| Tue 21 Oct 2008, 8:00 | | PWK / PIK - Pick `N Pay Holdings Limited / Pick `N Pay Stores Limited - |
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PWK PIK
PWK PIK
PWK / PIK - Pick `N Pay Holdings Limited / Pick `N Pay Stores Limited -
Unaudited interim condensed consolidated results for the six months ended 31
August 2008
PICK `N PAY HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1981/009610/06)
Share code: PWK ISIN: ZAE000005724
PICK `N PAY STORES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1968/008034/06)
Share code: PIK
ISIN code: ZAE000005443
PicknPay
UNAUDITED INTERIM CONDENSED CONSOLIDATED RESULTS FOR THE SIX MONTHS ENDED 31
AUGUST 2008
Up 16.4% Turnover
Up 16.7% Trading profit
Up 21.5% Diluted headline earnings per share
Up 15.2% Headline earnings per share
Up 15.0% Interim dividend per share
Salient features of the result- continuing operations
We are pleased with this result considering the current economic climate and the
tightening of consumer spending as a result of high food and fuel inflation and
high interest rates.
The results of Score Supermarkets have been disclosed as discontinued as we are
closing down its operations. The majority of its property leases will be sub-let
for operation as Pick n Pay Family franchises. This is an exciting BEE
opportunity for the Group, both expanding the Pick n Pay brand into new markets,
and promoting black entrepeneurs. We consider the results of the continuing
operations to be a more accurate indicator of the performance of the Group.
Turnover
Group turnover at R23.7 billion is 16.4% above last year. This growth comprises
15.2% in the Southern African business segment and 24.9% in Australia. The
Franklins increase in Australian dollars is 2.2%.
Trading profit
Trading profit increased by 16.7% with trading profit margin remaining at 2.9%.
Diluted headline earnings per share and headline earnings per share ("HEPS")
Diluted HEPS at 89.76 cents increased by 21.5% over last year. However, due to
the dilutive effect of issuing 20 million new ordinary shares on the conversion
of the convertible debentures on 31 December 2007, HEPS at 90.31 cents increased
by 15.2%.
Dividends per share
We are declaring an interim dividend per share of 35.75 cents for Pick n Pay
Stores Limited and 17.45 cents for Pick n Pay Holdings Limited. In both
instances this is an increase of 15.0% over last year.
Operational overview
The critical factors that are driving the performance of the Group are as
follows:
Franklins Australia - Franklins had a very good trading period realising an
operating profit before interest and capital profits of R1.5 million versus a
loss for the same period last year of R40.3 million. This significant turnaround
over last year is due to increased operating efficiencies, high double digit
turnover growth from refurbished stores and the success of the customer loyalty
programme.
During the period under review we converted one corporate store to Franchise,
bringing the total number of Franchise stores to seven. Three new corporate
stores will be opened in the remainder of the financial year.
Managing Director Aubrey Zelinsky and his team are to be congratulated for this
very positive performance in a difficult and competitive environment.
Boxer Superstores - Boxer continues to perform exceptionally well with very
strong growth in both turnover and operating profit. This was Boxer`s first
result under the leadership of Managing Director Eugene Stoop, who is having a
very positive effect on the business.
Pick n Pay
Hypermarkets - Hypers had a strong trading period showing good growth in both
turnover and profit contribution. Turnovers were particularly strong in the new
format and refurbished Hypers. In addition to the new Hypermarket opened in
Woodmead, we will open another new Hypermarket on the Durban South Coast in the
next six months.
Supermarkets - Supermarkets performed well with particularly strong growth
achieved in our Family franchise stores. We opened 6 new Franchise stores and
completed 16 score conversions in the current six months. In the next 6 months,
a further 5 new Family and 5 new Corporate stores will be opened. In addition 4
more Corporate stores will be converted to Family stores and another 11 Score
conversions completed.
Pick n Pay strategy - We continued the investment in the implementation of our
strategy, including:
SAP - We are starting to reap the benefits of prompt and more accurate
information and improved control in the regions where SAP is fully operational
and will complete the installation in the inland Pick n Pay regions over the
next 18 months.
Longmeadow distribution centre - The first phase of transferring our
distribution capabilities to Longmeadow is now complete. We are stabilising the
operation and the next phase of expanding central distribution capabilities will
commence in 2009. It is currently being primarily used for tactical buy-ins of
merchandise to combat the effects of inflation.
Fresh foods - We continue to focus on fresh foods and are pleased with the
customer acceptance of the convenience food range.
House brands - We launched the rebranded PnP house brands ("PnP no name" and
"PnP") recently. Early indications are that they have received a very favourable
response from customers.
Small store formats - We have just opened our first trial Pick n Pay Daily
supermarket. This format is targeted at those customers who shop frequently with
smaller basket sizes. It contains a merchandise range of approximately 6 500
lines giving customers a good product range in a convenience store format. In
November/December 2008 we will also be opening two trial Pick n Pay Express
stores, in partnership with BP. This will offer true convenience shopping for
customers on a forecourt. We are excited about the potential of these small
store formats.
New world-class stores - We opened another new format Hyper at Woodmead and
reopened our flagship Supermarket in Claremont, Cape Town. These stores have
already received high acclaim, with Claremont being our most successful
supermarket opening in over a decade, and we expect the same consumer acceptance
when we reopen Benmore, in Johannesburg, at the end of October 2008.
Score - Implementation of the conversion process is now in full swing and on
track with 23 stores converted to Pick n Pay Family stores to date. These stores
will be operated by black franchisees. A further nine stores have been
transferred to Boxer, six leases ceded outside the Group and nine permanently
closed.
Sustainability - We are changing the way we operate by introducing more
environmentally responsible policies. These include installing video
conferencing facilities in all regional centres to dramatically reduce air
travel and increasing recycling and power saving initiatives. We will also be
embarking on an initiative to encourage our customers to significantly reduce
the use of plastic bags.
New stores - We continue to expand our footprint with the opening of 11 new
stores across all brands in the first six months and 21 in the second half of
the year.
General comments and prospects
We are pleased with this result, given trading conditions. The current turmoil
in world markets is of concern, with further tightening of economic conditions.
Despite this challenge, all our strategic investments will position us very well
for the future.
We remain confident that the group will achieve a good growth in headline
earnings per share, from continuing operations, for the full financial year.
For and on behalf of the Board
Raymond Ackerman Nick Badminton
Chairman Chief Executive Officer
20 October 2008
PICK n PAY STORES LIMITED -
Share code: PIK ISIN code: ZAE000005443
INCOME STATEMENT
Unaudited Audited
Six months ended Year to
Aug 2008 Growth Aug 2007* Feb 2008*
Rm % Rm Rm
Continuing
operations
Revenue (note 2) 24 804.9 21 278.8 44 516.1
Turnover 23 651.9 16.4 20 322.6 42 474.3
Cost of (19 811.2) (16 980.6) (35 383.3)
merchandise sold
(note 4)
Gross profit 3 840.7 3 342.0 7 091.0
Other trading 1 121.2 936.5 1 996.8
income
Trading expenses (4 264.7) (3 686.4) (7 561.8)
(note 4)
Loss on sale of (6.4) - (4.4)
property,
equipment and
vehicles
Trading profit 690.8 16.7 592.1 1 521.6
Interest received 31.8 19.7 45.0
Interest paid (55.2) (30.3) (79.2)
Profit on sale of 15.1 47.0 47.0
stores
Operating profit 682.5 628.5 1 534.4
Impairment of - (9.1) (9.1)
investment in
associate
Profit before tax 682.5 619.4 1 525.3
Tax (248.0) (227.5) (557.6)
Profit for the 434.5 391.9 967.7
period from
continuing
operations
Loss from (48.7) (21.9) (30.9)
discontinued
operation (note 7)
Profit for the 385.8 370.0 936.8
period
Trading profit 2.9% 2.9% 3.6%
margin -
continuing
operations
Earnings per share
- cents
Basic 81.83 81.92 206.19
Continuing 92.16 86.77 212.99
operations
Discontinued (10.33) (4.85) (6.80)
operation
Diluted 81.33 77.25 196.47
Continuing 91.59 81.82 202.95
operations
Discontinued (10.26) (4.57) (6.48)
operation
Interim dividend - 35.75 15.0 31.10
No. 81 payable
Headline earnings
reconciliation
Profit for the 385.8 370.0 936.8
period
Loss on sale of 11.3 - 4.4
property,
equipment and
vehicles
Profit on sale of (15.1) (47.0) (47.0)
stores
Impairment of - 9.1 9.1
investment in
associate
Headline earnings 382.0 332.1 903.3
Continuing 425.8 20.3 354.0 934.2
operations
Discontinued (43.8) (21.9) (30.9)
operation
Headline earnings
per share - cents
Headline 81.03 73.52 198.82
Continuing 90.31 15.2 78.37 205.62
operations
Discontinued (9.28) (4.85) (6.80)
operation
Diluted 80.53 69.35 189.45
Continuing 89.76 21.5 73.90 195.92
operations
Discontinued (9.23) (4.55) (6.47)
operation
*Restated - refer notes 4 and 7.
BALANCE SHEET
Unaudited Audited
Aug 2008 Aug 2007 Feb 2008*
Rm Rm Rm
Assets
Non-current assets
Goodwill 815.8 735.5 857.5
Intangible assets (note 5) 308.9 250.2 298.4
Property, equipment and vehicles 2 685.4 2 750.2 2 802.5
(note 5)
Investments 0.2 0.2 0.2
Loans 124.5 111.1 120.7
Operating lease asset 12.5 6.6 10.9
Participation in export 60.2 66.7 61.5
partnerships
Deferred tax 135.9 125.1 143.6
4 143.4 4 045.6 4 295.3
Current assets
Inventory 3 086.5 2 638.1 3 101.4
Trade and other receivables 1 473.2 1 084.8 1 243.9
Cash and cash equivalents 1 176.1 656.1 663.2
Assets held for sale - 98.7 - -
discontinued operation (note 5)
5 834.5 4 379.0 5 008.5
Total assets 9 977.9 8 424.6 9 303.8
Equity and liabilities
Total equity 1 247.8 677.7 1 433.7
Non-current liabilities
Long-term debt 683.2 680.4 681.3
Retirement scheme obligations 29.0 102.0 49.0
Operating lease liability 640.3 603.9 626.9
1 352.5 1 386.3 1 357.2
Current liabilities
Short-term debt 39.4 45.0 36.4
Trade and other payables 7 104.1 6 171.3 6 209.2
Tax 234.1 144.3 267.3
7 377.6 6 360.6 6 512.9
Total equity and liabilities 9 977.9 8 424.6 9 303.8
Shares in issue - millions 506.1 486.1 506.1
Weighted average shares in issue 471.5 451.8 454.4
- millions (note 3)
Net asset value - cents per share
(property value based
on directors` valuation) 338.2 212.9 374.7
*Restated - refer note 5.
STATEMENT OF CHANGES IN EQUITY
Unaudited Audited
Six months ended Year to
Aug 2008 Aug 2007 Feb 2008
Rm Rm Rm
Total equity at 1 March 1 433.7 1 015.4 1 015.4
Total recognised income and 318.6 406.8 1 161.9
expense for the period
Profit for the period 385.8 370.0 936.8
Gains and losses recognised
directly in equity:
Foreign currency translation (67.2) 36.8 225.1
Dividends paid (550.9) (477.4) (614.9)
Issue of share capital - - 79.9
Share repurchases - (300.0) (299.6)
Proceeds from employees on 19.1 12.6 45.8
settlement of share options
Share options expense 27.3 20.3 45.2
Total equity at 31 August/29 1 247.8 677.7 1 433.7
February
CASH FLOW STATEMENT
Unaudited Audited
Six months ended Year to
Aug 2008 Aug 2007* Feb 2008*
Rm Rm Rm
Cash flows from operating
activities
Trading profit 640.3 568.4 1 486.8
Continuing operations 690.8 592.1 1 521.6
Discontinued operation (50.5) (23.7) (34.8)
Loss on sale of property, 11.3 - 4.4
equipment and vehicles
Depreciation and amortisation 309.2 246.4 548.2
Share options expense 27.3 20.3 45.2
Net operating lease obligations 11.8 19.0 37.6
Cash generated before movements 999.9 854.1 2 122.2
in working capital
Movements in working capital: 668.9 125.0 (526.5)
Increase in trade and other 881.8 534.4 501.4
payables
Decrease/(increase) in inventory 14.9 (270.6) (734.0)
Increase in trade and other (227.8) (138.8) (293.9)
receivables
Cash generated by trading 1 668.8 979.1 1 595.7
activities
Interest received 33.6 21.5 48.9
Continuing operations 31.8 19.7 45.0
Discontinued operation 1.8 1.8 3.9
Interest paid (55.2) (30.3) (79.2)
Cash generated by operations 1 647.2 970.3 1 565.4
Dividends paid (550.9) (477.4) (614.9)
Tax paid (273.6) (282.5) (504.7)
Net cash from operating 822.7 210.4 445.8
activities
Cash flows from investing
activities
Property, equipment and vehicle (358.8) (453.8) (698.2)
additions
Intangible asset additions (40.4) (69.3) (163.0)
Proceeds on sale of assets 76.0 50.6 50.6
Loans advanced (3.8) (2.3) (11.9)
Net cash used in investing (327.0) (474.8) (822.5)
activities
Cash flows from financing
activities
Debt raised 5.0 491.9 484.2
Issue of shares - - 79.9
Share repurchases - (300.0) (299.6)
Proceeds from employees on 19.1 12.6 45.8
settlement of share options
Net cash from financing 24.1 204.5 310.3
activities
Net increase/(decrease) in cash 519.8 (59.9) (66.4)
and cash equivalents
Cash and cash equivalents at 1 663.2 709.1 709.1
March
Exchange rate effect on cash and (6.9) 6.9 20.5
cash equivalents
Cash and cash equivalents at 31 1 176.1 656.1 663.2
August/29 February
*Restated - refer note 7.
SEGMENTAL REPORT
Southern Africa Australia
Aug 2008 Aug 2007 Aug 2008 Aug 2007
Rm Rm Rm Rm
Segment revenue 21 535.8 18 662.0 3 269.1 2 616.8
Turnover 20 622.7 17 896.5 3 029.2 2 426.1
- Australian dollars 419.1 410.2
(millions)
Segment result
Operating profit
before interest
(note 6) 695.7 632.4 10.2 6.7
- Australian dollars
(millions)
(note 6) 1.4 1.1
Included in segment
result:
Depreciation and (242.1) (178.0) (49.2) (36.8)
amortisation
Share options expense (27.3) (20.3) - -
Net accrual for
future lease
expenditure (15.4) (16.4) - -
Goodwill, included in 137.1 137.1 678.7 598.4
total assets
Total assets, net of 7 602.1 6 197.5 1 816.7 1 524.5
deferred tax
Total liabilities, 7 398.9 6 311.1 713.5 816.9
net of tax
Capital expenditure 303.6 477.1 92.1 34.3
SEGMENTAL REPORT (continued)
Total
Aug 2008 Aug 2007
Rm Rm
Segment revenue 24 804.9 21 278.8
Turnover 23 651.9 20 322.6
- Australian dollars (millions)
Segment result
Operating profit before interest
(note 6) 705.9 639.1
- Australian dollars (millions)
(note 6)
Included in segment result:
Depreciation and amortisation (291.3) (214.8)
Share options expense (27.3) (20.3)
Net accrual for future lease
expenditure (15.4) (16.4)
Goodwill, included in total assets 815.8 735.5
Total assets, net of deferred tax 9 418.8 7 722.0
Total liabilities, net of tax 8 112.4 7 128.0
Capital expenditure 395.7 511.4
The above segmental information does not include Score Supermarkets Operating
Limited, which has been classified as a discontinued operation (refer note 7).
Pick n Pay Holdings Limited ("PIKWIK")
Share code: PWK ISIN code: ZAE000005724
Pikwik`s only asset is its 54.48% (2007: 57.40%) effective holding in Pick n Pay
Stores Limited (excluding treasury shares). The Pikwik Group earnings are
directly related to those of this investment. Headline earnings for the period
amount to R208.5 million (2007: R188.6 million).
Headline earnings per share and diluted headline earnings per share from
continuing operations is 45.17 cents (2007: 39.30 cents) and 44.40 cents (2007:
36.69 cents), respectively. Group headline earnings per share and Group diluted
headline earnings per share is 40.52 cents (2007: 36.86 cents) and 39.81 cents
(2007: 34.29 cents), respectively. The total number of shares in issue is 527.2
million (2007: 527.2 million) and the weighted average number of shares in issue
during the period is 514.6 million (2007: 511.6 million) . Pikwik`s interim
dividend per share is 17.45 cents (2007: 15.18 cents), an increase of 15.0%.
Dividend declarations
The directors have declared the following cash dividends:
Pick n Pay Stores Limited (No. 81) 35.75 cents per share
Pick n Pay Holdings Limited (No. 54) 17.45 cents per share
For both Companies, the last day of trade in order to participate in the
dividend (CUM dividend) will be Friday, 5 December 2008. The shares will trade
EX dividend from the commencement of business on Monday, 8 December 2008 and the
record date will be Friday, 12 December 2008.
The dividends will be paid on Monday, 15 December 2008.
Share certificates may not be dematerialised or rematerialised between Monday, 8
December 2008 and Friday, 12 December 2008, both dates inclusive.
On behalf of the Boards of Directors
GF Lea - Company Secretary 20 October 2008
Notes to the financial information
1. The Group`s interim condensed consolidated financial statements have been
prepared in accordance with IAS 34 - Interim Financial Reporting. The
accounting policies and methods of computation applied in the preparation
of these financial statements are in accordance with IFRS and are
consistent with those applied in the preparation of the Group`s annual
financial statements for the year ended 29 February 2008.
2. Revenue comprises turnover, other trading income and interest received.
3. 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.
4. Transport costs have been reclassified from trading expenses to cost of
sales. Comparative figures have been restated accordingly.
5. At February 2008 computer hardware assets with a cost of R31.4 million were
incorrectly included as part of intangible assets. This amount has been
reallocated to property, plant and equipment and the February 2008
comparative numbers have been restated accordingly. Also note that in the
current period Score assets with a net book value of R98.7 million have
been reclassified as held for sale.
6. Operating profit before interest in Australia includes a net R8.7 million
(2007: R47.0 million) profit on sale of assets, as a result of the
strategic franchise roll-out.
7. The Group has committed to the closure of its subsidiary, Score
Supermarkets Operating Limited. The Score stores will be closed and the
property, equipment and vehicles sold. The majority of the stores will be
sub-let to black franchisees and will be converted into Pick n Pay Family
Franchise stores. Although this means a discontinuation of the Score brand,
it is an exciting opportunity for the Group to expand the Pick n Pay brand
into new markets, as well as being able to create franchise opportunities
for black entrepreneurs. The closure of the Score operation will be
complete by 28 February 2010.
Score has been presented as a discontinued operation in the financial
information to 31 August 2008, and the comparative information has been restated
accordingly. The salient financial information of Score is as follows:
Aug 2008 Aug 2007 Feb 2008
Rm Rm Rm
Income statement
Revenue 1 214.4 1 457.8 2 950.4
Turnover 1 180.6 1 436.8 2 906.4
Trading expenses 314.1 326.7 656.5
Loss on sale of property, equipment 4.9 - -
and vehicles
Trading loss for the period 50.5 23.7 34.8
Loss for the period 48.7 21.9 30.9
Balance sheet
Total assets 423.2 577.5 492.4
Total liabilities 383.6 474.6 403.8
Cash flow statement
Net cash from operating activities 36.1 57.6 10.1
Net cash from/(used in) investing 59.4 (11.7) (9.4)
activities
Directors of Pick n Pay Stores Limited
Executive: RD Ackerman (Chairman),NP Badminton (CEO),
W Ackerman, DG Cope
Non-executive: D Robins* (Deputy Chairman), GM Ackerman, HS Herman(+),
C Nkosi(+), BJ van der Ross(+), J van Rooyen(+)
Directors of Pick n Pay Holdings Limited
Non-executive: GM Ackerman (Chairman), RD Ackerman,
W Ackerman, RP de Wet(+), HS Herman(+)
*German (+)Independent
21 October 2008
Sponsor: Investec Bank Limited
Date: 21/10/2008 08:00:13 Produced by the JSE SENS Department.
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