| Tue 15 Nov 2005, 12:00 | | The Spar Group Limited - Audited results for the y |
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The Spar Group Limited - Audited results for the year ended 30 September 2005
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")
AUDITED RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2005
* TURNOVER +15.2%
* OPERATING PROFIT +30.1%
* HEADLINE EARNINGS PER SHARE +26.3%
* FINAL DIVIDEND 64.5 CENTS PER SHARE
INCOME STATEMENTS
year ended 30 September
R"000 2005 2004 Change
REVENUE 13 737 483 12 104 563 13.5%
Turnover 13 598 961 11 985 151 13.5%
Continuing operations 13 598 961 11 803 014 15.2%
Discontinued operations - 182 137
Cost of sales 12 398 996 10 886 466
Gross profit 1 199 965 1 098 685
Other income 138 522 119 412
Trading expenses (823 928) (822 590)
Warehousing and
distribution expenses (443 926) (396 731)
Marketing and selling expenses (206 897) (221 427)
Administration and
information technology expenses (173 105) (204 432)
OPERATING PROFIT 514 559 395 507 30.1%
Interest received 5 637 12 205
Interest paid (5 457) (3 315)
Profit on disposal of
discontinued operations - 20 502
Net profit before taxation 514 739 424 899
Taxation (157 111) (132 925)
NET PROFIT FOR THE YEAR 357 628 291 974 22.5%
HEADLINE EARNINGS RECONCILIATION
Net profit for the year 357 628 291 974
Adjusted for:
Loss/(profit) on sale
of property, plant and
equipment and retail
stores, net of impairments
and net of taxation 1 813 (20 177)
Amortisation of goodwill - 12 338
HEADLINE EARNINGS 359 441 284 135 26.5%
EARNINGS PER SHARE (CENTS)
Headline earnings per share 212.7 168.4 26.3%
Fully diluted headline
earnings per share 208.0 168.4
Earnings per share 211.6 173.0 22.3%
Fully diluted earnings per share 206.9 173.0
SALIENT STATISTICS
Net asset value per share (cents) 442.8 259.1
Net margin - continuing operations (%) 3.8 3.3
Debt: Equity ratio (%) 14.5 81.8
Return on average equity (%) 60.3 60.5
STATEMENTS OF CHANGES IN EQUITY
Share Non-
capital distributable Accumulated
R"000 and premium reserves profit Total
Balance at 30
September 2003 96 511 527 836 528 443
Share capital
issued 5 - - 5
Net profit for
the year - - 291 974 291 974
Dividends
declared - - (383 200) (383 200)
Release of the
revaluation
reserve - (566) 566 -
Foreign exchange
translation - 39 - 39
Balance at 30
September 2004 101 (16) 437 176 437 261
Share capital
and premium
issued 5 279 - - 5 279
Net profit for
the year - - 357 628 357 628
Dividends
declared - - (50 727) (50 727)
Foreign exchange
translation - (6) - (6)
Balance at 30
September 2005 5 380 (22) 744 077 749 435
BALANCE SHEETS at 30 September
R"000 2005 2004
ASSETS
NON-CURRENT ASSETS 639 805 573 591
Property, plant and equipment 370 225 295 466
Goodwill 245 568 246 808
Loans 17 560 24 625
Deferred taxation asset 6 452 6 692
CURRENT ASSETS 2 056 454 1 683 056
Inventories 384 857 335 253
Trade and other receivables 1 570 213 1 292 909
Prepayments 32 642 6 348
Bank balances - Guilds 68 742 48 546
TOTAL ASSETS 2 696 259 2 256 647
EQUITY AND LIABILITIES
CAPITAL AND RESERVES 749 435 437 261
Share capital and premium 5 380 101
Non-distributable reserves (22) (16)
Accumulated profit 744 077 437 176
NON-CURRENT LIABILITIES 41 791 38 736
Deferred taxation liability 25 110
Post retirement medical aid provision 40 772 36 872
Long-term borrowings 994 1 754
CURRENT LIABILITIES 1 905 033 1 780 650
Trade payables and accruals 1 741 162 1 378 279
Bank overdrafts - SPAR 68 536 355 308
Current portion of long-term borrowings 39 094 832
Provisions 49 980 41 065
Taxation 6 261 5 166
TOTAL EQUITY AND LIABILITIES 2 696 259 2 256 647
CASH FLOW STATEMENTS year ended 30 September
R"000 2005 2004
CASH FLOWS FROM OPERATING ACTIVITIES 370 475 (29 817)
Cash generated from operations 572 961 526 211
Interest received 5 270 12 205
Interest paid (1 179) (3 315)
Taxation paid (155 850) (181 718)
Dividends paid (50 727) (383 200)
CASH FLOWS FROM INVESTING ACTIVITIES (61 203) (307 747)
Investment to maintain operations (24 678) (11 929)
Replacement of property,
plant and equipment (29 293) (21 019)
Proceeds on disposal
of property, plant and equipment 4 615 9 090
Investment to expand operations (44 888) (30 655)
Acquisition of subsidiaries - (291 863)
Disposal of retail division - 17 092
Disposal of subsidiaries - (993)
Acquisition of minority shareholding - (1)
Net movement on loans,
investments and goodwill 8 363 10 602
CASH FLOWS FROM FINANCING ACTIVITIES (2 304) (5 792)
Proceeds from issue of
share capital and premium 5 279 5
Repayment of long-term borrowings (7 583) (5 797)
NET INCREASE/(DECREASE)
IN CASH AND CASH EQUIVALENTS 306 968 (343 356)
CASH AND CASH EQUIVALENTS
AT 30 SEPTEMBER 2004 (306 762) 36 594
CASH AND CASH EQUIVALENTS
AT 30 SEPTEMBER 2005 206 (306 762)
Analysed:
Bank overdrafts - SPAR (68 536) (355 308)
Bank balances - Guilds 68 742 48 546
NOTES TO THE FINANCIAL STATEMENTS
1.BASIS OF PRESENTATION
The consolidated financial statements are prepared in accordance with the South
African Statements of Generally Accepted Accounting Practice. The accounting
policies used in the preparation of the financial statements are consistent
with those applied in the annual financial statements of the prior year, except
for the adoption of AC140 "Business Combinations". With effect from 1 October
2004, the group no longer amortises goodwill. Except for the aforementioned,
the following principal accounting policies have been consistently applied in
all material respects.
2. COST OF SALES
Cost of sales represents the net cost of purchases from suppliers, after
rebates and incentive allowances. The 2004 comparative figures have been
restated to exclude distribution expenses, which expenses have now been
included under the heading "warehousing and distribution expenses". The
restatement amounted to R144.1 million.
3. DEPRECIATION
During the current financial year, the group reassessed the estimates of the
useful lives of certain assets, principally within the vehicle, plant and
machinery and computer equipment categories, in order to more accurately
reflect the specific employment of these assets by the group. This change
resulted in a reduction in the depreciation charge for the year of
R10.2million.
4.SHARE CAPITAL AND PREMIUM 2005 2004
R"000 R"000
Authorised
250 000 000 (2004: 250 000 000) ordinary
shares of 0.06 cents (2004: 0.06 cents) each 150 150
Issued
169 260 035 (2004: 168 763 670) ordinary
shares of 0.06 cents (2004: 0.06 cents) each 102 101
Share premium account
Balance at beginning of year - -
Shares issued 5 278 -
Total share capital and premium 5 380 101
Pursuant to the exercising of options an additional 496 365 ordinary shares of
0.06 cents each were issued,thereby increasing the issued share capital to
R101 556 consisting of 169 260 035 shares of 0.06 cents each.
The weighted average number of shares used in the calculation of earnings per
share and headline earnings per share was 169 010 748 (2004: 168 763 670).
Fully diluted earnings and headline earnings per share was based on a weighted
average number of 172 822 332 ordinary shares.
5. CONTINGENT LIABILITIES 2005 2004
R"000 R"000
The company has guaranteed
the finance obligations of
certain SPAR retailer
members to the amount of: 179 272 178 297
6. OPERATING LEASES
Operating lease income and expenditure
is recognised in the income statement
on a straight line basis
over the lease term. 2005 2004
R"000 R"000
Operating lease charges
reported in operating profit
Immovable property 3 088 6 223
- lease rentals 86 944 76 038
- sub-lease recoveries (83 856) (69 815)
Plant, equipment and vehicles 5 064 1 861
Operating lease commitments
Future minimum lease payments
under non-cancellable
operating leases are as follows: 1 084 224 918 941
- land and buildings 1 082 034 914 520
- other 2 190 4 421
The future minimum sub-lease
recoveries under non-
cancellable property leases are: (1 061 527) (807 727)
22 697 111 214
7. CAPITAL COMMITMENTS
Contracted 48 454 4 228
Approved but not contracted 25 924 1 089
74 378 5 317
8. POST BALANCE SHEET EVENTS
The directors are not aware of any material events that have occurred
subsequent to 30 September 2005 which may have an impact on the group"s
reported financial position at this date.
NATURE OF BUSINESS
The group owns and operates six distribution centres that supply and service
independently owned SPAR food stores, TOPS liquor outlets and Build it building
materials outlets, situated in South Africa and neighbouring countries. The
group has core competencies in distribution and the managing of voluntary
trading organisations. The group provides the control and leadership for SPAR,
TOPS and Build it in Southern Africa.
REVIEW OF TRADING RESULTS
Against a background of continuing low levels of inflation (2% - 3%) the group
achieved a turnover increase of 15.2%. Although the gross margin declined
slightly, improvements in operating efficiencies and tight cost controls
resulted in an improved net margin. Operationally all distribution centres
performed well resulting in operating profit on a like for like basis
increasing by 22%.
Savings arising from a lower depreciation charge (the result of a revision to
the estimated lives of operating assets), the cessation of the payment of the
administration fee to the group"s former holding company, and the benefit of
not having to write off goodwill, boosted operating profit growth to 30.1% on
prior year.
Headline earnings of R359 million (2004: R284 million) up 26.5%, translated
into headline earnings per share of 212.7 cents, a 26.3% increase on 2004
headline earnings per share.
The group remained a substantial generator of cash, and this enabled the group
to significantly reduce its overdraft to R69 million at year end
(2004: R355million).
OPERATIONS
During the year, a net 110 new SPAR, Build it and TOPS at SPAR stores were
opened. SPAR stores now total 783 in number, with Build it at 178 stores and
TOPS 172 stores. SPAR retail store sales once again grew ahead of the growth of
the overall market enabling SPAR to grow its market share. Retail store selling
space increased 3.3% to 687 335 m2.
Good sales growth in all retail store formats has driven growth through the
group"s distribution centres. Continued progress has been made growing liquor
sales, via TOPS outlets, and building materials, through Build it.
Marketing spend increased, resulting in greater exposure on television and in
the national press. Private label products sold through the group"s three store
formats, SPAR, Build it and TOPS, received increased focus.New private label
branded products were launched and improved packaging and advertising
introduced. The group continued to sponsor women in sport.
DISTRIBUTION FACILITIES
A 6 700 m2 extension to the KwaZulu-Natal distribution centre was completed
and brought into use. This additional capacity will enable the distribution
centre to handle increased dry goods volumes.
Plans are in place to commence the construction of a 5 700 m2 dry goods and
perishable facility expansion at the Eastern Cape distribution centre. This
additional facility, which is budgeted to cost R22 million, will come on stream
in July 2006.
The group"s major productivity initiative, the implementation of radio
frequency for inbound and outbound processes, was successfully piloted at the
KwaZulu-Natal distribution centre. By end 2006 radio frequency based inbound
and outbound processes will be fully operational at the South Rand distribution
centre and outbound processes will have been introduced at the North Rand
distribution centre. This technology will have a positive impact on
productivity and accuracy within operations. Capex for radio frequency
installations is forecast at R11 million for 2006 with a further R20 million to
be spent in 2007.
Group capex for 2006 is budgeted at R157 million.
DIVIDEND
In line with the group"s current dividend cover policy of 2.25 times, a final
dividend of 64.5 cents per share has been declared, bringing the full year
dividend to 94.5 cents.
LOOKING FORWARD 2006
We are confident that the group will again show good revenue growth in 2006
with positive leverage being achieved in terms of growth of operating profit.
Earnings growth will be adversely affected by a substantial increase in the
STC charge. This increased charge will arise due to the levying during 2006 of
STC on the 2005 final dividend and the 2006 interim dividend. During 2005 the
group only paid an interim dividend.
We anticipate the group continuing to generate substantial cash flows during
2006 which will result in a considerable increase in interest receivable.
In the event of the forecast cash flows materialising, consideration will be
given to reducing the dividend cover.
AUDITED RESULTS
These results have been audited by Deloitte & Touche, the group"s auditors,
and their unqualified opinion is available for inspection at SPAR"s registered
office.
ANNUAL REPORT
The group"s annual report and notice of annual general meeting will be mailed
to shareholders during December 2005.
IFRS
The group"s 2006 financial statements will be prepared in accordance with IFRS
reporting standards. Other than for the effect of IFRS 2, accounting for share
based payments, it is not anticipated that IFRS reporting standards will have
a material effect on the group"s results.
MJ Hankinson
Chairman
PK Hughes
Chief Executive
DECLARATION OF ORDINARY DIVIDEND
Notice is hereby given that a final dividend of 64.5 cents per share was
declared on 14 November 2005, payable on 12 December 2005.
The salient dates for the payment of the final dividend are detailed below:
Last day to trade cum-dividend Friday, 2 December 2005
Shares to commence trading ex-dividend Monday, 5 December 2005
Record date Friday, 9 December 2005
Payment of dividend Monday,12 December 2005
Shareholders will not be permitted to dematerialise or rematerialise their
share certificates between Monday, 5 December 2005 and Friday, 9 December 2005,
both days inclusive.
By order of the board
RC Fenner
Secretary
Pinetown
14 November 2005
DIRECTORATE AND ADMINISTRATION
DIRECTORS: MJ Hankinson* (Chairman), PK Hughes (Chief Executive),
RW Coe, DB Gibbon*, RJ Hutchison*, MP Madi*, HK Mehta* *Non-executive
COMPANY SECRETARY: RC Fenner
REGISTERED OFFICE: 22 Chancery Lane, PO Box 1589, Pinetown, 3600
ISIN: ZAE000058517 JSE code: SPP
TRANSFER SECRETARIES: Ultra Registrars (Pty) Limited,
PO Box 4844, Johannesburg, 2000
AUDITORS: Deloitte & Touche
PO Box 243, Durban, 4000
SPONSOR: Rand Merchant Bank (A division of FirstRand Bank Limited)
PO Box 786273, Sandton, 2146
BANKERS: First National Bank
PO Box 4130, Umhlanga Rocks, 4320
WEBSITE: www.spar.co.za
Date: 15/11/2005 12:00:20 PM Produced by the JSE SENS Department
