| Tue 25 Aug 2009, 8:30 | | SHP - Shoprite Holdings Limited - Reviewed results for the 12 months ended 30 |
|
SHP
SHP
SHP - Shoprite Holdings Limited - Reviewed results for the 12 months ended 30
June 2009
SHOPRITE HOLDINGS LIMITED
(Reg. No. 1936/007721/06)
(ISIN: ZAE 000012084)
(JSE Share code: SHP)
(NSX Share code: SRH)
(LuSE Share code: SHOPRITE)
("the Group")
Key information
- Trading profit up 28,1% to R2,941 billion.
- Turnover up 24,5% - from R47,652 billion to R59,319 billion.
- Diluted headline earnings per share up 30,9% to 390,8 cents.
- Final dividend per share declared: 130,0 cents.
- Further workforce appointments: 11 000
Whitey Basson, chief executive, commented:
The Group has followed up the excellent results of 2008 with equally good
results in 2009 despite a constantly weakening economy. Turnover growth of 24,5%
comfortably exceeded food inflation and enabled the Group to increase market
share by 1,5%, the biggest gain shown by any food retailer during this period,
to 30%. This strong growth required the appointment of a further 11 000 staff
members. We continued to sacrifice gross margin to build turnover and to assist
our beleaguered customers we put approximately R356 million back into their
pockets during the reporting period. Through increased efficiency in managing
the cost base, we succeeded in increasing our trading margin from 4,82% to
4,96%. The continued success of the Group in an intensely contested retail
environment is the result of a focused business plan applied consistently over
many years by a highly experienced management team. Central to this business
plan is the decision for us to control, to the best of our ability, all aspects
of our business. Today we are achieving the benefits of the economies of scale
we have accomplished and of our continuous investment in infrastructure and in
the development and training of our employees.
24 August 2009
Enquiries:
Shoprite Holdings Limited Tel: (021) 980 4000
Whitey Basson, chief executive
Carel Goosen, deputy managing director
De Kock Communications Tel: (021) 422 2690
Ben de Kock Cell: 076 390 7725
OPERATING ENVIRONMENT
The spill over effects of the global credit crisis on the South African economy
became more marked in the second half of the year with weakening manufacturing
output and increasing unemployment. Higher-income individuals saw their net
worth eroded by a sharp drop in investment and property values, while lower-
income earners were affected mainly by job losses and the high cost of living.
These conditions forced greater austerity on consumers and saw them becoming
increasingly price-sensitive. The difficult trading conditions were exacerbated
by a worsening security situation. Escalating crime has forced the Group to
greatly increase security measures to safeguard our assets and ensure customers
shop in a safe environment.
COMMENTS ON THE RESULTS
Income statement
Total turnover
Total turnover increased by 24,5% from R47,652 billion to R59,319 billion due to
an excellent performance from all the Group`s divisions. The growth exceeded
internal food inflation, which was higher than the previous financial year.
Gross profit
The Group continued to sacrifice gross profit, especially in respect of staple
foods, to increase customer support and assist lower-income earners. As a
result, gross margin reduced from 19,9% to 19,3%.
Expenses
Overall, costs were meticulously controlled and grew at a slower rate than
turnover. The cost of electricity nevertheless escalated by 35% due to Eskom`s
tariff hikes, but also because the shift to fresh and value-added products
increases the need for refrigeration, which now accounts for 80% of store energy
consumption. The increase of 21,8% in employee benefits resulted primarily from
the increase in the staff complement (from 73 000 to 84 000) to support the
growth in all areas of the business. Depreciation and amortisation was 26,3%
higher due to the net gain of 95 own stores and the ongoing refurbishment of the
Group`s 1079 own stores.
Trading margin
The trading margin increased from 4,82% to 4,96% given the greater efficiency
with which the business is being managed. It is a factor of the strong growth in
turnover which gave rise to a 20,6% increase in gross profit even though the
Group reduced gross margin from 19,9% to 19,3%. This, coupled with a slower
increase in expenditure of 19,2%, led to an increase in trading profit of 28,1%.
Interest received and finance costs
Net interest received decreased by 15,5% due to lower interest rates, but
particularly because of capital expenditure of R1,820 billion and other cashflow
items, which was funded out of the Group`s own cash resources.
Dividend declared
The board has declared a final dividend of 130,0 cents per ordinary share to
bring the total distribution for the year to 200,0 cents per ordinary share
(2008: 155 cents), an increase of 29%.
Balance sheet
Property, plant and equipment
The increase of 19,0% to R5,360 billion was mainly due to refurbishments and new
stores opened during the year, the purchase of land and the development of
buildings of R347 million, as well as investment in technology of R242 million.
Inventories
The increase of 28,3% in inventory to R6,042 billion is higher than the growth
in turnover. The following reasons are the most relevant:
- There was a net gain of 59 supermarkets, while a net 28 furniture stores were
opened in the 12 months to end June and had to be provisioned.
- Supplier deliveries continued to be erratic forcing the Group to continue
stockpiling certain product ranges to avoid out-of-stock situations in our
stores.
- Before the financial year-end, stocks had already been received at the
distribution centres for the Checkers chain`s successful Golden Celebration
promotion in July.
Cash and cash equivalents
Net cash and cash equivalents were slightly lower at R2,811 billion (2008:
R3,136 billion) due to the high capital expenditure referred to earlier.
OPERATIONAL REVIEW
Turnover increased by 24,5% to R59,319 billion while trading profit was 28,1%
higher at R2,941 billion, up from R2,297 billion in the corresponding period.
All our divisions, with the exception of furniture, produced turnover growth
well in excess of 20%. In a market characterised by declining disposable income
and increasing pressure on consumers across the spectrum, the Group continued to
benefit from our positioning as the country`s leading value-provider in food
retailing. Our one-stop shopping concept is increasingly gaining favour with
consumers who welcome not having to travel to different venues to conduct their
business. Our in-store pharmacies, of which the Group now has 81, are playing an
important role in bringing new customers into stores and have promoted sales in
the beauty and health departments. Well-stocked liquor stores located near to,
or at the entrance to supermarkets have stimulated both wine and liquor sales,
while Money Market is constantly extending its range of services to now also
include flight bookings, travel packages and hotel reservations. The non-RSA
business contributed 13,7% to total turnover.
Number of outlets
Confirmed
New stores
JUN 2008 Opened Closed JUN 2009 JUN 2010
SUPERMARKETS 636 67 8 695 64
- SHOPRITE 370 16 3 383 23
- CHECKERS 124 11 1 134 13
- CH HYPER 24 0 0 24 0
- USAVE 118 40 4 154 28
HUNGRY LION 112 12 4 120 3
FURNITURE 236 30 2 264 10
- OK FURNITURE 197 23 2 218 8
- HOUSE & HOME 39 7 0 46 2
TOTAL OWN STORES 984 109 14 1079 77
- OK FRANCHISE 252 37 24 265 8
- H/LION FRANCHISE 4 1 0 5 0
TOTAL FRANCHISE 256 38 24 270 8
TOTAL STORES 1240 147 38 1349 85
COUNTRIES OUTSIDE RSA 16 0 0 16
RSA supermarkets
The Group`s supermarket operation in South Africa, which includes the Shoprite,
Checkers and Usave brands, is its primary business generating 78,5% of total
turnover. Despite sales weakening in the second half of the year we still grew
ahead of the market for the 12 months to end June by increasing sales by 22,8%
to R46,551 billion. As a result the Group made strong gains in market share,
growing by 1,5 percentage points to 30%. In the course of the year a record net
number of 57 stores were added and the Group now owns and operates 593
supermarkets within the borders of South Africa. Much of the success of our
supermarket chains is due to the fact that each of them addresses a separate but
complementary target audience. Their clear positioning and unambiguous
identities allow management to focus on the specific needs and aspirations of
the consumers targeted by each chain and satisfy these through the correct
product offering. Together the three chains cover virtually the whole South
African consumer spectrum.
Shoprite
With 310 stores in South Africa, the Group`s original brand, which now has 12
more outlets than a year ago, is still by far the biggest of our three chains
and continues to be the basis of our operations. It increased turnover by 20,9%
to R27,180 billion, representing 58,4% of the RSA supermarkets` turnover.
Research during May 2009 confirmed that Shoprite best delivers on the most
important needs of the majority of shoppers. The number of customers grew by
6,2% as more and more higher-income shoppers became value driven. This enabled
the chain to grow its share of the food retail market.
Checkers
With its 154 stores, the chain, which now has nine more outlets than a year ago,
increased turnover by 23,1% to R17,7 billion. Checkers supermarkets became South
Africa`s fastest-growing food retail chain for the 12 months to end June.
Focusing on both price and lifestyle, it has identified a clearly defined
audience that allows for carefully targeted marketing. The chain showed a strong
increase in consumer support and grew the value per customer transaction by
11,8%. This enabled it to grow its share of the food retail market.
Usave
The small-format, limited-range Usave chain operated 129 outlets at the end of
the reporting period, experiencing a net gain of 36 stores. Growth continued to
be brisk with turnover increasing by 57,7% due partially to the new stores
opened. On a like-for-like basis the growth in turnover was 21,3%. The low cost
chain, which stocks mainly basic food lines it sells at highly competitive
prices, has become increasingly attractive to price conscious consumers as it
manages to be cheaper than most supermarkets in South Africa.
Supermarkets outside South Africa
With credit playing a relatively small role, most countries on the continent
were less affected by the global credit crisis than South Africa. The Group`s
non-RSA supermarkets grew turnover by 39,9% in rand terms (36,7% on a like-for-
like basis) compared to the previous year. Only five new stores were added due
to the endemic lack of suitable trading space while three were closed and we now
operate 102 stores under mainly the Shoprite and Usave banners. Non-RSA sales
constituted 13,6% of our total supermarket turnover. Whereas a weaker rand for
the first six months provided us with a substantial price advantage, the
situation was reversed in the second six months when the currency strengthened.
OK Franchise
The franchise division made strong gains during the year, growing turnover
substantially above food inflation to 26,5%. With overhead costs well under
control, the division reported a significantly higher trading profit. It showed
a net gain of 13 new members, who not only brought the total number of
franchisees to 265, but also increased the stature of its membership base. These
members, spread throughout South Africa and four neighbouring countries, benefit
in particular from the Group`s buying power in obtaining the best prices. The
division continued to exercise rigorous credit control and bad debt provisions
remained well within acceptable levels.
Furniture
For the furniture division the 12 months to end June was a challenging time with
discounters dropping the prices of appliances and home entertainment products
further in an attempt to build turnover through increased unit sales. In this
deteriorating trading environment the division managed to raise turnover by
13,9%. The mass-market chains OK Furniture and OK Power Express continued to
trade at the same levels as before the introduction of the National Credit Act
(NCA) in June 2007, but sales in House & Home remained subdued. A welcome
development was an increase in the demand for credit, mainly from traditional
House & Home customers. Taking a longer-term view, the division continued its
strong expansion drive, opening a net of 28 stores to bring the total to 264
outlets. Of these, 27 are located in the BLSN (Botswana, Lesotho, Namibia and
Swaziland) countries and Mozambique and the intention is to move further into
Africa.
GROUP PROSPECTS AND OUTLOOK
We expect trading conditions in the new financial year to be challenging. There
is as yet no substantial evidence that South Africa is starting to move out of
the recession and even if that were to be the case, such a recovery will take
time to work through the economy as a whole. We are concerned about the
increasing number of unemployed people, now at 9 million, and about the
Government`s ability, in the light of lower tax revenues, to continue supporting
the poor through social grants to the extent it does at present. Food inflation
is also coming down rapidly and reached 7,4% in July. Nevertheless, we believe
that, because of our value positioning, the Group is still better placed than
most to weather the present market conditions and to, once again, achieve
satisfactory results.
By order of the board
CH Wiese JW Basson
Chairman Chief executive
Cape Town
24 August 2009
CORPORATE GOVERNANCE
The Group is committed to the principles embodied in the Code of Corporate
Practice and Conduct in the King Report 2002 ("the Code"). The Group complies
with the significant requirements incorporated in the Code and in the Listings
Requirements of the JSE Ltd.
DIVIDEND NR 121
The Board has declared a final dividend of 130,0 cents (2008: 106,0 cents) per
share, payable to shareholders on Monday, 21 September 2009. This brings the
total dividend for the year to 200,0 cents per ordinary share (2008: 155,0
cents). The last day to trade cum dividend will be Friday, 11 September 2009. As
from Monday, 14 September 2009 all trading of Shoprite Holdings Ltd shares will
take place ex dividend. The record date is Friday, 18 September 2009.
Share certificates may not be dematerialised or rematerialised between Monday,
14 September 2009, and Friday, 18 September 2009, both days inclusive.
ACCOUNTABILITY
These condensed consolidated preliminary results have been prepared in
accordance with International Financial Reporting Standards ("IFRS"), IAS 34:
Interim Reporting and Schedule 4 of the South African Companies Act (Act no 61
of 1973), as amended. The accounting policies are consistent with those used in
the annual financial statements for the financial period ended June 2008.
AUDITORS` REVIEW OPINION
The condensed consolidated preliminary results for the year ended June 2009 have
been reviewed by PricewaterhouseCoopers Inc. The auditors` unqualified review
opinion is available for inspection at the Company`s registered office
Condensed Group Income Statement
Reviewed Audited
% year ended year ended
R`000 change June 09 June 08
Sale of merchandise 24.5 59 318 559 47 651 548
Cost of sales 25.5 (47 878 232) (38 161 987)
Gross profit 20.6 11 440 327 9 489 561
Other operating income 26.6 1 244 363 982 770
Depreciation and amortisation 26.3 (753 921) (596 841)
Operating leases 16.7 (1 310 522) (1 122 522)
Employee benefits 21.8 (4 453 771) (3 655 978)
Other expenses 15.2 (3 225 562) (2 800 440)
Trading profit 28.1 2 940 914 2 296 550
Exchange rate gains (90.9) 3 005 33 187
Items of a capital nature (562.2) (31 227) 6 756
Operating profit 24.7 2 912 692 2 336 493
Interest received 4.2 191 566 183 915
Finance costs 45.6 (86 142) (59 149)
Profit before tax 22.6 3 018 116 2 461 259
Tax 14.2 (999 478) (875 570)
Profit for the year 27.3 2 018 638 1 585 689
ATTRIBUTABLE TO:
Equity holders of the Company 27.3 1 998 246 1 570 252
Minority interest 32.1 20 392 15 437
2 018 638 1 585 689
Earnings per share (cents) 28.1 396.5 309.5
Diluted earnings per share (cents) 29.5 386.3 298.3
Ordinary dividend per share paid (cents)
Interim dividend paid 42.9 70.0 49.0
Final dividend declared 22.6 130.0 106.0
Total 29.0 200.0 155.0
Number of ordinary shares (`000) used for
calculation of: earnings per share
(weighted average) 504 030 507 320
: diluted earnings per share
(weighted average) 517 250 526 455
Condensed Group Balance Sheet
Reviewed Audited
R`000 June 09 June 08
ASSETS
Non-current assets 6 048 645 5 120 964
Property, plant and equipment 5 359 587 4 502 928
Available-for-sale investments 47 804 37 548
Loans and receivables 2 636 4 056
Deferred tax assets 277 951 248 614
Intangible assets 354 434 319 825
Fixed escalation operating lease accrual 6 233 7 993
Current assets 10 690 843 9 733 319
Inventories 6 041 906 4 707 394
Other current assets 1 780 972 1 718 427
Assets held for sale 5 168 107 389
Loans and receivables 37 409 43 468
Cash and cash equivalents 2 825 388 3 156 641
Total assets 16 739 488 14 854 283
EQUITY AND LIABILITIES
Total equity 5 029 295 4 818 838
Capital and reserves attributable
to equity holders 4 960 000 4 758 656
Minority interest 69 295 60 182
Non-current liabilities 766 217 841 031
Borrowings 16 677 12 762
Deferred tax liabilities 26 992 16 241
Provisions 170 231 316 600
Fixed escalation operating lease accrual 414 164 439 762
Other non-current liabilities 138 153 55 666
Current liabilities 10 943 976 9 194 414
Other current liabilities 10 567 076 9 060 941
Provisions 362 977 112 682
Bank overdraft 13 923 20 791
Total liabilities 11 710 193 10 035 445
Total equity and liabilities 16 739 488 14 854 283
Reconciliation of Headline Earnings
Reviewed Audited
% year ended year ended
R`000 change June 09 June 08
Net profit attributable to shareholders 1 998 246 1 570 252
Re-measurements 31 227 (6 756)
Profit on disposal of property (3 425) (2 234)
Loss on disposal and scrapping
of plant, equipment and intangible assets 23 915 9 250
Loss/(profit)on other investing activities 23 (510)
Insurance claims received - (21 689)
Impairment of goodwill 3 608 2 336
Impairment of property, plant and
equipment, intangible assets
and assets held for sale 7 106 6 091
Tax effect on re-measurements (7 913) 8 735
Headline earnings 2 021 560 1 572 231
Earnings per share (cents) 28.1 396.5 309.5
Diluted earnings per share (cents) 29.5 386.3 298.3
Headline earnings per share (cents) 29.4 401.1 309.9
Diluted headline earnings
per share (cents) 30.9 390.8 298.6
Ordinary dividend per share (cents)
Interim dividend paid 42.9 70.0 49.0
Final dividend declared 22.6 130.0 106.0
Total 29.0 200.0 155.0
Condensed Group Cash Flow Statement
Reviewed Audited
year ended year ended
R`000 Notes June 09 June 08
Cash generated by operations 3 435 736 3 286 747
Operating profit 2 912 692 2 336 493
Less: investment income (29 279) (27 760)
Non-cash items 1 1 065 296 709 744
Cash settled share options (484 896) (128 615)
Changes in working capital 2 (28 077) 396 885
Net interest received 127 129 146 182
Dividends received 7 574 6 344
Dividends paid (902 576) (587 789)
Tax paid (842 045) (616 141)
Cash flows from operating activities 1 825 818 2 235 343
Cash flows utilised by investing activities (1 737 303) (1 167 589)
Purchase of property, plant and equipment
and intangible assets (1 820 256) (1 436 195)
Proceeds on disposal of property,
plant and equipment and intangible assets 68 010 68 021
Proceeds on disposal of assets held for sale 13 131 194 544
Acquisition of operations - (5 909)
Other investment activities 1 812 11 950
Cash flows (utilised by)/from
financing activities (333 108) 20 497
Acquisition of treasury shares (383 445) -
Proceeds on disposal of treasury shares 42 510 -
Increase in borrowings 7 827 20 274
Net proceeds on issue of preference shares
to joint venture - 223
Movement in cash and cash equivalents (244 593) 1 088 251
Effect of exchange rate movements on
cash and cash equivalents (79 792) 59 897
Net movement in cash and cash equivalents (324 385) 1 148 148
Reviewed Audited
year ended year ended
R`000 June 09 June 08
CASH FLOW INFORMATION
1. Non-cash items
Depreciation on property, plant and equipment 741 710 597 786
Amortisation of intangible assets 54 743 29 002
Net fair value losses/(gains)
on financial instruments 7 919 (5 612)
Exchange rate gains (3 005) (33 187)
Profit on disposal of property - (200)
Profit on disposal of assets held for sale (3 425) (2 034)
Loss on disposal and scrapping of plant
and equipment, intangible assets and
assets held for sale 23 915 9 250
Impairment of property, plant and equipment
and assets held for sale 7 106 6 091
Impairment of goodwill 3 608 2 336
Movement in provisions 117 591 86 030
Movement in cash-settled share-based
payment accrual 139 965 59 835
Insurance claims received - (21 689)
Movement in fixed escalation operating
lease accrual (24 831) (17 864)
1 065 296 709 744
2. Changes in working capital
Inventories (1 464 435) (913 824)
Trade and other receivables (89 157) (133 276)
Trade and other payables 1 525 515 1 443 985
(28 077) 396 885
Condensed Segment Information
Reviewed Audited
% year ended year ended
R`000 change June 09 June 08
SEGMENT REVENUE - by business segment
- Supermarkets 25.0 56 745 719 45 393 380
- Furniture 13.9 2 572 840 2 258 168
Total segment revenue 24.5 59 318 559 47 651 548
SEGMENT RESULT* - by business segment
- Supermarkets (including unallocated) 28.4 2 760 455 2 150 178
- Furniture 1.6 154 185 151 799
Total segment result 26.6 2 914 640 2 301 977
*Segment result comprises trading profit plus exchange rate losses/gains less
investment income.
Supplementary Information
Reviewed Audited
R`000 June 09 June 08
1. Capital commitments 337 276 327 425
2. Contingent liabilities 138 316 34 406
3. Net asset value per share (cents) 990 938
4. Total number of shares in issue
(adjusted for treasury shares) 500 898 507 320
Condensed Statement of Changes in Equity
Reviewed Audited
year ended year ended
R`000 June 09 June 08
Balance at beginning of July 4 818 838 3 688 771
Net movement in treasury shares (340 935) -
Net fair value profits on available-for-sale
investments, net of tax 8 819 11 995
Profit for the year 2 018 638 1 585 689
Minority interest on additional shares
issued by subsidiary 757 -
Cash settlement of share options (379 349) (62 341)
Foreign currency translation differences (193 856) 182 987
Dividends distributed to shareholders (903 617) (588 263)
Balance at end of June 5 029 295 4 818 838
DIRECTORATE AND ADMINISTRATION
Executive directors
JW Basson (chief executive), CG Goosen (deputy managing director), B Harisunker,
AE Karp, EL Nel, BR Weyers
Non-executive directors
CH Wiese (chairman), TRP Hlongwane, JA Louw, JF Malherbe, JG Rademeyer
Alternate directors
JAL Basson, M Bosman, PC Engelbrecht, JD Wiese
Company secretary
PG du Preez
Registered office
Cnr William Dabs and Old Paarl Roads, Brackenfell, 7560, South Africa. PO Box
215, Brackenfell, 7561, South Africa Telephone: +27 (0)21 980 4000 Facsimile:
+27 (0)21 980 4050. Website: www.shopriteholdings.co.za
Transfer secretaries
South Africa: Computershare Investor Services (Pty) Ltd, PO Box 61051,
Marshalltown, 2107, South Africa Telephone: +27 (0)11 370 5000
Facsimile: +27 (0)11 688 5248 Website: www.computershare.com
Namibia: Transfer Secretaries (Pty) Ltd, PO Box 2401, Windhoek, Namibia
Telephone: +264 (0)61 227 647 Facsimile: +264 (0)61 248 531
Zambia: Lewis Nathan Advocates, PO Box 37268, Lusaka, Zambia
Telephone: +260 (0)211 262 009 Facsimile: +260 (0)211 261 997
Sponsors
South Africa: Nedbank Capital, PO Box 1144, Johannesburg, 2000, South Africa
Telephone: +27 (0)11 295 8602 Facsimile: +27 (0)11 294 8602 Website:
www.nedbank.co.za
Namibia: Old Mutual Investment Group (Namibia) (Pty) Ltd, PO Box 25549,
Windhoek, Namibia
Telephone: +264 (0)61 299 3527 Facsimile: +264 (0)61 299 3528
Zambia: Lewis Nathan Advocates, PO Box 37268, Lusaka, Zambia
Telephone: +260 (0)211 262 009 Facsimile: +260 (0)211 261 997
Auditors
PricewaterhouseCoopers Incorporated, PO Box 2799, Cape Town, 8000, South Africa
Telephone: +27 (0)21 529 2000 Facsimile: +27 (0)21 529 3300
Date: 25/08/2009 08:30:02 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
