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PIK - Pick N Pay Stores Limited - Unaudited interi 20 Oct 2010
PIK PWK
PIK
PIK - Pick N Pay Stores Limited - Unaudited interim condensed consolidated
results for the six months ended 31 August 2010
PICK n PAY STORES LIMITED
Reg. no. 1968/008034/06
Share code: PIK
ISIN code: ZAE000005443
Pick n Pay
Unaudited interim condensed consolidated results for the six months ended 31
August 2010
Financial highlights - continuing operations
Turnover (R`billion) 2010: 25.2 2009: 23.8
EBITDA (R`million) 2010: 1074.0 2009: 1023.9
Headline earnings (cents per share) 2010: 90.17 2009: 97.20
Interim dividend (cents per share) 2010: 37.00 2009: 39.75
Result overview - continuing operations
Over the past 6 months we have seen some of the toughest trading conditions in
our Group`s history, in an economic climate slow to recover from the global
recession, a very competitive environment and low inflation.
Despite these challenges, there are a number of highlights as we maintain focus
on our strategy and continue to transform the business:
- The consolidation of our 3 northern regions into one team is now complete and
will start to bring operating efficiencies and cost reductions;
- Our SAP implementation has been concluded, resulting in a fully integrated
system across the business, with improved in-store disciplines, more efficient
business processes and timely information for performance management;
- The extension of the groceries section at our Longmeadow distribution centre
is complete. Longmeadow processes 30% of our inland grocery volume and 40% of
value, with 550 000 cases handled every week and 32 major suppliers delivering
directly to the facility. By the end of this financial year, Longmeadow will
distribute 40% of grocery volume. In line with our supply chain strategy we will
be rolling out another 4 distribution centres country wide over the next 3
years;
- The implementation of extensive cost control measures has resulted in
meaningful cost savings, with more to come;
- The decision to sell Franklins following our strategic review;
- Increased participation in the LSM 4 - 7 market with both Boxer and our Pick n
Pay stores converted from Score;
- Specific strategic initiatives resulting in strong growth in Private Label,
Clothing and Liquor sales; and
- The opening of our first store in Zambia, which has been positively received
and is trading well, as part of our expansion into southern Africa.
Group turnover at R25.2 billion for the period is 6.0% above last year. Turnover
growth has been modest with customers exercising caution despite the dramatic
fall in food inflation and many price decreases. Group like for like turnover is
up 2.1% for the period.
Gross profit margin has fallen from 18.0% last year to 17.8% this year, due to
our aggressive pricing of basic commodities and increased franchise
participation.
Trading profit is down 0.4% to R720.3 million, due to the lower gross profit
margin and cost inflation exceeding internal food inflation. The overall
decrease in trading profit has been mitigated by enhanced operating efficiencies
and improved cost management.
EBITDA (earnings before interest, tax and depreciation) at R1 074.0 million is
up 4.9%.
Headline earnings per share at 90.17 cents is 7.2% down on last year.
The interim dividend per share at 37.00 cents for Pick n Pay Stores Limited and
17.94 cents for Pick n Pay Holdings Limited is a decrease of 6.9% and 7.1%
respectively.
Operational highlights
Pick n Pay and Boxer combined, increased turnover by 6.0% for the period. Pick n
Pay`s corporate internal food inflation fell from 9.8% in August 2009 to 0.1% in
August 2010. On average Pick n Pay food inflation was 1.0% for the past 6
months, against an average of 12.5% for the equivalent period last year.
Notwithstanding that consumer spending remains subdued, we have seen strong
growth in certain areas due to specific strategic initiatives, including Private
Label, Clothing and Liquor. We have also experienced encouraging growth and an
increase in customers in the LSM 4 - 7 market, with a strong performance from
Boxer and a profit turnaround in the Pick n Pay stores converted from Score.
During the period we opened 1 new Pick n Pay corporate supermarket, 5 Pick n Pay
franchise stores, 3 liquor stores, 6 clothing stores and 1 Boxer Build.
We are on track to open a further 40 stores across all formats, including 15
supermarkets and our new flagship store in Hurlingham Johannesburg, by the end
of the financial year.
We continue to move forward with our expansion into Africa and are pleased with
the progress made to date. We opened our first Pick n Pay store in Zambia in
July 2010. The support from our new Zambian customers is encouraging and the
store continues to perform well. We have confirmed openings for 4 more stores in
Zambia over the next 12 months. We currently have 17 stores in Namibia, 12 in
Botswana, 7 in Swaziland and 1 each in Lesotho and Zambia. In addition to Zambia
we plan to open stores in Mauritius, Malawi and Mozambique.
We have decided to sell our Australian operations, Franklins and have accepted
an offer of AUD215.0 million from Metcash. The sale is subject to approval from
the Australian Competition and Consumer Commission (ACCC), whose decision is
expected in November 2010. We are committed to the sale of Franklins, and should
the ACCC not give the go ahead we will sell the Franklins` stores, either
individually or in groups. Franklins has been treated as a discontinued
operation and its results have been reflected separately from those of
continuing operations. Turnover in Franklins for the period of AUD417.5 million
was down 3.5%, with operating losses incurred of AUD11.3 million against a
profit of AUD1.8 million in the corresponding period last year.
General comments
We expect trading conditions in the second half of the year to remain difficult,
as the after effects of the recession continue to be felt. The focus on our
strategy will ensure that Pick n Pay continues to be a strong and formidable
player in the retail industry. We have already made great strides in
transforming Pick n Pay, and with our strong and energetic management team, we
remain optimistic for the future.
For and on behalf of the board
Gareth Ackerman
Chairman
Nick Badminton
Chief Executive Officer
19 October 2010
Statement of comprehensive income
Unaudited Audited
Six months Year to
ended
Aug Growth Aug Feb
2010 2009* 2010*
Rm % Rm Rm
Continuing operations
Revenue (note 3) 25 347.9 23 919.7 49 323.8
Turnover 25 208.4 6.0 23 779.6 49 068.6
Cost of merchandise (20 716.5) (19 501.2) (40 245.0)
sold
Gross profit 4 491.9 4 278.4 8 823.6
Other trading income 117.6 97.1 186.5
Trading expenses (3 889.2) (3 652.2) (7 371.4)
Trading profit 720.3 723.3 1 638.7
Interest received 21.9 42.9 68.7
Interest paid (60.1) (41.0) (86.3)
Profit on sale of - 190.9 190.9
property
Profit before tax 682.1 916.1 1 812.0
Tax (253.8) (272.7) (531.9)
Profit for the period 428.3 643.4 1 280.1
from continuing
operations
Loss from discontinued (74.0) (56.9) (91.2)
operations (note 5)
Profit for the period 354.3 586.5 1 188.9
Other comprehensive
income
Exchange rate (58.5) 27.2 73.8
differences on
translating foreign
operations
Retirement benefit (4.8) - (34.3)
actuarial loss
Total comprehensive 291.0 613.7 1 228.4
income for the period
EBITDA, excluding 1 074.0 4.9 1 023.9 2 271.3
capital profit on sale
of property
Gross profit margin 17.8% 18.0% 18.0%
Trading profit margin 2.9% 3.0% 3.3%
Earnings per share -
cents
Basic 74.58 124.00 251.25
Continuing operations 90.17 136.04 270.53
Discontinued operations (15.59) (12.04) (19.28)
Diluted 73.04 122.22 247.40
Continuing operations 88.30 134.09 266.38
Discontinued operations (15.26) (11.87) (18.98)
Headline earnings
reconciliation
Profit for the period 354.3 586.5 1 188.9
Headline adjustments
(net of tax):
Loss on sale of 3.4 3.4 6.9
equipment and vehicles
- discontinued
operations
Profit on sale of - (183.7) (183.7)
property
Headline earnings 357.7 406.2 1 012.1
Continuing operations 428.3 (6.9) 459.8 1 096.4
Discontinued operations (70.6) (53.6) (84.3)
Headline earnings per
share - cents
Headline 75.31 85.88 213.90
Continuing operations 90.17 (7.2) 97.20 231.71
Discontinued operations (14.86) (11.32) (17.81)
Diluted 73.74 84.63 210.62
Continuing operations 88.30 (7.8) 95.79 228.16
Discontinued operations (14.56) (11.16) (17.54)
Interim dividend - No. 37.00 (6.9) 39.75
85 payable
*Restated - refer note 5
Statement of financial position
Unaudited Audited
Aug 2010 Aug 2009 Feb 2010
Rm Rm Rm
Assets
Non-current assets
Intangible assets 406.9 1 099.9 1 126.7
Property, equipment and vehicles 3 129.4 3 034.2 3 415.5
Operating lease asset 31.5 16.8 33.5
Participation in export 49.7 57.3 50.6
partnerships
Deferred tax 75.3 104.1 98.1
Loans 109.8 131.9 124.7
Investments 0.2 0.2 0.2
3 802.8 4 444.4 4 849.3
Current assets
Assets held for sale - 1 993.7 21.7 -
discontinued operations (note 5)
Inventory 2 944.6 2 965.9 3 326.2
Trade and other receivables 1 734.2 1 564.3 1 968.0
Cash and other equivalents 344.6 1 592.3 1 055.3
7 017.1 6 144.2 6 349.5
Total assets 10 819.9 10 588.6 11 198.8
Equity and liabilities
Total shareholders` equity 1 837.1 1 701.8 2 144.6
Non-current liabilities
Long-term debt 660.0 678.1 670.7
Retirement scheme obligations 36.4 14.3 24.7
Operating lease liability 707.9 673.5 695.9
1 404.3 1 365.9 1 391.3
Current liabilities
Liabilities held for sale - 762.9 - -
discontinued operation (note 5)
Short-term debt 36.7 45.6 38.8
Tax 212.4 295.0 230.7
Trade and other payables 6 566.5 7 180.3 7 393.4
7 578.5 7 520.9 7 662.9
Total equity and liabilities 10 819.9 10 588.6 11 198.8
Shares in issue - millions 480.4 506.1 480.4
Weighted average shares in issue 475.1 472.9 473.2
- millions (note 4)
Net asset value - cents per
share (property value based on
directors` valuation) 447.6 404.7 512.5
Cash flow statement
Unaudited Audited
Six months Year
ended to
Aug 2010 Aug 2009* Feb 2010*
Rm Rm Rm
Cash flows from operating
activities
Trading profit 720.3 723.3 1 638.7
Depreciation and amortisation 353.7 300.6 632.6
Share options expense 31.3 30.3 65.2
Net operating lease obligations 14.0 16.8 36.5
Cash generated before movements 1 119.3 1 071.0 2 373.0
in working capital
Movements in working capital: (76.1) 421.8 (56.7)
(Decrease) / increase in trade (155.0) 9.4 283.9
and other payables
(Increase) / decrease in (109.5) 182.2 (163.8)
inventory
Decrease / (increase) in trade 188.4 230.2 (176.8)
and other receivables
Cash generated by trading 1 043.2 1 492.8 2 316.3
activities
Interest received 21.9 42.9 68.7
Interest paid (60.1) (41.0) (86.3)
Cash generated by operations 1 005.0 1 494.7 2 298.7
Dividends paid (633.5) (628.7) (814.6)
Tax paid (230.9) (162.4) (457.5)
Net cash from operating 140.6 703.6 1 026.6
activities - continuing
operations
Net cash from / (utilised in)
operating activities -
discontinued operations 45.3 21.7 (78.4)
Total net cash from operating 185.9 725.3 948.2
activities
Cash flows from investing
activities
Intangible asset additions (52.5) (22.2) (49.9)
Property, equipment and vehicle (521.2) (360.7) (969.6)
additions
Proceeds on sale of property, - 214.9 209.4
equipment and vehicles
Loans repaid / (advanced) 14.9 (3.2) 3.9
Net cash utilised in investing
activities - continuing
operations (558.8) (171.2) (806.2)
Net cash utilised in investing
activities - discontinued
operations (78.0) (37.2) (117.2)
Total net cash utilised in (636.8) (208.4) (923.4)
investing activities
Cash flows from financing
activities
Debt (repaid) / raised (13.0) 6.3 1.2
Share repurchases (68.3) (31.9) (80.1)
Proceeds from employees on 36.4 22.9 36.4
settlement of share options
Total net cash utlised in
financing activities -
continuing
operations (44.9) (2.7) (42.5)
Net cash from / (utilised in)
financing activities -
discontinued operations 10.0 1.0 (8.1)
Total net cash utilised in (34.9) (1.7) (50.6)
financing activities
Net (decrease)/increase in cash (485.8) 515.2 (25.8)
and cash equivalents
Cash and cash equivalents at 1 1 055.3 1 072.8 1 072.8
March
Effect of exchange rate (10.4) 4.3 8.3
fluctuations on cash and cash
equivalents
Cash and cash equivalents at 31 559.1 1 592.3 1 055.3
August / 28 February
Continuing operations 344.6
Discontinued operation 214.5
*Restated - refer note 5
Statement of changes in equity
Unaudited Audited
Six months Year
ended to
Aug 2010 Aug 2009 Feb 2010
Rm Rm Rm
At 1 March 2 144.6 1 695.5 1 695.5
Total comprehensive income for 291.0 613.7 1 228.4
the period
Dividends paid (633.5) (628.7) (814.6)
Share repurchases (68.3) (31.9) (80.1)
Net effect of settlement of 72.0 22.9 52.1
employee share options
Net effect of cancelling - - (2.7)
treasury shares
Share options expense 31.3 30.3 66.0
At 31 August / 28 February 1 837.1 1 701.8 2 144.6
Unaudited operating segment report
Pick n Payand Boxer Insurance
Aug 2010 Aug 2009 Aug 2010 Aug 200
Rm Rm Rm Rm
External revenue 25 346.5 23 918.0 1.4 1.7
Inter-segment revenue (9.3) (10.3) 9.3 10.3
External turnover 25 208.4 23 779.6 - -
- Australian dollars
(millions)
Profit before tax 673.2 720.3 8.9 4.9
- Australian dollars
(millions)
Total assets 8 796.8 8 543.4 29.4 50.1
Unaudited operating segment report (continued)
Unallocated TOTAL
Head Office CONTINUING
costs and revenues OPERATIONS
Aug 2010 Aug 2009 Aug 2010 Aug 2009
Rm Rm Rm Rm
External revenue - - 25 347.9 23 919.7
Inter-segment revenue - - - -
External turnover - - 25 208.4 23 779.6
- Australian dollars
(millions)
Profit before tax - 190.9 682.1 916.1
- Australian dollars
(millions)
Total assets - - 8 826.2 8 593.5
Unaudited operating segment report (continued)
DISCONTINUED OPERATIONS
Franklins Score
Aug 2010 Aug 2009 Aug 2010 Aug 2009
Rm Rm Rm Rm
External revenue 2 790.3 2 782.0 - 537.2
Inter-segment revenue - - - -
External turnover 2 787.5 2 778.5 - 536.4
- Australian dollars 417.5 432.8
(millions)
Profit before tax (74.0) 11.7 - (67.9)
- Australian dollars (11.3) 1.8
(millions)
Total assets 1 993.7 1 892.1 - 103.0
Unaudited operating segment report (continued)
TOTAL OPERATIONS
Aug 2010 Aug 2009
Rm Rm
External revenue 28 138.2 27 238.9
Inter-segment revenue - -
External turnover 27 995.9 27 094.5
- Australian dollars (millions)
Profit before tax 608.1 859.9
- Australian dollars (millions)
Total assets 10 819.9 10 588.6
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 28 February 2010.
2. 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 2010. For further information, please refer to note 28
of the 2010 annual report.
3. Revenue comprises turnover, other trading income and interest received.
4. 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.
5. Discontinued operations:
Franklins - the Group has decided to exit Australia and is selling its operation
to the Metcash Group. The sale is subject to approval by the Australian
Competition and Consumer Commission. Franklins has therefore been presented as a
discontinued operation at 31 August 2010 and the comparative information has
been restated accordingly.
Score - the Group has completed the closure of the store operations of its
subsidiary Score Supermarkets Operating Limited, which is disclosed as a
discontinued operation.
Notes to the financial information (continued)
The salient financial information of the discontinued operations is as follows:
Franklins Pty Limited
Unaudited Audited
Aug 2010 Aug 2009 Feb 2010
Rm Rm Rm
Statement of comprehensive
income
Revenue 2 790.3 2 782.0 5 673.3
Turnover 2 787.5 2 778.5 5 666.0
Trading expenses 665.1 651.3 1 319.8
Loss on sale of equipment and (3.4) (3.0) (5.6)
vehicles
Trading (loss) / profit for (75.0) 11.2 14.4
the period
(Loss) / profit for the period (74.0) 11.7 16.3
(after tax)
Statement of financial
position
Total assets 1 993.7 1 892.1 2 055.5
Total liabilities 762.9 969.8 975.2
Cash flow statement
Net cash from / (utilised in) 45.3 139.7 134.3
operating activities
Net cash (utilised in) / from (78.0) (74.4) (174.0)
investing activities
Net cash from / (utilised in) 10.0 1.0 (8.1)
financing activities
Notes to the financial information (continued)
The salient financial information of the discontinued operations is as follows:
Score Supermarkets Operating Limited
Unaudited Audited
Aug 2010 Aug 2009 Feb 2010
Rm Rm Rm
Statement of comprehensive
income
Revenue - 537.2 580.9
Turnover - 536.4 579.8
Trading expenses - 165.4 238.1
Loss on sale of equipment - (0.4) (1.3)
and vehicles
Trading (loss) / profit for - (68.7) (107.1)
the period
(Loss) / profit for the - (68.6) (107.5)
period (after tax)
Statement of financial
position
Total assets - 103.0 86.1
Total liabilities - 177.2 174.4
Cash flow statement
Net cash from / (utilised - (118.0) (212.7)
in) operating activities
Net cash (utilised in) / - 37.2 56.8
from investing activities
Net cash from / (utilised - - -
in) financing activities
Notes to the financial information (continued)
The salient financial information of the discontinued operations is as follows:
Total Discontinued Operations
Unaudited Audited
Aug 2010 Aug 2009 Feb 2010
Rm Rm Rm
Statement of comprehensive income
Revenue 2 790.3 3 319.2 6 254.2
Turnover 2 787.5 3 314.9 6 245.8
Trading expenses 665.1 816.7 1 557.9
Loss on sale of equipment and (3.4) (3.4) (6.9)
vehicles
Trading (loss) / profit for the (75.0) (57.5) (92.7)
period
(Loss) / profit for the period (74.0) (56.9) (91.2)
(after tax)
Statement of financial position
Total assets 1 993.7 1 995.1 2 141.6
Total liabilities 762.9 1 147.0 1 149.6
Cash flow statement
Net cash from / (utilised in) 45.3 21.7 (78.4)
operating activities
Net cash (utilised in) / from (78.0) (37.2) (117.2)
investing activities
Net cash from / (utilised in) 10.0 1.0 (8.1)
financing activities
Pick n Pay Holdings Limited ("PIKWIK")
Reg. No. 1981/009610/06
Share Code: PWK ISIN code: ZAE000005724
Pikwik`s only asset is its 53.97% (2009: 54.41%) 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 R193.2 million (2009: R221.0
million). Headline earnings per share is 37.45 cents (2009: 42.89 cents).
Headline earnings per share from continuing operations is 44.87 cents (2009:
48.55 cents).
Diluted headline earnings per share is 36.21 cents (2009: 41.79 cents).
Diluted headline earnings per share from continuing operations is 43.56 cents
(2009: 47.38 cents).
The total number of shares in issue is 527.2 million (2009: 527.2 million) and
the weighted average number of shares in issue during the period is 515.9
million (2009: 515.2 million) . Pikwik`s interim dividend per share is 17.94
cents (2009: 19.31 cents), a decrease of 7.1%.
Dividend declarations
The directors have declared the following cash dividends:
Pick n Pay Stores Ltd (No. 85) 37.00 cents per share
Pick n Pay Holdings Ltd (No. 58) 17.94 cents per share
For both Companies, the last day of trade in order to participate in the
dividend (CUM dividend) will be Friday, 3 December 2010. The shares will trade
EX dividend from the commencement of business on Monday, 6 December 2010 and the
record date will be Friday, 10 December 2010.
The dividends will be paid on Monday, 13 December 2010.
Share certificates may not be dematerialised or rematerialised between Monday, 6
December 2010 and Friday, 10 December 2010, both dates inclusive.
On behalf of the boards of directors
DE Muller - Company Secretary
19 October 2010
Directors of Pick n Pay Stores Limited:
Executive: NP Badminton (CEO), DG Cope (CFO), JG Ackerman, SD Ackerman-Berman
Non-executive: GM Ackerman (Chairman), D Robins (German)
Independent non-executive: HS Herman, C Nkosi, BJ van der Ross, RSJ van
Rensburg, J van Rooyen
Directors of Pick n Pay Holdings Limited:
Non-executive: RD Ackerman (Chairman), GM Ackerman, W Ackerman
Independent non-executive: RP de Wet, HS Herman
Alternate: SD Ackerman-Berman, JG Ackerman, D Robins (German)
Registered office: 101 Rosmead Avenue, Kenilworth, Cape Town, 7708
JSE Limited Sponsor: Investec Bank Limited, 100 Grayston Drive, Sandton, 2196
Transfer secretaries: Computershare Investor Services (Pty) Limited, 70 Marshall
Street, Johannesburg, 2001
20 October 2010
Sponsor: Investec Bank Limited
Date: 20/10/2010 08:00:01 Produced by the JSE SENS Department.
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