| Tue 15 Apr 2003, 8:50 | | PICK "N PAY STORES LIMITED/ PICK "N PAY HOLDINGS L |
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Pick "n Pay Stores Limited
Share code: PIK ISIN code: ZAE000005443
Pick "n Pay Holdings Limited
("PIkwik")
Share code: PWK ISIN code: ZAE000005724
PICK "n PAY
REVIEWED group results for the year ended 28 February 2003
The Pick "n Pay Group is one of Africa"s largest and most consistently
successful retailers of food, clothing and general merchandise.
REVIEW OF OPERATIONS
GROUP OVERVIEW
This performance is the result of the success of many endeavours embarked upon
over the last few years. The year has been particularly difficult with our fight
to keep consumer prices down with rampant inflation and to this end, we have
reduced our operating margin from 3.3% to 2.9% this year.
Excluding the acquisition of Australia and Boxer (which are included in this
result for the first time for a full year), turnover increased by 20% and we
have also achieved an increase in operating profits at this level.
The decrease in operating margin is in line with our policy of food subsidies on
maize, meat and other basics. This aggressive position taken by the Group of
keeping consumer prices down has been somewhat offset by the additional income
generated in the extra turnover.
Headline earnings per share increased by 34.5% for the year. This increase over
that of headline earnings is as a result of the repurchase of 23.2 million Pick
"n Pay Stores Limited shares and the concentration effect thereof.
Our dividend distribution for the year has been increased in line with our
increase in headline earnings per share.
PICK "N PAY RETAIL DIVISION
This division performed well across all regions, the highlights being:
- The reduction in trading margins without an impact on profitability due to
increased turnover, a trend we wish to continue.
- The return to profit of all of our Free State stores following the
amalgamation of the regional office with the Gauteng region.
- The consolidation of the administration of the Hypermarkets has seen even
greater efficiencies and improvements in profitability.
- The Franchise division continues to grow with the opening of 28 new stores,
bringing the total to 117 Family stores and 46 Mini Markets.
GROUP ENTERPRISES
Score had strong growth for the year with the launch of 21 new stores. The
highlight of the year was the introduction of Score into the Western Cape with 5
new stores in December. The year ahead will see continued aggressive expansion
with approximately 40 new stores opening in southern Africa.
The purchase of Boxer Superstores Group was successfully concluded with the
acquisition of 37 stores. This chain is already contributing positively to the
performance of the Group and we are proud to have them as part of the Pick "n
Pay family. In the year ahead, this chain is looking at various opportunities
for expansion and have 6 confirmed new store openings.
Boardmans has seen another year of very active movement in the housewares market
with many more new entrants. This year saw the opening of 2 new stores, one of
which is an experimental 600m2 kitchen shop in the Cresta centre, which has
traded ahead of expectations. In the year ahead you will see the active roll-out
of further Boardmans stores including our new larger style Boardmans at Blue
Route which opened in Cape Town in March and the commencing of an on-line
wedding gift registry.
Considering the adverse trading circumstances in Zimbabwe, TM Supermarkets
continues to perform admirably and we are proud of the management for their
dedication in running this business in a challenging environment.
The Pick "n Pay Go Banking initiative with Nedcor is going ahead strongly and
has seen significant growth in the customer base in the year under review. The
new enhancements to be launched in the year ahead will lead to a growing
acceptance amongst consumers of the Go Banking service.
Franklins Australia
This past year sees the first full 12 months of turnover of R4.6 billion. Our
trading loss for the year of R84.1 million represents a loss of 1.8 % of sales.
This is a significant improvement on last year, bearing in mind that we only had
3 months of sales of R1.7 billion and a total loss of R89 million. This
comprised R29 million operating and R59.9 million exceptional item, which was
taken as set-up costs.
Included in this years" operational loss are certain items of expenditure that
are non-recurring and we have elected not to take these as an exceptional item
as we did last year, but to reflect it as ongoing operational expenditure.
The acceptance of the revitalised Franklins business by consumers in Sydney, New
South Wales, has been very encouraging and, notwithstanding a very tough
Australian economy, we have continued to show store sales growth ahead of
inflation. We are on line with our original forecast.
GENERAL COMMENT
In the last few years the Pick "n Pay Group has evolved enormously in terms of
clearly understanding and focusing on our core markets and areas of competence
and capability. The restructuring of the organisation into the 3 divisions, Pick
"n Pay Retail, Group Enterprises and Franklins Australia, has led to a new
release of energy within the Group. Our current single goal is to continually
reduce expenditure as a percentage of sales. This will ensure that we deliver on
a long-term basis for all consumers of this country.
I would like to thank all of my colleagues in the company for the support,
goodwill and teamwork that we have enjoyed, and look forward to the future with
confidence.
Sean Summers
Chief Executive Officer
14 April 2003
Stores Limited
Share code: PIK ISIN code: ZAE000005443
Income statement
Reviewed Reviewed Reviewed
2003 Growth 2002 2001
Rm % Rm Rm
Revenue (note 1) 27 139.6 19 519.2 15 753.4
Turnover 26 194.2 39.2 18 817.5 15 126.1
Cost of merchandise sold (21 552.3) (15 375.1) (12 433.3)
Gross profit 4 641.9 3 442.4 2 692.8
Other income 833.5 598.8 519.8
Trading expenses (4 794.7) (3 485.9) (2 814.0)
Trading profit 680.7 22.6 555.3 398.6
Interest received 91.8 72.5 80.9
Interest paid (41.4) (36.2) (35.8)
Dividends received 20.1 30.4 26.6
Operating profit 751.2 20.7 622.0 470.3
Goodwill amortisation (38.6) (1.6) -
Exceptional items (note 2)(5.3) (36.0) 17.3
Profit before tax 707.3 584.4 487.6
Tax (253.5) (184.2) (147.2)
Profit after tax 453.8 400.2 340.4
Minority interest - (0.6) (5.4)
Net profit for the year 453.8 399.6 335.0
Adjustment (note 3) 43.9 (17.8) (17.3)
Headline earnings 497.7 30.3 381.8 317.7
Trading profit margin 2.6% 3.0% 2.6%
Operating profit margin 2.9% 3.3% 3.1%
Per share - cents
Headline earnings 102.24 34.5 76.01 63.62
Earnings 93.22 79.55 67.07
Fully diluted headline
earnings 98.20 74.32 62.48
Fully diluted earnings 89.64 77.73 65.80
Dividends
Interim - No. 69 paid 14.00 10.50 8.85
Final - No. 70 payable 55.00 33.3 41.25 34.00
Total 69.00 33.3 51.75 42.85
Dividend cover 1.5 1.5 1.5
Balance sheet
Reviwed Audited Audited
2003 2002 2001
Rm Rm Rm
Assets
Non-current assets
Goodwill 742.1 704.1 -
Property 110.9 95.4 70.3
Equipment and vehicles 877.2 855.1 817.2
Investments 181.4 195.5 195.5
Loans 163.8 263.7 295.9
Deferred tax 68.6 43.1 -
Participation in export partnerships 143.3 149.3 166.2
2 287.3 2 306.2 1 545.1
Current assets
Stocks 1507.3 1 267.0 866.0
Trade and other receivables 495.7 357.5 287.1
Cash resources 1 035.6 986.5 1 085.3
3 038.6 2 611.0 2 238.4
Total assets 5 325.9 4 917.2 3 783.5
Equity and liabilities
Capital and reserves 999.1 1 220.9 862.6
Minority interest - - 19.6
Non-current liabilities
Interest bearing debt 243.3 241.3 242.3
Provisions 255.7 250.1 173.4
Deferred tax 158.7 177.9 134.5
657.7 669.3 550.2
Current liabilities
Interest bearing debt 186.7 17.2 15.3
Trade and other payables 3 265.1 2 770.5 2 120.4
Tax 217.3 239.3 215.4
3 669.1 3 027.0 2 351.1
Total equity and liabilities 5 325.9 4 917.2 3 783.5
Shares in issue - millions 483.4 497.1 501.3
Weighted average shares in issue
- millions 486.8 502.4 499.4
Net asset value - cents per share
(property value based on
directors" valuation) 240.9 273.5 208.0
Cash flow statement
Reviwed Audited Audited
2003 2002 2001
Rm Rm Rm
Trading profit 680.7 555.3 398.6
Depreciation 278.1 251.1 230.7
Trade and other payables 429.6 590.7 134.5
Stocks (149.9) (268.0) (133.1)
Trade and other receivables (132.3) (53.6) 31.8
Cash generated by operations 1 106.2 1 075.5 662.5
Interest received 91.8 72.5 80.9
Interest paid (41.4) (36.2) (35.8)
Dividends received 20.1 30.4 26.6
Australian set-up costs - (59.9) -
Dividends paid (258.5) (173.5) (121.3)
Tax paid (323.9) (207.6) (177.4)
Net cash inflow from operating
activities 594.3 701.2 435.5
Property (4.2) (25.0) 61.3
Equipment and vehicles (276.9) (137.6) (223.7)
Investments - - (14.0)
Loans 99.9 32.2 (102.2)
Net acquisition (note 4) (232.7) (604.6) -
Net cash outflow from investing
activities (413.9) (735.0) (278.6)
Interest bearing debt raised 171.5 0.9 155.1
Share repurchases (300.2) (92.1) -
Net cash (outflow)/inflow from
financing activities (128.7) (91.2) 155.1
Net increase/(decrease) in cash
resources 51.7 (125.0) 312.0
Cash resources at 1 March 986.5 1 085.3 773.3
Effect of exchange rate movements
on working capital (2.6) 26.2 -
Cash resources at 28 February 1 035.6 986.5 1 085.3
Statement of changes in equity
Reviwed Audited Audited
2003 2002 2001
Rm Rm Rm
Capital and reserves at 1 March 1 220.9 862.6 709.8
Prior year adjustment (note 5) - - (68.8)
Capital and reserves - as restated 1 220.9 862.6 641.0
Net profit for the year - as
restated 453.8 399.6 335.0
As previously reported 400.0 322.9
Prior year adjustment (note 5) (0.4) 12.1
Distributions (258.5) (220.2) (179.2)
Capitalisation award - 46.7 62.3
Share repurchase (300.2) (92.1) -
Foreign currency translation reserve (116.9) 224.3 3.5
Capital and reserves at 28 February 999.1 1 220.9 862.6
SEGMENTAL REPORT
Southern Africa Australia Total
Reviewed Audited Reviewed Audited Reviewed Audited
2003 2002 2003 2002 2003 2002
Rm Rm Rm Rm Rm Rm
Turnover 21 635.3 17 137.5 4 558.9 1 680.0 26 194.2 18 817.5
Trading
profit/
(loss) 764.8 588.8 (84.1) (33.5) 680.7 555.3
Exceptional
items (5.3) 23.9 - (59.9) (5.3) (36.0)
Goodwill
amortisa-
tion (9.6) (1.6) (29.0) - (38.6) (1.6)
Depreciation,
included
in trading
profit/
(loss) (250.2) (237.3) (27.9) (13.8) (278.1) (251.1)
Goodwill 180.9 40.5 561.2 663.6 742.1 704.1
Property,
equipment
and
vehicles 801.2 777.5 186.9 173.0 988.1 950.5
Total
current
assets
(excluding
cash
resources) 1 813.3 1 405.5 189.7 219.0 2 003.0 1 624.5
Total
current
liabilities
(excluding
debt) 3 145.6 2 643.7 336.8 366.1 3 482.4 3 009.8
PICK"N PAY Holdings Limited ("PIkwik")
Share code: PWK ISIN code: ZAE000005724
ResultS for the year ended 28 February 2003
Pikwik"s only asset is its 53.2% (2002: 51.8%) 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 R264.9 million (2002:
R197.7 million).
Headline earnings per share, calculated using the shares in issue at the balance
sheet date of 527.2 million (2002: 527.2 million), is 50.24 cents (2002: 37.49
cents). Pikwik"s final dividend per share is 26.85 cents (2002: 20.13 cents).
Dividend declaration
The directors have declared the following cash dividends:
Pick "n Pay Stores Ltd (No. 70) 55.00 cents per share
Pick "n Pay Holdings Ltd (No. 43) 26.85 cents per share
For both Companies, the last day of trade in order to participate in the
dividend (CUM dividend) will be Friday, 6 June 2003.
The shares will commence trading EX dividend from the commencement of business
on Monday, 9 June 2003 and the record date will be Friday, 13 June 2003.
The dividends will be paid on Tuesday, 17 June 2003.
Share certificates may not be dematerialised or rematerialised between Monday, 9
June 2003 and Friday, 13 June 2003, both dates inclusive.
G. F. LEA
Group secretary 14 April 2003
NOTES TO THE FINANCIAL INFORMATION
1. Accounting policies adopted in these results 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. The financial information has been reviewed by
KPMG Inc., whose unqualified review opinion is available for inspection at the
Company"s registered office. It is anticipated that an unqualified audited
opinion will be issued in due course once the annual financial statements have
been finalised. Revenue comprises turnover, other income, interest received and
dividends received.
2. Current year exceptional items comprise a profit on the disposal of
properties of R12.4 million, less a provision for an impairment in the value of
the Group"s investment in Prism Holdings Limited of R14.1 million and a capital
loss on the disposal of the Group"s Tanzania operations of R3.6 million. The
prior year"s exceptional items have been adjusted to include profits on disposal
of Group properties of R8.9 million in 2002 and R17.3 million in 2001, arising
from the change in the Group"s accounting policy for the depreciation of owner
occupied buildings as explained in note 5.
3. The headline earnings adjustment comprises the add-back of the exceptional
items in note 2 and goodwill amortisation. The prior year headline earnings
adjustments have been adjusted for the deduction of profits on the sale of
properties arising from the change in the Group"s accounting policy for the
depreciation of owner occupied buildings as explained in note 5.
4. The current year net acquisitions comprise the net cash consideration paid
for the acquisition of the Boxer Group of R185.8 million, additional Franklins
stores of R57.3 million, less proceeds from the sale of the Tanzania operations
of R10.4 million.
5. In accordance with new South African Statements of Generally Accepted
Accounting Practice the Group now depreciates owner occupied buildings. The
effect of this change is disclosed in the Statement of Changes in Equity.
Comparative figures have been adjusted accordingly.
These results are also available on our website http://www.picknpay.co.za
