| Mon 18 Apr 2011, 8:00 | | PWK/PIK - Pick n Pay Holdings Limited/Pick n Pay Stores Limited - Reviewed |
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PWK PIK
PWK PIK
PWK/PIK - Pick n Pay Holdings Limited/Pick n Pay Stores Limited - Reviewed
condensed consolidated results for the year ended 28 February 2011
Pick n Pay Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1981/009610/06)
Share code: PWK ISIN code: ZAE000005724
Pick n Pay Stores Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1968/008034/06)
Share Code: PIK ISIN code: ZAE000005443
Reviewed condensed consolidated results for the year ended 28 February 2011
Financial highlights - continuing operations
Turnover EBITDA Headline earnings Total dividend
R`billion R`million cents per share cents per share
2011: 51.9 2 160.9 189.35 142.50
2010: 49.0 2 271.3 231.71 174.50
Result overview - continuing operations
The 2011 financial year was the toughest trading year in our Group`s history.
We undertook a number of significant and challenging steps to transform the
business, at the same time we experienced an exceedingly difficult trading
environment.
Despite our disappointment in the result, we have achieved much over the year:
- We completed the consolidation of our 3 inland regions into one which will
realise tangible improvements in operating efficiencies and cost reductions.
- With the roll-out of SAP complete, we now have a fully integrated system
across the business, with improved in-store disciplines, more efficient
business processes and more timely information for performance management.
- We have completed the extension of our Longmeadow Distribution Centre, which
now stands at 65,000 square metres. We have introduced automated
replenishment which has improved store strike rates. Longmeadow now processes
50% of our inland grocery value, with 1 million cases handled each week from
44 major suppliers who deliver direct to the facility. Although significant
improvements have been made, the facility is not yet optimal and every effort
is being made to ensure that Longmeadow becomes the blueprint that we roll out
to distribution centres in the Western Cape, Kwa-Zulu Natal, Eastern Cape and
Gauteng over the next 3 to 5 years.
- We opened 2 stores in Zambia, which have been extremely well received and
are trading ahead of expectations.
- We increased our footprint in the LSM 4 -7 market, and are showing strong
growth in this sector from both Boxer and our Pick n Pay stores converted from
Score.
- We opened our new flagship store "PnP on Nicol". It is not only a world
class retail destination, it is truly a store for the future - built and
operated entirely on sustainable, environmentally friendly principles in line
with international best practice. Customer reaction has been overwhelmingly
positive and we are looking to roll-out the most successful innovations to
selected stores.
- After a tough time with a national labour strike over our busiest trading
period, we have negotiated a three year wage deal with the Union. We are
confident that Pick n Pay and SACCAWU can now work together to improve the
relationship.
- A great deal of work was done on our new loyalty programme "Smart Shopper"
during the year under review, and we were thrilled by its launch in March
2011. The programme was based on significant customer research and it will
provide our Smart Shoppers with meaningful reward and revolutionise the way we
engage with customers.
Group turnover at R51.9 billion for the year is 5.9% above last year.
Turnover growth has been modest, impacted by our national labour strike and
customers exercising caution despite the dramatic fall in food inflation and
many price decreases. Group like for like turnover is up 2.0% for the year.
Gross profit margin has fallen from 18.0% last year to 17.5% this year, due to
aggressive investment in price to regain lost ground after the national strike
and the effect of increased franchise participation.
Trading profit is down 13.5% to R1 417.7 million, due to the lower gross
profit margin and cost inflation exceeding internal sales price inflation. In
addition, we experienced operational difficulties at Longmeadow which had a
material negative effect on our result.
EBITDA (earnings before interest, tax, depreciation and capital items) at R2
160.9 million is down less than trading profit at 4.9%, demonstrating our
ability to generate cash.
Headline earnings per share at 189.35 cents is 18.3% down on last year.
The total dividends per share for the year of 142.50 cents for Pick n Pay
Stores Limited and 69.28 cents for Pick n Pay Holdings Limited are 18.3% and
18.4% down on last year, respectively.
Operational highlights
Pick n Pay and Boxer combined, increased turnover by 5.9% for the year. On
average Pick n Pay`s corporate internal food price inflation was 1.3% for the
financial year, against an average of 8.7% last year.
We have seen strong growth in certain areas, including Private Label, Liquor,
and most notably Clothing. Our Clothing division has grown turnover
significantly over last year, demonstrating the positive acceptance by
customers of our clothing, which offers good quality at an affordable price.
We have also experienced encouraging growth in the LSM 4 -7 market, with good
performances from Boxer and the Pick n Pay franchise stores converted from
Score.
During the year we opened 4 new Pick n Pay corporate supermarkets, 13 Pick n
Pay franchise stores, 33 liquor stores (franchise and corporate), 11 clothing
stores and 6 stores across our Boxer formats.
In the year ahead we plan to open a further 12 new corporate and 7 new
franchise supermarkets, as well 10 clothing stores and approximately 45 liquor
stores (corporate and franchise). In the Boxer stable, we will open 13
supermarkets, 7 Punch stores, 5 liquor stores and 5 Boxer Builds.
We continue our expansion into Africa. We now have two stores in Zambia and
the support from our new Zambian customers has been extremely gratifying. We
are once again accounting for our share of profits of our 25% investment in TM
Supermarkets in Zimbabwe. We are encouraged by the improved economic climate
and trading stability in Zimbabwe and are impressed with the hard work of the
team at TM. We have successfully concluded negotiations to purchase a further
24% of TM, to bring our total shareholding to 49%. The transaction is
awaiting approval by the Reserve Bank of Zimbabwe and the Zimbabwean
Indigenisation Board.
In 2012 we will open 3 more stores in Zambia, 3 in Mozambique and 2 in
Mauritius.
In July 2010, subject to approval by the Australian competition regulator, the
Australian Competition and Consumer Commissions (ACCC), we accepted an offer
from Metcash to acquire our Australian operation, Franklins. The ACCC
reviewed the proposed transaction under its informal merger clearance process
and opposed the sale to Metcash on the basis that it is likely to have the
effect of substantially lessening competition in an Australian market.
Following the ACCC`s decision, the parties announced that they proposed to
proceed with the transaction and this led the ACCC to commence legal
proceedings in the Federal Court of Australia in December 2010, seeking to
prevent the parties from completing the transaction. We and Metcash agreed
with the ACCC to an expedited hearing, which commenced in mid-March 2011. The
judgement of the Court is expected before 30 June 2011. If the Federal Court
of Australia prevents the acquisition by Metcash, we remain committed to the
sale of Franklins and anticipate selling the Franklins stores, either
individually or in groups, under a competitive tender process.
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 year of AUD827.2 million was down 3.9%, with a net loss
incurred of AUD18.1 million (excluding depreciation, which is not provided at
Group level from the time a business is classified as held for sale) against a
profit of AUD2.5 million last year.
General comments
We are disappointed in the result, but would like to give credit to the Pick n
Pay team for achieving an enormous amount under trying conditions. As we have
communicated before, we are in the process of positioning Pick n Pay for the
future, and strongly believe that our strategic initiatives will build a sound
platform for future growth and continued success in the medium to long term.
For and on behalf of the board
Gareth Ackerman Nick Badminton
Chairman Chief Executive Officer 15 April 2011
PICK n PAY STORES LIMITED - Reg. no. 1968/008034/06 Share code: PIK ISIN
code: ZAE000005443
STATEMENT OF COMPREHENSIVE INCOME
Reviewed Audited
Year to Year to
Feb 2011 Growth Feb 2010*
Rm % Rm
Continuing operations
Revenue (note 3) 52 216.7 49 323.8
Turnover 51 945.8 5.9 49 068.6
Cost of merchandise sold (42 859.6) (40 245.0)
Gross profit 9 086.2 8 823.6
Other trading income 231.4 186.5
Trading expenses (7 899.9) (7 371.4)
Trading profit 1 417.7 (13.5) 1 638.7
Interest received 39.5 68.7
Interest paid (111.0) (86.3)
Gain on recognition of investment 7.5 -
in associate
Share of associate`s income 2.4 -
Profit on sale of property - 190.9
Profit before tax 1 356.1 1 812.0
Tax (447.8) (531.9)
Profit for the year from continuing 908.3 1 280.1
operations
Loss from discontinued operations (123.4) (91.2)
(note 6)
Profit for the year 784.9 1 188.9
Other comprehensive income
Exchange rate differences on 50.1 73.8
translating foreign operations
Net loss on hedge of net investment (52.2) -
in foreign operation
Retirement benefit actuarial loss (12.5) (34.3)
Total comprehensive income for the 770.3 1 228.4
year
EBITDA, excluding capital items 2 160.9 (4.9) 2 271.3
Gross profit margin 17.5% 18.0%
Trading profit margin 2.7% 3.3%
Earnings per share - cents
Basic 164.99 (34.3) 251.25
Continuing operations 190.92 (29.4) 270.53
Discontinued operations (25.93) (19.28)
Diluted 162.20 (34.4) 247.40
Continuing operations 187.68 (29.5) 266.38
Discontinued operations (25.48) (18.98)
Headline earnings reconciliation
Profit for the year 784.9 1 188.9
Headline adjustments (net of tax):
Loss on sale of equipment and 7.0 6.9
vehicles - discontinued operations
Profit on sale of property - (183.7)
Gain on recognition of investment (7.5) -
in associate
Headline earnings 784.4 (22.5) 1 012.1
Continuing operations 900.8 (17.8) 1 096.4
Discontinued operations (116.4) (84.3)
Headline earnings per share - cents
Headline 164.90 (22.9) 213.90
Continuing operations 189.35 (18.3) 231.71
Discontinued operations (24.45) (17.81)
Diluted 162.10 (23.0) 210.62
Continuing operations 186.14 (18.4) 228.16
Discontinued operations (24.04) (17.54)
Interim dividend - No. 85 paid 37.00 39.75
Final dividend - No. 86 payable 105.50 134.75
Total dividend 142.50 (18.3) 174.50
*Restated - refer note 6
STATEMENT OF FINANCIAL POSITION
Reviewed Audited
Feb 2011 Feb 2010
Rm Rm
Assets
Non-current assets
Intangible assets 404.5 1 126.7
Property, equipment and vehicles 3 401.8 3 415.5
Operating lease asset 19.5 33.5
Participation in export partnerships 48.2 50.6
Deferred tax 85.8 98.1
Loans 90.2 124.7
Investment in associate 9.9 -
Investments 0.2 0.2
4 060.1 4 849.3
Current assets
Assets held for sale - discontinued 2 120.1 -
operations (note 6)
Inventory 3 162.7 3 326.2
Trade and other receivables 1 739.2 1 968.0
Cash and cash equivalents 352.6 1 055.3
7 374.6 6 349.5
Total assets 11 434.7 11 198.8
Equity and liabilities
Total shareholders` equity 2 158.8 2 144.6
Non-current liabilities
Long-term debt 626.9 670.8
Retirement scheme obligations 27.1 24.7
Operating lease liability 711.1 695.9
1 365.1 1 391.4
Current liabilities
Liabilities held for sale - discontinued 826.6 -
operations (note 6)
Short-term debt 950.2 38.7
Tax 96.2 230.5
Trade and other payables 6 037.8 7 393.6
7 910.8 7 662.8
Total equity and liabilities 11 434.7 11 198.8
Shares in issue - millions 480.4 480.4
Weighted average shares in issue - 475.7 473.2
millions (note 4)
Net asset value - cents per share 503.0 512.5
(property value based on directors`
valuation)
STATEMENT OF CHANGES IN EQUITY
Reviewed Audited
Year to Year to
Feb 2011 Feb 2010
Rm Rm
At 1 March 2 144.6 1 695.5
Total comprehensive income for the year 770.3 1 228.4
Dividends paid (808.0) (814.6)
Share repurchases (90.2) (80.1)
Net effect of settlement of employee share 68.3 52.1
options
Net effect of cancellation of treasury - (2.7)
shares
Share options expense 73.8 66.0
At 28 February 2 158.8 2 144.6
CASH FLOW STATEMENT
Reviewed Audited
Year to Year to
Feb 2011 Feb 2010*
Rm Rm
Cash flows from operating activities
Trading profit 1 417.7 1 638.7
Depreciation and amortisation 733.3 632.6
Share options expense 73.8 65.2
Net operating lease obligations 29.3 36.5
Cash generated before movements in working 2 254.1 2 373.0
capital
Movements in working capital: (844.8) (58.1)
(Decrease)/increase in trade and other (678.1) 245.2
payables
Increase in inventory (349.1) (129.9)
Decrease/(increase) in trade and other 182.4 (173.4)
receivables
Cash generated by trading activities 1 409.3 2 314.9
Interest received 39.5 68.7
Interest paid (111.0) (86.3)
Cash generated by operations 1 337.8 2 297.3
Dividends paid (808.0) (814.6)
Tax paid (526.3) (457.5)
Total net cash from operating activities - 3.5 1 025.2
continuing operations
Net cash from/(utilised in) operating 13.9 (62.9)
activities - discontinued operations
Total net cash from operating activities 17.4 962.3
Cash flows from investing activities
Intangible asset additions (82.5) (49.9)
Property, equipment and vehicle additions (1 163.2) (969.5)
Proceeds on sale of property, equipment 21.9 209.4
and vehicles
Loans repaid 34.5 3.9
Net cash utilised in investing activities (1 189.3) (806.1)
- continuing operations
Net cash utilised in investing activities (151.4) (117.2)
- discontinued operations
Total net cash utilised in investing (1 340.7) (923.3)
activities
Cash flows from financing activities
Debt raised 867.5 1.0
Share repurchases (90.2) (80.1)
Proceeds from employees on settlement of 25.1 36.4
share options
Total net cash from/(utilised in) 802.4 (42.7)
financing activities - continuing
operations
Total net cash from/(utilised in) 10.0 (9.9)
financing activities - discontinued
operations
Total net cash from/(utilised in) 812.4 (52.6)
financing activities
Net decrease in cash and cash equivalents (510.9) (13.6)
Cash and cash equivalents at 1 March 1 055.3 1 072.8
Effect of exchange rate fluctuations on (76.2) (3.9)
cash and cash equivalents
Cash and cash equivalents at 28 February 468.2 1 055.3
Continuing operations 352.6
Discontinued operations 115.6
* Restated - refer note 6
OPERATING SEGMENT REPORT
Unallocated Head
Office
Pick n Pay and Insurance costs and revenues
Boxer
Reviewed Audited Reviewed Audited Reviewed Audited
Feb 2011 Feb 2010 Feb 2011 Feb 2010 Feb 2011 Feb 2010
Rm Rm Rm Rm Rm Rm
External 52 214.0 49 320.6 2.7 3.2 - -
revenue
Inter- (12.9) (14.4) 12.9 14.4 - -
segment
revenue
External 51 945.8 49 068.6 - - -
turnover
-
Australian
dollars
(millions)
Profit/(los 1 340.6 1 603.2 15.5 17.9 - 190.9
s) before
tax
-
Australian
dollars
(millions)
Total 9 256.6 9 009.5 58.0 47.7 - -
assets
TOTAL CONTINUING DISCONTINUED OPERATIONS
OPERATIONS Franklins Score
Reviewed Audited Reviewed Audited Reviewed Audited
Feb 2011 Feb 2010 Feb 2011 Feb 2010 Feb 2011 Feb 2010
Rm Rm Rm Rm Rm Rm
External 52 216.7 49 323.8 5 617.4 5 673.3 - 580.9
revenue
Inter- - - - - - -
segment
revenue
External 51 945.8 49 068.6 5 613.0 5 666.0 - 579.8
turnover
- Austra- 827.2 861.1
lian
dollars
(millions)
Profit/ 1 356.1 1 812.0 (123.4) 16.3 - (106.0)
(loss)
before tax
- Austra- (18.1)* 2.5
lian
dollars
(millions)
Total 9 314.6 9 057.2 2 120.1 2 055.5 - 86.1
assets
*Excluding depreciation of AUD10.5 million.
TOTAL
OPERATIONS
Reviewed Audited
Feb 2011 Feb 2010
Rm Rm
External revenue 57 834.1 55 578.0
Inter-segment revenue - -
External turnover 57 558.8 55 314.4
- Australian dollars (millions)
Profit/(loss) before tax 1 232.7 1 722.3
- Australian dollars (millions)
Total assets 11 434.7 11 198.8
Notes to the financial information
1. KPMG Inc, the Group`s independent auditor, has reviewed the condensed
consolidated results contained in this preliminary report, and has expressed
an unmodified conclusion on the preliminary financial statements. Their review
report is available for inspection at the Company`s registered office. These
preliminary financial statements are prepared in accordance with the
recognition and measurement requirements of IFRS and the disclosure
requirements of IAS 34. Accounting policies are consistent with those of prior
years.
2. During the year, certain companies within the Group entered into
transactions with each other. These intra-group transactions are 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. The Group recommenced equity accounting its 25% investment in TM
Supermarkets in Zimbabwe (TM) from 1 March 2010. The investment has been
recognised at 25% of the shareholder`s equity of TM at the beginning of the
current year.
6. Discontinued operations:
Franklins - in July 2010 the Group agreed to sell its Australian operation to
Metcash, subject to approval by the Australian competition regulator, the
Australian Competition and Consumer Commissions (ACCC). The ACCC opposed the
sale to Metcash on the basis that it is likely to have the effect of
substantially lessening competition in an Australian market.
Following the ACCC`s decision, the parties announced that they proposed to
proceed with the transaction and this led the ACCC to commence legal
proceedings in the Federal Court of Australia in December 2010, seeking to
prevent the parties from completing the transaction. We and Metcash agreed
with the ACCC to an expedited hearing, which commenced in mid-March 2011. The
judgement of the Court is expected before 30 June 2011. If the Federal Court
of Australia prevents the acquisition by Metcash, we remain committed to the
sale of Franklins and anticipate selling the Franklins stores, either
individually or in groups, under a competitive tender process.
Franklins has been presented as a discontinued operation at 28 February 2011
and the comparative information has been restated accordingly.
Score - the Group completed the closure of the store operations of its
subsidiary Score Supermarkets Operating Limited in 2010.
The salient financial information of the discontinued operations is as
follows:
Franklins Pty Score Supermarkets Total discontinued
Limited Operating Limited operations
Reviewed Audited Reviewed Audited Reviewed Audited
Feb 2011 Feb 2010 Feb 2011 Feb 2010 Feb 2011 Feb 2010
Rm Rm Rm Rm Rm Rm
Statement of
comprehen-
sive income
Revenue 5 617.4 5 673.3 - 580.9 5 617.4 6 254.2
Turnover 5 613.0 5 666.0 - 579.8 5 613.0 6 245.8
Trading 1 281.6 1 319.8 - 238.1 1 281.6 1 557.9
expenses
Loss on sale (7.0) (5.6) - (1.3) (7.0) (6.9)
of equipment
and vehicles
Trading (123.2) 14.4 - (107.1) (123.2) (92.7)
(loss)/profit
for the year
(Loss)/profit (123.4) 16.3 - (107.5) (123.4) (91.2)
for the year
(after tax)
Statement of
financial
position
Total assets 2 120.1 2 055.5 - 86.1 2 120.1 2 141.6
Total 826.6 975.2 - 174.4 826.6 1 149.6
liabilities
Cash flow
statement
Net cash 13.9 149.8 - (212.7) 13.9 (62.9)
from/(uti-
lised in)
operating
activities
Net cash (151.4) (174.0) - 56.8 (151.4) (117.2)
(utilised
in)/from
investing
activities
Net cash 10.0 (9.9) - - 10.0 (9.9)
from/(uti-
lised in)
financing
activities
Pick n Pay Holdings Limited ("")
Share Code: PWK ISIN code: ZAE000005724
Pikwik`s only asset is its 53.95% (2010: 54.43%) 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 year amount to R423.4 million (2010: R549.9
million).
Headline earnings per share is 82.08 cents (2010: 106.72 cents).
Headline earnings per share from continuing operations is 94.29 cents (2010:
115.62 cents).
Diluted headline earnings per share is 79.68 cents (2010: 103.84 cents).
Diluted headline earnings per share from continuing operations is 91.78 cents
(2010: 112.64 cents).
The total number of shares in issue is 527.2 million (2010: 527.2 million) and
the weighted average number of shares in issue during the year is 515.9
million (2010: 515.3 million).
Pikwik`s total dividend for the year is 69.28 cents per share (2010: 84.93
cents per share), a decrease of 18.4%.
Dividend declarations
The directors have declared the following cash dividends:
Pick n Pay Stores Ltd (No. 86) 105.50 cents per share
Pick n Pay Holdings Ltd (No. 59) 51.34 cents per share
For both Companies, the last day of trade in order to participate in the
dividend (CUM dividend) will be Friday, 3 June 2011. The shares will trade EX
dividend from the commencement of business on Monday, 6 June 2011 and the
record date will be Friday, 10 June 2011.
The dividends will be paid on Monday, 13 June 2011.
Share certificates may not be dematerialised or rematerialised between Monday,
6 June 2011 and Friday, 10 June 2011, both dates inclusive.
On behalf of the boards of directors
DE Muller - Company Secretary
15 April 2011
Directors of Pick n Pay Stores Limited
Executive: NP Badminton (CEO), DG Cope (CFO), SD Ackerman-Berman, JG Ackerman
Non-executive: GM Ackerman (Chairman), D Robins (German)
Independent non-executive: HS Herman, A Mathole, L Phalatse, BJ van der Ross,
RSJ van Rensburg, J van Rooyen, A Mathole and L Phalatse were appointed to
the Board on 1 November 2010. C Nkosi retired from the Board on 31 December
2010.
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 directors: JG Ackerman, SD Ackerman, D Robins (German)
Registered office: 101 Rosmead Avenue, Kenilworth, Cape Town, 7708
Sponsor: Investec Bank Limited, 100 Grayston Drive, Sandton, 2196
Transfer secretaries: Computershare Investor Services (Pty) Limited,
70 Marshall Street, Johannesburg, 2001
www.pnp.co.za
Date: 18/04/2011 08:00:03 Produced by the JSE SENS Department.
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