| Wed 19 Oct 2011, 8:19 | | PWK/PIK - Pick n Pay Holdings/Pick n Pay Stores - |
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PWK PIK
PWK PIK
PWK/PIK - Pick n Pay Holdings/Pick n Pay Stores - Unaudited interim
condensed consolidated results for the six months ended 31 August 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
Unaudited interim condensed consolidated results for the six months ended
31 August 2011
Financial highlights - continuing operations
Turnover Headline earnings Interim dividend
R`billion cents per share cents per share
2011: 27.1 54.73 22.50
2010: 25.2 90.17 37.00
Review of operations
We have seen encouraging turnover growth, above the market for the first
time in a few years, however the investments we have made in transforming
Pick n Pay into a world class retailer have had a material impact on
earnings. The most significant of these are the launch and set up of our
loyalty programme Smart Shopper, the investment in building a specialised
category buying function, and supply chain improvements. These
initiatives will enable us to better serve our customers in the future.
Notwithstanding the challenges facing the Group and the scale of the work
still to come, there have been a number of highlights over the last 6
months, which give us a renewed momentum going forward.
Strategic update
The core of our strategy is focused on realising the full potential of
our South African businesses. To do so we are closely focused on
improving our customer offer and streamlining our operations. We are
consolidating and upgrading our support functions so that they can better
enable our colleagues to deliver outstanding products in great stores at
competitive prices. The first steps in this consolidation are the set-up
of our specialist category buying function and the centralisation of our
supply chain. At the same time, improving our customer offer was
significantly enhanced by the launch of our Smart Shopper loyalty
programme. Looking ahead, we will be simplifying our regional and store
structures and our administration functions.
Smart Shopper - We successfully launched our Smart Shopper loyalty
programme in March, which has been extremely well received. We aimed to
sign up 3 million cardholders in the first year and achieved 4.1 million
in the first 6 months. Although still in its infancy, we believe the
encouraging growth in turnover is due in part to this programme.
Substantial set-up costs have impacted the earnings of the Group in the
first half of the year, but we expect the programme to drive turnover
growth in the medium to long-term and generate additional value through
more effective marketing to our customers.
Specialised buying - We are investing a great deal of time and resources
in transforming our buying into a focused, centralised category
management function. This will enable us to improve our customer offer
and work more efficiently with our suppliers. Regional work undertaken to
date has already had a positive impact on gross margin. Costs associated
with this project have also had a significant impact on the earnings for
the last 6 months. The new category management team was announced in mid-
October and will be functional by March 2012.
Central distribution - Centralising distribution continues. We plan to
optimise the Longmeadow operation before proceeding with our new
distribution centres in the Western Cape, KwaZulu-Natal, Eastern Cape and
Gauteng over the next 5 years. We have achieved operational improvements
at Longmeadow over the last 6 months, with a decrease in distribution
cost per case. Our Western Cape distribution centre is due to open in May
2012.
Expense control - The 13.7% increase in operating expenses over last year
reflects the investment phase we are in. General expense control was
satisfactorily maintained during the six months, with the majority of the
increase in expenses being contributed by Smart Shopper. However, we
remain resolutely focused on expense control to ensure that our cost of
doing business is in line with, or lower than, that of our competition.
Labour - In line with Group strategy, much work is being done to achieve
optimal labour utilisation. We have just completed a CCMA facilitation
process with SACCAWU, without the parties reaching a solution to
retrenchments. We will do everything feasible to minimise dismissals.
Franklins, Australia - We have completed the sale of Franklins to Metcash
after a 15-month delay due to opposition by the Australian Competition
and Consumer Commission (the ACCC) and subsequent Federal Court
proceedings. The sale proceeds, subject to final working capital
adjustments, will be approximately R1.3 billion, all of which will be
invested in our core South African operations. Although the ACCC have
appealed the court`s decision, we are very confident that the initial
verdict, which was comprehensively in our favour, will be upheld. In the
unlikely event of the ACCC succeeding with their appeal, Pick n Pay has
agreed to share any divestiture costs or penalties equally with Metcash.
As the Group concluded the sale of Franklins on 30 September 2011, it
continues to be disclosed as a discontinued operation at 31 August 2011,
and its results have been reflected separately from continuing
operations.
Financial highlights
Group turnover at R27.1 billion for the period is 7.4% above last year,
with strong growth from like-for-like stores. This is encouraging in a
highly competitive environment and gives us confidence that our Smart
Shopper programme is proving popular with customers. While our own
internal selling price inflation remains below CPI we are seeing
increases which when combined with economic uncertainty will lead our
customers to exercise caution.
Gross profit margin has declined slightly from 17.8% last year to 17.7%
this year. The margin benefits from improved specialist buying have been
offset by the discounts offered under the Smart Shopper programme. We
anticipate that we will be able to strengthen our margins over the next
few years while maintaining our competitive price position through our
work on category management and supply chain improvements.
Trading profit is down 31.7% to R492.2 million due to significant costs
relating to our strategic transformation initiatives. A major portion of
these costs are initial set-up costs relating to Smart Shopper and
category management.
EBITDA (earnings before interest, tax, depreciation and amortisation) is
down 17.8% to R882.4 million.
Net cash from operating activities at R1 190.0 million is up from R185.9
million for the same period last year, due to improved working capital
management.
The interim dividend per share at 22.50 cents per share for Pick n Pay
Stores Limited and 10.91 cents per share for Pick n Pay Holdings Limited
is down 39.2% in line with the decrease in headline earnings per share
from continuing operations.
Operational highlights
Pick n Pay and Boxer - Turnover growth is encouraging, with particularly
strong performances from private label, clothing, pharmacy and liquor. In
addition Boxer continues to trade well in the highly competitive LSM 4-7
market.
During the period we opened 4 corporate supermarkets, 5 franchise
supermarkets, 14 corporate liquor stores, 6 franchise liquor stores, and
9 clothing stores. In addition we converted
3 franchise supermarkets to corporate stores. Boxer opened
4 new superstores, 6 Punch stores, 1 Boxer Build and 1 liquor store.
In the next 6 months we plan to open 9 new supermarkets
(6 corporate and 3 franchise), 12 liquor stores, 6 clothing stores, and 9
Boxer superstores and 3 Punch stores.
Our steady growth into Africa continues. We now have 2 stores in Zambia,
both trading extremely well, and our first store in Mozambique opened in
June 2011, with our first store opening in Mauritius just after the 6
month period. In the next 6 months we will open 2 more stores in Zambia,
1 in Mozambique and 2 in Mauritius. We are still waiting for approval
from the Zimbabwean Indigenisation Board in order to purchase an
additional 24% of TM Supermarkets in Zimbabwe, to take our stake to 49%.
General comments
We welcome Richard van Rensburg as Deputy CEO. Richard, who has been a
valuable non-executive director on our Stores Board for a number of
years, brings with him much experience in accounting, retail, supply
chain and information systems. He has been appointed to assist us in
steering our change programme to successful completion.
We are making good progress in transforming the business. Although
challenges lie ahead, we believe in our people and in this exceptional
Group. We continue to look forward with excitement and anticipation at
all we will be able to achieve. We thank the team for their continued
commitment and hard work.
For and on behalf of the board
Gareth Ackerman Nick Badminton
Chairman Chief Executive Officer
18 October 2011
PICK n PAY STORES LIMITED - Reg. no. 1968/008034/06
Share code: PIK ISIN code: ZAE000005443
Statement of comprehensive income
Unaudited Audited
Six months Year
ended to
Aug 2011 Growth Aug 2010 Feb 2011
Rm % Rm Rm
Continuing operations
Revenue (note 3) 27 213.1 25 347.9 52 216.7
Turnover 27 082.8 7.4 25 208.4 51 945.8
Cost of merchandise (22 282.4) (20 716.5) (42 859.6)
sold
Gross profit 4 800.4 4 491.9 9 086.2
Other trading income 116.8 117.6 231.4
Trading expenses (4 421.1) (3 889.2) (7 899.9)
Loss on sale of (3.9) - -
property, equipment
and vehicles
Trading profit 492.2 720.3 1 417.7
Interest received 13.5 21.9 39.5
Interest paid (71.8) (60.1) (111.0)
Gain on recognition - - 7.5
of investment in
associate
Share of associate`s (2.0) - 2.4
(loss) / income
Profit before tax 431.9 682.1 1 356.1
Tax (174.5) (253.8) (447.8)
Profit for the period 257.4 428.3 908.3
from continuing
operations
Loss from (65.8) (74.0) (123.4)
discontinued
operation (note 5)
Profit for the period 191.6 354.3 784.9
Other comprehensive
income
Exchange rate 48.1 (58.5) 50.1
differences on
translating foreign
operations
Net loss on hedge of (49.9) - (52.2)
net investment in
foreign operation
Retirement benefit 4.5 (4.8) (12.5)
actuarial
profit/(loss)
Total comprehensive 194.3 291.0 770.3
income for the period
EBITDA 882.4 (17.8) 1 074.0 2 160.9
Gross profit margin 17.7 17.8 17.5
(%)
Trading profit margin 1.8 2.9 2.7
(%)
Earnings per share -
cents
Basic 40.14 74.58 164.99
Continuing operations 53.92 90.17 190.92
Discontinued (13.78) (15.59) (25.93)
operation
Diluted 39.62 73.04 162.20
Continuing operations 53.23 88.30 187.68
Discontinued (13.61) (15.26) (25.48)
operation
Headline earnings
reconciliation
Profit for the period 191.6 354.3 784.9
Headline adjustments
(net of tax):
Loss on sale of 3.9 - -
property, equipment
and vehicles
Loss on sale of 0.8 3.4 7.0
equipment and
vehicles -
discontinued
operation
Gain on recognition - - (7.5)
of investment in
associate
Headline earnings 196.3 357.7 784.4
Continuing operations 261.3 (39.0) 428.3 900.8
Discontinued (65.0) (70.6) (116.4)
operation
Headline earnings per 41.11 75.31 164.90
share - cents
Continuing operations 54.73 (39.3) 90.17 189.35
Discontinued (13.62) (14.86) (24.45)
operation
Diluted headline 40.59 73.74 162.10
earnings per share -
cents
Continuing operations 54.03 (38.8) 88.30 186.14
Discontinued (13.44) (14.56) (24.04)
operation
Interim dividend - 22.50 (39.2) 37.00
No. 87 payable
Statement of changes in equity
Unaudited Audited
Six months Year
ended to
Aug 2011 Aug 2010 Feb 2011
Rm Rm Rm
At 1 March 2 158.8 2 144.6 2 144.6
Total comprehensive income for 194.3 291.0 770.3
the period
Dividends paid (498.0) (633.5) (808.0)
Share repurchases (25.5) (68.3) (90.2)
Net effect of settlement of 31.0 72.0 68.3
employee share options
Share options expense 42.6 31.3 73.8
At 31 August / 28 February 1 903.2 1 837.1 2 158.8
Statement of financial position
Unaudited Audited
Aug 2011 Aug 2010 Feb 2011
Rm Rm Rm
Assets
Non-current assets
Intangible assets 543.3 406.9 404.5
Property, equipment and vehicles 3 566.7 3 129.4 3 401.8
Operating lease asset 43.9 31.5 37.7
Participation in export 48.1 49.7 48.2
partnerships
Deferred tax 107.4 75.3 85.8
Investment in associate 7.8 - 9.9
Loans 79.7 109.8 90.2
Investments 0.2 0.2 0.2
4 397.1 3 802.8 4 078.3
Current assets
Assets held for sale - 2 117.3 1 993.7 2 120.1
discontinued operation (note 5)
Inventory 3 173.8 2 944.6 3 162.7
Trade and other receivables 1 928.1 1 734.2 1 739.2
Cash and other equivalents 360.7 344.6 -
7 579.9 7 017.1 7 022.0
Total assets 11 977.0 10 819.9 11 100.3
Equity and liabilities
Total shareholders` equity 1 903.2 1 837.1 2 158.8
Non-current liabilities
Long-term debt 1 033.1 660.0 626.9
Retirement scheme obligations 20.8 36.4 27.1
Operating lease liability 762.6 707.9 729.3
1 816.5 1 404.3 1 383.3
Current liabilities
Liabilities held for sale - 838.9 762.9 826.6
discontinued operation (note 5)
Cash and cash equivalents - - 547.4
Short-term debt 49.1 36.7 50.2
Tax 94.1 212.4 96.2
Trade and other payables 7 275.2 6 566.5 6 037.8
8 257.3 7 578.5 7 558.2
Total equity and liabilities 11 977.0 10 819.9 11 100.3
Shares in issue - millions 480.4 480.4 480.4
Weighted average shares in issue - 477.4 475.1 475.7
millions (note 4)
Net asset value - cents per share 430.6 447.6 503.0
(property value based on
directors` valuation)
Cash flow statement
Unaudited Audited
Six months Year
ended to
Aug 2011 Aug 2010 Feb 2011
Rm Rm Rm
Cash flows from operating
activities
Trading profit 492.2 720.3 1 417.7
Loss on sale of property, 3.9 - -
equipment and vehicles
Depreciation and amortisation 392.2 353.7 733.3
Share options expense 42.6 31.3 73.8
Net operating lease obligations 27.0 14.0 29.3
Cash generated before movements 957.9 1 119.3 2 254.1
in working capital
Movements in working capital: 1 034.8 (76.1) (844.8)
Increase / (decrease) in trade 1 234.7 (155.0) (678.1)
and other payables
Increase in inventory (11.2) (109.5) (349.1)
(Increase) / decrease in trade (188.7) 188.4 182.4
and other receivables
Cash generated by trading 1 992.7 1 043.2 1 409.3
activities
Interest received 13.5 21.9 39.5
Interest paid (71.8) (60.1) (111.0)
Cash generated by operations 1 934.4 1 005.0 1 337.8
Dividends paid (498.0) (633.5) (808.0)
Tax paid (180.6) (230.9) (526.3)
Net cash from operating 1 255.8 140.6 3.5
activities - continuing
operations
Net cash (utilised in) / from (65.8) 45.3 13.9
operating activities -
discontinued operation
Total net cash from operating 1 190.0 185.9 17.4
activities
Cash flows from investing
activities
Intangible asset additions (117.3) (52.5) (82.5)
Property, equipment and vehicle (551.0) (521.2) (1 163.2)
additions
Purchase of operations (58.7) - -
Proceeds on sale of property, 27.4 - 21.9
equipment and vehicles
Loans repaid 10.4 14.9 34.5
Net cash utilised in investing (689.2) (558.8) (1 189.3)
activities - continuing
operations
Net cash utilised in investing (17.9) (78.0) (151.4)
activities - discontinued
operation
Total net cash utilised in (707.1) (636.8) (1 340.7)
investing activities
Cash flows from financing
activities
Debt raised / (repaid) 405.1 (13.0) (32.5)
Share repurchases (25.5) (68.3) (90.2)
Proceeds from employees on 30.7 36.4 25.1
settlement of share options
Net cash from / (utilised in) 410.3 (44.9) (97.6)
financing activities -
continuing operations
Net cash from financing 12.4 10.0 10.0
activities - discontinued
operation
Total net cash from / (utilised 422.7 (34.9) (87.6)
in) financing activities
Net increase / (decrease) in 905.6 (485.8) (1 410.9)
cash and cash equivalents
Cash and cash equivalents at 1 (431.8) 1 055.3 1 055.3
March
Effect of exchange rate (81.5) (10.4) (76.2)
fluctuations on cash and cash
equivalents
Cash and cash equivalents at 31 392.3 559.1 (431.8)
August / 28 February
Continuing operations 360.7 344.6 (547.4)
Discontinued operation 31.6 214.5 115.6
Operating segment report
Pick n Pay and Boxer Insurance
Aug 2011 Aug 2010 Aug 2011 Aug 2010
Rm Rm Rm Rm
External revenue 27 211.7 25 346.5 1.4 1.4
Inter-segment revenue (9.9) (9.3) 9.9 9.3
External turnover 27 082.8 25 208.4 - -
- Australian dollars
(millions)
Profit / (loss) before 421.4 673.2 10.5 8.9
tax
- Australian dollars
(millions)
Total assets 9 801.4 8 796.8 58.3 29.4
Operating segment report (continued)
Total continuing Discontinued operation
operations Franklins
Aug 2011 Aug 2010 Aug 2011 Aug 2010
Rm Rm Rm Rm
External revenue 27 213.1 25 347.9 2 904.1 2 790.3
Inter-segment - - - -
revenue
External turnover 27 082.8 25 208.4 2 904.0 2 787.5
- Australian 398.7 417.5
dollars (millions)
Profit / (loss) 431.9 682.1 (65.8) (74.0)
before tax
- Australian (9.1) (11.3)
dollars (millions)
Total assets 9 859.7 8 826.2 2 117.3 1 993.7
Operating segment report (continued)
Total operations
Aug 2011 Aug 2010
Rm Rm
External revenue 30 117.2 28 138.2
Inter-segment revenue - -
External turnover 29 986.8 27 995.9
- Australian dollars (millions)
Profit / (loss) before tax 366.1 608.1
- Australian dollars (millions)
Total assets 11 977.0 10 819.9
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 2011.
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
parties are unchanged from those reported at 28 February 2011.
For further information, please refer to note 28 of the 2011
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 operation - InterFrank Group Holdings Pty Limited
("Franklins"):
As the Group completed the sale of Franklins on 30 September 2011 it
continues to be disclosed as a discontinued operation at
31 August 2011. The net proceeds from the sale were approximately R1.3
billion, which will be invested in the Group`s South African operations.
The transaction will only be accounted for in the second half of the
financial year. Notwithstanding our decision to complete the sale, the
ACCC`s appeal has been expedited with a three day hearing scheduled to
begin on 24 October 2011. Our confidence in a successful outcome has been
boosted by the comprehensive judgment in our favour in the Federal Court
in late August 2011 and by the court`s denial of the ACCC`s application
for an interim injunction.
The salient financial information of the discontinued operation is as
follows:
Franklins
Unaudited Audited
Aug 2011 Aug 2010 Feb 2011
Rm Rm Rm
Statement of comprehensive income
Revenue 2 904.1 2 790.3 5 617.4
Turnover 2 904.0 2 787.5 5 613.0
Trading expenses 683.6 665.1 1 281.6
Loss on sale of equipment and (0.8) (3.4) (7.0)
vehicles
Trading loss for the period (65.8) (75.0) (123.2)
Loss for the period after tax (65.8) (74.0) (123.4)
Statement of financial position
Total assets 2 117.3 1 993.7 2 120.1
Total liabilities 838.9 762.9 826.6
Cash flow statement
Net cash (utilised in) / from (65.8) 45.3 13.9
operating activities
Net cash utilised in investing (17.9) (78.0) (151.4)
activities
Net cash from financing activities 12.4 10.0 10.0
Pick n Pay Holdings Limited ("PIKWIK")
Reg. No. 1981/009610/06
Share Code: PWK ISIN code: ZAE000005724
Pikwik`s only asset is its 53.85% (2010: 53.97%) 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 R105.3 million
(2010: R193.2 million).
Headline earnings per share is 20.40 cents (2010: 37.45 cents).
Headline earnings per share from continuing operations is
27.19 cents (2010: 44.87 cents).
Diluted headline earnings per share is 19.94 cents
(2010: 36.21 cents).
Diluted headline earnings per share from continuing operations is 26.68
cents (2010: 43.56 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 period is 516.4 million
(2010: 515.9 million). Pikwik`s interim dividend per share
is 10.91 cents (2010: 17.94 cents), a decrease of 39.2%.
Dividend declarations
The directors have declared the following cash dividends:
Pick n Pay Stores Limited (No. 87) 22.50 cents per share
Pick n Pay Holdings Limited (No. 60) 10.91 cents per share
For both Companies, the last day of trade in order to participate in the
dividend (CUM dividend) will be Friday, 2 December 2011. The shares will
trade EX dividend from the commencement of business on Monday,
5 December 2011 and the record date will be Friday,
9 December 2011.
The dividends will be paid on Monday, 12 December 2011.
Share certificates may not be dematerialised or rematerialised between
Monday, 5 December 2011 and Friday, 9 December 2011, both dates
inclusive.
On behalf of the boards of directors
DE Muller - Company Secretary
18 October 2011
Directors of Pick n Pay Stores Limited:
Executive: NP Badminton (CEO),
RSJ van Rensburg (Deputy CEO - appointed 1 October 2011),
A Jakoet (CFO),
JG Ackerman, SD Ackerman-Berman
Non-executive: GM Ackerman (Chairman), D Robins (German)
Independent non-executive: HS Herman, A Mathole, L Phalatse,
BJ van der Ross, 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, J van Rooyen
Alternate: JG Ackerman, SD Ackerman-Berman, 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.picknpay.co.za
Date: 19/10/2011 08:00:01 Produced by the JSE SENS Department.
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