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PICK N PAY STORES LIMITED - Unaudited Interim Condensed Consolidated Results for the 26 week period ended 31 August 2014

Release Date: 16/10/2014 07:05
Code(s): PIK     PDF:  
Wrap Text
Unaudited Interim Condensed Consolidated Results for the 26 week period ended 31 August 2014

Pick n Pay Stores Limited
Registration number: 1968/008034/06
JSE share code: PIK
ISIN: ZAE000005443

Unaudited interim condensed consolidated results 
for the 26 week period ended 31 August 2014

Measured progress in a challenging market


Review of operations
Key financial indicators
                                    26 weeks to       26 weeks to
                                      31 August       1 September           %
                                           2014              2013      change   
  Total till sales                R37.4 billion     R35.0 billion         7.1   
  Turnover                        R32.1 billion     R30.1 billion         6.8   
  Gross profit margin                     17.7%             17.9%               
  Trading profit                 R386.6 million    R317.5 million        21.8   
  Trading profit margin                    1.2%              1.1%               
  Profit before tax              R366.8 million    R271.8 million        35.0   
  Profit before tax margin                 1.1%              0.9%               
  Basic earnings per share          54.39 cents       40.05 cents        35.8   
  Headline earnings per share       53.98 cents       40.81 cents        32.3   
  Interim dividend per share        19.60 cents       14.80 cents        32.4   


Results summary
Pick n Pay delivered a substantially improved profit performance for the half-year ending 
31 August 2014, demonstrating sustained progress against our plan to improve the business. 

A determined focus on cost control and operating efficiency is strengthening our business and 
is continuing to drive our profit growth in a challenging trading environment. Trading profit 
increased by 21.8% on last year. Improved working capital management resulted in stronger cash 
balances and a considerable saving on net interest paid, driving profit before tax up 35.0% on 
last year. The profit before tax margin is 1.1%, up from 0.9% last year.

Headline earnings per share are 32.3% up on the same period last year. The Group declared an
interim dividend of 19.60 cents, up 32.4% on last year. 

Turnover growth of 6.8% reflects the growing financial pressure faced by customers in a very
competitive market. Our core customers are becoming increasingly price sensitive in the face 
of rising utility, transport and commodity prices and higher borrowing costs. The situation is 
even more challenging in the emerging markets which Boxer serves, where unemployment remains a 
major concern and there is considerable reliance on social grants. 

We supported our customers over the period through substantive investment in price, containing
food price increases at 6.7%, against CPI food inflation of 8.4%. This price investment is 
reflected in a decrease in our gross margin from 17.9% to 17.7%. We are encouraged by the 
progress we are making in improving our business. Our supply chain and store operations are 
simpler and more effective. As a result, operating costs and like-for-like stock holdings are 
lower. Centralisation of our administrative functions means better support for our stores, and 
benefits our customers through improved availability, better service and more innovation.


Operational review
Growth in a competitive market
We opened 46 new stores over the period, bringing Pick n Pay and Boxer to a number of 
communities in which we had not traded before. We are on track to create more than 3 000 new 
jobs this financial year, a significant contribution to the national priority of building 
employment, training and skills. To improve the quality of our estate, we closed five 
under-performing stores and invested R110 million on improving existing stores. 

The Group now has 1 117 stores, comprising 665 company-owned stores and 452 franchise stores,
across multiple retail formats and six southern African countries. In addition 52 stores, four 
of which trade under the Pick n Pay brand, are operated in Zimbabwe by our associate, TM 
Supermarkets.

Our space growth over the period was behind that of our sector. We are determined that new 
space should deliver acceptable and sustainable returns, and have reviewed our plans against 
this requirement. By using the flexibility available across our Pick n Pay and Boxer formats, 
and  the  opportunity to satisfy the growing demand for convenience, we are confident that we 
can  grow  sustainably. We will therefore accelerate our opening programme, with more than 80 
new stores planned to open in the second half of the year.

Improved financial control and operational efficiencies
We are pleased with the enhanced efficiencies and cost reductions that are being achieved 
through our investment in centralised category-based procurement, distribution, administration 
and related systems. In the first half of this year we completed the rollout of our fully 
integrated forecast and replenishment system, and substantively improved our two main distribution 
centres. We implemented a specialised high-density picking area (pick tunnel) in our Philippi 
Distribution Centre in the Western Cape, significantly increasing the efficiency of handling 
slow-moving and single-item units. This has increased the capacity of the facility from 8 000 line 
items to 14 500, enabling us to centralise an additional 50 suppliers in the Western Cape. We have 
implemented the EWM SAP warehousing system in our Longmeadow Distribution Centre in Gauteng. This 
system had been introduced successfully at Philippi, and we expect it to contribute to a 40% 
increase in picking efficiency at Longmeadow by the end of the financial year. Notwithstanding 
the costs associated with these two initiatives, we reduced our distribution costs in both 
facilities compared to the same period last year. 

Our improved systems have enabled more effective inventory management, with stock levels reduced 
by two days in the distribution centres and the total value of stock on hand being down 6% on a 
like-for-like basis. Stock availability remains a challenge, and while we have seen a 2% 
improvement over the period, we continue to work closely with suppliers to achieve further 
improvement.  

We have reduced trading expenses as a percentage of sales by 0.2 percentage points, from 17.7% 
to 17.5%, largely through improved labour scheduling and productivity at store level, and a 
more streamlined support office function following the head office restructure in the previous 
financial year. 

Investing in our customer offer
As well as driving profit growth, cost and operational improvements strengthen our ability to
enhance the shopping trip for customers. This is crucial to our strategic aim of sales-led 
growth. Lower costs enable us to invest more in the customer offer in a period of high 
inflation. Internal food inflation for the half-year was held to 6.7%, compared to food CPI 
of 8.4%.

We recognise that our customers are increasingly price sensitive in this current market and 
are shopping around for the best deals. We responded through the launch of Pick n Pay Brand 
Match at the end of August. Customer feedback and the results to date have been very 
encouraging. Brand Match is strengthening confidence in the competitiveness of our prices, 
and building even greater loyalty in Pick n Pay. 

We have improved the quality of our fresh, perishable and pre-packaged convenience ranges. 
Through our “Fresh Promise” we have reaffirmed our commitment to the quality of our fresh 
produce, and this has been positively received by our customers. We have used smart shopper 
insight to enhance our in-store offer, and have added new value-added areas into stores, 
such as biltong bars and fresh flowers. 

Customers are seeking greater convenience. As a result, our smaller, more convenient stores 
have out-performed our larger hypermarket format. However, hypermarkets remain a valuable 
part of our business, attracting a large number of customers and generating significant 
revenue for the Group. There are substantial opportunities to improve their efficiency and 
offer for customers, and we are developing an overall strategy as well as an individual plan 
for each hyper. We have already refitted three larger stores as part of this strategy. We 
have appointed a member of our senior management team, Neal Quirk, as the head of our 
Hypermarket business. Neal’s focus and operational expertise will ensure that trading 
densities improve through better use of space and stronger customer focus. 

Our clothing business delivered strong growth over the period, through both an expanded 
range and additional space allocations in our supermarkets. 

We continue to invest in our online business, which we believe will become an increasingly
valuable asset in the future of South African retail. We have built confidence in the 
online experience, through improved availability, quality and reliability and as a result, 
we have delivered 37% growth in customers over last year. 

We continue to innovate, offering our customers a wide range of value-added services aimed 
at increased convenience and lower household costs. Mobile money, our partnership with MTN, 
continues to perform well. The service has 1.8 million customers, 400 000 of whom use money 
transfers regularly and 250 000 utilise their mobile money account as their low-cost bank 
account. 

Our smart shopper loyalty programme was recently voted the best loyalty programme in South 
Africa for the second year running at the Sunday Times Top Brands awards. More than 10% of 
South Africans now have a smart shopper card, with 10 cards swiped every second that our 
doors are open. Loyalty sales account for 65% of our turnover, with the value of a smart 
shopper basket consistently and meaningfully growing ahead of a non-loyalty basket. Our 
smart shopper programme is a key differentiator for Pick n Pay, and we are determined to 
keep it relevant and meaningful for customers. We have built on the point of sale 
enhancements introduced last year, with the introduction of targeted promotions, 
personalised cash off vouchers and a number of new partners. As a result, our smart 
shoppers are more engaged than ever, with redemptions of customer offers up 42% over last 
year. We have given back R1.5 billion in smart shopper points since the inception of the 
programme.

Rest of Africa: establishing a second engine of growth
We continue to strengthen our position outside South Africa with established franchise 
businesses in Botswana, Lesotho, Namibia and Swaziland, and a growing company-owned business 
in Zambia. These operations have performed well over the period. Segmental revenue is up 
15.0% to R1.7 billion, with like-for-like growth of 7.8%. Segmental profit has grown by 
43.0%  to R135.1 million, partly driven by the Group’s strategic decision to exit 
Mozambique and Mauritius last year.  

TM Supermarkets, the Group’s 49% held investment in Zimbabwe, has had a more difficult time 
over the period, with our share of their income falling by 22.9% to R11.1 million. This 
reflects significant deflation in Zimbabwe, resulting in price decreases across a broad 
range of categories. We remain confident of the prospects for this business, which has 
embarked on a substantial store refurbishment programme.

We continue to actively examine opportunities for sustainable growth outside South Africa. 
As a result, we plan to extend our operations in the medium term by opening stores in Ghana, 
one of the most rapidly growing markets in Africa. We are also close to completing our 
analysis of the opportunities available to us in Nigeria. Our approach outside our borders  
remains measured, and no investment will be undertaken without a comprehensive understanding 
of a market and its supply chain capacities. 

Creating a high-performance team
We are beginning to benefit from our new talent-spotting and performance management processes. 
We are investing more in training and development to ensure we have the right skills and 
capabilities in place, and are continuously reviewing our head office structure to ensure we 
offer an efficient and effective support function for our stores. 

We have made a number of new senior management appointments from within the talent pool at 
Pick n Pay. This strengthens our decision-making capacity and demonstrates our commitment to 
recognising and developing talent within the business, and rewarding successful leadership. 
In addition, Jonathan Muthige has joined Pick n Pay as our head of human resources, 
replacing Isaac Motaung, who is retiring after 42 years of incredible service to our business. 
Jonathan will add momentum and experience to our determination to make Pick n Pay the employer 
of choice wherever we operate. 

Doing good is good business
We remain determined to play a strong and positive role in the communities we serve and in 
the prosperity of the country as a whole. We have expanded the number of Pick n Pay Women’s 
Walks in association with Pink Drive, helping to increase public awareness of breast cancer. 
We have increased our support for Community Food Gardens and other community programmes. On 
sustainability, we have exceeded our target to reduce our energy use by 30% against a 2008 
baseline. Our overall climate change strategy has been recognised by our inclusion in the 
renowned CPD Global Leaders Index and the international Dow Jones Sustainability Index.

Conclusion: More to come
The Group is encouraged by this improved profit performance. Good expense control and improved
operational efficiency is delivering higher returns and strengthening the capacity of the 
business to deliver on our strategy of customer-focused, sales-led growth. We are impatient
to lead more change in Pick n Pay and accelerate progress on our plan. A great deal of hard 
work remains to be done under increasingly challenging economic conditions, but we intend to 
sustain the momentum we have built up over the past 18 months.


Financial review
Turnover
Group turnover increased by 6.8% to R32.1 billion (2013: R30.1 billion). Total sales growth 
has slowed over the period, due in part to lower growth from net new space. New stores 
contributed 2.8% to our turnover growth, compared to 4.4% in the prior year. Net trading 
space grew by 1.6% over the period. We are pleased, however, with the improvement in our 
like-for-like turnover growth, which has increased to 4.0% from 2.7% for the year ended 
February 2014. The Group demonstrated stronger growth at overall point of sale level, with 
owned and franchise stores collectively growing till sales by 7.1%, with like-for-like 
growth of 4.7%. 

Gross profit
Gross profit of R5.7 billion is 5.8% up on last year. The gross margin has decreased from 
17.9% to 17.7%, reflecting our ongoing commitment to keeping prices as low as possible for  
our customers in challenging economic times. 

Other trading income
Certain elements of trading income previously included under cost of merchandise sold (within
gross profit) were reclassified during the 2014 financial year and disclosed separately. This 
was done to improve the visibility of all other trading income, specifically commissions 
received. The prior period has been restated to align with the current year disclosures, please 
refer to note 6 of the summarised financial information presented in the notes section. The 
15.4% increase in other income is largely attributable to the increase in commissions received, 
which reflects the launch of a number of new initiatives, such as mobile money and the sale 
of iTunes vouchers, which attracted high commissions on launch. 

Trading profit
The trading profit margin improved from 1.1% to 1.2%, due to improved expense control and
operating efficiency. Trading expenses increased by 5.3% and as a percentage of turnover 
decreased from 17.7% to 17.5%. The Group contained like-for-like expense growth (removing 
the impact of new and closed stores) at 3.0%, against CPI growth for the period of 6.3%.  
We are very pleased with the meaningful and sustainable progress being made across all 
areas of the business. 

* Employee costs increased by 5.3% over the period, with like-for-like growth contained at 
  3.0%, notwithstanding new store growth and a wage rate increase in line with CPI. The 
  Group remains resolutely focused on reducing labour costs in the business through improved 
  productivity and efficiencies. 
  
* Occupancy costs have increased by 12.9%, reflecting our space growth since the beginning 
  of September last year. Like-for-like occupancy costs are up 8.3%, reflecting above-CPI 
  regulatory increases in rates and taxes. 

* Costs of operations are down 0.1% on last year, and down 3.0% on a like-for-like basis. 
  This is mainly due to reduced amortisation and depreciation charges as a result of assets 
  impaired in the prior year. Our operational teams have improved the cost of opening new 
  stores and improved the efficiencies of existing stores. We have exceeded our target to 
  reduce our energy usage by 30.0% against our 2008 baseline, which is saving the business 
  money in the face of increasing energy costs.
  
* Merchandise and administration costs have increased by 7.4% or 8.8% on a like-for-like 
  basis. The main driver in this category is bank charges. As South Africa’s largest 
  acceptor of electronic tender, we are sensitive to increases in bank charges, particularly 
  as our customers move from debit cards to hybrid cards. The Reserve Bank has taken action 
  to reduce bank inter-change fees with the benefits expected to flow in the 2016 financial 
  year. 

Interest
The net interest expense of R33.9 million is R21.0 million better than the prior year’s 
expense of R54.9 million. Improved working capital management, particularly our focus on 
optimising inventory levels, has resulted in stronger cash balances and enabled the 
repayment  of short-term debt under our DMTN programme.  

Tax
The tax rate improved from 29.5% to 28.6%, as a result of our increased profit margin 
and with no change in the value of our non-deductible expenses. 

Earnings per share
Basic earnings per share (EPS) increased 35.8% from 40.05 to 54.39 cents per share. 

Headline earnings per share (HEPS) increased 32.3% from 40.81 to 53.98 cents per 
share. 

Profits on the sale of assets, net of tax, of R2.0 million have been deducted from 
headline earnings, against an add-back of losses on the sale of assets, net of tax, 
of R3.6 million in 2013.


Financial position
                                   Sunday,           Sunday,
                                 31 August       1 September
                                      2014              2013
                                        Rm                Rm  
  Inventory                        4 153.6           3 950.7   
  Trade and other receivables      2 709.4           2 390.1   
  Cash and cash equivalents          965.4           1 340.3   
  Current liabilities             (9 162.7)         (9 157.2)  
  Net working capital             (1 334.3)         (1 476.1)  


We are pleased with the improvement in net working capital of R141.8 million, 
particularly in the context of the store expansion programme. Inventory has increased 
by R202.9 million or 5.1%, with like-for-like inventory (excluding the impact of 
new stores) decreasing by 6.0%, mainly due to efficiencies derived from our supply chain 
channel, including the benefits from our enhanced forecast and replenishment system. 

The increase in trade and other receivables of R319.3 million relates both to new 
franchise stores and a reduction in our bad debt provision. On a like-for-like basis, 
our cash position is R425.1 million stronger, which is testament to the good work being 
done in respect of inventory management and improved control over both capital and 
operating expenditure. The decrease in cash and cash equivalents of R374.9 million is 
after the repayment of R800 million of short-term debt over the last 12 months. 

Shareholder distribution
The Board declared an interim dividend of 19.60 cents per share,32.4% up 
on last year.

We would like to thank our whole team for their efforts in refocusing the Group, and 
for all their hard work which has delivered this improved result.

 
             
Gareth Ackerman            Richard Brasher
Chairman                   Chief Executive Officer

15 October 2014

 
Dividend declarations
Pick n Pay Stores Limited - 
Tax reference number: 9275/141/71/2

Number of shares in issue: 487 322 321

Notice is hereby given that the directors have declared an interim dividend 
(number 93) of 19.60 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 2.94000 cents per share, leaving shareholders 
who are not exempt from dividends tax with a net dividend of 16.66000 cents 
per share.

Dividend dates
The last day of trade in order to participate in the dividend (CUM dividend) will be 
Friday, 5 December 2014.

The shares will trade EX dividend from the commencement of business on Monday, 
8 December 2014 and the record date will be Friday, 12 December 2014. The dividends will 
be paid on Monday, 15 December 2014.

Share certificates may not be dematerialised or rematerialised between Monday, 
8 December 2014 and Friday, 12 December 2014, both dates inclusive.

On behalf of the board of directors


 
Debra Muller
Company Secretary

15 October 2014


Consolidated statement of comprehensive income
for the period ended
                                                                        Unaudited                   Unaudited        Audited        
                                                                      26 weeks to                 26 weeks to    52 weeks to    
                                                                        31 August                 1 September        2 March        
                                                                             2014       Change           2013           2014           
                                                                               Rm            %             Rm             Rm             
  Revenue                                                                32 452.6          7.2       30 278.0        63 661.9   
  Turnover                                                               32 110.6          6.8       30 067.6        63 117.0   
  Cost of merchandise sold                                              (26 424.7)         7.0      (24 693.8)      (52 077.1)  
  Gross profit                                                            5 685.9          5.8        5 373.8        11 039.9   
  Other trading income                                                      316.0         15.4          273.9           500.6   
  Trading expenses                                                       (5 615.3)         5.3       (5 330.2)      (10 530.2)  
  Employee costs                                                         (2 818.6)         5.3       (2 677.9)       (5 326.3)  
  Occupancy                                                                (897.0)        12.9         (794.3)       (1 613.9)  
  Operations                                                             (1 281.2)       (0.1)       (1 282.0)       (2 580.5)  
  Merchandising and administration                                         (618.5)         7.4         (576.0)       (1 009.5)  
                                                                                                                                
  Trading profit                                                            386.6         21.8          317.5         1 010.3   
  Profit/(loss) on sale of property, plant and equipment                      3.0                        (5.2)           (5.5)  
  Impairment loss on intangible assets                                          -                           -          (104.1)  
  Interest received                                                          26.0         35.4           19.2            44.3   
  Interest paid                                                             (59.9)      (19.2)          (74.1)         (143.9)  
  Share of associate’s income                                                11.1       (22.9)           14.4            32.0   
  Profit before tax                                                         366.8         35.0          271.8           833.1   
  Tax                                                                      (104.9)        30.8          (80.2)         (249.4)  
  Profit for the period                                                     261.9         36.7          191.6           583.7   
  Other comprehensive income                                                                                                    
   Items that will not be reclassified to profit or loss                                                                        
   Remeasurement in retirement scheme assets                                  1.7                         4.7            57.1   
   Items that may be reclassified to profit or loss                                                                             
   Exchange rate differences on translating foreign operations               (6.5)                       (3.7)            6.4   
  Other comprehensive income, net of tax                                     (4.8)                        1.0            63.5   
  Total comprehensive income for the period                                 257.1         33.5          192.6           647.2 

  
                                                                            Cents     Change %          Cents           Cents   
   Basic earnings per share                                                 54.39         35.8          40.05          122.01   
   Diluted basic earnings per share                                         53.52         34.8          39.69          120.21   
   Headline earnings per share                                              53.98         32.3          40.81          138.51   
   Diluted headline earnings per share                                      53.12         31.3          40.45          136.46   


   
Consolidated statement of financial position
                                                      Unaudited       Unaudited       Audited        
                                                          as at           as at         as at    
                                                      31 August     1 September       2 March        
                                                           2014            2013          2014  
                                                             Rm             Rm             Rm 
  ASSETS                                                                                        
  Non-current assets                                                                            
  Property, plant and equipment                         3 947.8         3 980.7       4 039.3   
  Intangible assets                                     1 016.3           959.5         987.6   
  Operating lease assets                                  145.8           116.3         132.8   
  Investment in associate                                 177.0           148.3         165.9   
  Participation in export partnerships                     26.9            25.4          25.1   
  Loans                                                   108.7            95.1          92.0   
  Retirement scheme assets                                 94.3            12.0          85.1   
  Deferred tax assets                                     206.9           205.4         212.1   
                                                        5 723.7         5 542.7       5 739.9   
  Current assets                                                                                
  Inventory                                             4 153.6         3 950.7       3 979.8   
  Trade and other receivables                           2 709.4         2 390.1       2 841.1   
  Cash and cash equivalents                             1 285.4         1 340.3       1 540.3   
  Derivative financial instruments                            -               -           3.5   
                                                        8 148.4         7 681.1       8 364.7   
  Total assets                                         13 872.1        13 223.8      14 104.6   
  EQUITY AND LIABILITIES                                                                        
  Capital and reserves                                                                          
  Share capital                                             6.0             6.0           6.0   
  Share premium                                               -               -             -   
  Treasury shares                                        (162.7)        (140.1)       (145.7)   
  Retained earnings                                     2 709.7         2 458.6       2 849.1   
  Foreign currency translation deficit                    (13.3)         (16.9)         (6.8)   
  Total shareholders’ interest                          2 539.7         2 307.6       2 702.6   
  Non-current liabilities                                                                       
  Borrowings                                              741.1           772.3         747.1   
  Operating lease liabilities                           1 108.6           986.7       1 042.7   
                                                        1 849.7         1 759.0       1 789.8   
  Current liabilities                                                                           
  Trade and other payables                              9 069.0         8 231.1       8 085.1   
  Bank overdraft and overnight borrowings                 320.0               -         670.0   
  Borrowings                                               40.2           829.6         737.8   
  Tax                                                      45.9            80.2         111.2   
  Provisions                                                4.5             9.6           8.1   
  Derivative financial instruments                          3.1             6.7             -   
                                                        9 482.7         9 157.2       9 612.2   
  Total equity and liabilities                         13 872.1        13 223.8      14 104.6   
  Net asset value - cents per share                       613.6           543.1         645.6   
  (property valued based on directors’ valuation)                                               


  
Consolidated statement of changes in equity
for the period ended 31 August 2014
                                                                                                                         Foreign         Total         
                                                                                                                        currency        Share-         
                                                                       Share      Share     Treasury     Retained    translation      holders'   
                                                                     capital    premium       shares     earnings        deficit      interest       
  Unaudited                                                               Rm         Rm           Rm           Rm             Rm            Rm 
  At 3 March 2013                                                        6.0          -       (139.4)     2 562.6           (13.2)     2 416.0       
  Total comprehensive income for the period                                -          -            -        196.3            (3.7)       192.6       
  Profit for the period                                                    -          -            -        191.6               -        191.6       
  Exchange rate differences on translating foreign operations              -          -            -            -            (3.7)        (3.7)       
   Remeasurement in retirement scheme assets                               -          -            -          4.7               -          4.7       
  Transactions with owners                                                 -          -         (0.7)      (300.3)              -       (301.0)       
  Dividends paid                                                           -          -            -      (328.2)               -       (328.2)       
  Share repurchases                                                        -          -        (10.6)           -               -        (10.6)       
  Net effect of settlement of employee share options                       -          -          9.9         (6.8)              -          3.1       
  Share options expense                                                    -          -            -         34.7               -         34.7       
                                                                                                                                                     
  At 1 September 2013                                                    6.0          -       (140.1)     2 458.6           (16.9)     2 307.6       
  Total comprehensive income for the period                                -          -            -        444.5            10.1        454.6       
  Profit for the period                                                    -          -            -        392.1               -        392.1       
  Exchange rate differences on translating foreign operations              -          -            -            -            10.1         10.1       
   Remeasurement in retirement scheme assets                               -          -            -         52.4               -         52.4       
  Transactions with owners                                                 -          -         (5.6)       (54.0)              -        (59.6)       
  Dividends paid                                                           -          -            -        (70.2)              -        (70.2)       
  Share repurchases                                                        -          -        (35.1)           -               -        (35.1)       
  Net effect of settlement of employee share options                       -          -         29.5        (20.6)              -          8.9       
  Share options expense                                                    -          -            -         36.8               -         36.8       
                                                                                                                                                     
  At 2 March 2014                                                        6.0          -       (145.7)     2 849.1            (6.8)     2 702.6       
  Total comprehensive income for the period                                -                       -        263.6            (6.5)       257.1       
  Profit for the period                                                    -          -            -        261.9               -        261.9       
  Exchange rate differences on translating foreign operations              -          -            -            -            (6.5)        (6.5)      
  Remeasurement in retirement scheme assets                                -          -            -          1.7               -          1.7       
  Transactions with owners                                                 -          -        (17.0)      (403.0)              -       (420.0)       
  Dividends paid                                                           -          -            -       (366.8)              -       (366.8)             
  Share repurchases                                                        -          -       (122.7)           -               -       (122.7)       
  Net effect of settlement of employee share options                       -          -        105.7        (75.5)              -         30.2       
  Share-based payments expense                                             -          -            -         39.3               -         39.3       
                                                                                                                                                     
  At 31 August 2014                                                      6.0          -       (162.7)     2 709.7           (13.3)     2 539.7       


  
Consolidated statement of cash flows
for the period ended
                                                                           Unaudited      Unaudited        Audited        
                                                                         26 weeks to    26 weeks to    52 weeks to    
                                                                           31 August    1 September        2 March        
                                                                                2014           2013           2014           
                                                                                  Rm             Rm             Rm   
  Trading profit                                                               386.6          317.5        1 010.3   
  Depreciation and amortisation                                                427.3          478.8          948.4   
  Share-based payment expense                                                   39.3           34.7           71.5   
  Movement in net operating lease liabilities                                   52.9           51.4           90.8   
  Movement in provisions                                                       (3.6)            9.6          (0.9)   
  Fair value adjustments                                                         6.6            3.6          (6.6)   
  Cash generated before movements in working capital                           909.1          895.6        2 113.5   
  Movements in working capital                                                 943.9        1 386.6          780.7   
  Movements in trade and other payables                                        983.9        1 357.1        1 229.1   
  Movements in inventory                                                     (171.7)           45.8           31.6   
  Movements in trade and other receivables                                     131.7         (16.3)        (480.0)   
                                                                                                                     
  Cash generated by trading activities                                       1 853.0        2 282.2        2 894.2   
  Interest received                                                             26.0           19.2           44.3   
  Interest paid                                                               (59.9)         (74.1)        (143.9)   
  Cash generated by operations                                               1 819.1        2 227.3        2 794.6   
  Dividends paid                                                             (366.8)        (328.2)        (398.4)   
  Tax paid                                                                   (136.3)        (113.1)        (270.2)   
  Cash generated by operating activities                                     1 316.0        1 786.0        2 126.0   
  Cash flows from investing activities                                                                               
  Investment in intangible assets                                             (67.6)        (103.8)        (289.2)   
  Investment in property, plant and equipment                                (281.4)        (453.9)        (882.4)   
  Purchase of operations                                                      (50.9)              -        (103.3)   
  Proceeds on disposal of intangible assets                                      1.6              -           11.1   
  Proceeds on disposal of property, plant and equipment                         27.8           15.2           38.2   
  Loans (advanced)/repaid                                                     (16.7)            3.5            6.5   
  Participation in export partnerships                                         (1.8)          (9.9)            3.0   
  Retirement obligation                                                        (6.8)            5.1          (4.0)   
  Cash utilised in investing activities                                      (395.8)        (543.8)      (1 220.1)   
  Cash flows from financing activities                                                                               
  Borrowings (repaid)/raised                                                 (703.6)          397.9          280.9   
  Share repurchases                                                          (122.7)         (10.6)         (45.7)   
  Proceeds from employees on settlement of share options                         0.8            0.6            1.3   
  Cash (utilised in)/generated by financing activities                       (825.5)          387.9          236.5   
  Net increase in cash and cash equivalents                                     94.7        1 630.1        1 142.4   
  Cash and cash equivalents at beginning of period                             870.3        (269.9)        (269.9)   
  Effect of exchange rate fluctuations on cash and cash equivalents              0.4         (19.9)          (2.2)   
  Net cash and cash equivalents at end of period                               965.4        1 340.3          870.3   
  Consisting of:                                                                                                     
  Cash and cash equivalents                                                  1 285.4        1 340.3        1 540.3   
  Bank overdraft and overnight borrowings                                    (320.0)              -        (670.0)   
                                                                                                                     


Notes to the financial information
for the period ended 31 August 2014

  1. Basis of preparation and accounting policies
     The condensed consolidated interim financial statements are prepared in accordance 
     with International Financial Reporting Standards, IAS 34 Interim Financial Reporting, 
     the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee 
     and Financial Pronouncements as issued by Financial Reporting Standards Council and 
     the requirements of the Companies Act of South Africa. The accounting policies applied 
     in the preparation of these interim financial statements are in terms of International 
     Financial Reporting Standards and are consistent with those applied in the financial 
     statements for the 52 weeks ended 2 March 2014. These interim financial statements 
     have been prepared by the Finance Division under the supervision of the Chief Financial 
     Officer, Mr Bakar Jakoet CA(SA), and have not been audited or reviewed by the Group’s 
     external auditors, KPMG Inc.    

  2. Related party transactions
     During the period, certain companies within the Group entered into transactions with 
     each other. These intra-group transactions are eliminated on consolidation. Related 
     parties are unchanged from those reported at 2 March 2014. For further information 
     please refer to note 27 of the 2014 Group financial statements and note 8 of the 
     2014 Company financial statements.





  3.    SHARE CAPITAL                                                                  
                                                               Unaudited      Unaudited        Audited        
                                                             26 weeks to    26 weeks to    52 weeks to    
                                                               31 August    1 September        2 March        
                                                                    2014           2013           2014           
                                                                      Rm             Rm             Rm   
        Authorised                                                                                       
        800 000 000 (2013: 800 000 000) ordinary shares           
        of 1.25 cents each                                          10.0           10.0           10.0    
        Issued                                                                                           
        487 322 321 (2013: 480 397 321) ordinary shares          
        of 1.25 cents each                                           6.1            6.0            6.0   
                                                                          
 
     24 019 866 of the unissued shares of the Company may be utilised to settle the 
     Company’s obligations under the employee share schemes. To date, 9 615 000 shares 
     have been issued, resulting in 14 404 866 remaining.      
 
     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.     
 
     During the 26 weeks ended 31 August 2014, 6 925 000 shares were issued with a value 
     of R57.31 per share to subsidiary companies within the Group to be utilised as share 
     based payments in terms of a forfeitable share plan (FSP) as approved by shareholders 
     at the extra ordinary general meeting held on 12 February 2014. Refer to note 8.                                                 

  4. OPERATING Segments                                                           
                                                   South      Rest of         Total
                                                  Africa      Afriica    operations
                                                      Rm           Rm            Rm  
     Unaudited                                                                            
     2014                                                                                 
     Total segment revenue                      31 030.1      1 732.4      32 762.5       
     External revenue                           31 030.1      1 422.5      32 452.6       
     Direct deliveries*                                -        309.9         309.9       
     Segment external turnover                  30 688.1      1 422.5      32 110.6       
     Segmental profit**                            231.7        135.1         366.8       
     Other information                                                                    
     Statement of comprehensive income                                                    
     Interest received                              23.5          2.5          26.0       
     Interest paid                                  59.9            -          59.9       
     Depreciation and amortisation                 416.3         11.0         427.3       
     Share of associate’s income                       -         11.1          11.1       
     Statement of financial position                                                      
     Total assets                               12 853.1      1 019.0      13 872.1       
     Total liabilities                          11 011.2        321.2      11 332.4       

      2013                                                                                 
      Total segment revenue                      29 046.9      1 506.1      30 553.0       
      External revenue                           29 046.9      1 231.1      30 278.0       
      Direct deliveries*                                -        275.0         275.0       
      Segment external turnover                  28 836.5      1 231.1      30 067.6       
      Segmental profit**                            177.3         94.5         271.8       
      Other information                                                                    
      Statement of comprehensive income                                                    
      Interest received                              19.1          0.1          19.2       
      Interest paid                                  73.8          0.3          74.1       
      Depreciation and amortisation                 469.2          9.6         478.8       
      Share of associate’s income                       -         14.4          14.4       
      Statement of financial position                                                      
      Total assets                               12 299.3        924.5      13 223.8       
      Total liabilities                          10 382.8        533.4      10 916.2       
      *   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.                                                    
      **  Segmental profit is the reported measure used for evaluating the Group’s operating 
          segments performance. On an overall basis the segmental profit is equal to the Group’s 
          reported profit before tax. The Rest of Africa segment’s segmental profit comprises 
          the segment’s trading result and directly attributable costs only. No allocations are 
          made for indirect or incremental cost incurred by the South Africa segment relating to 
         the Rest of Africa segment.                                                    

  5.     EARNINGS PER SHARE                                                                                   
                                                                    Unaudited      Unaudited        Audited        
                                                                  26 weeks to    26 weeks to    52 weeks to    
                                                                    31 August    1 September        2 March        
                                                                         2014           2013           2014           
                                                                        Cents          Cents          Cents
                                                                    per share      per share      per share     
         Basic                                                          54.39          40.05         122.01   
         Diluted basic                                                  53.52          39.69         120.21   
         Headline                                                       53.98          40.81         138.51   
         Diluted headline                                               53.12          40.45         136.46   
                                                                                                              
                                                                           Rm             Rm             Rm   
  5.1    Basic and headline earnings                                                                          
         Reconciliation between basic and headline earnings:                                                  
         Basic earnings (profit for the period)                         261.9          191.6          583.7   
         Adjustments:                                                    (2.0)           3.6           78.9   
         (Profit)/loss on sale of property, plant 
         and equipment                                                   (3.0)           5.2            5.5   
         Tax effect of profit/(loss) on sale of 
         property, plant and equipment                                    1.0           (1.6)          (1.6)   
         Impairment of intangible assets                                    -              -          104.1   
         Tax effect of impairment of intangible assets                      -              -          (29.1)   
                                                                                                              
         Headline earnings                                              259.9          195.2          662.6   
                                                                                                              
                                                                        000’s          000’s          000’s   
  5.2    Number of shares                                                                                     
         Weighted average number of ordinary 
        shares in issue                                             481 536.3      478 364.1      478 386.8   
         Diluted weighted average number of 
         ordinary shares in issue                                   489 333.6      482 680.7      485 577.4   
         Number of shares in issue                                  487 322.3      480 397.3      480 397.3   

  6.    RECLASSIFICATIONS                                                                                                              
  6.1   Other trading income                                                                                      
        In line with the reclassification for the 52 weeks ended 2 March 2014, trading income of R82.7 million 
        previously included under cost of merchandise sold has been reclassified and disclosed separately. This 
        has been done to improve the visibility of all other trading income, specifically commissions received. 
        The prior period has been restated to align with the current period disclosures. 
             
                                                                                                       Unaudited     
                                                                                                     26 weeks to     
                                                     Unaudited          Unaudited                    1 September            
                                                   26 weeks to        26 weeks to                           2013   
                                                     31 August        1 September                  As previously          
                                                          2014               2013    Adjustment           stated              
                                                            Rm                 Rm            Rm               Rm              
        Gross profit                                   5 685.9            5 373.8         (82.7)         5 456.5   
        Other trading income                             316.0              273.9          82.7            191.2   
                                                                                                                         
  6.2   Trading expenses                                                                                          
        The Group completed the centralisation of its buying, operational and finance support functions during the 
        previous period. As a result, the Group reviewed all allocations of trading expenses in the statement of 
        comprehensive income for the 52 weeks ended 2 March 2014 to ensure that it accurately reflected the new 
        operating costs structures within the Group. Trading expenses presented for the 26 weeks ended 
        1 September 2013 have been adjusted in line with the full-year classifications. The reclassifications had 
        no impact on information presented for prior financial period-ends as the centralised operating structures 
        and related cost implications have not been in effect during those periods.                                                                     
                                                                                                       Unaudited     
                                                                                                     26 weeks to     
                                                     Unaudited          Unaudited                    1 September            
                                                   26 weeks to        26 weeks to                           2013   
                                                     31 August        1 September                  As previously          
                                                          2014               2013     Adjustment          stated              
                                                            Rm                 Rm             Rm              Rm              
           Trading expenses                           (5 615.3)          (5 330.2)             -        (5 330.2)   
           Employee costs                             (2 818.6)          (2 677.9)             -        (2 677.9)   
           Occupancy                                    (897.0)            (794.3)          75.3          (869.6)   
           Operations                                 (1 281.2)          (1 282.0)       (108.9)        (1 173.1)   
           Merchandising and administration             (618.5)            (576.0)          33.6          (609.6)   
                                                                                                                         
  6.3    Provisions                                                                                                
         In line with the reclassification for the 52 weeks ended 2 March 2014 and in order to improve disclosure, 
         provisions previously included under trade and other payables during the 26 weeks ended 1 September 2013 
         are now presented separately on the face of the statement of financial position and the related 
         adjustments made to the statement of cash flows.                                                                       

  6.4    Operating segments                                                                                            
         Total segment revenue - Rest of Africa                                                                        
         In line with reclassifications done during the 52 weeks ended 2 March 2014, inter-segment revenue previously 
         disclosed of R90.1 million has been removed as this was actual intra-segment revenue between businesses 
         within the Rest of Africa segment.                                                                        
                                                                                                         Unaudited     
                                                                                                       26 weeks to     
                                                        Unaudited           Unaudited                  1 September            
                                                      26 weeks to         26 weeks to                         2013   
                                                        31 August         1 September                As previously          
                                                             2014                2013   Adjustment          stated              
                                                               Rm                  Rm           Rm              Rm              
         Total segment revenue - Rest of Africa            1 732.4            1 506.1        (90.1)        1 596.2   
         External revenue                                  1 422.5            1 231.1            -         1 231.1   
         Direct deliveries                                   309.9              275.0            -           275.0   
         Inter-segment revenue                                   -                  -        (90.1)           90.1   
                                                                                                                       
         Segment external turnover                                                                                     
         Segment external turnover presented previously inappropriately included direct deliveries of R275 million 
         under the Rest of Africa segment. This was not included in the total external turnover and therefore 
         resulted in the South Africa segment external turnover being understated by R275 million. In line with 
         reclassifications for the 52 weeks ended 2 March 2014, the prior year segment external turnover has been 
         restated to reflect the correct segmentation between the Rest of Africa and South Africa.                                                                        
                                                                                                           Unaudited     
                                                                                                         26 weeks to     
                                                         Unaudited          Unaudited                    1 September            
                                                       26 weeks to        26 weeks to                           2013   
                                                         31 August        1 September                  As previously          
                                                              2014               2013    Adjustment           stated              
                                                                Rm                 Rm            Rm               Rm              
         Total segment external turnover                  32 110.6           30 067.6             -         30 067.6   
         South Africa                                     30 688.1           28 836.5         275.0         28 561.5   
         Rest of Africa                                    1 422.5            1 231.1        (275.0)          1 506.1   
                                                                                                                                                       
         Segmental profit                                                                                              
         Segmental profit previously included internal administration fees between South Africa and the Rest of Africa 
         of R29.4 million. This was not eliminated and therefore resulted in an overstatement of segmental profit under 
         South Africa and an understatement of segmental profit under the Rest of Africa. The prior year segmental 
         profit has been restated to reflect the correct segmentation between South Africa and the Rest of Africa. No 
         such reclassification was required for the 52 weeks ended 2 March 2014.                                                                        
                                                                                                                       
                                                                                                          Unaudited     
                                                                                                        26 weeks to     
                                                         Unaudited          Unaudited                   1 September            
                                                       26 weeks to        26 weeks to                          2013   
                                                         31 August        1 September                 As previously          
                                                              2014               2013    Adjustment          stated              
                                                                Rm                 Rm            Rm              Rm              
         Total segmental profit                              366.8              271.8             -           271.8   
         South Africa                                        231.7              177.3         (29.4)          206.7   
         Rest of Africa                                      135.1               94.5          29.4            65.1   
                                                                                                                       
         Total assets                                                                                                  
         Total assets for the Rest of Africa presented previously excluded the Group’s investment in its associate, 
         TM Supermarkets, and therefore resulted in the Rest of Africa segment total assets being understated by 
         R148.3 million. The prior year total assets have been restated to reflect the correct segmentation between 
         South Africa and the Rest of Africa. No such reclassification was required during the 52 weeks ended 
         2 March 2014.                                                                        
                                                                                                         Unaudited     
                                                                                                       26 weeks to     
                                                        Unaudited           Unaudited                  1 September            
                                                      26 weeks to         26 weeks to                         2013   
                                                        31 August         1 September                As previously          
                                                             2014                2013   Adjustment          stated              
                                                               Rm                  Rm           Rm              Rm              
         Total assets                                     13 872.1           13 223.8             -       13 223.8   
         South Africa                                     12 853.1           12 299.3       (148.3)       12 447.6   
         Rest of Africa                                    1 019.0              924.5        148.3           776.2   
                                                                                                                             
  7.    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, is categorised into level 2 of the fair value hierarchy and is 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.  

  8.    ISSUE OF SHARES IN RESPECT OF FORFEITABLE SHARE PLAN                                                                                           
        Pick n Pay Stores Limited issued 6 925 000 shares in June 2014, in order to meet the share obligations under 
        its new employee forfeitable share plan (FSP), which was approved by shareholders in February 2014. The FSP 
        brings our approach to providing share incentives in line with international best practice, further aligning 
        the interests of senior management with those of our shareholders.                                                                                                                                                                                           
        The shares were awarded to FSP participants during August 2014. The participants, although benefiting from full 
        voting rights and full rights to any dividends declared, cannot dispose of their shares during a three-year 
        employment period. In addition, the shares are subject to further performance conditions linked to the 
        Pick n Pay Stores Limited Group's compound annual growth in headline earnings per share. Should the employment 
        condition or performance conditions not be met, the shares (or a portion thereof) are forfeited. Please refer 
        to our 2014 integrated annual report for further information.
                                                                                                 
        The total employee cost in respect of the FSP is recognised on a straight-line basis over the employment period, 
        commencing on the award date. The current period expense is not material.                                                                                                                                                                                                                                                                                                                                                                                                                      

Store numbers report
                                    February                        Converted    Converted        August   
                                        2014    Opened    Closed    -openings    -closings          2014                                                                                             
  Company owned                                                                                         
  Pick n Pay                             464        19       (2)            3          (3)           481   
  Hypermarkets                            20         -        -             -           -             20   
  Supermarkets                           200         8       (1)            2          (2)           207   
  Clothing                                88         7       (1)            -           -             94   
  Liquor                                 152         4        -             1          (1)           156   
  Pharmacy                                 4         -        -             -           -              4   
  Boxer                                  179         5       (1)            1           -            184   
  Superstores                            123         2       (1)            1           -            125   
  Hardware                                19         1        -             -           -             20   
  Liquor                                  21         1        -             -           -             22   
  Punch                                   16         1        -             -           -             17   
  Total company owned                    643        24       (3)            4          (3)           665   
  Franchise                                                                                                
  Pick n Pay                                                                                               
  Family                                 254         4       (1)            5          (3)           259   
  Mini Market                             22         -       (1)            -          (3)            18   
  Daily                                    1         -        -             -           -              1   
  Express                                 21        10        -             -           -             31   
  Liquor                                 121         6        -             1          (1)           127   
  Clothing                                14         2        -             -           -             16   
  Total franchise                        433        22       (2)            6          (7)           452   
  Total Group stores                   1 076        46       (5)           10         (10)         1 117   
  TM Supermarkets - associate             52         1       (1)            -           -             52   
  Total including associate            1 128        47       (6)           10         (10)         1 169   
  footprint outside south africa                                                                   
  (included in the number above)                                                            
  Pick n Pay company-owned                 8         -        -             -            -             8   
  Boxer company-owned                      5         -       (1)            -            -             4   
  Pick n Pay franchise                    33         2       (1)            -            -            34   
  TM Supermarkets - associate             52         1       (1)            -            -            52   
  Total                                   98         3       (3)            -            -            98   


Corporate information
 
Pick n Pay Stores Limited 
Registration number: 1968/008034/06
JSE share code: PIK
ISIN: ZAE000005443 

Board of directors
Executive
Richard Brasher (CEO)
Richard van Rensburg (deputy CEO)
Aboubakar (Bakar) Jakoet (CFO)
Suzanne Ackerman-Berman
Jonathan Ackerman

Non-executive
Gareth Ackerman (Chairman)
David Friedland
David Robins

Independent non-executive
Hugh Herman
Lorato Phalatse
Ben van der Ross
Jeff van Rooyen
Audrey Mothupi
John Gildersleeve

Company Secretary
Debra Muller
email address: dmuller@pnp.co.za

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

Promotion of Access to Information Act
Information officer - Penny Gerber
email address: pgerber@pnp.co.za

Website
Pick n Pay: www.picknpay.co.za
Investor relations: www.picknpayinvestor.co.za

Transfer secretaries
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

Auditors
KPMG Inc. 

Attorneys
Edward Nathan Sonnenberg 

Principal transactional bankers
Absa Limited
First National Bank

Jse Limited Sponsor
Investec Bank Limited
100 Grayston Drive
Sandton 2196

Investor relations
David North
email address: dnorth@pnp.co.za

Penny Gerber
email address: pgerber@pnp.co.za

Customer careline
Tel +27 800 11 22 88
email address: customercare@pnp.co.za

Online shopping
Tel +27 860 30 30 30
www.picknpay.co.za

Date: 16/10/2014 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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