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SHP - Shoprite Holdings Limited - Unaudited interim results for the 6 months
ended December 2011
SHOPRITE HOLDINGS LIMITED
(Reg. No. 1936/007721/06)
(ISIN: ZAE 000012084)
(JSE Share code: SHP)
(NSX Share code: SRH)
(LuSE Share code: SHOPRITE)
("the Group")
Key information
Trading profit was up 16,7% to R2,164 billion.
Turnover increased 13,2% - from R36,259 billion to R41,054 billion.
Headline earnings per share rose 18,6% to 280,8 cents.
Whitey Basson, chief executive, commented:
The Group increased turnover by 13,2% during the period under review and by
15,4% during the second quarter in a contested trading environment. The Group
enjoyed particularly good sales in December when turnover increased even
further by 17,2%. In doing so the Group remained a highly competitive player
in the local food retail sector and has, according to Nielsen`s industry
growth reports, further increased its market share. Store sales were
supported by an increase in the demand for general merchandise. A contributory
factor for this strong performance was the fact that merchandise was once
again in stores well before the start of the festive season trading period,
enabling the Group to reap the maximum benefit from increased consumer
spending. The efficient stocking of stores is made possible by a supply chain
which operates at a high level of efficiency and the benefits of the Group`s
continuous investment in increasing the capacity for its major distribution
centres.
20 February 2012
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 Cell: 076 390 7725
OPERATING ENVIRONMENT
The period under review was one of ongoing slow growth of an economy still
recovering from the fall-out of a worldwide recession, as well as
unemployment, which has reached 25% in South Africa. The plight of consumers,
especially at the lower end of the market, has not changed. They are impacted
daily by cost increases on all sides ranging from energy and transport to
health and education and as such the shrinking disposable income of shoppers
has fired increased competition among food retailers. The Group was to an
extent protected against this competition by the size of its store footprint
and the efficiency of its infrastructure which enabled it to be highly price
competitive without sacrificing profitability.
COMMENTS ON THE RESULTS
Statement of Comprehensive Income
Total turnover
Total turnover grew 13,2% from R36,259 billion to R41,054 billion. Internal
inflation was 4,6% compared to the official inflation figure of 5,8%. This
compares with growth of 9,4% in the corresponding six months when internal
deflation averaged 1,2%. During the period under review the rand remained weak
against most non-RSA currencies. This had a supporting effect on the
conversion to rand of non-RSA sales, which grew 21,2%.
Expenses
The increase of 12,9% in staff costs to R3,265 billion is below the growth in
turnover of 13,2%. It includes new staff appointed for additional stores
opened. Other Expenses grew 19,2%, more than turnover growth, mainly due to
the escalation in electricity and other energy costs. If one excludes water
and electricity costs, then Other Expenses increased by 13,8%, which was in
line with the turnover growth.
Trading margin
The trading margin at 5,3% was higher than in the corresponding period (5,1%)
and reflects the increasing efficiencies achieved by, inter alia, the recent
expansion of the Group`s supply chain infrastructure.
Exchange rate gains
The Group achieved an exchange rate gain of R27,7 million as against an
exchange rate loss of R13,4 million in the corresponding period due to the
weakness of the rand against the US dollar and other African currencies.
Although it helped make prices of South African merchandise more competitive,
it did increase the cost of new outlets and supporting infrastructure
elsewhere in Africa.
Finance cost and interest received
The increase in net interest paid was due to the continued high capital
expenditure on new stores, information technology infrastructure and
distribution centres.
Statement of Financial Position
Property, plant and equipment and intangible assets
The increase is due to the investment in new stores, vacant land purchased for
strategic purposes, investment in information technology to support inventory
management, as well as normal asset replacements.
Cash and cash equivalents and bank overdrafts
This item should be seen in conjunction with current liabilities. The decrease
in net overdraft at balance sheet date is due to certain creditors being paid
after balance sheet date in the current year, whereas they had been paid
before balance sheet date in the previous year. In addition, the Group spent
R3 billion on capital goods during the preceding 12 months.
OPERATIONAL REVIEW
All the divisions experienced satisfactory growth in turnover and trading
profit. Growing the Group`s footprint remained a priority and a net 59 owned
stores were opened in the period under review while particular attention was
paid to maximising the benefits at operational level of the Group`s increased
supply-chain capacity.
Number of outlets
YEAR TO DATE (6 MONTHS) CONFIRMED
JUN 11 OPENED CLOSED DEC 11 NEW STORES
TO JUNE 2013
SUPERMARKETS 814 42 4 852 141
- SHOPRITE 407 16 1 422 55
- CHECKERS 159 5 1 163 15
- CHECKERS HYPER 26 1 0 27 2
- USAVE 222 20 2 240 69
HUNGRY LION 130 14 1 143 5
FURNITURE 300 11 3 308 28
- OK FURNITURE 232 10 2 240 23
- HOUSE & HOME 50 0 1 49 0
- OK POWER EXPRESS 18 1 0 19 5
TOTAL OWNED STORES 1244 67 8 1303 174
- OK FRANCHISE 269 158 * 8 419 4
- USAVE FRANCHISE 2 1 0 3 1
- H/L FRANCHISE 5 0 0 5 0
TOTAL FRANCHISE 276 159 8 427 5
TOTAL STORES 1520 226 16 1730 179
COUNTRIES OUTSIDE RSA 15 15 1
*Includes 148 Metcash
Franchises
Supermarkets RSA
The Group`s core business, Supermarkets RSA, grew sales 12,3% from R28,515
billion to R32,031 billion and produced a trading profit of R1,788 billion
(2010: R1,530 billion). Strict disciplines throughout the business, together
with further supply-chain efficiencies, made it possible to restrict internal
food inflation to 5,0% on average against the official food inflation figure
of 9,3%. The prices of certain basic food stuffs in particular nevertheless
rose steeply. Sales of higher-margin general merchandise items showed healthy
growth, particularly during December. The average value per transaction was
7,6% higher.
The flagship Shoprite chain with 339 supermarkets in South Africa, increased
sales 11,0% off an already high base. It continued to focus on delivering the
lowest prices to continuously strengthen its market positioning, resulting in
strong sales for the brand over the festive season in particular. The value-
added services, such as money transfers provided through the Group`s Money
Market counters, continued to show strong growth despite increased competition
in this field.
Checkers, including Checkers Hyper, continued to grow its customer base by
4,6% during the review period, and increased turnover by 11% and 9,9% on a
like-for-like basis. The specialist departments of which the wine department
topped the list, continued to be part of its particular appeal for targeted
higher-income consumers. It is also constantly extending its offering of well-
known international brands such as Starbucks, the world`s best-known coffee
brand, which was previously unavailable in South Africa.
Usave now operates 204 stores in South Africa having gained a net 14 outlets
in the period under review. It increased sales by 20,9% due to a 10,2% growth
in the number of customer transactions and a 9,8% growth in basket size.
Usave, selling a limited range of food and non-food products in a no-frills
environment, continues to offer customers the lowest prices in the market.
Supermarkets non-RSA
The Group`s non-RSA supermarkets achieved a sales growth of 21,2%, and on a
like-for-like basis of 13,9%, due partly to the weakness of the rand against
most non-RSA currencies. At constant currencies this represents a rand
turnover growth of 16,9% which is partly due to new stores in Nigeria and
Angola. The Group now operates 123 stores outside South Africa and is
investigating a number of new store locations.
Furniture
Sales growth of 13,6% was achieved despite continuing difficult trading
conditions brought about by the further erosion of consumer disposable income.
The turnover growth was generated mainly by the division`s OK Furniture and OK
Power Express chains which focus on the middle market. With price deflation
averaging 7,4% for the six months, the Division continued its highly
competitive pricing policy to increase unit sales and boost turnover in an
intensely competitive market.
Other Operating Segments
These include the results of the OK Franchise Division, the pharmacy division
as well as Computicket.
The operations of the OK Franchise Division were boosted by the consolidation
of the acquired Metcash franchise stores which added 148 stores to its
membership base spread throughout the rural areas of South Africa and Namibia.
It grew total turnover by 16,7% and by 8,1% on a like-for-like basis and
increased profitability as well.
The Group`s pharmacy division consists of MediRite, which at the end of
December operated 130 in-store pharmacies in Shoprite and Checkers outlets, as
well as Transpharm, a wholesale supplier of pharmaceutical products to both
MediRite and external customers. MediRite, which experienced a surge of 25% in
the number of prescriptions filled, maintains an ongoing focus on the
recruitment of qualified pharmacists to support its expansion.
Computicket, which has extended its network of outlets in supermarkets to
include furniture stores, increased its investment in cutting-edge technology
to strengthen its position as South Africa`s leading ticketing business. It
increased its customer count by 7% and opened its first cross-border outlet in
Namibia. The ticketing service is now being piloted in selected OK Franchise
member stores.
GROUP PROSPECTS AND OUTLOOK
The board does not expect any material changes to take place in market
conditions in the second half of the year as nothing in the economic
environment suggests that the pressure on consumers will ease. The Group
nevertheless expects to maintain satisfactory growth in turnover and
profitability as the benefits of an expanded infrastructure become more
apparent.
DIVIDEND
Due to transitional rules relating to the phasing out of STC (secondary tax on
companies) and its replacement with the new Dividends Tax, the board has
decided to defer the declaration of an interim dividend until after 1 April
2012, but as soon as reasonably possible thereafter.
ACCOUNTABILITY
These condensed consolidated interim results have been prepared in accordance
with International Financial Reporting Standards ("IFRS"), IAS 34: Interim
Reporting, the South African Companies Act (Act no 71 of 2008), as amended and
the listing requirements of the JSE Limited. The accounting policies are
consistent with those used in the annual financial statements for the
financial period ended June 2011.
By order of the board
CH Wiese JW Basson
Chairman Chief Executive
Cape Town
20 February 2012
Condensed Group Statement of Comprehensive Income
Unaudited Unaudited Audited
6 months 6 months for the
% ended ended year ended
R`000 change Dec 11 Dec 10 Jun 11
Sale of merchandise 13,2 41 053 561 36 259 130 72 297 777
Cost of sales 13,0 (32 857 420) (29 076 055) (57 624 408)
Gross profit 14,1 8 196 141 7 183 075 14 673 369
Other operating income 25,5 884 384 704 967 1 855 841
Depreciation and amortisation 8,2 (511 806) (472 831) (933 592)
Operating leases 14,1 (952 091) (834 078) (1 700 468)
Employee benefits 12,9 (3 265 348) (2 891 568) (5 762 045)
Other expenses 19,2 (2 187 510) (1 835 417) (4 146 408)
Trading profit 16,7 2 163 770 1 854 148 3 986 697
Exchange rate gains/(losses) (307,3) 27 710 (13 366) (446)
Items of a capital nature (77,7) (2 951) (13 248) (78 533)
Operating profit 19,8 2 188 529 1 827 534 3 907 718
Interest received (12,4) 38 459 43 911 94 614
Finance costs 6,7 (65 619) (61 511) (125 964)
Profit before income tax 19,4 2 161 369 1 809 934 3 876 368
Income tax expense 19,1 (729 277) (612 084) (1 346 826)
Profit for the period 19,6 1 432 092 1 197 850 2 529 542
Other comprehensive income,
net of income tax expense 301 956 (193 350) (140 501)
Fair value movements on
available-for-sale investments 8 747 (2 777) 1 950
Foreign currency translation
differences 293 209 (190 573) (142 451)
Total comprehensive income
for the period 1 734 048 1 004 500 2 389 041
Profit attributable to:
Owners of the parent 19,6 1 418 890 1 186 183 2 509 780
Non-controlling interest 13,2 13 202 11 667 19 762
1 432 092 1 197 850 2 529 542
Total comprehensive income
attributable to:
Owners of the parent 73,3 1 720 846 992 833 2 369 279
Non-controlling interest 13,2 13 202 11 667 19 762
1 734 048 1 004 500 2 389 041
Earnings per share (cents) 19,6 280,3 234,4 495,9
Ordinary dividend per share (cents)
Final/interim dividend paid 165,0 147,0 88,0
Interim/final dividend declared - 88,0 165,0
Number of weighted average ordinary
shares (`000) used for calculation
of earnings per share 506 133 506 133 506 133
Condensed Group Statement of Financial Position
Unaudited Unaudited Audited
R`000 Dec 11 Dec 10 Jun 11
ASSETS
Non-current assets 10 676 014 8 596 101 9 287 521
Property, plant and equipment 9 436 394 7 599 588 8 168 749
Available-for-sale investments 69 827 54 160 59 656
Loans and receivables 4 483 10 632 4 308
Deferred income tax assets 295 878 266 933 326 457
Intangible assets 860 186 659 229 719 105
Fixed escalation operating
lease accrual 9 246 5 559 9 246
Current assets 14 032 962 12 298 821 11 357 577
Inventories 9 353 042 7 627 603 7 055 867
Other current assets 2 671 425 2 534 134 2 293 933
Loans and receivables 137 495 52 723 46 226
Cash and cash equivalents 1 871 000 2 084 361 1 961 551
Assets held for sale 58 659 77 724 58 659
Total assets 24 767 635 20 972 646 20 703 757
EQUITY AND LIABILITIES
Total equity 8 024 056 6 204 305 7 143 450
Capital and reserves attributable
to owners of the parent 7 964 434 6 153 650 7 084 700
Non-controlling interest 59 622 50 655 58 750
Non-current liabilities 1 041 425 950 538 1 109 996
Borrowings 30 831 23 725 26 177
Deferred income tax liabilities 12 379 9 826 25 377
Provisions 370 129 281 622 339 200
Fixed escalation operating
lease accrual 470 118 430 948 455 787
Other non-current liabilities 157 968 204 417 263 455
Current liabilities 15 702 154 13 817 803 12 450 311
Other current liabilities 13 346 251 10 625 402 10 304 094
Provisions 88 624 104 832 104 117
Bank overdraft 2 267 279 3 087 569 2 042 100
Total liabilities 16 743 579 14 768 341 13 560 307
Total equity and liabilities 24 767 635 20 972 646 20 703 757
Earnings per Share
Unaudited Unaudited Audited
6 months 6 months for the
% ended ended year ended
R`000 change Dec 11 Dec 10 Jun 11
Profit attributable to
owners of the parent 1 418 890 1 186 183 2 509 780
Re-measurements 2 951 13 248 78 533
Profit on disposals of
assets held for sale - (576) (12 868)
Loss on disposals of property - - 6 214
Loss on disposals and scrappings
intangible assets 2 558 13 825 32 256
Impairment of property, plant
and equipment and assets
held for sale - - 56 351
Impairment of goodwill - - 768
Insurance claims received - - 217
Loss/(profit) on other investing activities 393 (1) (4 405)
Income tax effect of re-measurements (449) (843) (19 307)
Headline earnings 1 421 392 1 198 588 2 569 006
Earnings per share (cents) 19,6 280,3 234,4 495,9
Headline earnings
per share (cents) 18,6 280,8 236,8 507,6
Ordinary dividend per share (cents) 165,0 235,0 253,0
Final/interim dividend paid 165,0 147,0 88,0
Interim/final dividend declared - 88,0 165,0
Condensed Group Statement of Cash Flows
Unaudited Unaudited Audited
6 months 6 months for the
ended ended year ended
R`000 Notes Dec 11 Dec 10 Jun 11
Cash generated by operations 3 366 877 803 000 3 794 508
Operating profit 2 188 529 1 827 534 3 907 718
Less: investment income (38 438) (9 073) (27 663)
Non-cash items 1 678 779 733 406 1 459 479
Settlement of share
appreciation rights (287 540) (218 037) (218 037)
Payment for settlement of
post-retirement medical
benefits liability - - (2 630)
Changes in working capital 2 825 547 (1 530 830) (1 324 359)
Net interest paid (21 332) (11 552) (15 445)
Dividends received 32 610 3 025 11 758
Dividends paid (852 685) (771 177) (1 216 084)
Income tax paid (1 083 775) (531 728) (1 031 092)
Cash flows from/(utilised by)
operating activities 1 441 695 (508 431) 1 543 645
Cash flows utilised by
investing activities (1 825 173) (1 768 005) (2 937 011)
Purchase of property, plant and
equipment and intangible assets (1 674 088) (1 797 578) (3 005 219)
Proceeds on disposal of assets
held for sale, property, plant
and equipment and intangible assets 7 338 45 352 91 843
Acquisition of subsidiaries
and operations (72 410) - (27 128)
Other investment activities (86 013) (15 779) 3 493
Cash flows from financing activities 4 622 4 431 9 329
Net movement in cash and
cash equivalents (378 856) (2 272 005) (1 384 037)
Cash and cash equivalents at
the beginning of the period (80 549) 1 344 587 1 344 587
Effect of exchange rate
movements on cash and
cash equivalents 63 126 (75 790) (41 099)
Cash and cash equivalents
at the end of the period (396 279) (1 003 208) (80 549)
Cash Flow Information
1. Non-cash items
Depreciation of property,
plant and equipment 531 582 474 003 948 520
Amortisation of intangible assets 31 087 27 477 57 922
Net fair value (gains)/losses on
financial instruments (21 897) 1 474 5 105
Exchange rate (gains)/losses (27 710) 13 366 446
Profit on disposals of assets
held for sale - (576) (12 868)
Loss on disposals of property - 5 243 6 214
Loss on disposals and scrappings
of plant, equipment and intangible
assets 2 558 8 582 32 256
(Reversal)/impairment of property,
plant and equipment and assets
held for sale - (508) 56 351
Movement in provisions 13 782 11 387 70 876
Movement in cash-settled
share-based payment accrual 128 031 186 350 272 808
Impairment of goodwill - - 768
Movement in fixed escalation
operating lease accrual 21 346 6 608 21 081
678 779 733 406 1 459 479
2. Changes in working capital
Inventories (2 163 939) (1 594 564) (1 000 474)
Trade and other receivables (157 060) (523 171) (236 566)
Trade and other payables 3 146 546 586 905 (87 319)
825 547 (1 530 830) (1 324 359)
Condensed Group Operating Segment Information
Unaudited Unaudited Audited
6 months 6 months for the
% ended ended year ended
R`000 change Dec 11 Dec 10 Jun 11
Sale of merchandise
Supermarkets RSA 12,3 32 030 963 28 514 676 57 213 793
Supermarkets Non-RSA 21,2 4 502 804 3 715 104 7 316 698
Furniture 13,6 1 822 699 1 603 950 3 059 648
Other operating segments 11,2 2 697 095 2 425 400 4 707 638
13,2 41 053 561 36 259 130 72 297 777
Trading profit
Supermarkets RSA 16,8 1 787 559 1 530 250 3 302 262
Supermarkets Non-RSA 22,5 214 428 175 026 415 524
Furniture 19,9 108 974 90 900 131 484
Other operating segments (8,9) 52 809 57 972 137 427
16,7 2 163 770 1 854 148 3 986 697
Supplementary Information
Unaudited Unaudited Audited
R`000 Dec 11 Dec 10 Jun 11
1. Capital commitments 1 072 592 2 703 403 1 343 534
2. Contingent liabilities 157 792 119 938 157 792
3. Net asset value per share (cents) 1 574 1 216 1 400
4. Total number of shares in issue
(adjusted for treasury shares) 506 133 506 133 506 133
Condensed Group Statement of Changes in Equity
Unaudited Unaudited Audited
6 months 6 months for the
ended ended year ended
R`000 Dec 11 Dec 10 Jun 11
Balance at beginning of July 7 143 450 5 972 016 5 972 016
Total comprehensive income 1 734 048 1 004 500 2 389 041
Dividends distributed to owners (853 442) (772 211) (1 217 607)
Balance at end of December/June 8 024 056 6 204 305 7 143 450
Directorate and administration
Executive directors
JW Basson (chief executive), CG Goosen (deputy managing director),
B Harisunker, AE Karp, EL Nel, BR Weyers
Non-executive director
CH Wiese (chairman)
Executive alternate directors
JAL Basson, M Bosman, PC Engelbrecht
Independent non-executive directors
EC Kieswetter, JA Louw, JF Malherbe, JG Rademeyer
Non-executive alternate director
JD Wiese
Company secretary
PG du Preez
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.shopriteholdings.co.za
Transfer secretaries
South Africa: Computershare Investor Services (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: ENFIN Solutions Limited, PO Box 320069, Lusaka, Zambia
Telephone: +260 (0)211 256 284/5, Facsimile: +260 (0)211 256 294
Sponsors
South Africa: Nedbank Capital, PO Box 1144, Johannesburg, 2000, South Africa
Telephone: +27 (0)11 295 8525 Facsimile: +27 (0)11 294 8525
Website: www.nedbank.co.za
Namibia: Old Mutual Investment Group (Namibia) (Pty) Ltd, PO Box 25549,
Windhoek, Namibia
Telephone: +264 (0)61 299 3264 Facsimile: +264 (0)61 299 3528
Auditors
PricewaterhouseCoopers Incorporated, PO Box 2799, Cape Town, 8000, South
Africa Telephone: +27 (0)21 529 2000 Facsimile: +27 (0)21 529 3300
Date: 21/02/2012 09:00:01 Supplied by www.sharenet.co.za
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