| Tue 19 Oct 2004, 9:03 | | Pick 'n Pay - Unaudited Interim Group Results For |
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PICK `n PAY STORES LIMITED
Share code: PIK
ISIN code: ZAE000005443
Pick `n Pay Holdings Ltd
(Incorporated in the Republic of South Africa)
(Registration number 1981/009610/06)
Share code: PWK
ISIN: ZAE000005724
UNAUDITED INTERIM GROUP RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2004
* TURNOVER UP 9.3%
* TRADING PROFIT UP 22.0%
* OPERATINGPROFIT UP 18.9%
* HEADLINE EARNINGS PER SHARE UP 17.1%
* INTERIM DIVIDEND PER SHARE UP 20.0%
* REVIEW OF OPERATIONS
* GROUP OVERVIEW
Given the very low levels of inflation throughout the Group, with deflation
being experienced in certain areas of our Group activities in southern Africa
and Australia, we are pleased to present these results.
Group turnover increased by 9.3% which shows a good increase in real terms.
The increase in trading profit and operating profit (including interest
received) of 22.0% and 18.9% respectively, is particularly pleasing and reflects
the continued efficiencies being achieved throughout the Group. As a result,
operating profit margins increased from 2.4% to 2.6%.
Headline earnings at R246.8 million for the period (2003: R210.6 million),
increased by 17.2% with headline earnings per share growing by 17.1%. Headline
earnings excludes goodwill amortisation and the profit on the sale of Boardmans
of R24.0 million.
The result has enabled us to increase our interim dividend by 20.0%.
PICK `n PAY RETAIL DIVISION
This division with 14 Hypermarkets, 128 Supermarkets and 166 Franchise stores
continues to be the driving force behind the Pick `n Pay Group and predominant
contributor to Group profitability, with consistently good results across all
divisions. Some of the highlights are as follows:
Supermarkets - showed good growth in turnover and continue to make a significant
profit contribution to the Group. During the period 7 new Corporate stores were
opened, 3 in Gauteng, 3 in Kwa-Zulu Natal and 1 in Limpopo. We have another 7
stores planned to open in the second six month period.
Hypermarkets - showed real growth in turnover and strong profit growth. Our
focus is on building top line sales growth in this division.
Franchise - during the period we opened a further 6 stores; 4 in South Africa, 1
in Botswana and 1 in Namibia. The Family store brand showed particularly good
growth in turnover and profitability.
GROUP ENTERPRISES
Score - turnover for the period has shown strong increases with even greater
increases in volumes due to deflation for the period of approximately 5.0%.
Score opened 4 new stores and completed the transfer of the majority of its
stores in the Eastern Cape to Boxer and the Western Cape stores to the Pick `n
Pay Western Cape region. This restructure now allows Score management to
concentrate on the predominantly strong areas of the Score brand in the Northern
and Central regions of the country.
With the re-organisation now complete and with further strides being made in
expense savings and operational efficiencies, Score is well on the way to
returning to profitability in the near future.
Boxer Superstores - had a good six month trading period with commendable
increases in both turnover and profitability. In addition to the Score stores
taken over in the Eastern Cape, Boxer opened 2 new stores with a further 2 to be
opened in the next 6 month trading period.
Banking in partnership with Nedcor, has continued to grow its account base
and funds on deposit. Go Banking provides a significant platform for future
growth in the evolving financial services sector.
TM Supermarkets in Zimbabwe continues to trade well. Turnover increases are
above the very high levels of inflation.
FRANKLINS AUSTRALIA
Turnover for the six months at A$426.5 million is 1.6% below last year, which is
largely accounted for by the fact that food deflation in New South Wales was
0.9% for the period.
We are in the process of setting up our own distribution systems and channels
with two new distribution partners. As a result of these projects, exceptional
once off costs pushed the trading loss before goodwill to A$6.7 million for the
period versus A$3.2 million last year. All these additional costs were
anticipated at the beginning of the year and are in line with budget. We remain
confident of the future of the business and controlling our own distribution
channels will drive the expansion of new corporate stores and franchising.
GENERAL COMMENT AND PROSPECTS
We foresee low levels of inflation continuing for the remainder of the financial
year, which we believe is good for the consumer and the country and its economy.
We are actively pursuing real volume growth through pricing and service
enhancement and are confident of showing a good earnings increase for the full
year.
For and on behalf of the Board
Raymond Ackerman
Chairman
Sean Summers
Chief Executive Officer
18 October 2004
INCOME STATEMENT
Audited
Six months ended 31 August Year to
2004 Growth 2003 Feb 2004
Rm % Rm Rm
Revenue (note 2) 15 859.2 14 496.7 30 448.3
Turnover 15 245.8 9.3 13 953.7 29 276.1
Cost of merchandise sold (12 757.3) (11 667.5) (24 420.4)
Gross profit 2 488.5 2 286.2 4 855.7
Other income 566.2 488.4 1 076.1
Trading expenses (2 686.3) (2 468.9) (5 142.8)
Goodwill amortisation (17.8) (18.3) (36.8)
Trading profit 350.6 22.0 287.4 752.2
Interest received 44.7 45.1 81.9
Operating profit 395.3 18.9 332.5 834.1
Interest paid (20.8) (24.6) (46.6)
Dividends received 2.5 9.5 14.2
Profit on sale of
Boardmans (note 5) 24.0 - -
Profit before tax 401.0 317.4 801.7
Tax (148.0) (125.1) (286.0)
Net profit for the period 253.0 192.3 515.7
Trading profit margin 2.3% 2.1% 2.6%
Operating profit margin 2.6% 2.4% 2.8%
Per share - cents
Headline earnings 52.40 17.1 44.73 117.38
Earnings 53.72 40.84 109.55
Fully diluted headline
earnings 50.04 42.85 111.64
Fully diluted earnings 51.29 39.17 104.26
Interim dividend - No. 73 19.80 20.0 16.50
Headline earnings
reconciliation
Net profit for the period 253.0 192.3 515.7
Goodwill amortisation 17.8 18.3 36.8
Profit on sale of
Boardmans (24.0) - -
Headline earnings 246.8 17.2 210.6 552.5
BALANCE SHEET
Aug Aug Audited
2004 2003 Feb 2004
Rm Rm Rm
Assets
Non-current assets
Goodwill 684.1 726.9 745.1
Property 212.1 164.6 182.3
Equipment and vehicles 1 093.9 942.4 1 045.4
Investments 7.9 182.9 7.7
Loans 88.2 96.6 89.6
Participation in export partnerships 124.8 131.4 127.6
Deferred tax 114.0 87.2 99.2
2 325.0 2 332.0 2 296.9
Current assets
Stocks 1 566.6 1 552.6 1 578.7
Trade and other receivables 551.0 547.1 628.1
Cash resources 1 431.9 947.4 1 502.5
3 549.5 3 047.1 3 709.3
Total assets 5 874.5 5 379.1 6 006.2
Equity and liabilities
Total shareholders` equity 990.5 843.8 1 132.4
Non-current liabilities
Interest-bearing debt 185.8 240.1 188.2
Retirement scheme obligations 170.0 136.0 145.0
Deferred tax 127.0 149.2 133.9
482.8 525.3 467.1
Current liabilities
Interest-bearing debt 34.2 122.7 159.9
Trade and other payables 4 037.0 3 698.6 3 972.0
Tax 330.0 188.7 274.8
4 401.2 4 010.0 4 406.7
Total equity and liabilities 5 874.5 5 379.1 6 006.2
Shares in issue - millions (note 3) 486.1 483.4 483.4
Weighted average shares in issue - millions (note 4) 471.0
470.8 470.7
Net asset value - cents per share (property value based on directors`
valuation) 255.9 213.9 285.9
CASH FLOW STATEMENT
Audited
Year to
Six months ended 31 August 2004 2003 Feb 2004
Rm Rm Rm
Trading profit 350.6 287.4 752.2
Depreciation 148.0 144.4 283.1
Goodwill amortisation 17.8 18.3 36.8
Trade and other payables 100.8 314.8 592.0
Stocks (33.3) (45.3) (71.4)
Trade and other receivables 79.2 (47.9) (125.1)
Exchange rate effect on working
capital (16.3) (3.6) (19.8)
Cash generated by trading activities 646.8 668.1 1 447.8
Interest received 44.7 45.1 81.9
Cash generated by operations 691.5 713.2 1 529.7
Interest paid (20.8) (24.6) (46.6)
Dividends received 2.5 9.5 14.2
Dividends paid (292.3) (241.3) (316.7)
Tax paid (114.5) (181.4) (283.5)
Net cash inflow from
operating activities 266.4 275.4 897.1
Property (32.4) (55.3) (74.2)
Equipment and vehicles (218.7) (211.9) (434.4)
Investments realised - - 175.3
Loans repaid 1.4 0.9 7.9
Proceeds from sale of Boardmans
(note 5) 78.1 - -
Net cash outflow from investing
activities (171.6) (266.3) (325.4)
Interest-bearing debt repaid (128.2) (68.8) (87.9)
Issue of new shares (note 3) 12.2 - -
Share repurchases (67.5) (38.0) (38.0)
Take-up of share options 18.1 9.5 21.1
Net cash outflow from financing
activities (165.4) (97.3) (104.8)
Net (decrease)/increase in cash
resources (70.6) (88.2) 466.9
Cash resources at 1 March 1 502.5 1 035.6 1 035.6
Cash resources at 31 August/
29 February 1 431.9 947.4 1 502.5
STATEMENT OF CHANGES IN EQUITY
Audited
Aug Aug Year to
2004 2003 Feb 2004
Rm Rm Rm
Capital and reserves at 1 March 1 132.4 924.8 924.8
Net profit for the period 253.0 192.3 515.7
Dividends paid (292.3) (241.3) (316.7)
Issue of new shares (note 3) 12.2 - -
Share repurchases (67.5) (38.0) (38.0)
Take-up of share options 18.1 9.5 21.1
Revaluation of investments 0.2 1.5 1.6
Foreign currency translation (65.6) (5.0) 23.9
Capital and reserves at 31 August/
29 February 990.5 843.8 1 132.4
SEGMENTAL REPORT
Southern Africa
Aug Aug
2004 2003
Rm Rm
Turnover 13 248.0 11 842.8
- Australian dollars
Trading profit/(loss) before
goodwill amortisation 400.4 321.5
- Australian dollars
Goodwill amortisation (4.8) (4.8)
Profit on sale of Boardmans 24.0 -
Depreciation, included in trading
profit/(loss) (129.1) (128.1)
Goodwill 166.4 175.4
Property, equipment and vehicles 1 101.2 916.0
Total current assets
(excluding cash resources) 1 924.3 1 918.1
Total current liabilities
(excluding debt) 3 992.6 3 493.9
SEGMENTAL REPORT (continued)
Australia Total
Aug Aug Aug Aug
2004 2003 2004 2003
Rm Rm Rm Rm
Turnover 1 997.8 2 110.9 15 245.8 13 953.7
- Australian dollars 426.5 433.3
Trading profit/(loss)
before goodwill
amortisation (32.0) (15.8) 368.4 305.7
- Australian dollars (6.7) (3.2)
Goodwill amortisation (13.0) (13.5) (17.8) (18.3)
Profit on sale of
Boardmans - - 24.0 -
Depreciation, included
in trading
profit/(loss) (18.9) (16.3) (148.0) (144.4)
Goodwill 517.7 551.5 684.1 726.9
Property, equipment
and vehicles 204.8 191.0 1 306.0 1 107.0
Total current assets
(excluding cash
resources) 193.3 181.6 2 117.6 2 099.7
Total current liabilities
(excluding debt) 374.4 393.4 4 367.0 3 887.3
NOTES TO THE FINANCIAL INFORMATION
1. Accounting policies comply with South African Statements of Generally
Accepted Accounting Practice and are consistent with those applied for the year
ended 29 February 2004.
2. Revenue comprises turnover, other income, interest received and dividends
received.
3. During the period Pick `n Pay Stores Limited issued 2 690 000 shares pursuant
to the take-up of share options under the 1997 share option scheme.
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. Effective 1 April 2004 the Boardmans division was sold for net asset value
plus goodwill of R26 million. The profit on sale is the amount received for
goodwill after transaction costs.
6. In the 2004 annual financial statements the Group advised that the South
African Revenue Service (`SARS`) was enquiring into the tax treatment of the
participation of various corporations, including a company in the Group, in
export partnerships. SARS has now issued an assessment on a Group company as the
first step in a test case procedure agreed with SARS for determining the correct
tax treatment. The Board considers that adequate warranties are in place to meet
any liability that may arise from this assessment.
PICK `n PAY HOLDINGS LIMITED (`PIKWIK`)
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2004
Share code: PWK ISIN code: ZAE000005724
Pikwik`s only asset is its 52.9% (2003: 53.2%) 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 R130.6 million (2003:
R112.1 million).
Headline earnings per share, calculated using the weighted average number of
shares in issue during the period of 500.5 million (2003: 495.0 million), is
26.10 cents (2003: 22.65 cents). Pikwik`s interim dividend per share is 9.67
cents (2003: 8.05 cents).
DIVIDEND DECLARATIONS
The directors have declared the following cash dividends:
Pick `n Pay Stores Ltd (No. 73) 19.80 cents per share
Pick `n Pay Holdings Ltd (No. 46) 9.67 cents per share
For both Companies, the last day of trade in order to participate in the
dividend (CUM dividend) will be Friday, 3 December 2004.
The shares will trade EX dividend from the commencement of business on Monday, 6
December 2004 and the record date will be Friday, 10 December 2004.
The dividends will be paid on Monday, 13 December 2004.
Share certificates may not be dematerialised or rematerialised between Monday, 6
December 2004 and Friday, 10 December 2004, both dates inclusive.
On behalf of the boards of directors
GF Lea
Company Secretary
18 October 2004
These results are also available on our website
http://www.picknpay.co.za
Directors of Pick `n Pay Stores Limited:
Executive: RD Ackerman* (Chairman), D Robins** (Deputy Chairman), SR Summers
(CEO), W Ackerman*, DG Cope Non-executive: GM Ackerman*, RP de Wet*+, HS
Herman*+, C Hultzer*+, C Nkosi+, DM Nurek+, BJ van der Ross+ *Also directors
of Pick `n Pay Holdings Limited **German +Independent
