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SPP
SPP
SPP - The Spar Group Limited - The Spar Group Limited unaudited interim results
for the six months ended 31 March 2011 and cash dividend declaration
THE SPAR GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1967/001572/06)
JSE Code: SPP
ISIN: ZAE000058517
("SPAR")
THE SPAR GROUP LIMITED UNAUDITED INTERIM RESULTS for the six months ended
31 March 2011 and cash dividend declaration
FINANCIAL HIGHLIGHTS
Turnover + 9.1%
Operating profit + 4.1%
Interim dividend 142 cents per share
Condensed consolidated statement of comprehensive income
Unaudited Unaudited Audited
sixmonths Six months Year
ended ended ended
March
% March September
Rmillion Change 2011 2010 2010
REVENUE 19 294.7 17 669.6 35 159.6
Turnover 9.1 19 115.0 17 513.4 34 844.2
Cost of sales (17 584.8) (16 131.2) (32 083.7)
Gross profit 1 530.2 1 382.2 2 760.5
Other income 179.7 156.2 315.4
Operating expenses (996.8) (853.3) (1 759.6)
TRADING PROFIT 713.1 685.1 1 316.3
BBBEE transactions (6.5) (6.2) (13.0)
OPERATING PROFIT 4.1 706.6 678.9 1 303.3
Interest received 7.5 11.7 24.6
Interest paid (14.2) (11.5) (20.9)
Share of equity
accounted associate 0.8 0.4
Profit before taxation 700.7 679.1 1 307.4
Taxation (221.5) (204.2) (391.6)
PROFIT FOR THE PERIOD
ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS 479.2 474.9 915.8
Exchange differences
from translation of
foreign operations 0.1
TOTAL COMPREHENSIVE
INCOME 479.2 474.9 915.9
EARNING PER SHARE
Earnings per
share (cents) 279.6 278.2 536.0
Diluted
earnings per
share (cents) 261.9 264.8 506.2
SALIENT
STATISTICS
Headline
earnings per
share (cents) 0.6 279.8 278.1 536.1
Diluted
headline
earnings per
share (cents) 262.1 264.6 506.3
Dividend per
share (cents) 1.4 142.0 140.0 362.0
Net asset value
per share (cents) 1 328.0 1 169.6 1 278.8
Trading profit
margin (%) 3.7 3.9 3.8
Return on equity (%) 21.5 24.1 44.4
HEADLINE
EARNINGS
RECONCILIATION
Profit for the period
attributable to
ordinary shareholders 479.2 474.9 915.8
Adjusted for:
Loss/(profit)
on sale of
property, plant
and equipment 0.5 (0.4) 0.1
Tax effects of
adjustments (0.2) 0.1
HEADLINE EARNINGS 479.5 474.6 915.9
Condensed consolidated statement of cash flows
Unaudited Unaudited Audited
sixmonths Six months Year
ended ended ended
march March September
2011 2010 2010
Rmillion
CASH FLOWS FROM OPERATING ACTIVITIES (446.1) (71.2) 238.9
Operating profit before: 706.2 679.0 1 303.3
Non cash items 94.4 67.2 153.6
Loss/(profit) on disposal of property,
plant and equipment 0.5 (0.4) 0.1
Net working capital changes (637.2) (301.1) (257.5)
- Increase in inventories (240.9) (121.6) (106.1)
- Increase in trade and other
receivables (184.0) (358.0) (700.9)
- (Decrease)/increase in trade payables
and provisions (212.3) 178.5 549.5
Cash generated from operations 163.9 444.7 1 199.5
Interest received 6.6 11.0 23.6
Interest paid (14.2) (11.5) (20.9)
Taxation paid (221.9) (176.2) (384.8)
Dividends received 0.4
Dividends paid (380.9) (339.2) (578.5)
CASH FLOWS FROM INVESTING ACTIVITIES (172.8) (76.2) (281.0)
Investment to expand operations (64.9) (65.1) (169.3)
Investment to maintain operations (30.1) (24.7) (34.3)
- Replacement of property, plant and
equipment (30.2) (26.0) (36.3)
- Proceeds on disposal of property,
plant and equipment 0.1 1.3 2.0
Acquisition of subsidiaries (71.8) (54.1)
Net movement on loans and investments (6.0) 13.6 (23.3)
CASH FLOWS FROM FINANCING ACTIVITIES (22.6) (92.5) (121.3)
Proceeds from issue of share capital
and premium 13.0 10.1 10.1
Proceeds from exercise of share options 12.5 41.2 56.7
Share repurchases (48.1) (143.8) (188.1)
NET DECREASE IN CASH AND CASH
EQUIVALENTS (641.5) (239.9) (163.4)
NET OVERDRAFTS AT BEGINNING OF PERIOD (445.9) (282.5) (282.5)
NET OVERDRAFTS AT THE END OF PERIOD (1 087.4) (522.4) (445.9)
Condensed consolidated statement of changes in equity
Share Currency Share
capital trans- based
and Treasury lation payment
Rmillion premium shares reserve reserve
CAPITAL AND RESERVES
AT SEPTEMBER 2009 23.3 - (0.3) 231.1
Total comprehensive income
for the period
Issue of shares 10.1 (10.1)
Recognition of share based
payments 9.1
Take-up of share options 136.2 (84.9)
Transfer arising from take-up
of share options 84.9
Share repurchases (143.8)
Dividends declared
Recognition of BBBEE
transaction 6.2
CAPITAL AND RESERVES AT
31 MARCH 2010 33.4 (17.7) (0.3) 246.4
Total comprehensive income
for the period 0.1
Recognition of share based
payments 9.2
Take-up of share options 51.2 (35.6)
Transfer arising from take-up
of share options 35.6
Share repurchases (44.3)
Dividends declared
Recognition of BBBEE
transaction 6.2
CAPITAL AND RESERVES
AT SEPTEMBER 2010 33.4 (10.8) (0.2) 261.8
Total comprehensive income
for the period
Issue of shares 13.0 (13.0)
Recognition of share based
payments 8.5
Take-up of share options 53.7 (28.2)
Transfer arising from take-up
of share options 28.2
Share repurchases (48.1)
Dividends declared
Recognition of BBBEE
transaction 6.2
CAPITAL AND RESERVES AT
MARCH 2011 46.4 (18.2) (0.2) 276.5
Attributable
Retained to ordinary
Rmillion earnings shareholders
CAPITAL AND RESERVES
AT SEPTEMBER 2009 1 686.2 1 940.3
Total comprehensive income for the period 474.9 474.9
Issue of shares -
Recognition of share based payments 9.1
Take-up of share options 51.3
Transfer arising from take-up of share options (84.9) -
Share repurchases (143.8)
Dividends declared (339.2) (339.2)
Recognition of BBBEE transaction 6.2
CAPITAL AND RESERVES AT 31 MARCH 2010 1 737.0 1 998.8
Total comprehensive income for the period 440.9 441.0
Recognition of share based payments 9.2
Take-up of share options 15.6
Transfer arising from take-up of share options (35.6) -
Share repurchases (44.3)
Dividends declared (239.3) (239.3)
Recognition of BBBEE transaction 6.2
CAPITAL AND RESERVES
AT SEPTEMBER 2010 1 903.0 2 187.2
Total comprehensive income for the period 479.2 479.2
Issue of shares -
Recognition of share based payments 8.5
Take-up of share options 25.5
Transfer arising from take-up of share options (28.2) -
Share repurchases (48.1)
Dividends declared (380.9) (380.9)
Recognition of BBBEE transaction 6.2
CAPITAL AND RESERVES AT MARCH 2011 1 973.1 2277.6
Condensed consolidated statement of financial position
Unaudited Unaudited Audited
march March September
Rmillion 2011 2010 2010
ASSETS
Non-current assets 2 114.2 1 886.9 2 006.0
Property, plant and equipment 1 551.1 1 464.6 1 521.0
Goodwill 371.5 245.6 299.7
Operating lease receivables 133.7 141.7 139.1
Investment in associate 16.6 3.5 17.0
Other investments 1.5 1.5
Loans 31.2 2.8 23.0
Deferred taxation asset 7.5 25.3 3.2
Other non-current assets 1.1 3.4 1.5
Current assets 5 927.9 5 174.7 5 522.9
Inventories 1 200.1 974.8 959.2
Trade and other receivables 4 593.7 4 091.1 4 412.0
Prepayments 17.6 12.9 28.6
Operating lease receivables 22.0 17.9 25.7
Loans 10.3 0.5 2.2
Taxation receivable 5.6 10.0
Bank balances - Guilds 78.6 77.5 85.2
TOTAL ASSETS 8 042.1 7 061.6 7 528.9
EQUITY AND LIABILITIES
Capital and reserves 2 277.6 1 998.8 2 187.2
Share capital and premium 46.4 33.4 33.4
Treasury shares (18.2) (17.7) (10.8)
Currency translation reserve (0.2) (0.3) (0.2)
Share based payment reserve 276.5 246.4 261.8
Retained earnings 1 973.1 1 737.0 1 903.0
Non-current liabilities 216.9 210.8 209.5
Post retirement medical aid provision 76.8 70.3 75.1
Operating lease payables 140.1 140.5 134.4
Current liabilities 5 547.6 4 852.0 5 132.2
Trade and other payables 4 353.0 4 194.6 4 565.0
Operating lease payables 23.0 18.2 29.9
Provisions 5.6 5.6 5.8
Taxation payable 33.7 0.4
Bank overdrafts 1 166.0 599.9 531.1
TOTAL EQUITY AND LIABILITIES 8 042.1 7 061.6 7 528.9
Notes to the condensed consolidated interim results
1 BASIS OF PRESENTATION AND COMPLIANCE WITH IFRS
The condensed financial information has been prepared in accordance with the
framework concepts and the measurement and recognition requirements of
International Financial Reporting Standards (IFRS), the AC 500 standards as
issued by the Accounting Practices Board and the information as required by IAS
34: Interim Financial Reporting. The report has been prepared using accounting
policies that comply with IFRS which are consistent with those applied in the
financial statements for the year ended 30 September 2010.
These unaudited interim results have not been reviewed or reported on by the
group`s external auditors.
Unaudited Unaudited Audited
sixmonths Six months Year
ended ended ended
March March September
2011 2010 2010
Rmillion
2 SHARE CAPITAL AND PREMIUM
authorised
250 000 000 (March 2010: 250 000 000)
ordinary shares of 0.06 cents
(March 2010: 0.06 cents) each 0.2 0.2 0.2
30 000 000 (March 2010: 30 000 000)
redeemable, convertible
preference shares of 0.06 cents each - -
Issued
171 729 604 (March 2010: 171 170 013)
ordinary shares of 0.06 cents
(March 2010: 0.06 cents) each 0.1 0.1 0.1
18 911 349 (March 2010: 18 911 349)
redeemable, convertible
preference shares of 0.06 cents each - - -
share premium account 46.3 33.3 33.3
Balance at beginning of year 33.3 23.2 23.2
Shares issued during the year 13.0 10.1 10.1
Total share capital and premium 46.4 33.4 33.4
Issued share capital amounts to
R103 038, consisting of 171 729 604
ordinary shares. 559 591 ordinary
shares were issued during the
six months ended 31 March 2011.
Issued redeemable, convertible
preference share capital amounts to
R11 347, consisting of 18 911 349
(March 2010:18 911 349) shares.
The weighted average number of ordinary
shares (net of treasury shares)
used in the calculation of earnings per
share and headline earnings per
share was 171 394 121 (March 2010:
170 672 879).
Diluted earnings and headline earnings
per share were based on a
weighted average number of ordinary
shares (net of treasury shares) of
182 991 411 (March 2010: 179 364 480).
3 CONTINGENT LIABILITIES
The company has guaranteed the finance
obligations of certain SPAR
retailer members to the amount of: 386.9 361.8 366.0
4 OPERATING LEASES
Operating lease costs charged against
operating profit
Immovable property 16.7 - 10.0
- Lease rentals 161.7 129.5 274.5
- Sub-lease recoveries (145.0) (129.5) (264.5)
Plant, equipment and vehicles 5.8 4.7 7.5
Operating lease commitments
Future minimum lease payments under
non-cancellable operating leases 2539.5 2 134.7 2 324.2
- Land and buildings 2536.3 2 132.6 2 318.4
- Other 3.2 2.1 5.8
Future minimum sub-lease receivables
under non-cancellable property
leases (2191.7) (2 102.0) (2 119.1)
Net commitments 347.8 32.7 205.1
5 CAPITAL COMMITMENTS
Contracted 55.4 52.2 168.0
Approved but not contracted 11.0 30.5 23.0
Total capital commitments 66.4 82.7 191.0
6 CONDENSED OPERATING SEGMENT INFORMATION
The group operates its business from seven 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 a separate
reportable segment of the group.
7 POST BALANCE SHEET EVENTS
No material events have occurred subsequent to 31 March 2011 which may have an
impact on the group`s reported financial position at this date.
Review and trading results
TRADING OVERVIEW
Trading for the period under review has been challenging with consumer spending
still under pressure, continued low food inflation (below 2%) and a very
competitive retail environment. Despite these factors, turnover growth of 9.1%
was pleasing and included strong volume growth of 6.9%, which reflected the
underlying health of the business and importantly, our retailers` businesses.
Operating profit, up by 4.1%, reflects the impact of tougher trading and of the
strategic decisions to enter food retail and building materials wholesaling.
These initiatives are important for the group in the medium term but they have
impacted the cost base in the short term. The increasing oil price has also
directly affected group delivery costs. The effect of the above mentioned
factors has led to total costs increasing 16.8%; without them `normal` costs
were up 7.8%.
Headline earnings per share increased by 0.6% which was influenced by a lower
once off tax benefit last year, a negative interest impact caused by the
investment in retail stores and increased working capital levels. Stock levels
increased as a result of the introduction of the new building materials
wholesale division and Easter being later this year. Debtors, and in particular
creditors, were impacted by the period end timing. Management are satisfied that
the group`s cash flows will remain positive over the balance of the year.
SPAR wholesale turnover of R15.9 billion was up 7.2%. Retail trading space
increased to 916 458 mSquared with 15 new stores opened. At the end of the
period under review the group serviced 858 SPAR stores (266 SUPERSPAR, 454 SPAR
and 138 KWIKSPAR stores). The group`s number one priority remains driving retail
growth.
TOPS store numbers increased to 481 with 23 new stores opening during the six
month period. Liquor trading remained extremely strong with ex distribution
centre turnover increasing 19.0% to R1.3 billion (2010: R1.1 billion). The TOPS
brand continues to gain market share.
Build it turnover at R1.88 billion (2010: R1.55 billion) grew 21.4% on the
comparable prior period. This was an excellent performance given the state of
this industry and the current economic climate. Nine new stores were opened
taking total store numbers to 263. The Build it wholesale operation in Pinetown
is operating efficiently although the early sales performance is behind an
aggressive forecast. The group is confident that going forward, this situation
will continue to improve.
During the period the group`s retail division purchased a further 4 SPAR retail
stores bringing the total stores owned to 9 and 5 allied TOPS stores. The
performance of these stores is not yet satisfactory and considerable effort is
being made to improve their results. The group remains committed to independent
retailing, however, the acquisition of underperforming strategic sites is an
opportunity for the group.
CAPITAL EXPENDITURE
The extension to the perishable facility at the Eastern Cape distribution centre
is progressing according to timetable and budget, with anticipated handover of
the facility scheduled for September 2011.
The group is confident that 2011 capital expenditure will not exceed
R170 million.
PROSPECTS
The group anticipates that the tough trading environment will continue for the
remainder of the financial year. However, continuing lower interest rates and
increasing levels of food inflation improves the outlook for trading.
The group will, for the remainder of the year, focus on improving the
performance of new business initiatives, opening new stores, driving organic
growth and stringent cost control.
Mike Hankinson Wayne Hook
Chairman Chief Executive
DECLARATION OF ORDINARY DIVIDEND
Notice is hereby given that an interim dividend of 142 cents per share has been
declared in respect of the six months ended 31 March 2011.
The salient dates for the payment of the interim dividend are detailed below:
Last day to trade cum-dividend Friday 3 June 2011
Shares to commence trading ex-dividend Monday 6 June 2011
Record date Friday 10 June 2011
Payment of dividend Monday 13 June 2011
Shareholders will not be permitted to dematerialise or rematerialise their share
certificates between Monday 6 June 2011 and Friday 10 June 2011, both days
inclusive.
By order of the board
KJ O`Brien Pinetown
Company Secretary 10 May 2011
DIRECTORATE AND ADMINISTRATION
Directors: MJ Hankinson* (Chairman), WA Hook (Chief Executive),
MW Godfrey, DB Gibbon*, PK Hughes*, RJ Hutchison*, MP Madi*,
HK Mehta*, P Mnganga*, R Venter, CF Wells* (appointed 1 April 2011).
* 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: Barnard Jacobs Mellet Corporate Finance (Pty) Limited,
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: 11/05/2011 07:05:12 Produced by the JSE SENS Department.
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