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The Spar Group Limited unaudited interim results for the six months ended 31 March 2014
The SPAR Group Limited
REGISTRATION NUMBER: 1967/001572/06
ISIN: ZAE000058517
JSE SHARE CODE: SPP
www.spar.co.za
THE SPAR GROUP LIMITED UNAUDITED INTERIM RESULTS
FOR THE SIX MONTHS ENDED 31 MARCH 2014
Revenue +7.7%
Profit after tax +9.4%
Headline earnings per share +9.1%
Interim dividend per share +8.9%
Net asset value per share +12.4%
Condensed consolidated statement of comprehensive income
*Restated
Unaudited Unaudited *Restated
six months six months Year
ended ended ended
% March March September
Rmillion Change 2014 2013 2013
Revenue 7.7 25 830.6 23 991.3 47 795.8
Turnover 7.6 25 605.8 23 794.8 47 387.3
Cost of sales (23 552.3) (21 904.1) (43 566.6)
Gross profit 2 053.5 1 890.7 3 820.7
Other income 224.8 196.5 408.5
Operating expenses 9.7 (1 382.8) (1 260.5) (2 570.3)
Trading profit 895.5 826.7 1 658.9
BBBEE transactions (6.2) (6.7) (13.3)
Operating profit 889.3 820.0 1 645.6
Interest received 13.3 13.8 34.0
Interest paid (12.1) (15.5) (24.8)
Share of equity accounted associate (1.0) 0.8 3.3
Profit before taxation 8.6 889.5 819.1 1 658.1
Taxation (246.6) (231.5) (470.8)
Profit for the period attributable to ordinary shareholders 9.4 642.9 587.6 1 187.3
Other comprehensive income
Exchange differences from translation of foreign operations (0.3) 0.6 0.6
Actuarial gain on post retirement medical aid 5.9 11.8
Total comprehensive income 642.6 594.1 1 199.7
EARNINGS PER SHARE
Earnings per share (cents) 9.2 372.1 340.9 688.8
Diluted earnings per share (cents) 348.9 318.4 643.0
SALIENT STATISTICS
Headline earnings per share (cents) 9.1 372.0 341.0 694.8
Diluted headline earnings per share (cents) 9.5 348.8 318.5 648.6
Dividend per share (cents) 8.9 195.0 179.0 485.0
Net asset value per share (cents) 12.4 1 876.9 1 669.2 1 842.2
Operating profit margin (%) 3.5 3.4 3.5
Return on equity (%) 21.0 21.6 39.6
HEADLINE EARNINGS RECONCILIATION
Profit for the period attributable to ordinary shareholders 642.9 587.6 1 187.3
Adjusted for:
(Profit)/loss on disposal of property, plant and equipment (0.1) 0.2 (0.1)
– Gross (0.2) 0.3 (0.2)
– Tax 0.1 (0.1) 0.1
(Profit) on part disposal of share of associate (0.1)
– Gross (0.1)
– Tax
Impairment of goodwill 7.5
Impairment of investment 3.0
Headline earnings 9.3 642.7 587.8 1 197.7
*Restated for the effect of IAS 19, refer to note 2
Condensed consolidated statement of financial position
*Restated
Unaudited Unaudited *Restated
six months six months Year
ended ended ended
March March September
Rmillion 2014 2013 2013
ASSETS
Non-current assets 2 444.6 2 312.0 2 381.7
Property, plant and equipment 1 769.9 1 665.2 1 749.1
Goodwill 396.7 391.0 387.6
Operating lease receivables 91.8 103.8 98.1
Investment in associate 72.0 40.8 52.6
Other investments 1.9 20.9 1.9
Loans 82.2 76.2 64.4
Deferred taxation asset 30.1 14.1 28.0
Current assets 7 868.1 7 350.0 7 404.8
Inventories 1 680.4 1 450.3 1 374.0
Trade and other receivables 5 931.8 5 576.3 5 841.3
Prepayments 49.4 19.1 32.7
Operating lease receivables 42.7 38.3 39.1
Loans 4.2 6.8 5.5
Taxation receivable 6.1
Bank balances – SPAR 125.2
Bank balances – Guilds 159.6 127.9 112.2
Total assets 10 312.7 9 662.0 9 786.5
EQUITY AND LIABILITIES
Capital and reserves 3 242.4 2 877.0 3 175.6
Stated capital 67.6 61.6 61.6
Treasury shares (47.8) (56.7) (42.8)
Currency translation reserve 0.2 0.5 0.5
Share based payment reserve 371.0 338.4 355.1
Retained earnings 2 851.4 2 533.2 2 801.2
Non-current liabilities 226.4 248.6 227.5
Deferred taxation liability 3.2 4.9 1.5
Post retirement medical aid provision 113.8 121.6 110.9
Operating lease payables 109.4 122.1 115.1
Current liabilities 6 843.9 6 536.4 6 383.4
Trade and other payables 5 632.8 6 484.6 6 204.6
Operating lease payables 45.0 39.3 41.9
Provisions 16.1 12.5 14.7
Taxation payable 2.7 11.3
Bank overdrafts 1 147.3 110.9
Total equity and liabilities 10 312.7 9 662.0 9 786.5
*Restated for the effect of IAS 19, refer to note 2
Condensed consolidated statement of changes in equity
Attrib-
utable
Currency Share to
trans- based ordinary
Stated Treasury lation payment Retained share-
Rmillion capital shares reserve reserve earnings holders
Capital and reserves
at September 2012 54.5 (6.9) (0.1) 323.1 2 467.0 2 837.6
Effect of adoption of IAS 19 (10.7) (10.7)
Restated capital and reserves
at September 2012* 54.5 (6.9) (0.1) 323.1 2 456.3 2 826.9
Total comprehensive income 0.6 587.6 588.2
Acturial gain on post retirement
medical aid 5.9 5.9
Share capital issued 7.1 (7.1) –
Recognition of share based
payments 9.1 9.1
Take-up of share options 74.6 (43.3) 31.3
Transfer arising from take-up
of share options 43.3 (43.3) –
Share repurchases (117.3) (117.3)
Dividends declared (473.3) (473.3)
Recognition of BBBEE transaction 6.2 6.2
Restated capital and reserves
at March 2013* 61.6 (56.7) 0.5 338.4 2 533.2 2 877.0
Total comprehensive income 599.7 599.7
Acturial gain on post retirement
medical aid 5.9 5.9
Recognition of share based
payments 10.5 10.5
Take-up of share options 42.0 (28.9) 13.1
Transfer arising from take-up
of share options 28.9 (28.9) –
Share repurchases (28.1) (28.1)
Dividends declared (308.7) (308.7)
Recognition of BBBEE transaction 6.2 6.2
Capital and reserves
at September 2013 61.6 (42.8) 0.5 355.1 2 801.2 3 175.6
Total comprehensive income (0.3) 642.9 642.6
Share capital issued 6.0 (6.0) –
Recognition of share based
payments 9.7 9.7
Take-up of share options 104.8 (63.2) 41.6
Transfer arising from take-up
of share options 63.2 (63.2) –
Share repurchases (103.8) (103.8)
Dividends declared (529.5) (529.5)
Recognition of BBBEE transaction 6.2 6.2
Capital and reserves
at March 2014 67.6 (47.8) 0.2 371.0 2 851.4 3 242.4
*Restated for the effect of IAS 19, refer to note 2
Condensed consolidated statement of cash flows
*Restated
Unaudited Unaudited *Restated
six months six months Year
ended ended ended
March March September
Rmillion 2014 2013 2013
CASH FLOWS FROM OPERATING ACTIVITIES (783.8) (337.0) (443.2)
Operating profit before: 889.3 820.0 1 645.6
Non cash items 108.9 107.0 195.4
Impairment of goodwill 7.5
(Profit)/loss on disposal of property, plant and equipment (0.2) 0.3 (0.2)
Net working capital changes (995.9) (545.2) (1 032.7)
– (Increase)/decrease in inventories (306.4) (34.7) 41.6
– (Increase) in trade and other receivables (118.8) (227.2) (514.9)
– (Decrease) in trade payables and provisions (570.7) (283.3) (559.4)
Cash generated from operations 2.1 382.1 815.6
Interest received 11.3 14.3 34.0
Interest paid (12.1) (15.5) (24.8)
Taxation paid (255.6) (244.6) (486.0)
Dividends paid (529.5) (473.3) (782.0)
CASH FLOWS FROM INVESTING ACTIVITIES (143.0) (165.5) (296.1)
Investment to expand operations (64.8) (97.2) (220.1)
Investment to maintain operations (31.0) (48.8) (78.5)
– Replacement of property, plant and equipment (31.3) (49.6) (83.3)
– Proceeds on disposal of property, plant and equipment 0.3 0.8 4.8
Acquisition of business (11.6) (24.3)
Proceeds from disposal of business 17.0
Net movement on loans and investments (35.6) (19.5) 9.8
CASH FLOWS FROM FINANCING ACTIVITIES (62.2) (86.0) (101.0)
Proceeds from issue of shares 6.0 7.1 7.1
Proceeds from exercise of share options 35.6 24.2 37.3
Share repurchases (103.8) (117.3) (145.4)
Net (decrease) in cash and cash equivalents (989.0) (588.5) (840.3)
Net balances at beginning of period 1.3 841.6 841.6
Net (overdrafts)/balances at end of period (987.7) 253.1 1.3
*Restated for the effect of IAS 19, refer to note 2
Notes to the condensed consolidated financial results
1. BASIS OF PRESENTATION AND COMPLIANCE WITH IFRS
The condensed consolidated interim financial statements are prepared in accordance with International Financial
Reporting Standard, (IAS) 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued
by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting
Standards Council and the requirements of the Companies Act of South Africa. The accounting policies applied
are consistent with those of the previous interim results, with the exception of the amendments relating to IAS19
(revised) Employee Benefits.
The information contained in the interim report has neither been audited nor reviewed by the group's external
auditors. These condensed consolidated financial statements have been prepared under the supervision of
Mr MW Godfrey CA(SA), on behalf of The SPAR Group Limited.
2. CHANGE IN ACCOUNTING POLICY
In the current year, the group has applied IAS 19 Employee Benefits (as revised in 2011). IAS 19 (revised)
impacted the measurement of the various components representing movements in the post retirement medical
aid obligation and associated disclosures.
The impact of the application of IAS 19 (revised) on the group's financial results is as follows:
Post
retirement Deferred
medical taxation
Rmillion aid provision asset Equity
Balance as reported at 30 September 2012 (103.4) 10.9 2 837.6
Effect of adoption of IAS 19 (revised) (14.9) 4.2 (10.7)
Restated balance as at 30 September 2012 (118.3) 15.1 2 826.9
Balance as reported at 30 September 2013 (108.0) 27.2 3 177.7
Effect of adoption of IAS 19 (revised)
– Prior year adjustment (14.9) 4.2 (10.7)
– Restatement (4.4) 1.2 (3.2)
Effect on other comprehensive income 16.4 (4.6) 11.8
Restated balance as at 30 September 2013 (110.9) 28.0 3 175.6
Balance as reported at 31 March 2013 (112.7) 11.6 2 883.4
Effect of adoption of IAS 19 (revised)
– Prior year adjustment (14.9) 4.2 (10.7)
– Restatement (2.2) 0.6 (1.6)
Effect on other comprehensive income 8.2 (2.3) 5.9
Restated balance as at 31 March 2013 (121.6) 14.1 2 877.0
*Restated *Restated
Unaudited Unaudited Year
six months six months ended
ended March ended March September
Rmillion 2014 2013 2013
3. STATED CAPITAL
Authorised
250 000 000 (March 2013: 250 000 000) ordinary shares 0.2 0.2 0.2
30 000 000 (March 2013: 30 000 000) redeemable
convertible preference shares – – –
Issued
173 224 452 (March 2013: 172 782 188) ordinary shares 67.6 61.6 61.6
18 774 999 (March 2013: 18 911 349) redeemable
convertible preference shares – – –
Total stated capital 67.6 61.6 61.6
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 R67 568 111, consisting of 173 224 452 ordinary shares. 424 142 ordinary shares
were issued during the six months ended 31 March 2014.
Issued redeemable convertible preference share capital amounts to R11 265, consisting of 18 774 999
(March 2013: 18 911 349) shares issued during the financial year ended 30 September 2009.
During the six months ended March 2014, 84 950 redeemable convertible preference shares were converted
into 32 142 ordinary shares. These relate to the vesting arising from the death of participants in both BBBEE
trusts.
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 172 754 643 (March 2013: 172 363 059).
Diluted earnings and headline earnings per share were based on a weighted average number of ordinary shares
(net of treasury shares) of 184 265 095 (March 2013: 184 558 192).
*Restated *Restated
Unaudited Unaudited Year
six months six months ended
ended March ended March September
Rmillion 2014 2013 2013
4. CONTINGENT LIABILITIES
The company has guaranteed the finance obligations
of certain SPAR retailer members to the amount of: 507.2 404.8 482.8
5. OPERATING LEASES
Operating lease costs charged against operating profit
Immovable property 32.6 29.3 55.0
– Lease rentals 293.5 204.5 474.3
– Sub-lease recoveries (260.9) (175.2) (419.3)
Plant, equipment and vehicles 2.5 6.4 4.8
Operating lease commitments
Future minimum lease payments under non-cancellable
operating leases 3 748.9 3 609.2 3 694.0
– Land and buildings 3 742.2 3 602.2 3 686.6
– Other 6.7 7.0 7.4
Future minimum sub-lease receivables under
non-cancellable property leases (3 368.5) (3 219.0) (3 290.2)
Net commitments 380.4 390.2 403.8
6. CAPITAL COMMITMENTS
Contracted 26.8 52.9 93.0
Approved but not contracted 10.9 76.6 13.2
Total capital commitment 37.7 129.5 106.2
7. 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 Chief Executive Officer (the Chief Operating Decision Maker) is 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.
8. EVENTS AFTER THE REPORTING DATE
No material events have occurred subsequent to 31 March 2014 which may have an impact on the group's
reported financial position at this date.
Review of results
TRADING OVERVIEW
Trading conditions remain tough with ongoing pressure on consumer spending due to rising unemployment, increasing
household debt and interest rates. Mine strike action has affected trading in certain rural regions through reduced disposable
income. Retailers continue to be faced with fierce competitor activity, as well as increasing energy and operating costs.
Group turnover increased 7.6% to R25.6 billion (2013: R23.8 billion), supported by the strong performance of liquor
and building materials, which both delivered double digit growth and countered the impact of heightened competition
experienced in food retail. The turnover growth was negatively influenced by the later Easter holidays in the current year.
Profit before taxation increased 8.6% to R889.5 million (2013: R819.1 million). Gross margins increased to 8.0%
from the prior year, underpinned by stronger growth in ex-warehouse sales. SPAR successfully mitigated the impact
of substantial fuel price increases, with its core expenses growing in line with revenue. Operating expenses
rose 9.7%. and were influenced by higher marketing expenditure and additional information technology costs.
Profit after taxation increased by 9.4%.
Headline earnings rose 9.3% to R642.7 million (2013: R587.8 million) with a corresponding increase in headline
earnings per share to 372.0 cents (2013: 341.0 cents). An interim dividend of 195 cents (2013: 179 cents) per share
was declared, up 8.9%.
SPAR wholesale turnover increased 6.6% to R20.8 billion, benefiting from strong uptake of SPAR house brands.
Net retail trading space increased 0.8%, while 8 new stores were opened and 65 stores underwent upgrades in line
with the group's focus on organic store growth. At the end of March the group serviced 873 SPAR stores. Total retail
turnover increased 6.6% on a comparable store basis.
TOPS maintained its strong growth trajectory, albeit off a higher base, with wholesale turnover increasing 11.4% to
R2.1 billion. Store numbers grew to 595 with 19 new stores opened during the period. The liquor performance was
underpinned by product inflation of 5.7%.
Combined food and liquor retail sales, which allows for a better industry comparative, increased by 7.1% and
6.8% on a like-for-like store basis.
Build it staged a strong recovery, with pleasing wholesale turnover growth of 11.3% to R2.7 billion against muted
market demand. Rand weakness negated the benefits of low-priced cement imports that had negatively impacted
Build it's prior year performance. Build it house brand imports increased 29.9%, in spite of the weak domestic
currency, reflecting the strong consumer support. Eleven new stores were added during the period, bringing total
store numbers to 299. The group continued to expand the brand into neighbouring countries, with new retailers
joining the Build it Guild in Mozambique and Botswana.
The group continued to invest in appropriate assets and capital expenditure remained in line with projections.
Expenditure for the full year is expected to be R230 million, well within the original budget.
Notwithstanding an overdraft position at the reporting date of R1 147.3 million (2013 : cash balance R125.2 million)
the group’s cash flow remains strong with the substantial change resulting from the timing of the month end creditor payments.
PROSPECTS
SPAR anticipates that market conditions will remain largely unchanged for the remainder of the financial year with
continued stress on consumer spending, muted and economic growth. The trading performance
for the first seven weeks of the second half of the year has remained consistent, and the group expects sales growth to be broadly
in line with the first half.
BOARD OF DIRECTORS
Wayne Hook stepped down as Chief Executive Officer of The SPAR Group Limited on 31 January 2014 due to his wife's illness,
but remains on the board as an executive director.
Graham O'Connor was appointed as Chief Executive Officer of the group on 1 February 2014. His appointment was
ratified by shareholders at the annual general meeting on 11 February 2014.
Mike Hankinson Graham O'Connor
Chairman Chief Executive Officer
Declaration of ordinary dividend
Notice is hereby given that an interim gross cash dividend of 195 cents per share has been declared by the board in
respect of the six months ended 31 March 2014. The dividend has been declared out of income reserves.
The salient dates for the payment of the interim dividend are detailed below:
Last day to trade cum-dividend Friday, 6 June 2014
Shares to commence trading ex-dividend Monday, 9 June 2014
Record date Friday, 13 June 2014
Payment of dividend Tuesday, 17 June 2014
Shareholders will not be permitted to dematerialise or rematerialise their share certificates between Monday, 9 June
2014 and Friday, 13 June 2014, both days inclusive.
In terms of South African taxation legislation effective from 1 April 2012, the following additional information is
disclosed:
• The South African local dividend tax rate is 15%;
• No STC credits will be utilised;
• The net local dividend amount is 165.75 cents per share for shareholders liable to pay tax on dividends, and
195 cents per share for shareholders exempt from such dividend tax;
• The issued share capital of the SPAR Group Limited is 173 224 452 ordinary shares; and
• The SPAR Group Limited's tax reference number is 9285/168/20/0.
By order of the board
KJ O'Brien Pinetown
Company Secretary 20 May 2014
Directorate and administration
DIRECTORS: MJ Hankinson* (Chairman), GO O'Connor (Chief Executive), MW Godfrey, WA Hook
PK Hughes*, RJ Hutchison*, MP Madi*, HK Mehta*, P Mnganga*, R Venter, CF Wells*
*Non-executive
COMPANY SECRETARY: KJ O'Brien
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) Ltd, 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: 21/05/2014 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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