| Wed 17 Nov 2004, 8:03 | | RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2004 |
|
Spar - Reviewed Results For The Year Ended 30 September 2004
The Spar Group Limited
Registration number: 1967/001572/06
Share code: SPP
ISIN Number: ZAE000058517
(`Spar` or `the group`)
REVIEWED RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2004
- Revenue up 18,4%
- Operating profit up 19,1%
- Headline earnings up 9,0%
Income statement Notes Reviewed Audited %
2004 2003 change
Revenue 11 985 151 10 121 051 18,4%
Continuing operations 11 803 014 9 845 344 19,9%
Discontinued operations 182 137 275 707
Operating profit before
interest and taxation 2 416 009 349 414 19,1%
Continuing obligations 393 319 360 291 9,2%
Discontinued operations 22 690 (10 877)
Interest paid (3 315) (4 064)
Interest received 12 205 26 025
Net profit before taxation 424 899 371 375 14,4%
Taxation (132 925) (117 893) 12,8%
Net profit for the year 291 974 253 482 15,2%
Headline earnings
reconciliation
Net profit for the year 291 974 253 482
Adjusted for:
Profit on sale of fixed
assets, net of impairments (20 177) 6 392
Amortisation of goodwill 12 338 692
Headline earnings 284 135 260 566 9,0%
Earnings per share
Number of shares in issued
(`000) 3 168 764 168 764
Earnings per share (cents) 173,0 150,2 15,2%
Headline earnings per share 168,4 154,4 9,0%
(cents)
Salient statistics
Net asset value per share 259,1 313,1
(cents)
Net margin - continuing 3,3 3,7
operations (%)
Debt equity ratio (%) 70,7 0,9
(debt includes bank
overdraft)
Return on average equity 60,5 58,1
(%)
Notes to the financial statements
1. Presentation
The consolidated financial statements were prepared in accordance with South
African Statements of Generally Accepted Accounting Practice. The principal
accounting policies employed have been consistently applied in all material
respects.
R`000 Reviewed Audited
2004 2003
2. Operating profit before interest
and taxation
Operating profit before interest and
taxation was calculated after taking
the following items into account:
Amortisation of goodwill (12 338) (692)
Cost of sales (11 030 572) (9 275 639)
Depreciation (41 697) (36 373)
Profit on disposal of discontinued 20 502 -
operations
Profit on sale of fixed assets 2 430 4 856
Impairment of property, plant and (2 546) (11 248)
equipment and retail stores
3. Share capital 150 100
Authorised: 250 000 000
(2003: 100 000) ordinary shares of
0,06 cents (2003: R1,00) each
Issued: 168 763 670 (2003: 96 043) 101 96
ordinary shares of 0,06 cents
(2003: R1,00) each
The amendments to Spar`s share capital made during the current year were as
follows:
An additional 50 000 ordinary shares of R1,00 each were created, thereby
increasing authorised share capital to R150 000 consisting of 150 000 shares of
R1,00 each;
The authorised share capital was thereafter subdivided into 250 000 000 ordinary
shares of 0,06 cents each;
The existing issued share capital of 96 043 ordinary shares of R1,00 each was
sub-divided into 160 071 667 ordinary shares of 0,06 cents each; and
Tiger Brands Limited subscribed for an additional 8 692 003 ordinary shares at
par value of 0,06 cents each. The subscription consideration of R5 215,20 was
settled in cash.
4. Contingent liabilities
The group has guaranteed the finance 178 297 167 311
obligations of certain Spar members amounting
to:
5. Commitments
Future lease payments under non-cancellable
leases:
Not later than one year 107 356 80 917
Later than one year but not later than five
years 434 577 310 343
Later than five years 377 008 254 258
918 941 645 518
The corresponding commitments of Spar retailers 807 726 622 924
to the Group in terms of sub-leases were:
6. Capital commitments
Contracted 4 228 2 468
Approved but not contracted 1 089 6 638
5 317 9 106
7. Material events
No material events have occurred since the year-end, which have
had an effect on the trading operations of the group
Balance sheet Reviewed Audited
R`000 2004 2003
Assets
Non-current assets 573 591 361 427
Property, plant and equipment 295 466 311 214
Goodwill 246 808 6 798
Loans and investments 24 625 38 229
Deferred taxation asset 6 692 5 186
Current assets 1 634 510 1 414 846
Inventories 335 253 315 659
Trade and other receivables 1 299 257 1 062 593
Cash and cash equivalents - 36 594
Total assets 2 208 101 1 776 273
Equity and liabilities
Capital and reserves 437 261 528 443
Minority interest - 1
Non-current liabilities 38 736 37 297
Deferred taxation liability 110 24
Long-term borrowings 1 754 -
Provision for post-retirement medical 36 872 32 486
aid
Amount due to Tiger Brands Limited - 4 787
Current liabilities 1 732 104 1 210 532
Accounts payable 1 419 344 1 166 179
Short-term borrowings 832 -
Bank overdraft 306 762 -
Taxation 5 166 44 353
Total equity and liabilities 2 208 101 1 776 273
Cash Flow statement Reviewed Audited
R`000 2004 2003
Cash generated before: 461 628 396 489
Net working capital changes 64 583 (349 128)
Taxation paid (181 718) (109 296)
Interest paid (3 315) (4 064)
Interest received 12 205 26 025
Dividends paid (383 200) (69 400)
Net cash utilised by operating (29 817) (109 374)
activities
Capital expenditure (51 674) (105 783)
Business acquired
(291 863) (7 427)
Proceeds on disposal of business and 25 189 4 787
fixed assets
Acquisition of minority shareholding (1) -
Net movement on loans 10 602 (11 357)
Net cash utilised by investing (307 747) (119 780)
activities
Proceeds from issue of share capital 5 -
Repayment of long-term borrowings (5 797) -
Net cash utilised by financing (5 792) -
activities
Net decrease in cash and cash (343 356) (229 154)
equivalents
Statement of changes in equity
Share Non- Accumulated Total
Capital distributable profit
R`000 reserves
Balance at 30 96 1 048 343 285 344 429
September 2002
Net profit for the - - 253 482 253 482
year
Dividends - - (69 400) (69 400)
Realisation of - (469) 469 -
revaluation
Foreign exchange - (68) - (68)
translation
Balance at 30 96 511 527 836 528 443
September 2003
Issue of share 5 - - 5
capital (note 3)
Net profit for the - - 291 974 291 974
year
Dividends - - (383 200) (383 200
Realisation of - (566) 566 -
revaluation
Foreign exchange - 39 - 39
translation
Balance at 30 101 (16) 437 176 437 261
September 2004
Nature of business
The group owns and operates six distribution centres that supply and service
independently owned SPAR stores, TOPS liquor outlets and Build it builders
merchant outlets, situated in South Africa and neighbouring countries. The group
has core competencies in the managing of voluntary trading associations and
provides the control and leadership of SPAR, TOPS and Build it in Southern
Africa.
Review of trading results
Pursuant to the group`s unbundling from Tiger Brands Limited, the Board is
pleased to present Spar`s results for the year ended 30 September 2004. The
results exceed the profit forecast published in the pre-listing statement and,
whilst satisfactory, reflect the challenges of trading in a highly competitive
and low inflationary environment. The results include the trading revenues and
profits of Nelspruit Wholesalers (Pty) Limited, which was acquired with effect
from 31 October 2003.
Notwithstanding low levels of inflation and in certain areas deflation, the
company increased revenue (excluding discontinued operations) by 19,9% to R11,8
billion (2003: R9,8 billion). Excluding the contribution from Nelspruit
Wholesalers, revenue increased 11,3%. Against a backdrop of food inflation of
2%-3%, real growth of approximately 8,5% was achieved, which was ahead of market
growth and in line with prior years.
Operating profit before interest and taxation increased by 19,1% to R416,0
million (2003: R349,4 million). Operating profit from the group`s continuing
(distribution centre) operations reflected the competitive trading conditions
that prevailed during the year resulting in a profit growth of 9,2%
The fall in the (continuing operations) trading margin to 3,3% (2003: 3,7%) was
attributable to the amortisation of goodwill on the acquisition of Nelspruit
Wholesalers and start-up costs incurred as a result of the expansion of the
North Rand distribution centre. The lower recovery of costs at the South Rand
distribution centre, resulting from the transfer of a considerable volume of
perishable business to the new North Rand facility, further negatively impacted
the margin. With the North Rand facility now bedded down and perishable volumes
through the South Rand facility growing, it is anticipated that the trading
margin will increase in 2005.
Interest received decreased by 53,1% to R12,2 million (2003: R26,0 million) as
the group utilised cash resources in November 2003 to fund the Nelspruit
Wholesalers acquisition.
The dividend of R350 million paid on 22 September 2004 to Tiger Brands Limited
further reduced cash resources and will result in lower interest receivable in
2005.
The group remains a strong cash generator with net cash generated from operating
activities, before dividends, of R353,3 million.
Headline earnings increased by 9,0% to R284,1 million (2003: R260,6 million).
The return on average equity was a creditable 60,5% (2003: 58,1%).
Discontinued operations
In May 2004 the group disposed of its remaining four company owned SPAR stores,
which resulted in a profit on disposal of R20,5 million. The revenues and
trading profits of these stores to date of disposal, together with the profit on
disposal have been disclosed under the discontinued operations heading.
Unbundling
Without doubt, the most exciting and challenging event of the year was the
unbundling of Spar from holding company Tiger Brands Limited and the subsequent
listing of the company on the JSE Securities Exchange South Africa in October
2004. Spar`s association with Tiger Brands commenced in 1978 when Tiger Brands
took a minority stake in the company. The company became a wholly-owned
subsidiary of Tiger Brands in 1988. The management of Spar express their sincere
appreciation to Tiger Brands for the tremendous support and guidance that has
been given over the years and for the part that Tiger Brands played in the
growth and development of Spar in Southern Africa. The Board is confident that
Spar will continue to deliver shareholder value.
Strategic review and prospects
Spar`s strategy remains to continue growing market share through:
- opening state-of-the-art stores and upgrading existing stores;
- streamlining its logistics and distribution functions;
- attracting a greater share of mass market consumers;
- innovative branding and marketing; and
- commitment to human capital development.
The group has targeted opening an additional 130 SPAR, TOPS and Build it stores
by the end of calendar 2005, on the back of which retail space is anticipated to
increase by more than 5%. This will translate into revenue and market share
growth for the group.
An extension to the KwaZulu-Natal distribution centre is planned and the Lowveld
distribution centre (Nelspruit Wholesalers) will be upgraded.
The roll-out of radio frequency and voice activated picking, which will over
time contribute to improved efficiencies and reduced costs through the supply
chain, will commence in 2005.
Headline earnings per share growth in 2005 is expected to exceed that achieved
in 2004.
Directorate
Spar subscribes to the King II Code of Corporate Governance and has appointed a
number of new non-executive Board members who assumed office on 1 October 2004.
The full Board of directors is:
Independent, non-executive directors: Michael Hankinson (Chairman), David
Gibbon, Rowan Hutchison, Phinda Madi, Harish Mehta and Gugu Moloi.
Executive directors: Peter Hughes (Chief Executive) and Rodney Coe (Finance).
Dividend
During the year dividends of R383,2 million, per share - 227,1 cents (2003:
R69,4 million, per share - 41,1 cents) were paid to Tiger Brands Limited.
Dividend policy
Notwithstanding the comment in the pre-listing statement that an annual year-end
dividend will be declared, the directors expect to recommend the declaration of
an appropriate interim and final dividend.
Reviewed results
These results have been reviewed by Deloitte & Touche, the group`s auditors, and
their unqualified review opinion is available for inspection at Spar`s
registered office.
Abridged annual report
The group`s abridged annual report and notice of annual general meeting will be
mailed to shareholders in early January 2005.
MJ Hankinson PK Hughes
Non-executive Chairman Chief Executive
17 November 2004
Website: www.spar.co.za
Registered office: 22 Chancery Lane, Pinetown
Transfer secretaries: Ultra Registrars (Pty) Limited
Spar is alive with possibilities and as South Africa celebrates ten years of
democracy, the political and economic scenarios continue to improve, providing
an ideal platform for Spar to further its success story and ensure that it
really is `Good for You`.
Peter Hughes
Chief Executive
Date: 17/11/2004 07:00:16 AM
Produced by the JSE SENS Department
