To view the PDF file, sign up for a MySharenet subscription.

SHP - Shoprite Holdings Limited - Interim results for the 26 weeks to 31

Release Date: 20/02/2007 07:30
Code(s): SHP
Wrap Text

SHP - Shoprite Holdings Limited - Interim results for the 26 weeks to 31 December 2006 SHOPRITE HOLDINGS LIMITED (Reg. No. 1936/007721/06) (ISIN: ZAE000012084) (JSE Share code: SHP) (NSX Share code: SRH) (LuSE Share code: SHOPRITE) ("the Group") SHOPRITE HOLDINGS: INTERIM RESULTS FOR THE 26 WEEKS TO 31 DECEMBER 2006 Key information Trading profit was up 27,9% to R717,3 million. Turnover increased 14,9% - from R16,621 billion to R19,105 billion. Non-RSA supermarkets achieved 28,0% sales growth. Diluted headline earnings per share from continued operations rose 26,0% to 82,8 cents. Dividend per share proposed increased 29,6% to 35,0 cents. Whitey Basson, chief executive, commented: Management is satisfied with the growth achieved in the first six months of the 2007 financial year, especially as this was achieved despite 12 weeks of industrial action that affected, in particular, the operations of the Shoprite brand. The Group also managed to substantially recoup the market share lost during those turbulent times and for December 2006 that share was back to just fractionally below what it had been in December 2005. Although our primary business remains food retailing, our offering spans an ever-increasing range that also encompasses furniture stores, pharmacies, liquor outlets, consumer convenience services and the country`s most extensive booking facilities for theatre and entertainment. 20 February 2007 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 076 390 7725 Operating environment Despite interest rates edging up consumer spending remained high with no noticeable change in spending patterns in the food retail sector. The rapidly expanding new middle class with its growing disposable income remains the single most powerful driver of retail growth in South Africa, boosted by the more than half a million new jobs that came on stream in the previous year. Credit is still widely available to consumers and the swing away from cash is only now starting to stabilise in, for instance, the durable and semi-durable market. The prices of most home entertainment products are still subject to deflation. On the other hand food inflation, in categories such as meat products, rose sharply, averaging 8,0% for the period under review as against 2,8% in the corresponding period in 2005. The Group`s own internal inflation rate rose to 5,6% in the review period from 2,5% in 2005. Comments on the results Income statement Total turnover Total turnover increased by 14,9% from R16,621 billion to R19,105 billion. The negative impact of the extended industrial action was countered by rising food inflation and the turnover generated by the Group`s net gain of 40 new stores during the period. Gross profit Gross profit was boosted by increased turnover in the higher margin perishable foods and service departments as well as by a larger contribution from non- food sales to total turnover. Expenses Overhead expenses were well managed and kept within budgeted parameters. Trading profit Given the strong growth in turnover, the increased margins achieved and the strictly contained overhead costs, trading profit advanced 27,9%. Trading margin The trading margin of 3,8% was higher than a year ago and is the highest yet recorded by the Group. It is a function of the growth in gross profit and the slower increase in overhead costs, supported by an improved performance of the Group`s non-RSA operations. Interest received and finance costs Net interest income was almost unchanged due to the investment in new stores. Exchange rate differences The rand`s slight weakening against the US dollar and other currency fluctuations during the six months resulted in a forex gain of R19,5 million as against a forex loss of R28,7 million in the corresponding period. Income of a capital nature The income of a capital nature (in previous years referred to as exceptional items) in the income statement of R21,8 million relates mainly to profit achieved on the sale of some properties. Dividend declared The Board declared an interim dividend of 35,0 cents per ordinary share (2006: 27,0 cents). Balance sheet Intangible assets The increase in intangible assets relates mainly to the investment in the Group`s new back-office system. Inventories The increase of 12,5% in inventory to R4,074 billion was mainly the result of provisioning a net of 40 new supermarkets opened during the reporting period. Management also took a strategic decision to buy forward aggressively for the 2007 Back to School campaign and to avoid out-of-stock situations over the festive season due to reduced supplier services during that period. This decision was vindicated by the strong surge in turnover during December and since the start of 2007. Operational review The Group as a whole performed well during the period under review. It recorded an increase of 27,9% in trading profit to R717,3 million (2006: R560,9 million). It is increasingly benefiting from its decision to position its brands as chains of destination stores offering consumers higher levels of convenience, and the Group`s operations now include a growing number of in-store pharmacies as well as Money Market kiosks that provide an extensive range of consumer convenience services as well as booking facilities for theatre and sporting events countrywide. These additional services play an important role in bringing growing numbers of consumers into our stores. The Group`s core target market, was not materially affected by the rise in interest rates and consumer spending continued unabated. Number of outlets JUN 2006 Open Closed DEC Confirmed
2006 New stores JUN 2007 SUPERMARKETS 574 25 (10) 589 15 - SHOPRITE 348 13 (1) 360 7 - CHECKERS 110 3 (0) 113 2 - CH HYPER 24 0 (0) 24 0 - USAVE 92 9 (9) 92 6 HUNGRY LION 74 19 (1) 92 8 FURNITURE 198 7 (0) 205 10 - OK FURNITURE 171 6 (0) 177 10 - HOUSE & HOME 27 1 (0) 28 0 TOTAL OWN STORES 846 51 (11) 886 33 - OK FRANCHISE 253 24 (14) 263 2 - H/LION FRANCHISE 2 0 (0) 2 0 TOTAL FRANCHISE 255 24 (14) 265 2 TOTAL STORES 1101 75 (25) 1151 35 COUNTRIES OUTSIDE RSA 16 0 (0) 16 0 RSA supermarkets The Group`s supermarket operation in South Africa, encompassing three chains - Shoprite, Checkers and Usave - forms the core of the business and represents 79,1% of total turnover. Management is satisfied with the performance of this division which grew turnover by 13,9% to R15,111 billion. The number of customer transactions increased 6,1% while growth in basket size amounted to 7,3%. Market share lost during the industrial action in the review period was regained to a large extent by December. The Group is increasingly being offered space on a preferential basis in new growth nodes and thus is able to position new stores in the right locations. However, management believes the slower growth on existing business confirms its conviction that the market is nearing saturation. Shoprite Shoprite, by far the largest of the three main brands and recently named South Africa`s number one retail brand in the annual Sunday Times/Markinor Top Brand survey, increased turnover by 11,8% despite being hardest hit by the industrial action referred to earlier. It remains the preferred destination of first-time home-owners as well as of the rapidly expanding middle class. To satisfy the aspirations of all these consumers Shoprite recently completed an extensive store repositioning programme. During the review period Shoprite increased the number of customer transactions by 4,5% and grew basket size by 6,8%. Checkers Checkers is positioning itself more strongly in the higher-income sector and the differentiation between Shoprite and Checkers customers has grown to the point where cannibalisation has been virtually eliminated. The differentiation is mainly in the area of lifestyle while much attention is also being paid to improving customer relations and service delivery. Consumers are responding with increasing support. In the six months to end December, Checkers boosted turnover by 16,1%. It increased the number of customer transactions by 8,6% and basket size by 6,9% in its 137 outlets. Since 2005 it has grown its LSM 8 to 10 customer base by 14%. Usave This small-format, no-frills discounter of primarily hard groceries substantially increased its acceptance across the consumer spectrum. Management continues to refine and expand the range. Usave`s format allows it to establish outlets in areas too small for full- scale supermarkets, thereby promoting the Group`s penetration of the market. Its primary growth is therefore taking place mostly in rural areas and smaller trading nodes. Operations outside South Africa The Group`s investments in Africa are increasingly paying off as it grows and stabilises its presence in the 16 countries in which it operates outside the RSA. All these countries improved on past contributions and together reported turnover growth of 28,0%. The Group`s first supermarket in Lagos, Nigeria, performed well in the first year of operation while its franchise store in Mumbai in India reported substantial increases in turnover and customer numbers. The weakening of the rand assisted exports into Africa at acceptable margins while trading was enhanced by the stability of most major African currencies. OK Franchise This division regained its momentum by growing its member base. During the period under review it gained 24 new accounts as part of an intensive campaign to expand its membership base. To balance its strong rural presence, the membership drive is primarily aimed at strengthening the urban visibility of its three brands - OK Grocer, OK Foods and OK Minimark. During the period under review the division opened its first liquor outlet, under the name Enjoy. Furniture Consumer spending was particularly evident in the durable and semi-durable markets, enabling the Group`s furniture division to maintain sales growth of 14,2% in an intensely competitive environment, particularly in the appliances and home entertainment sectors. Margins remained under pressure, but were maintained with the help of effective cost control and stock management systems and the Division reported a profit increase of 14,8%. Like the rest of the retail furniture sector, the division continued to trade in an environment of negative price inflation. The swing to cash sales in the business has started to stabilise despite credit remaining freely available pending the provisions of the National Credit Act becoming fully operational in June 2007. Corporate governance The Group is committed to 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 in the Listings Requirements of the JSE Ltd. Dividend no 116 The Board has declared an interim dividend of 35,0 cents (2006: 27,0 cents) per ordinary share, payable to shareholders on Monday, 19 March 2007. The last day to trade cum dividend will be Friday, 9 March 2007. As from Monday, 12 March 2007, all trading of Shoprite Holdings Ltd shares will take place ex dividend. The record date is Friday, 16 March 2007. Share certificates may not be dematerialised or rematerialised between Monday, 12 March 2007, and Friday, 16 March 2007, both days inclusive. Accountability These condensed consolidated interim results have been prepared in accordance with International Financial Reporting Standards ("IFRS"), IAS 34: Interim Reporting, 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 2006. Comparative information for the six months ended December 2005 was adjusted to reflect the recalculation of the impact of hyperinflationary economies on the Group`s results. This recalculation was done in line with the final review of the effect of hyperinflation on the Group`s results for the 12 months ended June 2006. This adjustment had no material impact on the Group`s earnings. CONDENSED GROUP INCOME STATEMENT Unaudited Unaudited Audited 6 months 6 months for the year ended % ended ended R`000 Dec 06 change Dec 05 Jun 06 Sale of merchandise 19 105 298 14,9% 16 620 683 33 511 287 Cost of sales (15 265 063) 13,8% (13 419 769) (26 715 806) Gross profit 3 840 235 20,0% 3 200 914 6 795 481 Other operating income 397 710 14,3% 347 850 765 180 Depreciation and amortisation (247 494) 25,3% (197 521) (434 866) Operating leases (465 896) 26,5% (368 168) (841 446) Employee benefits (1 487 189) 11,8% (1 330 250) (2 815 830) Other expenses (1 320 093) 20,9% (1 091 942) (2 215 944) Trading profit 717 273 27,9% 560 883 1 252 575 Exchange rate gains/(losses) 19 504 (168,1%) (28 658) 8 445 Income of a capital nature 21 835 167,8% 8 153 166 906 Operating profit 758 612 40,4% 540 378 1 427 926 Interest received 48 755 29,7% 37 578 96 385 Finance costs (46 237) 34,2% (34 460) (89 736) Profit before tax 761 130 40,0% 543 496 1 434 575 Tax (298 604) 60,6% (185 924) (518 240) Profit after tax 462 526 29,4% 357 572 916 335 Loss for the period from discontinued operation - (7 622) (19 853) Profit for the period 462 526 32,2% 349 950 896 482 ATTRIBUTABLE TO: Equity holders of the Company 455 224 32,0% 344 953 890 132 Minority interest 7 302 46,1% 4 997 6 350 462 526 349 950 896 482 Earnings per share from continued operations (cents) 89,7 29,1% 69,5 179,4 Earnings per share (cents) 89,7 31,9% 68,0 175,4 Diluted earnings per share from continued operations (cents) 86,5 28,9% 67,1 172,7 Diluted earnings per share (cents) 86,5 31,7% 65,7 168,9 Ordinary dividend per share paid (cents) 46,0 64,3% 28,0 55,0 Ordinary dividend per share declared (cents) 35,0 29,6% 27,0 73,0 Number of ordinary shares (`000) used for calculation of: earnings per share 507 345 507 355* 507 346* diluted earnings per share 526 384 525 277* 526 998* (* weighted average) RECONCILIATION OF HEADLINE EARNINGS Unaudited Unaudited Audited
6 months 6 months for the year ended ended % ended R`000 Dec 06 Dec 05 change Jun 06 Net profit attributable to shareholders 455 224 344 953 890 132 Loss for the period from discontinued operation - 7 622 19 853 Earnings from continued operations 455 224 352 575 909 985 Income of a capital nature after tax (19 519) (7 225) (141 557) Profit on disposal of operations - - (622) Profit on disposal of property (22 366) (9 264) (144 584) (Profit)/loss on disposal and scrapping of of plant, equipment and intangible assets (938) 2 039 6 613 Insurance claim received for building - - (2 006) Reversal of impairment - property, plant and equipment - - (1 559) Impairment of goodwill 3 785 - 1 286 Prescription of amounts owing - - (685) Headline earnings from continued operations 435 705 345 350 768 428 Add: loss for the period from discontinued operation - (7 622) (19 853) Income of a capital nature after tax from discontinued operation - - (4 210) Headline earnings 435 705 337 728 744 365 Earnings per share from continued operations (cents) 89,7 69,5 29,1% 179,4 Earnings per share (cents) 89,7 68,0 31,9% 175,4 Diluted earnings per share from continued operations (cents) 86,5 67,1 28,9% 172,7 Diluted earnings per share (cents) 86,5 65,7 31,7% 168,9 Headline earnings per share from continued operations (cents) 85,9 68,1 26,1% 151,5 Headline earnings per share (cents) 85,9 66,6 29,0% 146,7 Diluted headline earnings per share from continued operations (cents) 82,8 65,7 26,0% 145,8 Diluted headline earnings per share (cents) 82,8 64,3 28,8% 141,2 Ordinary dividend per share paid (cents) 46,0 28,0 64,3% 55,0 Ordinary dividend per share declared (cents) 35,0 27,0 29,6% 73,0 CONDENSED STATEMENT OF CHANGES IN EQUITY Unaudited Unaudited Audited 6 months 6 months for the year
ended ended ended R`000 Dec 06 Dec 05 Jun 06 Balance at beginning of July 3 082 868 2 265 877 2 265 877 Net movement in treasury shares - - (99) Net fair value profits on available-for-sale investments, net of tax 14 982 10 933 12 452 Net profit for the period 462 526 349 950 896 482 Employee share option scheme - value of services provided - 764 764 Cash settlement of share options (63 821) - - Foreign currency translation differences (45 777) 91 886 187 545 Dividends distributed to shareholders (235 224) (143 163) (280 153) Balance at end of December/June 3 215 554 2 576 247 3 082 868 CONDENSED SEGMENT INFORMATION Unaudited Unaudited Audited 6 months 6 months for the year
ended % ended ended R`000 Dec 06 change Dec 05 Jun 06 SEGMENT REVENUE - by business segment - Supermarkets 17 924 867 15,0% 15 587 333 31 635 822 - Furniture 1 180 431 14,2% 1 033 350 1 875 465 Total segment revenue 19 105 298 14,9% 16 620 683 33 511 287 SEGMENT RESULT - by business segment - Supermarkets - (including unallocated) 606 999 44,5% 420 203 1 051 301 - Furniture 123 719 14,8% 107 739 198 633 Total segment result 730 718 38,4% 527 942 1 249 934 Segment result comprises trading profit plus exchange rate losses/gains less investment income. CONDENSED GROUP BALANCE SHEET Unaudited Unaudited Audited
R`000 Dec 06 Dec 05 Jun 06 ASSETS Non-current assets 4 062 604 3 261 792 3 759 229 Property, plant and equipment 3 592 185 2 759 149 3 248 283 Available-for-sale investments 18 437 45 679 13 846 Loans and receivables 32 384 48 319 38 817 Deferred tax assets 162 483 232 991 219 626 Intangible assets 255 074 172 337 235 866 Fixed escalation operating lease accrual 2 041 3 317 2 791 Current assets 7 886 336 6 589 410 6 183 163 Inventories 4 073 930 3 622 068 3 269 500 Other current assets 1 742 495 1 732 397 1 492 466 Assets classified as held for sale 128 236 257 784 163 876 Available-for-sale investments 46 526 - 33 592 Loans and receivables 11 317 18 814 15 758 Cash and cash equivalents 1 883 832 958 347 1 207 971 Total assets 11 948 940 9 851 202 9 942 392 EQUITY AND LIABILITIES Total equity 3 215 554 2 576 247 3 082 868 Capital and reserves attributable to equity holders 3 163 099 2 530 595 3 035 863 Minority interest 52 455 45 652 47 005 Non-current liabilities 720 769 754 472 731 860 Borrowings 2 510 2 450 2 464 Deferred tax liabilities 8 960 9 189 7 400 Provisions 254 079 214 062 269 264 Fixed escalation operating lease accrual 455 220 528 771 452 732 Current liabilities 8 012 617 6 520 483 6 127 664 Other current liabilities 7 646 308 5 830 384 5 422 096 Provisions 45 743 43 127 34 301 Liabilities classified as held for sale - 23 160 - Bank overdraft 320 566 623 812 671 267 Total liabilities 8 733 386 7 274 955 6 859 524 Total equity and liabilities 11 948 940 9 851 202 9 942 392 CONDENSED GROUP CASH FLOW STATEMENT Unaudited Unaudited Audited 6 months 6 months for the year
ended ended ended R`000 Notes Dec 06 Dec 05 Jun 06 Cash generated by continued operations 2 137 506 969 623 2 065 366 Operating profit 758 612 540 378 1 427 926 Less: investment income (6 059) (4 283) (11 086) Non-cash items 1 242 225 231 350 281 090 Cash-settled share options (32 977) - - Changes in working capital 2 1 175 705 202 178 367 436 Net interest received 6 703 5 862 12 656 Dividends received 1 874 1 539 5 079 Dividends paid (234 933) (145 474) (282 473) Tax paid (287 321) (150 845) (438 890) Cash utilised by discontinued operations - (6 065) (23 050) Cash flows from operating activities 1 623 829 674 640 1 338 688 Cash flows from investing activities (579 455) (619 545) (1 097 877) Purchase of property, plant and equipment and intangible assets (658 754) (526 108) (1 318 364) Proceeds on disposal of property, plant and equipment and intangible assets 75 799 49 450 343 601 Proceeds on disposal of listed investments 3 542 - - Acquisition of subsidiaries /operations - (138 200) (136 565) Proceeds on disposal of operations - - 2 632 Acquisition of listed investment (4 407) - - Other investment activities 4 365 (4 687) 10 819 Cash flows from financing activities 303 - 406 Acquisition of treasury shares - - (99) Proceeds on issue of preference shares to joint venture 303 - 505 Movement in cash and cash equivalents 1 044 677 55 095 241 217 Effect of exchange rate movements on cash and cash equivalents (18 115) (12 981) 3 066 Net movement in cash and cash equivalents 1 026 562 42 114 244 283 CASH FLOW INFORMATION 1. Non-cash items Depreciation on property, plant and equipment 252 612 207 146 447 808 Amortisation of intangible assets 7 438 6 231 14 380 Net fair value losses/(gains) on financial instruments 20 689 537 (20 091) Exchange rate (gains)/losses (19 504) 28 554 (8 445) Share options granted - 764 764 Profit on disposal of property (24 192) (10 958) (171 651) (Profit)/loss on disposal and scrapping of plant and equipment and intangible assets (1 428) 2 805 9 257 Reversal of impairment of property, plant and equipment - - (1 559) Profit on disposal of operations - - (728) Impairment of goodwill 3 785 - 1 286 Loss on disposal of listed investment 865 - - Movement in provisions (3 743) (3 622) 28 204 Movement in fixed escalation operating lease accrual 5 703 (107) (18 135) 242 225 231 350 281 090 2. Changes in working capital Inventories (826 150) (871 280) (500 151) Trade and other receivables (286 034) (265 585) 23 580 Trade and other payables 2 287 889 1 339 043 844 007 1 175 705 202 178 367 436 SUPPLEMENTARY INFORMATION Unaudited Unaudited Audited
R`000 Dec 06 Dec 05 Jun 06 1. Capital commitments 328 030 305 683 388 775 2. Contingent liabilities 60 004 97 790 88 362 3. Net asset value per share (cents) 623 499 598 4. Total number of shares in issue (adjusted for treasury shares) 507 345 507 355 507 345 Group prospects and outlook The Board expects the economic factors that influenced the Group`s performance in the first half of the year to continue largely unchanged in the second half. By order of the Board C H Wiese Chairman J W Basson Chief executive 19 February 2007 Directorate and administration Executive directors: JW Basson (chief executive), CG Goosen (deputy managing director), B Harisunker, AE Karp, EL Nel, AN van Zyl, BR Weyers Non-executive directors: CH Wiese (chairman), JJ Fouche, TRP Hlongwane, JA Louw, JF Malherbe, JG Rademeyer Alternate directors: JAL Basson, M Bosman, PC Engelbrecht, JD Wiese 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 Transfer secretaries South Africa: Computershare Investor Services 2004 (Pty) Ltd, PO Box 61051, Marshalltown, 2107, South Africa Telephone: +27 (0)11 370 5000 Facsimile: +27 (0)11 688 5238 Website: www.computershare.com Namibia: Transfer Secretaries (Pty) Ltd, PO Box 2401, Windhoek, Namibia Telephone: +264 (0)61 227 647 Facsimile: +264 0(61) 248 531 Zambia: Lewis Nathan Advocates, PO Box 37268, Lusaka, Zambia Telephone: +260 (0)1 223 174 Facsimile: +260 (0)1 229 868 Sponsors South Africa: Nedbank Capital, PO Box 1144, Johannesburg, 2000, South Africa Telephone: +27 (0)11 295 8602 Facsimile: +27 (0)11 294 8602 Website: www.nedbank.co.za Namibia: Old Mutual Investments Services (Pty) Ltd, PO Box 25549, Windhoek, Namibia Telephone: +264 (0)61 299 3527 Facsimile: +264 (0)61 299 3528 Zambia: Lewis Nathan Advocates, PO Box 37268, Lusaka, Zambia Telephone: +260 (0)1 223 174 Facsimile: +260 (0)1 229 868 Auditors: PricewaterhouseCoopers Incorporated, PO Box 2799, Cape Town, 8000, South Africa. Date: 20/02/2007 07:30:04 Supplied by www.sharenet.co.za Produced by the JSE SENS Department.

Share This Story