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Super Group - Unaudited results for the six months ended 30 September 2005
Super Group Limited
(Incorporated in the Republic of South Africa)
(Registration number:1943/016107/06)
(ISIN number: ZAE000011334)
(Share code:SPG)
("Super Group")
Unaudited results for the six months ended 30 September 2005
* Revenue + 20%
* Operating income + 28%
* Headline earnings per share + 20%
* Cash generated from operations R440 million
Commentary
Super Group delivered solid growth from operations for the period under review.
Revenue increased 20% to R4,8 billion. Organic revenue growth of 17% was driven
by strong growth in traditionally low margin businesses. Operating margins,
after International Financial Reporting Standards adjustments, increased from
6,4% to 6,8% resulting in operating income increasing 28% to R330 million.
Headline earnings per share increased 20% from 49,8 cents to 59,6 cents.
Cash generated from operations increased 254% to R440 million. Improved working
capital management resulted from increased emphasis on cash management within
each business. The increase in supply chain trade receivables, the prepayment of
expenses and dealerships inventories was financed by an increase in trade
payables.
Cash was invested in assets required for new supply chain contracts to ensure
that the business meets the growing demand for integrated supply chain
management solutions. In particular, R160 million was invested in Super Park, a
new warehousing facility. These funds will be refinanced using approved property
funding. Furthermore, effective 1 April 2005, Super Group acquired 70% of SMB
Fleet Management Pty Limited, the leading provider of private consumer leases in
Australia which will complement the FleetAustralia business. During the period,
the Super Group Share Trust acquired an additional 9,4 million shares at an
average price of R10,91 cents to meet future obligations in respect of the Share
Option Trust.
The balance sheet of the group remains strong with cash and cash equivalents of
R805 million. At 30 September 2005, Super Group had net debt of R560 million and
gearing of 34%, after excluding full maintenance leasing and Australian ring-
fenced debt.
Divisional overview
Supply Chain Division
Supply Chain Management produced pleasing results. Revenue increased 16% to R1
billion and operating income increased 24% resulting in operating margins of
14%. This operating margin was negatively affected by the strong revenue growth
in the lower margin procurement and bulk materials handling businesses. Super
Group continues to extend the scope of services within clients and be awarded
new contracts.
Fleet Solutions reported strong growth in revenue and operating income primarily
as a result of the acquisition of SMB Fleet Management and the annualisation of
the FleetAustralia acquisition. The South African operations performed in line
with expectations increasing revenue and operating income by 15% and 11%
respectively. Effective 1 June 2005, FleetAfrica was awarded a five-year
contract to manage the Isuzu Maintenance and Service Plans on behalf of General
Motors South Africa. FleetAfrica has been re-awarded the contract for the supply
of the fleets and fleet-related services on an outsourced basis for the City of
Johannesburg. The Australian operations performed according to expectations in a
competitive market.
African Transport performed slightly ahead of expectations on the back of
improved transport activity and cost containment. The challenging trading
conditions within the various regions continue to be actively managed. The re-
consolidation of the Zimbabwean operations and the adoption of hyperinflation
accounting did not have a material impact on previously reported shareholders"
equity. Opening reserves were positively impacted by R65 million which was
offset by a R73 million reduction in the prior year headline earnings. In the
period under review, a loss of R7 million was included in headline earnings.
Retail Supply Chain comprising Super Group Auto Parts and Mica, increased
revenue by 45% and operating income by 25%. The automotive parts business
performed below expectations, however market share was maintained in highly
competitive market conditions. The once-off costs of implementing the recently
adopted single-brand strategy in the automotive parts business, will negatively
affect performance in the next six months. The home improvement business,
trading under the Mica brand, performed in line with expectations. Operating
margin was depressed by the additional costs of integrating Mica"s business into
the Retail Supply Chain business.
Automotive Division
Dealerships benefited from the buoyant industry conditions. Performance was
adversely affected by the weakness in the used vehicle market, especially in the
commercial vehicle segments, resulting from competitively priced imported new
vehicles.
Services
This division, which comprises Group treasury and insurance, performed according
to expectations. Strong revenue growth resulted from increased insurance
activities, however, the re-insurance costs of such risks resulted in no
material increase in operating income. The fair value adjustment relates to a
R37 million reduction in the carrying value of the Group"s investment in CIC
Holdings Limited, following their decision to dispose of TFD Network Africa
(Pty) Limited.
Basis of preparation and accounting policies
The Group has adopted International Financial Reporting Standards (IFRS) for the
year ending 31 March 2006. The interim results have been prepared in accordance
with the Group"s accounting policies which comply with IFRS, IAS34 - Interim
financial reporting, the Listings Requirements of the JSE and the Companies Act
of South Africa. Comparative figures have been restated where applicable as
required by IFRS.
The following significant new accounting policies were applied for IFRS
reporting:
* Property, vehicles and equipment - Component approach accounting has been
applied where parts of an item of property, plant and equipment have different
useful lives. Residual values and useful lives of all assets are assessed
annually.
* Foreign exchange - Foreign exchange differences arising on translation of all
foreign operations are recognised directly in a separate component of equity
(foreign currency translation reserve).
* Basis of consolidation - Subsidiaries in the Group that operate under severe
long-term restrictions which significantly impair their ability to transfer
funds, were not consolidated under SA GAAP. These exclusions are no longer
provided for in IAS27 (revised) and such subsidiaries are now consolidated.
* Share-based payments - Shares that were granted post 7 November 2002 to
employees and which remain unvested at 1 January 2005, are measured at fair
value at grant date. The expense is recognised over the vesting period, and
adjusted to reflect actual levels of vesting with a corresponding increase in
the equity settled share-based payment reserves.
The change in accounting interpretation for operating leases has resulted in
payments made under fixed escalation operating leases being recognised in the
income statement on a straight-line basis over the term of the lease. Previously
operating lease payments were expensed on a cash flow basis based on an
interpretation of the standard that was generally accepted in South Africa. The
required adjustment (net of the deferred taxation effect) has been made as
required by IAS8 with the necessary restatement of comparative figures.
Future developments under IFRS
The consolidated financial statements have been prepared on the Group"s
expectation of standards that will be applicable at 31 March 2006, being the
first annual financial statements that the Group will prepare under IFRS. The
preliminary opening balance sheet may not correspond exactly to the opening
balance sheet that will be used to prepare the 2006 IFRS consolidated financial
statements, due to one or more of the following reasons:
* The accounting statements are subject to ongoing review and may change;
* The consolidated financial statements have been prepared based on the outcome
expected at this point in time, of the technical issues and exposure drafts
currently being examined by the IASB and IFRIC, which may be applicable to the
2006 IFRS consolidated financial statements;
* Interpretations may differ as practice develops; and
* Tax legislation and tax-related interpretations might develop further.
The Group continues to account for its black economic empowerment transaction on
the same basis as disclosed in the 2005 annual report, pending the finalisation
of the accounting standards relating to these transactions.
Capital commitments, contingent liabilities and other commitments
The group has authorised, but not yet contracted for, capital commitments of
R340 million, excluding full maintenance lease assets. Contingent liabilities
and other commitments are consistent with those disclosed in 2005 annual report.
Prospects
The next six months will be impacted upon by the buoyant vehicle market;
continued success of extending the scope of services to supply chain clients;
the magnitude of retail supply chain restructuring costs; the inflow of major
fleet outsourcing contracts and the challenging operating conditions within our
African business.
Appreciation
We extend our appreciation to our directors, management and staff for their
valued efforts as well as to our advisors, financiers, customers, suppliers and
shareholders who are thanked for their continuing belief in and support of Super
Group.
Dividends
In line with the Company"s dividend policy, no interim dividend has been
declared.
On behalf of the board
Larry Lipschitz Dheven Dharmalingam
Chief Executive Officer Group Financial Director
9 November 2005
CONSOLIDATED BALANCE SHEETS
30 September 30 September 31 March
2005 2004 2005
Unaudited Unaudited Audited
R"000 R"000* R"000*
ASSETS
Property, 981 355 735 729 766 450
vehicles and
equipment
Full maintenance 1 184 420 1 148 828 1 245 162
lease assets
Goodwill and 1 134 787 799 493 976 756
intangibles
Investments and 164 421 202 878 196 335
loans
Deferred tax 60 348 97 610 63 671
assets
Current assets 3 219 984 2 881 249 2 986 239
Inventories 857 789 804 735 778 725
Trade and 1 516 741 1 329 740 1 297 933
other
receivables
Cash and cash 845 454 746 774 909 581
equivalents
Total assets 6 745 315 5 865 787 6 234 613
EQUITY AND
LIABILITIES
Capital and
reserves
Share capital 1 663 703 1 588 031 1 809 008
and reserves
Minority 143 944 51 211 110 987
interest
Liabilities
Fund reserves 131 326 140 600 104 064
Deferred tax 168 897 179 429 193 079
liabilities
Interest-bearing 2 708 425 2 157 721 2 372 035
debt
- Non-current - 1 069 970 738 169 369 983
Full maintenance
lease
liabilities
- Australian 208 144 185 535 130 600
liabilities
- Corporate bond 1 305 406 984 035 1 177 441
and other
- Current 24 783 181 484 627 666
- Full
maintenance
lease
liabilities
- Other 59 361 65 289 58 802
- Bank overdraft 40 761 3 209 7 543
Current 1 929 020 1 748 795 1 645 440
liabilities
Total equity and 5 865 787 6 234 613
liabilities 6
745 315
Net asset value 468,4 434,2 495,7
per share
cents
Net tangible 148,9 215,6 228,1
asset value per
share cents
CONSOLIDATED INCOME STATEMENTS
Six months Six months Twelve
months
30 September 30 September 31 March
2005 2004 2005
Unaudited Unaudited % Audited
R"000 R"000* change R"000*
Revenue 4 814 192 4 016 928 19,8 8 444 942
Trading income before 484 468 408 429 18,6 895 106
depreciation
Depreciation 104 199 117 905 238 781
Trading income 380 269 290 524 30,9 656 325
Translation losses 8 337 8 078 19 600
Goodwill 4 098 - 27 404
impairment/amortisation
Net loss on
disposal/closure of
businesses and fair
value adjustments 38 204 24 224 27 803
Operating income 329 630 258 222 27,7 581 518
Net interest costs 89 377 77 576 153 328
Income from associates 2 500 4 718 6 775
(net of taxation)
Profit before taxation 242 753 185 364 31,0 434 965
Taxation 48 978 38 131 103 220
Profit after taxation 193 775 147 233 31,6 331 745
Attributable to: 21 836 6 685 28 901
Minorities
Attributable to: 171 939 140 548 22,3 302 844
Ordinary shareholders
Number of shares in
issue ("000)
- Total effective 355 201 365 726 (2,9) 364 929
- Weighted 359 315 330 854 8,6 348 006
- Diluted 378 490 346 506 9,2 364 278
Basic earnings per 47,9 42,5 12,7 87,0
share (cents)
Headline earnings per 59,6 49,8 19,7 102,9
share (cents)
Diluted earnings per 45,4 40,6 11,8 83,1
share (cents)
Diluted headline 56,6 47,6 18,9 98,3
earnings per share
(cents)
Dividend per ordinary
share (cents) paid
during
the period 37,0 32,0 15,6 32,0
Final dividend per
ordinary share (cents)
declared
subsequent to 31 March 37,0
2005
RECONCILIATION OF HEADLINE EARNINGS
Net profit for 171 939 140 548 22,3 302 844
the period
Adjusted for:
Net loss on
disposal/closure
of businesses
and fair
value 38 204 24 224 27 803
adjustments
Goodwill 4 098 - 27 404
impairment
Headline 214 241 164 772 30,0 358 051
earnings for the
period
CONSOLIDATED CASH FLOW STATEMENTS
Cash flows from
operating
activities
Operating cash flow 438 036 398 318 820 733
before working
capital changes
Working capital 2 457 (273 845) (284 675)
changes
(Increase) in (82 019) (58 720) (45 920)
inventories
(Increase) in (209 597) (227 616) (141 972)
trade and other
receivables
278 537 60 250 (33 444)
Increase/(decrease)
in trade and other
payables
28 736 (6 228) (16 645)
Increase/(decrease)
in fund reserves
Movement in (13 200) (41 531) (46 694)
foreign currency
translation reserve
Cash generated from 440 493 124 473 536 058
operations
Net interest paid (77 806) (78 109) (154 903)
Net dividend paid (137 687) (114 118) (112 670)
Taxation paid (39 895) (7 902) (67 282)
Net cash 185 105 (75 656) 201 203
inflow/(outflow)
from operating
activities
Cash flows from
investing
activities
Net cost on (133 330) (377 653) (409 339)
acquisition of
subsidiaries and
operations
Additions to
operating fixed
assets - net
of disposals (292 664) (171 631) (271 148)
Additions to full
maintenance lease
assets -
net of disposals (49 876) (96 759) (249 393)
(Increase)/decrease (2 439) 9 436 (26 106)
in investments and
loans
Net cash outflow (478 309) (636 607) (955 986)
from investing
activities
Cash flows from
financing
activities
Net (cost)/proceeds
of share purchases
and
share issues (101 833) 263 292 274 955
Increase in 195 659 977 205 1 082 660
interest-bearing
debt
Increase/(decrease) 97 101 (53 100) 30 233
in full maintenance
debt
Net cash inflow 190 927 1 187 397 1 387 848
from financing
activities
Net
(decrease)/increase
in cash and
cash equivalents (102 277) 475 134 633 065
Cash and cash
equivalents at
beginning
of period 902 038 268 322 268 322
Movement in foreign 4 932 109 651
currency
translation reserve
Cash and cash 804 693 743 565 902 038
equivalents at end
of period
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS" EQUITY
Balance at beginning 1 859 769 1 281 205 1 281 205
as previously
reported
Adoption of IFRS and
change in
interpretation
of accounting (50 764) 28 163 28 163
policies
Property, vehicles (2 708) (3 373) (3 373)
and equipment
Reconsolidation and
hyperinflation -
Zimbabwean (9 775) 65 406 65 406
subsidiaries
Circular 7/2005 - (40 598) (33 870) (33 870)
operating lease
straightlining
Translation of 2 317 - -
goodwill at closing
rate
Share (101 836) 263 293 330 981
(repurchases)/issues,
net of expenses
Translation of (78 090) (10 573) (19 528)
foreign entities
Net profit for the 171 939 140 548 302 844
period
Ordinary dividends (137 315) (114 605) (114 657)
Balance at end of the 1 663 703 1 588 031 1 809 008
period
Comprising:
Share capital 40 688 35 673 41 627
Share premium 263 684 349 008 364 581
Accumulated profit 1 054 947 856 922 1 020 898
Share repurchase (238 012) (238 012) (238 012)
programme
Equity settled share- 29 208 15 540 22 038
based payment reserve
Net surplus on 556 036 556 036 556 036
disposal of
investments
Revaluation reserve 22 205 22 717 22 488
Translation of (70 814) (15 340) 14 156
foreign entities
Contingency reserve 5 761 5 487 5 196
1 663 703 1 588 031 1 809 008
* Comparative figures are restated, where necessary, in accordance with current
period classifications and accounting policies
RECONCILIATION OF SOUTH AFRICAN GAAP TO IFRS
Twelve months Six months
31 March 2005 30 Sept 2004
Audited Unaudited
R`000 R"000
Net profit as 395 343 172 403
previously reported -
SA GAAP
IFRS2 - share-based (14 400) (7 902)
payments
Property, vehicles and 1 181 1 148
equipment
Reconsolidation and (72 552) (22 455)
hyperinflation -
Zimbabwean
subsidiaries
Restated net profit - 309 572 143 194
IFRS
Circular 7/2005 - (6 728) (2 646)
operating lease
straightlining
Restated net profit 302 844 140 548
after revised
interpretation on
operating leases and
IFRS
TRADING INCOME AFTER NET INTEREST COSTS
Six months Six months Twelve months
Sept 2005 Sept 2004 March 2005
% % %
Rand 67 78 75
Australian 14 7 7
dollar
US dollar and 19 15 18
other
100 100 100
SEGMENTAL ANALYSIS
Sept Sept March
2005 2004 % 2005
Revenue R"000 R"000 change R"000
Supply Chain 1 006 252 868 793 15,82 1 755 430
Management
African 157 089 322 392 (51,27) 479 666
Transport
Fleet Solutions 494 480 338 956 45,88 747 862
Retail Supply 1 084 682 747 798 45,05 1 876 453
Chain
Dealerships 1 909 059 1 622 173 17,69 3 439 053
Services 162 630 116 816 39,22 146 478
Total Group 4 814 192 4 016 928 19,85 8 444 942
Trading income
Supply Chain 141 266 114 207 23,69 281 362
Management
African (7 720) (4 276) (80,54) (53 863)
Transport
Fleet Solutions 124 068 88 305 40,50 185 829
Retail Supply 51 872 41 549 24,85 99 080
Chain
Dealerships 65 550 47 678 37,48 121 339
Services 5 233 3 061 70,96 22 578
Total Group 380 269 290 524 30,89 656 325
Operating
income
Supply Chain 141 266 114 207 23,69 280 193
Management
African (12 333) (7 858) (56,95) (84 913)
Transport
Fleet Solutions 121 568 88 305 37,67 185 829
Retail Supply 51 872 41 549 24,85 98 908
Chain
Dealerships 65 550 23 454 179,48 86 018
Services (38 293) (1 435) - 15 483
Total Group 329 630 258 222 27,65 581 518
Registered office 27 Impala Road, Chislehurston, Sandton, 2196 Private Bag
X9973, Sandton, 2146
Transfer secretaries Computershare Investor Services 2004 (Pty) Limited
Ground Floor, 70 Marshall Street, Johannesburg, 2001 PO Box 61051,
Marshalltown, 2107
Sponsor Deutsche Securities Member of Deutsche Bank Group
Directors P. Malungani* (Chairman), P. Vallet* (Deputy Chairman), L. Lipschitz
(Chief Executive Officer), S. Abrahams*, L. Bergman*, D. Dharmalingam, B.
Greenstone*, L. Johnston,
B. Shongwe*, P. Smith, B. Tshili* * Non-executive Austrian
Group Company Secretary J. van Es
Super Group Limited (Incorporated in the Republic of South Africa)
(Registration number 1943/016107/06) ISIN number ZAE000011334 Share code SPG
www.supergrp.com
Date: 10/11/2005 07:00:52 AM Produced by the JSE SENS Department
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