| Thu 20 Apr 2006, 8:01 | | Pick `n Pay /Pikwik - Reviewed group results for t |
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PIK PWK
PIK PWK
Pick `n Pay /Pikwik - Reviewed group results for the year ended 28 February 2006
Pick `n Pay Stores Limited
(Incorporated in the Republic of South Africa)
(Registration number 1968/008034/06)
Share Code: PIK & ISIN: ZAE000005443
("Pick `n Pay")
Pick `n Pay Holdings Limited(Incorporated in the Republic of South Africa)
(Registration number 1981/009610/06)Share code: PWK & ISIN code:
ZAE000005724("Pikwik")
REVIEWED GROUP RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2006
Turnover Up 10.0%
Trading profit Up 16.9%
Operating profit Up 13.0%
Final dividend per share Up 18.0%
Headline earnings per share Up 17.1%
REVIEW OF OPERATIONS
GROUP OVERVIEW
We are pleased to report that the Group has achieved a 17.1% increase in
Headline Earnings per share for the year ended 28 February 2006. The result is
against a background of various challenges we have had to overcome during the
financial year including a very competitive trading environment with continued
low inflation and the industrial action at Pick "n Pay in the middle of the
year.
The Group has adopted International Financial Reporting Standards ("IFRS") and
we draw your attention to the separate section of this result outlining the
changes we have made in this regard.
Group turnover at R35.1 billion is an increase of 10.0% and shows good real
growth above the very low levels of inflation, with the Southern Africa segment
achieving a growth of 11.3%.
The increase in trading profit of 16.9% for the Group is a good performance.
Trading margin has increased from 2.8% to 3.0%.
Headline earnings at R705.6 million increased by 15.2% for the year. As a result
of the concentration effect of share repurchases, mainly towards the end of the
prior year, our headline earnings per share at 153.02 cents is up 17.1%.
PICK "N PAY RETAIL
The Retail division had a commendable increase in both turnover and
profitability, despite the negative impact that the industrial action had on the
business. The continued low inflation rate, which averaged 3.5% for the year,
has been great for consumers and continues to focus our attention on cost
control.
Supermarkets - during the year eight new corporate supermarkets were opened with
a further 10 stores planned in the year ahead.
Family and Mini Market franchise stores continue to make a significant
contribution to the Group. Franchise stores now total 179 with 11 new Family
stores being opened in the current year. In the year ahead we will open a
further 24 Family stores.
Hypermarkets were particularly affected by the industrial action, but as a brand
still continue to be the cheapest food retail outlet in the country. The next
financial year will be particularly exciting with two new Hypermarkets in
Zambezi Road, Pretoria and Old Pretoria Road, Centurion being opened. These will
be the first new Hypermarkets opened in many years and shows our commitment to
this large retail format. A further two stores are currently being constructed
for opening in the year ending February 2008.
The Retail division has also been expanding our liquor outlets to 22 and
clothing stores to 18 during the year. Liquor outlets, adjacent to Supermarkets
and Hypermarkets, have been particularly successful and as a format show good
potential for the future. Our clothing stores expanded by a further 10 stores
this year.
GROUP ENTERPRISES
Score Supermarkets had a very strong trading year showing real growth in
turnover and significantly reduced expenses. Following this turnaround, in the
year ahead we will open seven new stores and convert a further 28 stores to the
successful "Nambawane" format as well as completing the scanning rollout.
Boxer Superstores had yet another excellent trading year showing real increases
in both turnover and profit contribution. In the current year three new stores
were opened. Next year will see Boxer open eight new supermarkets and the
completion of its rollout of scanning in all stores.
TM Supermarkets continues to trade under very trying circumstances with
inflation reaching levels of over 900%. During the year there was a significant
weakening in the Zimbabwean Dollar which is currently over $16,500 to the Rand.
FRANKLINS AUSTRALIA
Following the change-over to our own distribution channels at the beginning of
the year the business is far more efficient, as is evident from the trading loss
in the second half of the year being reduced to R29.2 million from the R63.5
million incurred in the first half. The year ahead will see further significant
reductions in the losses.
The transition to the SAP software system has been very successful and has
assisted us in planning for the implementation of this system in our South
African operations.
An important milestone in the last few months has been the development of our
franchise model which is currently being piloted.
Our main focus at Franklins in the year ahead will be the refinement and rollout
of our franchise format as well as the opening of three new corporate stores.
GENERAL COMMENT AND PROSPECTS
We have had an exceptionally busy trading year and are pleased that we have
again produced a strong performance. We are excited by the prospect of a
significant number of new stores being opened in the 2007 financial year. Each
division within the Group is highly focused on their respective goals in the
next year and we are confident that we will be able to achieve an acceptable
increase in headline earnings.
We would like to express our appreciation for the loyal support shown by all our
employees, customers and suppliers.
For and on behalf of the Board
Raymond Ackerman
Chairman
Sean Summers
Chief Executive Officer
19 April 2006
PICK "n PAY STORES LIMITED
Share code: PIK
ISIN code: ZAE000005443
INCOME STATEMENT
Reviewed Audited
Year to Year to
February February
2006 Growth 2005
Rm % Rm
Revenue (note 2) 36 784.6 33 343.9
Turnover 35 078.4 10.0 31 885.0
Cost of merchandise sold (29 060.1) (26 388.2)
Gross profit 6 018.3 5 496.8
Other trading income 1 649.3 1 377.5
Trading expenses (6 620.2) (5 978.7)
Trading profit 1 047.4 16.9 895.6
Interest received 56.7 81.4
Operating profit 1 104.1 13.0 977.0
Interest paid (37.6) (32.9)
Dividends received 0.2 -
Share of associate"s profit 23.4 14.6
Exceptional items (2.5) 21.6
Profit before tax 1 087.6 980.3
Tax (note 5) (384.5) (346.2)
Net profit for the year 703.1 634.1
Trading profit margin 3.0% 2.8%
Operating profit margin 3.1% 3.1%
Per share - cents
Earnings 152.49 135.30
Diluted earnings 144.42 129.20
Interim dividend - No. 75 paid 23.30 19.80
Final dividend - No. 76 payable 90.50 18.0 76.70
Total dividend 113.80 96.50
Headline earnings reconciliation
Net profit for the year 703.1 634.1
Exceptional items 2.5 (21.6)
Loss on sale of fixed assets 6.8 3.8
Profit on sale of property (4.3) (1.4)
Profit on sale of Boardmans - (24.0)
Headline earnings 705.6 15.2 612.5
Per share - cents
Headline earnings 153.02 17.1 130.70
Diluted headline earnings 144.92 124.84
BALANCE SHEET
Reviewed Audited
February February
2006 2005
Rm Rm
Assets
Non-current assets
Goodwill (note 4) 634.9 634.2
Intangible asset - software development 110.9 25.3
Property 499.0 251.6
Equipment and vehicles 1 349.0 1 133.6
Investments 9.3 3.6
Investment in associate 47.0 23.6
Loans 96.7 95.8
Operating lease assets 4.8 3.7
Participation in export partnerships 71.8 102.7
Deferred tax 234.1 205.5
3 057.5 2 479.6
Current assets
Inventory 1 984.2 1 858.6
Trade and other receivables 750.7 634.5
Cash and cash equivalents 944.6 1 329.0
3 679.5 3 822.1
Total assets 6 737.0 6 301.7
Equity and liabilities
Total shareholders" equity 865.3 714.8
Non-current liabilities
Interest-bearing debt 172.3 178.6
Retirement scheme obligations 194.8 189.8
Operating lease obligations 539.8 490.9
906.9 859.3
Current liabilities
Interest-bearing debt 74.4 56.6
Trade and other payables 4 654.1 4 282.3
Tax 236.3 388.7
4 964.8 4 727.6
Total equity and liabilities 6 737.0 6 301.7
Shares in issue - millions 486.1 486.1
Weighted average shares in issue -
millions (note 3) 461.1 468.7
Net asset value - cents per share
(property value based on directors"
valuation) 260.2 211.5
CASH FLOW STATEMENT
Reviewed Audited
Year to Year to
February February
2006 2005
Rm Rm
Trading profit 1 047.4 895.6
Depreciation and amortisation 325.4 304.7
Share options expense 22.4 10.0
Net operating lease obligations 47.8 58.9
Trade and other payables 377.9 365.9
Inventory (125.6) (341.1)
Trade and other receivables (85.2) 15.7
Cash generated by trading activities 1 610.1 1 309.7
Interest received 56.7 81.4
Cash generated by operations 1 666.8 1 391.1
Interest paid (37.6) (32.9)
Dividend received from associate - 6.1
Dividends received 0.2 -
Dividends paid (452.0) (381.6)
Tax paid (565.5) (341.1)
Net cash inflow from operating activities 611.9 641.6
Property (248.2) (73.7)
Equipment and vehicles (538.6) (421.0)
Intangible asset - software development (90.0) (25.3)
Acquisition of stores (5.2) -
Loans advanced (0.9) (6.7)
Proceeds from sale of Boardmans - 78.1
Net cash outflow from investing activities (882.9) (448.6)
Interest-bearing debt raised/(repaid) 11.4 (112.9)
Issue of new shares - 12.2
Share repurchases (132.0) (267.3)
Take-up of share options from share trust 25.2 23.8
Net cash outflow from financing activities (95.4) (344.2)
Net decrease in cash and cash equivalents (366.4) (151.2)
Cash and cash equivalents at 1 March 1 329.0 1 502.5
Exchange rate effect on cash and cash
equivalents (18.0) (22.3)
Cash and cash equivalents at 28 February 944.6 1 329.0
STATEMENT OF CHANGES IN EQUITY
Reviewed Audited
2006 2005
Rm Rm
Total shareholders" equity at 1 March -
as previously reported 714.8 1 132.4
IFRS adjustments (refer IFRS disclosure)
Operating leases - (299.9)
Inventory valuation - (11.0)
Investment in associate - 10.0
Goodwill write-off (note 4) - (57.5)
Total shareholders" equity at 1 March -
as re-stated 714.8 774.0
Net profit for the year - as re-stated 703.1 634.1
Net profit for the year - as previously
reported 649.6
IFRS adjustments (refer IFRS disclosure)
Operating leases (46.2)
Inventory valuation (3.2)
Investment in associate 8.6
Share options expense (10.0)
Goodwill amortisation 35.3
Dividends paid (452.0) (381.6)
Issue of new shares - 12.2
Share repurchases (132.0) (267.3)
Take-up of share options from share trust 25.2 23.8
Share options expense 22.4 10.0
Revaluation of investments 5.7 0.9
Foreign currency translation (21.9) (91.3)
Total shareholders" equity at 28 February 865.3 714.8
SEGMENTAL REPORT
Southern Africa Australia
Reviewed Audited Reviewed Audited
Feb 2006 Feb 2005 Feb 2006 Feb 2005
Rm Rm Rm Rm
Turnover 31 143.6 27 989.2 3 934.8 3 895.8
- Australian dollars 810.9 841.1
Trading profit/(loss) 1 140.1 958.0 (92.7) (62.4)
- Australian dollars (19.0) (13.4)
Exceptional items (2.5) 21.6 - -
Depreciation and
amortisation, included
in trading profit/(loss) (279.7) (267.9) (45.7) (36.8)
Goodwill 171.2 171.2 463.7 463.0
Intangible asset -
software development 81.3 - 29.6 25.3
Property, equipment
and vehicles 1 610.7 1 203.5 237.3 181.7
Inventory and
receivables 2 349.4 2 123.1 385.5 370.0
Trade and other payables 4 229.1 3 842.8 425.0 439.5
SEGMENTAL REPORT
Total
Reviewed Audited
Feb 2006 Feb 2005
Rm Rm
Turnover 35 078.4 31 885.0
- Australian dollars
Trading profit/(loss) 1 047.4 895.6
- Australian dollars
Exceptional items (2.5) 21.6
Depreciation and
amortisation, included
in trading profit/(loss) (325.4) (304.7)
Goodwill 634.9 634.2
Intangible asset -
software development 110.9 25.3
Property, equipment
and vehicles 1 848.0 1 385.2
Inventory and receivables 2 734.9 2 493.1
Trade and other payables 4 654.1 4 282.3
NOTES TO THE FINANCIAL INFORMATION
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 audit opinion will be issued in due course
once the annual financial statements have been audited.
1. The Group has changed its accounting policies to comply with International
Financial Reporting Standards ("IFRS") effective 1 March 2004. All comparative
information has been adjusted accordingly.
Refer to the separate IFRS disclosure for further information.
2. Revenue comprises turnover, other trading income, interest received and
dividends received.
3. 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.
4. An amount of goodwill on the acquisition of Franklins in Australia in 2002
should have been expensed in the year incurred. Goodwill and opening accumulated
profits have been adjusted accordingly.
5. The Franklins deferred tax asset of R81.4 million, accumulated since
acquisition, has been written off in the tax charge in the year under review.
The impact of this write-off has been largely offset by the release of prior
year tax overprovisions.
COMPLIANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS")
In order to comply with IFRS the Group has adopted the following accounting
policies. All comparative information has been adjusted to comply with these new
accounting policies.
1. Operating leases with fixed rental escalations are now charged to the income
statement on a straight line basis as opposed to a cash basis in previous years.
This has necessitated the raising of a provision for lease expenses and an asset
for lease income on the balance sheet. This provision and asset will be reversed
during the latter part of each lease term when the actual cash flow exceeds the
respective income statement amounts.
2. The valuation of inventory now takes account of normal cash discounts which
has the effect of reducing the inventory valuation at the reporting date.
3. As the Group holds a 25% interest in TM Supermarkets in Zimbabwe we now
recognise our share of after tax profits per the equity accounting method.
Previously, we only accounted for dividends actually received.
4. Share options (share-based payments) granted to employees after November 2002
are valued using a binomial valuation model and this value is charged to the
income statement over the expected life of the option.
5. Goodwill is no longer amortised and is now stated at its carrying value as at
1 March 2004. This carrying value is reviewed annually for impairment.
6. We have changed various income statement classifications to allow for the
above changes and also to comply with IFRS classifications.
PICK "n PAY HOLDINGS LIMITED ("PIKWIK")
REVIEWED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2006
Share Code: PWK ISIN code: ZAE000005724
Pikwik"s only asset is its 52.94% (2005: 52.94%) 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 R373.5 million (2005:
R324.3 million).
Headline earnings per share, calculated using the weighted average number of
shares in issue during the year of 505.4 million (2005: 501.1 million), is 73.90
cents (2005: 64.71 cents). Pikwik"s final dividend per share is 44.18 cents
(2005: 37.43 cents).
DIVIDEND DECLARATIONS
The directors have declared the following cash dividends:
Pick "n Pay Stores Limited (No. 76) 90.50 cents per share
Pick "n Pay Holdings Limited (No. 49) 44.18 cents per share
For both Companies, the last day of trade in order to participate in the
dividend (CUM dividend) will be Friday, 2 June 2006.
The shares will trade EX dividend from the commencement of business on Monday, 5
June 2006 and the record date will be Friday, 9 June 2006.
The dividends will be paid on Monday, 12 June 2006.
Share certificates may not be dematerialised or rematerialised between Monday, 5
June 2006 and Friday, 9 June 2006, both dates inclusive.
On behalf of the boards of directors
GF Lea
Company Secretary
19 April 2006
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
These results are also available on our website http://www.picknpay.co.za
Date: 20/04/2006 08:01:55 AM Produced by the JSE SENS Department
