| Wed 18 Mar 2009, 7:30 | | SPG - Super Group Limited - Unaudited condensed interim financial statements for |
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SPG
SPG
SPG - Super Group Limited - Unaudited condensed interim financial statements for
the six months ended 31 December 2008 and cautionary announcement
Super Group Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1943/016107/06)
ISIN number: ZAE000011334)
Share code: SPG
("Super Group" or "the Group")
Unaudited condensed interim financial statements for the six months ended 31
December 2008 and cautionary announcement
Interim financial statements
- HEPS from continuing operations 15,5 cents
- Debt reduced by R687 million from 30 June 2008
- Trading gearing reduced to 51% from 72% at 30 June 2008
- Cash generated from operations R723 million
- Cash and cash equivalents R452 million
- NTAV per share 128,9 cents
Super Group is a broad-based supply chain management business, operating
predominantly throughout Africa and Australia. Our primary operating activities
include supply chain management, retail supply chain management, fleet
management and automotive businesses.
Introduction
Super Group, in discussion with its stakeholders and lenders, is in the process
of restructuring its existing debt and recapitalising the Group to the amount of
R1 billion. This will enable the Group to realign short and long term debt with
the support of stakeholders and principal funders. The refinancing agreements
are as a result of the credit re-rating by FitchRatings at the end of 2008 which
affected certain of the Group`s term borrowings.
As part of the process, Super Group appointed RMB Corporate Finance to advise
the Group on various strategic options available, which would allow for a
normalisation of the Group`s liquidity and credit funding position.
The recapitalisation will take the form of a rights offer of ordinary shares at
45 cents per share and will be underwritten by Allan Gray and a number of Super
Group`s lenders. In addition, lenders have agreed to restructure their debt
facilities to allow Super Group to continue its operations without undue
liquidity constraints. The agreement includes lenders agreeing to an
appropriate terming out of their existing facilities and providing additional
liquidity facilities to Super Group.
It is anticipated that the recapitalisation and restructuring of debt facilities
will be completed before Super Group`s 30 June 2009 year end.
The Group`s continuing operations are profitable and the cash flow outlook is
positive with significant annuity based or contract-type cash flow. The majority
of the businesses are the market leaders in their areas of operation. Super
Group is confident that the actions taken and strategies being implemented will
enable it to emerge a stronger and refocused Group with a new financial
foundation.
Overview of results
Super Group achieved acceptable operating results from its continuing businesses
during the most challenging six months in the 22 year history of the Group. The
financial results reflect that the Group`s continuing operations remain
profitable and cash generative. Trading was adversely affected by the impact of
the depressed vehicle market, slowing consumer spend and the global credit
crisis. Operating profit from continuing operations of R422 million was 7% lower
than the comparative period and trading margins declined from 8.0% to 7.5%.
Continuing operations generated headline earnings per share of 15.5 cents.
Loss per share and headline loss per share of 86.7 cents and 15.6 cents
respectively is impacted by the trading loss of R130 million in discontinued
operations and the fair value provision raised on discontinuance of R294
million. The Group generated cash from operations of R723 million, a 130%
increase on the comparable period in 2008 and reduced net debt by R687 million
in challenging conditions.
Supply Chain Management delivered revenue and trading profit growth of 10% and
13% respectively. This was mainly as a result of increased volumes and margin
improvements in the African Transport business. Retail Supply Chain revenue and
trading profit declined by 5% and 30% respectively. AutoZone performed ahead of
expectation but Mica was particularly affected by declining consumer spending.
Deteriorating industry conditions resulted in Dealerships` revenue declining by
21% and a 71% reduction in trading profit. Defined action plans have been
implemented in both Mica and Dealerships to improve profitability in the current
macro-economic environment.
The cumulative 500-basis-points escalation in interest rates over the past two
and a half years and continuing investment in the full maintenance lease ("FML")
assets supporting the City of Johannesburg and Eastern Cape Provincial
Government fleet outsourcing contracts have contributed to an increase in net
finance charges paid. The Group does not take any interest rate risk on these
contracts and finance charges are passed through directly to the customer.
Included in finance charges is a R49 million non-cash fair value provision
related to mark-to-market adjustment on interest rate swaps.
The Group`s tax rate from continuing operations has reduced from 20% to 10% as a
result of the increased relative contribution of foreign earnings in lower tax
jurisdictions.
The board of directors resolved to classify the commercial vehicle and equipment
businesses as a disposal group and accordingly all the assets and related
liabilities have been classified as discontinued operations. At 31 December
2008, a fair value provision on discontinuance of R294 million has been raised
to reduce the carrying value of the assets to estimated fair value taking into
account current market conditions.
Continuing operations generated cash after working capital of R600 million,
resulting in a cash conversion ratio of 92%. A strong focus on working capital
management resulted in a reduction in working capital and a cash release of R262
million.
There was a reduction in capital expenditure during the period under review. In
addition, an amount of R125 million was received from the disposal of non-core
properties. Net capital expenditure (including FML) incurred of R180 million
related primarily to investments in supply chain transport fleets, new vehicles
for the City of Johannesburg FML contract and FML vehicles in the Australian
fleet management business.
The Group reduced net debt by R687 million to R3 billion at 31 December 2008.
Included in net debt is R2 billion relating to FML and Australian non-recourse
borrowings. The reduction in net debt is mainly due to the proceeds from the
rights issue of R510 million, property disposals and increased cash generation
from operations which has been utilised to settle short term debt. At 31
December 2008 the Group had gearing, after excluding full maintenance and non-
recourse debt, of 51% which is an improvement from 72% at 30 June 2008.
Divisional overview
Supply Chain Management - The South African operations produced nominal revenue
growth in an environment where volumes across FMCG, automotive and truck rental
sectors are reducing. FMCG operations continued to experience difficult trading
conditions in a highly competitive segment. The automotive supply chain business
renewed a number of existing contracts and secured additional new business. The
convenience supply chain operations showed pleasing sales growth and started to
benefit from economies of scale. Trading margins improved to 14.2% as a result
of the decision not to renew loss making contracts and consulting fees earned on
foreign supply contracts.
The African Transport operations produced solid growth. The business benefited
from strong US dollar organic revenue and trading profit growth particularly in
commodity exports and fuel and food products. The improvement in trading margins
from 9.1% to 11.9% was driven by operational efficiencies from the fleet
replacement and expansion programme.
Retail Supply Chain - AutoZone achieved revenue and trading profit growth of 4%
and 18% respectively. Margins have improved on the back of a cost reduction
programme and a renewed procurement and exclusive brand strategy. The division
has implemented an inventory deployment programme which is showing signs of
sustained working capital investment reductions.
Mica`s performance was disappointing. Reduced disposable income of consumers,
enforcement of brand standards, financial compliance by members and changes to
its dropshipment strategy resulted in revenue declining 19%. Once-off costs of
R11 million relating to store closure costs and store set-up costs resulted in a
break even trading profit. An additional 9 Mica member stores were opened and 11
stores terminated translating into 174 stores at December 2008.
Fleet Solutions - FleetAfrica increased revenue by 15% to R516 million. Vehicles
under management increased 8% to 60 200 vehicles. Trading profits decreased
marginally as a result of increased maintenance and operating costs and higher
depreciation charges in light of reducing residual values in a weakening used
vehicle market.
The Australian fleet management business performed in line with expectations
growing revenue by 45% and trading profit by 24%. Vehicles under management
increased 28% to 71 100 vehicles. The business has successfully bedded down the
acquisition of the Commercial Fleet business. Trading margins declined from
16.9% to 14.5% as a result of lower residual values, ongoing pressure on
management fees and reduced maintenance margins.
Automotive - Dealerships` performance was disappointing. Revenue decreased by
21% and trading profit reduced by 71%. The significant decline in profitability
is as a result of the decline in industry volumes compounded by increased
competition especially in Gauteng where the business operates the majority of
its dealerships. The division is realigning cost structures to compensate for
further volume reductions. During the period the division exited one
underperforming dealership and opened a Toyota flagship dealership in the south
of Johannesburg.
Super Group Industrial Product`s performance was in line with guidance. The
Hermans truck accident repairs business continues to perform well. Management of
the cranes business has been replaced and the solid order book should support
improved performance. The Group is focusing on value maximisation while
continuing with the disposal of the commercial vehicle and equipment businesses.
Services - The insurance business showed good growth in premiums written but
this was offset by the higher than expected claims and lower investment returns
which was in line with the industry.
Prospects
The actions taken and strategies being implemented should secure the future of
Super Group in challenging local and international conditions. Some short-term
actions are starting to yield financial and organisational improvements. These
include improvements in working capital and net debt and the sale of non-core
assets.
The challenging economic conditions are set to continue as the uncertainty
created by the global financial crisis impacts global growth and unsettles
financial markets. Our focus remains on profitability through realigning cost
structures in highly competitive markets and capital preservation through better
working capital management and a curtailment of capital expenditure. The change
to banks` lending policies resulting from the global credit crisis will continue
to provide funding challenges in our fleet management businesses. The difficult
trading conditions that we are experiencing will certainly continue until
confidence in economic prospects returns. We expect these factors to adversely
affect performance in the second half of our financial year.
Shareholders are advised that the above information has not been reviewed or
reported on by the Group`s external auditors.
Cautionary
As mentioned above, Super Group is in discussion with its stakeholders and
lenders, to restructure the existing debt and recapitalise the Group which if
successfully concluded, may have a material effect on the price of Super Group`s
securities. Accordingly, shareholders are advised to exercise caution when
dealing in Super Group`s securities until a detailed announcement is made.
On behalf of the board
17 March 2009
Larry Lipschitz Jonty Jankovich-Besan
Chief Executive Officer Chief Financial Officer
Consolidated balance sheets
Restated
31 December 31 December 30 June
08 07 08
R`000 Unaudited Unaudited Audited
ASSETS
Property, plant and 925 383 1 640 152 957 295
equipment
Full maintenance lease 1 925 335 1 807 939 2 026 724
assets
Intangible assets 216 948 237 522 251 315
Goodwill 1 444 478 1 350 872 1 574 797
Investments in associates 87 385 83 538 70 022
Investments and other non- 275 064 164 568 230 373
current assets
Deferred tax assets 186 465 117 491 177 890
Current assets 5 218 473 4 074 195 5 441 193
Assets held for sale 999 150 - 668 381
Inventories 1 010 042 1 411 571 1 310 579
Trade and other 2 085 164 2 158 738 2 273 582
receivables
Insurance related assets 426 255 161 161 345 590
Cash and cash 697 862 342 725 843 061
equivalents
Total assets 10 279 531 9 476 277 10 729 609
EQUITY AND LIABILITIES
Capital and reserves
Capital and reserves 2 086 289 2 104 422 2 007 161
attributable to equity
holders of Super Group
Limited
Minority interest 237 776 193 167 257 777
Total equity 2 324 065 2 297 589 2 264 938
Liabilities
Fund reserves 310 575 275 496 342 201
Deferred tax liabilities 199 844 230 765 209 186
Full maintenance lease 1 586 845 1 474 360 1 796 535
liabilities (including
Australian FML)
Non-current 1 022 176 1 153 202 1 122 669
Current 564 669 321 158 673 866
Interest-bearing borrowings 1 694 031 2 539 851 2 336 799
Non-current 1 198 595 1 124 884 1 278 933
Current 495 436 1 414 967 1 057 866
Insurance related 626 098 275 204 501 734
liabilities
Interest-bearing property 431 553 - 428 818
borrowings associated with
assets held for sale
Other liabilities directly 335 322 - 56 351
associated with assets held
for sale
Other current liabilities 2 771 198 2 383 012 2 793 047
Total equity and 10 279 531 9 476 277 10 729 609
liabilities
Consolidated income statements
Restated
6-month 6-month Year
period ended period ended ended
31 December 31 December 30 June
08 07 08
R`000 Unaudited Unaudited Audited
Revenue 5 661 718 5 655 542 11 528 445
Trading profit before 652 592 654 742 1 295 600
depreciation,
amortisation
and recoupments
Depreciation, (227 637) (199 859) (414 306)
amortisation and
recoupments
Trading profit 424 955 454 883 881 294
Capital items (2 544) (1 202) (44 834)
Operating profit 422 411 453 681 836 460
Net finance charges paid (295 499) (182 228) (381 210)
Fair value adjustments (48 827) - 16 797
to interest rate swaps
Share of profit of 3 100 1 175 2 275
associates (net of
taxation)
Profit before taxation 81 185 272 628 474 322
Income tax expense (8 249) (53 249) (38 549)
Profit for the period 72 936 219 379 435 773
from continuing
operations
Loss for the period from (423 378) (52 520) (429 482)
discontinuing
operations
Trading loss after (129 648) (52 520) (415 812)
interest and income tax
Impairment of (44 826) - (13 670)
goodwill
Fair value loss on (248 904) - -
discontinuation
(Loss)/profit for the (350 442) 166 859 6 291
period
Attributable to minority 10 977 13 880 22 444
shareholders
Attributable to equity (361 419) 152 979 (16 153)
holders of Super Group
Limited
(350 442) 166 859 6 291
Reconciliation of
headline earnings
Profit attributable to (361 419) 152 979 (16 153)
equity holders of
Super Group Limited
Capital items 2 544 1 202 44 834
(continuing operations)
Closure costs - 1 202 6 506
Profit on sale of (6 342) - -
property
Costs incurred on - - 3 438
unsuccessful business
combination
Impairment of - - 32 065
goodwill and intangible
assets
Impairment of 8 886 - 2 825
property, plant and
equipment
Impairment of goodwill - 44 826 - 13 670
discontinued operations
Fair value loss on 248 904 - -
discontinuation
Headline (loss)/earnings (65 145) 154 181 42 351
for the period
Trading loss from 129 648 52 520 415 812
discontinuing operations
Headline earnings for 64 503 206 701 458 163
the period from
continuing operations
Basic earnings per share (86,7) 42,9 (4,5)
(cents)
Basic earnings per share 14,9 57,6 115,8
(cents) (continuing
operations)
Diluted earnings per (86,7) 40,6 (4,3)
share (cents)
Diluted earnings per 14,9 54,5 110,3
share (cents)
(continuing operations)
Headline earnings per (15,6) 43,2 11,9
share (cents)
Headline earnings per 15,5 57,9 128,3
share (cents)
(continuing operations)
Diluted headline (15,6) 40,9 11,3
earnings per share
(cents)
Diluted headline 15,5 54,8 122,3
earnings per share
(cents) (continuing
operations)
Consolidated statements of changes in equity
Restated
6-month 6-month Year
period ended period ended ended
31 December 31 December 30 June
08 07 08
R`000 Unaudited Unaudited Audited
Capital and reserves
attributable to equity
holders of Super Group
Limited
Balance at beginning of 2 007 161 2 101 158 2 101 158
the period
Share issues and options 506 635 3 438 2 564
exercised, net of expenses
Effect of foreign exchange (73 045) (10 107) 58 420
on equity holders of Super
Group Limited
Profit attributable to (361 419) 152 979 (16 153)
equity holders of
Super Group Limited
Other movements in 6 957 (1 847) 4 071
reserves
Ordinary dividends - (141 199) (142 899)
Balance at end of the 2 086 289 2 104 422 2 007 161
period
Minority interest
Balance at beginning of 257 777 94 194 94 194
period
Ordinary dividends paid to - (3 577) (6 987)
minority shareholders
Profit attributable to 10 977 13 880 22 444
minority shareholders
Effect of foreign exchange (19 919) 1 171 22 548
on minority shareholders
Changes in minority (11 059) 87 499 125 578
shareholders as a result
of acquisitions and
disposals
Balance at end of the 237 776 193 167 257 777
period
Total equity at end of the 2 324 065 2 297 589 2 264 938
period
Comprising:
Share capital 54 551 47 297 47 297
Share premium 1 010 610 511 229 511 229
Retained earnings 1 091 276 1 626 984 1 457 363
Share buyback reserve (537 617) (536 743) (537 617)
General reserve 556 036 556 036 556 036
Revaluation reserve 89 451 80 223 89 451
Foreign currency (213 684) (209 166) (140 639)
translation reserve
Contingency reserve - 31 709 28 562 24 041
insurance
Hedging reserve 3 957 - -
Minority interest 237 776 193 167 257 777
Total equity at end of the 2 324 065 2 297 589 2 264 938
period
Salient features
Restated
6-month 6-month Year
Period ended Period ended ended
31 December 31 December 30 June
08 07 08
R`000 Unaudited Unaudited Audited
1. Interest-bearing
borrowings comprise:
Australia non-recourse 455 618 442 176 575 744
borrowings
Corporate bond 415 069 896 604 413 846
Securitisation 259 041 - 255 890
Property borrowings 431 553 404 087 428 818
Other borrowings 361 199 547 209 529 406
Bank overdraft 262 985 249 775 618 264
Interest-bearing 2 185 465 2 539 851 2 821 968
borrowings before
reallocation to held for
sale
Interest-bearing property (431 553) - (428 818)
borrowings associated with
assets held for sale
Other interest bearing (59 881) - (56 351)
borrowings directly
associated with assets
held for sale
1 694 031 2 539 851 2 336 799
2. Share statistics
Total issued less treasury 497 950 357 318 357 276
shares (`000)
Weighted (`000) 416 723 356 939 357 085
Diluted (`000) 416 723 377 236 374 756
Net asset value per share 419,0 588,9 561,8
(cents)
Net asset value per share 128,9 210,9 121,0
excluding goodwill
(cents)
3. Capital commitments
Authorised, but not yet 24 480 44 143 167 123
contracted for capital
commitments, excluding
full maintenance lease
assets
Capital commitments will be funded from normal operating cash flows and
the utilisation of existing borrowing facilities.
There have been no significant changes in the rental and other
commitments and contingent liabilities disclosed at 30 June 2008 in the
Group`s annual financial statements.
4. Basis of preparation and accounting policies
The condensed consolidated interim financial statements for the six-
month period ended 31 December 2008 have been prepared in compliance
with the Listings Requirements of the JSE Limited, International
Financial Reporting Standards (IFRS) (in particular
IAS 34 Interim Financial Reporting) and the South African Companies
Act, 1973, as amended.
The accounting policies applied in the presentation of the condensed
consolidated financial statements are consistent with those applied for
the year ended 30 June 2008 except for the adoption of the amendments
to IFRIC 12 (Service Concession Agreements), IFRIC 13 (Customer Loyalty
Programmes) and IFRIC 14 and IAS 19 (The limit on a Defined Benefit
Assets, Minimum Funding Requirements and their Interaction). The
adoption of these revised standards and interpretations have not had a
material impact on the reported results. Consequently, no adjustments
relating to these amendments have been made to previously reported
figures.
This interim report should be read in conjunction with the annual
financial statements for the year ended 30 June 2008. These financial
statements have not been reviewed or audited by the Group`s auditors.
5. Related party transactions
The Group, in the ordinary course of business, entered into various
sales and purchase transactions on an arm`s length basis with related
parties.
6. Subsequent events
Other than the matters disclosed, the directors are not aware of any
matter or circumstance arising subsequent to the balance sheet date to
the date of this report.
Consolidated cash flow statements
Restated
6-month 6-month Year
period ended period ended ended
31 December 31 December 30 June
08 07 08
R`000 Unaudited Unaudited Audited
Cash flows from
operating activities
Operating cash flow 460 749 598 100 975 578
before working capital
changes
Working capital changes 262 463 (283 495) 163 285
Cash generated from 723 212 314 605 1 138 863
operations
Net finance charges (360 437) (206 073) (501 653)
paid
Net dividend paid - (144 468) (149 995)
Taxation paid (42 738) (41 865) (110 085)
Net cash 320 037 (77 801) 377 130
retained/(utilised)
from operating
activities
Cash flows from
investing activities
Cash effect of business (45 541) 13 131 (85 470)
combinations, net of
cash received
Additions to property, (57 963) (254 497) (297 566)
plant and equipment and
intangible assets - net
of disposals
Additions to full (122 183) (257 261) (520 345)
maintenance lease
assets -
net of disposals
(Increase)/decrease in (16 262) 1 272 (44 632)
other investments and
loans
Net cash outflow from (241 949) (497 355) (948 013)
investing activities
Cash flows from
financing activities
Net proceeds on share 506 989 9 017 9 017
purchases, share issues
and options exercised
Interest-bearing 97 924 294 547 1 198 768
borrowings raised
Interest-bearing (272 862) (217 498) (1 269 417)
borrowings repaid
Full maintenance lease 183 691 288 486 741 196
borrowings raised
Full maintenance lease (356 296) (125 953) (336 340)
borrowings repaid
Net cash inflow from 159 446 248 599 343 224
financing activities
Net increase/(decrease) 237 534 (326 557) (227 659)
in cash and cash
equivalents
Cash and cash 224 797 422 488 422 488
equivalents at
beginning of the period
Effect of foreign (10 139) (2 981) 29 968
exchange on cash and
cash equivalents
Net cash and cash 452 192 92 950 224 797
equivalents at end of
the period
Segmental analysis
Revenue
6-month 6-month Year
period ended period ended ended
31 December 31 December 30 June
2008 2007 2008
Unaudited Unaudited Audited
R`000 Restated
Supply Chain 1 476 795 1 347 615 2 874 610
Management
Fleet Solutions 875 033 697 528 1 526 644
Retail Supply Chain 1 278 455 1 347 759 2 726 699
Automotive 1 620 184 2 055 804 3 960 568
Services 411 251 206 836 439 924
Continuing operations 5 661 718 5 655 542 11 528 445
Discontinued 302 852 597 339 885 534
operations
Group 5 964 570 6 252 881 12 413 979
Segmental analysis (continued)
Trading profit
6-month 6-month Year
period ended period ended ended
31 December 31 December 30 June
2008 2007 2008
Unaudited Unaudited Audited
R`000 Restated
Supply Chain 203 677 180 843 365 277
Management
Fleet Solutions 150 321 142 612 299 553
Retail Supply Chain 50 998 72 689 134 997
Automotive 17 151 42 795 75 208
Services 2 808 15 944 6 259
Continuing operations 424 955 454 883 881 294
Discontinued (73 701) (9 654) (299 614)
operations
Group 351 254 445 229 581 680
Segmental analysis
(continued)
Operating profit
6-month 6-month Year
period ended period ended ended
31 December 31 December 30 June
2008 2007 2008
Unaudited Unaudited Audited
R`000 Restated
Supply Chain 203 677 180 843 363 431
Management
Fleet Solutions 150 321 142 612 298 102
Retail Supply Chain 50 198 72 689 134 997
Automotive 10 450 41 593 65 264
Services 7 765 15 944 (25 334)
Continuing operations 422 411 453 681 836 460
Discontinued (367 431) (9 654) (313 284)
operations
Group 54 980 444 027 523 176
Company information
Registered Office?27 Impala Road, Chislehurston, Sandton, 2196. Private Bag
X9973, Sandton, 2146
Transfer Secretaries?Computershare Investor Services (Pty) Limited. Ground
Floor, 70 Marshall Street, Johannesburg, 2001.
PO Box 61051, Marshalltown, 2107
Directors?P Malungani*# (Chairman), P Vallet* (Deputy Chairman),
L Lipschitz (Chief Executive Officer), S Abrahams*#,
J Jankovich-Besan (Chief Financial Officer), D Dharmalingam, B Tshili*#,
V Chitalu*#, D Rose *#?
*Non-executive?#Independent
Company Secretary?D de Quintal
Also available on www.supergroup.co.za
Sandton
18 March 2009
Sponsor: Deutsche Securities (SA) (Proprietary) Limited
Date: 18/03/2009 07:30:02 Produced by the JSE SENS Department.
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