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Shoprite Holdings : Results for the year ended 2 July 2017
SHOPRITE HOLDINGS LIMITED
(Reg. No. 1936/007721/06)
(ISIN: ZAE000012084)
(JSE Share code: SHP)
(NSX Share code: SRH)
(LuSE Share code: SHOPRITE)
("the Group")
Key information
The key information is for a 52-week period, compared to 53 weeks of the
preceding financial year which have been restated for a change in accounting
policy with respect to the treatment of advertising rebates. The comparative
figures for the restated 52 weeks are given in brackets and are unaudited.
- Trading profit is up 11.6% (52 weeks: 15.7%) to R8 billion.
- Turnover increased 8.4% - from R130 billion to R141 billion
(52 weeks: 10.6% from R127 billion).
- Diluted headline earnings per share rose 11.9% - from 900.3 cents to
1,007.4 cents (52 weeks: 16.1% from 867.6 cents).
- EBITDA increased by 6.8% - from R9.4 billion to R10 billion
(52 weeks: 8.9% from R9.2 billion).
- Dividend per share declared 504 cents, an increase of 11.5% over the
452 cents of the corresponding period.
Pieter Engelbrecht, chief executive:
The Group achieved strong results in the 52 weeks until 2 July 2017 with
turnover growth of 8.4% (52 weeks: 10.6%). The core South African supermarket
operation, which represents 72% of total sales and 79% of trading profit,
recorded sales growth of 8.0% (52 weeks: 10.5%) in a tough operating
environment.
Most South Africans continue to prefer shopping at our supermarkets, which is
evident from our gain in annual market share, which increased to 31.9%. We
continue to offer people the lowest prices and to subsidise basic food items to
assist price sensitive consumers. Internal food inflation averaged 5.9%
compared to official food inflation of 10%. We have shielded customers from
R1.8 billion of potential additional expenses, had our prices tracked
inflation.
Supermarkets outside of South Africa in 14 countries in Africa and the Indian
Ocean Islands continued to perform well, generating a 11.7% increase (52 weeks:
13.5%) in turnover. Turnover growth of 31.6% (52 weeks: 33.8%) at constant
currencies remains strong, albeit at a lower rate than the previous year.
The Group continues to open new stores and was trading from a total 2 689
outlets in 15 countries at the end of the reporting period. The Group remains a
significant job creator with 6 027 new positions filled over the past year. Our
total staff complement rose to 143 802 employees, making our Group the largest
South African employer in the private sector. The Group is also ahead of its
annual target in terms of its 5-year employment equity plan.
We believe there is room for further growth as we continue to improve
efficiencies and profitability both in South Africa and beyond the country's
borders. We made progress on all our strategic priorities, which includes an
increased focus on our upmarket fresh product offering, increasing private
label participation as well as the strengthening of our franchise offer and
footprint expansion.
Despite a constrained trading environment, the company is healthy and doing
well across multiple brands and regions.
21 August 2017
Enquiries:
Shoprite Holdings Limited Tel: 021 980 4000
Pieter Engelbrecht, chief executive
Marius Bosman, chief financial officer
Adele Lambrechts Tel: 021 980 4000
OPERATING ENVIRONMENT
South Africa experienced a technical recession in the second half of the
reporting period, putting further pressure on the already price sensitive
consumer. In this difficult trading environment, the Group remained resilient
with growth in sales and market share. Our business on the rest of the
continent was impacted by various factors, such as slowing economies, lower
commodity prices and forex shortages. The weakening of most currencies against
the rand (the Nigerian Naira for instance devalued 22.7% against the rand) also
impacted turnover. Despite this the Non-RSA Supermarkets increased sales and
grew its customer base by 8.3% (52 weeks: 10.3%), primarily driven by Angola
and Nigeria.
COMMENTS ON THE RESULTS
Statement of Comprehensive Income
Total turnover
Total turnover for the Shoprite Group increased by 8.4% to R141 billion for the
52 weeks to 2 July 2017 (52 weeks: 10.6%). Growth on a like-for-like basis was
5.8% compared to 52 weeks of the preceding year. All the segments reported
satisfactory growths in tough economic conditions. Supermarkets RSA grew by
8.0% (52 weeks: 10.5% with like-for-like growth at 6.9%). Turnover for the
Supermarkets Non-RSA division is 11.7% higher (52 weeks: 13.5% with like-for-
like growth at 1%) and growth in constant currencies at 31.6% (52 weeks: 33.8%)
which accentuates the effect of devaluations of Non-RSA currencies against the
rand.
Gross profit
Gross profit increased by a healthy 10.3% from R30.7 billion to R33.8 billion
and is reflected at 23.99% of turnover (2016: 23.58%). This improvement was due
to an even better contribution from the Group's distribution centers as well as
more rebates generated by successful promotions. Shrinkage remains well under
control. During this twelve months, the Group changed its accounting policy
with respect to the treatment of advertising rebates with certain rebates
relating to advertising now being deducted from the purchase price of goods.
The effect on Group results was not material. See note 9 in this announcement
for more detail.
Expenses
Depreciation and amortisation increased by 7.5%, lower than the previous year
and mainly due to an increased number of smaller stores opened during the last
number of years. Operating leases increased by 9.6%, mainly due to a net 109
new corporate outlets opened during the year. The higher growth in Employee
benefits can be ascribed to the effect of higher inflation in the Non-RSA
countries which, in turn, gave rise to higher wage increases. With increases
in Electricity less pronounced this year, other operating expenses increased by
9.4%. Security costs are still showing double digit growth due to the Group
having to spend more to protect customers and stores from the scourge of
burglaries and armed robberies which are on the increase, especially during
month-ends and grant pay-outs.
Trading margin
The trading margin increased from 5.60% to 5.76%. This margin reflects the
effects of real growth in turnover as well as of investment in new stores and
in the supply-chain infrastructure.
Exchange rate losses
The Group recorded an exchange rate loss of R236 million against a loss of R46
million in the corresponding period. This was partly due to the devaluation of
certain Non-RSA currencies against the US$ and the rand during the period under
review with the resultant effect on short-term loan balances. In addition, the
rand also strengthened against the US$ with the result that a loss was also
recorded on US$ balances held in South Africa as well as certain forward
foreign exchange contracts. It remains Group policy to enter into forward
exchange contracts on all imports due to rand volatility.
Finance cost and interest received
When compared to the corresponding period, net interest expense decreased due
to the convertible bonds that converted during the year resulting in the last
interest payment being forfeited.
Earnings per share
Diluted headline earnings per share increased by 11.9% from 900.3 cents to
1,007.4 cents and increased by 16.1% when the 53rd week in the previous year is
excluded.
Statement of Financial Position
Property, plant and equipment and intangible assets
The increase is due to the investment in a net 109 new corporate outlets,
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 the purchase of
US$ Index Linked Angolan Government bonds to the value of R1.4 billion during
the 12 months. This was done as a hedge against a possible devaluation of the
Angolan kwanza. In addition, the calendar month closed before the accounting
month-end date, with the result that some creditors were paid before accounting
cut-off. Capital expenditure for the year was higher than the corresponding 12
months due to the building of a new distribution centre in the Western Cape,
South Africa.
Inventory
The increase in inventory is due to the provisioning of the net 109 new
corporate outlets as well as the increased capacity created in some of the
distribution centres. Management is actively pursuing reducing inefficient
stock holding at branch level and the roll out of new information systems in
the new year is expected to assist in this.
Trade and other payables
Trade and other payables show an increase of 5% on the previous year when the
calendar month closed before the accounting month-end date, with the result
that creditors were paid before the cut-off. This increase goes hand in hand
with inventory that also increased more than the growth in turnover.
Borrowings
R4.59 billion of the convertible bonds were converted during the year and R108
million redeemed. 27 149 869 shares were issued in the conversion.
Pro Forma Information
Certain financial information presented in these annual financial results
constitutes pro forma financial information. The pro forma financial
information is the responsibility of the board of directors of the Company and
is presented for illustrative purposes only. Because of its nature, the pro
forma financial information may not fairly present the Group's financial
position, changes in equity, results of operations or cash flows.
An assurance report (in terms of ISAE 3420: Assurance Engagements to Report on
the Compilation of Pro Forma Financial Information) has been issued by the
Group's auditors in respect of the pro forma financial information included in
this announcement. The assurance report is available for inspection at the
registered office of the Company.
Impact of the Group's pro forma constant currency disclosure
The Group discloses unaudited constant currency information in order to
indicate the Group's underlying Non-RSA businesses performance in terms of
sales growth, excluding the effect of foreign currency fluctuations. To present
this information, current period turnover for entities reporting in currencies
other than ZAR are converted from local currency actuals into ZAR at the prior
year's actual average exchange rates on a country-by-country basis.
The table below sets out the percentage change in turnover, based on the actual
results for the financial year, in reported currency and constant currency for
the following major currencies. The total impact on Supermarkets Non-RSA is
also reflected after consolidating all currencies in this segment.
Reported Currency Constant Currency
% Change % Change % Change % Change
on prior on prior on prior on prior
period period period period
53 weeks 52 weeks 53 weeks 52 weeks
Angola kwanza 47.4 49.2 78.6 80.9
Nigeria naira (8.2) (7.0) 48.2 50.2
Zambia kwacha (1.0) 1.0 (1.3) 0.7
Mozambique metical (18.4) (16.9) 20.1 22.3
Total Supermarkets Non-RSA 11.7 13.5 31.6 33.8
Impact of the previous year's extra week on 2017 year-end financial reporting
The Group reports on the retail calendar of trading weeks which results in the
inclusion of a 53rd week approximately every six years, as pointed out in the
Basis of Preparation.
The results for the financial year under review are for a 52-week period, ended
2 July 2017, compared to 53 weeks in the previous financial year. It is
therefore useful and good governance to report pro forma information for a 52-
week 2016 comparative period, so as to facilitate comparisons against the prior
and current period results.
The unaudited pro forma 52-week information for the previous financial year has
been prepared for illustrative purposes only, to indicate how such information
compares to the actual audited results of the Group for the 52-week period
ended 2 July 2017.
The estimated financial impact of the extra week in the prior period is shown
below:
Change Change 52 weeks 53 weeks 52 weeks
on on to to to
prior prior 2 July 3 July Extra 3 July
period period 2017 2016 week 2016
53 weeks 52 weeks Audited Audited adjustment Pro forma
% % Rm Rm Rm Rm
Sale of
merchandise
Total 8.4 10.6 141 000 130 028 (2 591) 127 437
References
were made to
the following
subtotals:
Supermarkets
RSA 8.0 10.5 101 734 94 167 (2 073) 92 094
Checkers RSA 8.5 10.8 38 594 35 557 (711) 34 846
Shoprite RSA 6.0 8.6 51 992 49 027 (1 160) 47 867
Usave RSA 7.8 10.4 5 919 5 489 (128) 5 361
LiquorShop RSA 20.4 22.7 4 838 4 018 (75) 3 943
Supermarkets
Non-RSA 11.7 13.5 24 840 22 246 (369) 21 877
Furniture 4.3 6.2 5 432 5 207 (93) 5 113
Cost of sales 7.9 10.2 (107 174) (99 372) 2 139 (97 233)
Gross profit 10.3 12.0 33 826 30 656 (452) 30 204
Other income
and expenses 9.9 10.9 (25 699) (23 375) 198 (23 177)
Trading profit
Total 11.6 15.7 8 127 7 281 (254) 7 027
References
were made to
the following
subtotals:
Supermarkets
RSA 10.2 14.1 6 424 5 828 (197) 5 631
Supermarkets
Non-RSA 14.7 18.9 1 407 1 227 (44) 1 183
Profit before
income tax 11.2 15.4 7 615 6 848 (249) 6 599
Income tax
expense 9.1 13.2 (2 180) (1 998) 72 (1 926)
Profit after
tax 12.1 16.3 5 435 4 850 (177) 4 673
EBITDA 6.8 8.9 10 013 9 376 9 194
Diluted
headline
earnings
per share
(cents) 11.9 16.1 1 007.4 900.3 867.6
Notes:
1. The accounting policies adopted by the Group in the latest audited
annual financial statements, which have been prepared in accordance with
International Financial Reporting Standards, have been used in preparing
the unaudited pro forma 52-week information.
2. The extra week adjustments were calculated with reference to:
- Actual sales of merchandise (which have been extracted from the
Group's accounting records) and cost of sales for the extra week from
29 June 2015 to 5 July 2015;
- Other income and expenses based on an assessment of management
information and
- The effective tax rate applicable to the extra week period.
3. The calculation of diluted headline earnings per share for the pro
forma 52-week period is based on the weighted number of shares for that
period.
4. The extra week adjustments, in the opinion of the directors, fairly
reflects the results for the one week period from 29 June 2015 to 5 July
2015.
Like-for-like comparisons
Like-for-like sales is a measure of the growth in the Group's year-on-year
sales, removing the impact of new store openings and closures in the current
or previous reporting periods.
52 weeks 52 weeks 52 weeks 52 weeks
to to to to
2 July 2 July 3 July 3 July
References were made Change 2017 2017 2016 2016
to the following in like- Like- Pro Like-
subtotals of sale for-like Audited for-like forma for-like
of merchandise % Rm Rm Rm Rm
Total 5.8 141 000 131 258 127 437 124 063
Supermarkets RSA 6.9 101 734 97 679 92 094 91 360
Supermarkets Non-RSA 1.0 24 840 21 732 21 877 21 521
NUMBER OF OUTLETS 2 JULY 2017
12 MONTHS CONFIRMED
NEW
STORES
2016 OPENED CLOSED 2017 2018
SUPERMARKETS 1 171 72 17 1 226 82
SHOPRITE 579 38 4 613 41
CHECKERS 201 10 2 209 14
CHECKERS HYPER 37 0 0 37 0
USAVE 354 24 11 367 27
LIQUORSHOP 337 54 1 390 32
HUNGRY LION 187 11 1 197 9
FURNITURE 497 23 32 488 19
OK FURNITURE 444 23 31 436 17
HOUSE & HOME 53 0 1 52 2
OK FRANCHISE 359 52 23 388 34
TOTAL STORES 2 551 212 74 2 689 176
COUNTRIES OUTSIDE RSA 14 14
TOTAL STORES OUTSIDE RSA 386 55 4 437 43
These numbers exclude the MediRite pharmacies as they are located within stores.
OPERATIONAL REVIEW
Supermarkets RSA
The core South African supermarket operation again delivered a strong
performance in a tough operating environment. It grew sales by 8.0% to R101.734
billion during the reporting period (52 weeks: 10.5%). In total the South
African division boasts 31.9% market share, while almost all its brands gained
market share and continues to grow.
Checkers, which includes the larger format Hyper stores, remains the star
performer and grew sales by 8.5% (52 weeks: 10.8%) to R38.594 billion. The
division now trades through 239 outlets.
In line with the trend towards more frequent and fresh shopping and wellness
and healthier eating we have vastly improved our fresh, convenience and healthy
eating ranges. Our fresh and convenience product offering has been doubled over
the past year with great success. It resulted in increased spend by more
affluent customers.
The Shoprite brand, with its focus on middle and lower-income consumers,
continued to subsidise basic food prices to assist the most vulnerable.
Notwithstanding its shopper base being the hardest hit, Shoprite grew sales by
6% (52 weeks: 8.6%) to R52 billion.
Usave, the Group's small-format hard discount chain, is positioned to offer the
lowest possible prices on a limited assortment. It delivered a healthy sales
growth of 7.8% (52 weeks: 10.4%).
The Group's LiquorShop brand is the country's fastest-growing retail liquor
chain with a store opening rate of one per week. Its performance has been
excellent, with an exceptional ROI and growth in sales of 20.4% (52 weeks:
22.7%) to R4.8 billion. Market share is now 18.2%, a 0.72 percentage point
increase year-on-year.
Our supermarkets are supported by an extensive and sophisticated supply-line
infrastructure that ensures on-shelf availability. With about 750 000 square
metres of distribution space, we are the country's and continent's largest
distributor.
Supermarkets Non-RSA
Supermarkets Non-RSA, which trades in 14 countries in the rest of Africa and
the Indian Ocean islands, again produced healthy results. The 308 outlets
generated sales of R24.8 billion, 11.7% higher than the corresponding period
(52 weeks: 13.5%). Angola and Nigeria continue to be the top performers,
despite a shortage of foreign currency in these oil-producing countries. We
have also seen a good recovery in Namibia this year.
In the first half of the year the Group had a substantial competitive advantage
over many other traders in the region by funding its stock requirements from
its external balance sheet. Operations came under pressure in the latter half
of the year as sales slowed down, severely impacted by various factors such as
the devaluation of most currencies against the rand.
Slowing economies, lower commodity prices and forex shortages also negatively
impacted retail sales. Notwithstanding the trading difficulties, the customer
base remains healthy, with the Group's supermarkets in Angola and Nigeria
increasing customers by 35.7% (52 weeks: 37.7%) and 38.2% (52 weeks: 40.4%)
respectively.
Angola delivered a strong performance and now accounts for the lion's share of
Non-RSA sales. Our 30 supermarkets are well ahead of expectations. We opened
one store in the financial year, with an additional two to be opened in the
next 12 months. We have also purchased a distribution centre which will improve
supply chain efficiencies and on-shelf availability.
Restrictions on key imported lines remained a challenge in Nigeria, but through
a focused marketing drive on local products we managed to generate a 48.2%
sales growth (52 weeks: 50.2%) in local currency. The region holds significant
growth potential for the Group despite short term issues including the oil
price, a devaluing currency and the ban on certain imports to stem the outflow
of dollars. We have 23 stores in the country with a further two under
construction.
Furniture
The Furniture division performed well compared to its peers in a very tough
environment, with more restrictive credit regulation and low consumer
confidence putting pressure on sales. It grew turnover by 4.3% (52 weeks:
6.2%). A robust performance by the 77 stores outside South Africa supported
this growth.
In South Africa, where the division trade under the OK Furniture, OK Power
Express and House & Home brands, the year was characterised by heightened
competition in a depressed durable goods market. OK Furniture, by far the
biggest divisional brand, traded relatively well and grew sales by 10.4%. Plans
are in place to reposition the House & Home brand, which continues to
experience challenges. Outside South Africa our nine stores in Angola are
trading particularly well and we plan to expand our operation in the country.
Other Operating Segments
The OK Franchise division produced excellent results with sales up 10.1% and
growth in market share. This is an important extension of our business as it
gives us access to neighbourhoods and smaller, mostly rural communities where
about 60% of the stores are currently located. A future focus will include the
main-stream convenience market in metropoles. The division now trades largely
under the OK Foods, OK MiniMark and OK Express brands, as well as a wholesale
division, Megasave, which enables franchisees to benefit from the Group's
buying power.
Members' purchases from Group distribution centres grew by 29% over the twelve
months. While increasing the frequency of deliveries to members, the division
extended its offering to include perishables and frozen products and showed
better product availability for consumers. The division now has 388 members in
South Africa and Namibia, while we continue to receive significant interest
from potential franchisees across the continent.
The franchise division has a strong growth focus and continues its
modernisation to improve service delivery and to enhance the image of the OK
brand.
The MediRite division comprises two business units - the retail pharmacy chain
MediRite and Transpharm, a wholesaler of medical products. While growth is
hindered by, amongst others, government imposed exit price restrictions, the
losses experienced at MediRite have been well contained and the progress of the
division is positive. MediRite trades from a total 162 pharmacies and expanded
its footprint in Angola, where we now have 13 pharmacies. Plans are also
underway for expansion to Mozambique. Transpharm, which supplies to MediRite as
well as a number of external customers, showed improved profitability.
Computicket is still hampered by consumers' lack of disposable income with
customers cutting back on their discretionary spending. We are however
cautiously confident about sales growth after branching out into new business
by adding sports competition entries to the booking offer. The travel section
continues to do well despite the adverse trading environment.
GROUP PROSPECTS AND OUTLOOK
The Group is healthy and its business continues to perform well across multiple
brands and countries. This diversification of brands and territories offers us
many levers to pull to navigate the slower growth environment envisaged. In
South Africa, high levels of unemployment are bound to persist with continued
consumer indebtedness and shrinking disposable income, but we have proved our
ability to operate profitably in such circumstances. Our international sales
have also strengthened despite trading in challenging markets, driven by
improvements across our offer. We expect the positive sales momentum to
continue in South Africa and beyond the country's borders.
RETIREMENT OF CEO AND BOARD MEMBERS
In the past year Dr Whitey Basson, who headed Shoprite since 1979, retired as
CEO, but continues his association with the Shoprite Group in the role of vice
chairman. Dr Basson has been succeeded by Mr Pieter Engelbrecht who, for most
of his 20 years with the Group, has worked in close association with Dr Basson.
Two esteemed board members, Messrs Brian Weyers and Aubrey Karp, who joined the
Group in 1980 and 1990 respectively, also retired during the year. Mr Weyers
served as a director of Shoprite Holdings since 1997 and Mr Karp was appointed
to the board in 2005.
DIVIDEND NO 137
The board has declared a final dividend of 324 cents (2016: 296 cents) per
ordinary share, payable to shareholders on Monday, 11 September 2017. The
dividend has been declared out of income reserves. This brings the total
dividend for the year to 504 cents (2016: 452 cents) per ordinary share. The
last day to trade cum dividend will be Tuesday, 5 September 2017. As from
Wednesday, 6 September 2017, all trading of Shoprite Holdings Ltd shares will
take place ex dividend. The record date is Friday, 8 September 2017. Share
certificates may not be dematerialised or rematerialised between Wednesday,
6 September 2017, and Friday, 8 September 2017, both days inclusive.
In terms of the Dividends Tax, the following additional information is
disclosed:
1. The local dividend tax rate is 20%.
2. The net local dividend amount is 259.20 cents per share for shareholders
liable to pay Dividends Tax and 324 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 600 021 829 ordinary shares.
4. Shoprite Holdings Ltd's tax reference number is 9775/112/71/8.
BASIS OF PREPARATION
The Group reports on the retail calendar of trading weeks which treats each
financial year as an exact 52-week period, incorporating trade from Monday to
Sunday each week. This treatment effectively results in the loss of a day (or
two in a leap year) per calendar year. These days are brought to account
approximately every six years by including a 53rd week. Accordingly, the
results for the financial year under review are for a 52-week period, ended
2 July 2017, compared to 53 weeks in the previous financial year.
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, except as set out below.
Various new and revised accounting standards became effective during the year,
but their implementation had no significant impact on the results of either the
current or the previous year.
The preparation of these summarised consolidated financial results for the year
ended 2 July 2017 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 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 2017.
Held-to-maturity investments
During the reporting period, the Group acquired AOA, USD Index Linked, Angola
Government Bonds which are classified as held-to-maturity investments. The
Group classifies investments as held-to-maturity if they are non-derivative
financial assets with fixed or determinable payments and fixed maturities and
the Group intends to, and is able to, hold them to maturity.
Held-to-maturity financial assets are recognised initially at fair value plus
directly attributable transaction costs. Subsequent to initial recognition,
held-to-maturity financial assets are measured at amortised cost, using the
effective interest rate method. These financial assets are included under non-
current assets unless it matures within 12 months after statement of financial
position date. Interest on held-to-maturity financial assets is recognised in
the statement of comprehensive income as part of other operating income.
If there is objective evidence that an impairment loss has been incurred, the
amount of the loss is measured as the difference between the held-to-maturity
investments' carrying amount and the present value of the estimated future cash
flows discounted at the original effective interest rate applicable to the
relevant held-to-maturity investments. The carrying amount will be reduced and
the loss recognised in the statement of comprehensive income.
Change in accounting policy
During the reporting period, the Group changed its accounting policy with
respect to the treatment of advertising rebates. The Group previously reflected
these rebates net of advertising expenses as part of other operating income.
The change in accounting policy is effective for the year ended 2 July 2017 and
has been applied retrospectively. This has therefore resulted in a restatement
of the comparative 2016 figures on the statement of financial position and
statement of comprehensive income. Refer to note 9 for further information and
a summary of the effect of this change in accounting policy.
DIRECTORATE AND ADMINISTRATION
Executive directors
PC Engelbrecht (CEO), CG Goosen, M Bosman, B Harisunker, EL Nel
Non-executive directors
CH Wiese (chairman), JW Basson (vice chairman)
Independent non-executive directors
JF Basson, JJ Fouche, EC Kieswetter, JA Louw, ATM Mokgokong, JA Rock
Alternate non-executive directors
JAL Basson
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, 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 Services (Namibia) (Pty) Ltd, PO Box 25549,
Windhoek, Namibia
Telephone: +264 (0)61 299 3347, facsimile: +264 (0)61 299 3500,
email: NAM-OMlnvestmentServices@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, 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
SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Restated
Audited Audited
52 weeks 53 weeks
% 2017 2016
Notes change Rm Rm+
Sale of merchandise 8.4 141 000 130 028
Cost of sales 7.9 (107 174) (99 372)
GROSS PROFIT 10.3 33 826 30 656
Other operating income 7.0 2 615 2 444
Depreciation and amortisation 7.5 (2 176) (2 025)
Operating leases 9.6 (3 819) (3 486)
Employee benefits 10.5 (10 498) (9 499)
Other operating expenses 9.4 (11 821) (10 809)
TRADING PROFIT 11.6 8 127 7 281
Exchange rate losses (236) (46)
Items of a capital nature (166) (11)
OPERATING PROFIT 6.9 7 725 7 224
Interest received 29.9 226 174
Finance costs (31.7) (340) (498)
Share of profit/(loss) of
equity accounted investments 4 (52)
PROFIT BEFORE INCOME TAX 11.2 7 615 6 848
Income tax expense 9.1 (2 180) (1 998)
PROFIT FOR THE YEAR 12.1 5 435 4 850
OTHER COMPREHENSIVE INCOME,
NET OF INCOME TAX (933) (579)
Items that will not be reclassified
to profit or loss
Re-measurements of post-employment
medical benefit obligations 3 1
Items that may subsequently be
reclassified to profit or loss
Foreign currency translation
differences (822) (680)
Share of foreign currency translation
differences of equity accounted
investments (103) 76
For the period (103) 122
Reclassified to profit for the period - (46)
(Losses)/gains on effective cash flow hedge (11) 24
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 4 502 4 271
PROFIT ATTRIBUTABLE TO: 5 435 4 850
Owners of the parent 5 428 4 844
Non-controlling interest 7 6
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: 4 502 4 271
Owners of the parent 4 495 4 265
Non-controlling interest 7 6
Basic earnings per share (cents) 5 10.3 999.8 906.0
Diluted earnings per share (cents) 5 9.3 984.8 901.3
Basic headline earnings per
share (cents) 5 13.1 1 023.2 905.0
Diluted headline earnings
per share (cents) 5 11.9 1 007.4 900.3
+ The 2016 figures have been restated for the change in accounting policy.
Refer to note 9 for more detail.
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Restated Restated
Audited Audited Audited
2017 2016 2015
Notes Rm Rm+ Rm+
ASSETS
NON-CURRENT ASSETS 24 572 20 633 18 586
Property, plant and equipment 18 407 16 908 15 374
Equity accounted investments 27 95 178
Held-to-maturity investments 1 1 311 - -
Loans and receivables 1 110 599 547
Deferred income tax assets 859 698 569
Intangible assets 2 355 1 857 1 458
Trade and other receivables 503 476 460
CURRENT ASSETS 31 032 27 351 25 053
Inventories 17 794 15 055 13 321
Trade and other receivables 5 105 5 096 4 568
Derivative financial instruments 1 - -
Current income tax assets 154 146 44
Loans and receivables 211 270 59
Cash and cash equivalents 7 767 6 784 7 061
Assets held for sale 119 17 13
TOTAL ASSETS 55 723 48 001 43 652
EQUITY
CAPITAL AND RESERVES ATTRIBUTABLE TO
OWNERS OF THE PARENT
Share capital 2 681 650 650
Share premium 8 585 4 029 4 029
Treasury shares 2 (446) (760) (759)
Reserves 18 838 17 155 14 905
27 658 21 074 18 825
NON-CONTROLLING INTEREST 91 65 68
TOTAL EQUITY 27 749 21 139 18 893
LIABILITIES
NON-CURRENT LIABILITIES 1 492 1 492 5 659
Borrowings 3 - 102 4 305
Deferred income tax liabilities 96 128 187
Provisions 232 267 321
Fixed escalation operating
lease accruals 1 164 995 846
CURRENT LIABILITIES 26 482 25 370 19 100
Trade and other payables 17 414 16 590 17 432
Borrowings 3 3 274 5 022 567
Derivative financial instruments - 32 2
Current income tax liabilities 582 574 960
Provisions 154 187 136
Bank overdrafts 5 058 2 965 3
TOTAL LIABILITIES 27 974 26 862 24 759
TOTAL EQUITY AND LIABILITIES 55 723 48 001 43 652
+ The 2015 and 2016 figures have been restated for the change in accounting
policy. Refer to note 9 for more detail.
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Non-
Total controlling
Rm equity interest
BALANCE AT 28 JUNE 2015
AS PREVIOUSLY STATED 19 160 68
Effect of adjusted treatment of
advertising rebates (note 9) (267)
AS RESTATED 18 893 68
Total comprehensive income 4 271 6
Profit for the year - AS RESTATED 4 850 6
AS PREVIOUSLY STATED 4 847 6
Effect of adjusted treatment of
advertising rebates (note 9) 3 -
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 3 JULY 2016 21 139 65
Total comprehensive income 4 502 7
Profit for the year 5 435 7
Recognised in other
comprehensive income
Re-measurements of post-employment
medical benefit obligations 4
Income tax effect of re-measurements
of post-employment medical benefit
obligations (1)
Foreign currency translation
differences (925)
Losses on effective cash flow hedge (15)
Income tax effect of losses on
effective cash flow hedge 4
Share-based payments - value of
employee services 139
Modification of cash bonus arrangement
transferred from provisions 6
Purchase of treasury shares (59)
Treasury shares disposed 2
Realisation of share-based payment reserve -
Ordinary shares issued on conversion of
convertible bonds 4 587
Equity component of convertible bonds
converted during the period transferred
to retained earnings -
Non-controlling interest on acquisition
of subsidiary 2 2
Non-controlling interest on disposal of
subsidiary 27 27
Dividends distributed to shareholders (2 596) (10)
BALANCE AT 2 JULY 2017 27 749 91
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)
Attributable to owners of the parent
Share Share
Rm Total capital premium
BALANCE AT 28 JUNE 2015
AS PREVIOUSLY STATED 19 092 650 4 029
Effect of adjusted treatment of
advertising rebates (note 9) (267)
AS RESTATED 18 825 650 4 029
Total comprehensive income 4 265 - -
Profit for the year - AS RESTATED 4 844
AS PREVIOUSLY STATED 4 841
Effect of adjusted treatment of
advertising rebates (note 9) 3
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 3 JULY 2016 21 074 650 4 029
Total comprehensive income 4 495 - -
Profit for the year 5 428
Recognised in other
comprehensive income
Re-measurements of post-employment
medical benefit obligations 4
Income tax effect of re-measurements
of post-employment medical benefit
obligations (1)
Foreign currency translation
differences (925)
Losses on effective cash flow hedge (15)
Income tax effect of losses on
effective cash flow hedge 4
Share-based payments - value of
employee services 139
Modification of cash bonus arrangement
transferred from provisions 6
Purchase of treasury shares (59)
Treasury shares disposed 2
Realisation of share-based payment reserve -
Ordinary shares issued on conversion of
convertible bonds 4 587 31 4 556
Equity component of convertible bonds
converted during the period transferred
to retained earnings -
Non-controlling interest on acquisition
of subsidiary -
Non-controlling interest on disposal of
subsidiary -
Dividends distributed to shareholders (2 586)
BALANCE AT 2 JULY 2017 27 658 681 8 585
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)
Attributable to owners of the parent
Treasury Other Retained
Rm shares reserves earnings
BALANCE AT 28 JUNE 2015
AS PREVIOUSLY STATED (759) 1 005 14 167
Effect of adjusted treatment of
advertising rebates (note 9) (267)
AS RESTATED (759) 1 005 13 900
Total comprehensive income - (580) 4 845
Profit for the year - AS RESTATED 4 844
AS PREVIOUSLY STATED 4 841
Effect of adjusted treatment of
advertising rebates (note 9) 3
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 3 JULY 2016 (760) 554 16 601
Total comprehensive income - (936) 5 431
Profit for the year 5 428
Recognised in other
comprehensive income
Re-measurements of post-employment
medical benefit obligations 4
Income tax effect of re-measurements
of post-employment medical benefit
obligations (1)
Foreign currency translation
differences (925)
Losses on effective cash flow hedge (15)
Income tax effect of losses on
effective cash flow hedge 4
Share-based payments - value of
employee services 139
Modification of cash bonus arrangement
transferred from provisions 6
Purchase of treasury shares (59)
Treasury shares disposed 2
Realisation of share-based payment reserve 371 (371)
Ordinary shares issued on conversion of
convertible bonds
Equity component of convertible bonds
converted during the period transferred
to retained earnings (361) 361
Non-controlling interest on acquisition
of subsidiary
Non-controlling interest on disposal of
subsidiary
Dividends distributed to shareholders (2 586)
BALANCE AT 2 JULY 2017 (446) (969) 19 807
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
Restated
Audited Audited
year ended year ended
2017 2016
Notes Rm Rm+
CASH FLOWS FROM OPERATING ACTIVITIES 3 339 1 443
Operating profit 7 725 7 224
Less: investment income (189) (111)
Non-cash items 6.1 3 089 2 681
Changes in working capital 6.2 (2 278) (3 334)
Cash generated from operations 8 347 6 460
Interest received 399 258
Interest paid (416) (426)
Dividends received 16 27
Dividends paid (2 595) (2 152)
Income tax paid (2 412) (2 724)
CASH FLOWS UTILISED BY INVESTING ACTIVITIES (6 985) (4 733)
Investment in property, plant and equipment
and intangible assets to expand operations (3 836) (3 304)
Investment in property, plant and equipment
and intangible assets to maintain operations (1 331) (1 448)
Proceeds on disposal of property, plant and
equipment and intangible assets 40 85
Payments for held-to-maturity investments (1 370) -
Amounts paid to Resilient Africa (Pty) Ltd (612) (208)
Amounts received from Resilient
Africa (Pty) Ltd 136 -
Other investing activities (2) (55)
Proceeds on disposal of investment
in associate - 197
Cash outflow on disposal of investment
in subsidiary (9) -
Acquisition of subsidiary (1) -
CASH FLOWS FROM FINANCING ACTIVITIES 2 826 10
Purchase of treasury shares (59) (28)
Proceeds from treasury shares disposed 4 9
Redemption of Shoprite Holdings Ltd
preference share capital - (2)
Convertible bonds settled at maturity date (108) -
Increase in borrowing from ABSA Bank Ltd 1 361 -
Increase in borrowing from
Barclays Bank Mauritius Ltd 1 224 -
Increase in borrowing from Standard
Chartered Bank (Mauritius) Ltd 476 216
Repayment of borrowing from
Standard Bank de Angola, S.A. (111) (201)
Increase in other borrowings 39 16
NET MOVEMENT IN CASH AND CASH EQUIVALENTS (820) (3 280)
Cash and cash equivalents at the
beginning of the year 3 819 7 058
Effect of exchange rate movements on cash
and cash equivalents (290) 41
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 2 709 3 819
Consisting of:
Cash and cash equivalents 7 767 6 784
Bank overdrafts (5 058) (2 965)
2 709 3 819
+ The 2016 figures have been restated for the change in accounting policy.
Refer to note 9 for more detail.
SUMMARISED OPERATING SEGMENT INFORMATION
ANALYSIS PER REPORTABLE SEGMENT
Audited 2017
Supermarkets Supermarkets
RSA Non-RSA Furniture
Rm Rm Rm
Sale of merchandise 107 001 24 867 5 432
External 101 734 24 840 5 432
Inter-segment 5 267 27 -
Trading profit 6 424 1 407 123
Interest income included in
trading profit 70 78 314
Depreciation and amortisation* 1 884 421 108
Total assets 32 535 16 407 4 180
Audited 2017
Other
operating
segments Consolidated
Rm Rm
Sale of merchandise 9 000 146 300
External 8 994 141 000
Inter-segment 6 5 300
Trading profit 173 8 127
Interest income included in
trading profit 36 498
Depreciation and amortisation* 44 2 457
Total assets 2 601 55 723
Restated Audited 2016+
Supermarkets Supermarkets
RSA Non-RSA Furniture
Rm Rm Rm
Sale of merchandise 98 103 22 263 5 207
External 94 167 22 246 5 207
Inter-segment 3 936 17 -
Trading profit 5 828 1 227 91
Interest income included in
trading profit 62 5 316
Depreciation and amortisation* 1 737 413 96
Total assets 29 985 11 489 3 965
Restated Audited 2016+
Other
operating
segments Consolidated
Rm Rm
Sale of merchandise 8 436 134 009
External 8 408 130 028
Inter-segment 28 3 981
Trading profit 135 7 281
Interest income included in
trading profit 28 411
Depreciation and amortisation* 42 2 288
Total assets 2 562 48 001
GEOGRAPHICAL ANALYSIS
Audited 2017
Outside
South Africa South Africa Consolidated
Rm Rm Rm
Sale of merchandise - external 113 660 27 340 141 000
Non-current assets** 16 101 5 164 21 265
Restated Audited 2016++
Outside
South Africa South Africa Consolidated
Rm Rm Rm
Sale of merchandise - external 105 603 24 425 130 028
Non-current assets** 14 274 4 967 19 241
+ The 2016 figures have been restated for the change in accounting policy.
Refer to note 9 for more detail.
++ The 2016 figures have been restated for the reclassification of prepaid
land leases from current to non-current assets. Refer to note 10 for more
detail.
* Represent gross depreciation and amortisation before appropriate
allocations of distribution cost.
** Non-current assets consist of property, plant and equipment, intangible
assets and non-financial trade and other receivables.
SELECTED EXPLANATORY NOTES TO THE SUMMARISED CONSOLIDATED FINANCIAL RESULTS
Audited Audited
2017 2016
Rm Rm
1 HELD-TO-MATURITY INVESTMENTS
AOA, USD Index Linked, Angola Government Bonds 1 311 -
The AOA, USD Index Linked, Angola Government
Bonds earn interest at an average rate of
7.0% p.a. and are repayable within 36 months.
Accrued interest is payable bi-annually. These
bonds are denominated in Angola kwanza and no
allowance for impairment has been made. The
maximum exposure to credit risk at the reporting
date is the carrying value. The Group does not
hold any collateral as security.
2 SHARE CAPITAL AND TREASURY SHARES
2.1 Ordinary share capital
Authorised:
650 000 000 (2016: 650 000 000)
ordinary shares of 113.4 cents each
Issued:
600 021 829 (2016: 572 871 960)
ordinary shares of 113.4 cents each 681 650
Reconciliation of movement in
number of ordinary shares issued:
Number of shares
2017 2016
Balance at the
beginning of the year 572 871 960 572 871 960
Shares issued during
the year 27 149 869 -
Balance at the
end of the year 600 021 829 572 871 960
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
2017 2016
Issued ordinary
share capital 600 021 829 572 871 960
Treasury shares
(note 2.3) (36 166 544) (38 246 183)
563 855 285 534 625 777
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.
2.2 Deferred share capital
Authorised:
360 000 000 (2016: 360 000 000)
non-convertible, non-participating
no par value deferred shares
Issued:
305 621 601 (2016: 291 792 794)
non-convertible, non-participating
no par value deferred shares - -
Reconciliation of movement in number of
deferred shares issued:
Number of shares
2017 2016
Balance at the
beginning
of the year 291 792 794 291 792 794
Shares issued
during the year 13 828 807 -
Balance at the end
of the year 305 621 601 291 792 794
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.
681 650
2.3 Treasury shares
36 166 544 (2016: 38 246 183) ordinary shares 446 760
Reconciliation of movement in number
of treasury shares for the Group:
Number of shares
2017 2016
Balance at the
beginning of the year 38 246 183 38 221 703
Shares purchased
during the year 300 439 194 916
Shares disposed
during the year (19 259) (57 503)
Shares utilised for
settlement of
equity-settled
share-based payment
arrangements (2 360 819) (112 933)
Balance at the
end of the year 36 166 544 38 246 183
Consisting of:
Shares owned by
Shoprite Checkers
(Pty) Ltd 35 436 572 35 436 572
Shares held by
Shoprite Checkers
(Pty) Ltd for the
benefit of participants
to equity-settled
share-based payment
arrangements 729 972 2 809 611
36 166 544 38 246 183
3 BORROWINGS
Consisting of:
Convertible bonds (note 3.1) - 4 655
ABSA Bank Ltd (note 3.2) 1 304 -
Barclays Bank Mauritius Ltd (note 3.3) 1 173 -
Standard Chartered Bank (Mauritius) Ltd (note 3.4) 652 222
Standard Bank de Angola, S.A. - 121
First National Bank of Namibia Ltd 134 105
The Standard Bank of South Africa Ltd 11 -
Other borrowings - 21
3 274 5 124
3.1 Convertible bonds
The Group has issued 6.5% convertible bonds
for a principal amount of R4.7 billion
(2016: R4.7 billion). The bonds matured on
3 April 2017 at their nominal value. Bondholders
had the option to convert their convertible
bonds at the maturity date at the rate of
5 919.26 shares per R1 million. 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, was
initially included in shareholders' equity in other
reserves, net of income taxes, and transferred to
retained earnings upon conversion and redemption.
The convertible bonds recognised in the statement
of financial position is calculated as follows:
Liability component at the beginning of the year 4 655 4 511
Ordinary shares issued on conversion of
convertible bonds (4 587) -
Convertible bonds settled at maturity date (108) -
Interest expense 187 449
Interest paid (147) (305)
Liability component at the end of the year - 4 655
3.2 ABSA Bank Ltd
This loan is denominated in US dollar, unsecured,
payable within 12 months and bears interest at
an average of 1.82% (2016: N/A) p.a.
3.3 Barclays Bank Mauritius Ltd
This loan is denominated in US dollar, unsecured,
payable within 12 months and bears interest at
an average of 2.16% (2016: N/A) p.a.
3.4 Standard Chartered Bank (Mauritius) Ltd
This loan is denominated in US dollar, unsecured,
payable within 12 months and bears interest at
an average of 2.47% (2016: 2.65%) p.a.
4 FAIR VALUE DISCLOSURES
The fair value of Angola Government Bonds included in held-to-
maturity investments amounted to R1.3 billion (2016: N/A) 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
7.0% (2016: N/A) and is within level 2 of the fair value hierarchy.
The fair value of USD denominated amounts owing by Resilient Africa
(Pty) Ltd included in loans and receivables amounted to R586 million
(2016: N/A) 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 3.0% (2016: N/A) and is within level 2 of the fair
value hierarchy.
The fair value of amounts owing by employees included in loans and
receivables amounted to R102 million (2016: R217 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% (2016: 10.5%) and is within level 2 of the fair value hierarchy.
The fair value of the liability component of the convertible bonds
amounted to R4.7 billion at the previous statement of financial
position date. The fair value was calculated using cash flows
discounted at a rate based on the borrowings rate of 9.5% and was
within level 2 of the fair value hierarchy.
The book value of all other financial assets and liabilities
approximate the fair values thereof.
Restated
Audited Audited
2017 2016
Rm Rm+
5 EARNINGS PER SHARE
Profit attributable to owners of the parent 5 428 4 844
Re-measurements 167 13
Profit on disposal and scrapping of property - (1)
Loss on disposal and scrapping of plant and
equipment and intangible assets 79 59
Impairment/(reversal of impairment) of property,
plant and equipment 19 (16)
Impairment of intangible assets 70 66
Insurance claims receivable (5) (25)
Profit on disposal of investment in associate - (71)
Loss/(profit) on other investing activities 3 (1)
Re-measurements included in share of
profit/loss of equity-accounted investments 1 2
Income tax effect on re-measurements (41) (19)
Headline earnings 5 554 4 838
Number of ordinary shares '000 '000
- In issue 563 855 534 626
- Weighted average 542 927 534 636
- Weighted average adjusted for dilution 564 814 537 423
Reconciliation of weighted average number
of ordinary shares in issue during the year:
Weighted average number of ordinary shares 542 927 534 636
Adjustments for dilutive potential of
full share grants and convertible bonds 21 887 2 787
Weighted average number of ordinary shares
for diluted earnings per share 564 814 537 423
Earnings per share Cents Cents
- Basic earnings 999.8 906.0
- Diluted earnings 984.8 901.3
- Basic headline earnings 1 023.2 905.0
- Diluted headline earnings 1 007.4 900.3
+ The 2016 figures have been restated for the change in accounting
policy. Refer to note 9 for more detail.
Restated
Audited Audited
2017 2016
Rm Rm+
6 CASH FLOW INFORMATION
6.1 Non-cash items
Depreciation of property, plant and equipment 2 146 1 993
Amortisation of intangible assets 311 295
Net fair value (gains)/losses on financial
instruments (33) 30
Exchange rate losses 236 46
Profit on disposal and scrapping of property - (1)
Loss on disposal and scrapping of plant and
equipment and intangible assets 79 59
Impairment/(reversal of impairment) of property,
plant and equipment 19 (16)
Impairment of intangible assets 70 66
Profit on disposal of investment in associate - (71)
Movement in provisions (52) 5
Movement in cash-settled share-based payment accrual 11 (10)
Movement in share-based payment reserve 139 140
Movement in fixed escalation operating
lease accruals 163 145
3 089 2 681
6.2 Changes in working capital
Inventories (3 237) (1 998)
Trade and other receivables (164) (588)
Trade and other payables 1 123 (748)
(2 278) (3 334)
+ The 2016 figures have been restated for the change in accounting
policy. Refer to note 9 for more detail.
7 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. Related party transactions also include
key management personnel compensation, loans to directors and loans to
associates and joint ventures. For further information, refer to the
audited annual financial statements.
In terms of an employment agreement, Dr Basson is entitled to put
all Shoprite Holdings Ltd shares directly or indirectly held by him
against the Company whilst still in the employment of the Company. The
specific repurchase will be subject to the provisions of the Memorandum
of Incorporation of the Company, the Companies Act, No. 71 of 2008 (as
amended) and the JSE Limited Listings Requirements, where applicable.
Dr Basson formally notified the Company of the exercising of the put
option on 2 May 2017 whereby a specific repurchase of 8 683 327
Shoprite Holdings Ltd shares was proposed at R211.01 per share.
Subsequently the purchase price of each Put Option share was reduced to
R201.07, being the 30-day VWAP of the ordinary shares up to and
including 2 May 2017. The general shareholders meeting, where
shareholders are required to approve this transaction, will be held on
5 September 2017.
Restated
Audited Audited
2017 2016
Rm Rm+
8 SUPPLEMENTARY INFORMATION
Contracted capital commitments 1 807 1 682
Contingent liabilities 85 146
Net asset value per share (cents) 4 905 3 942
+ The 2016 figures have been restated for the change in accounting
policy. Refer to note 9 for more detail.
9 CHANGE IN ACCOUNTING POLICY
During the year, the Group changed its accounting policy with respect
to the treatment of advertising rebates. Although nothing has changed
in "IAS 2 Inventories", "IFRS 15: Revenue from contracts with
customers" has provided a principle that can be applied when
determining which rebates should be deducted in determining the costs
of purchase in accordance with paragraph 11 of IAS 2. IFRS 15 provides
more clarity on how the supplier should treat the payment of rebates
to its customers: "An entity shall account for consideration payable
to a customer as a reduction of the transaction price and, therefore,
of revenue unless the payment to the customer is in exchange for a
distinct good or service that the customer transfers to the entity."
The Group has changed its policy in applying IAS 2 paragraph 11 and now
considers whether the good/service provided to the supplier in exchange
for the advertising rebates is distinct from the purchase of the
goods/services from the supplier. The Group's advertising rebates
result from the process of negotiating the best product price with the
supplier and therefore the Group does not provide distinct goods or
services to its suppliers in exchange for the rebates.
The Group previously classified these rebates net of advertising
expenses with its other operating income in the statement of
comprehensive income. It was concluded that the Group's inventory
accounting policy should be changed as a result of the additional
guidance provided by IFRS 15 with regards to the accounting treatment
of rebates. Further, in accordance with "IAS 8: Accounting policies,
changes in accounting estimates and errors", it results in information
that is more relevant to the financial position and performance.
The change in accounting policy is effective for the year ended
2 July 2017 and has been applied retrospectively. This has therefore
resulted in a restatement of the comparative 2016 and 2015 figures on
the statement of financial position. The aggregate effect of the
changes in accounting policy on the annual financial statements for
these periods are as follows:
2016 2016 2016
Previously Effect of
reported change Restated
Rm Rm Rm
9.1 Impact on statement of
financial position
Deferred income tax assets 599 99 698
Inventories 15 420 (365) 15 055
TOTAL ASSETS 48 267 (266) 48 001
Reserves 17 419 (264) 17 155
Deferred income tax liabilities 130 (2) 128
TOTAL EQUITY AND LIABILITIES 48 267 (266) 48 001
2015 2015 2015
Previously Effect of
reported change Restated
Rm Rm Rm
9.1 Impact on statement of
financial position (continued)
Deferred income tax assets 469 100 569
Inventories 13 689 (368) 13 321
TOTAL ASSETS 43 920 (268) 43 652
Reserves 15 172 (267) 14 905
Deferred income tax liabilities 188 (1) 187
TOTAL EQUITY AND LIABILITIES 43 920 (268) 43 652
2016 2016 2016
Previously Effect of
reported change Restated
Rm Rm Rm
9.2 Impact on statement of
comprehensive income
Cost of sales (102 792) 3 420 (99 372)
GROSS PROFIT 27 236 3 420 30 656
Other operating income 3 711 (1 267) 2 444
Other operating expenses (8 659) (2 150) (10 809)
TRADING PROFIT 7 278 3 7 281
PROFIT FOR THE YEAR 4 847 3 4 850
TOTAL COMPREHENSIVE INCOME
FOR THE YEAR 4 268 3 4 271
Basic earnings per share (cents) 905.4 0.6 906.0
Diluted earnings per share (cents) 900.7 0.6 901.3
Basic headline earnings
per share (cents) 904.4 0.6 905.0
Diluted headline earnings
per share (cents) 899.7 0.6 900.3
2016 2016 2016
Previously Effect of
reported change Restated
Rm Rm Rm
9.3 Impact on statement of cash flows
Operating profit 7 221 3 7 224
Changes in working capital (3 331) (3) (3 334)
NET MOVEMENT IN CASH AND
CASH EQUIVALENTS (3 280) - (3 280)
10 RECLASSIFICATION OF DISCLOSURE ITEMS
Certain reclassifications of statement of financial position items in the
current year resulted in changes to the relevant comparative
information to ensure accurate comparability with the current year
information. The affected line items are detailed below.
Reclassification of fixed escalation operating lease accruals to trade
and other receivables and reclassification of prepaid land leases from
current trade and other receivables to non-current. These
reclassifications ensured that all operating lease receivables are
classified together and that current and non-current trade and other
receivables are reflected appropriately.
2016 2015
Rm Rm
Decrease in fixed escalation operating
lease accruals 28 9
Increase in trade and other receivables 476 460
Increase in non-current assets 448 451
Decrease in trade and other receivables 448 451
Decrease in current assets 448 451
TOTAL ASSETS - -
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