| Thu 23 Sep 2004, 10:44 | | SPAR - ABRIDGED PRE-LISTING STATEMENT |
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SPAR - ABRIDGED PRE-LISTING STATEMENT
THE SPAR GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1967/001572/06)
Share code: SPP ISIN: ZAE000058517
(`Spar` or `the company`)
ABRIDGED PRE-LISTING STATEMENT
This abridged pre-listing statement is not an invitation to subscribe for
shares in Spar, but is issued in compliance with the Listings Requirements of
the JSE Securities Exchange South Africa (the `JSE`) for the purpose of
providing information to the public with regard to Spar.
The information has been extracted from the detailed pre-listing statement
which, together with the circular issued to shareholders of Tiger Brands
Limited (`Tiger Brands`), dated 23 September 2004, is being posted to Tiger
Brands shareholders today.
The JSE has agreed to the listing of the entire issued ordinary share capital
of Spar in the `Non-Cyclical Services - Food and Drug Retailers` sector of the
JSE list under the abbreviated name `Spar` with effect from the commencement of
business on Monday, 18 October 2004.
1. BACKGROUND TO AND RATIONALE FOR THE LISTING OF SPAR
On 13 May 2004 Tiger Brands announced on SENS that, as part of its ongoing
focus on its core activities, and in order to maximise shareholder value, it
intended to unbundle its entire shareholding in Spar (the `unbundling`). The
Tiger Brands directors have therefore resolved, subject to the fulfilment of
certain conditions precedent and in terms of the unbundling agreement entered
into between Tiger Brands and Spar on 15 September 2004, to distribute 168 763
670 Spar shares (the `Spar distribution shares`) to Tiger Brands shareholders
and to make an application for the separate listing of Spar on the JSE.
The Spar distribution shares will be distributed in the ratio of one Spar share
for every one Tiger Brands share held by a shareholder recorded in the register
at the close of business on 22 October 2004 (the `record date`).
2. NATURE OF BUSINESS
Spar is the registered licensee of the SPAR brand in southern Africa. The
company is also the registered owner of the TOPS and Build it trademarks.
The nature of the relationship between the company and independently owned SPAR
stores (grocery outlets), TOPS stores (liquor outlets) and Build it stores
(building material outlets) is one of joint co-operation for the benefit of the
members of this association. This concept is hereinafter referred to as
`voluntary trading`.
Spar focuses on:
the wholesale distribution and supply of goods and services to independently
owned SPAR, TOPS and Build it stores from six regional distribution centres
(`DC`s`); and
the managing of voluntary trading groups.
Spar`s revenue stream is derived from the provision of goods and services to
SPAR, TOPS and Build it stores. Spar does not own any SPAR, TOPS or Build it
retail stores and accordingly the financial performance of individual stores
does not form part of the company`s financial results.
The foundations of Spar`s business have been built on the company`s core
competencies of managing voluntary trading groups, providing distribution and
logistical services, brand management and strong operational management.
2.1 Voluntary trading
Spar has considerable expertise in the running and managing of voluntary
trading groups. These skills encompass, inter alia, the managing of the
relationship between independent retailers and Spar DC`s, the identification of
trading locations, store design and development expertise, store management
techniques, the development of retailer training programmes, the securing of
competitive prices through bulk buying and managing regional advertising and
promotional activities. These activities are aimed at ensuring that voluntary
trading store operators can compete effectively against retail chain store
operators.
2.2 Distribution and logistics
Spar operates from six purpose built modern DC`s. These fully racked and
equipped warehouses provide the backbone of Spar`s warehousing and distribution
capability. Spar owns the properties from which it operates in South Rand,
North Rand, KwaZulu-Natal, the Western Cape and the Eastern Cape. Spar has
concluded an agreement to purchase the premises from which it operates in
Nelspruit.
The efficient management of a modern transport fleet is core to Spar`s
operations. Short and medium haul deliveries are handled by Spar`s own fleet of
150 trucks and 240 trailers, whilst a limited number of long distance
deliveries are outsourced.
2.3 Brand management
Brand management and brand recognition is of paramount importance. The SPAR
brand is actively managed and promoted with substantial expenditure being
incurred annually to ensure that SPAR remains a well recognised and respected
South African retail brand.
2.4 Operational management
Spar operates its DC`s as decentralised business units. Each DC is a stand
alone operation run by focused functional heads under the leadership of a
divisional managing director. Spar has competent management in place at all
levels of the organisation, with development and training programmes ensuring
competency and succession.
3. PROSPECTS
Spar`s unique proposition allows it to penetrate the entire South African
market, service the full spectrum of LSM`s and cater for all the ethnic groups.
Future growth prospects are regarded as positive, although at more moderate
levels than in the past. Growth will be leveraged by:
- increasing the number of SPAR stores, through the development of new stores,
as well as the conversion of existing retail outlets to the SPAR system;
- organically growing existing SPAR stores, which encompasses increasing the
size and offering of SPAR stores;
- increasing the loyalty of SPAR retailers to the company i.e. increasing
retailer store owners` purchases from the DC`s; and
- increasing the range of products and services available to retailer store
owners from the DC`s.
Spar focuses only on voluntary trading, which is its main point of difference
when compared to the corporate retail chains. In recent years, these chains
have seen the need to add franchised stores to their business models. This has
increased the competitive environment in which Spar operates, in that Spar now
needs to compete, not only for consumer spend, but to secure voluntary trading
members.
The recent drop in food inflation (currently approximately 2%) has impacted on
sales and profit growth. It is envisaged that low levels of inflation will
continue in the short to medium term, resulting in lower growth in revenues
than those achieved in previous years when inflation contributed substantially
to sales growth.
Spar has core competencies in the managing of voluntary trading groups and has
successfully rolled out the TOPS and Build it voluntary trading groups. Both
these ventures have good growth prospects, but, as the trading groups are
predominantly serviced directly by suppliers they do not yield the same
profitability opportunities that SPAR stores present through being serviced out
of the DC`s.
4. FINANCIAL INFORMATION AND FORECAST
The income statements and balance sheets for the six months ended 31 March 2004
and 31 March 2003, the two financial years ended 30 September 2003 and 30
September 2002 and the reviewed forecast income statement for the year ending
30 September 2004, are set out below.
Income statements Reviewed
Forecast Unaudited Audited
year ending 6 months to year to
30 September 31 March 30 September
2004 2004 2003
R`000 R`000 R`000
REVENUE 11 930 000 6 073 612 10 121 051
PROFIT FROM OPERATIONS 410 235 210 714 349 414
Interest paid (2 256) (2 328) (4 064)
Interest received - see
note below 11 816 6 020 26 025
NET PROFIT BEFORE TAXATION 419 795 214 406 371 375
Taxation (133 177) (68 994) (117 893)
NET PROFIT FOR THE PERIOD 286 618 145 412 253 482
Number of shares in issue
at listing (`000) 168 764 168 764 168 764
Earnings per share (cents) 169.8 86.2 150.2
Headline earnings per share
(cents) 165.2 88.8 154.4
Unaudited Audited
6 months to year to
31 March 30 September
2003 2002
R`000 R`000
REVENUE 5 074 494 8 345 307
PROFIT FROM OPERATIONS 178 091 291 640
Interest paid (1 536) (3 793)
Interest received - see note below 11 977 17 411
NET PROFIT BEFORE TAXATION 188 532 305 258
Taxation (61 136) (98 005)
NET PROFIT FOR THE PERIOD 127 396 207 253
Number of shares in issue
at listing (`000) 168 764 168 764
Earnings per share (cents) 75.5 122.8
Headline earnings per share (cents 80.2 124.2
Note:
On 1 July 2004, Spar declared a dividend of R33,2 million to Tiger Brands. A
further dividend of R350 million was paid to Tiger Brands on 22 September 2004.
As a result of the aforementioned dividend payments, it is anticipated that
Spar will not earn interest in 2005 to the same extent as is forecast to accrue
to the company for the year ending 30 September 2004.
Balance sheets Unaudited Audited
31 March 30 September
2004 2003
R`000 R`000
NON-CURRENT ASSETS
Property, plant and equipment 319 609 311 214
Goodwill 255 906 6 798
Loans 38 672 38 229
Deferred taxation asset 6 843 5 186
Total non-current assets 621 030 361 427
CURRENT ASSETS
Inventories 391 985 315 659
Trade and other receivables 1 166 975 1 062 593
Cash and cash equivalents - 36 594
Total current assets 1 558 960 1 414 846
TOTAL ASSETS 2 179 990 1 776 273
EQUITY AND LIABILITIES
CAPITAL AND RESERVES
Share capital and share premium 96 96
Non-distributable reserves 371 511
Retained income 673 248 527 836
Total capital and reserves 673 715 528 443
NON-CURRENT LIABILITIES
Minority interest - 1
Long-term borrowings 3 191 -
Deferred taxation - 24
Provision for post-retirement medical aid 34 244 32 486
Amount due to holding company 4 787 4 787
Total non-current liabilities 42 222 37 298
CURRENT LIABILITIES
Accounts payable 1 195 924 1 062 341
Amounts owing to Tiger Brands Limited
group companies 144 037 103 838
Bank overdraft 94 780 -
Taxation 29 312 44 353
Total current liabilities 1 464 053 1 210 532
TOTAL EQUITY AND LIABILITIES 2 179 990 1 776 273
Balance sheets Unaudited Audited
31 March 30 September
2003 2002
R`000 R`000
NON-CURRENT ASSETS
Property, plant and equipment 265 778 249 837
Goodwill - -
Loans 33 483 29 728
Deferred taxation asset 1 743 7
Total non-current assets 301 004 279 572
CURRENT ASSETS
Inventories 304 071 268 642
Trade and other receivables 902 734 952 709
Cash and cash equivalents 30 837 265 748
Total current assets 1 237 642 1 487 099
TOTAL ASSETS 1 538 646 1 766 671
EQUITY AND LIABILITIES
CAPITAL AND RESERVES
Share capital and share premium 96 96
Non-distributable reserves 1 004 1 048
Retained income 427 681 343 285
Total capital and reserves 428 781 344 429
NON-CURRENT LIABILITIES
Minority interest 1 1
Long-term borrowings - -
Deferred taxation - 106
Provision for post-retirement medical aid 29 849 28 785
Amount due to holding company 4 787 4 787
Total non-current liabilities 34 637 33 679
CURRENT LIABILITIES
Accounts payable 976 946 1 269 792
Amounts owing to Tiger Brands Limited
group companies 67 258 88 421
Bank overdraft - -
Taxation 31 024 30 350
Total current liabilities 1 075 228 1 388 563
TOTAL EQUITY AND LIABILITIES 1 538 646 1 766 671
5. DIRECTORS
5.1 Directors
The names, ages, dates of appointment and business addresses of the directors
are set out below:
5.1.1 Michael John Hankinson (55)
(Independent non-executive chairman)
Date appointed to the board: 9 September 2004
Business address: 265 Sydney Road, Durban
5.1.2 Roy Vaughan Smither (59)*
(Non-executive director)
Date appointed to the board: 23 February 1999
Business address: 85 Bute Lane, Sandown, Sandton
5.1.3 Peter Kilby Hughes (58)
(Chief Executive Officer)
Date appointed to the board: 1 September 1989
Business address: 22 Chancery Lane, Pinetown, KwaZulu-Natal
5.1.4 Rodney Walter Coe (56)
(Financial director)
Date appointed to the board: 1 November 1990
Business address: 22 Chancery Lane, Pinetown, KwaZulu-Natal
* Mr R V Smither, who is an executive director of Tiger Brands, will resign as
a director of Spar, pursuant to the unbundling.
5.2 Additional directors
The following individuals have been offered and have accepted directorships of
Spar and will take up their appointments pursuant to the unbundling:
5.2.1 Gugu Moloi (36)
(Independent non-executive director)
Business address: 310 Burger Street, Pietermaritzburg
5.2.2 David Braidwood Gibbon (62)
(Independent non-executive director)
Business address: 7 Marandella, 100 Methven Road, Westville
5.2.3 Harish Kantilal Mehta (54)
(Independent non-executive director)
Business address: 6 Cedarfield Close, Springfield Park, Durban
5.2.4 Phinda Madi (37)
(Independent non-executive director)
Business address: All Care House, 90 Grayston Drive, Sandton
5.2.5 Rowan James Hutchison (57)
(Independent non-executive director)
Business address: Bartersfield Estate, Howick
6. SHARE CAPITAL
On listing, the authorised share capital of Spar will be R150 000,00 divided
into 250 000 000 ordinary shares of 0,06 of a cent each and the issued share
capital will comprise 168 763 670 ordinary shares of 0,06 of a cent each,
amounting to R101 258,20 with a share premium of R nil, all shares ranking pari
passu.
7. DETAILED PRE-LISTING STATEMENT
Copies of the detailed pre-listing statement, together with the circular to
Tiger Brands shareholders, will be available on the Tiger Brands website
www.tigerbrands.com. English copies of the detailed pre-listing statement and
Tiger Brands circular may be obtained during normal business hours from
Thursday, 23 September 2004 until Friday, 8 October 2004, both days inclusive,
at the following addresses:
Spar, 22 Chancery Lane, Pinetown;
Tiger Brands, 85 Bute Lane, Sandown, Sandton;
Rand Merchant Bank, 1 Merchant Place, Corner Fredman Drive and Rivonia
Road, Sandton;
Nedbank Capital, 3rd Floor, Corporate Place, 135 Rivonia Road, Sandown,
Sandton;
Garlicke & Bousfield, 7 Torsvale Crescent, La Lucia Ridge;
Edward Nathan & Friedland, 4th Floor, The Forum, 2 Maude Street, Sandown,
Sandton; and
Ultra Registrars, 11 Diagonal Street, Johannesburg.
Merchant bank and lead sponsor to Spar
Rand Merchant Bank (A Division of FirstRand Bank Limited)
Corporate Finance
Corporate law advisers and consultants to Spar
GARLICKE & BOSFIELD
Reporting accountants and auditors to Spar
Deloitte & Touche Chartered Accountants (SA)
Registered Accountants and Auditors
Transfer secretaries to Spar
Ultra Registrars (Pty) Limited
Reg. No. 2000/007239/07
(`Ultra Registrars`)
Investment bank to Tiger Brands and transactional sponsor
Nedbank Capital
Corporate law advisers to Tiger Brands
EDWARD NATHAN & FRIEDLAND
CORPORATE LAW ADVISERS & CONSULTANTS
EDWARD NATHAN & FRIEDLAND (PTY ) LTD
(Registration number 1999/026464/07)
Date: 23/09/2004 08:56:14 AM Produced by the JSE SENS Department
