| Tue 23 Feb 2010, 9:00 | | SHP - Shoprite Holdings - Unaudited interim results for the 6 months ended |
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SHP
SHP
SHP - Shoprite Holdings - Unaudited interim results for the 6 months ended
December 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")
UNAUDITED INTERIM RESULTS FOR THE 6 MONTHS ENDED DECEMBER 2009
Key information
- Trading profit was up 17,5% to R1,656 billion.
- Turnover increased 11,9% from R29,604 billion to R33,139 billion.
- Diluted headline earnings per share rose 13,3% to 208,5 cents.
- Dividend per share declared: 80,0 cents (2009: 70,0 cents) - an increase of
14,3%.
Whitey Basson, chief executive, commented:
In a market in which trading conditions remained difficult, the Group performed
satisfactorily and continued to outperform the rest of the sector. Turnover
growth slowed in line with lower internal food inflation, which during the
reporting period averaged 4,2% (2009: 16,9%). The supermarket operations in
South Africa - the core of the Group`s business - was the best-performing
division while the turnover of Supermarkets Non-RSA slowed due to the impact of
the global recession on these countries. The strengthening of the rand against
their respective currencies further impacted on the rand results reported. The
Group continued to enjoy increased support from cash-strapped consumers across
all major chains with core market share increasing by 1,2% to 29,8%. The
Furniture Division reported good results taking into consideration the highly
competitive environment in which it operates. Due to efficient management of its
cost base the Group recorded a trading margin of 5,0% against the 4,8% achieved
a year ago.
22 February 2010
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 076 390 7725
OPERATING ENVIRONMENT
The operating environment remained extremely challenging, with the increase in
unemployment putting a further damper on the disposable income of particularly
middle and lower-income earners. At the other end of the scale, substantially
lower interest rates eased the debt burden on many while at the same time
putting the investment income of particularly the older generation under
pressure. Despite the fact that the after-effects of the global recession will
still be felt for a long time to come, the first tentative signs of a recovery
at the end of the reporting period had somewhat buoyed consumers` outlook.
COMMENTS ON THE RESULTS
Total turnover
Total turnover increased by 11,9% from R29,604 billion to R33,139 billion. The
slower growth must be seen in relation to the drop in internal food inflation
from 16,9% in December 2008 to 4,2%. In addition the stronger rand had a major
effect on the translation of Non-RSA sales to rand, with Supermarkets Non-RSA
reflecting a 4,3% decline in sales.
Trading margin
The trading margin increased from 4,8% to 5,0% and reflects the efficiency with
which the business was managed during the reporting period.
Exchange rate differences
The exchange rate loss of R33,6 million (2009: a gain of R26,3 million) is a
factor of the strengthening of the rand against the currencies of countries in
which the Group trades outside of South Africa.
Interest received and finance cost
The decrease in net interest received was due to the interest rate reductions
during the past 12 months, as well as the increase in capital expenditure
relating to new stores opened and the settlement of employee share incentive
schemes.
Diluted headline earnings
The increase of 13,3% in diluted headline earnings per share is lower than the
17,5% increase in trading profit due to a decrease in net interest received as
well as exchange rate losses as detailed above.
OPERATIONAL REVIEW
The Group maintained its position as the country`s leading value provider in the
food retailing sector. All the divisions in the Group produced acceptable
results, with Supermarkets RSA performing the best. Central to the success of
the Group is a business formula that increasingly offers a one-stop shopping
experience and experienced management at every level capable of adapting rapidly
to changing market conditions. Despite the present recession the Group did not
scale down its expansion plans, gaining a net 58 new stores during the six
months under review. The Group also continued growing its supporting
infrastructure, especially in the areas of supply chain management and
information technology, to ensure it serves its customers even better. The Group
is proud that it was able to employ 5 000 more people to bring its total staff
compliment to 89 000 at the end of the review period.
Number of outlets
Net Confirmed
increase new
over stores
last Jun
Jun 09 Opened Closed Dec 09 6 months 2011
Supermarkets 695 53 -5 743 48 68
- Shoprite 381 16 -3 394 13 33
- Checkers 135 6 0 141 6 16
- Checkers Hyper 24 1 0 25 1 0
- Usave 155 30 -2 183 28 19
Hungry Lion 120 5 -2 123 3 9
Furniture 264 9 -2 271 7 14
- OK Furniture 218 6 0 224 6 11
- H&H 46 3 -2 47 1 3
Total own stores 1,079 67 -9 1,137 58 91
Total franchise 270 14 -8 276 6 20
- OK Franchise 265 12 -8 269 4 20
- H Lion Franchise 5 1 0 6 1 0
- Usave Franchise 0 1 0 1 1 0
TOTAL STORES 1,349 81 -17 1,413 64 111
Supermarkets RSA
The operations of the Shoprite, Checkers and Usave brands inside South Africa
reported sales growth of 14,5% while the rest of the South African food
retailing market increased by 9%. Customer growth was 6,5% while the size of the
basket grew by 7,3%. This produced turnover of R26,303 billion for the period
compared to R22,963 billion in the corresponding six months and a trading profit
that was 27,5% higher at R1,322 billion.
Shoprite, the Group`s flagship brand, increased the value and number of
transactions, thereby confirming it had retained its strong customer gains of
the previous 18 months. Its turnover growth was above internal food inflation.
Checkers continued to gain support from its higher LSM target market. It
increased value per transaction above the inflation rate, as well as the number
of customer transactions.
The small-format Usave chain with its strong focus on growth continued its roll-
out in South Africa adding a net 27 new stores to bring its total to 157.
Supermarkets Non-RSA
Due to the appreciation of the rand against the major African currencies, food
imports from South Africa became more expensive and nullified the lower food
inflation. In addition, Africa has been as hard hit by the global recession due
to its dependence on commodity exports. In rand terms sales declined by 4,3% to
R3,605 billion. In constant currency terms, however, sales increased by 16,3%.
To retain its price competitiveness not all increases brought about by the
stronger rand could be passed on to the consumer and gross margin came under
pressure, leading to a 22,2% drop in trading profit to R193,2 million. In the 6
months to December, Supermarkets Non-RSA gained a net 4 new stores.
Furniture
Given consumers` reduced levels of spending on durables and semi-durables, the
division`s sales increase of 11,5% in an environment of virtually no inflation
is satisfactory. Like-for-like sales increased 4,5% compared to 2,4% in the
corresponding period. The growth is attributed to a number of factors such as
the significant interest rate reductions during the 12 months ending December
2009, the improved rand/US dollar exchange rate which reduced the price of
imported goods, and the division`s investment in its store expansion programme.
However, an escalation in service and other charges put net margin under
pressure and trading profit for the period increased by 2,9% to R104,3 million.
Other operating segments
Other operating segments comprise the results of the OK Franchise Division,
MediRite and Computicket. These divisions showed a 13,3% increase in turnover to
R1,692 billion while trading profit grew 63,0% from R22,9 million to R37,3
million. OK Franchise continued to refine its client base which it grew to 269
members who benefit from the Group`s massive buying power. MediRite, whose
pharmacies are located inside Shoprite and Checkers supermarkets, is an
important focal point of the Group in extending its range of services for the
benefit of consumers. MediRite, which operated 81 pharmacies at the end of the
2009 financial year, continued to expand its footprint and opened 19 outlets
during the reporting period. Computicket, by far the country`s biggest ticketing
service provider, derives its income from commission earned on ticket sales
across the entertainment, travel and leisure spectrums. It continued its strong
income growth despite the depressed consumer market.
GROUP PROSPECTS AND OUTLOOK
Management accepts that due to the depth of the recession, the recovery of the
economy will also be a slow process. The relatively lower growth in basket size
shows consumers are still struggling with the benefits of lower food inflation
cancelled out by the rise in unemployment. Although there are early signs of
recovery in certain sectors, past experience has shown that while food retailing
is often the last to be affected by a downswing in the economic cycle it is also
frequently the last to benefit from any recovery. Although little change in
market conditions is therefore expected, management is confident that the Group
will be able to maintain its position as market leader.
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 NO 122
The board has declared an interim dividend of 80,0 cents (2009: 70,0 cents) per
ordinary share, payable to shareholders on Tuesday, 23 March 2010. The last day
to trade cum dividend will be Friday, 12 March 2010. As from Monday, 15 March
2010, all trading of Shoprite Holdings Ltd shares will take place ex dividend.
The record date is Friday, 19 March 2010. Share certificates may not be
dematerialised or rematerialised between Monday, 15 March 2010, and Friday, 19
March 2010, both days inclusive.
ACCOUNTABILITY
These condensed consolidated interim 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 2009 with the
following exceptions.
The Group adopted the revised IAS 1, Presentation of Financial Statements, IFRS
8, Operating Segments and Circular 3/2009 on Headline Earnings during the period
under review. The presentation of the financial statements and operating segment
disclosures have been changed according to the changes in IAS 1 and IFRS 8
respectively, with no adjustment necessary on the adoption of Circular 3/2009.
Interim results for the 6 months ended December 2009
Condensed group statement of comprehensive income
Audited
Unaudited Unaudited for
6 months 6 months the year
% ended ended ended
R`000 change Dec 09 Dec 08 Jun 09
Sale of merchandise 11.9 33 138 535 29 603 953 59 318 559
Cost of sales 12.2 (26 757 553) (23 847 251) (47 878 232)
Gross profit 10.8 6 380 982 5 756 702 11 440 327
Other operating income 11.4 549 334 493 045 1 244 363
Depreciation and amortisation 3.5 (389 771) (376 733) (753 921)
Operating leases 21.8 (743 893) (610 747) (1 310 522)
Employee benefits 12.6 (2 507 779) (2 227 095) (4 453 771)
Other expenses 0.4 (1 632 481) (1 625 780) (3 225 562)
Trading profit 17.5 1 656 392 1 409 392 2 940 914
Exchange rate (losses)/gains (227.6) (33 596) 26 319 3 005
Items of a capital nature (76.4) (2 340) (9 917) (31 227)
Operating profit 13.7 1 620 456 1 425 794 2 912 692
Interest received (48.1) 53 858 103 844 191 566
Finance costs 40.1 (35 564) (25 380) (86 142)
Profit before income tax 8.9 1 638 750 1 504 258 3 018 116
Income tax expense 5.2 (570 643) (542 235) (999 478)
Profit for the period 11.0 1 068 107 962 023 2 018 638
Other comprehensive
income, net of tax (157 887) 183 541 (185 037)
Fair value movements on
available-for-sale investments 2 305 12 254 8 819
Foreign currency translation
differences (160 192) 171 287 (193 856)
Total comprehensive income
for the period 910 220 1 145 564 1 833 601
Profit attributable to:
Owners of the parent 11.0 1 059 790 955 185 1 998 246
Non-controlling interest 21.6 8 317 6 838 20 392
1 068 107 962 023 2 018 638
Comprehensive income attributable to:
Owners of the parent (20.8) 901 903 1 138 726 1 813 209
Non-controlling interest 21.6 8 317 6 838 20 392
910 220 1 145 564 1 833 601
Earnings per share (cents) 12.4 211.6 188.3 396.5
Diluted earnings per
share (cents) 14.5 208.2 181.9 386.3
Ordinary dividend per share (cents)
Final/interim dividend paid 130.0 106.0 70.0
Interim/final dividend declared 80.0 70.0 130.0
Number of weighted average ordinary
shares (`000) used for calculation of:
earnings per share 500 955 507 320 504 030
diluted earnings per share 509 091 525 106 517 250
Condensed group statement of financial position
Unaudited Unaudited Audited
R`000 Dec 09 Dec 08 Jun 09
ASSETS
Non-current assets 6 889 877 5 905 919 6 048 645
Property, plant and equipment 6 038 485 5 199 474 5 359 587
Available-for-sale investments 50 483 51 798 47 804
Loans and receivables 5 315 7 325 2 636
Deferred tax assets 260 845 317 142 277 951
Intangible assets 528 516 320 080 354 434
Fixed escalation operating lease accrual 6 233 10 100 6 233
Current assets 12 607 292 12 764 762 10 685 675
Inventories 6 974 489 6 489 063 6 041 906
Other current assets 2 339 518 2 115 686 1 780 972
Loans and receivables 69 243 67 146 37 409
Cash and cash equivalents 3 224 042 4 092 867 2 825 388
Assets held for sale 12 329 109 548 5 168
Total assets 19 509 498 18 780 229 16 739 488
EQUITY AND LIABILITIES
Total equity 5 166 372 5 036 537 5 029 295
Capital and reserves attributable to
equity holders 5 106 904 4 976 780 4 960 000
Non-controlling interest 59 468 59 757 69 295
Non-current liabilities 925 944 989 391 766 217
Borrowings 19 409 23 898 16 677
Deferred tax liabilities 50 174 13 193 26 992
Provisions 272 294 425 718 170 231
Fixed escalation operating
lease accrual 416 256 418 479 414 164
Trade and other payables 167 811 108 103 138 153
Current liabilities 13 417 182 12 754 301 10 943 976
Other current liabilities 13 282 027 12 680 741 10 567 076
Provisions 53 004 46 851 362 977
Bank overdraft 82 151 26 709 13 923
Total liabilities 14 343 126 13 743 692 11 710 193
Total equity and liabilities 19 509 498 18 780 229 16 739 488
Condensed operating segment information
Audited
Unaudited Unaudited for
6 months 6 months the year
% ended ended ended
R`000 change Dec 09 Dec 08 Jun 09
Sale of merchandise
Supermarkets RSA 14.5 26 303 456 22 963 178 46 550 895
Supermarkets Non-RSA (4.3) 3 604 702 3 767 842 7 315 148
Furniture 11.5 1 538 376 1 380 036 2 572 840
Other operating segments 13.3 1 692 001 1 492 897 2 879 676
11.9 33 138 535 29 603 953 59 318 559
Trading profit
Supermarkets RSA 27.5 1 321 617 1 036 883 2 303 097
Supermarkets Non-RSA (22.2) 193 172 248 193 414 642
Furniture 2.9 104 347 101 454 176 785
Other operating segments 63.0 37 256 22 862 46 390
17.5 1 656 392 1 409 392 2 940 914
The basis for reporting segmental financial information has been changed in
accordance with the requirements of IFRS 8, Operating Segments. Operating
segments were identified based on financial information regularly reviewed by
the Shoprite Holdings Ltd board of directors (identified as the chief operating
decision maker of the Group in terms of the IFRS 8 requirements) for performance
assessments and resource allocations.
Supplementary information
Unaudited Unaudited Audited
R`000 Dec 09 Dec 08 Jun 09
1. Capital commitments 1 062 881 261 063 337 276
2. Contingent liabilities 64 204 34 792 138 316
3. Net asset value per share (cents) 1 009 981 990
4. Total number of shares in issue
(adjusted for treasury shares) 506 133 507 345 500 898
Reconciliation of headline earnings
Audited
Unaudited Unaudited for
6 months 6 months the year
% ended ended ended
R`000 change Dec 09 Dec 08 Jun 09
Profit attributable to owners
of the parent 1 059 790 955 185 1 998 246
Re-measurements 2 340 9 917 31 227
Loss/(profit) on disposals of
assets held for sale - 9 607 (3 425)
Loss on disposals and scrappings
of plant, equipment and
intangible assets 7 941 647 23 915
Impairment of property, plant
and equipment and assets
held for sale - - 7 106
Impairment of goodwill - - 3 608
Insurance claims received (5 627) - -
Loss/(profit) on other
investing activities 26 (337) 23
Tax effect of re-measurements (699) 962 (7 913)
Headline earnings 1 061 431 966 064 2 021 560
Earnings per share (cents) 12.4 211.6 188.3 396.5
Diluted earnings per
share (cents) 14.5 208.2 181.9 386.3
Headline earnings per
share (cents) 11.3 211.9 190.4 401.1
Diluted headline earnings
per share (cents) 13.3 208.5 184.0 390.8
Ordinary dividend per share (cents) 200.0
Final/interim dividend paid 130.0 106.0 70.0
Interim/final dividend declared 80.0 70.0 130.0
Condensed group statement of cash flows
Audited
Unaudited Unaudited for
6 months 6 months the year
ended ended ended
R`000 Notes Dec 09 Dec 08 Jun 09
Cash generated by operations 3 348 282 2 763 057 3 435 736
Operating profit 1 620 456 1 425 794 2 912 692
Less: investment income (12 462) (4 199) (29 279)
Non-cash items 1 590 684 482 825 1 065 296
Payments for cash settlement of
share options - (97 460) (484 896)
Payments for post-retirement
medical benefits (200 631) - -
Changes in working capital 2 1 350 235 956 097 (28 077)
Net interest received 30 728 82 434 127 129
Dividends received 28 229 7 574
Dividends paid (672 102) (544 187) (902 576)
Tax paid (515 578) (406 642) (842 045)
Cash flows from operating activities 2 191 358 1 894 891 1 825 818
Cash flows utilised by
investing activities (1 472 951) (1 019 288) (1 737 303)
Purchase of property, plant and
equipment and intangible assets (1 269 398) (1 039 336) (1 820 256)
Proceeds on disposal of assets held for
sale, property, plant and equipment
and intangible assets 24 139 45 386 81 141
Acquisition of operations (190 000) - -
Other investment activities (37 692) (25 338) 1 812
Cash flows (utilised by)/from
financing activities (238 965) 999 (333 108)
Acquisition of treasury shares (244 439) - (383 445)
Proceeds on disposal of treasury shares - - 42 510
Other financing activities 5 474 999 7 827
Net movement in cash and
cash equivalents 479 442 876 602 (244 593)
Cash and cash equivalents at the
beginning of the year 2 811 465 3 135 850 3 135 850
Cash and cash equivalents with
acquisition of operations (66 204) - -
Effect of exchange rate movements
on cash and cash equivalents (82 812) 53 706 (79 792)
Cash and cash equivalents at the
end of the year 3 141 891 4 066 158 2 811 465
CASH FLOW INFORMATION
1. Non-cash items
Depreciation of property, plant
and equipment 396 086 356 684 741 710
Amortisation of intangible assets 21 212 35 334 54 743
Net fair value losses on
financial instruments 58 017 7 500 7 919
Exchange rate losses/(gains) 33 596 (26 319) (3 005)
Profit on disposals of
assets held for sale - (3 744) (3 425)
Loss on disposals and
scrappings of plant, equipment and
intangible assets 7 766 647 23 915
Impairment of property, plant and
equipment and assets held for sale - - 7 106
Profit on other investing activities - (337) -
Impairment of goodwill - - 3 608
Movement in provisions (7 950) 49 687 117 591
Movement in cash-settled
share-based payment accrual 82 331 88 758 139 965
Insurance claims received (5 627) - -
Movement in fixed escalation
operating lease accrual 5 253 (25 385) (24 831)
590 684 482 825 1 065 296
2. Changes in working capital
Inventories (865 109) (1 736 324) (1 464 435)
Trade and other receivables (415 528) (401 561) (89 157)
Trade and other payables 2 630 872 3 093 982 1 525 515
1 350 235 956 097 (28 077)
Condensed statement of changes in equity
Audited
Unaudited Unaudited for
6 months 6 months the year
ended ended ended
R`000 Dec 09 Dec 08 Jun 09
Balance at beginning of July 5 029 295 4 818 838 4 818 838
Net movement in treasury shares (244 439) - (340 935)
Net fair value movements on
available-for-sale investments,
net of tax 2 305 12 254 8 819
Profit for the period 1 068 107 962 023 2 018 638
Loss on treasury shares utilised
for share option take-up, net of tax 147 412 - -
Non-controlling interest purchased (3 215) - 757
Cash settlement of share options - (382 843) (379 349)
Foreign currency translation
differences (160 192) 171 287 (193 856)
Dividends distributed to owners (672 901) (545 022) (903 617)
Balance at end of December/June 5 166 372 5 036 537 5 029 295
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), 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: 23/02/2010 09:00:02 Produced by the JSE SENS Department.
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