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SHOPRITE HOLDINGS LIMITED (REGISTRATION NUMBER 05/07721/06)
PROFIT ANNOUNCEMENT FOR THE 12 MONTHS ENDED 30 JUNE 1999 CONSOLIDATED INCOME STATEMENT
AUDITED AUDITED CHANGE 12 MONTHS TO 12 MONTHS TO % R'000 30/06/99 30/06/98
TURNOVER 17 245 920 14 476 324 19 OPERATING PROFIT BEFORE
EXCEPTIONAL ITEMS 125 921 236 655 (47) EXCEPTIONAL ITEMS (1 345) (2 028) OPERATING PROFIT AFTER
EXCEPTIONAL ITEMS 124 576 234 627 (47) INVESTMENT INCOME 116 422 93 126 25 FINANCE CHARGES 102 641 46 611 120 PROFIT BEFORE TAXATION 138 357 281 142 (51) TAXATION 19 631 31 843 (38) PROFIT AFTER TAXATION 118 726 249 299 (52) OUTSIDE SHAREHOLDERS' INTEREST 4 416 7 468
NET PROFIT 114 310 241 831 (53) HEADLINE EARNINGS PER SHARE (CENTS) 21.3 46.1 (53.8) EARNINGS PER SHARE (CENTS)
AFTER EXCEPTIONAL ITEMS 21.0 45.7 (54.0) DISTRIBUTION TO SHAREHOLDERS
(CENTS PER SHARE) 14.0 14.0
DIVIDEND COVER (TIMES) 1.5 3.3 NUMBER OF ORDINARY SHARES ('000) USED FOR CALCULATION OF EARNINGS
PER SHARE (WEIGHTED AVERAGE*) 543 479 529 275* CONSOLIDATED BALANCE SHEET
AUDITED AUDITED
(R'000) 30/06/99 30/06/98
ORDINARY SHAREHOLDERS' FUNDS 1 092 100 1 055 427
OUTSIDE SHAREHOLDERS' INTEREST 25 048 21 601
INTEREST-BEARING DEBT 349 602 173 806
CAPITAL EMPLOYED 1 466 750 1 250 834
FIXED ASSETS 1 138 431 963 471
INVESTMENTS 135 970 364 550
CURRENT ASSETS 3 879 544 3 432 170
INVENTORIES 2 083 302 2 052 037
ACCOUNTS RECEIVABLE 1 265 478 1 336 190
BANK BALANCES AND CASH 530 764 43 943
TOTAL ASSETS 5 153 945 4 760 191
INTEREST-FREE LIABILITIES 3 687 195 3 509 357
EMPLOYMENT OF CAPITAL 1 466 750 1 250 834 CONSOLIDATED CASH FLOW STATEMENT
AUDITED AUDITED
12 MONTHS TO 12 MONTHS TO
(R'000) 30/06/99 30/06/98
CASH GENERATED BY OPERATIONS 530 613 91 020
NET INVESTMENT INCOME 1 733 24 732
DIVIDENDS RECEIVED 12 048 21 784
DIVIDENDS PAID (81 536) (68 378)
CASH FLOW FROM OPERATIONS 462 858 69 158
INVESTMENT ACTIVITIES (151 833) (387 469)
ACQUISITION OF FIXED ASSETS (373 024) (317 910)
OTHER INVESTMENT ACTIVITIES 221 191 (69 559)
NET CASH FLOW 311 025 (318 311)
FINANCING ACTIVITIES 175 796 (133 571)
PROCEEDS ON SHARE ISSUE - 332 991
NET MOVEMENT IN DEBT 175 796 (466 562)
MOVEMENT IN BANK BALANCES AND CASH 486 821 (451 882) ACQUIRED THROUGH ACQUISITION
OF OPERATIONS - 139 961
NET MOVEMENT IN BANK BALANCES AND CASH 486 821 (311 921) SUPPLEMENTARY INFORMATION
AUDITED AUDITED
12 MONTHS TO 12 MONTHS TO
(R'000) 30/06/99 30/06/98
1. DEPRECIATION FOR THE PERIOD 189 416 138 761 2. DIVIDENDS RECEIVED (INCLUDED IN
INVESTMENT INCOME) 12 048 21 784
3. CAPITAL EXPENDITURE FOR THE PERIOD 373 024 317 910
30/06/99 30/06/98 4. COMMITMENTS FOR CAPITAL
EXPENDITURE CONTRACTED FOR 71 330 44 990 5. INVESTMENTS: UNLISTED - AT COST AND
DIRECTORS' VALUATION 132 699 361 279
LISTED - AT COST 3 271 3 271
- AT MARKET VALUE 6 141 8 569
6. CURRENT LIABILITIES 3 967 522 3 557 176 7. NUMBER OF ORDINARY
SHARES IN ISSUE ('000) 543 479 543 479
8. CONTINGENT LIABILITIES 412 358 683
9. NET ASSET VALUE PER SHARE (CENTS) 201 194 COMMENTS ON THE RESULTS
1. IN COMPARING THE RESULTS FOR THE 12 MONTHS TO 30 JUNE 1999 WITH THOSE OF THE PREVIOUS YEAR, IT MUST BE BORNE IN MIND THAT THE RESULTS OF OK BAZAARS (1929) LTD ("OK BAZAARS") WERE INCORPORATED WITH THOSE OF THE GROUP FOR THE LAST 8 MONTHS OF THE 1998 FINANCIAL YEAR ONLY.
2. ALL THE DIVISIONS EXCEPT OK FURNITURE REPORTED SATISFACTORY SALES. THE DROP IN THE SALES OF THE LATTER IS DIRECTLY RELATED TO THE SUBSTANTIAL INCREASE IN INTEREST RATES ON CREDIT SALES AND IS IN LINE WITH WHAT HAPPENED IN THE REST OF THE INDUSTRY. SALES HAVE ALREADY STARTED TO INCREASE SINCE INTEREST RATES HAVE BEEN REDUCED.
3. COMPARISONS BETWEEN THE SECOND-LAST AND LAST STOCKTAKINGS OF THE YEAR UNDER REVIEW REVEALED DISCREPANCIES ON AN UNPRECEDENTED SCALE. THESE ABNORMAL SHORTFALLS WERE CONFINED TO ABOUT 76 OF THE 158 SUPERMARKET STORES IN THE GROUP'S GAUTENG REGION.
THE FOLLOWING FACTORS CONTRIBUTED TO PUTTING PRESSURE ON THE GROUP'S NORMAL INTERNAL CONTROLS IN IDENTIFYING THESE ABERRANT TENDENCIES IMMEDIATELY: - THE REBUILDING AND CONVERSION OF 79 OK STORES TO THE SHOPRITE/CHECKERS TRADEMARK DURING THE PERIOD UNDER REVIEW
- THE SWITCH FROM THE DIRECT MERCHANDISING OF SHOPRITE STORES TO MERCHANDISING BY THE DISTRIBUTION CENTRES IN GAUTENG AND THE ATTENDANT PILING-UP OF DOCUMENTATION
- THE CONVERSION TO ANOTHER COMPUTER SYSTEM FOR THE DISTRIBUTION CENTRES, AND - THE OPENING OF AN ADDITIONAL ADMINISTRATIVE OFFICE IN PRETORIA.
INITIALLY IT WAS THOUGHT THAT A SYSTEMS FAULT WAS TO BLAME. AFTER A THOROUGH INVESTIGATION, HOWEVER, THE BOARD AND THE GROUP'S EXTERNAL AUDITORS CAME TO THE CONCLUSION THAT THERE WERE NO MATERIAL DEFECTS IN THE DESIGN OF THE ACCOUNTING STOCK CONTROL SYSTEMS.
4. THE GROUP'S OPERATIONS ELSEWHERE IN AFRICA RESULTED IN A FOREIGN EXCHANGE LOSS OF R25 MILLION OWING TO EXCHANGE RATE FLUCTUATIONS BETWEEN THE RAND AND THE CURRENCIES OF THE COUNTRIES IN WHICH SHOPRITE IS OPERATING. ALTHOUGH THIS LOSS WAS LARGELY ATTRIBUTABLE TO THE FINANCING OF CAPITAL GOODS, THE BOARD DECIDED TO SHOW THESE LOSSES AS OPERATING LOSSES IN ACCORDANCE WITH THE GROUP'S EXISTING ACCOUNTING POLICY.
5. FINANCE CHARGES WERE SIGNIFICANTLY HIGHER THAN IN THE PREVIOUS YEAR OWING TO CAPITAL EXPENDITURE OF R373 MILLION ON CONVERTING THE REMAINING OK STORES. THIS CAPITAL EXPENDITURE RESULTED IN INTEREST-BEARING DEBT INCREASING.
6. AS THE OUTCOME IN THE DISPUTE BETWEEN THE GROUP AND SAB IS NOT YET KNOWN, FOR REASONS OF PRUDENCY NO PROVISION HAS BEEN MADE FOR POSSIBLE INTEREST RECEIVABLE ON THE AMOUNT INVOLVED.
7. INVESTMENTS, CASH AND CONTINGENT LIABILITIES: AT THE END OF THE FINANCIAL YEAR THE BOARD DECIDED TO FINANCE THE LOAN TO THE SHARE INCENTIVE TRUST FROM EXTERNAL SOURCES. THIS DECISION WAS TAKEN IN ORDER TO HAVE CAPITAL ON HAND FOR EXPANSIONS BOTH INSIDE AND OUTSIDE SOUTH AFRICA. THE COMPANY GUARANTEES THIS LOAN TO THE TRUST, WHICH EXPLAINS THE INCREASE IN CONTINGENT LIABILITIES. PROSPECTS
THE BOARD IS SATISFIED THAT THE GROUP WILL SOON RETURN TO A SATISFACTORY LEVEL OF PROFITABILITY. DIVIDEND
THE BOARD HAS DECLARED A FINAL DIVIDEND OF 6,5 CENTS, BRINGING THE TOTAL DISTRIBUTION FOR THE YEAR TO 14,0 CENTS PER SHARE (1998: 14,0 CENTS). THE FINAL DIVIDEND WILL BE PAYABLE ON 23 SEPTEMBER 1999 TO SHAREHOLDERS REGISTERED IN THE COMPANY'S REGISTER OF SHAREHOLDERS AT THE CLOSE OF BUSINESS ON 10 SEPTEMBER 1999. YEAR 2000 COMPLIANCE
- CRITICAL OPERATING SYSTEMS WERE IDENTIFIED AND THEIR COMPLIANCE WERE TESTED. WHERE NECESSARY, SOFTWARE WAS SUCCESSFULLY UPGRADED.
- CERTAIN NON-CRITICAL SOFTWARE WAS IDENTIFIED AS NOT BEING YEAR 2000
COMPLIANT. IT WILL BE REPLACED OR ADAPTED BEFORE THE END OF 1999.
- KEY SUPPLIERS WERE CONTACTED IN ORDER TO CONFIRM COMPLIANCE WITH YEAR 2000 REQUIREMENTS. CONFIRMATION WILL BE OBTAINED IN GOOD TIME OR ALTERNATIVE SUPPLIERS WILL BE IDENTIFIED. BY ORDER OF THE BOARD CH WIESE JW BASSON
CHAIRMAN MANAGING DIRECTOR 23 AUGUST 1999 C/O WILLIAM DABS AND OLD PAARL ROADS BRACKENFELL
