| Tue 22 Feb 2005, 10:33 | | Interim results for the 27 weeks ended December 20 |
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Shoprite - Interim results for the 27 weeks ended December 2004
Interim results for the 27 weeks ended December 2004
Shoprite Holdings Limited
Registration No 1936/007721/06
ISIN: ZAE000012084
JSE share code: SHP
NSX share code: SRH
LuSE share code: SHOPRITE
`Shoprite` or `the Group`
Focused on growth
Interim results for the 27 weeks ended December 2004
This interim report covers 27 weeks compared to the 26 weeks of the
corresponding period in 2003, a factor that should be taken into consideration
when evaluating these results. To make the comparison with the corresponding six
months in 2003 meaningful, percentages provided in the section `Key information`
below are given for both a 27-week and a 26-week reporting period.
Key information
* Total turnover increased 14,2% (26 weeks: 10,4%) from R13,360 billion to
R15,254 billion.
* Non-RSA operations achieved 26,4% (26 weeks: 22,1%) sales growth in stable
currency terms.
* Operating profit before exchange differences was up 47,7% (26 weeks: 25,2%) to
R466,2 million.
* Headline earnings per share grew 55,4% to 60,6 cents (26 weeks: up 30,8% to
51,0 cents).
* Headline earnings per share, adjusted for exchange differences, rose 39,3% to
61,7 cents (26 weeks: up 17,8% to 52,2 cents).
* Dividend per share envisaged increased 33,3% to 22,0 cents.
* Net asset value per share increased 22,8% to 464 cents.
Whitey Basson, chief executive, commented:
`Although experiencing internal food deflation in all our operating chains the
Group nevertheless managed turnover growth of 14,1% for the 27 weeks under
review compared to the 26 weeks of the corresponding period a year ago. This was
achieved by growing the number of customer store visits combined with an
increase in basket size. Most pleasing was the strong spurt of 47,7% in
operating profit before exchange differences which generated a net profit margin
of 3,06%, the highest ever achieved by the Group. Our ambitious new-store
programme announced last year is on track and we will continue to grow strongly
in all our markets.`
21 February 2005
Enquiries:
Shoprite Holdings Limited
Tel 021 980 4000
Whitey Basson, Chief executive
Carel Goosen, Deputy managing director
De Kock Communications
Tel 021 422 2690
Ben de Kock
082 905 6274
Operating environment
In the year since the previous interim report the already very low food
inflation dropped even lower - from 2,6% in December 2003 to 1,5% in December
2004 - and there are no market indicators suggesting that this is going to
change in the short term. However, consumer confidence continued unabated
stimulating sales of particularly durable goods. The Group`s furniture division
benefited substantially from this trend. The continued strength of the rand
perpetuated the benefits and disadvantages associated with it - cheaper imports
but also more expensive exports of South African products to our stores in
Africa, forcing the Group to increasingly source merchandise from elsewhere.
Comments on the results
Income statement
Total revenue
Total revenue increased by 13,9% from R13,635 billion to R15,529 billion. If the
additional week of the current reporting period is disregarded, revenue growth
was 10,2%.
Gross profit
Gross profit was 15,9% higher at R2,178 billion. This is ascribed to greater
efficiency in sourcing and replenishment, augmented product ranges and improved
sales of higher-margin non-food items.
Operating margin
The operating margin before exchange differences has shown consistent growth
over the past few years. In the year since the end of 2003 it has accelerated
from 2,36% to 3,06%, due to the same factors as set under `Gross profit` above,
combined with relentless shrinkage control.
Exchange losses
During the review period the rand strengthened 10,5% against the US dollar
compared to 9% in the corresponding period. Exchange losses nevertheless reduced
from R31,5 million to R6,9 million due to the Group`s exposure to other
currencies.
Exceptional items
Exceptional items reduced from R80,7 million in 2003 to R18,7 million, mainly
due to an end to the amortisation of negative goodwill during the 2004 financial
year when the remaining balance of the negative goodwill arising from the OK
Bazaars takeover had been fully utilised. The R18,7 million in exceptional items
resulted for the most part from the realisation of the Group`s investment in
Canal Walk Ltd.
Earnings per share
Earnings per share increased 17,5% to 63,9 cents and headline earnings per share
55,4% to 60,6 cents. Once adjusted for exchange differences, headline earnings
per share were 39,3% higher at 61,7 cents.
Balance sheet
Stock levels
Stock levels rose marginally to R3,198 billion (2003: R3,174 billion) mainly due
to the need to provision new outlets and buying for the Christmas season which,
for the food industry as a whole, did not meet expectations.
Cash and cash equivalents
Cash and cash equivalents reduced from R1,650 billion in 2003 to R779,4 million.
This was mainly due to the fact that the corresponding reporting period ended on
28 December before the usual major month-end creditor payments were made. The
Group was also for the first time since the acquisition in 1997 of OK Bazaars
and its assessed tax losses, required to pay provisional tax. Total tax paid
during the review period came to R326,2 million compared to R9,3 million in
2003.
Borrowings
The Group decided to take advantage of the current low interest rate environment
to restructure its balance sheet by obtaining longer-term finance to fund future
capital commitments.
Operational review
The reporting period to December 2004 was a successful trading one for the
Group, with all the retail divisions reporting good growth in turnover, despite
internal food deflation of between 0,3% and 1,3% across the different brands.
Turnover growth was helped along by a strong emphasis on higher-margin non-food
sales without in the process diluting the Group`s primary focus on food. The
Group marginally increased market share despite opening fewer top-end stores
within South Africa than its main competitors.
Store June 2004 Opened Closed Dec. 2004
Supermarkets 486 29 (5) 510
Shoprite 316 9 (3) 322
Checkers 88 3 0 91
Checkers Hyper 23 0 0 23
Usave 59 17 (2) 74
Hungry Lion 52 5 (1) 56
(joint venture)
Furniture Group 167 6 0 173
OK Furniture 145 6 0 151
House & Home 22 0 0 22
Total own stores 705 40 (6) 739
OK Franchise 297 14 (38) 273
Hungry Lion franchise 3 1 0 4
Total franchise 300 15 (38) 277
Total stores 1005 55 (44) 1 016
Countries outside South 15 1 0 16
Africa
Supermarkets
The Supermarket Division produced satisfactory revenue growth and a strong
increase in profitability by good management of the cost and the distribution
chain. The combined revenue of the three supermarket brands - Shoprite, Checkers
and Usave - increased by 13,5% to R14,418 billion (26 weeks: 9,7% to R13,940
billion). Customer visits to its 510 stores increased 7,2% while basket size
across the brands was 3,6% higher. The lower growth in basket size should be
seen against the fact that all three chains experienced negative food inflation.
Shoprite
Shoprite, harder hit than Checkers by internal food deflation, given its mass-
market customer profile and product mix, grew turnover on a like-for-like basis
by 8,6% and overall by 11,7% on a 26-week comparative basis. The growth of 6,2%
in customer visits and 5,2% in basket size also reflected increasing support
from South Africa`s emerging middle class.
Checkers
The Checkers brand continued to reflect the value of its new positioning in its
customer support, with turnover growth of 7,3% on a like-for-like basis and 7,2%
overall on a 26-week comparative basis. It grew basket size 4,9% compared to a
year ago.
Usave
The roll-out of Usave outlets continued apace to keep up with support for the
brand, and a further 15 stores were opened during the review period to bring the
total in South Africa to 57 - 30 more than a year ago. Due to its market
positioning and all-out focus on price, Usave experienced the highest deflation
of the chains, a fact reflected in basket growth of 2,8%. The tempo of new-store
openings resulted in the number of customer visits increasing by 144%.
Operations outside South Africa
The Group`s operations in 16 countries outside South Africa performed to
expectations, achieving 23,7% sales growth in stable currency terms on a 26-week
comparative basis. If currency fluctuations are taken into account, this
turnover growth translates into 10,3% in rand terms. During the period under
review the Group started trading as a wholesale operation in India and in its
first franchised Hyper in a modern shopping centre in Mumbai. Management is
excited about the enormous potential for growth in the subcontinent.
OK Franchise
After substantial write-offs in the previous financial year this division is
back on an even keel and performing satisfactorily. During the review period 38
memberships and franchises were terminated and 14 new stores opened. All these
businesses are being well managed and operating results are expected to improve
in the next six months.
Furniture
Good growth was again experienced in the Furniture Division. Revenue increased
19,7% for the 27 weeks and 16,3% on a 26-week comparative basis. Operating
profit grew strongly by 34,0% to R98,6 million for the 27 weeks and by 24,4% for
the 26-week comparative period. These results were achieved in a highly
competitive market, characterised by strong consumer demand and lower prices for
imported goods given the strength of the rand.
Group prospects and outlook
We do not foresee any material changes occurring in the next six months in the
retail environment in which the Group operates. Food inflation will remain low
so we will continue our strategy of increasing and further upgrading our non-
food product offering. We are looking forward to continued turnover growth from
our major supermarket brands and we are confident that the Group will be able at
least to maintain its present level of profitability.
Corporate governance
Shoprite acts in accordance with the principles embodied in the Code of
Corporate Practice and Conduct in the King Report 2002 (`the Code`). The Group
complies with the significant requirements incorporated in the Code and the JSE
Securities Exchange SA listing requirements.
Accountability
These condensed consolidated interim results have been prepared in accordance
with South African Statements of Generally Accepted Accounting Practice (`GAAP`)
and Schedule 4 of the South African Companies Act (Act No 61 of 1973), as
amended. The accounting policies are consistent with those used in the annual
financial statements for the financial period ended June 2004 with the following
exception:
* With the introduction of new accounting statements IFRS 3, Business
Combinations; IAS 36, Impairment of Assets and IAS 38, Intangible Assets, all
relevant transactions, assets and liabilities are now accounted for in terms of
these statements. These statements require prospective application and had no
material effect on the Group`s results.
Where necessary, comparative figures have been adjusted to conform to changes in
presentation made in the current period. In particular, the cash flow statement
and related disclosure for the period ending December 2003 have been adjusted
with the elimination of all exchange differences.
In accordance with the recommendations of the JSE Securities Exchange South
Africa, the Group now consolidates its share incentive scheme to ensure
compliance with AC 132: Consolidated financial statements and accounting for
investments in subsidiaries. The restatement had no significant effect on
earnings or headline earnings per share.
Adjusted headline earnings are calculated by excluding the after-tax effect of
exchange gains and losses from headline earnings.
Dividend
It is envisaged that an interim dividend of 22,0 cents per share will be
declared towards the end of March 2005.
CH Wiese
Chairman
JW Basson
Chief executive
21 February 2005
Condensed group income statement
Unaudited Unaudited Audited
27 weeks % 26 weeks 52 weeks
R`000 ended Dec 04 change ended Dec 03 ended Jun 04
Revenue 15 529 378 13,9 13 635 118 27 171 644
Sale of
merchandise 15 254 123 14,2 13 359 516 26 641 233
Finance income
earned 81 701 7,1 76 318 171 322
Franchise fees
received 10 131 (2,9) 10 431 19 779
Operating lease
income 97 742 (9,7) 108 260 221 187
Net premiums
earned 85 681 6,3 80 593 118 123
Gross profit 2 178 038 15,9 1 879 465 4 063 879
Other operating
income 1 217 445 12,1 1 085 955 2 263 846
Depreciation (214 290) 15,6 (185 426) (407 382)
Operating leases (365 488) 4,8 (348 695) (857 341)
Staff costs (1 243 169) 11,9 (1 110 682) (2 273 837)
Other operating
costs (1 106 295) 10,1 (1 004 941) (2 086 996)
Operating profit
before exchange
losses 466 241 47,7 315 676 702 169
Exchange losses (6 894) (78,1) (31 470) (78 848)
Operating profit
before exceptional
items 459 347 61,6 284 206 623 321
Exceptional items 18 669 (76,9) 80 688 161 594
Operating profit
after exceptional
items 478 016 31,0 364 894 784 915
Investment income 27 579 25,9 21 910 57 739
Finance costs (6 311) (32,8) (9 385) (30 062)
Profit before tax 499 284 32,3 377 419 812 592
Tax (167 491) 73,5 (96 518) (244 107)
Profit after tax 331 793 18,1 280 901 568 485
Minority interest (7 765) 54,2 (5 037) (11 674)
Net profit 324 028 17,5 275 864 556 811
Earnings per share
(cents) 63,9 17,5 54,4 109,8
Diluted earnings
per share (cents) 62,2 16,7 53,3 107,7
Headline earnings
per share (cents) 60,6 55,4 39,0 79,9
Diluted headline
earnings per share
(cents) 59,0 54,0 38,3 78,3
Adjusted headline
earnings per share
(cents) 61,7 39,3 44,3 93,5
Adjusted diluted
headline earnings
per share (cents) 60,1 38,5 43,4 91,7
Ordinary dividend
per share paid
(cents) 19,5 18,2 16,5 33,0
Ordinary dividend
per share
envisaged (cents) 22,0 33,3 16,5 36,0
Number of ordinary
shares (`000) used
for calculation of
: earnings per
share 507 387* 507 466* 506 979*
: diluted earnings
per share 520 914* 517 727* 517 007*
(* weighted
average)
Condensed statement of changes in equity
Unaudited Unaudited Audited
27 weeks 26 weeks 52 weeks
R`000 ended Dec 04 ended Dec 03 ended Jun 04
Balance at beginning of
July 2 128 215 1 732 939 1 732 939
Net movement in treasury
shares (164) (3 469) (3 080)
Net fair value profits on
available-for-sale
investments, net of tax 2 769 1 958 8 969
Net profit for the period
324 028 275 864 556 811
Dividends distributed to
shareholders (98 942) (83 782) (167 424)
Balance at end of
December/June 2 355 906 1 923 510 2 128 215
Condensed segment information
Unaudited Unaudited Audited
27 weeks % 26 weeks 52 weeks
R`000 ended Dec 04 change ended Dec 03 ended Jun 04
Revenue - by
business segment
- Supermarkets 14 418 020 13,5 12 706 720 25 455 828
- Furniture 1 111 358 19,7 928 398 1 715 816
Total revenue 15 529 378 13,9 13 635 118 27 171 644
Operating profit -
by business segment
- Supermarkets 360 784 71,3 210 655 469 288
- Furniture 98 563 34,0 73 551 154 033
Total operating
profit 459 347 61,6 284 206 623 321
Condensed group balance sheet
Unaudited Unaudited Audited
R`000 Dec 04 Dec 03 Jun 04
Assets
Non-current assets 2 663 667 2 194 186 2 452 285
Property, plant and equipment
2 339 398 1 972 825 2 178 809
Available-for-sale
investments 32 675 57 519 6 980
Loans originated by the
enterprise 79 445 72 474 66 537
Deferred tax assets 169 394 133 479 169 620
Intangible assets 42 755 (42 111) 30 339
Current assets 5 941 566 6 709 287 5 479 081
Inventories 3 197 962 3 173 583 2 620 150
Other current receivables 1 952 938 1 823 264 1 651 701
Available-for-sale
investments - - 53 624
Loans originated by the
enterprise 11 229 62 856 19 538
Cash and cash equivalents 779 437 1 649 584 1 134 068
Total assets 8 605 233 8 903 473 7 931 366
Equity and liabilities
Capital and reserves 2 355 906 1 923 510 2 128 215
Minority interest 45 772 36 242 38 007
Non-current liabilities 217 887 222 144 218 325
Borrowings 2 450 2 450 2 450
Deferred tax liabilities 1 998 3 986 1 939
Provisions 213 439 215 708 213 936
Current liabilities 5 985 668 6 721 577 5 546 819
Borrowings 600 000 - -
Other current liabilities 5 336 760 6 670 752 5 492 419
Provisions 48 908 50 825 48 567
Bank overdraft - - 5 833
Total equity and liabilities 8 605 233 8 903 473 7 931 366
Reconciliation of headline earnings
Unaudited Unaudited Audited
27 weeks 26 weeks 52 weeks
R`000 ended Dec 04 ended Dec 03 ended Jun 04
Net profit attributable to
shareholders 324 028 275 864 556 811
Exceptional items after tax (18 647) (80 688) (160 140)
Profit on sale of unlisted
investment (17 978) - -
Profit on sale of listed
investment (669) - -
Profit on sale of operation - - (68)
Reversal of impairment of
buildings - - (3 067)
Impairment of unlisted
investment - - 5 119
Amortisation of negative
goodwill - (72 288) (150 036)
Reversal of impairment of
amounts owing by share
incentive trust participants
- - (7 946)
Payment for lease - - 3 000
cancellation
Receipt for lease - (8 400) (6 975)
cancellation
Prescription of amounts - - (167)
owing
Other items after tax
Loss on disposal and
scrapping of plant and 1 868 1 028 3 194
equipment
Amortisation of goodwill - 1 959 5 087
Headline earnings 307 249 198 163 404 952
Exchange losses after tax 5 791 26 426 68 988
Adjusted headline earnings 313 040 224 589 473 940
Supplementary information
Unaudited Unaudited Audited
R`000 Dec 04 Dec 03 Jun 04
1.Capital commitments 344 008 108 873 174 053
2.Contingent liabilities 47 227 46 834 14 707
3.Net asset value per share
(cents) 464 378 419
4.Total number of shares in
issue (adjusted for
treasury shares) 507 387 507 310 507 387
Condensed group cash flow statement
Unaudited Unaudited Audited
27 weeks 26 weeks 52 weeks
R`000 Notes ended Dec 04 ended Dec 03 ended Jun 04
Cash generated by
operations (202 009) 1 337 925 1 341 611
Operating profit before
exceptional items 459 347 284 206 623 321
Non-cash items 1 220 016 215 420 499 276
Changes in working
capital 2 (881 372) 829 899 213 447
Exceptional items 3 - 8 400 5 567
Net finance costs 21 268 11 283 22 971
Dividends received - 1 242 4 706
Dividends paid (97 370) (83 657) (171 105)
Tax paid (326 173) (9 341) (75 012)
Cash flows from
operating activities (604 284) 1 257 452 1 123 171
Cash flows from
investing activities (348 154) (361 213) (736 243)
Purchase of property,
plant and equipment (387 965) (336 363) (765 960)
Proceeds on disposal of
investments 50 000 - -
Acquisition of
subsidiaries/operations (2 329) (13 178) (14 147)
Disposal of interest in
operation - - 5 200
Other investment
activities (7 860) (11 672) 38 664
Net cash flow (952 438) 896 239 386 928
Cash flows from
financing activities 599 836 (3 469) (3 080)
Acquisition of treasury
shares (164) (3 469) (3 703)
Proceeds on sale of
treasury shares - - 623
Borrowings raised 600 000 - -
Movement in cash and
cash equivalents (352 602) 892 770 383 848
Effect of exchange rate
movements on cash and
cash equivalents 3 804 (14 892) (27 319)
Net movement in cash
and cash equivalents (348 798) 877 878 356 529
Cash flow information
1 Non-cash items
Depreciation on property,
plant and equipment 214 290 185 426 407 382
Amortisation of goodwill - 1 959 5 087
Loss on disposal and scrapping
of plant and equipment
2 670 1 481 4 117
Net fair value losses/(gains)
on financial instruments (3 838) (4 916) 3 842
Exchange losses 6 894 31 470 78 848
220 016 215 420 499 276
2 Changes in working capital
Inventories (611 412) (631 191) (98 169)
Trade and other receivables (333 955) (419 219) (227 341)
Trade and other payables 64 151 1 889 724 552 402
Movement in provisions (156) (9 415) (13 445)
(881 372) 829 899 213 447
3 Exceptional items
Exceptional items per income
statement 18 669 80 688 161 594
Profit on sale of unlisted
investment (18 000) - -
Profit on sale of listed
investment (669) - -
Profit on disposal of
operation - - (97)
Reversal of impairment of
buildings - - (3 067)
Impairment of unlisted
investment - - 5 119
Reversal of impairment of
amounts owing by share
incentive trust participants - - (7 946)
Amortisation of negative
goodwill - (72 288) (150 036)
- 8 400 5 567
Directorate and administration
Executive directors:
JW Basson (chief executive), CG Goosen (deputy managing director),
B Harisunker, BR Weyers, AN Van Zyl
Non-executive directors:
CH Wiese (chairman), JJ Fouche, TRP Hlongwane, JA Louw, JF Malherbe,
JG Rademeyer
Company secretary:
AN van Zyl
Registered office:
Cnr William Dabs and Old Paarl Roads, Brackenfell, 7560, South Africa
PO Box 215, Brackenfell, 7561, South Africa
Telephone: +27 (0)21 980 4000
Facsimile: +27 (0)21 980 4050
Website: www.shoprite.co.za
Auditors: PricewaterhouseCoopers Inc
PO Box 2799, Cape Town, 8000, South Africa
Transfer secretaries:
Computershare Investor Services 2004 (Pty) Ltd
PO Box 61051, Marshalltown, 2107, South Africa
Telephone +27 (0)11 370 5000
Facsimile +27 (0)11 688 5520
Website: www.computershare.com
Sponsor:
Nedbank Capital
PO Box 1144, Johannesburg, 2000, South Africa
Telephone +27 (0)11 295 8602
Facsimile +27 (0)11 294 8602
Website: www.nedbank.com
website: www.shoprite.co.za
Date: 22/02/2005 08:00:21 AM
Produced by the JSE SENS Department
