| Wed 21 Oct 2009, 8:00 | | PIK/PWK - Pick `n Pay/ Pick `n Pay Holdings - Unaudited interim condensed |
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PWK PIK
PWK PIK
PIK/PWK - Pick `n Pay/ Pick `n Pay Holdings - Unaudited interim condensed
consolidated results for the six months ended 31 August 2009
PICK `n PAY STORES LIMITED
Share code: PIK & ISIN code: ZAE000005443
Pick `n Pay Holdings Limited ("PIKWIK")
Share Code: PWK & ISIN code: ZAE000005724
Unaudited interim condensed consolidated results for the six months ended 31
August 2009
FINANCIAL HIGHLIGHTS - CONTINUING OPERATIONS
Turnover up 12.3%
EBITDA* up 10.6%
*excluding capital profits on the sale of properties and stores
Headline earnings per share up 11.1%
Interim dividend per share up 11.2%
Result overview
This has been an exceptionally tough trading period in a recessionary economic
climate which has had a marked effect on consumer spending. However, we expect
the recent 5.5% reduction in interest rates and rapidly reducing inflation to
ease the strain on consumers` disposable income in the period ahead.
Notwithstanding these challenges, we continue to make significant progress in
our efforts to transform Pick n Pay. We`ve seen some very positive results from
our efforts to date:
Overall our continuing operations have gained 0.4% of market share in the period
with significant gains in every fresh food category.
Our revamped private label offer has delivered 26% sales growth. We are giving
customers a great value alternative to the leading brands.
The three Pick n Pay Express stores we`ve opened are performing ahead of
expectations. A further two will be opened in the next month.
We have all but completed the process of converting Score to Pick n Pay
franchise and Boxer. We now sell as much from 48 conversions as we did from 126
Score stores.
We continue to be South Africa`s lowest priced retailer - although it`s proving
challenging to get customers to believe this given the quality of our offer and
our high store standards.
The efficiency of our Longmeadow operations has improved markedly.
The installation of SAP is 85% complete with just a handful of Hypers and inland
franchise stores to go.
Our continued efforts to help our customers live more sustainable lives has
resulted in our being recognised by the Sunday Times survey as the most green
retailer.
However, there is still a lot to do. The management team is focused on ensuring
that we not only grow topline sales but improve the efficiency of every part of
our operation.
Group turnover at R26.6 billion is 12.3% above last year, with a growth of 15.3%
from Pick n Pay and Boxer and a decrease of 8.3% at Franklins, the latter being
due to the strengthening of the Rand. The Franklins increase in Australian
Dollars is 3.3%.
The decrease in trading profit margin from 2.9% last year to 2.8% this period
follows a drop in gross profit margin for the period to 18.6% from 18.8% last
year. This is a result of our investment in keeping prices down on certain fast
selling lines, among other things.
Profit before tax for the period at R927.8 million is 35.9% above last year, and
includes a profit on sale of certain properties of R190.9 million.
Headline earnings per share at 100.30 cents is 11.1% above last year.
The interim dividend per share at 39.75 cents for Pick n Pay Stores Limited and
19.31 cents for Pick n Pay Holdings Limited is an increase of 11.2% and 10.6%,
respectively, over last year.
Operational highlights
Franklins Australia produced a 3.3% increase in turnover in Australian Dollars,
and its profit before tax for the period (before capital items) increased from
R3.5 million last year to R14.7 million this year. The key driver to this
improvement is enhanced performances by refurbished stores, which includes an
introduction of a comprehensive fresh offer and a wider range of perishables. We
have now completed 15 refurbishments, with a further 7 stores to be completed by
the end of the financial year.
Pick n Pay and Boxer increased turnover by 15.3%, which has resulted in our
gaining market share. In addition to the Score conversions, we opened 5 new Pick
n Pay supermarkets in the period with a further 7 due to open in the second half
of the year. Boxer converted 8 Score stores in the period and will convert
another 2 in the second six months as well as open 2 new stores.
Our accelerated refurbishment programme of Pick n Pay Supermarkets is now under
way and we anticipate completing 34 franchise and corporate refurbishments this
financial year. The enhanced turnover growth experienced by the stores completed
to date gives us the confidence to accelerate the programme further and we plan
to refurbish a further 60 stores (including franchise stores) in the next
financial year.
A number of factors had a significant impact on our earnings growth, including:
our continued investment in keeping prices down; electricity costs soared and
look set to escalate further; and a prudent provision against certain franchise
debt arising from franchisee working capital constraints caused by the financial
crisis.
General comments
The Competition Commission investigation into food pricing is ongoing and we
continue to give the process our full co-operation.
Notwithstanding the worst recession in decades, we have still delivered headline
earnings growth and have not been distracted from introducing the strategic
imperatives and changes to the business that were required. We have seen
substantive change and investment in the business over the last three years and
the period ahead will see even more. While many of these improvements have
already begun to reap benefits (e.g. Score conversions, private label, fresh
foods, SAP) others such as supply chain will deliver their full potential in the
longer term. We have a young and energised team that is firmly focused on the
future.
Our Chairman, Raymond Ackerman, has indicated his wish to retire at the end of
the financial year, to be replaced by non-executive Chairman Gareth Ackerman. Mr
Ackerman will stay on in an advisory role as ambassador for the company and will
continue to work out of the Cape Town office as he has before. While it is still
some months before his official retirement, it is entirely appropriate to
acknowledge his contribution to the success of Pick n Pay, his role in changing
the retail landscape in South Africa, his contribution to South African society
and the legacy he has entrenched at the company. All of us at Pick n Pay wish
him extremely well.
For and on behalf of the board
Nick Badminton Raymond Ackerman
Chief Executive Officer Chairman
20 October 2009
PICK n PAY STORES LIMITED
Share code: PIK ISIN code: ZAE000005443
Statement of comprehensive income
Unaudited Audited
Six months ended Year to
Aug 2009 Growth Aug 2008* Feb 2009
Rm % Rm Rm
Continuing operations
Revenue (note 4) 26 701.7 23 772.8 50 135.8
Turnover 26 558.1 12.3 23 651.9 49 862.1
Cost of merchandise (21 617.8) (19 200.5) (40 404.7)
sold
Gross profit 4 940.3 4 451.4 9 457.4
Other trading income 97.1 89.1 201.8
Trading expenses (4 299.9) (3 843.3) (7 958.9)
Loss on sale of (3.0) (6.4) (13.7)
equipment and
vehicles
Trading profit 734.5 690.8 1 686.6
Interest received 46.5 31.8 71.9
Interest paid (44.1) (55.2) (107.5)
Profit on sale of 190.9 - 68.7
property
Profit on sale of - 15.1 15.1
stores
Profit before tax 927.8 682.5 1 734.8
Tax (272.7) (248.0) (568.0)
Profit for the period
from continuing
operations 655.1 434.5 1 166.8
Loss from (68.6) (48.7) (118.5)
discontinued
operation (note 7)
Profit for the period 586.5 385.8 1 048.3
Other comprehensive
income
Exchange rate 27.2 (67.2) (98.8)
differences on
translating foreign
operations
Total comprehensive 613.7 318.6 949.5
income for the period
Gross profit margin 18.6% 18.8% 19.0%
Trading profit margin 2.8% 2.9% 3.4%
Earnings per share -
cents
Basic 124.01 81.83 222.23
Continuing operations 138.51 92.16 247.35
Discontinued (14.50) (10.33) (25.12)
operation
Diluted 122.22 81.33 220.45
Continuing operations 136.52 91.59 245.37
Discontinued (14.30) (10.26) (24.92)
operation
Headline earnings
reconciliation
Profit for the period 586.5 385.8 1 048.3
Headline adjustments
(net of tax):
Loss on sale of 3.0 6.4 13.7
equipment and
vehicles
Loss on sale of 0.4 4.9 3.9
equipment and
vehicles -
discontinued
operation
Profit on sale of (183.7) - (68.7)
property
Profit on sale of - (15.1) (15.1)
stores
Headline earnings 406.2 382.0 982.1
Continuing operations 474.4 11.4 425.8 1 096.7
Discontinued (68.2) (43.8) (114.6)
operation
Headline earnings per
share - cents
Headline 85.88 81.03 208.19
Continuing operations 100.30 11.1 90.31 232.48
Discontinued (14.42) (9.28) (24.29)
operation
Diluted 84.64 80.53 206.53
Continuing operations 98.85 89.76 230.62
Discontinued (14.21) (9.23) (24.09)
operation
Interim dividend - 39.75 11.2 35.75
No. 83 payable
*Restated - refer note 1
Balance sheet
Unaudited Audited
Aug 2009 Aug 2008* Feb 2009
Rm Rm Rm
Assets
Non-current assets
Intangible assets 1 099.9 1 124.7 1 093.6
Property, equipment and vehicles 3 034.2 2 685.4 2 937.0
Investments 0.2 0.2 0.2
Loans 131.9 124.5 128.6
Operating lease asset 16.8 12.5 19.3
Participation in export 57.3 60.2 57.9
partnerships
Deferred tax 104.1 98.1 99.8
4 444.4 4 105.6 4 336.4
Current assets
Inventory 2 965.9 3 013.6 3 334.5
Trade and other receivables 1 564.3 1 473.2 1 769.5
Cash and cash equivalents 1 592.3 1 176.1 1 072.8
Assets held for sale - 21.7 98.7 62.6
discontinued operation
6 144.2 5 761.6 6 239.4
Total assets 10 588.6 9 867.2 10 575.8
Equity and liabilities
Total shareholders` equity 1 701.8 1 155.0 1 695.5
Non-current liabilities
Long-term debt 678.1 683.2 678.1
Retirement scheme obligations 14.3 29.0 8.2
Operating lease liability 673.5 640.3 658.5
1 365.9 1 352.5 1 344.8
Current liabilities
Short-term debt 45.6 39.4 38.3
Trade and other payables 7 180.3 7 104.1 7 315.8
Tax 295.0 216.2 181.4
7 520.9 7 359.7 7 535.5
Total equity and liabilities 10 588.6 9 867.2 10 575.8
Shares in issue - millions 506.1 506.1 506.1
Weighted average shares in issue 472.9 471.5 471.7
- millions (note 5)
Net asset value - cents per
share (property value based on
directors` valuation) 404.7 338.2 441.7
*Restated - refer note 1
Statement of changes in equity
Unaudited Audited
Six months ended Year to
Aug 2009 Aug 2008* Feb 2009
Rm Rm Rm
At 1 March - as restated 1 695.5 1 340.9 1 340.9
Total comprehensive income for 613.7 318.6 949.5
the period
Dividends paid (628.7) (550.9) (717.8)
Share repurchases (31.9) - (21.6)
Net effect of settlement of 22.9 19.1 85.4
employee share options
Share options expense 30.3 27.3 59.1
At 31 August / 28 February 1 701.8 1 155.0 1 695.5
*Restated - refer note 1
Cash flow statement
Unaudited Audited
Six months ended Year to
Aug 2009 Aug 2008* Feb 2009
Rm Rm Rm
Cash flows from operating
activities
Trading profit 734.5 690.8 1 686.6
Loss on sale of equipment and 3.0 6.4 13.7
vehicles
Depreciation and amortisation 351.9 291.4 615.8
Share options expense 30.3 27.3 59.1
Net operating lease obligations 16.8 15.3 33.4
Cash generated before movements 1 136.5 1 031.2 2 408.6
in working capital
Movements in working capital: 495.5 603.3 221.0
Increase in trade and other 10.3 898.3 1 157.8
payables
Decrease / (increase) in 250.1 (84.4) (415.2)
inventory
Decrease / (increase) in trade 235.1 (210.6) (521.6)
and other receivables
Cash generated by trading 1 632.0 1 634.5 2 629.6
activities
Interest received 46.5 31.8 71.9
Interest paid (44.1) (55.2) (107.5)
Cash generated by operations 1 634.4 1 611.1 2 594.0
Dividends paid (628.7) (550.9) (717.8)
Tax paid (162.4) (273.6) (567.7)
Net cash from operating 843.3 786.6 1 308.5
activities - continuing
operations
Net cash (used in) / from (118.0) 36.1 (56.1)
operating activities -
discontinued operation
Net cash from operating 725.3 822.7 1 252.4
activities
Cash flows from investing
activities
Intangible asset additions (22.9) (40.4) (66.1)
Property, equipment and vehicle (434.4) (358.8) (936.4)
additions
Proceeds on sale of property, 214.9 16.6 99.8
equipment and vehicles
Loans advanced (3.2) (3.8) (7.9)
Net cash used in investing (245.6) (386.4) (910.6)
activities - continuing
operations
Net cash from investing 37.2 59.4 68.9
activities - discontinued
operation
Net cash used in investing (208.4) (327.0) (841.7)
activities
Cash flows from financing
activities
Debt raised / (repaid) 7.3 5.0 (1.3)
Share repurchases (31.9) - (21.6)
Proceeds from employees on 22.9 19.1 31.3
settlement of share options
Net cash (used in) / from (1.7) 24.1 8.4
financing activities
Net increase in cash and cash 515.2 519.8 419.1
equivalents
Cash and cash equivalents at 1 1 072.8 663.2 663.2
March
Effect of exchange rate 4.3 (6.9) (9.5)
fluctuations on cash and cash
equivalents
Cash and cash equivalents at 31 1 592.3 1 176.1 1 072.8
August / 28 February
*Restated - refer note 1
Unaudited operating segment report
Pick n Pay and Boxer Franklins
Aug 2009 Aug 2008 Aug 2009 Aug 2008
Rm Rm Rm Rm
External revenue 23 918.0 20 736.4 2 782.0 3 033.6
Inter-segment revenue (10.3) (9.7) - -
External turnover 23 779.6 20 622.7 2 778.5 3 029.2
- Australian dollars 432.8 419.1
(millions)
Profit before tax 720.3 664.5 11.7 12.2
(note 6)
- Australian dollars 1.8 1.7
(millions)
Total assets 8 543.4 7 591.3 1 892.1 1 807.9
Unaudited operating segment report (continued)
Unallocated
Head Office
Insurance costs and revenues
Aug 2009 Aug 2008 Aug 2009 Aug 2008
Rm Rm Rm Rm
External revenue 1.7 2.8 - -
Inter-segment revenue 10.3 9.7 - -
External turnover - - - -
- Australian dollars
(millions)
Profit before tax 4.9 5.8 190.9 -
(note 6)
- Australian dollars
(millions)
Total assets 50.1 49.6 - -
Unaudited operating segment report (continued)
Total
continuing Total
operations Score operations
Aug Aug 2008 Aug Aug Aug Aug 2008
2009 2009 2008 2009
Rm Rm Rm Rm Rm Rm
External revenue 26 701.7 23 772.8 537.2 1 187.5 27 238.9 24 960.3
Inter-segment - - - - - -
revenue
External turnover 26 558.1 23 651.9 536.4 1 180.6 27 094.5 24 832.5
- Australian
dollars (millions)
Profit before tax 927.8 682.5 (67.9) (48.7) 859.9 633.8
(note 6)
- Australian
dollars (millions)
Total assets 10 485.6 9 448.8 103.0 418.4 10 588.6 9 867.2
The basis for reporting segmental financial information has been changed to
accord with IFRS 8:Operating Segments. Previously, segmental information was
provided on a geographic basis, reflecting only the southern African operations
and the Australian operation. With the implementation of IFRS 8, operating
segments were identified based on financial information regularly reviewed by
the Pick n Pay Stores Limited Board (identified as the Chief Operating Decision
Maker of the Group for IFRS 8 reporting purposes) for performance assessments
and resource allocations. As the Pick n Pay and Boxer operating segments have
demonstrated similar economic characteristics they have been aggregated in terms
of IFRS 8.
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, except as presented below
in note 2, are consistent with those applied in the preparation of the Group`s
annual financial statements for the year ended 28 February 2009. The financial
information reported for the 6 months to August 2008 has been restated to accord
with the changes effected for the year ended 28 February 2009. For further
information on the nature of these changes, please refer to note 31 of the 2009
annual report.
2. The Group adopted the revised IAS 1, IFRS 8 and Circular 3/2009 (the revised
Headline Earnings per Share circular) during the period under review. The
presentation of the financial statements (IAS 1) and operating segment
disclosures (IFRS 8) have been changed accordingly, with no adjustment necessary
on the adoption of Circular 3/2009.
3. During the period, certain companies within the Group entered into
transactions with each other. These intra-group transactions have been
eliminated on consolidation. Related party information is unchanged from that
reported at 28 February 2009. For further information, please refer to note 28
of the 2009 annual report.
4. Revenue comprises turnover, other trading income and interest received.
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. Profit before tax in Australia includes a net R3.0 million loss on sale of
assets (2008: R8.7 million profit).
7. As previously reported, the Group has committed to the closure of the
operations of its subsidiary, Score Supermarkets Operating Limited, which
results have been disclosed as a discontinued operation. The closure of the
Score operation will be completed by 28 February 2010.
The salient financial information of Score is as follows:
Unaudited Audited
Six months ended Year to
Aug 2009 Aug 2008* Feb 2009
Rm Rm Rm
Statement of comprehensive
income
Revenue 537.2 1 187.5 2 073.0
Turnover 536.4 1 180.6 2 070.8
Trading expenses 165.4 266.3 512.4
Loss on sale of equipment and 0.4 4.9 3.9
vehicles
Trading loss for the period 68.7 50.5 123.0
Loss for the period (after tax) 68.6 48.7 118.5
Balance sheet
Total assets 103.0 418.4 316.0
Total liabilities 177.2 383.1 328.3
Cash flow statement
Net cash (used in) / from (118.0) 36.1 (56.1)
operating activities
Net cash from investing 37.2 59.4 68.9
activities
Net cash from financing - - -
activities
*Restated - refer note 1
Pick n Pay Holdings Limited ("PIKWIK")
Share Code: PWK ISIN code: ZAE000005724
Pikwik`s only asset is its 54.41% (2008: 54.58%) 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 R221.0 million
(2008: R208.5 million).
Headline earnings per share from continuing operations is
50.09 cents (2008: 45.17 cents).
Diluted headline earnings per share from continuing operations is 48.91 cents
(2008: 44.40 cents).
Headline earnings per share is 42.89 cents (2008: 40.52 cents). Diluted headline
earnings per share is 41.79 cents
(2008: 39.81 cents).
The total number of shares in issue is 527.2 million
(2008: 527.2 million) and the weighted average number of shares in issue during
the period is 515.2 million (2008: 514.6 million). Pikwik`s interim dividend per
share is 19.31 cents
(2008: 17.45 cents), an increase of 10.6%.
Dividend declarations
The directors have declared the following cash dividends:
Pick n Pay Stores Ltd (No. 83) 39.75 cents per share
Pick n Pay Holdings Ltd (No. 56) 19.31 cents per share
For both Companies, the last day of trade in order to participate in the
dividend (CUM dividend) will be Friday, 4 December 2009. The shares will trade
EX dividend from the commencement of business on Monday, 7 December 2009 and the
record date will be Friday, 11 December 2009.
The dividends will be paid on Monday, 14 December 2009.
Share certificates may not be dematerialised or rematerialised between Monday, 7
December 2009 and Friday, 11 December 2009, both dates inclusive.
On behalf of the boards of directors
GF Lea - Company Secretary 20 October 2009
Directors of Pick n Pay Holdings Limited:
Non-executive: GM Ackerman (Chairman), RD Ackerman, W Ackerman
Independent non-executive: RP de Wet, HS Herman
Directors of Pick n Pay Stores Limited:
Executive: RD Ackerman (Chairman), NP Badminton (CEO),
W Ackerman, DG Cope (CFO)
Non-executive: GM Ackerman, D Robins (German)
Independent non-executive: HS Herman, C Nkosi, BJ van der Ross, RSJ van
Rensburg, J van Rooyen
Registered office: 101 Rosmead Avenue, Kenilworth, Cape Town, 7708
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Date: 21/10/2009 08:00:01 Produced by the JSE SENS Department.
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