| Tue 21 Apr 2015, 7:06 | | PICK N PAY HOLDINGS LIMITED - Audited summary financial statements for the 2015 financial period |
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PWK 201504210003A
Audited summary financial statements for the 2015 financial period
Pick n Pay Holdings Limited RF
Registration number: 1981/009610/06
JSE share code: PWK
ISIN: ZAE000005724
Audited summary financial statements for the 2015 financial period
Changing the Trajectory
Review of operations
Key financial indicators
52 weeks 52 weeks
1 March 2 March %
2015 2014 change
Turnover R66.9 billion R63.1 billion 6.1
Gross profit margin 17.8% 17.5%
Trading profit R1 238.6 million R1 008.1 million 22.9
Trading profit margin 1.9% 1.6%
Profit before tax R1 203.7 million R830.9 million 44.9
Profit before tax margin 1.8% 1.3%
Profit after tax R860.2 million R581.5 million 47.9
Basic earnings per share 88.78 cents 60.61 cents 46.5
Headline earnings per share 88.01 cents 68.83 cents 27.9
Total annual dividend per share 57.25 cents 44.30 cents 29.2
Result summary
Pick n Pay has delivered an improved financial performance for the 2015 financial year. Financial rigour over capital
and operating spend, combined with action to strengthen the business for the long term, have driven headline earnings
per share up 27.9% on last year.
This financial result marks an important staging post in Pick n Pay's strategic long-term recovery plan, and
represents the fourth consecutive reporting period of profit growth. The first stage of this plan - Stabilising the
Business - is now substantially complete. This is demonstrated by:
- Strong financial control and tighter working capital management. Consistently stronger cash balances throughout the
year enabled the business to repay R700 million in medium-term DMTN Programme debt. This delivered a 40.2% reduction in
net interest charges.
- Increasingly effective management of costs and greater operating efficiencies, with trading expenses increasing only
3.8% on a like-for-like basis, well below CPI for the period of 5.8%.
- Improvement in trading profit margin from 1.6% to 1.9% of turnover.
- Improvement in gross profit margin from 17.5% to 17.8% of turnover.
- An increase in profit after tax of 47.9% and basic earnings per share of 46.5% on last year.
The second stage of the Pick n Pay recovery plan - Changing the Trajectory - will deliver a better business for
customers, further improvements in operating efficiency, a dynamic approach to growth, and further strengthening of the
balance sheet and financial performance. Strong foundations for this stage have already been laid over the past two years.
In some cases these actions have impacted on the short-term performance of the business, but will strengthen the capacity
of Pick n Pay in the medium and long term. These steps have included:
- Action to improve the quality of the store portfolio by closing unprofitable stores and beginning the process of
refitting and modernising hypermarkets.
- Adopting a cautious approach to expansion during the 2015 financial year, to ensure that all new space will drive
strong sustainable returns (see ?A flexible and winning estate? section below).
- Ending the internal debate on supply chain centralisation and establishing a clear ambition to deliver every product
every day to stores on a short lead time. Supply chain centralisation has given rise to some operational challenges
during the year, but is delivering improvements in availability for customers, more efficient and lower-cost operations,
better inventory management and more productive use of space in stores.
The Group has consistently stated that its recovery must be customer-led as well as cost-driven. Improvements in cost
control and underlying efficiency have been at the forefront of the first stage of its plan. These provide a solid
foundation for the second stage, in which a leaner, more efficient business will create more value to invest in the
customer proposition.
Better for customers
The Group launched a number of initiatives over the year to help our customers. Brand Match is convincing customers
that they do not need to shop around for lower prices, and is building confidence in the competitiveness of Pick n Pay's
pricing. The introduction of Buy Aid has attracted new customers. Smart Shopper, South Africa's favourite loyalty
programme, continues to grow, and is a key differentiator for Pick n Pay. We are gaining valuable insight from Smart
Shopper to personalise and improve our promotions, with the number of vouchers redeemed increasing by 68% over the year. We
have also worked with key partners to provide additional value-added benefits to make Smart Shopper even more attractive to
our customers.
The Group has worked with its suppliers to improve product availability for customers, and the quality and range of
merchandise, particularly fresh produce. We are pleased with the results of our ?Super 6? campaign which has given
customers high-quality fruit and vegetable staples at competitive prices.
We have undertaken in-depth category reviews over the course of the year to improve product ranges in our stores. We
have entered into a strategic partnership with Daymon Worldwide to grow our private label offering which currently
contributes around 15% of our grocery turnover.
Value-added services are a growing part of our business and we will continue to innovate to bring convenient and
low-cost services to our customers.
A flexible and winning estate
At 1 March 2015, the Group store portfolio comprised 1 189 stores and 2.2 million square metres (excluding the
investment in TM Supermarkets in Zimbabwe). Pick n Pay opened 127 stores during the year across all Pick n Pay and Boxer
formats, including 36 new supermarkets, and closed 14 underperforming stores. The 113 net new stores added 5.2% to space.
The Group followed a cautious approach to new space growth in the 2015 financial year. The Group is determined only to
grow new space where it is confident that it will deliver strong and sustainable returns. To this end, it has developed
a plan for future space growth which takes advantage of our improved operating model, including store efficiency gains,
an increasingly centralised supply chain and improved labour productivity.
This will enable the Group to make more efficient use of existing space, widen the pool of potential sites for new
stores, and respond dynamically to the growing demand for convenience and local neighbourhood stores.
We have 20 hypermarkets which contribute meaningfully to Group turnover, and have embarked on a plan to modernise each
of these for customers. Four hypermarkets have undergone or are currently undergoing, refurbishment. They are
inevitably subject to a negative turnover impact during refurbishment, but are showing strong sales growth and improved trading
densities after refurbishment. For example, our new and improved Brackenfell Hypermarket in the Western Cape has halved
in size, now houses both the liquor store and pharmacy on-site, enjoys a refreshed range of clothing and general
merchandise and delivers a significantly improved turnover per square metre at a materially reduced occupancy cost.
Pick n Pay continues to develop as a multi-format, multi-channel business, and is excited by the growth delivered by
our clothing and liquor stores. Our online business once again delivered strong double-digit turnover growth, adding
another 40 000 new customers over the course of the year. The online offer in the Western Cape has been expanded through the
establishment of a dedicated online picking warehouse at our refurbished Brackenfell Hypermarket.
Efficient and effective operations
Pick n Pay established its Retail Office in September 2014 - a specialist team tasked with driving an efficient and
effective operating model across all store formats throughout the Group. In a short space of time the team has delivered
substantial cost savings in participating stores, demonstrating that we can successfully operate a more efficient store
on a lean cost base. The team has also co-ordinated and delivered improvements in back-door receiving and in-store
replenishment and achieved strong savings on waste and shrink. A well-run, cost effective store unlocks value for further
investment in the customer offer. Simple but efficient processes enable stores to focus fewer staff to receive goods at the
back door and more staff dedicated to customers on the shop floor.
Every product, every day
In the course of the financial year, the Group doubled the capacity of our supply chain capability in the Western Cape
by implementing a high-density pick tunnel in our Philippi Distribution Centre. It also rolled out the Enterprise
Warehouse Management (EWM) SAP warehousing system at the Longmeadow Distribution Centre in Gauteng, which will improve
operating efficiency at the facility. Pick n Pay is working closely with suppliers to accelerate the pace of centralisation,
adding 90 suppliers during the year and increasing the level of central supply by more than 10%.
The Philippi Distribution Centre is successfully delivering every product, every day to all corporate stores in the
Western Cape, on a 24-hour lead time. This is currently being introduced at Longmeadow in servicing the Inland Gauteng Region.
These operational advances, together with our automated forecast and replenishment system, have resulted in
improvements in on-shelf stock availability of 2.5%, while reducing the need for large back-up storage areas in stores.
A winning team
We have strengthened our senior management team over the last year through key internal and external appointments. We
have introduced new performance review and management systems for senior managers and established clear objectives and
lines of accountability.
We are committed to building a high performance team of well-managed, trained and skilled employees who are empowered
to build careers at Pick Pay and are motivated to contribute to the success of the business. We are determined to be
an organisation that fairly reflects the diversity of our country and the communities we serve and we are encouraged by
the improvement in our BBBEE score from level 6 to level 4 over the past 12 months.
Boxer - a national brand
Our Boxer business has grown significantly in recent years, despite the challenging conditions facing the poorer and
more rural communities of South Africa and Swaziland. Boxer customers often face economic hardship, which has been
exacerbated over the course of this year by the strikes in the platinum mines, civil protests over the lack of basic service
delivery and increasing unemployment. The Boxer business operates a lean and efficient economic model, offering a
compelling range of high-quality produce and merchandise at affordable prices. We are confident of the opportunity the Group
has to grow Boxer into a national brand and it forms a key part of our future growth strategy.
Rest of Africa - second engine of growth
Our operations outside South Africa continue to deliver good growth, with segmental revenue up 13.6%, notwithstanding
the weakening of the Zambian kwacha against the rand and the closure of our franchise operations in Mozambique and
Mauritius last year.
Segmental profits of the rest of Africa division are up 34.6% on last year. We continue to expand and improve our
operations outside South Africa, opening two stores in Zambia during the year and opening eight in Namibia, while closing
three under-performing stores in that country. The sizeable store refit programme in Zimbabwe continued over the year,
with the refurbishment of four TM Supermarkets and the rebranding of a further three stores to the Pick n Pay brand. The
opening of two new stores in Zimbabwe and the closure of one store during the year, brings the total number of TM
Supermarkets to 53, eight of which trade strongly under the Pick n Pay banner.
Markets outside South Africa remain a potential second engine of growth for Pick n Pay. We plan to strengthen our
footprint in existing territories and seek opportunities for sustainable growth beyond. We are confident of the prospects
for growth into Ghana and will open our first store in the region in 2016.
Financial review
Turnover
Group turnover growth of 6.1% reflects the financial pressure on middle-income customers, combined with the impact of
strategic actions which, while strengthening the quality of our estate, have impacted turnover in the reporting period.
The Group closed 26 under-performing stores in 2014 and a further 14 in 2015. Trade was also disrupted as four
hypermarkets and 16 supermarkets underwent refurbishment in the second half of the financial year.
In addition, the Group continued with its cautious approach to expansion, determined that all new space growth should
drive sustainable future returns. We have now developed a stronger plan for future growth, both in new space and through
customer innovation.
We are encouraged with the improvement in our underlying like-for-like turnover growth at 3.6% (2014: 2.7%). Our
customers remain under financial pressure, with the South African economic climate still characterised by a weak rand, high
unemployment, high levels of household debt and rising utility costs. Internal food inflation fell to 6.3% in the second
half of the year, compared to 6.7% in the first half.
Gross profit
Gross profit has increased by 8.2% to R11.9 billion. The gross profit margin has increased by 30 basis points from
17.5% to 17.8% of turnover, notwithstanding the investment in price through our Brand Match campaign and Smart Shopper
loyalty programme. We are pleased with the rate of progress demonstrated across our supply chain, notwithstanding operational
difficulties experienced in our Longmeadow Distribution Centre towards the end of the year. We are encouraged by the control
demonstrated over shrink and waste, which has once again delivered meaningful savings year-on-year.
Other trading income
Other trading income has increased by 20.4% to R602.9 million. The increase is largely due to commissions earned on
value-added services, which has increased by more than 100% over the period, attributable to financial services (including
mobile money), third-party bill payments and the sale of gift card vouchers, pre-paid electricity, lotto and travel and
event tickets. We will continue to focus on this area, providing our customers with increased convenience and
innovation.
Franchise fee income has reduced by 5.4% as a result of the closure of five franchise stores in Mauritius and
Mozambique in the previous year.
Trading expenses
Trading expenses at 16.9% of turnover have increased by 7.4%, with like-for-like expense growth contained at 3.8%
against CPI of 5.8%. The like-for-like expense growth is testament to the good work being done at store level to improve the
efficiency and profitability of store operations.
Employee costs increased 6.1% on last year. On a like-for-like basis, the growth in employee costs was contained at
3.5%, notwithstanding a charge of R67.3 million in respect of the new Employee Forfeitable Share Plan which was
implemented in August 2014 and an annual wage rate increase which was more in line with CPI. This is evidence of the tangible
progress achieved in improving labour productivity and efficiency throughout the Group, through the centralisation and
simplification of business processes and systems.
Occupancy costs which include rent, rates, security and insurance expenditure have increased by 15.7% on last year,
reflecting our space growth over the last year. Like-for-like occupancy costs have been contained at 6.9%, despite
regulated increases on rates and property taxes of up to 20%.
Operations costs are up 1.5% on last year, and 2.5% down on a like-for-like basis, driven by a substantially lower
amortisation and depreciation charge in 2015. Among the factors contributing to this reduced charge were a R104.1 million
impairment of intangible assets in the prior year, a large portion of capitalised investment over the last seven years
now being fully depreciated, and a reduction in capital spend over the past 18 months as the Group slowed new space growth
and refurbishment to ensure all customer-facing investment added real value and generated a sustainable level of
return.
Utility costs have increased 12.3% due to higher diesel usage and generator maintenance costs as a direct result of
load shedding. However, these costs continue to be mitigated through improved store efficiencies and the effective
measures in place to reduce electricity usage.
A number of IT systems came online during the year and professional fees related to the maintenance and support of the
systems have contributed to an increase in merchandise and administration costs of 15.7% (16.8% on a like-for-like
basis), with R66.8 million of IT support costs expensed as incurred. In addition, bank charges have increased by 26.6% on
last year, reflecting the increased usage of electronic tender by our customers. An improvement in bad debts, down 71.4%
on last year has mitigated the other increases in this category and provides encouraging evidence of the improving health
of our franchise business.
Trading profit
Trading profit has increased by 22.9% to R1 238.6 million. The trading profit margin has improved from 1.6% to 1.9%.
We remain confident of the substantial opportunity for margin improvement in the future.
Net interest
The net interest charge of R59.6 million is 40.2% down on last year. This is a result of stronger working capital
management throughout the year, with a particular focus on inventory management, which has resulted in stronger cash
balances and enabled the repayment of the medium-term R700 million DMTN Programme debt in June 2014.
Tax
The tax rate improved from 29.9% to 28.5%. The tax rate benefit is as a direct result of our improved profitability,
with no corresponding change in the level of non-deductible expenditure.
Earnings per share
Basic earnings per share (EPS) - increased 46.5% from 60.61 to 88.78 cents per share.
Headline earnings per share (HEPS) - increased 27.9% from 68.83 to 88.01 cents per share.
The profit on the sale of assets, net of tax, of R4.0 million has been taken into account in the calculation of headline
earnings, against the add-back of capital losses in the prior year of R42.5 million net of tax. The capital loss in the
prior year relates mainly to the impairment of obsolete IT systems.
Financial position
Sunday Sunday
1 March 2 March
2015 2014
Rm Rm
Inventory 4 654.5 3 979.8
Trade and other receivables 2 956.7 2 841.1
Cash and cash equivalents 1 174.6 1 540.3
Bank overdraft and overnight borrowings (500.0) (670.0)
Medium-term borrowings - DMTN Programme - (700.0)
Other current liabilities* (9 157.4) (8 210.6)
Net-working capital (871.6) (1 219.4)
* Excludes the short-term portion of long-term borrowings
We are pleased with the improvement in net-working capital of R347.8 million, which reflects the good work being done
across the business in terms of controlling capital and operating expenditure and managing working capital. Overall,
good work was achieved during the year in removing excess inventory from the business. Tighter working capital management
and a relentless focus on inventory led to consistently stronger cash balances over the 12 months, allowing for the
repayment of the medium-term DMTN Programme debt of R700 million and resulting in a substantially decreased interest charge.
Inventory has increased by R674.7 million or 17.0% on last year. This reflects the increase in centralisation of
suppliers over the period, which has resulted in elevated inventory levels in the short term, and the new stores opened. In
addition, labour disruption at our Longmeadow Distribution Centre, although quickly resolved, led to increased inventory
levels at the facility over year-end.
Trade and other receivables increased by R115.6 million or 4.1%, reflecting the reduction in our impairment allowance
included in merchandise and administration expenses.
Shareholder distribution
The Board declared a final dividend of 47.85 cents per share, bringing the total annual dividend for the year to
57.25 cents per share.
More to come - the next stage in the strategic journey
Pick n Pay is a stronger and more stable business than it was two years ago. We have improved the key underlying
financial and operational metrics of the business. Determined and focused financial control - covering both capital and
operational spend - has brought a welcome end to a lengthy period of spiralling costs. Tighter working capital management,
and strengthened cash balances, have contributed to the delivery of consistent profit growth over four consecutive
reporting periods. The Group has enhanced the quality of its retail estate, rationalised its underlying economic model and
improved its overall range and offer, while keeping the customer at the heart of its strategy.
The Group has changed significantly and for the better over the past two years. However, the Pick n Pay values of
consumer sovereignty, business efficiency and doing good is good business have endured and have guided our progress. By
improving the efficiency and underlying profitability of the business we have been able to do more for our customers and for
the communities we serve. Our future growth will create many more opportunities for individuals and suppliers to meet
their aspirations as employees and partners of our business.
The economic outlook remains challenging, exacerbated by the national electricity crisis and uncertainties in the global
economy. Leadership from across society is required in tackling these challenges and in defeating other threats such as the
worrying recent outbreak of xenophobic violence. Pick n Pay will as always play a positive role.
The company has undergone huge changes over the past five years, and in particular since 2013. It is ready for Stage 2 on
the journey ? changing the trajectory of Pick n Pay ? and is well-positioned for sustainable, long-term growth.
We would like to extend our thanks to the Pick n Pay team who have all worked extremely hard through this first stage
and continue to serve the business with a passion that is unique to the Pick n Pay brand.
Raymond Ackerman
Chairman
20 April 2015
Dividend declaration
Pick n Pay Holdings Limited RF - Tax reference
number: 9050/141/71/3
Number of shares in issue: 527 249 082
Notice is hereby given that the directors have declared a final gross dividend (number 67) of 47.85 cents per share
out of income reserves.
The dividend declared is subject to dividend withholding tax at 15%.
The tax payable is 7.1775 cents per share, leaving shareholders who are not exempt from dividends tax with a net
dividend of 40.6725 cents per share.
Dividend dates
The last day of trade in order to participate in the dividend (CUM dividend) will be Friday, 5 June 2015.
The shares will trade EX dividend from the commencement of business on Monday, 8 June 2015 and the record date will be
Friday, 12 June 2015. The dividends will be paid on Monday, 15 June 2015.
Share certificates may not be dematerialised or rematerialised between Monday, 8 June 2015 and Friday, 12 June 2015,
both dates inclusive.
On behalf of the board of directors
Debra Muller
Company Secretary
20 April 2015
Statement of comprehensive income
for the period ended
52 weeks 52 weeks
1 March 2 March
2015 Change 2014
Note Rm % Rm
Revenue 3 67 603.1 6.2 63 661.9
Turnover 3 66 940.8 6.1 63 117.0
Cost of merchandise sold (54 994.3) 5.6 (52 077.1)
Gross profit 11 946.5 8.2 11 039.9
Other trading income 3 602.9 20.4 500.6
Trading expenses (11 310.8) 7.4 (10 532.4)
Employee costs (5 653.9) 6.1 (5 326.5)
Occupancy (1 867.6) 15.7 (1 613.9)
Operations (2 618.8) 1.5 (2 580.5)
Merchandising and administration (1 170.5) 15.7 (1 011.5)
Trading profit 1 238.6 22.9 1 008.1
Profit/(loss) on sale of property, plant and equipment 10.4 (5.5)
Impairment loss on intangible assets - (104.1)
Finance income 3 59.4 34.1 44.3
Finance costs (119.0) (17.3) (143.9)
Share of associate's income 14.3 (55.3) 32.0
Profit before tax 1 203.7 44.9 830.9
Tax (343.5) 37.7 (249.4)
Profit for the period 860.2 47.9 581.5
Other comprehensive income
Items that will not be reclassified to profit or loss 33.0 57.1
Remeasurement in retirement scheme assets 45.9 79.3
Tax on remeasurement in retirement scheme assets (12.9) (22.2)
Items that may be reclassified to profit or loss
Exchange rate differences on translating foreign operations (11.4) 6.4
Total comprehensive income for the period 881.8 645.0
Profit for the period attributable to: 860.2 47.9 581.5
Owners of the Company 461.8 47.6 312.9
Non-controlling interest 398.4 48.3 268.6
Total comprehensive income for the period attributable to: 881.8 36.7 645.0
Owners of the Company 473.4 36.4 347.2
Non-controlling interest 408.4 37.1 297.8
Cents Change % Cents
Basic earnings per share 88.78 46.5 60.61
Diluted earnings per share 86.54 46.4 59.10
Headline earnings per share 88.01 27.9 68.83
Diluted headline earnings per share 85.80 27.8 67.13
Statement of financial position
As at As at
1 March 2 March
2015 2014
Note Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 4 187.0 4 039.3
Intangible assets 1 010.2 987.6
Operating lease assets 149.8 132.8
Investment in associate 180.2 165.9
Participation in export partnerships 23.4 25.1
Loans 100.6 92.0
Retirement scheme assets 70.1 85.1
Deferred tax assets 198.8 212.1
5 920.1 5 739.9
Current assets
Inventory 4 654.5 3 979.8
Trade and other receivables 2 956.7 2 841.1
Cash and cash equivalents 1 174.6 1 540.3
Derivative financial instruments 1.4 3.5
8 787.2 8 364.7
Total assets 14 707.3 14 104.6
EQUITY AND LIABILITIES
Equity
Share capital 4 6.6 6.6
Share premium 120.8 120.8
Treasury shares (109.0) (95.3)
Retained earnings 1 619.3 1 377.3
Foreign currency translation reserve (9.8) (3.6)
Attributable to owners of the Company 1 627.9 1 405.8
Non-controlling interest 1 499.2 1 290.6
Total equity 3 127.1 2 696.4
Non-current liabilities
Borrowings 492.8 747.1
Operating lease liabilities 1 138.5 1 042.7
1 631.3 1 789.8
Current liabilities
Trade and other payables 9 029.6 8 091.3
Bank overdraft and overnight borrowings 500.0 670.0
Borrowings 291.5 737.8
Current tax liabilities 126.8 111.2
Provisions 1.0 8.1
9 948.9 9 618.4
Total equity and liabilities 14 707.3 14 104.6
Number of shares in issue - millions 4 527.2 527.2
Weighted average number of shares in issue - millions 516.2 516.2
Diluted weighted average number of shares in issue - millions 521.7 521.5
Net asset value - cents per share (property value based on
directors' valuation) 691.7 605.5
Statement of changes in equity
for the period ended
Attributable to owners of the Company
Share Share Treasury Retained Foreign Total Non- Total
capital premium shares earnings currency Rm controlling equity
Rm Rm Rm Rm translation interest Rm
reserve Rm
Rm
At 3 March 2013 6.6 120.8 (89.3) 1 222.4 (7.1) 1 253.4 1 157.4 2 410.8
Total comprehensive income for the period - - - 343.7 3.5 347.2 297.8 645.0
Profit for the period - - - 312.9 - 312.9 268.6 581.5
Exchange rate differences on translating foreign operations - - - - 3.5 3.5 2.9 6.4
Remeasurement in retirement scheme assets - - - 30.8 - 30.8 26.3 57.1
Transactions with owners - - (6.0) (188.8) - (194.8) (164.6) (359.4)
Dividends paid - - - (215.2) - (215.2) (182.0) (397.2)
Share repurchases - - (9.5) (15.2) - (24.7) (21.0) (45.7)
Net effect of settlement of employee share options - - 3.5 3.0 - 6.5 5.5 12.0
Share-based payments expense - - - 38.6 - 38.6 32.9 71.5
At 2 March 2014 6.6 120.8 (95.3) 1 377.3 (3.6) 1 405.8 1 290.6 2 696.4
Total comprehensive income for the period - - - 479.5 (6.1) 473.4 408.4 881.8
Profit for the period - - - 461.8 - 461.8 398.4 860.2
Exchange rate differences on translating foreign operations - - - - (6.1) (6.1) (5.3) (11.4)
Remeasurement in retirement scheme assets - - - 17.7 - 17.7 15.3 33.0
Transactions with owners - - (13.7) (237.5) (0.1) (251.3) (199.8) (451.1)
Dividends paid - - - (245.2) - (245.2) (211.9) (457.1)
Share repurchases - - (22.2) (83.7) - (105.9) (72.0) (177.9)
Net effect of settlement of employee share options - - 8.5 19.1 - 27.6 16.4 44.0
Share-based payments expense - - - 75.2 - 75.2 64.7 139.9
Movement in non-controlling interest - - - (2.9) (0.1) (3.0) 3.0 -
At 1 March 2015 6.6 120.8 (109.0) 1 619.3 (9.8) 1 627.9 1 499.2 3 127.1
Statement of cash flows
for the period ended
52 weeks 52 weeks
1 March 2 March
2015 2014
Rm Rm
Cash flows from operating activities
Trading profit 1 238.6 1 008.1
Amortisation 155.0 199.3
Depreciation 714.5 749.1
Share-based payments expense 139.9 71.5
Movement in net operating lease liabilities 78.8 90.8
Movement in provisions (7.1) (0.9)
Fair value adjustments 2.1 (6.3)
Cash generated before movements in working capital 2 321.8 2 111.6
Movements in working capital 150.1 781.3
Movements in trade and other payables 938.3 1 229.7
Movements in inventory (672.6) 31.6
Movements in trade and other receivables (115.6) (480.0)
Cash generated from trading activities 2 471.9 2 892.9
Interest received 59.4 44.3
Interest paid (119.0) (143.9)
Cash generated from operations 2 412.3 2 793.3
Dividends paid (457.1) (397.2)
Tax paid (284.5) (270.2)
Cash generated from operating activities 1 670.7 2 125.9
Cash flows from investing activities
Investment in intangible assets (159.2) (289.2)
Investment in property, plant and equipment (897.3) (882.4)
Purchase of operations (50.9) (103.3)
Proceeds on disposal of intangible assets 4.7 11.1
Proceeds on disposal of property, plant and equipment 57.3 38.2
Loans (advanced)/repaid (8.6) 6.9
Participation in export partnership 1.7 3.0
Retirement obligation 60.9 (4.3)
Cash utilised in investing activities (991.4) (1 220.0)
Cash flows from financing activities
Proceeds from borrowings 400.0 3 100.0
Repayment of borrowings (1 100.6) (2 819.1)
Share repurchases (177.9) (45.7)
Proceeds from employees on settlement of share options 1.0 1.3
Cash (utilised in)/generated from financing activities (877.5) 236.5
Net (decrease)/increase in cash and cash equivalents (198.2) 1 142.4
Cash and cash equivalents at beginning of period 870.3 (269.9)
Effect of exchange rate fluctuations on cash and cash equivalents 2.5 (2.2)
Cash and cash equivalents at end of period 674.6 870.3
Consisting of:
Cash and cash equivalents 1 174.6 1 540.3
Bank overdraft and overnight borrowings (500.0) (670.0)
Notes to the financial information
for the period ended 1 March 2015
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
The summary Group financial statements for the period ended 1 March 2015 are prepared in accordance with the requirements
of the JSE Limited Listings Requirements for abridged reports, and the requirements of the Companies Act applicable
to summary financial statements. The Listings Requirements require abridged reports to be prepared in accordance
with the framework concepts and the measurement and recognition requirements of International Financial Reporting
Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and
Financial Pronouncements as issued by the Financial Reporting Standards Council and to also, as a minimum, contain
the information required by IAS 34 Interim Financial Reporting. The summary Group financial statements does not
include all the information required by IFRS for full financial statements and should be read in conjunction with
the 2015 integrated annual report. The accounting policies applied in the preparation of the Group financial
statements, from which the summary Group financial statements were derived, are in terms of International Financial
Reporting Standards and are consistent with the accounting policies applied in the preparation of the previous Group
annual financial statements. These results have been audited by KPMG Inc., whose unqualified report is available
for inspection at the registered office of the Company. The auditor's report does not necessarily cover all of the
information contained in this financial report. Shareholders are therefore advised that in order to obtain a full
understanding of the nature of the auditor's work, they should obtain a copy of that report together with the
accompanying financial information from the registered office of the Company. These financial statements have been
prepared by the Finance Division under the supervision of the Public Officer, Mr Bakar Jakoet CA(SA).
2. RELATED PARTIES
During the year, certain companies within the Group entered into transactions with each other. These intra-group
transactions are eliminated on consolidation. For further information please refer to note 27 of the 2014 integrated
annual report.
3. REVENUE
52 weeks 52 weeks
1 March 2 March
2015 2014
Rm Rm
Turnover 66 940.8 63 117.0
Finance income 59.4 44.3
Bank balances and investments 40.9 32.3
Trade and other receivables 13.9 8.2
Staff loans and other 4.6 3.8
Other trading income 602.9 500.6
Franchise fee income 294.4 311.2
Operating lease income 67.3 77.8
Commissions and income 241.2 111.6
67 603.1 63 661.9
4. SHARE CAPITAL
52 weeks 52 weeks
1 March 2 March
2015 2014
Rm Rm
Authorised 10.0 10.0
800 000 000 (2014: 800 000 000) ordinary shares of 1.25 cents each
Issued
527 249 082 (2014: 527 249 082) ordinary shares of 1.25 cents each 6.6 6.6
000's 000's
The number of shares in issue at end of period is made up as follows:
Treasury shares held by the share trust 9 257.8 9 193.8
Treasury shares held by a subsidiary company 1 848.7 1 848.7
11 106.5 11 042.5
Shares held outside the Group 516 142.6 516 206.6
527 249.1 527 249.1
26 362 454 of the unissued shares of the Company may be utilised, and is available, to settle the Company's
obligations under the employee share schemes.
The holders of ordinary shares are entitled to receive dividends as declared and are entitled to one vote
per share at meetings of the Company.
Directors' interest in shares
52 weeks 52 weeks
1 March 2 March
2015 2014
% %
Beneficial 0.9 0.9
Non-beneficial 50.6 50.6
51.5 51.5
The directors' interest in shares is their effective direct shareholding in the Company (excluding
treasury shares).
5. OPERATING SEGMENTS
South Rest of Total
Africa Africa operations
Rm Rm Rm
2015
Total segment revenue 64 574.2 3 681.9 68 256.1
External revenue 64 574.2 3 028.9 67 603.1
Direct deliveries* - 653.0 653.0
Segment external turnover 63 911.9 3 028.9 66 940.8
Profit before tax** 1 014.7 189.0 1 203.7
Other information
Statement of comprehensive income
Finance income 54.3 5.1 59.4
Finance costs 119.0 - 119.0
Depreciation and amortisation 845.2 24.3 869.5
Share of associate's income - 14.3 14.3
Statement of financial position
Total assets 13 637.5 1 069.8 14 707.3
Total liabilities 11 308.7 271.5 11 580.2
Additions to non-current assets 1 061.8 43.5 1 105.3
2014
Total segment revenue 60 925.9 3 241.5 64 167.4
External revenue 60 925.9 2 736.0 63 661.9
Direct deliveries* - 505.5 505.5
Segment external turnover 60 381.0 2 736.0 63 117.0
Profit before tax** 690.5 140.4 830.9
Other information
Statement of comprehensive income
Finance income 40.1 4.2 44.3
Finance costs 143.5 0.4 143.9
Depreciation and amortisation 923.1 25.3 948.4
Impairment loss on intangible assets 104.1 - 104.1
Share of associate's income - 32.0 32.0
Statement of financial position
Total assets 12 995.6 1 109.0 14 104.6
Total liabilities 11 070.3 337.9 11 408.2
Additions to non-current assets 1 233.8 26.2 1 260.0
* Direct deliveries are issues to franchisees directly by Group suppliers, these are not included in
revenue on the statement of comprehensive income.
** Segmental profit before tax is the reported measure used for evaluating the Group's operating segments' performance.
On an overall basis the segmental profit before tax is equal to the Group's reported profit before tax. The rest of
Africa segment's segmental profit before tax comprises the segment's trading result and directly attributable costs only.
No allocations are made for indirect or incremental cost incurred by the South African segment relating to
the rest of Africa segment.
6. HEADLINE EARNINGS RECONCILIATION
52 weeks 52 weeks
1 March 2 March
2015 2014
Rm Rm
Profit for the period 461.8 312.9
Profit attributable to forfeitable share plan shares (3.5) -
Basic earnings for the period 458.3 312.9
Adjustments: (4.0) 42.5
(Profit)/loss on sale of property, plant and equipment (5.6) 3.0
Tax effect of profit/(loss) on sale of property, plant and equipment 1.6 (0.8)
Impairment of intangible assets - 56.0
Tax effect of impairment of intangible assets - (15.7)
Headline earnings 454.3 355.4
Basic earnings for the period 458.3 312.9
Dilutive effect of share options (6.8) (4.7)
Diluted basic earnings 451.5 308.2
Headline earnings 454.3 355.4
Dilutive effect of share options (6.7) (5.3)
Diluted headline earnings 447.6 350.1
7. FINANCIAL INSTRUMENTS
All financial instruments held by the Group are measured at amortised cost, with the exception of derivative
financial instruments and certain items included in trade and other payables. The latter is measured at fair
value through profit or loss, is categorised into level 2 of the fair value hierarchy and is considered to be
immaterial. Level 2 is defined as using inputs other than quoted prices that are observable for the asset or
liability either directly (as prices) or indirectly (derived from prices). The carrying value of all financial
instruments approximate their fair value.
8. ISSUE OF SHARES IN RESPECT OF FORFEITABLE SHARE PLAN
Pick n Pay Stores Limited issued 6 925 000 shares in June 2014, in order to meet the share obligations under
its new employee forfeitable share plan (FSP), which was approved by shareholders in February 2014. The FSP
brings our approach to providing share incentives in line with international best practice, further aligning
the interests of senior management with those of our shareholders.
The shares were awarded to FSP participants during August 2014. The participants, although benefiting from
full voting rights and full rights to any dividends declared, cannot dispose of their shares during a three-year
employment period. In addition, the shares are subject to further performance conditions linked to the Pick n Pay
Stores Limited Group's compound annual growth in headline earnings per share. Should the employment condition or
performance conditions not be met, the shares (or a portion thereof) are forfeited. Please refer to our 2015 integrated
annual report for further information.
The total employee cost in respect of the FSP is recognised on a straight-line basis over the employment period,
commencing on the award date. The current period expense is R67.3 million.
Number of stores
2 March Opened Closed Converted Converted 1 March
2014 - openings - closings 2015
Company owned
Pick n Pay 464 52 (5) (4) 3 510
Hypermarkets 20 20
Supermarkets 200 17 (1) (3) 2 215
Clothing 88 16 (2) 102
Liquor 152 19 (1) (1) 1 170
Pharmacy 4 (1) 3
Boxer 179 14 (5) - 1 189
Superstores 123 5 (4) 1 125
Hardware 19 2 21
Liquor 21 1 22
Punch 16 6 (1) 21
Total company owned 643 66 (10) (4) 4 699
Franchise
Pick n Pay
Family 254 13 (2) (3) 4 266
Mini Market 22 1 (1) (1) 21
Daily 1 1
Express 21 25 46
Clothing 14 2 16
Liquor 121 20 (1) (1) 1 140
Total franchise 433 61 (4) (5) 5 490
Total Group stores 1 076 127 (14) (9) 9 1 189
TM Supermarkets 52 2 (1) 53
Total with TM Supermarkets 1 128 129 (15) (9) 9 1 242
African footprint 108* 12 (4) - - 116
- included in total
stores above
Pick n Pay company owned 8 2 10
Boxer company owned 5 5
Pick n Pay franchise 43 8 (3) 48
TM Supermarkets - associate 52 2 (1) 53
African footprint 108* 12 (4) - - 116
- by country
Botswana 9 9
Lesotho 3 3
Namibia 22 8 (3) 27
Swaziland 14 14
Zambia 8 2 10
Zimbabwe 52 2 (1) 53
* All franchise liquor and clothing stores are now included.
Corporate information
Registered office
Pick n Pay Office Park
101 Rosmead Avenue
Kenilworth
Cape Town 7708
Telephone +27 21 658 1000
Facsimile +27 21 797 0314
Postal address
PO Box 23087
Claremont 7735
Registrar
Computershare Investor Services
Proprietary Limited
70 Marshall Street
Johannesburg 2001
Postal address
PO Box 61051
Marshalltown 2107
Telephone +27 11 370 5000
Facsimile +27 11 688 5248
Sponsor
Investec Bank Limited
100 Grayston Drive
Sandton 2196
Company secretary
Debra Muller
email address: demuller@pnp.co.za
Board of directors
Executive
RD Ackerman (Chairman), W Ackerman, GM Ackerman
Non-executive
RP de Wet, HS Herman, J van Rooyen
Independent non-executive:
SD Ackerman-Berman, JG Ackerman, D Robins
Auditors
KPMG Inc.
Attorneys
Edward Nathan Sonnenberg
Investor relations
David North
email address: dnorth@pnp.co.za
Penny Gerber
email address: pgerber@pnp.co.za
Website
Pick n Pay: www.picknpay.co.za
Investor relations: www.picknpayinvestor.co.za
Date: 21/04/2015 07:06:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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