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Preliminary summarised audited results for the year ended 30 September 2015
THE SPAR GROUP LIMITED
REGISTRATION NUMBER: 1967/001572/06
ISIN: ZAE000058517
JSE SHARE CODE: SPP
THE SPAR GROUP LIMITED ("SPAR" or "the company" or "the group")
www.spar.co.za
PRELIMINARY SUMMARISED AUDITED RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2015
SUMMARISED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Audited Audited#
Year ended Year ended
% September September
Rmillion Change 2015 2014
REVENUE 34.6 74 060.0 55 015.9
Turnover 34.5 73 258.8 54 483.0
Cost of sales (66 892.2) (49 985.1)
Gross profit 6 366.6 4 497.9
Other income 801.2 532.9
Operating expenses 54.2 (4 860.2) (3 152.7)
Trading profit 2 307.6 1 878.1
BBBEE transactions (13.4) (13.2)
Operating profit 23.0 2 294.2 1 864.9
Other non-operating items (131.4) (1.0)
Interest received 29.2 34.2
Interest paid (121.6) (37.9)
Finance costs including foreign exchange gains and losses (108.1) (3.2)
Share of equity accounted associate losses (4.1) (12.8)
Profit before taxation 6.2 1 958.2 1 844.2
Taxation (537.3) (499.2)
Profit for the year attributable to ordinary shareholders 5.6 1 420.9 1 345.0
Other comprehensive income/(loss)
Items that will not be reclassified subsequently to profit or loss:
Actuarial loss on retirement funds (11.6) (21.4)
Actuarial loss on post-retirement medical aid (3.1) (8.1)
Items that may be reclassified subsequently to profit or loss:
Exchange differences from translation of foreign operations 20.7 16.1
Total comprehensive income 7.2 1 426.9 1 331.6
EARNINGS PER SHARE
Earnings per share (cents) 5.5 820.8 778.2
Diluted earnings per share (cents) 4.0 756.1 727.0
SALIENT STATISTICS
Headline earnings per share (cents) 6.9 835.5 781.8
Diluted headline earnings per share (cents) 5.4 769.6 730.4
Normalised headline earnings per share (cents) 20.5 940.0 779.8
Dividend per share (cents) 17.0 632.0 540.0
Net asset value per share (cents) 9.8 1 922.6 1 751.1
Operating profit margin (%) 3.1 3.4
Return on equity (%) 44.7 43.4
HEADLINE EARNINGS RECONCILIATION
Profit for the year attributable to ordinary shareholders 1 420.9 1 345.0
Adjusted for:
Loss on disposal of property, plant and equipment 12.1 4.3
- Gross 15.0 5.4
- Tax effect (2.9) (1.1)
Impairment of goodwill 11.6 5.6
Impairment of investments 1.7
Profit on disposal of associate interests (0.7) (1.5)
Profit on disposal of businesses (2.1)
Loss on disposal of assets held for sale 0.7
Headline earnings 7.0 1 446.3 1 351.3
# Reclassified for changes in presentation, refer to note 2.
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited Audited*
Year ended Year ended
September September
Rmillion Note 2015 2014
ASSETS
Non-current assets 6 771.1 5 853.9
Property, plant and equipment 3 221.3 2 878.2
Goodwill and intangible assets 5 3 281.5 2 726.0
Investment in associates 32.4 45.9
Other investments 2.3 2.9
Operating lease receivables 96.6 84.8
Loans 103.0 75.0
Deferred taxation asset 34.0 41.1
Current assets 12 364.6 11 253.7
Inventories 2 430.4 2 202.7
Trade and other receivables 9 309.2 8 515.1
Prepayments 64.0 32.9
Operating lease receivables 47.7 56.2
Loans 27.9 10.6
Taxation receivable 4.1
Bank balances - SPAR 399.9 323.6
Bank balances - Guilds 81.4 112.6
Assets classified as held for sale 194.6 15.0
Total assets 19 330.3 17 122.6
EQUITY AND LIABILITIES
Capital and reserves 3 328.4 3 026.5
Stated capital 67.6 67.6
Treasury shares (26.9) (48.2)
Currency translation reserve 37.3 16.6
Share-based payment reserve 425.1 387.7
Equity reserve (545.7) (545.7)
Retained earnings 3 371.0 3 148.5
Non-current liabilities 3 868.2 3 128.0
Deferred taxation liability 215.1 178.5
Post-retirement medical aid provision 140.8 129.1
Retirement benefit fund 305.9 286.1
Financial liability 4.6 729.8 548.9
Long-term borrowings 2 367.9 1 866.3
Operating lease payables 108.7 119.1
Current liabilities 12 132.6 10 968.1
Trade and other payables 11 349.2 9 697.9
Current portion of long-term borrowings 87.2 85.1
Operating lease payables 53.7 62.1
Provisions 110.3 95.8
Taxation payable 13.1 47.6
Bank overdrafts 519.1 979.6
Liabilities directly associated with assets classified as held for sale 1.1
Total equity and liabilities 19 330.3 17 122.6
* Reclassified for measurement period adjustment, refer to note 4.5.
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attri-
Currency Share butable to
trans- based ordinary
Stated Treasury lation payment Retained Equity share-
Rmillion capital shares reserve reserve earnings reserve holders
Capital and reserves at 30 September 2013 61.6 (42.8) 0.5 355.1 2 801.2 - 3 175.6
Total comprehensive income for the year 16.1 1 345.0 1 361.1
Actuarial loss on post-retirement medical aid (8.1) (8.1)
Actuarial loss on retirement funds (21.4) (21.4)
Purchase obligation of non-controlling interest (545.7) (545.7)
Recognition of share-based payments 20.2 20.2
Take-up of share options 164.6 (101.2) 63.4
Transfer arising from take-up of share options 101.2 (101.2) -
Share repurchases (164.0) (164.0)
Dividends paid (867.0) (867.0)
Issue of shares 6.0 (6.0) -
Recognition of BBBEE transaction 12.4 12.4
Capital and reserves at 30 September 2014 67.6 (48.2) 16.6 387.7 3 148.5 (545.7) 3 026.5
Total comprehensive income for the year 20.7 1 420.9 1 441.6
Actuarial loss on post-retirement medical aid (3.1) (3.1)
Actuarial loss on retirement funds (11.6) (11.6)
Recognition of share-based payments 25.0 25.0
Take-up of share options 250.2 (172.2) 78.0
Transfer arising from take-up of share options 172.2 (172.2) -
Share repurchases (228.9) (228.9)
Dividends paid (1 011.5) (1 011.5)
Issue of shares -
Recognition of BBBEE transaction 12.4 12.4
Capital and reserves at 30 September 2015 67.6 (26.9) 37.3 425.1 3 371.0 (545.7) 3 328.4
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
Audited Audited#
Year ended Year ended
September September
Rmillion Note 2015 2014
CASH FLOWS FROM OPERATING ACTIVITIES 1 269.3 481.2
Operating profit before: 2 294.2 1 864.9
Non-cash items 367.4 207.3
Loss on disposal of property, plant and equipment 15.0 5.4
Net working capital changes 278.0 (235.2)
- Increase in inventories (114.8) (179.9)
- Increase in trade and other receivables (387.7) (768.0)
- Increase in trade payables and provisions 780.5 712.7
Cash generated from operations 2 954.6 1 842.4
Interest received 26.7 30.9
Interest paid (145.0) (53.2)
Taxation paid (555.5) (471.9)
Dividends paid (1 011.5) (867.0)
CASH FLOWS FROM INVESTING ACTIVITIES (978.5) (924.4)
Investment to expand operations (422.1) (106.1)
Investment to maintain operations (103.4) (115.3)
- Replacement of property, plant and equipment (111.8) (120.8)
- Proceeds on disposal of property, plant and equipment 8.4 5.5
Acquisition of businesses/subsidiaries 4 (452.0) (696.4)
Proceeds from disposal of business 10.4 12.3
Proceeds from disposal of assets held for sale 18.6
Net movement in loans and investments (30.0) (18.9)
CASH FLOWS FROM FINANCING ACTIVITIES 162.3 (100.6)
Proceeds from issue of shares 6.0
Proceeds from exercise of share options 78.0 57.4
Proceeds from borrowings 313.2
Share repurchases (228.9) (164.0)
Net movement in cash and cash equivalents 453.1 (543.8)
Net (overdrafts)/balances at beginning of year (543.4) 1.3
Exchange rate translation 52.5 (0.9)
Net overdraft at end of year (37.8) (543.4)
# Reclassified for changes in presentation, refer to note 2.
NOTES TO THE SUMMARISED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND COMPLIANCE WITH IFRS
The preliminary summarised financial information was prepared in accordance with the framework concepts and the measurement and recognition requirements of
International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting
Pronouncements as issued by Financial Reporting Standards Council and the information at a minimum as required by IAS 34: Interim Financial Reporting, the JSE Limited
Listings Requirements and the requirements of the Companies Act of South Africa. The report was prepared using accounting policies that comply with IFRS and are
consistent with those applied in the consolidated financial statements for the year ended 30 September 2014.
In compliance with the disclosure requirements of the Companies Act, No 71 of 2008, the consolidated financial statements were prepared under the supervision of
Mr MW Godfrey CA(SA), Group Financial Director, on behalf of The SPAR Group Limited.
2. OTHER NON-OPERATING ITEMS
Rmillion 2015 2014
Remeasurement of financial instruments 72.8 (1.0)
Fair value adjustment to financial liability 72.8
Fair value adjustment to investment in GRH (1.0)
Capital items 58.6 2.0
Impairment of goodwill 11.6 5.6
Impairment of investments 1.7
Profit on disposal of associate interests (0.7) (1.5)
Profit on disposal of businesses (2.1)
Business acquisition costs 46.0
Total 131.4 1.0
Other non-operating items have been disclosed for the first time in 2015 with the relevant 2014 comparative information being reclassified as such presentation is
relevant to understanding the entity's financial performance. This change had no impact on profit before or after tax or on earnings per share or headline earnings
per share.
3. SEGMENTAL REPORTING
Segment accounting policies are consistent with those adopted for the preparation of the consolidated financial statements.
The principal segments of the group have been identified on a primary basis by geographical segment, which is representative of the internal reporting used for
management purposes as well as the source and nature of business risks and returns.
The Chief Executive Officer (the Chief Operating Decision Maker) is of the opinion that the operations of the individual distribution centres within Southern Africa
are substantially similar to one another and that the risks and returns of these distribution centres are likewise similar. The risks and returns of the Ireland
operations are not considered to be similar to those within Southern Africa.
As a result, the geographical segments of the group have been identified as Southern Africa and Ireland. All segment revenue and expenses are directly attributable
to the segments. Segment assets include all operating assets used by a segment. Segment liabilities include all operating liabilities. These assets and liabilities
are all directly attributable to the segments. All intra-segment transactions are eliminated on consolidation.
Segment analysis: Southern Consolidated
Rmillion Africa Ireland Total
2015
Total revenue 56 883.6 17 176.4 74 060.0
Operating profit 1 987.8 306.4 2 294.2
Profit before tax 1 776.1 182.1 1 958.2
Total assets 12 157.7 7 172.6 19 330.3
Total liabilities 9 038.8 6 963.1 16 001.9
2014*#
Total revenue 52 220.4 2 795.5 55 015.9
Operating profit 1 799.4 65.5 1 864.9
Profit before tax 1 794.2 50.0 1 844.2
Total assets 11 590.6 5 532.0 17 122.6
Total liabilities 8 607.0 5 489.1 14 096.1
* Reclassfied for measurement period adjustment, refer to note 4.5.
# Reclassified for changes in presentation, refer to note 2.
4. BUSINESS COMBINATIONS
4.1 During the 2015 financial year, the BWG Group, which is held by TIL JV Limited, a subsidiary of The SPAR Group Limited, acquired the entire issued share
capital of ADM Londis plc ("Londis") for a cash consideration of R317.0 million. This acquisition was effective from 27 June 2015. The principal business
activity of ADM Londis plc is that of wholesale and retail of consumer goods in Ireland. TIL JV Limited operates its business in Ireland.
The SPAR Group Limited acquired a controlling shareholding of 80% in the BWG Group effective 1 August 2014. The investment was made in TIL JV Limited, the
new holding company for the BWG Group. The reason for the acquisition of the BWG Group in 2014 was because of its strong commonality with The SPAR Group
Limited business model. The BWG Group also holds a dominant position in the Irish convenience market as well as generating strong profits. ADM Londis plc
was acquired in 2015 as it presented a major opportunity to acquire a large independent brand in the convenience market in which the BWG Group operates
and thereby consolidate its position of retail dominance.
4.2 During the course of the 2015 financial year, The SPAR Group Limited acquired the assets of nine retail stores. These acquisitions were funded from available
cash resources. The principal activity of these acquisitions is that of retail trade and all its aspects.
Assets acquired and liabilities assumed at date of acquisition
2015 2014*
ADM SA Retail TIL JV SA Retail
Rmillion Londis plc Stores Total LIMITED Stores Total
Assets 574.9 17.7 592.6 5 356.1 25.0 5 381.1
Property, plant and equipment 4.6 17.7 22.3 1 063.6 19.7 1 083.3
Intangible assets 98.1 98.1 1 456.3 1 456.3
Assets classified as held for sale 144.7 144.7 15.1 15.1
Inventories 37.1 37.1 639.1 5.2 644.3
Trade and other receivables 239.0 239.0 1 885.1 1 885.1
Taxation receivable 6.1 6.1 0.9 0.9
Cash and cash equivalents 45.3 45.3 296.0 0.1 296.1
Liabilities (304.3) - (304.3) (5 436.2) - (5 436.2)
Retirement benefit fund - (266.5) (266.5)
Long-term borrowings (2.0) (2.0) (1 962.6) (1 962.6)
Operating lease payables - (24.4) (24.4)
Trade and other payables (289.0) (289.0) (2 767.6) (2 767.6)
Provisions - (78.2) (78.2)
Bank overdrafts - (158.7) (158.7)
Deferred taxation liability (13.3) (13.3) (178.2) (178.2)
Total identifiable net assets at fair value 270.6 17.7 288.3 (80.1) 25.0 (55.1)
Goodwill arising from acquisition 216.3 117.3 333.6 878.7 10.2 888.9
Purchase consideration transferred 486.9 135.0 621.9 798.6 35.2 833.8
Cash and cash equivalents acquired (45.3) (45.3) (137.3) (0.1) (137.4)
Business acquisition costs 46.0 46.0 -
Contingent consideration (170.6) (170.6) -
Net cash outflow on acquisition 317.0 135.0 452.0 661.3 35.1 696.4
* Reclassified for measurement period adjustment, refer to note 4.5.
The initial accounting for the acquisition of ADM Londis plc is incomplete for the value of the consideration, assets held for sale, inventories, trade and
other receivables, and trade and other payables. This is as a result of costs in the acquisition including an element of deferred consideration, which is
contingent on the values realised for the assets held for sale. The contingent consideration will be limited to the proceeds received on the assets held for
sale and will not impact future earnings. The working capital element of the acquisition is subject to a completion account process, which requires that
the value of the working capital purchased at the date of acquisition be finalised within five months. As this process has not yet been formally concluded this
may result in a change in the fair value of working capital acquired.
4.3 Assets and liabilities at date of disposal
The assets and liabilities disposed of relate to retail stores.
Rmillion 2015 2014
Non-current assets 3.5 10.2
Property, plant and equipment 3.5 10.2
Non-current liabilities (2.4) -
Operating lease liability (2.4)
Goodwill 9.3
Profit on disposal of business 2.1
Proceeds 10.4 12.3
4.4 Impact of subsidiaries on the results of the group
Since acquisition ADM Londis plc has contributed R614.0 million revenue and R11.0 million operating profit to the results of the group. Had all the acquisitions been
consolidated from 1 October 2014, they would have contributed additional revenue of R2 571.9 million, and an operating profit of R62.3 million. The group's total
revenue would have increased to R76 631.9 million, and the group's operating profit would have increased to R2 356.5 million.
Contribution to results for the year
2015 2014
ADM SA Retail TIL JV SA Retail
Rmillion Londis plc Stores Total Limited Stores Total
Revenue 614.0 56.5 670.5 2 795.5 100.3 2 895.8
Trading profit before acquisition costs 11.0 3.4 14.4 65.5 3.6 69.1
4.5 Measurement period adjustment
In the 2014 business combination of TIL JV Limited, no fair value was placed on intangible assets in the BWG Group as the valuation of these assets had not been
completed. The valuation of these assets, namely acquired brands, has subsequently been finalised. The 2014 comparative information has been adjusted retrospectively
in this regard, to increase the value of intangible assets acquired to R1 456.3 million, and to increase the related deferred tax liability by R182.0 million, both
offset by a decrease in goodwill of R1 274.3 million. The effect on the 2014 business combination is as follows:
2014
TIL JV Limited
Measurement
As originally period Restated
Rmillion reported adjustment amount
Assets 3 903.6 1 452.5 5 356.1
Property, plant and equipment 1 063.6 1 063.6
Intangible assets 1 456.3 1 456.3
Deferred taxation assets 3.8 (3.8) -
Assets classified as held for sale 15.1 15.1
Inventories 639.1 639.1
Trade and other receivables 1 885.1 1 885.1
Taxation receivable 0.9 0.9
Cash and cash equivalents 296.0 296.0
Liabilities (5 258.0) (178.2) (5 436.2)
Retirement benefit fund (266.5) (266.5)
Long-term borrowings (1 962.6) (1 962.6)
Operating lease payables (24.4) (24.4)
Trade and other payables (2 767.6) (2 767.6)
Provisions (78.2) (78.2)
Bank overdraft (158.7) (158.7)
Deferred taxation liability (178.2) (178.2)
Total identifiable net assets at fair value (1 354.4) 1 274.3 (80.1)
Goodwill arising from acquisition 2 153.0 (1 274.3) 878.7
Purchase consideration transferred 798.6 - 798.6
Cash and cash equivalents acquired (137.3) (137.3)
Net cash outflow on acquisition 661.3 - 661.3
Indefinite useful life intangible assets represent acquired brands in the BWG Group. The acquired brands are established trademarks in the retail environment in
Ireland. History indicates that competitor movements had no significant impact on the sales generated by these brands. On this basis, in addition to future prospects,
management considered that the brands have indefinite useful lives. The recoverable amount of the BWG brands has been determined based on an excess
earnings calculation.
4.6 Fair value of financial instruments
Fair value hierarchy
The group's financial instruments carried at fair value are classified into three categories defined as follows:
Level 1 financial instruments are those that are valued using unadjusted quoted prices in active markets for identical financial instruments. These instruments
consist of the forward exchange contracts.
Level 2 financial instruments are those valued using techniques based primarily on observable market data. Instruments in this category are valued using quoted prices
for similar instruments or identical instruments in markets which are not considered to be active; or valuation techniques where all the inputs that have a
significant effect on the valuation are directly or indirectly based on observable market data. Financial instruments classified as level 2 are mainly comprised of
other equity investments.
Level 3 financial instruments are those valued using techniques that incorporate information other than observable market data.
Instruments in this category have been valued using a valuation technique where at least one input, which could have a significant effect on the instrument's
valuation, is not based on observable market data.
The following table shows a reconciliation of the opening and closing balances of level 3 financial instruments carried at fair value:
Financial liabilities carried at fair value
Rmillion 2015 2014
Balance at the beginning of the year 548.9 -
Initial recognition direct in equity 545.7
Finance costs recognised in profit or loss 45.9 6.7
Net exchange differences arising during the period 62.2 (3.5)
Fair value adjustments 72.8
Closing value of financial liability 729.8 548.9
Level 3 sensitivity information:
Key inputs used in the valuation of the financial liability include the assumed future profit targets and the discount rates applied. The assumed profitability was
based on historical performances but adjusted for expected growth.
The following additional factors were applied in calculating the financial liability at 30 September 2015:
Risk free rate of 8.15% (2014: 7.46%) based on R208 bonds.
Closing rand/euro exchange rate of 15.53 (2014: 14.26).
The following table shows how the fair value of the level 3 financial liabilities would change in relation to the interest rate if the interest rate increased or
decreased by 0.5%
2015
Discount rate Sensitivity Liability
Financial instruments Valuation technique % % Rmillion
Financial liability Income approach 8.15% 0.5% (17.5)
Financial liability Income approach 8.15% (0.5%) 18.0
2014
Discount rate Sensitivity Liability
Financial instruments Valuation technique % % Rmillion
Financial liability Income approach 7.46% 0.5% (15.9)
Financial liability Income approach 7.46% (0.5%) 16.4
For a 10% weakening of the rand against the euro, there would be an equal and opposite impact on profit before tax, based on the Irish profitability impact on South
Africa.
Rmillion Sensitivity % 2015 2014
Profit before taxation 10% 5.1 4.5
Profit before taxation (10%) (5.1) (4.5)
5. GOODWILL AND INTANGIBLE ASSETS
Rmillion 2015 2014
Goodwill
Opening balance of goodwill 1 270.9 387.6
Impairment (11.6) (5.6)
Goodwill derecognised on disposal of business (9.2)
Reclassified as held for sale (16.9)
Business combination 333.6 2 163.2
Measurement period adjustment (1 456.3)
Deferred tax relating to measurement period adjustment 182.0
Foreign exchange translation 27.9
Closing balance of goodwill 1 594.7 1 270.9
Analysed as follows:
Cost 1 604.7 1 281.5
Accumulated impairment (10.0) (10.6)
Intangible assets
Opening balance of intangible assets 1 455.1
Measurement period adjustment 1 456.3
Business Combination 98.1
Foreign exchange translation 133.6 (1.2)
Closing balance of intangible assets 1 686.8 1 455.1
Analysed as follows:
Cost 1 686.8 1 455.1
Total goodwill and intangible assets 3 281.5 2 726.0
Analysed as follows:
Cost 3 291.5 2 736.6
Accumulated impairment (10.0) (10.6)
Goodwill and indefinite useful life intangible assets are not amortised but tested for impairment annually.
Refer to note 4 for details on new business combinations during the year
6. NORMALISED HEADLINE EARNINGS
Rmillion 2015 2014
Headline earnings 1 446.3 1 351.3
Adjusted for exceptional items:
Fair value adjustment to financial liability 72.8
Business acquisition costs 46.0
Foreign exchange gains and losses on financial liability 62.2 (3.5)
Normalised headline earnings 1 627.3 1 347.8
Number of shares
Weighted average number of ordinary shares (net of treasury
shares) for the purposes of earnings per share ('000) 173 116 172 829
7. EVENTS AFTER THE REPORTING DATE
No material events have occurred subsequent to 30 September 2015 that may have an impact on the group's reported financial position at this date.
COMMENTARY
The SPAR Group had a milestone year in 2015, as the first full year of operating in a global context. The board and management recognised at the time of the Ireland
acquisition that the inclusion of the BWG Group was a fundamental shift for SPAR. It has increased SPAR's exposure to global thinking in different market
environments, allowing us to gain and share knowledge. That being said, the change has not affected our commitment to the values and relationships that are the
bedrock of the business.
Overall turnover grew by 34.5% to R73.3 billion (2014: R54.5 billion) and operating profit increased by 23.0% to R2.3 billion (2014: R1.9 billion), to which the
Ireland operations contributed 23% and 13% respectively. Excluding the BWG contribution, SPAR grew operating profit by 10.4% on the prior year, thereby delivering
real growth.
New store openings in South Africa were in line with the prior year, bringing the domestic footprint to 1 935 stores (2014: 1 864 stores) - growth was primarily
driven by organic accretion among existing businesses. BWG grew its store footprint in Ireland and the South West of England from 1 151 to 1 332, of which 145 are
attributable to the acquisition of ADM Londis plc. Together with the BWG Group, our total retail footprint increased to 3 267 stores.
FINANCIAL OVERVIEW
Summary segmental analysis
SPAR BWG Group SPAR Group
Rmillion (Southern Africa) (Ireland) Limited
Income statement
Turnover 56 367.6 16 891.2 73 258.8
Gross profit 4 597.4 1 769.2 6 366.6
Operating profit 1 987.8 306.4 2 294.2
Profit before taxation 1 776.1 182.1 1 958.2
Financial position
Property, plant and equipment 1 944.1 1 277.2 3 221.3
Goodwill and intangible assets 471.8 2 809.7 3 281.5
Current assets 8 675.4 3 689.2 12 364.6
Current liabilities 8 055.9 4 076.7 12 132.6
Long-term liabilities 981.8 2 886.4 3 868.2
Reported group turnover increased by 34.5% to R73.3 billion (2014: R54.5 billion). The Southern African operations grew by 9.0% to R56.4 billion and the remaining
R16.9 billion was contributed by BWG Group (Ireland), which was included for the full 12 month period.
The group's gross margin maintained a positive trend, increasing to 8.7% (2014: 8.3%), also benefiting from the full year contribution of BWG, whose customer base in
the convenience sector typically commands higher wholesale gross margins. SPAR Southern Africa's gross margin was marginally higher at 8.2%, reflecting the increasing
ex-warehouse contribution.
Operating profit rose 23.0% to R2.3 billion, with the Southern African operations showing a strong 10.4% increase to R2.0 billion. The Irish business reported
operating profit of R306 million for the year.
SPAR's headline earnings grew 7.0% to R1.4 billion with reported headline earnings per share growth of 6.9% to 835.5 cents. The calculation of headline earnings was
negatively impacted by the following exceptional items:
- The annual measurement of the financial liability relating to the future buyout of the minority interests in BWG amounted to R108.1 million in the period.
This comprised a finance cost adjustment of R45.9 million and an unrealised foreign exchange loss on translation of the financial liability of R62.2 million, arising
from the significant rand-euro depreciation over the year.
- The financial liability was also revised to recognise the inclusion of the additional profit contribution arising from the Londis business, resulting in a
further exceptional charge of R72.8 million.
- Once-off costs arising from the acquisition and integration of the Londis business amounted to R46.0 million. This comprised transaction related expenses,
costs associated with the closure of the warehousing facility and retrenchments costs that were recognised in the year under review.
Adjusting for these exceptional items, but excluding the finance cost component, results in a normalised headline earnings of R1.6 billion, representing a growth of
20.7%. This translates into normalised headline earnings per share of 940 cents, up 20.5%.
The board declared a final dividend of 393 cents per share (2014: 345 cents per share), resulting in a total annual dividend of 632 cents (2014: 540 cents), up 17.0%.
The stronger operating performance as well as a continued focus on working capital management saw a substantial improvement in cash generated from operations, which
increased to R3.0 billion (2014: R1.8 billion). Capital expenditure rose to R525.5 million (2014: R221.4 million), as the group completed a number of property related
projects including the expansion of the KwaZulu-Natal perishable facility, the introduction of a chilled facility in the Kilcarbery distribution centre in Dublin and
the commencement of the slow-moving goods warehouse at the South Rand distribution centre. The group also concluded the acquisition of ADM Londis plc, a large retail
chain in Ireland supporting some 145 branded retailers.
OPERATIONAL OVERVIEW
SOUTHERN AFRICA
Against the backdrop of continued pressure on consumer spending, SPAR stores reported a pleasing performance with retail turnover growth of 7.6% to R67.9 billion
(2014: R63.1 billion) while wholesale turnover grew 8.0% to R45.6 billion (2014: R42.2 billion), demonstrating that SPAR's merchandising, logistics and distribution
capability continues to be valued by independent retailers and their customers alike. Internally measured inflation was recorded at 5.2% for the period, with the
individual dry grocery category rising 4.2%. SPAR house brands gained further traction, increasing by 13.4% to more than R6.5 billion in sales as cash strapped
consumers increasingly recognise the quality and value provided by SPAR's private label products. Existing stores delivered strong like-for-like retail turnover
growth of 6.2%, as the group maintained its organic growth focus, supporting the revamp and modernisation of a further 159 stores during the year. SPAR store formats
and value proposition continue to attract strong interest from independent retailers, as reflected by the 26 new stores opening during the year, resulting in a 3.2%
increase in retail space and bringing the total store number to 885 SPAR stores at year-end.
Underpinned by its broad geographic presence and diverse product offering, and supported by its strong and vibrant marketing campaigns during the year, TOPS extended
its double digit growth trend, with retail turnover growth of 17.3% to R7.8 billion (2014: 6.6 billion), while same store growth measured 13.5%. Wholesale turnover
increased by 14.3% with total sales reaching R4.6 billion. The number of TOPS stores grew to 652, including 39 new store openings in 2015.
Combined food and liquor retail sales, which allows for a better industry comparison, increased by 8.6% and 6.9% on a like-for-like store basis.
Build it maintained its strong first half performance despite continued pressure on consumer spending with retail turnover growth of 14.0% to R10.4 billion while
wholesale turnover increased 12.4% to R6.2 billion. Build it's growth was strongly supported by 39% growth in neighbouring countries. On a like-for-like basis, same
stores reported a 9% improvement in retail turnover. Build it house brand imports continued to gain acceptance with total sales growing to R259.9 million, up 9.2% on
the prior year. Build it entered the DIY market with the opening of the first branded TrenDIY store late in the year.
Volumes handled by SPAR's seven distribution centres rose 3.9% with 219.0 million cases despatched (2014: 210.8 million cases). The KwaZulu-Natal perishable warehouse
extension is now in operation, having been completed on schedule in September 2015, and within the budget cost of R95 million. Installation of the slow-moving goods
facility at the South Rand distribution centre is well underway and on track to become operational during the first quarter of the 2016 financial year. SPAR's
projected capital expenditure budget for the year ahead, amounting to R462 million, includes a significant extension of the Western Cape perishables facility, the
purchase of additional land to expand the Eastern Cape distribution centre and the completion of the slow-moving goods installation at South Rand. The previously
reported planned new facility in the Lanseria area has been frustrated by administrative delays and the group has commenced negotiations on an alternative site. This
development project is expected to commence during 2017. The group will continue investing in its information technology platforms and R70 million has been allocated
for new projects in 2016.
IRELAND
SPAR Ireland continues to perform on plan with sales of EUR1.2 billion in 2015, showing euro-denominated growth of 6.7% over the full prior year. This was positively
impacted by the recognition of the Londis business for three months of the year. The comparable turnover growth measure would be an increase of 2.6%, which is a very
satisfying result in light of continuing deflation in foodstuffs measured at (2.1%). Profit after tax was negatively impacted by once-off, non-operational costs
relating to the acquisition and integration of the Londis wholesale business. Significant future synergies have been identified and the inclusion of the Londis
retailers into BWG's operating infrastructure is well on track. This transaction further extended BWG's leadership positioning in the convenience sector and increased
the overall store footprint in convenience and forecourt stores by 145 stores throughout Ireland.
The new Kilcarbery chilled facility was commissioned as planned in May 2015. Volumes through the facility are steadily growing and further productivity gains are
anticipated as the product range through this facility increases.
PROSPECTS
Although the trading environment in Southern Africa is expected to remain challenging, SPAR's brands are well positioned to continue serving our diverse customers.
Furthermore, the prospects in Ireland are improving as economic recovery and growth are set to continue. The group is therefore well positioned to extend its position
in both geographic segments.
The focus areas in South Africa for the year ahead include the opening of new stores across all brands, as well as supporting organic growth through further store
refurbishments. The group will continue to invest in its warehousing and distribution capacity to support growth, with the slow-moving goods warehouse to be completed
at South Rand, as well as commencing significant expansions to both of the Cape distribution facilities.
Among BWG's priorities for the year ahead include completing the full integration of Londis retailers to unlock the inherent distribution efficiencies and synergies.
Its brands remain well positioned to continue benefiting from an improving Irish economy.
SPAR's business model, which is grounded in our voluntary trading relationship with our network of independent retailers, remains robust. The board supports
management's renewed strategic focus on extracting optimal value from the model to the mutual benefit of the group and our stakeholders.
Mike Hankinson Graham O' Connor
Chairman Chief Executive Officer
AUDIT OPINION
The auditors, Deloitte & Touche, have issued their opinion on the consolidated financial statements for the year ended 30 September 2015. The audit was conducted in
accordance with International Standards on Auditing. They have issued an unmodified opinion. A copy of the auditor's report together with a copy of the audited
consolidated financial statements is available for inspection at the company's registered office. These summarised consolidated financial statements have been derived
from the consolidated financial statements and are consistent in all material respects with the consolidated financial statements. These summarised consolidated
financial statements have been audited by the company's auditors who have issued an unmodified opinion. The auditor's report does not necessarily report on all of
the information contained in this announcement. Shareholders are advised that in order to obtain a full understanding of the nature of the auditor's engagement they
should obtain a copy of that report together with the accompanying financial information from the company's registered office. Any reference to future
financial information included in this announcement has not been reviewed or reported on by the auditors.
DECLARATION OF ORDINARY DIVIDEND
Notice is hereby given that a final gross cash dividend of 393 cents per share has been declared by the board in respect of the year ended 30 September 2015.
The dividend has been declared out of income reserves.
This brings the total gross dividend for the year to 632 cents (2014: 540 cents) per ordinary share.
The salient dates for the payment of the final dividend are detailed below:
Last day to trade cum-dividend Friday, 27 November 2015
Shares to commence trading ex-dividend Monday, 30 November 2015
Record date Friday, 4 December 2015
Payment of dividend Monday, 7 December 2015
Shareholders will not be permitted to dematerialise or rematerialise their share certificates between Monday, 30 November 2015 and Friday, 4 December 2015, both days
inclusive.
In terms of South African taxation legislation effective from 1 April 2012, the following additional information is disclosed:
- The local dividends tax rate is 15%.
- The net local dividend amount is 334.05 cents per share for shareholders liable to pay tax on dividends, and 393 cents per share for shareholders exempt from such
dividend tax.
- The issued share capital of The SPAR Group Limited as at the date of declaration is 173 264 944 ordinary shares.
- The SPAR Group Limited's tax reference number is 9285/168/20/0.
By order of the board
KJ O'Brien
Company Secretary
Pinetown
10 November 2015
DIRECTORATE AND ADMINISTRATION
DIRECTORS: MJ Hankinson* (Chairman), GO O'Connor (Chief Executive Officer), 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
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) 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: 11/11/2015 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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