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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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