| Wed 15 Nov 2006, 12:00 | | The Spar Group - Audited Results for the year ende |
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SPP
SPP
The Spar Group - Audited Results for the year ended 30 September 2006
The Spar Group Limited
ISIN NUMBER JSE CODE
ZAE000058517 SPP
AUDITED RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2006
OPERATING PROFIT +20.7%
BASIC EARNINGS PER SHARE +18.6%
FINAL DIVIDEND 75 CENTS PER SHARE
CONDENSED INCOME STATEMENT
Restated
Year ended Year ended
September September %
Rmillion 2006 2005 Change
REVENUE 17 176.6 13 737.5 25.0
Turnover 17 009.6 13 599.0 25.1
Cost of sales (15 581.3) (12 399.0)
Gross profit 1 428.3 1 200.0
Other income 167.0 138.5
Operating expenses (992.5) (839.0)
OPERATING PROFIT 602.8 499.5 20.7
Interest received 21.7 5.6
Interest paid (6.1) (5.5)
Share of associate
company"s profit 0.3 0.2
Profit before taxation 618.7 499.8 23.8
Taxation (211.1) (157.2)
PROFIT FOR THE YEAR
ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS 407.6 342.6 19.0
EARNINGS PER SHARE (CENTS)
Earnings per share 240.5 202.7 18.6
Fully diluted earnings
per share 231.7 198.2
SALIENT STATISTICS
Headline earnings per
share (cents) 240.0 203.8 17.8
Fully diluted headline earnings
per share (cents) 231.2 199.3
Dividend per share (cents) 123.0 94.5 30.2
Net asset value per share (cents) 533.5 443.6
Net margin (%) 3.5 3.7
Return on average equity (%) 49.6 57.7
HEADLINE EARNINGS RECONCILIATION
Profit for the year attributable
to ordinary shareholders 407.6 342.6
Adjusted for:
(Profit)/loss on sale of property,
plant and equipment,
net of impairments and net of
taxation effect (0.9) 1.8
HEADLINE EARNINGS 406.7 344.4 18.1
CONDENSED STATEMENT OF CHANGES IN EQUITY
Share Share
capital based
and Treasury payment
Rmillion premium shares reserve
Total capital and reserves at
30 September 2004
- as previously reported 0.1 - -
IFRS adjustments (Note 1):
IFRS 2 Share based payments - - 3.4
IAS 19 Employee benefits - - -
Unrealised losses recognised - - -
Deferred taxation - - -
IAS 28 Investment in associate - - -
Total capital and reserves
at 30 September 2004 - restated 0.1 - 3.4
Profit for 2005 - restated - - -
Profit for 2005 as
previously reported - - -
Rate change attributable to IAS 19
deferred taxation adjustment - - -
IFRS adjustments (Note 1):
IFRS 2 Share based payments - - -
IAS 28 Investment in associate - - -
Share based payment reserve - - 15.1
Shares issued 5.3 - -
Dividends declared - - -
Total capital and reserves at
30 September 2005 - restated 5.4 - 18.5
Profit for 2006 - - -
Share based payment reserve - - 16.5
Shares issued 8.0 - -
Shares repurchased - (99.8) -
Dividends declared - - -
Total capital and reserves at
30 September 2006 13.4 (99.8) 35.0
Attributable
Retained to ordinary
Rmillion earnings shareholders
Total capital and reserves at
30 September 2004
- as previously reported 437.2 437.3
IFRS adjustments (Note 1):
IFRS 2 Share based payments (3.4) -
IAS 19 Employee benefits (3.8) (3.8)
Unrealised losses recognised (5.4) (5.4)
Deferred taxation 1.6 1.6
IAS 28 Investment in associate 5.0 5.0
Total capital and reserves
at 30 September 2004 - restated 435.0 438.5
Profit for 2005 - restated 342.6 342.6
Profit for 2005 as
previously reported 357.6 357.6
Rate change attributable to IAS 19
deferred taxation adjustment (0.1) (0.1)
IFRS adjustments (Note 1):
IFRS 2 Share based payments (15.1) (15.1)
IAS 28 Investment in associate 0.2 0.2
Share based payment reserve - 15.1
Shares issued - 5.3
Dividends declared (50.7) (50.7)
Total capital and reserves at
30 September 2005 - restated 726.9 750.8
Profit for 2006 407.6 407.6
Share based payment reserve - 16.5
Shares issued - 8.0
Shares repurchased - (99.8)
Dividends declared (190.7) (190.7)
Total capital and reserves at
30 September 2006 943.8 892.4
DECLARATION OF ORDINARY DIVIDEND
Notice is hereby given that a final dividend of 75 cents per share has been
declared in respect of the year ended 30 September 2006.
The salient dates for the payment of the final dividend are detailed below:
Last day to trade cum-dividend Friday, 1 December 2006
Shares to commence trading ex-dividend Monday, 4 December 2006
Record date Friday, 8 December 2006
Payment of dividend Monday, 11 December 2006
Shareholders will not be permitted to dematerialise or rematerialise their
share certificates between Monday, 4 December 2006 and Friday, 8 December
2006, both days inclusive.
By order of the board
K J O"Brien Pinetown
Secretary 14 November 2006
CONDENSED BALANCE SHEET
Restated
September September
Rmillion 2006 2005
ASSETS
NON-CURRENT ASSETS 836.9 653.3
Property, plant and equipment 519.1 370.2
Goodwill 245.6 245.6
Investment in associate 5.5 5.2
Loans 51.0 11.8
Operating lease receivables 15.7 12.5
Deferred taxation asset - 8.0
CURRENT ASSETS 2 699.7 2 049.8
Inventories 449.3 385.0
Trade and other receivables 2 146.3 1 551.5
Prepayments 12.5 32.6
Short-term loan 16.7 5.8
Current portion of operating
lease receivables 6.3 6.2
Bank balances - Guilds 68.6 68.7
TOTAL ASSETS 3 536.6 2 703.1
EQUITY AND LIABILITIES
CAPITAL AND RESERVES 892.4 750.8
Share capital and premium 13.4 5.4
Treasury shares (99.8) -
Share based payments reserve 35.0 18.5
Retained earnings 943.8 726.9
NON-CURRENT LIABILITIES 72.1 60.0
Deferred taxation liability 6.1 -
Post retirement medical aid provision 49.8 46.2
Long-term borrowings 0.4 1.0
Operating lease payables 15.8 12.8
CURRENT LIABILITIES 2 572.1 1 892.3
Trade payables and accruals 2 419.9 1 722.5
Current portion of long-term borrowings 37.6 39.1
Current portion of operating lease payable 6.2 5.9
Provisions 64.4 50.0
Taxation 16.9 6.3
Bank overdrafts 27.1 68.5
TOTAL EQUITY AND LIABILITIES 3 536.6 2 703.1
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND COMPLIANCE WITH IFRS
The group financial results from which these financial statements were
derived have been prepared on the historical cost basis excluding financial
instruments which are fair valued and conform to International Financial
Reporting Standards (IFRS). The accounting policies are consistent with those
applied in the annual financial statements for the year ended 30 September
2005 except as detailed below. These financial statements have been prepared
in terms of IAS 34 Interim financial reporting.
The date of transition to IFRS for the group is 1 October 2004 and
accordingly comparative information for the year ended 30 September 2005 and the
group"s opening balance sheet at 1 October 2004, which were originally
reported in accordance with South African Statements of Generally Accepted
Accounting Practice, have been restated to reflect all applicable IFRS
statements. The application of the following IFRS statements has resulted in
changes to capital and reserves at 30 September 2004 and net profit for the
comparative year. These changes are presented in the Condensed Statement of
Changes in Equity:
IAS 19 Employee benefits: The group has, in terms of IFRS 1 First-time adoption
of international financial reporting standards, elected to recognize all
cumulative unrecognised gains and losses at the date of transition.
IFRS 2 Share based payment: The group has granted share options to certain
employees under an employee share option scheme.
In accordance with IFRS 2, the group has recognised an expense in the income
statement, with a corresponding credit to the share based payment reserve,
representing the fair value of outstanding employee share options on its
equity settled scheme. The fair value at the date of granting the options is
charged to the income statement over the relevant option vesting periods,
adjusted to reflect the actual levels of vesting. The group has, in terms of
IFRS 1, elected not to apply the provisions of IFRS 2 to its equity settled
share options granted on or before 7 November 2002 or to options granted after
this date but which had vested prior to 1 January 2005.
IAS 28 Investment in associate: Prior to the revisions of IAS 28, this
statement provided that where associate companies operate under severe long-
term restrictions, which significantly impair their ability to transfer funds to
the investor, such investments are not equity accounted. The revised
statement (effective for financial periods commencing on or after 1 January
2005) removes this exemption. Accordingly, The Spar Group Limited"s
investment in Spar Harare (Pvt) Limited, previously impaired to Rnil, has
been reinstated and the carrying amount increased to recognise the group"s
share of the profit of Spar Harare (Pvt) Limited from the date the group
exerted significant influence over that company.
The effect of the transition to IFRS on earnings per share in the
comparative year is as follows:
Restated
Cents 2005
Earnings per share as previously reported 211.6
Rate change attributable to IAS 19 deferred taxation adjustment (0.1)
IFRS 2 Share based payments (8.9)
IAS 28 Investment in associate 0.1
Earnings per share as restated 202.7
2.SHARE CAPITAL AND PREMIUM Restated
Rmillion 2006 2005
AUTHORISED
250 000 000 (2005: 250 000 000) ordinary
shares of 0.06 cents (2005: 0.06 cents) each 0.2 0.2
ISSUED
169 935 935 (2005: 169 260 035)
ordinary shares of 0.06 cents
(2005: 0.06 cents) each 0.1 0.1
Share premium account
Balance at beginning of year 5.3 -
Shares issued during the year 8.0 5.3
Total share capital and premium 13.4 5.4
Pursuant to the exercising of options 675 900 (2005: 496 365) ordinary
shares were issued during the year ended 30 September 2006, thereby increasing
the issued share capital to R101 961 (2005: R101 556) consisting of 169 935
935 (2005: 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 169 447 986 (2005: 169 010 748). Fully diluted earnings and
headline earnings per share was based on a weighted average number of 175 874
772 (2005: 172 822 332) ordinary shares.
Restated
Rmillion 2006 2005
3. CONTINGENT LIABILITIES
The company has guaranteed the finance
obligations of certain
SPAR retailer members to the amount of: 164.8 179.3
4. OPERATING LEASES
OPERATING LEASE COSTS CHARGED
AGAINST OPERATING PROFIT
Immovable property 1.5 3.0
- lease rentals 103.5 86.9
- sub-lease recoveries (102.0) (83.9)
Plant, equipment and vehicles 13.4 5.1
OPERATING LEASE COMMITMENTS
Future minimum lease payments under
non-cancellable operating leases
are as follows: 1 297.6 1 084.2
- land and buildings 1 295.6 1 082.0
- other 2.0 2.2
The future minimum sub-lease recoveries
under non-cancellable property leases are: (1 277.6) (1 061.5)
Net commitments 20.0 22.7
5.CAPITAL COMMITMENTS
Contracted 95.0 48.5
Approved but not contracted 206.7 25.9
301.7 74.4
6. SEGMENTAL REPORTING
The group operates its business from six distribution centres situated
throughout Southern Africa. The distribution centres individually supply goods
and services of a similar nature to the group"s voluntary trading members. The
directors are of the opinion that the operations of the individual
distribution centres are substantially similar to one another and that the
risks and returns of these distribution centres are likewise similar. As a
consequence thereof, the business of the group is considered to be a single
geographic segment.
7. POST BALANCE SHEET EVENTS
No material events have occurred subsequent to 30 September 2006 which
may have an impact on the group"s reported financial position at this date.
CONDENSED CASH FLOW STATEMENT Year ended Year ended
September September
Rmillion 2006 2005
CASH FLOWS FROM OPERATING ACTIVITIES 372.7 370.5
Cash generated from operations 734.5 573.0
Interest received 21.4 5.3
Interest paid (6.1) (1.2)
Taxation paid (186.4) (155.9)
Dividends paid (190.7) (50.7)
CASH FLOWS FROM INVESTING ACTIVITIES (237.5) (61.2)
Investment to maintain operations (37.3) (24.7)
- Replacement of property, plant and equipment (39.7) (29.3)
- Proceeds on disposal of property,
plant and equipment 2.4 4.6
Investment to expand operations (150.1) (44.9)
Net movement on loans and investments (50.1) 8.4
CASH FLOWS FROM FINANCING ACTIVITIES (93.9) (2.3)
Proceeds from issue of share capital and premium 8.0 5.3
Shares repurchased (99.8) -
Repayment of long-term borrowings (2.1) (7.6)
NET INCREASE IN CASH AND CASH EQUIVALENTS 41.3 307.0
NET CASH AND CASH EQUIVALENTS/(OVERDRAFTS)
AT BEGINNING OF YEAR 0.2 (306.8)
NET CASH AND CASH EQUIVALENTS AT END OF YEAR 41.5 0.2
REVIEW OF TRADING RESULTS
The SPAR group had another good trading year with turnover topping the R17
billion mark and showing growth of 25%. Comparable turnover growth was 19.4%
after adjusting for direct delivery sales, which sales were handled on an
agency basis in 2005. A particularly impressive second half sales growth was
recorded due to strong consumer spending and aggressive marketing and
promotional activity. With inflation running at 3 - 4%, considerable real
growth in volumes was achieved.
Build it experienced exceptional growth and grew turnover 61% to R1.4 billion.
Good growth was also achieved by the TOPS stores. Perishable product turnovers
remained particularly buoyant.
The decline in the gross margin was in line with expectations and was the
result of the change in sales mix and the aforementioned move from agency to
direct delivery sales.
Well controlled working capital, coupled with the group"s exceptionally strong
cash flow earned the group net interest of R15.6 million (2005: R0.1 million).
Profit after interest reflected a 23.8% increase. The group took the decision
to retain in-house a number of loans made to retailer members, as opposed to
discounting the loans with bankers as occurred in 2005. These loans provided
an increased source of interest revenue.
Taxation increased to 34.1% (2005: 31.5%) of pre-tax profits as a result of
the substantially higher STC charge arising from the increased dividend
payment.
Net profit after taxation of R408 million represented a growth of 19.0% on
2005. Basic earning per share increased 18.6% to 240.5 cents per share. Return
on average equity was a creditable 49.6%.
RETAIL STORES
During the year under review 39 SPAR stores were opened, taking total SPAR
store numbers, after store losses, to 799. At year end the group supplied 145
SUPERSPAR, 478 SPAR and 176 KWIKSPAR stores. Trading space increased 5,9% to
727 547m2 and 122 stores were upgraded or underwent remodelling during the
year. SPAR retail stores turnover grew ahead of the growth of the market and
SPAR consequently gained market share.
Build it opened 43 new outlets and TOPS 44. The group now services 221 Build
it and 216 TOPS stores.
DISTRIBUTION FACILITIES
The strong sales performance experienced during the year resulted in a
substantial increase in the number of cases handled by the group"s
distribution centres. Notwithstanding this increase in activity, all
distribution centres operated efficiently with costs well controlled.
With the increase in volumes being handled by the group"s distribution
centres, the provision of additional distribution capacity has become a
priority. To this end construction has commenced on a new distribution
facility in Cape Town, additional property has been acquired adjoining the
KwaZulu-Natal distribution centre and expansion options in the inland region
will shortly be reviewed. As a result of the aforementioned, the group"s
revised forecast for capital expenditure for 2007 is R330 million.
PROSPECTS
Although a slow down in economic activity is forecast, planned retail store
openings and growth in retail trading areas augur well for good turnover
growth in 2007. Cash generation will accommodate the significant capital
expenditure forecast and the continuing implementation of the share purchase
programme. The group is confident that it will again achieve good revenue and
profit growth in 2007. Consideration will be given to reducing the dividend
cover.
DIVIDEND
In line with the group announcement to decrease the dividend cover, a final
dividend of 75 cents per share has been declared. The dividends for 2006
represent a 30% increase on the 2005 dividend declaration.
M J Hankinson P K Hughes
Chairman Chief Executive for year under review
DIRECTORATE
Peter Hughes retired as chief executive on 1 October 2006, but remains a non-
executive director of the company. The board wishes to express its sincere
appreciation to Peter for the role he played in the company over his 17 year
tenure. The board welcomes Wayne Hook who took over as chief executive
effective from the aforementioned date.
AUDIT OPINION
The auditors, Deloitte & Touche, have issued their opinion on the group"s
financial statements for the year ended 30 September 2006. The audit was
conducted in accordance with International Standards on Auditing. They have
issued an unmodified audit opinion. A copy of their audit report is
available for inspection at the company"s registered office. These condensed
financial statements have been derived from the group financial statements
and are consistent in all material respects with the group financial
statements.
DIRECTORATE AND ADMINISTRATION
DIRECTORS
M J Hankinson* (Chairman), W A Hook (Chief Executive), R W Coe, D B Gibbon*, P
K Hughes* R J Hutchison* M P Madi*, H K Mehta*, P Mnganga*
* Non-executive
COMPANY SECRETARY REGISTERED OFFICE
K J O"Brien 22 Chancery Lane, P O Box 1589, Pinetown, 3600
ISIN NUMBER JSE CODE
ZAE000058517 SPP
TRANSFER SECRETARIES
Link Market Services South Africa (Pty) Limited, P O Box 4844, Johannesburg,
2000
BANKERS
First National Bank, P O Box 4130, Umhlanga Rocks, 4320
SPONSOR
Rand Merchant Bank (A division of FirstRand Bank Limited)
P O Box 786273, Sandton, 2146
AUDITORS
Deloitte & Touche, P O Box 243, Durban, 4000
Date: 15/11/2006 12:01:12 PM Produced by the JSE SENS Department
