Wrap Text
Audited results for the 52 weeks ended 2 March 2014
Pick n Pay Stores Limited
Registration number: 1968/008034/06
JSE share code: PIK
ISIN: ZAE000005443
Results for the 52 weeks ended 2 March 2014
Clear plan delivers improved results
Review of operations
Key financial indicators
Normalised
trading As
calendar Comparable previously
364 days pro forma reported
364 days (pro forma)* % 368 days %
2014 2013 change* 2013 change
Total till sales R73.0 billion R67.8 billion 7.6 R68.5 billion 6.5
Turnover R63.1 billion R58.6 billion 7.7 R59.3 billion 6.5
Gross profit margin 17.5% 17.5% 17.4%
Trading profit R1 010.3 million R751.7 million 34.4 R852.4 million 18.5
Profit before tax R833.1 million R708.2 million 17.6 R808.9 million 3.0
Basic earnings per share 122.01 cents 100.50 cents 21.4 115.14 cents 6.0
Headline earnings per share** 138.51 cents 96.66 cents 43.3 111.30 cents 24.4
Total annual dividend per share 92.30 cents 84.00 cents 9.9
* The Group implemented a 52-week financial reporting calendar in February 2013. The 2014 financial year consists
of 364 trading days of turnover and related gross profit, compared with 368 days in the prior year. Reviewing
turnover and gross profit on a comparable 364-day basis is more meaningful and as such, the results in this
commentary are presented on a comparable pro forma basis (unless otherwise stated). For a detailed explanation
on the new financial calendar and its impact on the comparability of performance, please refer to note 2 of the
summarised financial information presented below.
**The difference in the growth in headline earnings per share against basic earnings per share is the exclusion
of profits and losses of a capital nature in the calculation of headline earnings. Capital losses net of tax
of R78.9 million are added back to headline earnings in 2014 (mainly comprising the impairment of intangible
assets), against a deduction net of tax of R18.4 million of capital profits in 2013.
The Group has delivered an improved financial performance compared to the previous year, substantively
delivering on the objectives set at the beginning of the year.
The Group increased turnover by 7.7% (compared to 6.2% the previous year). This was driven in part by an
accelerated programme of new-store growth. Like-for-like growth was subdued at 2.7%, reflecting the difficult
trading environment across the sector. Customers are facing increasing financial pressure as a result of rising
fuel, electricity and other utility costs, rising interest rates and levels of household debt. The weak rand is
also contributing to rising commodity and consumer goods prices.
The gap between Pick n Pay’s growth and overall market growth narrowed from 2.5% in the previous year to
0.7% this year.
Strong financial control is crucial in this environment. The Group’s improved financial performance reflects
in large measure the encouraging progress made over the past year in reducing cost through greater
organisational and operating efficiency and tighter fiscal control across the business. We reduced our trading
expenses as a percentage of turnover from 17.1% to 16.7% and our trading profit margin improved from 1.3%
to 1.6%.
The increase in turnover and reduction in trading expenses has delivered headline earnings per share which
are up 43.3% on a comparable pro forma basis. The total dividend per share for the year is 92.30 cents, up
9.9% on the prior year, in line with the Group’s policy to moderate the dividend cover to 1.5 times headline
earnings per share.
Our strategy remains that of customer-focused and sales-led growth. Lower costs will enable us to invest
more in our shopping trip, driving turnover growth by consistently improving our product offer, stock
availability and customer service.
Clear plan: delivers stronger operations
We are a stronger business than we were 12 months ago. We are better positioned to strengthen and grow our
core South African business, and actively explore new strategic opportunities in the rest of Africa.
Despite the more challenging trading environment, the Group grew at every level, serving more customers than
last year, in more stores and with higher value baskets.
The Group opened 111 new stores during the year and closed 26 under-performing stores, adding 3.4% net new
space. We grew our Pick n Pay and Boxer brands across a variety of retail formats, ranging from stores which
serve lower-income communities through to our new Waterfront store in Cape Town. We are particularly proud
to be serving some communities for the first time, including Chatsworth, KwaMashu and Hammersdale, which
demonstrates the strength and inclusiveness of our brand. We are under-represented in the market that our
Boxer brand serves and we look forward to expanding our footprint in these areas. The Group now has 1 076
stores, comprising 643 company-owned stores and 433 franchise stores, across multiple retail formats and
six southern African countries. In addition 52 stores, three of which trade under the Pick n Pay brand,
are operated in Zimbabwe by our associate, TM Supermarkets. Our franchisees remain crucial partners in our
business, exemplifying the Pick n Pay commitment to excellent customer service and we are grateful to each
of them for their hard work and entrepreneurship over the past year.
We are keenly focused on improving the quality of our fresh and perishable produce and our pre-packaged
convenience ranges, and are seeing good results in these areas. We are experiencing good growth in our
smaller convenience formats, reflecting the growing customer desire to shop more often in locations which
are easy to reach. While our larger Hypermarket stores remain under pressure, we are implementing plans to
improve the customer offer and experience in each individual Hyper. Our general merchandise team has made
good progress in rationalising and focusing our general merchandise range. This will have a positive impact
across the business, particularly in our Hypermarkets. Our smaller clothing and liquor formats continue to
perform well and make meaningful contributions to the turnover and profit growth of the business. We will
introduce expanded and targeted clothing ranges into our supermarkets next year. We have grown our online
food delivery business by 27% over the year. We now serve more than 2 000 customers per week, and have
extended the service during the year within the Western Cape, KwaZulu-Natal and the Free State.
Customers are more engaged than ever in our smart shopper loyalty programme, which remains South Africa’s
favourite loyalty programme. We have made a number of improvements for customers in the course of the year,
including offering loyalty points and vouchers on till slips at the point of sale, introducing instant
saver promotions and a smart shopper mobile application. We have issued almost eight million smart shopper
cards and the number of customers who regularly use their card is growing steadily in response to our
enhanced rewards programme.
We have supported our customers with good prices during the year, broadening our mix of promotions and
fighting inflation in core commodities by tailoring ranges and promotions to specific communities. Our
smart shopper programme provides us with valuable information in this regard, assisting us to tailor and
target promotions where and when they will be most effective.
This is in line with our strategy to continue to invest in the shopping trip. Our gross profit margin
remains unchanged at 17.5%, with savings generated through improvements in supply-chain efficiency being
reinvested in our customer offer.
We are pleased with the progress made across our buying and distribution channels. We continue to bring
more suppliers into our central distribution channels, increasing the volume through our distribution
centres by 10.8% over the year, and reducing the cost per case delivered by 6.5%.
The benefits of our central distribution strategy are increasing, with improved efficiencies and
meaningful cost reductions across our supply chain, including removing four-days value of inventory
from our stock levels, providing our stores with strike-rates that are significantly better than those
of direct to store suppliers and improving overall availability by 2.4 percentage points.
We completed the centralisation of our buying, operational and finance support functions, removing
duplicate costs and services in the business. This process necessitated tough decisions during the year
and resulted in the retrenchment of some head office support staff. This was a difficult time for the
business, but the rigorous review of all support structures and processes has enabled us to create a
more streamlined and effective support office.
Outside South Africa we increased segmental revenue by 27.9% on a comparable basis and increased our
like-for-like segmental revenue by 9.4%. In the course of the year we took clear and decisive action
to close our Mauritius and Mozambique franchise operations. In both cases we reached a firm conclusion
that the businesses, as they were structured did not offer us a sound basis for sustainable growth.
However, the prospects are strong in the markets in which we continue to operate and further afield.
We have experienced good growth in Zambia, and have installed a team on the ground in Nigeria to explore
opportunities in that market. We are proud of the leadership that Pick n Pay demonstrates as a responsible
and caring corporate citizen, whether it is supporting local charities and good causes in the communities
we serve, helping grow emerging market suppliers through our collaboration with the Ackerman Pick n Pay
Foundation, or leading on seafood sustainability and climate change. The welfare and sustainability of
the communities we serve is close to our hearts and has always been a key part of our approach.
Clear plan: more to do
We are encouraged by the progress shown across the business over the past year. Our strategic goal remains
that of sustainable customer-driven and sales-led growth, and the Group has more to deliver in terms of
improving our customer offer and winning more customers to Pick n Pay. We have a clear plan in place across
the Group, organised on the basis of a balanced scorecard comprising five segments: our customer offer, our
operations, the organisation of our people, our relationship with the communities we serve, and our financial
performance. By delivering this plan, customers will experience a better Pick n Pay. We will become more
efficient and reduce our costs further. Staff will be part of a more effective organisation. We will as a
result deliver better returns to our shareholders and an even stronger contribution to society and our
broader stakeholders.
Financial review
Turnover
Group turnover increased by 7.7% to R63.1 billion (2013: R58.6 billion, with 6.2% comparable growth).
Like-for-like turnover growth was 2.7% (2013: 3.0%) and net new stores contributed 5.0%, with our trading space
growing a net 3.4% over the year. We showed stronger like-for-like growth at overall point of sale level,
with like-for-like till sales from both owned and franchise stores growing by 3.5%. Pick n Pay internal
selling price inflation for the year was 5.3% (2013: 4.9%), against CPI inflation of 5.8%.
Gross profit
The Group has maintained the gross margin at 17.5%. We are pleased with the progress made across our buying
and distribution channels, which has resulted in improved efficiencies and meaningful cost reductions. In
particular our two central distribution centres, at Longmeadow in Gauteng and Philippi in the Western Cape,
have both delivered considerable operating improvements which have reduced the net cost of distribution as a
percentage of turnover. We have also demonstrated improved control over waste and shrink which are below the
levels of the previous year. In addition, our new reporting platform is enabling improved gross margin
management through the enhanced visibility of more timely information. All the cost savings realised have
been reinvested back into the selling price of goods, as part of our strategy of investing in the shopping
trip.
Other trading income
Certain elements of trading income previously included under cost of merchandise sold (within gross profit)
have been reclassified and disclosed separately. This has been done to improve the visibility of all other
trading income, specifically commissions received. The prior year has been restated to align with the current
year disclosures, please refer to note 7 of the summarised financial information presented below. The 3.5%
decrease in other trading income is mainly due to reduced commissions as customers move away from purchasing
airtime at the till to other digital platforms.
Trading profit
The trading profit margin improved from 1.3% to 1.6%. Expense control has been the key differentiator in
our improved performance this year, countering the modest turnover growth and continued investment in gross
profit margin. Trading expenses as a percentage of turnover have decreased from 17.1% to 16.7%, with
like-for-like expense growth almost flat at 0.8%. We are pleased with the good work being done around
tighter fiscal control, with all areas of the business contributing to the expense savings.
The following are good examples of the achievements over the past year:
The increase in employee costs was limited to 7.6%, notwithstanding the new store growth. Furthermore,
like-for-like employee costs increased by only 3.2% despite a new above-CPI wage rate agreement which
came into force at the beginning of the financial year. This demonstrates increased productivity at store
level, which is enabling us to staff our stores more efficiently and effectively.
Occupancy costs are up 7.6% in line with our store expansion programme; however the like-for-like increase
is only 2.6%. This is pleasing in light of the continued above-CPI regulatory increases in rates and taxes.
We remain a tenant of choice in the retail industry and continue to negotiate competitive rentals and
escalation terms with our landlords.
Costs of operations are up 9.2%, again reflecting our opening of 80 company-owned stores during the year,
with a like-for-like increase in costs of 4.1%. Administered increases in electricity prices are posing a
significant additional burden on operational costs. We are able to mitigate this to some degree: our
electricity usage is well controlled, and we have an effective programme of reducing energy use in our
stores. Amortisation and depreciation has increased by 5.9%, compared with the 10.8% growth seen in 2013,
which illustrates the good work being done around the control of capital expenditure and ensuring the spend
is targeted at improving the customer offer.
We are very pleased with the progress made on eliminating excess administrative costs in the business,
particularly at support office level. Merchandise and administration expenses have decreased by 14.8%, with
a like-for-like decrease of 17.9%. We have almost entirely removed consultancy costs from the business. As
South Africa’s largest acceptor of electronic tender, we have been subject to increased bank fees as our
customers move from debit cards to hybrid cards. We are encouraged that the Reserve Bank has taken action
to reduce bank interchange fees in respect of credit, debit and hybrid costs. The reduced fee schedule is
expected to be in force from 1 January 2015, with the benefits flowing in the 2016 financial year.
There is still a great deal of work to be done to optimise our cost structure and augment our
productivity and efficiency, but we are demonstrating that we can run a lower cost, more streamlined
business.
Loss on capital items
The Group completed the centralisation of its buying, operational and finance support functions during the
year. As a result, systems and reporting tools previously developed to support the decentralised business
operation became obsolete, necessitating an impairment of R104.1 million of those intangible assets. The
loss on capital items also includes a loss on the sale of fixed assets of R5.5 million, against a profit
of R21.6 million in the prior year.
Interest
The net interest expense of R99.6 million is R11.1 million more than the prior year’s expense of
R88.5 million due to periods of elevated borrowings, particularly in the first half of the year, as
a result of increased capital expenditure and inventory provisioning relating to new stores.
Earnings per share
Basic earnings per share (EPS) increased 6.0% from 115.14 to 122.01 cents per share. The new 52-week
reporting calendar resulted in the current reporting period being four trading days less than the prior
year. The comparable EPS growth (if the impact of 14.64 cents per share attributable to the additional
trading days is excluded) is 21.4%.
Headline earnings per share (HEPS) increased 24.4% from 111.30 to 138.51 cents per share. The new 52-week
reporting calendar resulted in the current reporting period being four trading days less than the prior
year.
The comparable HEPS growth (if the impact of 14.64 cents per share attributable to the additional trading
days is excluded) is 43.3%.
The significant difference in the growth in headline earnings per share against basic earnings per share
is the exclusion of profits and losses of a capital nature in the calculation of headline earnings.
Capital losses net of tax of R78.9 million are added back to headline earnings in 2014 (mainly comprising
the impairment of intangible assets), against a deduction net of tax of R18.4 million of capital profits
in 2013.
Financial position
Sunday Sunday
2 March 3 March
2014 2013
Rm Rm
Inventory 3 979.8 3 996.5
Other current assets 2 844.6 2 361.1
Cash and cash equivalents 1 540.3 1 255.7
Bank overdraft and overnight borrowings (670.0) (1 525.6)
Other current liabilities (8 942.2) (7 382.4)
Net working capital (1 253.7) (1 294.7)
We are pleased with the slight improvement in net working capital, particularly in the context of the store
expansion programme. Inventory has decreased by R16.7 million or 0.4%, with like-for-like inventory
(excluding the impact of new stores) decreasing by 5.7%. We have been focused on removing slow-moving
inventory lines from our business, rationalising our product range to provide our customers with a more
focused and relevant offering, as well as improving our supply chain efficiencies with improved strike rates
to stores. We are pleased with our progress in this area, but there is still much work to be done. The
increase in trade and other receivables of R480.0 million mainly relates to 12 net new franchise stores.
The net cash and overnight borrowing position at year-end has improved by R1 140.2 million on last year,
from negative R269.9 million to R870.3 million. The improved cash position is testament to the good work
being done in respect of inventory management and improved fiscal control over both capital and operating
expenditure. We raised an additional R300 million borrowing under our DMTN programme to capitalise on
competitive interest rates in the capital markets.
Shareholder distribution
In line with our review of all aspects of the business, the Board moderated the annual dividend cover to 1.5
times headline earnings per share. The final dividend of 77.50 cents per share brings the total dividend for
the annual period to 92.30 cents per share, which is 9.9% up on last year.
Prospects
It has been a challenging but rewarding year and we are pleased with this overall result. We are encouraged
by the improved financial performance delivered and the progress demonstrated across all areas of our
business. Our business is stronger than it was a year ago. Customers and shareholders are experiencing the
benefit.
Much work lies ahead in what is a difficult trading environment. We have a clear plan to improve the shopping
trip for our customers, drive higher turnover growth, and deliver further operating efficiencies and cost
savings. We thank all our staff who have worked so hard over the past 12 months to improve our business and
the lives of our customers.
Gareth Ackerman Richard Brasher
Chairman Chief Executive Officer
14 April 2014
Dividend declarations
Pick n Pay Stores Limited - Tax reference number: 9275/141/71/2
Number of shares in issue: 480 397 321
Notice is hereby given that the directors have declared a final gross dividend (number 92) of 77.50 cents
per share out of income reserves.
The dividend declared is subject to dividend withholding tax at 15%.
There is no secondary tax on companies (STC) to be taken into account when determining the dividend tax to
withhold.
The tax payable is 11.625 cents per share, leaving shareholders who are not exempt from dividends tax with
a net dividend of 65.875 cents per share.
Dividend dates
The last day of trade in order to participate in the dividend (CUM dividend) will be Friday, 6 June 2014.
The shares will trade EX dividend from the commencement of business on Monday, 9 June 2014 and the record
date will be Friday, 13 June 2014. The dividends will be paid on Tuesday, 17 June 2014.
Share certificates may not be dematerialised or rematerialised between Monday, 9 June 2014 and Friday, 13
June 2014, both dates inclusive.
On behalf of the board of directors
Debra Muller
Company Secretary
14 April 2014
Consolidated statement of comprehensive income
for the period ended
364 days to 368 days to
2 March 3 March
2014 Change 2013
Rm % Rm
Revenue 63 661.9 6.4 59 833.0
Turnover 63 117.0 6.5 59 271.3
Cost of merchandise sold (52 077.1) 6.4 (48 935.9)
Gross profit 11 039.9 6.8 10 335.4
Other trading income 500.6 (3.5) 518.9
Trading expenses (10 530.2) 5.3 (10 001.9)
Employee costs (5 326.3) 7.6 (4 952.0)
Occupancy (1 613.9) 7.6 (1 500.5)
Operations (2 580.5) 9.2 (2 363.9)
Merchandising and administration (1 009.5) (14.8) (1 185.5)
Trading profit 1 010.3 18.5 852.4
(Loss)/profit on sale of property, plant and equipment (5.5) 21.6
Impairment loss on intangible assets (104.1) -
Interest received 44.3 3.5 42.8
Interest paid (143.9) 9.6 (131.3)
Share of associate’s income 32.0 36.8 23.4
Profit before tax 833.1 3.0 808.9
Tax (249.4) (3.4) (258.3)
Profit for the period 583.7 6.0 550.6
Other comprehensive income
Items that will not be reclassified to profit or loss
Remeasurement in retirement scheme assets 57.1 1.4
Items that may be reclassified to profit or loss
Exchange rate differences on translating foreign operations 6.4 5.1
Other comprehensive income, net of tax 63.5 6.5
Total comprehensive income for the period 647.2 16.2 557.1
Cents Change % Cents
Earnings per share 122.01 6.0 115.14
Diluted earnings per share 120.21 6.0 113.39
Headline earnings per share 138.51 24.4 111.30
Diluted headline earnings per share 136.46 24.5 109.61
Consolidated statement of financial position
As at As at
2 March 3 March
2014 2013
Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 4 039.3 3 917.7
Intangible assets 987.6 947.9
Operating lease assets 132.8 105.5
Investment in associate 165.9 133.9
Participation in export partnerships 25.1 28.1
Loans 92.0 98.5
Retirement scheme assets 85.1 1.8
Deferred tax assets 212.1 174.4
5 739.9 5 407.8
Current assets
Inventory 3 979.8 3 996.5
Trade and other receivables 2 841.1 2 361.1
Cash and cash equivalents 1 540.3 1 255.7
Derivative financial instruments 3.5 -
8 364.7 7 613.3
Total assets 14 104.6 13 021.1
EQUITY AND LIABILITIES
Capital and reserves
Share capital 6.0 6.0
Treasury shares (145.7) (139.4)
Retained earnings 2 849.1 2 562.6
Foreign currency translation deficit (6.8) (13.2)
Total shareholders’ interest 2 702.6 2 416.0
Non-current liabilities
Borrowings 747.1 772.5
Operating lease liabilities 1 042.7 924.6
1 789.8 1 697.1
Current liabilities
Trade and other payables 8 085.1 6 856.0
Bank overdraft and overnight borrowings 670.0 1 525.6
Borrowings 737.8 431.5
Tax 111.2 82.8
Provisions 8.1 9.0
Derivative financial instruments - 3.1
9 612.2 8 908.0
Total equity and liabilities 14 104.6 13 021.1
Number of shares in issue - thousands 480 397.3 480 397.3
Weighted average number of shares in issue - thousands 478 386.8 478 132.9
Diluted weighted average number of shares in issue - thousands 485 577.4 485 518.8
Net asset value - cents per share (property value based on directors’ valuation) 645.6 586.0
Consolidated statement of changes in equity
for the period ended 2 March 2014
Foreign
currency
Share Treasury Retained translation Total
capital shares earnings deficit equity
Rm Rm Rm Rm Rm
At 1 March 2012 6.0 (142.8) 2 559.2 (18.3) 2 404.1
Total comprehensive income for the period - - 552.0 5.1 557.1
Profit for the period - - 550.6 - 550.6
Exchange rate differences on translating foreign operations - - - 5.1 5.1
Remeasurement in retirement scheme assets - - 1.4 - 1.4
Transactions with owners - 3.4 (548.6) - (545.2)
Dividends paid - - (583.5) - (583.5)
Share repurchases - (77.9) - - (77.9)
Net effect of settlement of employee share options - 81.3 (56.4) - 24.9
Share options expense - - 91.3 - 91.3
At 3 March 2013 6.0 (139.4) 2 562.6 (13.2) 2 416.0
Total comprehensive income for the period - - 640.8 6.4 647.2
Profit for the period - - 583.7 - 583.7
Exchange rate differences on translating foreign operations - - - 6.4 6.4
Remeasurement in retirement scheme assets - - 57.1 - 57.1
Transactions with owners - (6.3) (354.3) - (360.6)
Dividends paid - - (398.4) - (398.4)
Share repurchases - (45.7) - - (45.7)
Net effect of settlement of employee share options - 39.4 (27.4) - 12.0
Share options expense - - 71.5 - 71.5
At 2 March 2014 6.0 (145.7) 2 849.1 (6.8) 2 702.6
Consolidated statement of cash flows
for the period ended
364 days to 368 days to
2 March 3 March
2014 2013
Rm Rm
Cash flows from operating activities
Trading profit 1 010.3 852.4
Amortisation 199.3 145.8
Depreciation 749.1 749.7
Share options expense 71.5 91.3
Movement in net operating lease liabilities 90.8 74.8
Movement in provisions (0.9) (9.6)
Fair value adjustments (10.6) (2.6)
Cash generated before movements in working capital 2 109.5 1 901.8
Movements in working capital 783.7 (999.9)
Movements in trade and other payables 1 229.1 (140.2)
Movements in inventory 31.6 (626.0)
Movements in trade and other receivables (477.0) (233.7)
Cash generated by trading activities 2 893.2 901.9
Interest received 44.3 42.8
Interest paid (143.9) (131.3)
Cash generated by operations 2 793.6 813.4
Dividends paid (398.4) (583.5)
Tax paid (270.2) (311.6)
Cash generated by/(utilised in) operating activities 2 125.0 (81.7)
Cash flows from investing activities
Investment in intangible assets (289.2) (242.4)
Investment in property, plant and equipment (882.4) (970.1)
Purchase of operations (103.3) (118.3)
Proceeds on disposal of intangible assets 11.1 9.4
Proceeds on disposal of property, plant and equipment 38.2 222.1
Loans repaid/(advanced) 6.5 (17.7)
Cash utilised in investing activities (1 219.1) (1 117.0)
Cash flows from financing activities
Borrowings raised/(repaid) 280.9 (260.5)
Share repurchases (45.7) (77.9)
Proceeds from employees on settlement of share options 1.3 2.9
Cash generated by/(utilised in) financing activities 236.5 (335.5)
Net increase/(decrease) in cash and cash equivalents 1 142.4 (1 534.2)
Cash and cash equivalents at beginning of period (269.9) 1 271.7
Effect of exchange rate fluctuations on cash and cash equivalents (2.2) (7.4)
Cash and cash equivalents at end of period 870.3 (269.9)
Consisting of:
Cash and cash equivalents 1 540.3 1 255.7
Bank overdraft and overnight borrowings (670.0) (1 525.6)
Notes to the financial information
for the period ended 2 March 2014
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
The summary consolidated financial statements are prepared in accordance with the requirements of
the JSE Limited Listings Requirements for preliminary reports, and the requirements of the
Companies Act applicable to summary financial statements. The listings requirements require
preliminary reports to be prepared in accordance with the framework concepts and the measurement
and recognition requirements of International Financial Reporting Standards (IFRS) and the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and Financial
Pronouncements as issued by Financial Reporting Standards Council and to also, as a minimum,
contain the information required by IAS 34 Interim Financial Reporting. The accounting policies
applied in the preparation of the consolidated financial statements from which the summary
consolidated financial statements were derived are in terms of International Financial Reporting
Standards and are consistent with those accounting policies applied in the preparation of the
previous consolidated financial statements, except for the change in financial period cut-off
date as disclosed in note 2 together with standards and amendments that became effective on
1 January 2013 namely: IFRS 10 Consolidated Financial Statements; IFRS 12 Disclosure of Interest
in Other entities; IFRS 13 Fair Value Measurement; IAS 19 Employee Benefits; IAS 1 Presentation
of Financial Instruments (effective 1 July 2012); IAS 28 Investments in Associates and Joint
Ventures; and IAS 36 Impairment of Assets (effective 1 January 2014 - early adopted) and those
listed in note 7. The standards and amendments have been applied for the first time in the Group’s
financial year commencing 4 March 2013 and, other than those listed in note 7, had no material
impact on the financial results. The summary consolidated financial statements have been audited
by KPMG Inc., whose unqualified report is available for inspection at the registered office of
the Company. The auditor's report does not cover the commentary (review of operations) at the
beginning of this summary consolidated financial statements and the corporate information,
including the number of stores, at the end of this summary consolidated financial statements.
Shareholders are therefore advised that in order to obtain a full understanding of the nature of
the auditor’s work, they should obtain a copy of that report together with the accompanying financial
information from the registered office of the Company.
The financial information included in this report has been prepared by the Finance Division under
the supervision of the Chief Finance Officer, Mr Bakar Jakoet CA(SA).
2. CHANGE IN FINANCIAL PERIOD CUT OFF
The Group implemented a 52-week financial reporting calendar in February 2013. The 52-week financial
reporting calendar reflects that turnover and gross profit is managed on a daily basis and is
aggregated into 52 trading weeks of 364 days. All other items included in profit before tax (other
than those included in gross profit) are managed on a calendar month basis and are not pro-rated to
days or weeks.
The profit for the year consists of 52 weeks of gross profit and 12 calendar months of other income
and trading expenses. As a result of this change, the 2014 annual financial period began on 4 March
2013 and ended on 2 March 2014 (364 trading days). This compares to the 2013 annual financial period
which ran from 1 March 2012 to 3 March 2013 (368 trading days). The 2013 financial period therefore
included four extra days of turnover and related gross profit. Other income and expenditure between
the two years is comparable, with both the 2014 and 2013 financial years reporting a full 12 calendar
months of other income and trading expenses.
The details and impact of the additional four days included in the comparative period is set out
below. The normalised 2013 result presented below excludes four days of turnover and gross profit
relating to items sold during 1 to 4 March 2012. The accounting policies applied in calculating the
impact of the additional trading days are consistent with those applied in the Group’s consolidated
financial statements. The tax rate applied is the effective tax rate relating to the relevant entities
within the Group. The information below has been prepared for illustrative purposes only and is the
responsibility of the directors and because of its nature, may not fairly present the financial
position, changes in equity, results of operations or cash flows.
Normalised
trading
Prior year calendar
as published 364 days to
368 days to Effect of 3 March
3 March new trading 2013
2013 calendar (pro-forma)
Rm Rm Rm
Statement of comprehensive income
Revenue 59 833.0 (663.8) 59 169.2
Turnover 59 271.3 (663.8) 58 607.5
Cost of merchandise sold (48 935.9) 563.1 (48 372.8)
Gross profit 10 335.4 (100.7) 10 234.7
Other trading income 518.9 - 518.9
Trading expenses (10 001.9) - (10 001.9)
Trading profit 852.4 (100.7) 751.7
Profit on sale of property, plant and equipment 21.6 - 21.6
Interest received 42.8 - 42.8
Interest paid (131.3) - (131.3)
Share of associate’s income 23.4 - 23.4
Profit before tax 808.9 (100.7) 708.2
Tax (258.3) 30.7 (227.6)
Profit for the period 550.6 (70.0) 480.6
Statement of financial position
In the 52-week trading calendar the reporting period will always end on a Sunday. The current and
comparative period ended on similar days (2 March 2014 versus 3 March 2013) and therefore had no
impact on the statement of financial position.
3. Related parties
During the year, certain companies within the Group entered into transactions with each other. These
intra-group transactions are eliminated on consolidation. For further information please refer to the
2014 integrated annual report.
4. SHARE CAPITAL
364 days to 368 days to
2 March 3 March
2014 2013
Rm Rm
Authorised
800 000 000 (2013: 800 000 000) ordinary shares of 1.25 cents each 10.0 10.0
Issued
480 397 321 (2013: 480 397 321) ordinary shares of 1.25 cents each 6.0 6.0
000’s 000’s
The number of shares in issue at end of period is made up as follows:
Treasury shares held in the share trust 1 974.5 2 046.6
Shares held outside the Group 478 422.8 478 350.7
Total shares in issue at end of period 480 397.3 480 397.3
In accordance with the Memorandum of Incorporation and under general authority, 63.9 million unissued shares
(13.3% of issued shares) remain under the control of the directors to implement the terms and provisions of
the employee share schemes.
The holders of ordinary shares are entitled to receive dividends as declared and are entitled to one vote
per share at meetings of the Company.
Directors’ interest in shares
364 days to 368 days to
2 March 3 March
2014 2013
% %
Beneficial 0.9 1.0
Non-beneficial 27.5 27.5
28.4 28.5
The directors’ interest in shares is their effective direct shareholding in the Company (excluding treasury
shares) and their effective indirect shareholding through Pick n Pay Holdings Limited RF (excluding treasury
shares).
5. OPERATING Segments
South Total
Africa Africa operations
Rm Rm Rm
2014
Total segment revenue 60 925.9 3 241.5 64 167.4
External revenue 60 925.9 2 736.0 63 661.9
Direct deliveries* - 505.5 505.5
Segment external turnover 60 381.0 2 736.0 63 117.0
Profit before tax 692.7 140.4 833.1
Other information
Statement of comprehensive income
Interest received 40.1 4.2 44.3
Interest paid 143.5 0.4 143.9
Depreciation and amortisation 923.1 25.3 948.4
Impairment loss on intangible assets 104.1 - 104.1
Share of associate’s income - 32.0 32.0
Statement of financial position
Total assets 12 995.6 1 109.0 14 104.6
Total liabilities 11 064.1 337.9 11 402.0
Additions to non-current assets 1 233.8 26.2 1 260.0
2013
Total segment revenue 57 951.1 2 577.3 60 528.4
External revenue 57 951.1 1 881.9 59 833.0
Direct deliveries* - 695.4 695.4
Segment external turnover 57 389.4 1 881.9 59 271.3
Profit before tax 716.2 92.7 808.9
Other information
Statement of comprehensive income
Interest received 40.0 2.8 42.8
Interest paid 131.3 - 131.3
Depreciation and amortisation 881.4 14.1 895.5
Share of associate’s income - 23.4 23.4
Statement of financial position
Total assets 12 504.3 516.8 13 021.1
Total liabilities 10 150.7 454.4 10 605.1
Additions to non-current assets 1 276.7 29.7 1 306.4
* Direct deliveries are issues to franchisees directly by Group suppliers facilitated through the Group’s
supply chain, these are not included in revenue on the statement of comprehensive income.
6. HEADLINE EARNINGS RECONCILIATION
364 days to 368 days to
2 March 3 March
2014 2013
Rm Rm
Basic earnings (profit for the period) 583.7 550.6
Adjustments: 78.9 (18.4)
Loss/(profit) on sale of property, plant and equipment 5.5 (21.6)
Tax effect of (loss)/profit on sale of property, plant and equipment (1.6) 3.2
Impairment of intangible assets 104.1 -
Tax effect of impairment of intangible assets (29.1) -
Headline earnings 662.6 532.2
7. RECLASSIFICATIONS
Other trading income
During the period under review, trading income previously included under cost of merchandise sold has
been reclassified and disclosed separately. This has been done to improve visibility of all other
trading income, specifically commissions received. The prior year has been restated to align with the
current year disclosures.
368 days to
3 March
364 days to 368 days to 2013
2 March 3 March As previously
2014 2013 Adjustments stated
Rm Rm Rm Rm
Other trading income 500.6 518.9 174.5 344.4
Franchise fee income 311.2 321.5 37.5 284.0
Operating lease income 77.8 75.8 15.4 60.4
Commissions and other income 111.6 121.6 121.6 -
Provisions
In order to improve disclosure, provisions previously included under trade and other payables are now
presented separately.
8. FINANCIAL INSTRUMENTS
All financial instruments held by the Group are measured at amortised cost, with the exception of derivative
financial instruments and certain items included in trade and other payables. The latter is measured at fair
value through profit or loss, are categorised into level 2 of the fair value hierarchy and are considered to
be immaterial.
Level 2 is defined as using inputs other than quoted prices that are observable for the asset or liability
either directly (as prices) or indirectly (derived from prices). The carrying value of all financial
instruments approximate their fair value.
Number of stores
3 March Converted Converted 2 March
2013 Opened Closed openings closings 2014
Company owned
Pick n Pay 420 51 (7) 2 (2) 464
Hypermarkets 20 - - - - 20
Supermarkets 185 19 (4) 1 (1) 200
Clothing 76 14 (2) - - 88
Liquor 135 18 (1) 1 (1) 152
Pharmacy 4 - - - - 4
Boxer 150 29 (7) 7 - 179
Superstores 113 7 (3) 6 - 123
Hardware 15 5 (1) - - 19
Liquor 12 10 (2) 1 - 21
Punch 10 7 (1) - - 16
Total company-owned 570 80 (14) 9 (2) 643
Franchise
Pick n Pay
Family 262 8 (10) 1 (7) 254
Mini Market 23 - (1) - - 22
Daily 1 - - - - 1
Express 17 4 - - - 21
Clothing 13 1 - - - 14
Liquor 105 18 (1) 1 (2) 121
Total franchise 421 31 (12) 2 (9) 433
Total Group stores 991 111 (26) 11 (11) 1 076
TM Supermarkets - associate 49 3 - - - 52
Total including associate 1 040 114 (26) 11 (11) 1 128
FOOTPRINT outside south africa
(included in the numbers above)
Pick n Pay company-owned 5 3 - - - 8
Boxer company-owned 5 - - - - 5
Pick n Pay franchise 36 2 (5) - - 33
TM Supermarkets - associate 49 3 - - - 52
Total 95 8 (5) - - 98
Corporate information
Registered name
Pick n Pay Stores Limited
Registration number: 1968/008034/06
JSE share code: PIK
ISIN: ZAE000005443
Registered office
Pick n Pay Office Park
101 Rosmead Avenue
Kenilworth
Cape Town 7708
Telephone +27 21 658 1000
Facsimile + 27 21 797 0314
Postal address
PO Box 23087
Claremont 7735
Website
Pick n Pay: www.picknpay.co.za
Investor relations: www.picknpayinvestor.co.za
Registrar
Computershare Investor Services Proprietary Limited
70 Marshall Street
Johannesburg 2001
Postal address
PO Box 61051
Marshalltown 2107
Telephone +27 11 370 5000
Facsimile +27 11 688 5248
Sponsor
Investec Bank Limited
100 Grayston Drive
Sandton 2196
Company Secretary
Debra Muller
email address: demuller@pnp.co.za
Board of directors
Executive
RWP Brasher* (CEO), RSJ van Rensburg* (deputy CEO), A Jakoet* (CFO), JG Ackerman, SD Ackerman-Berman
* The Pick n Pay executive committee for the 2014 annual financial period consisted of Richard Brasher,
Richard van Rensburg and Bakar Jakoet.
Non-executive
GM Ackerman (Chairman), D Friedland, D Robins
Independent non-executive
J Gildersleeve, HS Herman, A Mothupi, L Phalatse, BJ van der Ross, J van Rooyen
Auditors
KPMG Inc.
Attorneys
Edward Nathan Sonnenberg
Date: 15/04/2014 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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