| Wed 10 May 2006, 10:00 | | Spar - Unaudited interim results for the six month |
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SPP
SPP
Spar - Unaudited interim results for the six months ended 31 March 2006
THE SPAR GROUP LIMITED
(Registration number: 1967/001572/06)
Share code: SPP
ISIN Number: ZAE000058517
("Spar")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2006
* OPERATING PROFIT +18.3%
* HEADLINE EARNINGS PER SHARE +16.8%
* INTERIM DIVIDEND 48 CENTS PER SHARE +60%
INCOME STATEMENTS
Unaudited Restated Restated
Six months Six months Year
ended ended ended
R"000 Mar 2006 Change Mar 2005 Sept 2005
REVENUE 8 231 197 22.6% 6 714 924 13 737 483
Turnover 8 153 567 22.7% 6 647 507 13 598 961
Cost of sales (7 453 749) (6 048 950) (12 398 996)
Gross profit 699 818 598 557 1 199 965
Other income 77 630 67 417 138 522
Operating expenses (467 351) (403 761) (839 045)
PROFIT FROM OPERATIONS 310 097 18.3% 262 213 499 442
Interest received 7 509 2 177 5 637
Interest paid (2 725) (4 651) (5 457)
Share of profit of associate 547 506 181
Net profit before taxation 315 428 21.2% 260 245 499 803
Taxation (109 018) (83 060) (157 165)
NET PROFIT FOR THE PERIOD 206 410 16.5% 177 185 342 638
HEADLINE EARNINGS
RECONCILIATION
Net profit for the period 206 410 177 185 342 638
Adjusted for:
(Profit)/loss on sale of
property, plant and equipment,
net of impairments and net of
taxation effect (267) (1 300) 1 813
HEADLINE EARNINGS 206 143 17.2% 175 885 344 451
EARNINGS PER SHARE (CENTS)
Headline earnings per share 121.7 16.8% 104.2 203.8
Fully diluted headline earnings
per share 117.4 102.2 199.3
Earnings per share 121.8 16.1% 104.9 202.7
Fully diluted earnings per share 117.6 103.0 198.3
SALIENT STATISTICS
Net asset value per
share (cents) 507.8 369.6 443.6
Net margin (%) 3.8 3.9 3.7
Debt: equity ratio (%) 9.4 30.8 14.5
Return on average equity (%) 25.6 27.3 57.7
STATEMENTS OF CHANGES IN EQUITY
Unaudited Restated Restated
R"000 Mar 2006 Mar 2005 Sept 2005
Total capital and reserves
at 30 September 2004
- as previously reported 437 261 437 261
IFRS adjustments (Refer Note 1):
Share based payment reserve (IFRS 2) 3 367 3 367
Investment in associate (IAS 28) 5 012 5 012
Share based payments (IFRS 2) (3 367) (3 367)
Post retirement medical aid provision
(IFRS 1 election) (3 766) (3 766)
- unrealised losses recognised (5 380) (5 380)
- deferred taxation 1 614 1 614
Total capital and reserves at
beginning of period
- as restated 750 808 438 507 438 507
Net profit for the period 206 410 177 185 342 638
Net profit for the period as
previously reported 182 981 357 628
Deferred taxation rate change - (54)
IFRS adjustments (Refer Note 1):
Investment in associate (IAS 28) 506 181
Share based payments (IFRS 2) (6 302) (15 117)
Share based payment reserve (IFRS 2) 8 599 6 302 15 117
Share capital and premium issued 5 161 2 805 5 279
Dividends declared (109 236) - (50 727)
Foreign currency exchange translation (9) (5) (6)
Total capital and reserves
at end of period 861 733 624 794 750 808
BALANCE SHEETS
Unaudited Restated Restated
R"000 Mar 2006 Mar 2005 Sept 2005
ASSETS
NON-CURRENT ASSETS 713 163 636 436 646 558
Property, plant and equipment 430 202 350 169 370 225
Goodwill 245 568 245 568 245 568
Investment in associate 5 740 5 518 5 193
Loans 24 519 23 730 17 560
Deferred taxation asset 7 134 11 451 8 012
CURRENT ASSETS 2 349 557 1 792 408 2 056 454
Inventories 438 676 348 930 384 857
Trade receivables 1 842 774 1 386 588 1 570 213
Prepayments 3 999 2 281 32 642
Bank balances - Guilds 64 108 54 609 68 742
TOTAL ASSETS 3 062 720 2 428 844 2 703 012
EQUITY AND LIABILITIES
CAPITAL AND RESERVES 861 733 624 794 750 808
Share capital and premium 10 541 2 906 5 380
Non-distributable reserves 27 052 9 648 18 462
Retained earnings 824 140 612 240 726 966
NON-CURRENT LIABILITIES 49 900 44 479 47 171
Deferred taxation liability - - 25
Post retirement medical
aid provision 48 552 44 202 46 152
Long-term borrowings 1 348 277 994
CURRENT LIABILITIES 2 151 087 1 759 571 1 905 033
Trade payables and accruals 2 028 771 1 524 484 1 741 162
Bank overdrafts 42 845 150 866 68 536
Current portion of
long-term borrowings 36 658 41 600 39 094
Provisions 24 147 20 299 49 980
Taxation 18 666 22 322 6 261
TOTAL EQUITY AND LIABILITIES 3 062 720 2 428 844 2 703 012
CASH FLOW STATEMENTS
Unaudited Restated Restated
Six months Six months Year
ended ended ended
R"000 Mar 2006 Mar 2005 Sept 2005
CASH FLOWS FROM OPERATING ACTIVITIES 104 671 240 584 370 475
Cash generated from operations 303 293 312 217 572 961
Interest received 6 920 2 177 5 270
Interest paid (546) (4 651) (1 179)
Taxation paid (95 760) (69 159) (155 850)
Dividends paid (109 236) - (50 727)
CASH FLOWS FROM INVESTING ACTIVITIES (84 514) (31 368) (61 203)
Investment to maintain operations (24 057) (18 691) (24 678)
- Replacement of property, plant and
equipment (24 599) (22 480) (29 293)
- Proceeds on disposal of property,
plant and equipment 542 3 789 4 615
Investment to expand operations (53 823) (14 737) (44 888)
Net movement on loans, investments
and goodwill (6 634) 2 060 8 363
CASH FLOWS FROM FINANCING ACTIVITIES 900 1 289 (2 304)
Proceeds from issue of share capital 5 161 2 805 5 279
Decrease in long-term borrowings (4 261) (1 516) (7 583)
NET INCREASE IN CASH AND CASH
EQUIVALENTS 21 057 210 505 306 968
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 206 (306 762) (306 762)
CASH AND CASH EQUIVALENTS AT
END OF PERIOD 21 263 (96 257) 206
Analysed:
Bank overdrafts (42 845) (150 866) (68 536)
Bank balances - Guilds 64 108 54 609 68 742
NOTES TO THE FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS") and the accounting standard applicable
to Interim Financial Reporting - IAS 34. Prior to 1 October 2005, the financial
statements were prepared in terms of South African Statements of Generally
Accepted Accounting Practice ("GAAP"). The first time adoption of IFRS has
resulted in changes to the group"s accounting policies and the need to restate
prior year accounts. Comparative information has been adjusted to reflect the
adoption of IFRS.
IFRS 1: The group has recognised post retirement medical aid actuarial
losses at the date of transition to IFRS. The group will continue to use the
corridor method of recognising actuarial gains and losses.
IFRS 2: Share based payments. Share options granted to employees after 7
November 2002 have been actuarially valued on grant date using the Black
Scholes method. These values have been or will be charged to the income
statement over the option vesting period.
IFRS 4: Financial guarantees have been classified as insurance contracts.
IAS 28: Investment in associate. The group has equity accounted its
investment in its Zimbabwean associate, SPAR Harare (Pvt) Limited. The
investment had been impaired to R nil as the entity operated under severe
long-term restrictions, preventing the transfer of funds from that country.
The group only accounted for cash dividends when received.
2. COMPARATIVE FIGURES
The March 2005 comparative revenue figure has been restated by R67.4 million
to include various other income items, and to be in line with the September
2005 classification.
Cost of sales represents the net cost of purchases from suppliers, after
rebates and incentive allowances. The March 2005 cost of sales comparative
figure has been restated to exclude distribution expenses, which expenses have
now been included under the heading "operating expenses". The restatement
amounted to R85.3 million. This reclassification is consistent with the
September 2005 classification.
The March 2005 comparative cash flow statement has been restated in order to
correspond with the year end September 2005 classifications.
3. SHARE CAPITAL AND PREMIUM
Unaudited Restated Restated
Six months Six months Year
ended ended ended
Mar 2006 Mar 2005 Sept 2005
R"000 R"000 R"000
Authorised
250 000 000 (March 2005: 250 000 000)
ordinary shares of 0.06 cents
(March 2005: 0.06 cents) each 150 150 150
Issued
169 713 436 (March 2005: 169 052 503)
ordinary shares of 0.06 cents
(March 2005: 0.06 cents) each 102 101 102
Share premium account
Balance at beginning of year 5 278 - -
Shares issued 5 161 2 805 5 278
Total share capital and premium 10 541 2 906 5 380
Pursuant to the exercising of options 453 401 ordinary shares of 0.06 cents
each were issued during the six months ended 31 March 2006, thereby increasing
the issued share capital to R101 828 consisting of 169 713 436 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 169 429 967 (March 2005: 168 856
059). Fully diluted earnings and headline earnings per share was based on a
weighted average number of 175 559 088 (March 2005: 172 039 916) ordinary
shares.
Unaudited Restated Restated
Six months Six months Year
ended ended ended
Mar 2006 Mar 2005 Sept 2005
R"000 R"000 R"000
4. CONTINGENT LIABILITIES
The company has guaranteed
the finance obligations of
certain SPAR retailer members
to the amount of: 192 340 178 483 179 272
5. OPERATING LEASES
Operating lease costs charged
against operating profit
Immovable property 809 494 3 088
- lease rentals 48 941 41 249 86 944
- sub-lease recoveries (48 132) (40 755) (83 856)
Plant, equipment and vehicles 1 010 784 5 064
Operating lease commitments
Future minimum lease payments
under non-cancellable
operating leases are as follows: 1 153 309 967 734 1 084 224
- land and buildings 1 150 734 964 117 1 082 034
- other 2 575 3 617 2 190
Future minimum sub-lease
recoveries under
non-cancellable
property leases are: (1 132 198) (947 042) (1 061 527)
Net commitments 21 111 20 692 22 697
6. CAPITAL COMMITMENTS
Contracted 29 310 3 022 48 454
Approved but not contracted 243 231 31 614 25 924
272 541 34 636 74 378
7. POST BALANCE SHEET EVENTS
No material events have occurred subsequent to 31 March 2006 which may have an
impact on the group"s reported financial position at that date.
REVIEW OF TRADING RESULTS
On the back of buoyant retail sales, the group experienced a strong trading
period with turnover well ahead of 2005. "Like on like" turnover growth was
17.4%, based on excluding from reported 2006 turnover, business now handled on
a drop shipment basis, but on which the group received a commission in 2005 and
which did not constitute turnover in 2005. With food inflation continuing to
run at low levels, substantial real growth was once again achieved.
Perishable product turnover growth was particularly good. Build it and TOPS as
anticipated experienced considerable growth. Retail store turnover grew ahead
of industry growth and as a consequence SPAR"s market share increased
marginally.
Operating profit before interest and taxation at R310 million increased 18.3%
on the comparative period. All distribution centres operated efficiently and
achieved their profit targets. The decline in the gross margin was in line
with expectations and was the result of a change in the sales mix and, as
indicated above, the move of business from a commission to a drop shipment
basis.
The strong cash flow resulted in net interest receipts of R4,8 million and
minimal borrowings at the interim close.
The increased taxation charge at 35.6% of pre tax profits (2005 - 31.9%)
reflected the STC paid on the final 2005 dividend.
STORE NUMBERS AND RETAIL SELLING AREAS
18 SPAR stores opened during the period under review, taking total SPAR store
numbers, after store losses, to 789. The group currently supplies 132
SUPERSPAR, 470 SPAR and 187 KWIKSPAR stores. Trading space increased 2.5% to
704 583 square metres.
The group continues to focus on the upgrading and remodelling of existing
stores.
Build it opened 13 new outlets and TOPS 16. The group now services 191 Build
it and 188 TOPS stores respectively.
CAPITAL EXPENDITURE
As a result of the extremely strong volume growths that the group"s
distribution centres have handled and capacity problems experienced over peak
trading periods, a detailed review of trading facilities has been undertaken.
Flowing from this review it has been determined that it is essential to
relocate the Western Cape distribution centre to new premises and for this
purpose the group has secured a property in Cape Town on which it will shortly
commence construction of a new dry goods and perishable facility. During the
next three years extensions to the group"s KwaZulu-Natal distribution centre"s
perishable facility and the South Rand and North Rand dry goods facilities
will be made.
Pursuant to the completion of the facilities review, capital expenditure for
the current financial year is anticipated to be in the region of R190 million.
Annual capex for 2007, 2008 and 2009 is forecast at R210 million, R150 million
and R170 million respectively. Capital expenditure will be financed from the
group"s cash resources.
LOOKING FORWARD
Planned SPAR store openings and growth in retail trading areas during the
remainder of the current financial year and further, augurs well for future
turnover growth. Current indications are that turnover will remain buoyant for
the remainder of the financial year, although it is anticipated that a
marginal increase in inflation is likely.
Strong cash generation will continue, notwithstanding the considerable
forecast capital expenditure. In order to efficiently utilise this cash, the
group proposes to implement a share purchase programme through the JSE.
Shareholders will be requested to confirm this programme and notice of the
necessary general meeting to ratify this action will shortly be sent to
shareholders.
DIVIDEND
In line with the group announcement to decrease the dividend cover, a dividend
of 48 cents per share has been declared. This dividend represents a 60%
increase on the 2005 interim declaration.
DIRECTORATE
Peter Hughes, having reached the age of 60, has decided to retire as Chief
Executive, effective November 2006. During his 17 year tenure as Chief
Executive, Peter has played a pivotal role in leading the SPAR organisation and
in securing SPAR"s pre-eminent position in the retail industry. Peter"s vast
experience will not however be lost to the group as he will be retained as a
non-executive director.
The board has pleasure in announcing the appointment of Wayne Hook as Peter"s
successor. Wayne will move to the group"s central office in June as CEO
designate and will take full responsibility and join the board in October
2006. Wayne, a chartered accountant, has a wealth of experience having joined
the group in 1985 as a financial manager. Thereafter he held executive
positions before being appointed managing director of the group"s KwaZulu-
Natal distribution centre in 1998. The board is confident that under Wayne"s
leadership SPAR will continue to grow and prosper.
During the period under review Phumla Mnganga joined the board as an
independent non-executive director.
MJ Hankinson
Chairman
PK Hughes
Chief Executive
10 May 2006
DECLARATION OF ORDINARY DIVIDEND
Notice is hereby given that an interim dividend of 48 cents per share has been
declared in respect of the half year ended 31 March 2006.
The salient dates for the payment of the interim dividend are detailed below:
Last day to trade cum-dividend Friday, 26 May 2006
Shares to commence trading ex-dividend Monday, 29 May 2006
Record date
Friday, 2 June 2006
Payment of dividend Monday, 5 June 2006
Shareholders will not be permitted to dematerialise or rematerialise their
share certificates between Monday, 29 May 2006 and Friday, 2 June 2006,
both days inclusive.
By order of the board
KJ O"Brien Pinetown
Secretary 10 May 2006
DIRECTORATE AND ADMINISTRATION
Directors: MJ Hankinson* (Chairman), PK Hughes (Chief Executive), RW Coe,
DB Gibbon*, RJ Hutchison*, MP Madi*, HK Mehta*, P Mnganga *.
* Non-executive
Company secretary: KJ O"Brien
ISIN: ZAE000058517 JSE code: SPP
Registered office: 22 Chancery Lane, PO Box 1589, Pinetown, 3600
Transfer secretaries: Ultra Registrars (Pty) Limited, PO Box 4844,
Johannesburg, 2000
Auditors: Deloitte & Touche, PO Box 243, Durban, 4000
Sponsor: Rand Merchant Bank, PO Box 786273, Sandton, 2146
Bankers: First National Bank, PO Box 4130, Umhlanga Rocks, 4320
Website: www.spar.co.za
Date: 10/05/2006 10:00:39 AM Produced by the JSE SENS Department
