| Tue 8 Oct 2002, 17:00 | | Pick 'n Pay Stores Limited - Interim Group Result |
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Pick `n Pay Stores Limited - Interim group results for the six months ended 31
August 2002
Pick `n Pay Stores Limited
Interim group results for the six months ended 31 August 2002
* Turnover Up 54.5%
* Trading profit Up 45.1%
* Operating profit Up 34.6%
* Headline earnings Up 30.8%
* Headline earnings per share Up 33.7%
* Interim dividend per share Up 33.3%
We are exceptionally pleased with this outstanding performance
The Pick `n Pay Group is one of Africa`s largest and most consistently
successful retailers of food, clothing and general merchandise.
... Our staff are dedicated to ensuring customer satisfaction
GROUP OVERVIEW
We are exceptionally pleased with this outstanding performance increasing Group
turnover for the six-month period by 54.5% and trading profit by 45.1% over last
year. Excluding Australia and Boxer, which are included in this half-year result
for the first time, turnover growth over last year is 19.0% which shows
significant real growth both in volume and market share.
The increase in turnover, together with the further containment of expenses, has
enabled the Group to increase its operating profit and headline earnings per
share by 34.6% and 33.7%, respectively. Features of this result include:
RETAIL DIVISION
The ongoing consolidation and work in streamlining various efficiencies in the
supermarket and hypermarket regions has led to a strong growth in profitability.
It is also extremely pleasing to note a further significant improvement in the
levels of shrinkage, again contributing to the bottom-line increase.
The Franchise division continues to show significant growth, not only in
existing and new Family stores, but also in the new Mini Market format.
Pick `n Pay Butcheries results have gone totally against the trend in the market
and has shown significant volume increases. This has largely been brought about
by the very aggressive stance on pricing.
GROUP ENTERPRISES DIVISION
Score has shown very aggressive turnover growth in real terms and during the
period has opened seven new stores. The move of the RiteValu Franchise stores
over to Pick `n Pay as Mini Markets has freed up the management of this division
to completely focus on its market, being the emerging supermarket industry in
South Africa.
Boxer Superstores has been fully consolidated into the Group result for the
first time following the approval by the Competition Authority for this merger.
We are particularly pleased with the significant progress that this chain
continues to make in its target market and, in the period under review, has
shown a very strong performance in both turnover and profit growth.
Notwithstanding the very competitive market in which Boardmans operates, we are
confident of the future growth prospects of this business. The period ahead will
see three new stores opening including the first Boardmans Superstore in Cape
Town, which will be approximately 2 500 m2 to 3 000 m2.
TM Supermarkets, in Zimbabwe, continues to trade very strongly showing growth in
turnover and profit above that of the very high levels of inflation, and
notwithstanding the dire circumstances that continue to exist in that country.
The HealthPharm Pharmacy business in the six months ahead will see significant
progress in terms of the stabilisation of its IT systems and the development of
its franchise offering. Due to the significant requirements of our IT division
in our new operations in Australia, development in the HealthPharm business was
delayed.
"Go Banking" continues to grow and progress has been made in the past six months
from an IT and enablement perspective. The period ahead will see the launch of
numerous new products, moving us towards the situation where Go Banking will
offer a meaningful alternative financial service to our consumers.
FRANKLINS AUSTRALIA
A significant feature of this result has been the performance of our Franklins
Australia operation. Turnover for the period under review was R2.4 billion and a
loss of R50.9 million was incurred, which is an improvement over the R84.0
million loss for the six months to February 2002. Included in this current
period loss, is approximately R30.0 million of non-recurring costs relating
primarily to store refurbishments, point-of-sale replacements as well as
significant expenditure on marketing and promotion. This expenditure has led to
a continual reduction in the operating losses on a month-by-month basis and we
remain confident that this chain will now move into profit within the next 12 to
18 months, as per our original forecast, at a pre-goodwill amortisation level.
We are currently in the process of finalising the acquisition of
six further stores to increase our current number to 75 and to capitalise on
opportunities to further grow this chain. This in itself is positive proof of
our experience to date and a significant vote of confidence for the future of
the Franklins business and its ability to grow.
GENERAL COMMENT
We remain enormously confident of the future of this young country of ours and
this is borne out by a very active store opening programme in the six months
ahead. We plan to open a total of 33 new stores spread across all brands.
In conclusion, we are really thrilled with this result and the fact that all
divisions performed beyond expectations.
With regard to the current issue of food prices and food inflation, we once
again appeal to Government for a targeted food assistance programme for the
unemployed, destitute and poverty-stricken in our country. To this end we
continue to do everything in our power to ensure that we negotiate terms and
conditions with our suppliers and manufacturers to allow us to keep basic food
prices at affordable levels.
I would like to once again refer to the R10 million basic food price subsidy
that is currently in place at Pick `n Pay, but there are limits to what we can
do in making sure that South Africa achieves its objectives as a whole.
Sean Summers
Chief Executive Officer 7 October 2002
Pick `n Pay Stores Limited
Share code: PIK; ISIN code: ZAE000005443
Income statement
Year
2002 Growth 2001 Feb 2002
Rm % Rm Rm
Revenue (note 1) 12 961.3 8 451.1 19 503.3
Turnover 12 577.5 54.5 8 143.3 18 817.5
Cost of merchandise sold (10 210.9) (6 699.9) (15 375.1)
Gross profit 2 366.6 1 443.4 3 442.4
Other income 328.1 249.0 582.9
Trading expenses (2 433.6) (1 512.5) (3 461.1)
Trading profit 261.1 45.1 179.9 564.2
Interest received 45.6 41.1 72.5
Interest paid (20.5) (18.5) (36.2)
Dividends received 10.1 17.7 30.4
Operating profit 296.3 34.6 220.2 630.9
Goodwill amortisation (19.5) (0.5) (1.6)
Exceptional items (note 2) (14.1) 15.0 (44.9)
Profit before tax 262.7 234.7 584.4
Tax (110.3) (81.9) (184.2)
Profit after tax 152.4 152.8 400.2
Minority interest 0.0 (0.6) (0.6)
Net profit for the period 152.4 152.2 399.6
Adjustment (note 3) 33.6 (10.0) (8.9)
Headline earnings 186.0 30.8 142.2 390.7
Per share - cents
Headline earnings 37.76 33.7 28.24 77.78
Earnings 30.94 30.22 79.55
Fully diluted headline
earnings 36.33 27.55 75.98
Fully diluted earnings 29.77 29.48 77.72
Dividends
Interim - No. 69
declared 14.00 33.3 10.50
Statement of changes in equity
Year
2002 2001 Feb 2002
Rm Rm Rm
Capital and reserves at 1 March 1 220.9 919.3 919.3
Prior year adjustment (note 5) (56.7) (56.7)
Capital and reserves - as restated 1 220.9 862.6 862.6
Net profit for the period -
as adjusted 152.4 152.1 399.6
As previously reported 151.0 400.0
Prior year adjustment (note 5) 1.1 (0.4)
Distributions (205.1) (170.4) (220.2)
Capitalisation award 46.7 46.7
Share repurchase (172.9) (92.1)
Foreign currency translation reserve (26.4) 38.9 224.3
Capital and reserves at
31 August/28 February 968.9 929.9 1 220.9
Balance sheet
2002 2001 Feb 2002
Rm Rm Rm
Assets
Non-current assets
Goodwill 821.0 41.6 704.1
Property 85.5 79.7 95.4
Equipment and vehicles 885.3 752.7 855.1
Investments 181.4 195.5 195.5
Loans 138.2 296.5 263.7
Participation in export
partnerships 144.2 160.1 149.3
2 255.6 1 526.1 2 263.1
Current assets
Stocks 1 438.9 871.3 1 267.0
Trade and other receivables 387.4 301.2 357.5
Cash resources 952.9 1 238.5 986.5
2 779.2 2 411.0 2 611.0
Total assets 5 034.8 3 937.1 4 874.1
Equity and liabilities
Capital and reserves 968.9 929.9 1 220.9
Non-current liabilities
Interest bearing debt 262.7 258.3 258.5
Provisions 262.7 173.4 250.1
Deferred tax 107.9 129.9 134.8
633.3 561.6 643.4
Current liabilities
Trade and other payables 3 253.1 2 295.7 2 770.5
Tax 179.5 149.9 239.3
3 432.6 2 445.6 3 009.8
Total equity and liabilities 5 034.8 3 937.1 4 874.1
Shares in issue - millions 483.4 506.0 497.1
Weighted average shares in issue -
millions 492.6 503.4 502.4
Net asset value - cents per share
(property value based on
directors` valuation) 231.8 241.1 273.5
SEGMENTAL REPORT
Southern Africa Australia Total
2002 2001 2002 2001 2002 2001
Rm Rm Rm Rm Rm Rm
Turnover 10 210.5 8 143.3 2 367.0 12 577.5 8 143.3
Trading
profit
(loss) 312.0 186.7 (50.9) (6.8) 261.1 179.9
Goodwill
amortisation 4.8 0.5 14.7 19.5 0.5
Depreciation,
included
in trading
profit/(loss) 110.1 119.6 13.2 123.3 119.6
Goodwill 185.6 41.6 635.4 821.0 41.6
Property,
equipment
and
vehicles 785.2 828.4 185.6 4.0 970.8 832.4
Total current
assets
(excluding
cash
resources) 1 627.8 1 172.5 198.5 1 826.3 1 172.5
Total
current
liabilities 2 790.1 2 445.6 642.5 3 432.6 2 445.6
Cash flow statement
Year
2002 2001 Feb 2002
Rm Rm Rm
Trading profit 261.1 179.9 564.2
Depreciation 123.3 119.6 251.1
Trade and other payables 410.7 171.4 581.8
Stocks (87.9) (4.5) (268.0)
Trade and other receivables (22.0) (8.0) (53.6)
Cash generated by operations 685.2 458.4 1 075.5
Interest received 45.6 41.1 72.5
Interest paid (20.5) (18.5) (36.2)
Dividends received 10.1 17.7 30.4
Australian set-up costs 0.0 0.0 (59.9)
Dividends paid (205.1) (122.4) (173.5)
Tax paid (200.7) (151.6) (207.6)
Cash retained from operating
activities 314.6 224.7 701.2
Property (9.4) 8.2 25.0
Equipment and vehicles 106.6 53.5 137.6
Interest bearing debt (4.2) (0.7) (0.9)
Share repurchases 172.9 0.0 92.1
Loans (125.5) 0.6 (32.2)
Net acquisition (note 4) 185.9 47.3 604.6
Cash utilised for investing
activities 326.3 108.9 826.2
Net (decrease)/increase in
cash resources (11.7) 115.8 (125.0)
Cash resources at 1 March 986.5 1 085.3 1 085.3
Effect of exchange rate movements
on working capital (21.9) 37.4 26.2
Cash resources at
31 August/28 February 952.9 1 238.5 986.5
NOTES TO THE FINANCIAL INFORMATION
1. Accounting policies comply with South African Statements of Generally
Accepted Accounting Practice and, except as stated in Note 5, are consistent
with those applied in the annual financial statements for the year ended 28
February 2002. Revenue comprises turnover, other income, interest received and
dividends received.
2. The current period exceptional item relates to an impairment value adjustment
made to the Group`s investment in Prism Holdings Limited.
3. Headline earnings adjustment comprises the impairment value adjustment as per
note 2 of R14.1 million and the amortisation of goodwill of R19.5 million.
4. The current period amount is the net cash consideration paid for the
acquisition of the Boxer Group.
5. The Group has changed its accounting policy for fixed assets and now
depreciates owner-occupied buildings in accordance with Generally Accepted
Accounting Practice.
The effect of this change is disclosed in the Statement of Changes in Equity.
Comparative figures have been adjusted accordingly.
Pick `n Pay Holdings Limited (`Pikwik`)
Share code: PWK; ISIN code: ZAE000005724
Results for the six months ended 31 AUGUST 2002
Pikwik`s only asset is its 53.2% (2001: 50.9%) investment in Pick `n Pay Stores
Limited. The Pikwik Group earnings are directly related to those of this
investment. Headline earnings for the period amount to R99.0 million (2001:
R72.3 million).
* Headline earnings per share, calculated using the shares in issue
at the balance sheet date of 527.2 million (2001: 527.2 million),
is 18.78 cents (2001: 13.72 cents).
* Pikwik`s interim dividend is 6.83 cents per share (2001: 5.13 cents per
share).
Dividend declaration
The directors have declared the following cash dividends:
Pick `n Pay Stores Ltd (No. 69) 14.00 cents per share
Pick `n Pay Holdings Ltd (No. 42) 6.83 cents per share
For both Companies, the last day of trade in order to participate in the
dividend (CUM dividend) will be Friday, 29 November 2002.
The shares will commence trading EX dividend from the commencement of business
on Monday, 2 December 2002 and the record date will be Friday, 6 December 2002.
The dividends will be paid on Monday, 9 December 2002.
Share certificates may not be dematerialised or rematerialised between Monday, 2
December 2002 and Friday, 6 December 2002, both dates inclusive.
G. F. LEA
Secretary 7 October 2002
These results are also available on our website http://www.picknpay.co.za
Date: 08/10/2002 08:55:00 AM Produced by the JSE SENS Department
