5
Stated capital                                54.5         49.6
Treasury shares                               (6.9)       (27.8)
Currency translation reserve                  (0.1)        (0.1)
Share based payment reserve                  323.1        292.0
Retained earnings                          2 467.0      2 175.8
Non-current liabilities                      236.3        216.5
Deferred taxation liability                    3.9          0.6
Post retirement medical aid provision        103.4         85.5
Operating lease payables                     129.0        130.4
Current liabilities                        6 821.4      5 595.6
Trade and other payables                   6 772.6      5 391.5
Operating lease payables                      35.4         37.0
Provisions                                     6.7         11.6
Taxation                                       6.7         40.6
Bank overdrafts                                           114.9
Total equity and liabilities               9 895.3      8 301.6

Condensed consolidated statement of changes in equity

                                                    Share                               Share
                                                  capital                Currency       based               Attributable
                                                      and   Treasury  translation     payment    Retained    to ordinary
Rmillion                                          premium     shares      reserve     reserve    earnings   shareholders
Capital and reserves at 30 September 2010            33.4      (10.8)        (0.2)      261.8     1 903.0        2 187.2
Total comprehensive income                                                    0.1                   952.6          952.7
Share capital issued                                 16.2      (16.2)                                                  
Recognition of share based payments                                                      17.8                       17.8
Take-up of share options                                        97.0                    (55.2)                      41.8
Transfer arising from take-up of share options                                           55.2       (55.2)             
Share repurchases                                              (97.8)                                              (97.8)
Dividends declared                                                                                 (624.6)        (624.6)
Recognition of BBBEE transaction                                                         12.4                       12.4
Capital and reserves at 30 September 2011            49.6      (27.8)        (0.1)      292.0      2 175.8       2 489.5
Total comprehensive income                                                                         1 058.9       1 058.9
Share capital issued                                  4.9       (4.9)                                                  
Recognition of share based payments                                                      18.7                       18.7
Take-up of share options                                       149.4                    (97.2)                      52.2
Transfer arising from take-up of share options                                           97.2       (97.2)             
Share repurchases                                             (123.6)                                             (123.6)
Dividends declared                                                                                 (670.5)        (670.5)
Recognition of BBBEE transaction                                                         12.4                       12.4
Capital and reserves at 30 September 2012            54.5       (6.9)        (0.1)      323.1     2 467.0        2 837.6

Condensed consolidated statement of cash flows

                                                               Audited       Audited
                                                            Year ended    Year ended
                                                             September     September
Rmillion                                                          2012          2011
CASH FLOWS FROM OPERATING ACTIVITIES                           1 153.5         737.7
Operating profit before:                                       1 510.2       1 404.4
Non cash items                                                   173.0         169.1
Loss on disposal of property, plant and equipment                  1.5           3.4
Net working capital changes                                      622.4         204.3
 Increase in inventories                                       (280.6)       (175.9)
 Increase in trade and other receivables                       (473.2)       (452.2)
 Increase in trade payables and provisions                    1 376.2         832.4
Cash generated from operations                                 2 307.1       1 781.2
Interest received                                                 32.8          17.1
Interest paid                                                    (27.8)        (24.7)
Taxation paid                                                   (488.1)       (411.3)
Dividends paid                                                  (670.5)       (624.6)
CASH FLOWS FROM INVESTING ACTIVITIES                            (222.0)       (254.2)
Investment to expand operations                                  (92.7)       (118.0)
Investment to maintain operations                                (71.8)        (36.6)
 Replacement of property, plant and equipment                   (74.1)        (41.5)
 Proceeds on disposal of property, plant and equipment            2.3           4.9
Acquisition of businesses                                         (9.1)        (82.2)
Net movement on loans and investments                            (48.4)        (17.4)
CASH FLOWS FROM FINANCING ACTIVITIES                             (71.4)        (56.1)
Proceeds from issue of shares                                      4.9          16.2
Proceeds from exercise of share options                           47.3          25.5
Share repurchases                                               (123.6)        (97.8)
Net increase in cash and cash equivalents                        860.1         427.4
Net overdrafts at beginning of year                              (18.5)       (445.9)
Net cash and cash equivalents/(overdrafts) at end of year        841.6         (18.5)

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 JSE requirements and the
    requirements of the Companies Act of South Africa. 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 2011.

    In compliance with the disclosure requirements of the Companies Act, No 71 of 2008, the annual
    financial statements have been prepared under the supervision of Mr MW Godfrey CA(SA) on
    behalf of The Spar Group Limited.	

                                                             Audited      Audited
                                                          Year ended   Year ended
                                                           September    September
   Rmillion                                                     2012         2011
2. STATED CAPITAL
   Authorised
   250 000 000 (2011: 250 000 000) ordinary shares               0.2          0.2
   30 000 000 (2011: 30 000 000) redeemable convertible
     preference shares                                                         
   Issued
   172 377 704 (2011: 171 936 604) ordinary shares              54.5         49.6
   18 911 349 (2011: 18 911 349) redeemable convertible
     preference shares                                                         
   Total stated capital                                         54.5         49.6

Per the resolution passed at the annual general meeting, all shares of par value were converted to
no par value.

Issued share capital amounts to R103 427, consisting of 172 377 704 ordinary shares. 441 100
ordinary shares were issued during the year ended 30 September 2012.

Issued redeemable convertible preference share capital amounts to R11 347, consisting of 18 911 349
(2011: 18 911 349) shares issued 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 171 992 577 (2011: 171 444 814).

Diluted earnings and headline earnings per share were based on a weighted average number of
ordinary shares (net of treasury shares) of 185 565 578 (2011: 182 689 548).

                                                                      Audited        Audited
                                                                   Year ended     Year ended
                                                                    September      September
   Rmillion                                                              2012           2011
3. CONTINGENT LIABILITIES
   The company has guaranteed the finance obligations of certain
     SPAR retailer members to the amount of:                            386.8         415.6

4. OPERATING LEASES
   Operating lease costs charged against operating profit
   Immovable property                                                    52.0           35.2
    lease rentals                                                      410.7          337.6
    sub-lease recoveries                                              (358.7)        (302.4)
   Plant, equipment and vehicles                                         15.7           13.9
   Operating lease commitments
   Future minimum lease payments under non-cancellable
     operating leases                                                 3 337.6        2 924.5
    land and buildings                                               3 335.0        2 917.2
    other                                                                2.6            7.3
   Future minimum sub-lease receivables under non-cancellable
     property leases                                                 (2 659.3)      (2 569.4)
   Net commitments                                                      678.3          355.1

5. CAPITAL COMMITMENTS
   Contracted                                                           161.4          130.3
   Approved but not contracted                                           56.5           16.1
   Total capital commitments                                            217.9          146.4

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 segment.

7. EVENTS AFTER THE REPORTING DATE
   No material events have occurred subsequent to 30 September 2012 which may have an impact
   on the group's reported financial position at this date.

Review of trading results
Trading for the year under review was impacted by an unsettled political and labour
scenario, consumer spending still under some pressure and a highly competitive
food retail environment. The group has, nevertheless, produced a solid set of
financial results for the year.

Turnover increased 12.2% to R43.2 billion which again included strong performances
from our liquor business and the building materials division. Internally measured
food inflation across the group averaged 6.1% for the year, while cases despatched
by our distribution centres increased by 6.4% reflecting the continued healthy, real
growth of our business.

SPAR retailers again performed well with retail turnover of R53.7 billion up 11.5%,
which drove wholesale turnover up by 11.0% to R35.5 billion. Turnover of existing
stores grew by 10.6%, which is well above the reported market performance and
was supported by the upgrade of 147 stores during the year. Group house brands
continued to perform well and now account for R6.2 billion of wholesale turnover
to retail stores. Retail trading space increased by 3.2% as we opened 23 new
stores. At the end of the year the group serviced 868 SPAR stores.

TOPS had another great year with retail turnover increasing by 21.2% to R5.0 billion
and supporting wholesale liquor turnover growth of 18.3%. We opened 47 new
stores and now have 538 stores operating under the TOPS banner. The brand
continued to "shake things up" in the market and again won numerous best
liquor store' awards.

Build it had an excellent trading year and retail turnover of R7.5 billion was up
17% on last year. Wholesale turnover of R4.6 billion rose by 18.5%. The organic
growth of existing stores was 15% which, when viewed against the performance
of the building industry, was outstanding. During the year, 20 new stores were
opened, taking total store numbers to 281.

The Build it house brand imports initiative showed further positive signs and
turnover increased by an encouraging 53% to R154 million. House brand product
is distributed to Build it retailers and we remain confident that this initiative remains
a growth opportunity for the group.

Profit before tax for the year was up 8.1%, despite the challenging trading
environment. The group's gross margin declined slightly to 8.0% (2011: 8.1%). We did
not experience the same inflation related margin opportunities as last year and, in
addition, the strong Build it and TOPS performances influenced the margin mix as
these divisions operate at lower gross margins. We will continue to focus on our
retailer's ongoing profitability which remains crucial to the group's future success.

Operating expenses increased 12.1% and were affected by a relatively high increase 
in Build It costs, impacted by abnormal bad debt losses, and the growth of the imports 
facility. The retail division also reported high cost increases, largely due to the 
timing of store acquisitions. The core SPAR business costs rose by 10,9% and were 
negatively impacted by fuel costs increasing by 32%, and the once-off strike costs 
at the KwaZulu-Natal facility of R12 million.

During the year under review, the corporate retail division reported turnover of
R780 million and an operating loss of R28.8 million, although this is offset by the
wholesale profit made on sales to this division. The group acquired 1 additional
retail store during the year and now owns 11 stores. Management in this division
are now well established and are committed to a much improved result in 2013.

Headline earnings rose 11% to R1 060.0 million (2011: R955.1 million) and
headline earnings per share increased by 10.6% to 616.3 cents (2011: 557.1 cents).

A final dividend of 275 cents (2011: 235 cents) per share was declared and was
adjusted to recognise the effect of the change in STC legislation. Dividends for the
year amounted to 430 cents (2011: 377 cents) per share representing a 14.1%
increase over last year.

Capital expenditure for the current year of R166.8 million was spent predominantly
on our fleet, materials handling equipment and the replacement of distribution
centre systems hardware infrastructure. The board recently approved an extension
to the KwaZulu-Natal distribution centre at a budgeted cost of R65 million to
handle the growth in volumes. This project will be completed by August 2013. The
group has also embarked on a phased programme to upgrade distribution centre
systems infrastructure, commencing in 2013 with the modernisation of group
financial systems. We anticipate that group capital expenditure for the next year
will be R290 million.

Cash generation remained strong and was positively impacted by lower levels of
capital expenditure and improved working capital management during the year.

The group has no long-term borrowings and, when necessary, funds its operations
from confirmed overdraft facilities. These facilities are adequate for forecast
requirements and are subject to annual review.

PROSPECTS
The group expects trading conditions to continue to be subdued with low
economic growth forecast and consumer spending remaining under pressure. The
consumer is likely to be further affected by rising food prices forecast in the 2013
financial year.

The group, however, remains optimistic that, by realising growth opportunities,
improving our operating efficiencies and tightly controlling costs, we will produce
a satisfactory level of earnings in 2013.

For and on behalf of the board
Mike Hankinson					                     Wayne Hook
Chairman				                             Chief Executive

AUDIT OPINION
The independent auditors, Deloitte & Touche, have issued their opinion on the group's
financial statements for the year ended 30 September 2012. The audit was conducted
in accordance with International Standards on Auditing. They have issued an
unmodified audit opinion. These abridged provisional financial statements have been
derived from the group financial statements and are consistent in all material respects,
with the group financial statements. The auditor's report does not necessarily cover
all of the information contained in this announcement. Shareholders are therefore
advised that in order to obtain a full understanding of the nature of the auditor's
work, they should obtain a copy of that report together with the accompanying
financial information from the registered office of the company.

DECLARATION OF ORDINARY DIVIDEND
Notice is hereby given that a final cash dividend of 275 cents per share (gross) has
been declared by the board in respect of the year ended 30 September 2012. The
dividend has been declared out of income reserves.

The salient dates for the payment of the final dividend are detailed below:

Last day to trade cum dividend	                            Friday, 30 November 2012
Shares to commence trading ex dividend	                     Monday, 3 December 2012
Record date	                                             Friday, 7 December 2012 
Payment of dividend	                                   Monday,  10 December 2012

Shareholders will not be permitted to dematerialise or rematerialise their share
certificates between Monday, 3 December 2012 and Friday, 7 December 2012,
both dates inclusive.

In terms of the new Dividend Tax effective 1 April 2012, the following additional
information is disclosed:

 The local dividend tax rate is 15%;
 There are no STC credits utilised;
 The net local dividend amount is 233.75 cents per share for shareholders liable
  to pay the new Dividend Tax, and 275 cents per share for shareholders exempt
  from paying the new Dividend Tax;
 The issued share capital of The SPAR Group Limited is 172 377 704 ordinary
  shares; and
 The SPAR Group Limited's income tax reference number is 9285/168/20/0

By order of the board
KJ O'Brien 	                                              Pinetown
Company Secretary	                                      13 November 2012

DIRECTORATE AND ADMINISTRATION

Directors: MJ Hankinson* (Chairman), WA Hook (Chief Executive), MW Godfrey, PK Hughes*, 
RJ Hutchison*, MP Madi*, HK Mehta*, P Mnganga*, R Venter, CF Wells*           
*Non-executive

Company secretary: KJ O'Brien

The Spar Group Limited ("SPAR" or "the company" or "the group")
RegistRation number: 1967/001572/06
ISIN: ZAE000058517      JSE share code: SPP
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: 14/11/2012 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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