| Tue 23 Aug 2011, 9:00 | | SHP - Shoprite Holdings - Preliminary Results For The 52 Weeks Ended June 2011 |
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SHP
SHP
SHP - Shoprite Holdings - Preliminary Results For The 52 Weeks Ended June 2011
SHOPRITE HOLDINGS LIMITED
(Reg. No. 1936/007721/06)
(ISIN: ZAE000012084)
(JSE Share code: SHP)
(NSX Share code: SRH)
(LuSE Share code: SHOPRITE)
("the Group")
Key information
- Trading profit was up 14,2% to R3,987 billion.
- Turnover increased 7,3% - from R67,402 billion to R72,298 billion.
- Diluted headline earnings per share rose 12,4% to 507,6 cents.
- Dividend per share declared 165 cents (2010: 147cents) an increase of 12,2%.
Whitey Basson, chief executive, commented:
In viewing the Group`s results in the year to June 2011, it has to be noted that
it was a 52 week reporting period compared to the corresponding period of 2010,
which consisted of 53 weeks. An extra week has a material impact on sales and
profitability. In a difficult trading period for the food retail sector, the
Group increased total turnover by 7,3% to R72,298 billion, compared to the
previous year, but if the additional week of 2010 is disregarded, turnover
growth was 9,7%. In evaluating these results it must also be borne in mind that
during the 2011 reporting period, internal food inflation averaged -0,1%
compared to 2,2% during the corresponding 12 months and against an official food
inflation rate of 3,2%. On the turnover growth of 7,3% the Group achieved a
trading profit growth of 14,2% due to stringent control over the rise in
operating costs, thereby increasing the trading margin to 5,5%.
22 August 2011
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 business environment during the reporting period presented many challenges
to the retail sector. Against the background of the lacklustre performance of
the economy and the continuing increase in unemployment, the disposable income
of consumers came under increased pressure from high household debt and the
surging cost of essential services. Although the sale of certain durable goods
saw a resurgence as more affluent consumers took advantage of more disposable
income, spending on fast-moving consumer goods remained depressed with few
factors present that could lead to an improvement in the short to medium term.
COMMENTS ON THE RESULTS
Statement of comprehensive income
Total turnover
For the 12 months to June 2011, a period of 52 weeks, the Group increased total
turnover by 7,3% to R72,298 billion. This is compared to the corresponding 12
months of 2010 which consisted of an extra week. Turnover increased by 9,7% if
the extra week is excluded. During the 2011 reporting period, internal food
inflation averaged -0,1% compared to 2,2% in the corresponding 12 months.
Expenses
Depreciation and amortisation grew 11,2% to R933,6 million due mainly to the
Group`s investment in new stores and related information technology
infrastructure. Similarly, the increase of 9,3% in staff costs to R5,762 billion
was mainly due to the new stores opened and the subsequent creation of just over
7 000 new jobs.
Trading margin
The trading margin at 5,5% was higher than in the corresponding period (5,2%)
and reflects the efficiencies achieved by management and the benefits of the
Group`s continuing investment in infrastructure.
Exchange rate losses
The exchange rate loss reduced from R77,8 million to R446 000 due to the rand
strengthening less in the period under review against the currencies of the
countries outside South Africa where it does business.
Finance cost and interest received
The move from net interest received to net interest paid was due to the increase
in capital expenditure on new stores, information technology and expansion of
the distribution centres.
Statement of financial position
Property, plant and equipment and intangible assets
The increase is due to the investment in 78 new stores, vacant land purchased
for strategic purposes, investment in information technology to support
inventory management, as well as normal asset replacements.
Cash and cash equivalents and bank overdrafts
This item should be seen in conjunction with current liabilities. The reduction
in cash at balance sheet date is due to certain creditors being paid before
balance sheet date in the current year, whereas they were paid after balance
sheet date in the previous year. In addition, capital expenditure during the
year was R3 billion.
OPERATIONAL REVIEW
Price competition amongst food retailers in a depressed South African market
remained fierce. In this climate all the divisions of the Group, with the
exception of the Furniture Division, maintained acceptable levels of growth and
profitability. The supermarket non-RSA division reported sound growth, although
this is negated by the continued strength of the rand during the review period.
NUMBER OF OUTLETS
JUN 12
CONFIRMED
NEW STORES
JUN 10 OPENED CLOSED JUN 11
SUPERMARKETS 762 64 10 816 74
- Shoprite 396 15 2 409 33
- Checkers 143 17 2 158 10
- Checkers Hyper 26 26 2
- Usave 197 32 6 223 29
HUNGRY LION 126 7 3 130 16
FURNITURE 280 25 5 300 16
- OK Furniture 216 20 4 232 14
- House & Home 47 3 50 1
- OK Power Express 17 2 1 18 1
TOTAL OWNED STORES 1168 96 18 1246 106
- OK Franchise 276 21 28 269 16
- H/L Franchise 5 5 0
TOTAL FRANCHISE 281 21 28 274 16
TOTAL STORES 1449 117 46 1520 122
COUNTRIES OUTSIDE RSA
15 15 1
Supermarkets RSA
The Group`s core business, its South African supermarket division, reported
positive sales growth of 7,2% (52 weeks: 9,8%) from R53,367 billion to R57,214
billion. This produced a trading profit of R3,302 billion (2010: R2,755
billion). Wherever possible, cost savings were passed on to consumers who as a
result could buy items from more than 40% of the Group`s product categories for
the same or lower price than during the previous reporting period.
The three chains have been designed to complement each other in covering the
full local LSM spectrum. Shoprite, the largest of the three, remains the
dominant player in the middle to lower income markets. It expanded its presence
with full-service supermarkets especially in economically disadvantaged
residential areas and continues to face fierce competition from an increasing
number of participants. It opened a net 11 new stores to bring its total to 331.
Checkers entrenched its position further in the upper-income consumer market and
53% of its customers now fall within LSM 8-10. It is increasingly becoming the
preferred anchor tenant for new shopping centre developments countrywide. It
added a net 15 new stores and now trades from 154 supermarkets and 26 Hypers.
Usave`s low cost structures enable it to consistently sell comparable products
at lower prices than its competitors enabling it to increase turnover. Its
strategic role in an increasingly competitive local market has grown during the
reporting period. It will be intensifying its store opening programme in the new
financial year.
Supermarkets non-RSA
Whilst a rand that remained strong, as well as one week less in the reporting
period resulted in reduced profitability, the trading margin achieved was close
to that of the South African business. When converted to rand, the turnover of
the 135 outlets the Group operates outside the borders of South Africa increased
by 2,1% compared to the previous year (4,5% on a 52-week basis). At constant
currencies, these operations grew turnover by 10,2% (12,8% on a 52-week basis).
The Group continues to expand its operations into Africa and has made great
strides in establishing a presence across the continent.
Furniture
The Furniture Division, which operates three chains - OK Furniture, House & Home
and OK Power Express - experienced a difficult trading year, contending with
deflation of 15,7% and even higher in certain product categories. It increased
turnover by 1,9% (52 weeks: 4,0%) to R3,060 billion despite these adverse
conditions and continued to grow strongly in terms of new outlets, ending the
reporting period with 300 stores of which 30 are outside the borders of South
Africa.
Other operating segments
The year under review was also a trying time for most of the OK Franchise
Division`s (OKFD) members who trade all over South Africa and Namibia as well as
in Botswana. It increased turnover by 7,8% while trading profit increased due to
overhead costs lagging the growth in income. A major development during the
reporting period was the offer made for Metcash`s franchise division which will
provide OKFD with a further platform to grow its business and franchisees, both
in numbers and in turnover. The transaction was ratified by the Competition
Authority after year-end.
During the reporting period MediRite increased its number of outlets from 104 to
121 and is budgeting for another 22 in the new financial year. Its pharmacies
enjoy secure supply lines from its fellow subsidiary, Transfarm Pharmaceutical
Wholesalers, with branches now in Cape Town as well as Gauteng, which now
provides 93% of their total product range and offers the opportunity of direct
purchases from international markets. They play an important role in providing
increased access to prescription and self-medicating remedies for economically
disadvantaged communities in which the Group`s supermarkets are located.
Computicket, which operates from all Group supermarkets as well as from a number
of standalone outlets and some stores in the furniture division, maintained its
pre-eminent position in the market and showed strong growth in both turnover and
trading profit.
GROUP PROSPECTS AND OUTLOOK
The board does not foresee present market conditions to change materially in the
new financial year. Food inflation is expected to rise further although prices
are likely to be held in check by the ongoing competition amongst the major food
retailers. Competition is expected to further intensify. However, we believe the
Group is well equipped to deal with the challenges that will confront it in the
new financial year.
CORPORATE GOVERNANCE
The Group adheres to the principles embodied in the King Code of Governance
Principles for South Africa 2009 ("the Code"). The Group complies with the
prescriptive requirements incorporated in the Code and the Listings Requirements
of the JSE Ltd, as well as legislation applicable to public listed companies in
South Africa.
DIVIDEND NO 125
The board has declared a final dividend of 165,0 cents (2010: 147,0 cents) per
ordinary share, payable to shareholders on Monday, 19 September 2011. This
brings the total dividend for the year to 253,0 cents per ordinary share (2010:
227,0 cents). The last day to trade cum dividend will be Friday, 9 September
2011. As from Monday, 12 September 2011, all trading of Shoprite Holdings Ltd
shares will take place ex dividend. The record date is Friday, 16 September
2011. Share certificates may not be dematerialised or rematerialised between
Monday, 12 September 2011, and Friday, 16 September 2011, 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 the South African Companies Act (Act no 71 of 2008), as
amended. The accounting policies are consistent with those used in the annual
financial statements for the financial period ended June 2010.
AUDITORS REVIEW OPINION
The condensed consolidated preliminary results for the year ended June 2011 have
been reviewed by PricewaterhouseCoopers Inc. The auditors` unqualified review
opinion is available for inspection at the Company`s registered office.
By order of the board
CH Wiese JW Basson
Chairman Chief executive
Cape Town
22 August 2011
Condensed Group Statement of Comprehensive Income
Reviewed Audited
52 weeks 53 weeks
% ended ended
R`000 change June 11 June 10
Sale of merchandise 7,3 72 297 777 67 402 440
Cost of sales 6,4 (57 624 408) (54 147 848)
Gross profit 10,7 14 673 369 13 254 592
Other operating income 17,7 1 855 841 1 576 128
Depreciation and amortisation 11,2 (933 592) (839 208)
Operating leases 9,7 (1 700 468) (1 550 745)
Employee benefits 9,3 (5 762 045) (5 273 843)
Other expenses 12,8 (4 146 408) (3 676 483)
Trading profit 14,2 3 986 697 3 490 441
Exchange rate losses (99,4) (446) (77 824)
Items of a capital nature 207,0 (78 533) (25 580)
Operating profit 15,4 3 907 718 3 387 037
Interest received (10,5) 94 614 105 741
Finance costs 34,4 (125 964) (93 690)
Profit before income tax 14,0 3 876 368 3 399 088
Income tax expense 21,1 (1 346 826) (1 111 792)
Profit for the year 10,6 2 529 542 2 287 296
OTHER COMPREHENSIVE INCOME, NET OF INCOME TAX
Fair value movements on
available-for-sale investments (76,3) 1 950 8 244
Foreign currency translation differences (16,2) (142 451) (170 030)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 12,4 2 389 041 2 125 510
PROFIT ATTRIBUTABLE TO:
Owners of the parent 10,7 2 509 780 2 266 522
Non-controlling interest (4,9) 19 762 20 774
2 529 542 2 287 296
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the parent 12,6 2 369 279 2 104 736
Non-controlling interest (4,9) 19 762 20 774
2 389 041 2 125 510
Condensed Group Statement of Financial Position
Reviewed Audited
R`000 June 11 June 10
ASSETS
Non-current assets 9 287 521 7 548 892
Property, plant and equipment 8 168 749 6 577 677
Available-for-sale investments 59 656 57 389
Loans and receivables 4 308 8 553
Deferred income tax assets 326 457 288 677
Intangible assets 719 105 611 037
Fixed escalation operating lease accrual 9 246 5 559
Current assets 11 357 577 10 416 433
Inventories 7 055 867 6 114 538
Other current assets 2 293 933 2 037 188
Loans and receivables 46 226 45 841
Cash and cash equivalents 1 961 551 2 218 866
Assets held for sale 58 659 26 372
Total assets 20 703 757 17 991 697
EQUITY AND LIABILITIES
Total equity 7 143 450 5 972 016
Capital and reserves attributable
to owners of the parent 7 084 700 5 904 832
Non-controlling interest 58 750 67 184
Non-current liabilities 1 109 996 1 034 025
Borrowings 26 177 21 534
Deferred income tax liabilities 25 377 18 953
Provisions 339 200 270 818
Fixed escalation operating lease accrual 455 787 418 641
Other non-current liabilities 263 455 304 079
Current liabilities 12 450 311 10 985 656
Other current liabilities 10 304 094 10 006 552
Provisions 104 117 104 825
Bank overdraft 2 042 100 874 279
Total liabilities 13 560 307 12 019 681
Total equity and liabilities 20 703 757 17 991 697
Earnings per Share
Reviewed Audited
52 weeks 53 weeks
% ended ended
R`000 change June 11 June 10
Net profit attributable to shareholders 2 509 780 2 266 522
Re-measurements 78 533 25 580
Profit on disposal of property (6 654) (503)
Loss on disposal and scrapping of plant,
equipment and intangible assets 32 256 14 536
(Profit)/loss on other investing activities (4 405) 572
Insurance claims received/(paid) 217 (3 657)
Impairment of goodwill 768 -
Impairment of property, plant and equipment,
intangible assets and assets held for sale 56 351 14 632
Income tax effect on re-measurements (19 307) 1 113
Headline earnings 2 569 006 2 293 215
Earnings per share (cents) 10,2 495,9 450,1
Diluted earnings per share (cents) 11,1 495,9 446,4
Headline earnings per share (cents) 11,5 507,6 455,4
Diluted headline earnings per share (cents) 12,4 507,6 451,6
Ordinary dividend per share (cents)
Interim dividend paid 10,0 88,0 80,0
Final dividend declared 12,2 165,0 147,0
Total 11,5 253,0 227,0
Number of ordinary shares (`000) used for
calculation of
: earnings per share (weighted average) 506 133 503 523 :
diluted earnings per share (weighted average) 506 133 507 775
Condensed Group Statement of Cash Flows
Reviewed Audited
52 weeks 53 weeks
ended ended
R`000 Notes June 11 June 10
Cash generated by operations 3 794 508 3 930 369
Operating profit 3 907 718 3 387 037
Less: investment income (27 663) (32 662)
Non-cash items 1 1 459 479 1 387 610
Settlement of share appreciation rights (218 037) -
Payments for settlement of post-retirement
medical benefits liability (2 630) (216 860)
Changes in working capital 2 (1 324 359) (594 756)
Net interest (paid)/received (15 445) 35 202
Dividends received 11 758 9 511
Dividends paid (1 216 084) (1 082 293)
Income tax paid (1 031 092) (1 383 049)
Cash flows from operating activities 1 543 645 1 509 740
Cash flows utilised by investing activities (2 937 011) (2 680 113)
Purchase of property, plant and equipment
and intangible assets (3 005 219) (2 509 369)
Proceeds on disposal of property, plant and
equipment and intangible assets 63 483 99 445
Proceeds on disposal of assets held for sale 28 360 1 011
Acquisition of subsidiaries and operations (27 128) (255 894)
Other investment activities 3 493 (15 306)
Cash flows from/(utilised) by financing activities 9 329 (237 928)
Acquisition of treasury shares - (244 439)
Increase in borrowings 9 329 9 726
Other financing activities - (3 215)
Net movement in cash and cash equivalents (1 384 037) (1 408 301)
Cash and cash equivalents at the beginning
of the year 1 344 587 2 811 465
Effect of exchange rate movements on cash
and cash equivalents (41 099) (58 577)
Cash and cash equivalents at the end of the year (80 549) 1 344 587
Cash Flow Information
1. Non-cash items
Depreciation on property, plant and equipment 948 520 848 270
Amortisation of intangible assets 57 922 47 849
Net fair value losses on financial instruments 5 105 27 899
Exchange rate losses 446 77 824
Loss/(profit) on disposal of property 6 214 (340)
Profit on disposal of assets held for sale (12 868) (163)
Loss on disposal and scrapping of plant and
equipment and intangible assets 32 256 14 536
Impairment of property, plant and
equipment and assets held for sale 56 351 14 632
Impairment of goodwill 768 -
Movement in provisions 70 876 59 317
Movement in cash-settled share-based
payment accrual 272 808 277 558
Movement in fixed escalation operating
lease accrual 21 081 20 228
1 459 479 1 387 610
2. Changes in working capital
Inventories (1 000 474) (46 064)
Trade and other receivables (236 566) (125 470)
Trade and other payables (87 319) (423 222)
(1 324 359) (594 756)
Condensed Operating Segment Information
Reviewed Audited
52 weeks 53 weeks
% ended ended
R`000 change June 11 Jun 10
Sale of merchandise
Supermarkets RSA 7,2 57 213 793 53 367 171
Supermarkets Non-RSA 2,1 7 316 698 7 163 977
Furniture 1,9 3 059 648 3 002 589
Other operating segments 21,7 4 707 638 3 868 703
7,3 72 297 777 67 402 440
Trading profit
Supermarkets RSA 19,9 3 302 262 2 755 207
Supermarkets Non-RSA (14,5) 415 524 485 799
Furniture 0,2 131 484 131 213
Other operating segments 16,2 137 427 118 222
14,2 3 986 697 3 490 441
Supplementary Information
Reviewed Audited
R`000 June 11 June 10
1. Capital commitments 1 343 534 1 674 508
2. Contingent liabilities 157 792 103 614
3. Net asset value per share (cents) 1 400 1 167
4. Total number of shares in issue
(adjusted for treasury shares) 506 133 506 133
Condensed Statement of Changes in Equity
Reviewed Audited
52 weeks 53 weeks
ended ended
R`000 June 11 June 10
Balance at beginning of July 5 972 016 5 029 295
Net movement in treasury shares - (244 439)
Total comprehensive income 2 389 041 2 125 510
Non-controlling interest purchased - (3 215)
Treasury shares utilised for share option
take-up, net of income tax - 147 413
Dividends distributed to shareholders (1 217 607) (1 082 548)
Balance at end of June 7 143 450 5 972 016
Directorate and administration
Executive directors
JW Basson (chief executive), CG Goosen (deputy managing director), B Harisunker,
AE Karp, EL Nel, BR Weyers
Non-executive director
CH Wiese (chairman)
Executive alternate directors
JAL Basson, M Bosman, PC Engelbrecht
Independent non-executive directors
EC Kieswetter, JA Louw, JF Malherbe, JG Rademeyer
Non-executive alternate director
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 5238, 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: Enfin Solution Limited, Plot 5 Katemo Road, Rhodes Park, Zambia
Telephone: +260 (0)211 256 284/5, Facsimile: +260 (0)211 256 294
Sponsors
South Africa: Nedbank Capital, PO Box 1144, Johannesburg, 2000, South Africa
Telephone: +27 (0)11 295 8525, Facsimile: +27 (0)11 294 8525
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
Auditors
PricewaterhouseCoopers Incorporated, PO Box 2799, Cape Town, 8000, South Africa
Telephone: +27 (0)21 529 2000, Facsimile: +27 (0)21 529 3300
Date: 23/08/2011 09:00:02 Produced by the JSE SENS Department.
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