| Tue 16 Apr 2002, 0:00 | | Pick `n Pay Stores Limited/pick `n Pay Holdings L |
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for the year ended 28 February 2002
Pick 'n Pay
Audited results for the year ended 28 February 2002
Turnover up 24.4%
Trading profit up 39.4%
Operating profit up 32.4%
Headline earnings up 21.1%
Headline earnings per share up 20.4%
Final dividend per share up 21.3%
Great teamwork ... leads to great results
Review of operations
Group overview
This result, with the enormous task of taking over 70 stores in Australia,
created not only one of the most exciting years in this Group's history, but
could not have been done without the superb teamwork and team spirit of our
people both in South Africa and Australia. Turnover for the year at R18.8
billion comprises R1.7 billion of Franklin's turnover for the period from
November 2001, the remainder of which shows a 13.3% increase in the turnover
of our Southern African operations. This strong real growth in turnover is
extremely pleasing and is ongoing testimony to the growing consumer support
being enjoyed by our various retail formats.
The operating profit increase of 32.4% is a great achievement and is after
an operating loss in Australia of R28.5 million. All of the non-recurring
start-up and commencement costs of R59.9 million relating to the acquisition
of the Franklins Group have also been expensed as an exceptional item.
Interest received for the year of R72.5 million is down on last year due to
the reduced cash balance resulting from; the purchase of Franklins for a
consideration of R557.3 million; the purchase of the remaining issued share
capital of Score Supermarkets for R62.3 million; and the purchase and
cancellation of 8.9 million Pick 'n Pay Stores Limited shares for R92.1
million. It was particularly pleasing to note, notwithstanding these large
outflows, cash resources at year end were R986.5 million, only R100 million
down on last year.
Pick 'n Pay Retail Division
The major highlight in this division has been a strong improvement in
profitability within the Hypermarket division, with the restructuring over
the last few years now showing full benefit. We are seeing levels of
profitability within the Hypers last seen 8 to 10 years ago.
All Supermarket regions posted strong performances. Specific regard has to
be taken of the Gauteng Supermarket region which, in the last 4 years as
part of ongoing restructuring for efficiency, has had to absorb and
consolidate numerous of our Gauteng operations. At year end store numbers
in this region totalled 101 comprising Corporate stores 40, Pick 'n Pay
Family 34 and Pick 'n Pay Mini Markets 27.
Our Family store division continues to grow with our 97th store opening
during this year. In the year ahead we will open a further 17 stores
including our first 2 in Botswana. Conversion of RiteValu Franchise stores
to the new format Mini Markets has been successfully completed with 40
stores at year end, and a further 12 stores confirmed to be opened in the
year ahead.
The newly appointed MD of this division, Nick Badminton and his team are to
be highly commended for their outstanding performance.
Group Enterprises
Under the leadership of Martin Rosen, the recently appointed MD of Group
Enterprises, operations within this division also turned in very good
results.
Score Supermarkets had an active growth with 11 stores opened in the year,
taking the total to 114. The year ahead will see the opening of a further 20
new stores. Under the new leadership of Ian Eadie, we are sure that his
knowledge and experience will ensure the future success and expansion of
this business.
Boardmans, under the new leadership of Rodney Mundell, also had a very
successful year in terms of both turnover and profit growth. With all the
years of experience gained in various general merchandise divisions within
the Group, Rodney's experience will help Boardmans to grow further in the
future.
Notwithstanding the very troubled year that Zimbabwe has gone through and
the significant challenges that our management team had to endure, TM
Supermarkets have once again produced a commendable performance. We continue
to give TM all the necessary support that is required to see them through
this difficult period.
The partnership between Nedcor and Pick 'n Pay in the form of Pick 'n Pay Go
Banking has gone through a tremendous amount of development work on
technology and systems and the year ahead will see significant launches and
enhancements of the overall consumer offering from this operation. We are
confident that the combination of the knowledge and reputation that we as
partners bring to the business collectively will allow us to grow a
significant banking offering.
HealthPharm, our new Pharmacy franchise operation, has now opened 5 stores
and we are confident that this market has significant opportunities for us.
It is important to understand that our business model does not rely in any
way on the current restructuring in the industry as our model is that of a
Franchise format which sees the ongoing empowerment and maintenance of the
professional Pharmacists serving their communities. The year ahead will see
continued openings and conversions of existing Pharmacy outlets.
Franklins Australia
The acquisition of 50 Franklins stores and the 20 store Fresco chain, gives
us a total of 70 stores in Metro Sydney. We see this very exciting
development achieving approximately AUD $1 billion turnover per annum which
equates to approximately R6 billion. This is significant compared to our
current R17 billion being generated from ongoing Southern African operations
and puts in perspective the relevance of this acquisition. During the year
(last quarter) we had significant start-up costs in acquiring these
businesses, both in the form of the purchase price paid to vendors as well
as the establishment of an infrastructure to take on board 2 significant
business operations. Due to the complexities of the various deals, we only
commenced taking on the stores approximately 6 to 8 weeks later than
envisaged. This obviously led to various fixed costs being incurred without
the advantage of the turnover and operating income generated to offset these
costs. The total non-recurring set up expenditure was R59.9 million which
has been fully expensed as an exceptional item in this result. An operating
loss of R28.5 million was also incurred by accelerated maintenance and a
short-fall against budget of gross margin due to the complexity of bedding
down our start-up systems, as well as running the Franklins and Fresco chain
in parallel.
We have now crossed the threshold of taking on and consolidating all of our
operations in Sydney. The operating knowledge from the day to day
administration has grown immensely and we are confident of generating
profits in the next 12 to 24 months.
Overall comment
This year has seen one of the most significant and exciting years in the
history of our organisation. The ongoing organic growth, as well as the
significant acquisition of Franklins in Australia, compelled us to further
refine Company structures. With this in mind, I want to thank my newly
appointed MD's, Nick Badminton, Martin Rosen and Aubrey Zelinsky, together
with every one of our employees for helping us achieve this phenomenal
performance.
In our endeavours to continue growing Pick 'n Pay, we are pleased to
announce that we have concluded negotiations to acquire Boxer Superstores.
This Group comprises 36 stores, largely operating in the rural areas of Kwa-
Zulu Natal, Eastern Cape, Transkei and Mpumalanga and is further proof of
our commitment to bring supermarkets to the emerging consumers of South
Africa and our poorer communities. These negotiations are subject to the
fulfilment of the suspensive conditions of sale which include approval in
terms of the Competition Act.
Sean Summers
(Chief Executive Officer)
15 April 2002
Income statement
2002 2001 2000
Rm % Rm Rm
Turnover (note 1) 18 817.5 24.4 15 126.1 13 606.7
Cost of merchandise
sold (15 375.1) (12 433.3) (11 197.3)
Gross profit 3 442.4 2 692.8 2 409.4
Other income 580.3 496.1 462.1
Trading expenses (3 459.7) (2 785.1) (2 532.4)
Trading profit 563.0 39.4 403.8 339.1
Interest received 72.5 80.9 103.0
Interest paid (36.2) (35.8) (28.3)
Dividends received 30.4 26.6 19.4
Operating profit
(note 1) 629.7 32.4 475.5 433.2
Exceptional items
(note 2) (44.9) - (32.4)
Profit before tax 584.8 475.5 400.8
Tax (184.2) (147.2) (132.5)
Profit after tax 400.6 328.3 268.3
Minority interest (0.6) (5.4) (8.1)
Net profit for the
period 400.0 322.9 260.2
Adjustment (note 2) (8.9) - 2.4
Headline earnings
per share - cents 391.1 21.1 322.9 262.6
Headline earnings 77.85 20.4 64.66 53.31
Earnings 79.62 64.66 52.83
Fully diluted
headline earnings 76.15 63.48 52.01
Fully diluted
earnings 77.85 63.48 51.55
Dividends
Interim - No. 67 paid 10.50 8.85 7.00
Final - No. 68 payable 41.25 21.3 34.00 27.75
Total 51.75 20.8 42.85 34.75
Dividend cover 1.50 1.51 1.53
Balance sheet
2002 2001 2000
Rm Rm Rm
ASSETS
Non-current assets
Goodwill 704.1 - -
Property 152.5 127.1 188.4
Equipment and vehicles 794.7 761.9 771.9
Leased vehicles 60.4 55.3 46.2
Investments 195.5 195.5 181.5
Loans 263.7 295.9 193.7
Participation in export
partnerships 149.3 166.2 183.4
2 320.2 1 601.9 1 565.1
Current assets
Stocks 1 267.0 866.0 730.0
Trade and other receivables 357.5 287.1 301.6
Cash resources 986.5 1 085.3 773.3
2 611.0 2 238.4 1 804.9
Total assets 4 931.2 3 840.3 3 370.0
EQUITY AND LIABILITIES
Capital and reserves 1 278.0 919.3 709.8
Minority interest - 19.6 18.4
Non-current liabilities
Interest bearing debt 196.6 200.5 53.9
Finance lease obligations 61.9 57.1 48.6
Provisions 250.1 173.4 173.4
Deferred tax 134.8 134.5 139.9
643.4 565.5 415.8
Current liabilities
Trade and other payables 2 770.5 2 120.5 1 985.8
Tax 239.3 215.4 240.2
3 009.8 2 335.9 2 226.0
Total equity and liabilities 4 931.2 3 840.3 3 370.0
Shares in issue - millions 497.1 501.3 494.8
Weighted average shares in
issue - millions 502.4 499.4 492.6
Net asset value - cents per
share (property value based
on directors' valuation) 273.5 208.0 164.2
Cash flow statement
2002 2001 2000
Rm Rm Rm
Trading profit 563.0 403.8 339.1
Depreciation and
amortisation 249.7 225.5 193.2
Trade and other payables 584.8 134.5 112.9
Stocks (268.0) (133.1) (19.2)
Trade and other receivables (53.6) 31.8 (145.7)
Cash generated by operations 1 075.9 662.5 480.3
Interest received 72.5 80.9 103.0
Interest paid (36.2) (35.8) (28.3)
Dividends received 30.4 26.6 32.2
Australian set-up costs (59.9) - -
Dividends paid (173.5) (121.2) (87.8)
Tax paid (207.6) (177.5) (74.6)
Cash retained from operating
activities 701.6 435.5 424.8
Property 25.4 (61.3) (4.7)
Equipment and vehicles 137.6 223.7 365.6
Interest bearing debt 3.9 (146.6) 95.3
Finance lease obligations (4.8) (8.5) (5.6)
Investments - 14.0 84.0
Share buy-backs 92.1 - -
Non-trade loans (32.2) 102.2 28.7
Net acquisitions (note 3) 604.6 - (4.6)
Cash (raised) utilised for
investing activities 826.6 123.5 558.7
Net increase in cash
resources (125.0) 312.0 (133.9)
Cash resources at 1 March 1 085.3 773.3 907.2
Effect on cash resources of
exchange rate movements 26.2 - -
Cash resources at
28 February 986.5 1 085.3 773.3
Statement of changes in equity
2002 2001 2000
Rm Rm Rm
Capital and reserves at
1 March 919 .3 709.8 597.5
Prior year adjustment
(note 4) - - (63.8)
Capital and reserves -
as restated 919.3 709.8 533.7
Net profit for the year 400.0 322.9 260.2
As previously reported - 319.0 255.8
Prior year adjustment
(note 4) - 3.9 4.4
Distributions (220.2) (179.2) (141.8)
Capitalisation award 46.7 62.3 57.7
Share buy-back/cancellation (92.1) - -
Foreign currency translation
reserve 224.3 3.5 -
Capital and reserves at
28 February 1 278.0 919.3 709.8
NOTES TO THE FINANCIAL INFORMATION
1 Franklins Australia contributed R1.7 billion to Group turnover and
incurred an operating loss of R28.5 million. This loss excludes R59.9
million of non-recurring set-up costs which are shown in exceptional items
(note 2).
2 The exceptional items relate to the non-recurring set-up costs in
establishing the Australian operation of R59.9 million less the proceeds
from the disposal of the Financial Services Division to Nedcor. The headline
earnings adjustment relates to the Financial Services disposal proceeds
after tax of R10.5 million less the amortisation of goodwill of R1.6
million.
3 Net acquisitions comprises:
the purchase for R62.3 million of the remaining issued share capital of
Score Supermarkets Operating Limited, which is now a wholly-owned
subsidiary;
the purchase for R557.3 million of the Franklins and Fresco Australian
operations;
less the proceeds of R15.0 million for the sale of Financial Services.
4 The Group has changed the following accounting policies to accord with
Generally Accepted Accounting Practice:
dividends and the related STC are now accounted for in the period when the
dividend is declared;
leave pay is now fully provided for;
any shortfall in the funding obligation required by the Group Retirement
Scheme is now fully provided for; and
leased passenger vehicles are now classified as finance leases and have
accordingly been capitalised on balance sheet, together with the lease
obligation.
The effects of these changes which have been accounted for as prior year
adjustments are disclosed in the Statement of Changes in Equity and
comparative figures have been restated accordingly.
Dividend declarations
The directors have declared the following dividends:
Pick 'n Pay Stores Limited - A cash dividend (No. 68) of 41.25 cents per
share. Share code: PIK. ISIN code: ZAE000005443.
Pick 'n Pay Holdings Limited - A cash dividend (No. 41) of 20.13 cents per
share. Share code: PWK. ISIN code: ZAE000005724.
For both companies, the last day of trade in order to participate in the
dividend (CUM dividend) will be Friday, 31 May 2002. The shares will
commence trading EX dividend from the commencement of business on Monday, 3
June 2002 and the record date will be Friday, 7 June 2002. The dividends
will be paid on Monday, 10 June 2002.
Share certificates may not be dematerialised between Monday, 27 May 2002 and
Friday, 7 June 2002, both days inclusive.
M MARSDEN CA (SA)
Secretary
15 April 2002
Pick 'n Pay Holdings Ltd (`Pikwik')
Result for year ended 28 FEBRUARY 2002
Pikwik's only asset is its 51.8% (2001: 51.0%) investment in Pick 'n Pay
Stores Limited. The Pikwik Group earnings are directly related to those of
this investment. Headline earnings for the year amount to R202.4 million
(2001: R164.6 million). Headline earnings per share, calculated using the
shares in issue at the balance sheet date of 527.2 million (2001: 522.6
million), is 38.40 cents (2001: 31.49 cents). Pikwik's declared dividend is
20.13 cents per share (2001: 16.62 cents per share). See dividend
declaration.
These results are also available on our website http://www.picknpay.co.za
