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Results for the year ended June 2016
SHOPRITE HOLDINGS LIMITED
(Reg. No. 1936/007721/06)
(ISIN: ZAE 000012084)
(JSE Share code: SHP)
(NSX Share code: SRH)
(LuSE Share code: SHOPRITE)
("the Group")
SHOPRITE HOLDINGS: RESULTS FOR THE YEAR ENDED JUNE 2016
Key information
The key information is for a 53-week period. The comparative figures for
52 weeks are given in brackets. Any reference to 52 weeks is for information
purposes only and is unaudited.
- Trading profit was up 15.0% to R7.278 billion (52 weeks: 11.0% to
R7.024 billion).
- Turnover increased 14.4% - from R113.694 billion to R130.028 billion
(52 weeks: 11.6% to R126.907 billion).
- Diluted headline earnings per share rose 17.0% - from 769.1 cents to
899.7 cents (52 weeks: 12.7% to 867.0 cents).
- EBITDA increased by 16.2% - from R8.065 billion to R9.373 billion
(52 weeks: 14.0% to R9.191 billion).
Whitey Basson, chief executive, commented:
In our view the Group has produced excellent results in the 12 months to
June 2016 given the challenging conditions that prevailed in the markets in
which we operate. Equally gratifying as the results we have achieved, is the
growing trust placed in us by our customers, with the latest AMPS figures
showing that 76% of the adult South African population shop at one of our
supermarket brands - up from 72% a year ago.
There are many factors which contributed to the results we have achieved,
but crucial amongst them has been an unwavering focus on ensuring the lowest
prices while also subsidising the price of basic foodstuffs wherever
possible. Rigorous cost control and more effective operating methods have
enabled us to achieve this without compromising our trading profit margin
which remained at 5.6%. Despite intense local competition we managed to keep
market share above 30%. In June market share increased to the highest level
in three years.
The level of efficiency with which we managed our business is also reflected
in our internal food inflation. Based on a monthly measurement of 81 000
product lines, it averaged just 3.5% for the period, well below South
Africa's official rate of food inflation according to Statistics SA of 7.2%
for the same period.
22 August 2016
Enquiries:
Shoprite Holdings Limited
Whitey Basson, Chief Executive Officer
Marius Bosman, Chief Financial Officer
Adele Gouws, Group PR and Communications Manager
Tel: (021) 980 4000
OPERATING ENVIRONMENT
The 12 months to June have been a difficult period economically not only for
South Africa, but also for the African continent and the world at large.
South Africa has remained caught in a low-growth trap because of external
factors beyond its control such as the continued slowdown in the Chinese
economy and the uncertainty following Brexit.
In a climate of political and economic instability and high unemployment,
domestic growth has slowed even further. The cost of living was compounded
by the worst drought in 35 years which has severely impacted prices of basic
agricultural products. As a result, the disposable income of especially
lower-income consumers has come under increasing pressure.
This drought has had an equally debilitating effect on the economies of
those countries in Southern Africa where we do business, while growth in
West-African countries such as Angola and Nigeria has been stifled by the
continued low price of oil on world markets and a severe lack of foreign
currency.
When seen against this backdrop, then the performance of the Group was even
more impressive. In the 12 months to June the Group continued to be
leaders in the food retailing sector in South Africa as well as in the
countries where it trades elsewhere in Africa. The strongest performance was
delivered by the African division with impressive turnover and profit growth
despite severe trading restrictions in some of its markets. In the local
market several of the smaller business units performed extremely well, the
star among these once again being LiquorShop which grew turnover by 32.3%
and like-for-like sales by 15.4%. Non-RSA liquor sales also showed rapid
growth. LiquorShop opened 44 outlets during the reporting period.
COMMENTS ON THE RESULTS
Statement of Comprehensive Income
Total turnover
As a general rule most international retailers report their results
utilising full weeks. The Group also uses this accepted accounting
procedure, with the result that an extra week is included approximately
every five to six years. This extra week is included in this year's results.
Total turnover increased by 14.4% for the 12 months to June 2016 – from
R113.69 billion to R130.03 billion. For a comparative 52 weeks the growth
was 11.6%.
Turnover growth in Non-RSA countries was negatively affected by the drop in
oil prices (Angola and Nigeria) while their currencies also depreciated
against the US$. There was also a significant depreciation of the Zambian
kwacha. On the positive side, the Group's Palanca store in Angola reopened
to great acclaim in April of this year. In addition, the Supermarkets Non-
RSA segment continued with its strategy of importing inventory to ensure
that customers have a proper range of products available to them. This
contributed to an excellent performance by this segment in the second half
of the year with a turnover growth of 43.1% (52 on 52 weeks). The increase
for the year at constant rates was 39.0%.
At the same time the general state of the economy in RSA is placing a damper
on consumer spending. The Supermarkets RSA operation nevertheless showed its
resilience with a satisfactory turnover growth of 10.9% and 8.1% for 52
weeks. This segment also had a much improved second six months with a
turnover growth of 9.0% (52 on 52 weeks).
Expenses
Depreciation and amortisation as well as the increase in the cost of
operating leases grew at a faster rate than turnover. This was mainly due to
the Group's continued investment in new stores and the refurbishment of
existing ones as well as in information technology. During the 12 months a
net 67 supermarkets and 26 furniture stores were opened. The Group continues
its roll-out of new stores, albeit at a more cautious pace, to enable it to
derive the maximum long-term benefit from the expected eventual improvement
in the economy.
Escalations in expenses such as security, electricity and other energy costs
were beyond the control of the Group. They were nevertheless monitored as
carefully as possible.
Trading margin
The trading margin increased slightly from 5.57% to 5.60%, but decreased
marginally to 5.53% when the effect of the extra week is taken into
consideration. This margin reflects the effects of real growth in turnover
as well as of investment in new stores and in the Group's supply-chain
infrastructure.
Exchange rate losses
The Group recorded an exchange rate loss of R46 million against a loss of
R132 million in the corresponding period. This was mainly due to the
devaluation of the Angolan, Nigerian and Zambian currencies against the
US$ during the period under review with the resultant effect on short-term
loan balances.
Finance cost and interest received
Net interest paid, when compared to the corresponding period, increased due
to a general hike in rates during the year and with capital and information
technology expenditure almost on par with the previous year. For the
convertible bonds issued, IFRS requires that interest be calculated at a
rate that approximates a market-related vanilla bond rate. For the 12 months
under review this amounted to a calculated interest paid of R449 million
compared to the actual interest paid of R305 million.
Earnings per share
Diluted headline earnings per share increased by 17.0% - from 769.1 cents to
899.7 cents and increased by 12.7% when the 53rd week is excluded.
Statement of Financial Position
Property, plant and equipment and intangible assets
The increase is due to the investment in a net 104 new corporate stores,
vacant land purchased for strategic purposes, investment in information
technology to support inventory management, distribution centre developments
as well as normal asset replacements.
Cash and cash equivalents and bank overdrafts
The decrease in cash at the reporting date resulted from capital expenditure
of about R4.8 billion during the past 12 months. In addition, the calendar
month closed before the year-end date, with the result that creditors were
paid before the accounting month end.
Inventory
The increase in inventory is due to the provisioning of the net 104 new
corporate stores as well as the increased capacity created in some of the
distribution centres. Management is also actively pursuing reductions of
inefficient stock holding at branch level and the increase of 12.6%, lower
than turnover growth, indicates that some progress was made.
Trade and other payables
Trade and other payables show a decrease of 4.8% on the previous year mainly
due to the calendar month that closed before the year-end date, with the
result that creditors were paid before the accounting month end.
Borrowings
The convertible bonds that are redeemable on 3 April 2017 are now reflected
under current liabilities.
NUMBER OF OUTLETS JUNE 2016
YEAR TO DATE (12 MONTHS) CONFIRMED
NEW STORES
TO
JUNE 2015 OPENED CLOSED JUNE 2016 JUNE 2017
SUPERMARKETS 1 104 79 12 1 171 81
SHOPRITE 546 33 2 577 54
CHECKERS 197 7 2 202 11
CHECKERS HYPER 33 4 0 37 0
USAVE 328 35 8 355 16
HUNGRY LION 176 18 7 187 10
FURNITURE 471 34 8 497 17
OK FURNITURE 419 33 8 444 17
HOUSE & HOME 52 1 0 53 0
OK FRANCHISE 360 31 32 359 23
TOTAL STORES 2 111 162 59 2 214 131
COUNTRIES OUTSIDE RSA 14 14
TOTAL STORES OUTSIDE RSA 333 50 8 375 46
OPERATIONAL REVIEW
In the past year the focus on becoming even more customer-centric had very
positive results for the Group. Fulfilling shoppers' basic requirements so
that they always find the products they want at competitive prices, has
major implications for the way we run our business and for our
relationship with customers.
To meet the challenge of having preferred products on the shelf in time, the
Group has continued to expand and refine its supply-line infrastructure in
close cooperation with suppliers. At the same time staff training programmes
have been greatly expanded to increase skills and build a more service-
orientated culture.
Supermarkets RSA
The South African operation, which remains the Group's core business,
representing more than 80% of total supermarket turnover, continues as a
major player in the domestic food retailing sector. With its four different
formats covering the full consumer spectrum, it performed very well under
the difficult prevailing circumstances, supported by the extensive range of
ancillary services provided. Boosted by a strong second half, it achieved a
turnover growth of 10.9% to R94.167 billion and a trading profit of R5.814
billion for the 53 weeks.
During the reporting period the Group opened an additional 57 supermarkets
to bring its total number of supermarkets in South Africa to 964. Food-
retailing formats were further streamlined during this time to better serve
the needs of smaller communities without compromising quality. Many of these
new stores are located close to residential areas for greater convenience.
The Shoprite brand, with 439 stores, generating R46.562 billion in sales, a
growth of 9.2%, continues as the flagship of the Group. There was a strong
focus on price to retain its low-price leadership in the market, driven by
several highly successful promotional programmes which also involved
subsidising certain basic food items to assist the poorest of the poor. Its
stores, which generate almost half of the Group's total supermarket sales in
South Africa, also continued to serve as prominent centres for the monthly
pay-out of grants and paid out 19 million grants over the year for children,
the elderly and the unemployed.
The Checkers supermarkets and hypers reported solid sales growth of 11.0% to
R33.968 billion for the year. Work is ongoing in the Checkers network of
stores to further upgrade specialist departments for cheese, wine, meat and
fresh foods and thus increase their appeal for higher-income urban
professionals in particular.
Usave with its limited range of essential product lines and promise of
everyday low prices, also enjoyed a good year, growing turnover by 11.8% to
R5.520 billion and customer numbers by 5.0%. It opened 30 new stores during
the year bringing the total number of outlets in South Africa to 292.
To support the growing number of outlets, the supply chain infrastructure is
continually expanded. In Cape Town a 120 000 square meter regional
distribution node, scheduled for completion before the end of 2017, will
consolidate the activities of five distribution centres spread throughout
the metro and greatly improve efficiencies in the provisioning of stores in
the area.
Supermarkets Non-RSA
The Group achieved excellent results elsewhere in Africa, which it considers
a natural geographic extension of its South African operations.
Notwithstanding stagnant commodity prices, a lack of foreign currency and
slower growth in several of the 14 countries where it trades, sales growth
for the 53 weeks accelerated by 32.6% (29.1% on a 52-week basis) and on a
constant currency basis by 39.0% (35.3% on a 52-week basis) while the number
of customers increased by 16%. Shoprite succeeded in operating successfully
in every market where it has a presence, even in small ones such as Uganda
and Malawi, both of which have been earmarked for further expansion.
The Group opened 22 supermarkets during the review period, most of them in
Angola, Zambia and Nigeria, to bring the total number of supermarkets beyond
South Africa's borders to 207. Angola was the star performer as, unlike most
other retailers, the Group was not restricted in its trading by the
country's severe lack of foreign exchange. In fact, it was able to replenish
its 29 supermarkets, spread throughout the country, on an almost continuous
basis. This near-exclusive availability of stock propelled very strong sales
to the extent that Angola reported the highest sales growth of all the
countries where Shoprite trades.
Although trading conditions in Nigeria, another important West-African
market for the Group, were extremely demanding because of import
restrictions, a collapsing oil industry and a lack of foreign exchange, the
Group has continued to grow its presence, opening seven supermarkets during
the reporting period with another four to follow in the new financial year.
Furniture
The Division's turnover growth of 15.3% (12.5% on a 52-week basis) was
boosted by a substantial increase in the number of outlets in the previous
financial year when it expanded its footprint by 103 stores. However, the
growth in turnover masks the extremely difficult market conditions in which
lack of disposable income was more pronounced than in almost any other
sector of the retail industry. As a result, the Division's profitability
came under considerable pressure in an intensely competitive environment.
The Furniture Division was markedly affected by the latest amendments to the
National Credit Act that has legislated a more onerous calculation of
affordability. This has not only complicated the granting of credit but has
also eliminated a substantial number of potential customers. These changes
had a material effect on the Division's profitability with both finance and
insurance income being negatively affected by the drop in credit
participation.
After several years of deflation, the furniture sector recently experienced
rapidly increasing inflation. This helped turnover growth in the Division's
three chains of which two - OK Furniture, by far the largest with 387
outlets, and OK Power Express - are focused on the middle to lower end of
the market while House and Home caters mainly for the higher income earners.
Like the rest of the Group, the Furniture Division is also accelerating its
push into Africa where it now runs 67 stores in seven markets which include,
in addition to the BLNS countries, also Mozambique, Zambia and Angola.
Other Operating Segments
OK Franchise: During the past year an energised Franchise Division was
substantially restructured to see it become a more competitive and assertive
player in its market segment. The number of OK trading formats was reduced
and a strong focus placed on upgrading all franchise stores to OK standards.
At the same time a programme was launched to further improve and strengthen
the Group's relationship with members. Management's decision to allow
members to open standalone liquor stores was received favourably.
These steps, coupled with an increased frequency in deliveries to stores,
have resulted in a marked improvement in the quality of customer service
provided by members. This in turn has led to a substantial increase in
turnover which grew by 15.6% to R5.583 billion for the year. The OK brand's
growth in stature has also led to an increasing number of developers
approaching the Division to take up space in new shopping malls.
MediRite: The Pharmacy Division consists of two business units: The in-store
pharmacy chain MediRite with 160 outlets of which 12 are in Angola and three
in Swaziland; and the wholesale operation trading under the name Transpharm
which supplies 99% of MediRite's stock in addition to servicing a range of
private clients.
Africa will be an important focus for both MediRite and Transpharm in the
new financial year. All 12 MediRite's in Angola, of which five were opened
during the year, are operating profitably.
MediRite is at present cooperating closely with the South African department
of health whereby its pharmacies will serve as pick-up points for people
receiving chronic medication from the State. This service will be rolled out
to 58 pharmacies in the course of 2017.
Computicket: The profitability of Computicket, which operates from the Money
Market kiosks in Shoprite and Checkers supermarkets, was again compromised
by the weakness of the rand. The devalued rand placed leading international
artists for local concert tours beyond the reach of South African
impresarios. However, its travel division, established several years ago,
continued to show substantial growth, especially in respect of the services
it offers for travel on the continent.
GROUP PROSPECTS AND OUTLOOK
There is nothing to indicate that the demanding trading conditions in South
Africa and in the countries in which the Group has a presence will ease in
the year ahead. If anything, conditions could become even more stressful,
judging by recent predictions such as the Governor of the South African
Reserve Bank expecting no growth for the country in the months ahead, while
the growth prospects for sub-Saharan Africa have again been revised down by
international agencies such as the IMF. The disposable income of a large
percentage of our customer base will therefore remain under intense pressure.
However, we are buoyed by the fact that over the years the Group has
acquired the skill to operate successfully even under the most adverse
conditions, as it has again demonstrated in the past financial year. This
gives us the confidence to believe we can do it again, for ours is a
business structured to withstand difficult times with a tried and tested
management team that operates at its best under challenging conditions.
DIVIDEND NO 135
The board has declared a final dividend of 296 cents (2015: 243 cents) per
ordinary share, payable to shareholders on Monday, 12 September 2016. The
dividend has been declared out of income reserves. This brings the total
dividend for the year to 452 cents (2015: 386 cents) per ordinary share. The
last day to trade cum dividend will be Tuesday, 6 September 2016. As from
Wednesday, 7 September 2016, all trading of Shoprite Holdings Ltd shares
will take place ex dividend. The record date is Friday, 9 September 2016.
Share certificates may not be dematerialised or rematerialised between
Wednesday, 7 September 2016, and Friday, 9 September 2016, both days
inclusive.
In terms of the Dividends Tax, the following additional information is
disclosed:
1. The local dividend tax rate is 15%.
2. The net local dividend amount is 251.60 cents per share for shareholders
liable to pay Dividends Tax and 296 cents per share for shareholders
exempt from paying Dividends Tax.
3. The issued ordinary share capital of Shoprite Holdings Ltd as at the
date of this declaration is 574 443 515 ordinary shares.
4. Shoprite Holdings Ltd's tax reference number is 9775/112/71/8.
BASIS OF PREPARATION
These summarised consolidated financial results 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), the SAICA Financial Reporting Guides as issued
by the Accounting Practices Committee and Financial Pronouncements as issued
by the 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
annual financial statements from which the summarised consolidated financial
results 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 annual financial statements.
The preparation of these summarised consolidated financial results for the
year ended June 2016 have been supervised by Mr M Bosman, CA(SA), and have
been audited by PricewaterhouseCoopers Inc., who expressed an unmodified
opinion thereon. The auditor also expressed an unmodified opinion on the
consolidated annual financial statements from which these summarised
consolidated financial results were derived. Copies of the auditor's reports
on both the consolidated annual financial statements and the summarised
consolidated financial results are available for inspection at the Company's
registered office. The auditor's report does not necessarily report on all
of the information contained in this announcement. Shareholders are
therefore advised that in order to obtain a full understanding of the nature
of the auditor's engagement they should obtain a copy of the auditor's
report together with the accompanying financial information from the
registered office of the Company. The consolidated annual financial
statements, together with the integrated annual report, will be available on
www.shopriteholdings.co.za on 30 September 2016.
By order of the board
CH Wiese JW Basson
Chairman Chief Executive Officer
Cape Town
22 August 2016
SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
53 weeks 52 weeks
ended ended
% June '16 June '15
Notes change Rm Rm
Sale of merchandise 14.4 130 028 113 694
Cost of sales 14.0 (102 792) (90 180)
GROSS PROFIT 15.8 27 236 23 514
Other operating income 8.3 3 711 3 428
Depreciation and amortisation 16.8 (2 025) (1 733)
Operating leases 16.6 (3 486) (2 990)
Employee benefits 11.7 (9 499) (8 507)
Other operating expenses 17.3 (8 659) (7 384)
TRADING PROFIT 15.0 7 278 6 328
Exchange rate losses (46) (132)
Items of a capital nature (11) (13)
OPERATING PROFIT 16.8 7 221 6 183
Interest received (19.4) 174 216
Finance costs 20.0 (498) (415)
Share of loss of associates
and joint ventures (52) (2)
PROFIT BEFORE INCOME TAX 14.4 6 845 5 982
Income tax expense 8.1 (1 998) (1 848)
PROFIT FOR THE YEAR 17.2 4 847 4 134
OTHER COMPREHENSIVE INCOME,
NET OF INCOME TAX (579) (387)
Items that will not be reclassified
to profit or loss
Re-measurements of post-employment
medical benefit obligations 1 1
Items that may subsequently be
reclassified to profit or loss
Foreign currency translation differences (680) (413)
Share of foreign currency translation
differences of associates and joint ventures 76 25
For the period 122 25
Reclassified to profit for the period (46) -
Gains on effective cash flow hedge 24 -
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 4 268 3 747
PROFIT ATTRIBUTABLE TO: 4 847 4 134
Owners of the parent 4 841 4 124
Non-controlling interest 6 10
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: 4 268 3 747
Owners of the parent 4 262 3 737
Non-controlling interest 6 10
Basic earnings per share (cents) 4 17.4 905.4 771.2
Diluted earnings per share (cents) 4 17.4 900.7 767.4
Basic headline earnings
per share (cents) 4 17.0 904.4 772.9
Diluted headline earnings
per share (cents) 4 17.0 899.7 769.1
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited Audited
June '16 June '15
Notes Rm Rm
ASSETS
NON-CURRENT ASSETS 20 086 18 035
Property, plant and equipment 16 908 15 374
Investment in associates and joint ventures 95 178
Loans and receivables 599 547
Deferred income tax assets 599 469
Intangible assets 1 857 1 458
Fixed escalation operating lease accruals 28 9
CURRENT ASSETS 28 164 25 872
Inventories 15 420 13 689
Trade and other receivables 5 544 5 019
Current income tax assets 146 44
Loans and receivables 270 59
Cash and cash equivalents 6 784 7 061
Assets held for sale 17 13
TOTAL ASSETS 48 267 43 920
EQUITY
CAPITAL AND RESERVES ATTRIBUTABLE
TO OWNERS OF THE PARENT
Share capital 1 650 650
Share premium 4 029 4 029
Treasury shares 1 (760) (759)
Reserves 17 419 15 172
21 338 19 092
NON-CONTROLLING INTEREST 65 68
TOTAL EQUITY 21 403 19 160
LIABILITIES
NON-CURRENT LIABILITIES 1 494 5 660
Borrowings 2 102 4 305
Deferred income tax liabilities 130 188
Provisions 267 321
Fixed escalation operating lease accruals 995 846
CURRENT LIABILITIES 25 370 19 100
Trade and other payables 16 590 17 432
Borrowings 2 5 022 567
Derivative financial instruments 32 2
Current income tax liabilities 574 960
Provisions 187 136
Bank overdrafts 2 965 3
TOTAL LIABILITIES 26 864 24 760
TOTAL EQUITY AND LIABILITIES 48 267 43 920
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Non-
Total controlling
Rm equity interest
BALANCE AT JUNE 2014 17 283 66
Total comprehensive income 3 747 10
Profit for the year 4 134 10
Recognised in other comprehensive income
Re-measurements of post-employment medical
benefit obligations 1
Foreign currency translation
differences (388)
Share-based payments - value of
employee services 131
Modification of cash bonus arrangement
transferred from provisions 26
Purchase of treasury shares (79)
Dividends distributed to shareholders (1 948) (8)
BALANCE AT JUNE 2015 19 160 68
Total comprehensive income 4 268 6
Profit for the year 4 847 6
Recognised in other comprehensive income
Re-measurements of post-employment
medical benefit obligations 1
Foreign currency translation
differences (604)
Gains on effective cash flow hedge 33
Income tax effect of gains on effective
cash flow hedge (9)
Share-based payments - value of
employee services 140
Modification of cash bonus arrangement
transferred from provisions 7
Purchase of treasury shares (28)
Treasury shares disposed 9
Realisation of share-based
payment reserve -
Dividends distributed to shareholders (2 153) (9)
BALANCE AT JUNE 2016 21 403 65
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)
Attributable to owners
of the parent
Share Share
Rm Total capital premium
BALANCE AT JUNE 2014 17 217 650 4 029
Total comprehensive income 3 737 - -
Profit for the year 4 124
Recognised in other comprehensive income
Re-measurements of post-employment
medical benefit obligations 1
Foreign currency translation
differences (388)
Share-based payments - value of
employee services 131
Modification of cash bonus arrangement
transferred from provisions 26
Purchase of treasury shares (79)
Dividends distributed to shareholders (1 940)
BALANCE AT JUNE 2015 19 092 650 4 029
Total comprehensive income 4 262 - -
Profit for the year 4 841
Recognised in other comprehensive income
Re-measurements of post-employment
medical benefit obligations 1
Foreign currency translation
differences (604)
Gains on effective cash flow hedge 33
Income tax effect of gains on effective
cash flow hedge (9)
Share-based payments - value of
employee services 140
Modification of cash bonus arrangement
transferred from provisions 7
Purchase of treasury shares (28)
Treasury shares disposed 9
Realisation of share-based
payment reserve -
Dividends distributed to shareholders (2 144)
BALANCE AT JUNE 2016 21 338 650 4 029
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)
Attributable to owners
of the parent
Treasury Other Retained
Rm shares reserves earnings
BALANCE AT JUNE 2014 (680) 1 236 11 982
Total comprehensive income - (388) 4 125
Profit for the year 4 124
Recognised in other comprehensive income
Re-measurements of post-employment
medical benefit obligations 1
Foreign currency translation
differences (388)
Share-based payments - value of
employee services 131
Modification of cash bonus arrangement
transferred from provisions 26
Purchase of treasury shares (79)
Dividends distributed to shareholders (1 940)
BALANCE AT JUNE 2015 (759) 1 005 14 167
Total comprehensive income - (580) 4 842
Profit for the year 4 841
Recognised in other comprehensive income
Re-measurements of post-employment
medical benefit obligations 1
Foreign currency translation
differences (604)
Gains on effective cash flow hedge 33
Income tax effect of gains on effective
cash flow hedge (9)
Share-based payments - value of
employee services 140
Modification of cash bonus arrangement
transferred from provisions 7
Purchase of treasury shares (28)
Treasury shares disposed 9
Realisation of share-based
payment reserve 18 (18)
Dividends distributed to shareholders (2 144)
BALANCE AT JUNE 2016 (760) 554 16 865
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
Audited Audited
year ended year ended
June '16 June '15
Notes Rm Rm
CASH FLOWS FROM OPERATING ACTIVITIES 1 443 3 756
Operating profit 7 221 6 183
Less: investment income (111) (99)
Non-cash items 5.1 2 681 2 912
Payments for cash settlement of share
appreciation rights - (3)
Changes in working capital 5.2 (3 331) (1 408)
Cash generated from operations 6 460 7 585
Interest received 258 294
Interest paid (426) (377)
Dividends received 27 21
Dividends paid (2 152) (1 947)
Income tax paid (2 724) (1 820)
CASH FLOWS UTILISED BY INVESTING ACTIVITIES (4 733) (4 670)
Investment in property, plant and equipment
and intangible assets to expand operations (3 304) (3 630)
Investment in property, plant and equipment
and intangible assets to maintain operations (1 448) (1 001)
Proceeds on disposal of property, plant and
equipment and intangible assets 85 71
Proceeds on disposal of assets held for sale - 163
Other investing activities (263) (264)
Investment in associates - (6)
Proceeds on disposal of investment in associate 197 -
Acquisition of operations - (3)
CASH FLOWS FROM/(UTILISED BY) FINANCING ACTIVITIES 10 (52)
Purchase of treasury shares (28) (79)
Proceeds from treasury shares disposed 9 -
Redemption of Shoprite Holdings Ltd preference
share capital (2) -
Increase in borrowing from Standard Chartered Bank
(Mauritius) Ltd 216 -
Repayment of borrowing from Standard
Bank de Angola, S.A. (201) -
Increase in borrowing from First National
Bank of Namibia Ltd 8 14
Increase in other borrowings 8 13
NET MOVEMENT IN CASH AND CASH EQUIVALENTS (3 280) (966)
Cash and cash equivalents at the beginning
of the year 7 058 8 100
Effect of exchange rate movements on cash
and cash equivalents 41 (76)
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 3 819 7 058
Consisting of:
Cash and cash equivalents 6 784 7 061
Bank overdrafts (2 965) (3)
3 819 7 058
SUMMARISED OPERATING SEGMENT INFORMATION
ANALYSIS PER REPORTABLE SEGMENT
Audited June 2016
Super- Super- Other
markets markets operating
RSA Non-RSA Furniture segments Consolidated
Rm Rm Rm Rm Rm
Sale of merchandise 98 103 22 263 5 207 8 436 134 009
External 94 167 22 246 5 207 8 408 130 028
Inter-segment 3 936 17 - 28 3 981
Trading profit 5 814 1 231 99 134 7 278
Depreciation and
amortisation* 1 737 413 96 42 2 288
Total assets 30 196 11 500 4 003 2 568 48 267
Audited June 2015
Super- Super- Other
markets markets operating
RSA Non-RSA Furniture segments Consolidated
Rm Rm Rm Rm Rm
Sale of merchandise 88 195 16 792 4 516 7 539 117 042
External 84 945 16 781 4 516 7 452 113 694
Inter-segment 3 250 11 - 87 3 348
Trading profit 5 268 741 205 114 6 328
Depreciation and
amortisation* 1 536 319 77 30 1 962
Total assets 28 056 9 726 4 019 2 119 43 920
GEOGRAPHICAL ANALYSIS
Audited June 2016
Outside
South South
Africa Africa Consolidated
Rm Rm Rm
Sale of merchandise - external 105 603 24 425 130 028
Non-current assets** 14 193 4 600 18 793
Audited June 2015
Outside
South South
Africa Africa Consolidated
Rm Rm Rm
Sale of merchandise - external 95 121 18 573 113 694
Non-current assets** 12 811 4 030 16 841
* Represent gross depreciation and amortisation before appropriate
allocations of distribution cost.
** Non-current assets consist of property, plant and equipment, intangible
assets and fixed escalation operating lease accruals.
SELECTED EXPLANATORY NOTES TO THE SUMMARISED CONSOLIDATED FINANCIAL RESULTS
Audited Audited
June '16 June '15
Rm Rm
1 SHARE CAPITAL AND TREASURY SHARES
1.1 Ordinary share capital
Authorised:
650 000 000 (2015: 650 000 000)
ordinary shares of 113.4 cents each
Issued:
572 871 960 (2015: 572 871 960)
ordinary shares of 113.4 cents each 650 650
Details of the shareholder spread
and major shareholders are disclosed in
the Shareholder Analysis contained in the
Integrated Report.
Treasury shares held by Shoprite Checkers
(Pty) Ltd are netted off against share capital
on consolidation. The net number of ordinary
shares in issue for the Group are:
Number of shares
June '16 June '15
Issued ordinary
share capital 572 871 960 572 871 960
Treasury shares
(note 1.3) (38 246 183) (38 221 703)
534 625 777 534 650 257
The unissued ordinary shares are under
the control of the directors who may issue
them on such terms and conditions as they deem
fit until the Company's next annual general meeting.
All shares are fully paid up.
1.2 Deferred share capital
Authorised:
360 000 000 (2015: 360 000 000)
non-convertible, non-participating
no par value deferred shares
Issued:
291 792 794 (2015: 291 792 794)
non-convertible, non-participating no
par value deferred shares - -
Reconciliation of movement in number of
deferred shares issued:
Number of shares
June '16 June '15
Balance at the
beginning of the
year 291 792 794 290 625 071
Shares issued
during the year - 1 167 723
Balance at the
end of the year 291 792 794 291 792 794
The unissued deferred shares are not under the
control of the directors, and can only be
issued under predetermined circumstances as
set out in the Memorandum of Incorporation of
Shoprite Holdings Ltd.
All shares are fully paid up and carry the
same voting rights as the ordinary shares. 650 650
1.3 Treasury shares
38 246 183 (2015: 38 221 703) ordinary shares 760 759
Reconciliation of movement in number of
treasury shares for the Group:
Number of shares
June '16 June '15
Balance at the
beginning of
the year 38 221 703 37 729 072
Shares purchased
during the year 194 916 492 631
Shares disposed during
the year (57 503) -
Shares utilised for
settlement of
equity-settled
share-based payment
arrangements (112 933) -
Balance at the
end of the year 38 246 183 38 221 703
Consisting of:
Shares owned by
Shoprite Checkers
(Pty) Ltd 35 436 572 35 450 975
Shares held by
Shoprite Checkers
(Pty) Ltd for the
benefit of participants to
equity-settled
share-based payment
arrangements 2 809 611 2 770 728
38 246 183 38 221 703
2 BORROWINGS
Consisting of:
Shoprite Holdings Ltd preference share capital - 2
Convertible bonds (note 2.1) 4 655 4 511
Standard Chartered Bank (Mauritius) Ltd 222 -
Standard Bank de Angola, S.A. 121 249
First National Bank of Namibia Ltd 105 97
Other borrowings 21 13
5 124 4 872
2.1 Convertible bonds
The Group has issued 6.5% convertible bonds
for a principal amount of R4.7 billion
(2015: R4.7 billion). The bonds mature on
3 April 2017 at their nominal value of
R4.7 billion (2015: R4.7 billion) or can
be converted into shares at the holders'
option at the maturity date at the rate of
5 919.26 shares per R1 million. The Group holds,
subject to conditions, rights on early
redemption. The values of the liability
component and the equity conversion component
were determined at issuance of the bonds.
The fair value of the liability component
was calculated using a market interest rate
for an equivalent non-convertible bond at
initial recognition. The residual amount,
representing the value of the equity
conversion option, is included in
shareholders' equity in other reserves,
net of income taxes.
The convertible bonds recognised in the
statement of financial position is
calculated as follows:
Liability component at the beginning of the year 4 511 4 381
Interest expense 449 436
Interest paid (305) (306)
Liability component at the end of the year 4 655 4 511
3 FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of amounts owing by employees
included in loans and receivables amounted
to R217.0 million (2015: R216.0 million) at
the statement of financial position date.
The fair value is calculated using cash flows
discounted at a rate based on the borrowings
rate of 10.5% (2015: 9.3%) and is within
level 2 of the fair value hierarchy.
The fair value of the liability component
of the convertible bonds included in borrowings
amounted to R4.7 billion (2015: R4.6 billion)
at the statement of financial position date.
The fair value is calculated using cash flows
discounted at a rate based on the borrowings
rate of 9.5% (2015: 8.5%) and is within
level 2 of the fair value hierarchy.
The book value of all other financial assets
and liabilities approximate the fair
values thereof.
4 EARNINGS PER SHARE
Profit attributable to owners of the parent 4 841 4 124
Re-measurements 13 15
(Profit)/loss on disposal and scrapping of property (1) 313
Profit on disposal of assets held for sale - (39)
Loss on disposal and scrapping of plant and
equipment and intangible assets 59 96
Reversal of impairment of property, plant
and equipment (16) (1)
Impairment of intangible assets 66 12
Insurance claims receivable (25) (367)
Profit on disposal of investment in associate (71) -
Profit on other investing activities (1) (1)
Re-measurements included in equity-accounted
loss of associates and joint ventures 2 2
Income tax effect on re-measurements (19) (6)
Headline earnings 4 835 4 133
Number of ordinary shares '000 '000
- In issue 534 626 534 650
- Weighted average 534 636 534 816
- Weighted average adjusted for dilution 537 423 537 432
Reconciliation of weighted average number
of ordinary shares in issue during the year:
Weighted average number of ordinary shares 534 636 534 816
Adjustments for dilutive potential of full
share grants 2 787 2 616
Weighted average number of ordinary
shares for diluted earnings per share 537 423 537 432
Earnings per share Cents Cents
- Basic earnings 905.4 771.2
- Diluted earnings 900.7 767.4
- Basic headline earnings 904.4 772.9
- Diluted headline earnings 899.7 769.1
5 CASH FLOW INFORMATION
5.1 Non-cash items
Depreciation of property, plant and equipment 1 993 1 754
Amortisation of intangible assets 295 208
Net fair value losses on financial instruments 30 3
Exchange rate losses 46 132
(Profit)/loss on disposal and scrapping of property (1) 313
Profit on disposal of assets held for sale - (39)
Loss on disposal and scrapping of plant and
equipment and intangible assets 59 96
Reversal of impairment of property, plant
and equipment (16) (1)
Impairment of intangible assets 66 12
Profit on disposal of investment in associate (71) -
Movement in provisions 5 72
Movement in cash-settled share-based payment
accrual (10) 60
Movement in share-based payment reserve 140 131
Movement in fixed escalation operating lease
accruals 145 171
2 681 2 912
5.2 Changes in working capital
Inventories (1 995) (1 483)
Trade and other receivables (588) (1 048)
Trade and other payables (748) 1 123
(3 331) (1 408)
6 RELATED PARTY INFORMATION
During the year under review, in the
ordinary course of business, certain
companies within the Group entered into
transactions with each other. All these
intergroup transactions are similar to those
in the prior year and have been eliminated
in the annual financial statements on
consolidation. For further information,
refer to the audited annual financial statements.
7 SUPPLEMENTARY INFORMATION
Contracted capital commitments 1 682 1 595
Contingent liabilities 146 13
Net asset value per share (cents) 3 991 3 571
DIRECTORATE AND ADMINISTRATION
Executive directors
JW Basson (chief executive), CG Goosen (deputy managing director),
M Bosman, B Harisunker, AE Karp, EL Nel, BR Weyers
Executive alternate directors
JAL Basson, PC Engelbrecht
Non-executive director
CH Wiese (chairman)
Independent non-executive directors
JF Basson, JJ Fouche, EC Kieswetter, JA Louw, ATM Mokgokong, JA Rock
Non-executive alternate director
JD Wiese
Company secretary
PG du Preez
Registered office
Cnr William Dabs and Old Paarl Roads, Brackenfell, 7560, South Africa
PO Box 215, Brackenfell, 7561, South Africa
Telephone: +27 (0)21 980 4000, facsimile: +27 (0)21 980 4050
Website: www.shopriteholdings.co.za
Transfer secretaries
South Africa: Computershare Investor Services (Pty) Ltd, PO Box 61051,
Marshalltown, 2107, South Africa
Telephone: +27 (0)11 370 5000, facsimile: +27 (0)11 688 5238,
email: Web.Queries@Computershare.co.za
Website: www.computershare.com
Namibia: Transfer Secretaries (Pty) Ltd, PO Box 2401, Windhoek, Namibia
Telephone: +264 (0)61 227 647, facsimile: +264 (0)61 248 531,
email: ts@nsx.com.na
Zambia: ShareTrack Zambia, Spectrum House, Stand 10 Jesmondine,
Great East Road, Lusaka, Zambia
PO Box 37283, Lusaka, Zambia,
Telephone: +260 (0)211 374 791 - 374 794, facsimile: +260 (0)211 374 781,
email: sharetrack@scs.co.zm
Website: www.sharetrackzambia.com
Sponsors
South Africa: Nedbank Corporate and Investment Banking, PO Box 1144,
Johannesburg, 2000, South Africa
Telephone: +27 (0)11 295 8525, facsimile: +27 (0)11 294 8525,
email: doristh@nedbank.co.za
Website: www.nedbank.co.za
Namibia: Old Mutual Investment Group (Namibia) (Pty) Ltd, PO Box 25549,
Windhoek, Namibia
Telephone: +264 (0)61 299 3264, facsimile: +264 (0)61 299 3500,
email: jgeorge3@oldmutual.com
Zambia: Pangaea Securities Ltd, 1st Floor, Pangaea Office Park,
Great East Road, Lusaka, Zambia, PO Box 30163, Lusaka 10101, Zambia
Telephone: +260 (0)211 220 707 / 238 709/10, facsimile: +260 (0)211 220 925,
email: info@pangaea.co.zm
Website: www.pangaea.co.zm
Auditors
PricewaterhouseCoopers Incorporated, PO Box 2799, Cape Town, 8000,
South Africa
Telephone: +27 (0)21 529 2000, facsimile: +27 (0)21 529 3300
Website: www.pwc.com/za
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