| Wed 14 Nov 2007, 7:00 | | SPP - The SPAR Group - Audited Results For The Yea |
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SPP
SPP
SPP - The SPAR Group - Audited Results For The Year Ended 30 September 2007 And
Ordinary Dividend Declaration
The SPAR Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1967/001572/06)
ISIN NUMBER: ZAE000058517
JSE CODE: SPP
AUDITED RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2007 AND ORDINARY DIVIDEND
DECLARATION
- OPERATING PROFIT R774.7 million +28.5%
- HEADLINE EARNINGS 312.3 cents per share +30.1%
- FINAL DIVIDEND 112.5 cents per share +50.0%
Condensed Income Statement
Audited Audited
year ended year ended
% September September
Rmillion Change 2007 2006
REVENUE 27.5 21 903.1 17 176.6
Turnover 27.6 21 704.0 17 009.6
Cost of sales (19 926.9) (15 581.3)
Gross profit 1 777.1 1 428.3
Other income 199.1 167.0
Operating expenses (1 201.5) (992.5)
Warehousing and distribution expenses (609.3) (515.5)
Marketing and selling expenses (320.4) (258.2)
Administration and information
technology expenses (271.8) (218.8)
OPERATING PROFIT 28.5 774.7 602.8
Interest received 32.3 21.7
Interest paid (10.3) (6.1)
Share of equity accounted associate (2.0) 0.3
Profit before taxation 28.4 794.7 618.7
Taxation (271.7) (211.1)
PROFIT FOR THE YEAR ATTRIBUTABLE
TO ORDINARY SHAREHOLDERS 28.3 523.0 407.6
EARNINGS PER SHARE
Earnings per share (cents) 30.1 313.0 240.5
Diluted earnings per share (cents) 299.0 231.7
SALIENT STATISTICS
Headline earnings per share (cents) 30.1 312.3 240.0
Diluted headline earnings
per share (cents) 298.4 231.2
Dividend per share (cents) 185.0 123.0
Net asset value per share (cents) 666.9 533.5
Operating profit margin (%) 3.6 3.5
Return on equity (%) 52.3 49.6
HEADLINE EARNINGS RECONCILIATION
Profit for the year attributable
to ordinary shareholders 523.0 407.6
Adjusted for:
Profit on sale of property,
plant and equipment (2.1) (1.2)
Impairment of property, plant
and equipment 0.5 -
Tax effects of adjustments 0.5 0.3
HEADLINE EARNINGS 28.3 521.9 406.7
Condensed Balance Sheet
Audited Audited
September September
Rmillion 2007 2006
ASSETS
NON-CURRENT ASSETS 1 242.5 925.9
Property, plant and equipment 736.2 519.1
Goodwill 245.6 245.6
Investment in associate 3.5 5.5
Finance lease receivables 9.3
Operating lease receivables 115.3 104.7
Loans 114.0 51.0
Other non-current assets 4.1
Deferred taxation asset 14.5
CURRENT ASSETS 3 815.0 2 702.6
Inventories 594.5 449.3
Trade and other receivables 2 677.9 2 146.3
Prepayments 17.8 12.5
Finance lease receivables 2.2
Operating lease receivables 10.3 9.2
Loans 31.1 16.7
Bank balances and cash 389.2
Bank balances - Guilds 64.3 68.6
3 787.3 2 702.6
Non-current assets held for sale 27.7
TOTAL ASSETS 5 057.5 3 628.5
EQUITY AND LIABILITIES
CAPITAL AND RESERVES 1 109.7 892.4
Share capital and premium 13.4 13.4
Treasury shares (154.4) (99.8)
Share based payment reserve 30.2 35.0
Retained earnings 1 220.5 943.8
NON-CURRENT LIABILITIES 169.8 160.5
Deferred taxation liability 6.1
Post retirement medical aid provision 54.8 49.8
Borrowings 0.4
Operating lease payables 115.0 104.2
CURRENT LIABILITIES 3 778.0 2 575.6
Trade and other payables 3 691.9 2 419.9
Borrowings 0.4 37.6
Operating lease payables 10.9 9.7
Provisions 3.5 64.4
Taxation 71.3 16.9
Bank overdrafts 27.1
TOTAL EQUITY AND LIABILITIES 5 057.5 3 628.5
Condensed Cash Flow Statement
Audited Audited
year ended year ended
September September
Rmillion 2007 2006
CASH FLOWS FROM OPERATING ACTIVITIES 924.7 369.0
Cash generated from operations 1 387.2 730.8
Interest received 32.0 21.4
Interest paid (10.3) (6.1)
Taxation paid (237.9) (186.4)
Dividends paid (246.3) (190.7)
CASH FLOWS FROM INVESTING ACTIVITIES (393.8) (237.5)
Investment to maintain operations (20.7) (37.3)
- Replacement of property, plant and equipment (38.7) (39.7)
- Proceeds on disposal of property,
plant and equipment 18.0 2.4
Investment to expand operations (275.9) (150.1)
Net movement on loans and investments (97.2) (50.1)
CASH FLOWS FROM FINANCING ACTIVITIES (118.1) (93.9)
Proceeds from issue of
share capital and premium 8.0
Proceeds from the exercise of share options 11.6
Share repurchases (92.1) (99.8)
Repayment of long-term borrowings (37.6) (2.1)
NET INCREASE IN CASH AND CASH EQUIVALENTS 412.8 37.6
NET CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 41.5 0.2
Effects of exchange rate changes
on the balance of cash
held in foreign currencies (0.8) 3.7
NET CASH AND CASH EQUIVALENTS AT END OF YEAR 453.5 41.5
Notes to the Financial Statements
1. BASIS OF PRESENTATION AND COMPLIANCE WITH INTERNATIONAL FINANCIAL REPORTING
STANDARDS
The group financial results, from which these condensed financial statements
were derived, are prepared in accordance with International Financial Reporting
Standards and have been prepared on the historical cost basis except for the
revaluation of financial instruments, the valuation of share based payments and
the post retirement medical obligation. The principal accounting policies
adopted are consistent with those of the previous year, except for the adoption
of IFRIC 4 and SAICA Circular 8/2007 in the current year, both of which have not
had a material impact on the financial statements. These condensed financial
statements have been prepared in terms of IAS 34 - Interim Financial Reporting.
Audited Audited
year ended year ended
September September
2007 2006
R million R million
2. NON-CURRENT ASSETS HELD FOR SALE
Property, plant and equipment held for sale 27.7
As a result of growth in business, the group
has concluded the sale of its Montague Gardens,
Cape Town distribution centre, effective
2 October 2007. Distribution centre operations
will be relocated to a new, larger facility
presently being constructed in Philippi, Cape
Town. Operations are expected to commence from the
new distribution centre during the second quarter
of 2008, with the present facility being vacated
by 31 May 2008.
No impairment was recognised on the reclassification of the property.
3. SHARE CAPITAL AND PREMIUM
Authorised
250 000 000 (2006: 250 000 000) ordinary
shares of 0.06 cent
(2006: 0.06 cent) each 0.2 0.2
Issued
169 940 035 (2006: 169 935 935) ordinary
shares of 0.06 cent
(2006: 0.06 cent) each 0.1 0.1
Share premium account 13.3 13.3
Balance at beginning of year 13.3 5.3
Shares issued during the year 8.0
Total share capital and premium 13.4 13.4
Pursuant to the exercising of options,
4 100 ordinary shares (2006:
675 900) were issued during the year ended
30 September 2007, thereby increasing the issued
share capital to R102 575 (2006: R101 961)
consisting of 169 940 035 ordinary shares
(2006: 169 935 935).
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 167 075 611 (2006: 169 447 986).
Diluted earnings and headline earnings per share
were based on a weighted average number of
ordinary shares (net of treasury shares) of
174 862 368 (2006: 175 874 772).
4. CONTINGENT LIABILITIES
The company has guaranteed the finance
obligations of certain SPAR
retailer members to the amount of 123.5 164.8
5. OPERATING LEASES
The operating lease receivables and payables
relating to sub-let properties have both been
restated by R91.9 million due to an error at
the initial measurement date. This has had
no effect on opening equity, or on current
and comparative earnings.
Operating lease costs charged against
operating profit
Immovable property 6.2 1.5
- lease rentals 138.0 103.5
- sub-lease recoveries (131.8) (102.0)
Plant, equipment and vehicles 12.9 13.4
Operating lease commitments
Future minimum lease payments under
non-cancellable operating leases: 1 542.3 1 297.6
- land and buildings 1 540.0 1 295.6
- other 2.3 2.0
The future minimum sub-lease recoveries under
non-cancellable property leases: (1 524.3) (1 277.6)
Net commitments 18.0 20.0
6. CAPITAL COMMITMENTS
Contracted 281.8 95.0
Approved but not contracted 192.5 206.7
474.3 301.7
7. SEGMENTAL REPORTING
The group operates its business from six distribution centres situated
throughout South Africa. The distribution centres individually supply goods and
services of a similar nature to the group`s voluntary trading members. The
directors are of the opinion that the operations of the individual distribution
centres are substantially similar to one another and that the risks and returns
of these distribution centres are likewise similar. As a consequence thereof,
the business of the group is considered to be a single geographic segment. TOPS
at SPAR and Build it, although constituting distinct businesses at retail, do
not satisfy the thresholds of significance for disclosure as separate reportable
segments of the group.
8. POST BALANCE SHEET EVENTS
No material events have occurred subsequent to 30 September 2007 which may have
an impact on the group`s reported financial position at this date.
The group has concluded the sale of its Montague Gardens, Cape Town
distribution centre effective 2 October 2007.
Condensed Statement of Changes in Equity
Share based
Share capital Treasury payment
Rmillion and premium shares reserve
Total capital and reserves
at 30 September 2005 5.4 18.5
Profit for 2006
Recognition of share based
payments 16.5
Shares issued 8.0
Share repurchases (99.8)
Dividends declared
Total capital and reserves
at 30 September 2006 13.4 (99.8) 35.0
Profit for 2007
Recognition of share based
payments 21.1
Take-up of share options 37.5 (25.9)
Share repurchases (92.1)
Dividends declared
Total capital and reserves
at 30 September 2007 13.4 (154.4) 30.2
Attributable
Retained to ordinary
Rmillion earnings shareholders
Total capital and reserves
at 30 September 2005 726.9 750.8
Profit for 2006 407.6 407.6
Recognition of share based payments 16.5
Shares issued 8.0
Share repurchases (99.8)
Dividends declared (190.7) (190.7)
Total capital and reserves
at 30 September 2006 943.8 892.4
Profit for 2007 523.0 523.0
Recognition of share based payments 21.1
Take-up of share options 11.6
Share repurchases (92.1)
Dividends declared (246.3) (246.3)
Total capital and reserves
at 30 September 2007 1 220.5 1 109.7
Review of Trading Results
SPAR produced a solid set of trading results on the back of an excellent
performance at retail, aggressive marketing, strong consumer spending and higher
inflation. The group achieved earnings of R523 million, an increase of 28.3% on
2006. Headline earnings per share of 312.3 cents, increased 30.1%. Cash
generation remained strong, notwithstanding the increased dividend and capital
expenditure and share buyback programmes.
Turnover up 27.6% reflected the group`s effort to drive growth and the strong
trading environment which existed during the year under review. The group`s
liquor and Build it sales performances were particularly pleasing, showing
growths of 48.2% and 37.3%, respectively. Perishable product sales also showed
above average growth. Internal inflation of between 7% - 8% meant that the group
achieved substantial real growth during 2007.
In spite of a competitive environment, category gross margins were maintained,
but as anticipated, the actual gross margin declined marginally to 8.2% from
8.4% in 2006. The decline in the margin was again caused by the change in the
sales mix. Gross profit at R1.78 billion increased 24.4%.
Warehouse and distribution expenditure, up 18.2%, increased at a rate lower than
the growth in ex warehouse turnover. Efficiencies from the implementation of new
warehouse technologies and improved fleet management were recorded.
Marketing costs increased 24.1% driven by increased television and radio
advertising, additional promotional campaigns, SPAR brand product research and
development costs and the recently announced sponsorship of the AmaZulu football
club.
Administration and information technology expenditure rose 24.2%. This increase
was driven, in the main, by the investment in warehouse technologies, the
installation of a virtual private network and new retail back office software.
Depreciation at R53.4 million increased from R39.7 million in 2006.
Net interest earned of R22.0 million (2006: R15.6 million) reflected the
increased contribution received as a result of the group`s additional financial
assistance to retailers. Loans were primarily made for store purchase purposes.
Following upon the continued depreciation of the Zimbabwean dollar, the group
provided for a decrease of R2.0 million in the value of its 35% investment in
SPAR Harare (Pvt) Limited. The group`s net investment in its Zimbabwean
associate stands at R3.5 million. Notwithstanding difficult trading conditions
in Zimbabwe, SPAR Harare traded profitably.
The effective rate of taxation, inclusive of Secondary Tax on Companies, at
34.2% remained unchanged from that of 2006.
The group invested R314.6 million on expansionary and replacement capital
expenditure and provided additional loan facilities to retailers of R77.6
million. The group continued to repurchase its shares. The cost of share
purchases during the year was R92.1 million. Proceeds from the exercising of
share options amounted to R11.6 million.
At year-end the group had cash holdings of R453.5 million (2006: R41.5 million)
on hand. Creditor finance remained linked to supplier trading terms and the
substantial increase in creditor finance was due to the September 2007 closing
cutoff date.
The group held good on its commitment to reduce the dividend cover, with cover
being reduced to 1.7 from 1.95 (2006). A final dividend of 112.5 cents per share
was declared. The annual dividend of 185 cents per share represented a 50.4%
increase over the 2006 dividend of 123 cents per share.
RETAIL STORES
An extremely active year was experienced at retail. The group opened a further
32 SPAR stores and 14 stores changed formats. The group supplied 810 SPAR stores
at year-end (SUPERSPAR 172, SPAR 477, KWIKSPAR 161). The ongoing programme of
upgrading stores resulted in 129 stores undertaking major revamps. Retail
trading space grew an impressive 7.2% to 780 294 m2. Sales at retail increased
21% and topped R29 billion. The group again gained market share and closed the
year with a national market share of 26.9%.
Build it opened 32 new outlets and TOPS 73. At year-end the group serviced 243
Build it and 287 TOPS stores, respectively.
DISTRIBUTION
The strong retail performance resulted in significant volume increases flowing
through the group`s facilities. The group`s six distribution centres handled
approximately 137 million cases during the year, up 14% on 2006. Notwithstanding
the considerable increase in activity, all distribution centres showed improved
efficiencies. Whilst there has been a quantum increase in the number of cases
handled, service levels to retail outlets remained satisfactory.
Pending completion of the group`s new Western Cape distribution centre and the
extension to the South Rand facility, the group will continue to make use of
temporary warehouse storage facilities.
FACILITIES
Construction of the group`s new 33 550 m2 Western Cape distribution centre is
progressing well with trading from this facility expected to commence in April
2008. This new R300 million facility will give SPAR Western Cape the ability to
consolidate its present operations onto a single site and to grow its market
share.
Property adjoining the group`s South Rand distribution centre has been acquired
and construction of a 23 500 m2 dry goods extension to the existing facility is
underway. Once complete in November 2008, the existing perishable facility will
be expanded from approximately 7 000 m2 to 12 500 m2. Estimated cost of the
total project is R265 million.
The group has acquired a 42 000 m2 site in Mount Edgecombe and planning is at an
advanced stage for the construction thereon of a 13 000 m2 dedicated perishable
facility. It is expected that trading from this new facility will commence early
in 2009, whereafter the existing perishable facility within the present KwaZulu-
Natal distribution centre will be converted to additional dry goods space.
PROSPECTS
The group expects the current favourable trading environment to continue in
2008, albeit slightly lower levels, caused by higher interest rates and an
anticipated slowdown in consumer spending. Planned SPAR, TOPS and BUILD it store
openings together with driving the growth of existing stores will translate into
positive volume growths.
The group is confident that it will be able to maintain category margins,
although a change in the sales mix and the expansion into emerging markets may
affect margins slightly. Warehouse efficiencies arising from recently
implemented warehouse technologies will continue to accrue, however increased
information technology expenditure will be incurred. The capital expenditure
programme will result in depreciation running at higher levels and the
relocation by the group`s Western Cape operation to its new distribution centre
will result in an increased level of costs at that operation. Additional
operating expenditure will be incurred by the South Rand distribution centre as
the operation copes with the inconvenience of the facility expansion.
Cash generation during 2008 will remain strong and will accommodate the group`s
capital expansion requirements as well as providing for dividends and share
buybacks. Net capital expenditure for 2008 (after receipt of the proceeds from
the sale of the Montague Gardens property) is expected to be R400 million.
DIVIDEND
In line with the group announcement to decrease the dividend cover, a final
dividend of 112.5 cents per share has been declared.
Mike Hankinson Wayne Hook
Chairman Chief Executive
13 November 2007
AUDIT OPINION
The auditors, Deloitte & Touche, have issued their opinion on the group`s
financial statements for the year ended 30 September 2007. The audit was
conducted in accordance with International Standards on Auditing. They have
issued an unmodified audit opinion. A copy of their audit report is available
for inspection at the company`s registered office. These condensed financial
statements have been derived from the group financial statements and are
consistent in all material respects, with the group financial statements.
DECLARATION OF ORDINARY DIVIDEND
Notice is hereby given that a final dividend of 112.5 cents per share has been
declared in respect of the year ended 30 September 2007.
The salient dates for the payment of the final dividend are detailed below:
Last day to trade cum-dividend Friday, 30 November 2007
Shares to commence trading ex-dividend Monday, 3 December 2007
Record date Friday, 7 December 2007
Payment of dividend Monday, 10 December 2007
Shareholders will not be permitted to dematerialise or rematerialise their
share certificates between Monday, 3 December 2007 and Friday,
7 December 2007, both days inclusive.
By order of the board
KJ O`Brien Pinetown
Secretary 13 November 2007
DIRECTORATE AND ADMINISTRATION
DIRECTORS: MJ Hankinson* (Chairman), WA Hook (Chief Executive), RW Coe,
DB Gibbon*, PK Hughes*, RJ Hutchison*, MP Madi*, HK Mehta*, P Mnganga*,
R Venter. *Non-executive
COMPANY SECRETARY: KJ O`Brien
ISIN: ZAE000058517 JSE 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: Rand Merchant Bank, PO Box 786273, Sandton, 2146
BANKER: First National Bank, PO Box 4130, Umhlanga Rocks, 4320
ATTORNEYS: Garlicke & Bousfield, PO Box 1219, Umhlanga Rocks, 4320
WEBSITE: www.spar.co.za
Date: 14/11/2007 07:00:05 Produced by the JSE SENS Department.
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