| Tue 24 Apr 2007, 9:12 | | Pikwik final results 28 February 2007 |
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PWK PIK
PWK PIK
PWK - Pick `N Pay Stores - Reviewed condensed consolidated
results for the year ended 28 February 2007
PICK `N PAY STORES LIMITED
Share Code: PIK ISIN Code: ZAE000005443
Reviewed condensed consolidated results for the year ended 28 February
2007
- Up 12.1% Turnover
- Up 23.2% Trading Profit
- Up 18.0% Headline earnings per share*
- Up 18.5% Final dividend per share
Review of Operations
Group overview
As we enter our 40th year of serving our customers we are pleased to
report that the Group has produced another strong performance.
Group turnover at R39.3 billion showed an increase of 12.1%. This was
after a strong second half trading performance, producing a 13.9%
increase in turnover.
The trading profit increase of 23.2% has led to an increase in our
trading profit margin from 3.0% to 3.3% in the current year.
The operating profit increase of 20.6% is lower than that of trading
profit due to the decrease in interest received. The lower interest
received is result of the average cash balances being lower than last
year due to significant capital investments of R1.1 billion, and
increased dividend payments and share repurchases.
Headline earnings per share increased by 18.0%, before the reversal of a
deferred tax asset of R46.4 million in relation to previous years` Score
operating losses. As this charge has not arisen from current year
activity, we consider a headline earnings calculation excluding this
charge to more fully reflect the Group`s result for the year. The
deferred tax asset has been reversed in light of Score`s disappointing
current year performance and to present a more conservative balance
sheet. In this regard we have also impaired goodwill of R36.3 million
relating to Score. This goodwill impairment has no effect on headline
earnings.
We increased our final dividend by 18.5% to 107.25 cents per share for
Pick `n Pay Stores Limited and 52.35 cents per share for Pick `n Pay
Holdings Limited. This brings the total dividend for the year to 134.25
cents per share for Pick `n Pay Stores Limited and
65.52 cents per share for Pick `n Pay Holdings Limited.
Pick `n Pay Retail Division
The Retail division produced a solid performance showing real growth in
both turnover and Group profit contribution.
Supermarkets - We opened 10 new corporate stores during the year,
converted 2 corporate stores to the Pick `n Pay Family franchise format
and had to close our Claremont store in Cape Town due to the site being
redeveloped. Claremont will be re-opened during the 2009 financial year.
For the 2008 financial year we already have
7 new corporate stores confirmed to be opened.
Family Franchise - We continue to expand our successful Family franchise
format opening 11 new stores during the past financial year including 1
in Namibia. We have another exciting year ahead of us, opening a further
20 Family stores during the 2008 financial year.
Hypermarkets - The opening of 2 new Hypermarkets in Zambezi Road, Montana
and on Old Pretoria Road, Centurion during the second half of the
financial year was a highlight of the year. We have received good
customer acceptance of our new format of Hypermarket and we expect these
openings, together with the 2 new openings planned for the 2008 financial
year, to provide a revived momentum for growth in this large store
format.
The Retail division continues to expand its other store formats
increasing the number of stand-alone Clothing stores to 24 and Liquor
stores to 36 during the year. During the next financial year we will open
a further 5 Clothing and 20 Liquor stores.
Group Enterprises
Score continued its conversion of stores to the Nambawane format
completing 18 conversions in the second half of the year. These
additional refurbishments helped Score produce a better second half
performance. Nevertheless we were disappointed with the performance for
the year and in this regard are reviewing various options on the future
direction of Score. The brand now comprises 127 stores.
Boxer had a very good year, despite the toughening trading conditions,
showing good real growth in both turnover and profit contribution. Boxer
opened 9 new stores including 3 Boxer Build hardware stores. During the
2008 financial year, Boxer will continue to expand its footprint by
opening a further 5 supermarkets and 4 Boxer Build hardware stores.
In February 2007 we decided jointly with Fruit & Veg City, following the
Competition Commission recommendation, not to pursue the acquisition.
Franklins Australia
The latest full year results reflect a substantial improvement in overall
profitability and general operational efficiencies, following a $10.2
million turnaround having reduced losses from $19 million to $8.8 million
through the stability and costs effectiveness of its new warehousing and
distribution capabilities.
During the year three new corporate stores were opened and a further
three stores are confirmed to be opened in the 2008 financial year. In
the same period five stores were closed, two of which were relocated in
existing shopping centres.
In order to capitalise and build on the current business platform the
Board has committed to a significant capital investment programme in our
corporate stores over the coming years. This additional investment in the
Franklins business confirms the Board`s commitment to growing our
business in Australia.
The Franklins Franchise system was successfully launched during the year
with the conversion of two stores (one being the conversion of a
corporate store). Since conversion both of these franchise stores have
shown double digit sales growth.
The roll out of further franchise stores is now a priority and we are
pleased to report that we have recently concluded agreements for the
conversion of a further four stores to the Franklins Franchise system.
This will take the total number of franchise stores to six. We are
confident that these conversions together with others planned for the
2008 financial year will give momentum to the expansion of the Franklins
Franchise system.
General Comments and Prospects
We have now completed a strategic review of the business with the
assistance of an international consulting group and are about to
implement many of the initiatives highlighted during the review.
The conversion to SAP accounting systems throughout the Group is now in
progress and it is anticipated that the conversion in the Pick `n Pay
Retail division will be completed during the 2008 financial year. We are
confident that the investment in the new system will lead to greater
operating efficiencies.
With the launch of our 40th Birthday campaign and various other
initiatives throughout the Group, we are confident of being able to
achieve good growth in headline earnings per share during the 2008
financial year.
For and on behalf of the Board
Raymond Ackerman Nick Badminton
Chairman Chief Executive Officer
23 April 2007
PICK `n PAY STORES LIMITED -
Share code: PIK ISIN code: ZAE000005443
Income Statement
Reviewed Audited
Year to Year to
Feb 2007 Growth Feb 2006
Rm % Rm
Revenue (note 3) 41 128.1 36 664.9
Turnover 39 337.1 12.1 35 078.4
Cost of merchandise sold (32 443.2) (29 060.1)
Gross profit 6 893.9 6 018.3
Other trading income 1 749.4 1 529.6
Trading expenses (7 354.9) (6 500.5)
Profit on sale of investments 8.2 -
Loss on sale of property, (9.4) (2.5)
equipment and vehicles
Trading profit 1 287.2 23.2 1 044.9
Interest received 41.6 56.7
Operating profit 1 328.8 1 101.6
Interest paid (49.3) (37.6)
Dividends received - 0.2
Share of associate`s profit 26.1 23.4
Impairment of investment in (64.0) -
associate (note 6)
Impairment of goodwill (note 8) (36.3) -
Profit before tax 1 205.3 1 087.6
Tax (note 7) (529.7) (384.5)
Profit for the year 675.6 703.1
Trading profit margin 3.3% 3.0%
Operating profit margin 3.4% 3.1%
Earnings per share - cents
Basic 148.13 152.49
Diluted 139.86 144.42
Interim dividend - No. 77 paid 27.00 23.30
Final dividend - No. 78 payable 107.25 18.5 90.50
Total dividend 134.25 113.80
Headline earnings reconciliation
Profit for the year 675.6 703.1
Profit on sale of investments (8.2) -
Loss on sale of property, 9.4 2.5
equipment and vehicles
Impairment of investment in 64.0 -
associate (note 6)
Impairment of goodwill (note 8) 36.3 -
Headline earnings 777.1 10.1 705.6
Reversal of deferred tax asset 46.4 -
(note 7)
Headline earnings before deferred 823.5 16.7 705.6
tax reversal
Headline earnings per share -
cents
Headline - before deferred tax 180.55 18.0 153.02
reversal*
Headline 170.38 153.02
Diluted 160.79 144.92
Balance Sheet
Reviewed Audited
Feb 2007 Feb 2006
Rm Rm
Assets
Non-current assets
Goodwill 714.3 634.9
Intangible assets 190.3 110.9
Property, equipment and vehicles 2 525.2 1 873.7
Investments 0.2 9.3
Investment in associate (note 6) 9.1 47.0
Loans 108.8 96.7
Operating lease asset 5.9 4.8
Participation in export partnerships 67.8 71.8
Deferred tax 151.2 238.3
3 772.8 3 087.4
Current assets
Inventory 2 367.4 1 984.2
Trade and other receivables 943.7 750.7
Cash and cash equivalents 709.1 944.6
4 020.2 3 679.5
Total assets 7 793.0 6 766.9
Equity and liabilities
Total equity 1 015.4 854.9
Non-current liabilities
Long-term debt 181.8 192.9
Retirement scheme obligations 129.0 194.8
Operating lease liability 584.3 554.4
895.1 942.1
Current liabilities
Short-term debt 51.6 79.5
Trade and other payables 5 605.4 4 654.1
Tax 225.5 236.3
5 882.5 4 969.9
Total equity and liabilities 7 793.0 6 766.9
Shares in issue - millions 486.1 486.1
Weighted average shares in issue - millions 456.1 461.1
(note 5)
Net asset value - cents per share (property
value based
on directors` valuation) 283.4 247.1
Statement of Changes in Equity
Reviewed Audited
Year to Year to
Feb 2007 Feb 2006
Rm Rm
Total equity at 1 March - as previously 854.9 714.8
reported
Prior year adjustment - operating leases (note - (10.4)
4)
Total equity at 1 March - as restated 854.9 704.4
Total recognized income and expense for the 832.9 686.9
year
Profit for the year 675.6 703.1
Gains and losses recognised directly in
equity:
Revaluation of investments (8.2) 5.7
Foreign currency translation 165.5 (21.9)
Dividends paid (523.8) (452.0)
Share repurchases (221.2) (132.0)
Take-up of share options by employees 43.4 25.2
Share options expense 29.2 22.4
Total equity at 28 February 1 015.4 854.9
Cash Flow Statement
Reviewed Audited
Year to Year to
Feb 2007 Feb 2006
Rm Rm
Trading profit 1 287.2 1 044.9
Profit on sale of investments (8.2) -
Loss on sale of property, equipment and 9.4 2.5
vehicles
Depreciation and amortisation 426.4 325.4
Share options expense 29.2 22.4
Net operating lease obligations 28.8 47.8
Increase in trade and other payables 868.1 377.9
Increase in inventory (383.2) (125.6)
Increase in trade and other receivables (189.1) (85.2)
Cash generated by trading activities 2 068.6 1 610.1
Interest received 41.6 56.7
Cash generated by operations 2 110.2 1 666.8
Interest paid (49.3) (37.6)
Dividends received - 0.2
Dividends paid (523.8) (452.0)
Tax paid (449.9) (565.5)
Cash flows from operating activities 1 087.2 611.9
Property, equipment and vehicle additions (1 047.0) (829.3)
Proceeds on sale of property, equipment and 29.2 49.6
vehicles
Intangible asset additions (79.8) (90.0)
Acquisition of stores (2.2) (5.2)
Proceeds on sale of investments 9.1 -
Loans advanced (12.1) (0.9)
Cash flows from investing activities (1 102.8) (875.8)
Debt (repaid)/raised (38.9) 4.3
Share repurchases (221.2) (132.0)
Take-up of share options by employees 43.4 25.2
Cash flows from financing activities (216.7) (102.5)
Net decrease in cash and cash equivalents (232.3) (366.4)
Cash and cash equivalents at 1 March 944.6 1 329.0
Exchange rate effect on cash and cash (3.2) (18.0)
equivalents
Cash and cash equivalents at 28 February 709.1 944.6
Segmental Report
Southern Africa
Reviewed Audited
Feb 2007 Feb 2006
Rm Rm
Segment revenue 36 527.2 32 429.4
Turnover 35 067.9 31 143.6
- Australian dollars
Segment result
Trading profit/(loss) 1 333.6 1 137.6
- Australian dollars
Depreciation and
amortisation, included
in trading profit/(loss) (365.5) (279.7)
Goodwill, included in
total assets 137.1 171.2
Total assets, net of
deferred tax and tax 6 310.8 5 358.7
Total liabilities, net of tax 6 010.4 5 187.6
Capital expenditure 1 073.4 813.7
Segmental Report (continued)
Australia Total
Reviewed Audited Reviewed Audited
Feb 2007 Feb 2006 Feb 2007 Feb 2006
Rm Rm Rm Rm
Segment revenue 4 600.9 4 235.5 41 128.1 36 664.9
Turnover 4 269.2 3 934.8 39 337.1 35 078.4
- Australian 807.2 810.9
dollars
Segment result
Trading (46.4) (92.7) 1 287.2 1 044.9
profit/(loss)
- Australian (8.8) (19.0)
dollars
Depreciation and
amortisation,
included
in trading (60.9) (45.7) (426.4) (325.4)
profit/(loss)
Goodwill, included
in
total assets 577.2 463.7 714.3 634.9
Total assets, net of
deferred tax and 1 331.0 1 169.9 7 641.8 6 528.6
tax
Total liabilities, 541.7 488.1 6 552.1 5 675.7
net of tax
Capital expenditure 55.6 110.8 1 129.0 924.5
Notes to the Financial Information
KPMG Inc, the Group`s independent auditor has reviewed the preliminary
financial statements contained in this preliminary report, and has
expressed an unmodified conclusion on the preliminary financial
statements. Their review report is available for inspection at the
company`s registered office.
1. These preliminary financial statements have been prepared in
accordance with the recognition and measurement requirements of IFRS and
the disclosure requirements of IAS 34. Accounting policies are consistent
with those of prior years except for the application of IFRIC 4
Determining whether an Arrangement contains a Lease (IFRIC 4) which has
been applied by the Group for the first time.
2. IFRIC 4 requires an entity to determine whether an arrangement, such
as a service contract, is or contains a lease. Where this is the case,
such a contract is accounted for in accordance with IAS 17 Leases. The
Group has identified equipment used by third party distribution centre
operators as finance leases and the trucks used by contracted operators
to distribute merchandise to our stores as operating leases. The effect
of the finance leases was to recognise the value of the assets and the
related liabilities on the balance sheet in the current year with no
effect on the Group`s equity. The operating leases (which have no income
statement or balance sheet effect) require additional disclosure in the
annual report. The comparative balance sheet has been adjusted
accordingly.
3. Revenue comprises turnover, other trading income, interest received
and dividends received.
4. With the adoption of IFRS in the 2006 financial year an error was made
in the restatement of opening balances relating to operating lease
liabilities. This has been corrected as a prior year adjustment to
opening equity with no effect on comparative earnings.
5. The weighted average number of shares is lower than that in issue due
to the treasury shares held by the Group being treated as cancelled for
this calculation.
6. In accordance with IFRS the 25% investment in TM Supermarkets in
Zimbabwe is accounted for on the equity basis. Our share of the after-tax
profits of TM Supermarkets is translated into Rands at the most realistic
rate at which dividends may be remitted. Due to worsening economic
conditions in Zimbabwe and a lack of available foreign exchange, the
possibility of remitting funds from Zimbabwe is currently remote. An
impairment review has been performed on the value of the investment in TM
Supermarkets and the investment has been written down by R64.0 million to
an estimated fair value of R9.1 million.
7. The tax charge includes a reversal of the deferred tax asset of R46.4
million relating to Score Supermarkets. As this charge has not arisen
from current year activity we consider a headline earnings calculation
excluding this charge to more fully reflect the Group`s result for the
year.
8. This amount represents an impairment of goodwill on the original
acquisition of Score Supermarkets.
9. Certain cost recoveries disclosed as other trading income in the 2006
financial year are now included in trading expenses to accord with
current year classifications. This reclassification had no effect on
earnings.
Pick `n Pay Holdings Limited ("PIKWIK")
Reviewed results for the year ended 28 February 2007
Share Code: PWK & ISIN code: ZAE000005724
Pikwik`s only asset is its 52.94% (2006: 52.94%) investment in Pick `n
Pay Stores Limited. The Pikwik Group earnings are directly related to
those of this investment. Headline earnings for the year amount to R411.4
million (2006: R373.5 million). Headline earnings before the deferred tax
reversal (note 7) is R436.0 million, an increase of 16.7%. Headline
earnings per share, calculated using the weighted average number of
shares in issue during the year of 508.7 million (2006: 505.4 million),
is 80.87 cents (2006: 73.90 cents). Headline earnings per share before
the deferred tax reversal (note 7) is 85.70 cents, an increase of 16.0%
The total number of shares in issue is 527.2 million (2006: 527.2
million). Pikwik`s final dividend per share is 52.35 cents (2006: 44.18
cents).
Dividend Declaration
The directors have declared the following cash dividends:
Pick `n Pay Stores Limited (No. 78) 107.25 cents per share
Pick `n Pay Holdings Limited (No. 51) 52.35 cents per share
For both Companies, the last day of trade in order to participate in the
dividend (CUM dividend) will be Friday, 1 June 2007. The shares will
trade EX dividend from the commencement of business on Monday, 4 June
2007 and the record date will be Friday,
8 June 2007.
The dividends will be paid on Monday, 11 June 2007.
Share certificates may not be dematerialised or rematerialised between
Monday, 4 June 2007 and Friday, 8 June 2007, both dates inclusive.
On behalf of the Boards of Directors
GF Lea - Company Secretary
23 April 2007
Directors of Pick `n Pay Stores Limited
Executive: RD Ackerman* (Chairman), D Robins* (Deputy Chairman), SR
Summers (CEO) (Retired 28 February 2007), NP Badminton (CEO) (Appointed 1
March 2007), W Ackerman*, DG Cope
Non-executive: GM Ackerman*, RP de Wet*, HS Herman*,
C Hultzer*, C Nkosi, DM Nurek, BJ van der Ross,
J van Rooyen (Appointed 5 March 2007)
*Also directors of Pick `n Pay Holdings Limited
*German Independent
These results are also available on our website http://www.picknpay.co.za
Date: 24/04/2007 08:02:01 Produced by the JSE SENS Department.
