Wrap Text
Unaudited Condensed Consolidated Interim Results For The 26 Weeks Ended 27 August 2017
PICK N PAY STORES LIMITED
Registration number: 1968/008034/06
JSE share code: PIK
ISIN: ZAE000005443
UNAUDITED CONDENSED
CONSOLIDATED INTERIM RESULTS
FOR THE 26 WEEKS ENDED 27 AUGUST
2017
REVIEW OF OPERATIONS
KEY FINANCIAL INDICATORS*
26 weeks to 26 weeks to
27 August 28 August %
2017 2016 change
Turnover R39.3bn R37.4bn 5.1
Gross profit margin 17.8% 17.9%
Trading expenses R7.0bn R6.6bn 5.1
Trading profit R641.5m R554.1m 15.8
Trading profit margin 1.6% 1.5%
Profit before tax before capital items R610.9m R548.2m 11.4
Profit before tax before capital items margin 1.6% 1.5%
Profit for the period R438.8m R381.8m 14.9
Normalised basic earnings per share 91.14c 78.69c 15.8
Normalised diluted earnings per share 89.52c 76.24c 17.4
Normalised headline earnings per share** 91.99c 82.43c 11.6
Normalised diluted headline earnings per share** 90.36c 79.87c 13.1
Basic earnings per share ("EPS") 61.03c 78.69c (22.4)
Diluted earnings per share ("DEPS") 59.94c 76.24c (21.4)
Headline earnings per share ("HEPS")** 61.88c 82.43c (24.9)
Diluted headline earnings per share ("DHEPS")** 60.78c 79.87c (23.9)
Interim dividend per share 33.40c 29.90c 11.7
* The result commentary is presented on a normalised basis, excluding the impact of the once-off voluntary severance programme
("VSP") completed in the first half of the current financial year, and excluding the impact of the unbundling of the Pick n Pay
Holdings Limited RF Group in the prior year. The principal differences between the Group's normalised and published results are
set out in the appendix to the review of operations - 'summary of non-recurring items'.
** Headline earnings per share and diluted headline earnings per share exclude capital losses, which accounts for the difference in
the year-on-year increase between EPS, HEPS and DHEPS.
RESULT SUMMARY
- Accelerated delivery of turnaround plan, reducing costs and increasing efficiency to create
headroom for lower prices and better value for customers
- Turnover growth of 5.1%; up 1.8% on a like-for-like basis
- Internal price inflation restricted to 3.6%; CPI food inflation of 6.9%
- Trading profit up 15.8% from R554.1 million to R641.5 million
- Trading margin improvement of 0.1 percentage point from 1.5% to 1.6%
- Normalised diluted headline earnings per share up 13.1% to 90.36 cents per share
- Normalised headline earnings per share up 11.6% to 91.99 cents per share
- Including once-off impact of VSP, diluted headline earnings per share down 23.9% and headline
earnings per share down 24.9%
- Interim dividend of 33.40 cents per share up 11.7% on the prior year, in line with the growth in
headline earnings per share on a normalised basis
The Group's turnaround plan since the 2014
financial year has been to grow its sales by
giving customers a better value offer and a more
modern shopping experience, reducing its costs, and
modernising its operations, in particular by
centralising its buying and supply chain.
By the end of the 2015 financial year, the Group
completed the first stage of its three-stage plan,
having stabilised the business through strong
financial control, greater operating efficiency
and effective business management systems.
The second stage of the Group's plan, is to change
the trajectory of performance and deliver sustainable
trading margin improvement. Among the key objectives
in this second stage are improved store efficiency,
reductions in operating costs, and further
progress on supply chain centralisation. These
and other steps create meaningful headroom
to deliver lower prices and better value for
customers.
With low levels of economic growth, rising costs
and high unemployment, customers are now more
than ever seeking out low prices and exceptional
value. Against this background, the Group took
decisive steps in the first half of this year to
accelerate its plan, in particular by reducing its
costs and modernising its operations in order
to deliver better value and a better offer to
customers.
REDUCING COSTS AND IMPROVING
OPERATING EFFICIENCY
Decisive action taken by the Group to reduce its
costs and improve its efficiency over the past
six months include the following:
Voluntary severance programme
During the period under review, the Group
completed a company-wide voluntary
severance programme ("VSP") in Pick n Pay.
This was designed to improve the efficiency
and productivity of staff across the business,
including in stores, supply chain and head
office, by removing roles and functions which
were no longer required as a result of improved
planning, processes and ways of working.
The programme was conducted in accordance
with the longstanding positive values of the
Group, and participation by employees was
entirely voluntary. The programme enabled 10%
of roles and functions to be removed across
Pick n Pay.
The cost of making compensation payments
to departing staff fell entirely within the first
half of the financial year, and is expected to be
recovered in full by the end of the financial year.
The reduction in employee numbers is expected
to have a substantial positive impact on the
operating costs of the Group in future years.
Supply chain centralisation
The Group has continued to make progress in
centralising its supply chain to deliver more
efficient and reliable product replenishment,
better on-shelf availability and lower cost.
Over the first half of the financial year, the
Group increased the total volume of goods
centralised by a further five percentage points,
to 65%. Centralisation in the Gauteng region
has increased by seven percentage points to
69% (groceries at 73%), and in the Western
Cape region by three percentage points to 76%
(groceries at 89%).
The Group is due to open a new Pick n Pay
distribution centre in KwaZulu-Natal before
the end of the financial year. The Group has also
extended the reach of its Philippi distribution
centre in the Western Cape, to serve its stores
along the Garden Route.
Modernising the Smart Shopper
programme
The Group introduced its Smart Shopper
customer loyalty programme in 2011. It has
been highly successful, with over seven million
active members, and has been recognised as
South Africa's favourite loyalty programme for
five consecutive years in the Sunday Times Top
Brands Awards.
In a difficult economy, customer feedback
has increasingly indicated the need for more
immediate discounts, individually tailored to
those products purchased most often. As a
result, the Group modernised its Smart Shopper
programme in March 2017. The improved scheme
places a greater focus on weekly personalised
discounts, with less emphasis on points awarded
automatically on the basis of customer spend.
The increase in product-specific discounts
enables greater supplier participation and
funding. These steps have had the effect of
reducing the cost of the programme to the
Group, allowing for greater price investment
and enhanced benefits for customers.
Buy-for-less programme
The Group initiated a buy-for-less programme
with suppliers in the first half of the financial
year. The programme emphasises the benefits
which accrue to customers, suppliers and
the Group from working together to identify
opportunities to improve efficiency, deliver
lower prices and create exceptional value.
The buy-for-less programme is supported
by the development and implementation of a
dedicated supplier IT platform at Pick n Pay
which provides comprehensive, real-time product
and supplier data, facilitating transparent
engagement and accurate decision-making.
Training on the platform has been provided
to almost 3 000 suppliers, providing greater
insight into the performance of their products
within Pick n Pay, and enabling improved product
management and stronger collaboration.
Building on knowledge gained over the past few
years, the Group has launched a comprehensive
review of its product categories, including brand
participation and space allocation, with the aim
of delivering stronger ranges which are better
targeted to differing customer needs around
the country.
DELIVERING BETTER VALUE FOR
CUSTOMERS
The Group is confident that, in addition to
improving the efficiency and effectiveness of
its operations, the above steps will deliver at
least R1.0 billion in a full year to invest in better
value for customers and deliver an enhanced
shopping experience.
Tangible progress has been achieved in pursuit of
these customer goals over the past six months,
and some key areas are highlighted below.
Lower prices and stronger promotions
In March 2017, the Group announced an
investment of R500.0 million in lower prices,
beginning with reductions in price across
1 300 everyday grocery items. The Group has
been encouraged by the response of customers,
and plans to extend price reductions to a wider
range of products in the second half of the year.
Customer service
In July 2017, Pick n Pay launched Fan Score, an
internal programme focused on improving customer
service across all its stores. The programme
measures stores on a monthly basis against
customer feedback received, and ranks stores
in order of their performance across the Group.
The programme provides employee incentives
for those stores which deliver exceptional
service. The programme has been effective
in engaging store staff on the importance of
customer service, identifying and remedying
inconsistent service across our stores and
in motivating and rewarding staff to deliver
continuous improvement. The programme has
also encouraged stronger engagement with
customers.
Smart Shopper
The Group is encouraged by the positive
customer response to the modernisation of
Smart Shopper.
A key element of the new programme is to deliver
personalised discounts to customers each week,
based on their actual shopping habits, either
by email, kiosk or through the Smart Shopper
app. The Group is pleased with the growth
in the number of customers accessing and
redeeming their weekly Smart Shopper discounts.
To encourage even more customers to do so,
the Group has relaunched its Pick n Pay mobile
app, which offers an enhanced and simplified
experience.
Private label and convenience range
The Group launched a further 400 private
label products in the first half of the financial
year. Of these, 163 were new, and 237 were
redesigned and improved products. Pick n Pay's
private label range has grown to more than
2 000 products, with participation of 19.0%.
Convenience foods are a key part of the
Group's strategy to grow its private label
offer. Products in this range are selected on
the basis of exceptional taste and innovation,
and are displayed prominently in-store, with
modern and attractive packaging. During
the period under review, Pick n Pay achieved
12 first-place awards in the Sunday Times Food
Awards, an independent taste test dedicated to
finding South Africa's best supermarket foods.
Pick n Pay was awarded more than double the
first-place awards of any other retailer.
The Group will continue to innovate in this area,
including through the launch of Pick n Pay's new
convenience range of meals for children in the
second half of this year.
The Group has established firm links between
its plan to grow its private label offer, and
its enterprise and supplier development
programme, which seeks to nurture and develop
entrepreneurs in South Africa.
A better, more convenient and modern
estate
The Group opened 63 new stores in the first half
of the financial year, including 40 company-owned
stores and 23 franchise stores. The Group continues
to strengthen its partnership with franchisees and
this part of the business continues to perform well.
A total of 13 new Pick n Pay clothing stores were
opened, with the clothing business continuing
to grow ahead of the market.
The Group's store refurbishment programme for
the first half of the financial year encompassed
34 stores. Major store refurbishments included
the Pick n Pay flagship supermarket in
Constantia, Cape Town and the Group's Durban
North Hypermarket, both of which are due to be
completed in the second half of the year. These
stores demonstrate the ongoing development
of the Group's Next Generation format and
operating model. The Group's estate included
183 Next Generation stores across Pick n Pay
and Boxer by the end of the period.
At the end of August, the Group had 1 613 stores,
including stores held through its investment in
TM Supermarkets, in Zimbabwe.
Multi-channel and financial services
Responding to the growing customer demand for
convenience, the Group continued to invest in
Pick n Pay Online. In September 2017, the Group
redesigned and launched its new mobile-enabled
website, marking a further step towards a fully
multi-channel grocery business. Pick n Pay's
online service enables customers to collect
products ordered online in some stores as an
alternative to having them delivered to their
home or office. Visitors to the Pick n Pay Online
website increased by 32% year-on-year.
Online customers in the Western Cape have
benefited from a dedicated warehouse since
2015, which has delivered a stronger range,
better availability and improved efficiency.
Online sales in this region increased 25.0%
year-on-year. Building on this success, the
Group opened a second dedicated warehouse
in Gauteng to serve customers in that region,
during the period.
Customer awareness of the Group's online offer
was demonstrated by the customer response to
the Knysna fire relief appeal, with customers
donating more than R1 million in groceries online
in two weeks.
The Group's money transfer product,
in partnership with TymeDigital by the
Commonwealth Bank SA (a subsidiary of
the Commonwealth Bank of Australia), had
200 000 customers registered either with
Pick n Pay or Boxer by the end of the period.
In line with its plans to launch a digital bank,
TymeDigital was recently awarded a banking
licence by the South African Reserve Bank, a first
in 18 years. The Group will be working closely
with TymeDigital to provide greater access to
financial services for its customers. This will
support improved financial inclusion and offer
better value to our customers in stores across
South Africa.
In September, the Group launched its Pick n Pay
Store Account. It gives qualifying Pick n Pay
customers access to a responsible credit facility
that offers up to 55 days interest-free, provided the
customer's balance is fully paid off monthly, and
no hidden fees for customers who choose to
spread their payments. The account is accessed
through the customer's existing Smart Shopper
card with the credit provider carrying all
associated funding costs and credit risk. The
Pick n Pay Store Account has been designed to offer
the most affordable form of credit in the market with
no transaction, joining or hidden administration fees.
The Group's customer-focused and innovative approach
to the Pick n Pay Store Account enables consumers to
manage their spend wisely and cost-effectively.
BOXER
The Boxer brand celebrates its 40th anniversary
in 2017. The Group is proud of the development
and progress of this exceptional business, and
the loyalty it inspires in its customers. The Group
remains determined to continue to develop the
business into a national brand.
Focusing on middle-income and lower-income
customers, Boxer accelerated its turnover
growth in the period in a competitive market.
It has consistently demonstrated the ability
to win customers in tough times through a
well-defined range, highly competitive prices,
and a compelling fresh meat offer.
During the period, Boxer converted a further
21 stores to its Next Generation format.
Altogether 70% of Boxer stores in KwaZulu-Natal
are now operating out of this improved format.
Boxer opened 13 stores during the first half of
the year, and grew its presence in the Western
Cape, with two new stores in Mitchells Plain and
Worcester. The Group is confident that these
two stores will be as successful as its Boxer
store in Khayelitsha.
Boxer has also made considerable progress on
the centralisation of its supply chain. The Boxer
distribution centre in Cato Ridge, outside
Durban, is now supplying all Boxer Superstores
and Boxer Punch stores in KwaZulu-Natal. Boxer
has recently opened a second distribution centre
in East London, which will supply groceries to
Eastern Cape stores from the second half of
this financial year.
REST OF AFRICA
The Group has a presence in Botswana, Lesotho,
Namibia, Swaziland, Zambia and Zimbabwe (49%
investment in its associate, TM Supermarkets).
It remains committed to extending its offer in
markets outside South Africa on a planned and
measured basis.
In the period under review, the Group opened four
new stores outside South Africa, one in Namibia
and three in Swaziland. Two underperforming
stores were closed in Namibia during the period,
taking the total number of stores outside South
Africa to 142 (including TM Supermarkets).
The Group's franchise businesses outside
South Africa, together with the Group's share
of profits of TM Supermarkets (its associate in
Zimbabwe), continue to make a positive growth
contribution. Despite the ongoing challenging
trading environment in Zambia, the Group
remains positive about its long-term prospects
in the region.
FINANCIAL REVIEW
As noted previously, Pick n Pay completed a
company-wide voluntary severance programme
("VSP") in the first half of the financial year.
The total cost of the VSP has been accounted
for during the reporting period, offset in part
by related savings during the period under
review. The net impact of the VSP amounted to
R200.0 million, before tax, and has had an impact
on employee costs under trading expenses. This
cost is expected to be fully recovered by the end
of the financial year through resulting savings
in employee costs.
The Group modernised its control structure
in the first half of the previous financial year,
with the unbundling of the Pick n Pay Holdings
Limited RF Group. Although there were material
non-recurring items in certain individual
categories of other trading income and trading
expenses, the transaction had no impact on
trading profit or headline earnings in the prior
period.
The financial review presented below excludes
all material non-recurring items related to
the Group's voluntary severance programme
in the first half of this financial year, and the
unbundling of the Pick n Pay Holdings Limited
RF Group in the same period last year. The result
commentary is presented on a normalised basis.
The principal differences between the Group's
normalised and published results are set out
in the appendix to the review of operations -
'summary of non-recurring items'.
Turnover
Group turnover increased 5.1% to R39.3 billion,
with like-for-like turnover growth of 1.8%.
This reflects the pressures of a challenging
trading environment, some disruption from store
refurbishments and closures, the temporary
displacement of staff through the VSP, and the
investment in lower prices to customers. Internal
price inflation was restricted to 3.6%, well below
CPI food inflation of 6.9%.
On a constant currency basis, Group turnover
was up 5.2% with like-for-like growth of 1.8%.
Please refer to the appendix to the review
of operations for further information on the
constant currency and like-for-like calculations.
Gross profit
Gross profit increased by 4.5% to R7.0 billion.
Gross profit margin declined by 0.1 percentage
point from 17.9% to 17.8%. The Group continues
to realise greater operational efficiency and
cost savings. Increased centralisation, better
buying and strong discipline on supply chain
related cost, including improved management
of waste, enabled meaningful price investment
across essential every day grocery lines.
Other trading income
Other trading income consists of franchise fee
income, operating lease income and commissions,
dividends received and income from value added
services.
Franchise fee income was up 14.3% to
R202.5 million, driven by the 46 net new
franchise stores opened over the last 12 months.
A number of legacy franchise agreements have
been restructured to bring them in line with the
standard terms and conditions of the Group's
current franchise arrangements. Any increase
in franchise fees received as a result of this
alignment has been offset by higher loyalty
payments to franchisees on products purchased
through the Group's supply chain (included within
gross profit). The Group continues to strengthen
its partnership with franchisees through lower
prices and improved availability in its supply
chain and through ongoing administrative and
operational support.
Operating lease income increased by 25.5%
to R211.8 million, largely driven by new head
leases added over the last 12 months.
Strategic head leases safeguard the long-term
tenancy of Pick n Pay franchise stores located at
key sites. The increase in rental income received
is matched with an equal corresponding increase
in rent paid (included within occupancy costs).
Commissions, dividends received and income
from value added services ("VAS") grew
33.9% to R217.0 million. This includes service
fee income earned in respect of merchandising
services, now performed in-house for a small
number of suppliers, which did not occur in the
prior year. The related cost of the in-house
function is included within employee costs.
Excluding the first-time merchandising fees
received, commissions and VAS income grew
by 15.0% year-on-year, predominantly driven
by commissions received on third party bill
payments and prepaid electricity purchases.
On a comparable basis, excluding the items of
income detailed above that have a corresponding
increase in operating costs, other trading income
increased by 8.2%.
Trading expenses
Trading expenses of R7.0 billion were up 5.1% on
the prior year with like-for-like expense growth
contained at 1.6%, demonstrating the Group's
success in improving the management of its
operating costs.
Employee costs increased by 1.9% on the
prior year to R3.3 billion, and improved by
0.3 percentage points from 8.6% to 8.3% of
turnover. The like-for-like decrease of 0.7%
reflected the improved efficiency delivered
through continued improvements in labour
scheduling and further support office efficiencies.
Occupancy costs were up 15.3% to R1.5 billion,
driven by the 89 net new company-owned stores
added to the estate over the last 12 months.
Like-for-like occupancy costs increased by
10.2%, driven by annual rental escalations,
above-inflation regulatory increases in rates
and a substantial step-up in security costs,
essential in ensuring the safety of our customers
and staff.
Occupancy costs also reflect the addition of
strategic head leases over a number of key
franchise stores.
Operations costs increased just 4.2% on last
year to R1.6 billion, notwithstanding ongoing
regulatory increases in electricity and utility
charges, which were well above inflation. Capital
investment costs, with related depreciation and
amortisation charges up only 5.5%, continued
to be well managed.
Merchandising and administration costs
increased by only 1.7% to R613.1 million,
reflecting substantial savings in professional,
legal and other support services over the period.
Trading profit
Trading profit increased by 15.8% to
R641.5 million, driven by greater operational
efficiency and strong cost control. Trading profit
margin improved by 0.1 percentage point, from
1.5% to 1.6% of turnover.
Net interest
Net interest paid increased from R34.4 million
to R70.6 million. Lower net cash balances
year-on-year reflect the Group's sustained
investment in its store opening, refurbishment
and centralisation programme over the past
few years. The Group's net funding position
has improved over the past six months,
notwithstanding cash outflows in respect of
employee compensation payments under the
Group's VSP, and share purchases related to
employee share incentive schemes.
Losses on capital items
The Group incurred capital losses to the value of
R5.7 million (2016: R6.2 million) in respect of the
disposal or impairment of assets, largely related
to its refurbishment programme. A further
impairment loss of R13.9 million was incurred
in the prior year, arising on the unbundling
of the Pick n Pay Holdings Limited RF Group.
Capital items are added back in the calculation
of headline earnings.
Profit before tax before capital items
Profit before tax before capital items, is up
11.4%, with the underlying margin improving
from 1.5% to 1.6% of turnover.
Rest of africa segment
Segmental revenue for the Rest of Africa division
increased 12.6% year-on-year to R2.3 billion,
with segmental revenue in constant currency up
14.3%, 2.0% on a like-for-like basis.
Profit before tax was up 22.3% from
R103.7 million to R126.8 million, in part due
to a strong performance from the Group's
associate in Zimbabwe, TM Supermarkets (TM),
which performed well in a difficult operating
environment. The Group's share of TM's earnings
grew 40.4% on last year to R40.0 million.
TM Supermarkets has 56 stores in Zimbabwe,
16 of which trade under the Pick n Pay banner.
The Group's franchise business continues to
make a positive contribution to the performance
of this segment, while its Zambian operation
continues to trade in a tough environment.
Tax
The effective tax rate of 27.5% is down on
the 27.7% of the prior period, as a result
of the Group's increased profitability with
no corresponding change in the level of
non-deductible expenditure. The effective rate
is in line with that of the full 2017 financial year.
FINANCIAL POSITION
The increase in the Group's assets was due to
its ongoing capital investment programme, in
particular investment in new and refurbished
stores across the Group, as well as further
investment in its centralised supply chain
infrastructure.
Working capital
The Group generated cash from working capital
of R790.2 million over the first half of the year,
compared with R443.4 million last year.
The year-on-year improvement in working
capital primarily arose from better inventory
management. The Group reported inventory
of R6.0 billion at the end of August 2017, an
increase of 6.1% year-on-year. The increase
was driven by the addition of 89 net new
company-owned stores over the past 12 months.
Reducing stock levels is a key area of focus for
the Group. On a like-for-like basis, excluding the
impact of new stores and inflation, inventory was
down 5.1% year-on-year, reflecting improved
forecasting and replenishment, as well as progress
made on reducing holdings of slow moving products
through an ongoing range rationalisation process.
Trade and other payables of R11.4 billion was in
line with last year. Trade and other receivables
increased 9.2% to R3.6 billion, reflecting
the addition of 46 net new franchise stores
over the past 12 months, and an increase in
sales to franchisees through the Group's
supply chain. The quality of the debtors' book
improved year-on-year, with the impairment
allowance reducing to 3.0% from 3.3% of the
outstanding balance.
Cash and cash equivalents
27 26 28
August February August
2017 2017 2016
Rm Rm Rm
Cash 966.3 961.9 1 080.9
Cost-effective
short-term
borrowings (1 800.0) (1 800.0) (750.0)
Cash and cash
equivalents (833.7) (838.1) 330.9
Total borrowings (128.6) (133.2) (135.3)
Net funding (962.3) (971.3) 195.6
The Group's net funding position has improved
since February 2017, with strong working
capital management mitigating the impact of
cash outflows in respect of VSP compensation
payments and shares purchased in respect of
employee share incentive schemes.
In addition, the Group invested a further
R778.1 million in capital, and paid dividends
of R705.5 million to shareholders (up 15.7%
year-on-year). The Group remains cash
generative, with cash generated from operations
up 13.9% to R1.9 billion, notwithstanding the
impact of the VSP. The Group's liquidity position
remains strong, with 25% of available
borrowing facilities utilised at period end.
The Group is confident of its ability to meet
its capital expenditure requirements through
internal cash generation and cost-effective
short-term borrowings.
Capital investment
The Group invested R778.1 million in capital
improvements, 80% of this investment is
focused on its store opening and refurbishment
programme with the objective to improve the
customer experience.
SHAREHOLDER DISTRIBUTION
The Board declared an interim dividend of
33.40 cents per share, up 11.7% on last year
in line with the growth in normalised headline
earnings per share.
THE RIGHT PLAN FOR TOUGHER TIMES
This year is a notable one for Pick n Pay,
celebrating the 50th anniversary of its
founding by Raymond Ackerman. It is also the
year that Pick n Pay has been named the most
trusted retailer in South Africa as voted for by
consumers.
The Group has articulated and pursued a clear and
consistent turnaround plan since 2013. Its key
objective is to deliver profit and turnover growth
by reducing costs and investing in the value
and quality of the customer offer. The recent
downturn in the economy has underlined the
relevance of this plan, and the importance of
its successful delivery.
The Group has taken a series of determined
steps in the first half of this financial year to
accelerate delivery of its plan, and in doing so
has strengthened its business to succeed in
tougher times. In particular, it has substantively
lowered its costs to enable it to deliver lower
prices and better value for customers in a firmly
price-driven market. These steps have had some
impact on turnover in the period. However,
the Group has delivered its ninth consecutive
period of profit growth, and is more firmly and
confidently positioned for future success.
APPENDIX TO THE REVIEW OF OPERATIONS
SUMMARY OF NON-RECURRING ITEMS
The table below presents the profit for the current and previous periods on a normalised basis,
excluding all non-recurring items, as detailed below:
Normalised Normalised
Unaudited Unaudited
26 weeks to 26 weeks to
27 August 28 August
2017 % of % 2016 % of
Rm turnover change Rm turnover
Revenue 39 999.1 5.5 37 925.5
Turnover 39 271.1 5.1 37 357.1
Cost of merchandise sold (32 300.1) 5.3 (30 686.3)
Gross profit 6 971.0 17.8 4.5 6 670.8 17.9
Other trading income 631.3 1.6 24.2 508.1 1.4
Franchise fee income 202.5 0.5 14.3 177.2 0.5
Operating lease income 211.8 0.5 25.5 168.8 0.5
Commissions, dividends received
and other income 217.0 0.6 33.9 162.1 0.4
Trading expenses (6 960.8) 17.7 5.1 (6 624.8) 17.7
Employee costs (3 267.5) 8.3 1.9 (3 205.9) 8.6
Occupancy (1 502.1) 3.8 15.3 (1 302.3) 3.5
Operations (1 578.1) 4.0 4.2 (1 513.8) 4.1
Merchandising and administration (613.1) 1.6 1.7 (602.8) 1.6
Trading profit 641.5 1.6 15.8 554.1 1.5
Finance income 96.7 0.2 60.4 60.3 0.2
Finance costs (167.3) 0.4 76.7 (94.7) 0.3
Share of associate's income 40.0 0.1 40.4 28.5 0.1
Profit before tax before capital
items 610.9 1.6 11.4 548.2 1.5
Losses on capital items (5.7) (20.1)
Loss on sale of property, plant and
equipment (4.3) (6.2)
Impairment loss on property, plant
and equipment (1.4) -
Impairment loss on
available-for-sale financial
instruments - (13.9)
Profit before tax 605.2 1.5 14.6 528.1 1.4
Tax (166.4) 0.4 13.7 (146.3) 0.4
Profit for the period 438.8 1.1 14.9 381.8 1.0
Cents Cents
Normalised
Basic earnings per share 91.14 15.8 78.69
Diluted earnings per share 89.52 17.4 76.24
Headline earnings per share 91.99 11.6 82.43
Diluted headline earnings per share 90.36 13.1 79.87
The voluntary severance programme ("VSP")
The Group's voluntary severance programme is
reflected in the interim 2018 financial period.
Employee compensation costs as a result of the
VSP, net of the related recoveries during the
period, amounted to R200.0 million, before tax,
which has been reflected in trading expenses,
as a part of employee costs. These costs are
expected to be fully recovered by the end of
the financial year. The VSP tax effect was
calculated at the Group's effective tax rate for
the reporting period.
The unbundling of the Pick n Pay Holdings Limited RF
Group
The unbundling of the Pick n Pay Holdings
Limited RF (PWK) Group is reflected in the
interim 2017 financial period. The transaction
did not have an impact on trading profit or
headline earnings, however, there were
material non-recurring items in certain
individual categories of income and expense,
as detailed below:
Other trading income - included a dividend in
specie of R412.3 million, representing the value
of the Pick n Pay Stores Limited shares (now held
as treasury shares) received by the Group on the
unbundling of Pick n Pay Holdings Limited RF.
Employee costs - the Group operates an
employee share incentive scheme where eligible
employees were granted share options in PWK.
These share options were cancelled and replaced
with Pick n Pay Stores Limited share options, in
terms of the shareholder approval received at the
general meeting held on 25 July 2016. Employee
costs included the share-based payment expense
related to the increase in the market value of
PWK share options prior to the unbundling, as
well as the cancellation and replacement cost
of these options.
Merchandising and administration costs -
included a net fair value loss of R206.5 million in
respect of the Group's investment in Pick n Pay
Holdings Limited RF. The fair value movement
was as a result of the increased market value
of PWK shares prior to the unbundling, and the
subsequent write-off of the investment on the
receipt of the dividend in specie distribution.
The dividend in specie, increased share-based
payment costs and related fair value adjustments,
relating to the unbundling, detailed above, had
no impact on trading profit or headline earnings.
The table below details the impact of the non-recurring items on the current and previous
reporting periods:
Non- Non-
recurring recurring
As reported items Normalised As reported items Normalised
26 weeks to 26 weeks to 26 weeks to 26 weeks to 26 weeks to 26 weeks to
27 August 27 August 27 August 28 August 28 August 28 August
2017 2017 2017 2016 2016 2016
Unaudited Rm Rm Rm Rm Rm Rm
Revenue 39 999.1 - 39 999.1 38 337.8 (412.3) 37 925.5
Turnover 39 271.1 - 39 271.1 37 357.1 - 37 357.1
Cost of merchandise
sold (32 300.1) - (32 300.1) (30 686.3) - (30 686.3)
Gross profit 6 971.0 - 6 971.0 6 670.8 - 6 670.8
Other trading
income 631.3 - 631.3 920.4 (412.3) 508.1
Dividend income in
specie - - - 412.3 (412.3) -
Franchise fee
income 202.5 - 202.5 177.2 - 177.2
Operating lease
income 211.8 - 211.8 168.8 - 168.8
Commissions,
dividends received
and other income 217.0 - 217.0 162.1 - 162.1
Trading expenses (7 160.8) 200.0 (6 960.8) (7 037.1) 412.3 (6 624.8)
Employee costs (3 467.5) 200.0 (3 267.5) (3 411.7) 205.8 (3 205.9)
Occupancy (1 502.1) - (1 502.1) (1 302.3) - (1 302.3)
Operations (1 578.1) - (1 578.1) (1 513.8) - (1 513.8)
Merchandising and
administration (613.1) - (613.1) (809.3) 206.5 (602.8)
Trading profit 441.5 200.0 641.5 554.1 - 554.1
Finance income 96.7 - 96.7 60.3 - 60.3
Finance costs (167.3) - (167.3) (94.7) - (94.7)
Share of associate's
income 40.0 - 40.0 28.5 - 28.5
Profit before tax
before capital
items 410.9 200.0 610.9 548.2 - 548.2
Losses on capital
items (5.7) - (5.7) (20.1) - (20.1)
Loss on sale of
property, plant
and equipment (4.3) - (4.3) (6.2) - (6.2)
Impairment loss on
property, plant
and equipment (1.4) - (1.4) - - -
Impairment loss on
available-for-sale
financial
instruments - - - (13.9) - (13.9)
Profit before tax 405.2 200.0 605.2 528.1 - 528.1
Tax (111.4) (55.0) (166.4) (146.3) - (146.3)
Profit for the
period 293.8 145.0 438.8 381.8 - 381.8
Earnings per share Cents Cents Cents Cents Cents Cents
Basic 61.03 30.11 91.14 78.69 - 78.69
Diluted 59.94 29.58 89.52 76.24 - 76.24
Headline 61.88 30.11 91.99 82.43 - 82.43
Diluted headline 60.78 29.58 90.36 79.87 - 79.87
PRO FORMA INFORMATION
Certain financial information presented in these
consolidated interim 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, result
of operations or cash flows. This information
has not been reviewed and reported on by the
Group's auditors.
Pro forma constant currency disclosures
The Group discloses constant currency
information in order to report on the Group's
Rest of Africa segmental revenue results,
excluding the impact of foreign currency
fluctuations. The segmental revenue growth in
constant currency is calculated by translating
the prior year local currency segmental revenue
at the current year average exchange rates on a
country-by-country basis and then comparing
that against the current year segmental
revenue translated at the current year average
exchange rates. The major currencies that are
contributing to the exchange rate movements
is the Zambian kwacha and the Botswana pula.
% increase % increase
reported constant
August 2017 currency currency
Rest of Africa segmental
revenue 12.6 14.3
Group turnover 5.1 5.2
ADDITIONAL INFORMATION
Like-for-like turnover growth comparisons
Like-for-like turnover growth is a measure of the
Group's comparable turnover growth, removing
the impact of store openings and closures in the
current or previous reporting periods.
Gareth Ackerman Richard Brasher
Chairman Chief Executive Officer
16 October 2017
DIVIDEND DECLARATION
PICK N PAY STORES LIMITED - TAX REFERENCE NUMBER: 9275/141/71/2
Number of shares in issue: 488 450 321
Notice is hereby given that the directors have declared an interim gross dividend (number 99) of
33.40 cents per share out of income reserves.
The dividend declared is subject to dividend withholding tax at 20%.
The tax payable is 6.68000 cents per share, resulting in shareholders who are not exempt from
dividends tax with a net dividend of 26.72000 cents per share.
DIVIDEND DATES
The last day of trade in order to participate in the dividend (CUM dividend) will be Tuesday,
5 December 2017.
The shares will trade EX dividend from the commencement of business on Wednesday, 6 December
2017 and the record date will be Friday, 8 December 2017. The dividends will be paid on Monday,
11 December 2017.
Share certificates may not be dematerialised or rematerialised between Wednesday, 6 December
2017 and Friday, 8 December 2017, both dates inclusive.
On behalf of the Board of directors
Debra Muller
Company Secretary
16 October 2017
GROUP STATEMENT OF COMPREHENSIVE INCOME
for the period ended
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
27 August 28 August 26 February
2017 2016 2017
Notes Rm Rm Rm
Revenue 2 39 999.1 38 337.8 79 117.8
Turnover 2 39 271.1 37 357.1 77 486.1
Cost of merchandise sold (32 300.1) (30 686.3) (63 549.4)
Gross profit 6 971.0 6 670.8 13 936.7
Other trading income 2 631.3 920.4 1 505.6
Trading expenses (7 160.8) (7 037.1) (13 668.5)
Employee costs (3 467.5) (3 411.7) (6 619.8)
Occupancy (1 502.1) (1 302.3) (2 678.9)
Operations (1 578.1) (1 513.8) (2 961.7)
Merchandising and administration (613.1) (809.3) (1 408.1)
Trading profit 441.5 554.1 1 773.8
Finance income 2 96.7 60.3 126.1
Finance costs (167.3) (94.7) (218.6)
Share of associate's income 40.0 28.5 80.2
Profit before tax before capital items 410.9 548.2 1 761.5
Losses on capital items (5.7) (20.1) (46.3)
Loss on sale of property, plant and equipment (4.3) (6.2) (20.4)
Impairment loss on property, plant and
equipment (1.4) - (5.9)
Impairment loss on intangible assets - - (6.1)
Impairment loss on available-for-sale financial
instruments - (13.9) (13.9)
Profit before tax 405.2 528.1 1 715.2
Tax (111.4) (146.3) (471.7)
Profit for the period 293.8 381.8 1 243.5
Other comprehensive income, net of tax
Items that will not be reclassified to profit
or loss 0.3 2.4 1.5
Remeasurement in retirement scheme assets 0.3 3.3 2.1
Tax on remeasurement in retirement scheme
assets - (0.9) (0.6)
Items that may be reclassified to profit or
loss 4.7 (64.1) (96.9)
Foreign currency translations 4.7 (31.6) (64.4)
Fair value loss on available-for-sale financial
instruments - (32.5) (32.5)
Total comprehensive income for the period 298.8 320.1 1 148.1
Cents Cents Cents
Earnings per share
Basic earnings per share 3 61.03 78.69 256.67
Diluted earnings per share 3 59.94 76.24 250.20
Headline earnings per share 3 61.88 82.43 264.35
Diluted headline earnings per share 3 60.78 79.87 257.69
Normalised earnings per share
Basic earnings per share 3 91.14 78.69 256.67
Diluted earnings per share 3 89.52 76.24 250.20
Headline earnings per share 3 91.99 82.43 264.35
Diluted headline earnings per share 3 90.36 79.87 257.69
GROUP STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
As at As at As at
27 August 28 August 26 February
2017 2016 2017
Notes Rm Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 5 802.2 5 242.3 5 583.6
Intangible assets 991.3 965.1 984.3
Operating lease assets 212.9 183.7 198.3
Financial instruments at fair value through profit
or loss 18.8 23.4 13.7
Investment in associate 333.3 286.3 309.7
Participation in export partnerships - 14.1 -
Loans 89.3 101.6 85.1
Retirement scheme assets 96.7 92.7 95.3
Deferred tax assets 218.1 220.1 218.0
7 762.6 7 129.3 7 488.0
Current assets
Inventory 5 992.0 5 647.1 5 994.6
Trade and other receivables 3 556.0 3 257.6 3 445.1
Cash and cash equivalents 966.3 1 080.9 961.9
10 514.3 9 985.6 10 401.6
Non-current asset held for sale 212.8 - 212.8
Total assets 18 489.7 17 114.9 18 102.4
EQUITY AND LIABILITIES
Equity
Share capital 4 6.0 6.0 6.0
Treasury shares 5 (839.2) (516.2) (554.3)
Retained earnings 4 295.5 3 977.5 4 652.1
Foreign currency translation reserve (19.8) 8.3 (24.5)
Total equity 3 442.5 3 475.6 4 079.3
Non-current liabilities
Borrowings 80.9 87.5 84.0
Operating lease liabilities 1 488.9 1 302.4 1 398.6
Deferred tax liabilities 15.9 9.9 14.6
1 585.7 1 399.8 1 497.2
Current liabilities
Trade and other payables 11 384.7 11 368.2 10 490.2
Bank overdraft and overnight borrowings 1 800.0 750.0 1 800.0
Borrowings 47.7 47.8 49.2
Current tax liabilities 227.6 70.0 174.8
Derivative financial instruments 1.5 3.5 11.7
13 461.5 12 239.5 12 525.9
Total equity and liabilities 18 489.7 17 114.9 18 102.4
Number of ordinary shares in issue - thousands 4 488 450.3 488 450.3 488 450.3
Weighted average number of ordinary shares in
issue - thousands 3.2 478 623.8 478 738.5 482 237.5
Diluted weighted average number of ordinary
shares in issue - thousands 3.2 487 283.9 494 112.9 494 709.6
Net asset value - cents per share (property value
based on directors' valuation) 829.8 828.3 979.5
GROUP STATEMENT OF CHANGES IN EQUITY
for the period ended
Foreign
Fair currency
Share Treasury value Retained translation Total
capital shares reserve earnings reserve equity
Unaudited Notes Rm Rm Rm Rm Rm Rm
At 28 February 2016 6.0 (63.5) 32.5 3 882.9 39.9 3 897.8
Total comprehensive
income for the period - - (32.5) 384.2 (31.6) 320.1
Profit for the period - - - 381.8 - 381.8
Remeasurement in
retirement scheme assets - - - 2.4 - 2.4
Foreign currency
translations - - - - (31.6) (31.6)
Fair value gain on
available-for-sale
financial instruments - - 26.6 - - 26.6
Reclassification to profit
or loss - - (59.1) - - (59.1)
Transactions with owners - (452.7) - (289.6) - (742.3)
Dividends paid - - - (609.7) - (609.7)
B share capital issued 4.2 - - - - - -
Shares received upon
unbundling 7 - (412.3) - - - (412.3)
Share purchases - (185.5) - - - (185.5)
Net effect of settlement of
employee share options - 145.1 - (103.5) - 41.6
Share-based payments
expense - - - 423.6 - 423.6
At 28 August 2016 6.0 (516.2) - 3 977.5 8.3 3 475.6
Total comprehensive
income for the period - - - 860.8 (32.8) 828.0
Profit for the period - - - 861.7 - 861.7
Remeasurement in
retirement scheme assets - - - (0.9) - (0.9)
Foreign currency
translations - - - - (32.8) (32.8)
Transactions with owners - (38.1) - (186.2) - (224.3)
Dividends paid - - - (143.8) - (143.8)
Share purchases - (159.9) - - - (159.9)
Net effect of settlement of
employee share options - 121.8 - (156.0) - (34.2)
Share-based payments
expense - - - 113.6 - 113.6
At 26 February 2017 6.0 (554.3) - 4 652.1 (24.5) 4 079.3
Total comprehensive
income for the period - - - 294.1 4.7 298.8
Profit for the period - - - 293.8 - 293.8
Foreign currency
translations - - - - 4.7 4.7
Remeasurement in
retirement scheme assets - - - 0.3 - 0.3
Transactions with owners - (284.9) - (650.7) - (935.6)
Dividends paid - - - (705.5) - (705.5)
Share purchases - (332.9) - - - (332.9)
Net effect of settlement of
employee share options - 48.0 - (47.0) - 1.0
Share-based payments
expense - - - 101.8 - 101.8
At 27 August 2017 6.0 (839.2) - 4 295.5 (19.8) 3 442.5
GROUP STATEMENT OF CASH FLOWS
for the period ended
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
27 August 28 August 26 February
2017 2016 2017
Note Rm Rm Rm
Cash flows from operating activities
Trading profit 441.5 554.1 1 773.8
Adjusted for dividend income - - (18.0)
Adjusted for non-cash items 696.6 668.6 1 356.7
Depreciation and amortisation 534.4 506.5 981.5
Equity-settled share-based payment expense 101.8 423.6 537.2
Cash-settled share-based payment expense - (124.6) (124.6)
Movement in net operating lease liabilities 75.7 50.7 132.3
Movement in provisions - (0.2) (0.2)
Fair value (gain)/loss on financial instruments at
fair value through profit or loss (15.3) 224.9 242.8
Dividend in specie received upon unbundling 7 - (412.3) (412.3)
Cash generated before movements in working
capital 1 138.1 1 222.7 3 112.5
Movements in working capital 790.2 443.4 (986.3)
Movements in trade and other payables 894.5 867.6 (28.1)
Movements in inventory 6.6 (492.8) (839.3)
Movements in trade and other receivables (110.9) 68.6 (118.9)
Cash generated from trading activities 1 928.3 1 666.1 2 126.2
Interest received 96.7 60.3 126.1
Interest paid (167.3) (94.7) (218.6)
Cash generated from operations 1 857.7 1 631.7 2 033.7
Dividends received - - 18.0
Dividends paid (705.5) (609.7) (753.5)
Tax paid (58.7) (215.0) (469.2)
Cash generated from operating activities 1 093.5 807.0 829.0
Cash flows from investing activities
Investment in intangible assets (39.6) (39.7) (134.0)
Investment in property, plant and equipment (671.5) (729.1) (1 736.0)
Investment in financial instruments at fair value - (6.7) (6.7)
Purchase of operations (71.0) (9.3) 1.8
Proceeds on disposal of property, plant and
equipment 26.9 16.9 49.8
Loans (advanced)/repaid (4.2) (5.2) 11.3
Participation in export partnership - - 14.1
Retirement obligation (1.1) 0.5 (2.4)
Cash utilised in investing activities (760.5) (772.6) (1 802.1)
Cash flows from financing activities
Borrowings raised 22.2 10.9 48.7
Repayment of borrowings (26.8) (405.2) (445.1)
Share purchases (332.9) (185.5) (345.4)
Proceeds from employees on settlement of share
options 1.0 1.3 8.0
Cash utilised in financing activities (336.5) (578.5) (733.8)
Net decrease in cash and cash equivalents (3.5) (544.1) (1 706.9)
Net cash and cash equivalents at beginning of
period (838.1) 882.9 882.9
Foreign currency translations 7.9 (7.9) (14.1)
Net cash and cash equivalents at end of period (833.7) 330.9 (838.1)
Consisting of:
Cash and cash equivalents 966.3 1 080.9 961.9
Bank overdraft and overnight borrowings (1 800.0) (750.0) (1 800.0)
NOTES TO THE FINANCIAL INFORMATION
for the period ended 27 August 2017
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
The condensed consolidated interim financial statements are prepared in accordance with
International Financial Reporting Standards ("IFRS"), IAS 34 Interim Financial Reporting, the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and Financial
Pronouncements as issued by Financial Reporting Standards Council and the requirements
of the Companies Act of South Africa. The accounting policies applied in the preparation
of these consolidated interim financial statements are in terms of International Financial
Reporting Standards and are consistent with those applied in the financial statements for
the 52 weeks ended 26 February 2017. These consolidated interim financial statements have
been prepared by the Finance Division under the supervision of the Chief Finance Officer,
Mr Bakar Jakoet CA(SA), and have not been audited or reviewed by the Group's external
auditors, Ernst & Young Inc.
Normalised basic and headline earnings exclude the once-off net cost of the voluntary severance
programme ("VSP"). Please refer to note 3 for further detail regarding the VSP. We believe
normalised basic and headline earnings is a useful measure of the Group's sustainable and
comparable trading performance. However, this is not a defined term under IFRS and may not
be comparable with similarly titled measures reported by other companies.
2. REVENUE
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
27 August 28 August 26 February
2017 2016 2017
Rm Rm Rm
Turnover 39 271.1 37 357.1 77 486.1
Finance income 96.7 60.3 126.1
Bank balances and investments 70.3 40.5 81.4
Trade and other receivables 25.0 17.8 40.3
Staff loans and other 1.4 2.0 4.4
Other trading income 631.3 920.4 1 505.6
Dividend in specie received upon unbundling
(note 7) - 412.3 412.3
Franchise fee income 202.5 177.2 349.8
Operating lease income 211.8 168.8 345.3
Commissions, dividends received and other
income 217.0 162.1 398.2
Revenue 39 999.1 38 337.8 79 117.8
3. BASIC, HEADLINE AND DILUTED EARNINGS PER SHARE
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
27 August 28 August 26 February
% 2017 2016 2017
change Cents Cents Cents
Earnings per share
Basic earnings per share (22.4) 61.03 78.69 256.67
Diluted earnings per share (21.4) 59.94 76.24 250.20
Headline earnings per share (24.9) 61.88 82.43 264.35
Diluted headline earnings per share (23.9) 60.78 79.87 257.69
Normalised earnings per share*
Basic earnings per share 15.8 91.14 78.69 256.67
Diluted earnings per share 17.4 89.52 76.24 250.20
Headline earnings per share 11.6 91.99 82.43 264.35
Diluted headline earnings per share 13.1 90.36 79.87 257.69
Rm Rm Rm
3.1 Basic and headline earnings
Reconciliation between basic and headline
earnings:
Profit for the period 293.8 381.8 1 243.5
Profit attributable to forfeitable share plan shares (1.7) (5.1) (5.7)
Basic earnings for the period 292.1 376.7 1 237.8
Adjustments: 4.1 18.3 37.2
Loss on sale of property, plant and equipment 4.3 6.2 20.4
Tax effect of loss on sale of property, plant and
equipment (1.2) (1.8) (5.7)
Impairment loss on property, plant and
equipment 1.4 - 5.9
Tax effect of impairment loss on property, plant
and equipment (0.4) - (1.7)
Impairment loss on intangible assets - - 6.1
Tax effect of impairment loss on intangible assets - - (1.7)
Impairment loss on available-for-sale financial
instruments - 13.9 13.9
Adjustments attributable to forfeitable share plan
shares - (0.4) (0.2)
Headline earnings for the period 296.2 394.6 1 274.8
Adjusted for once-off impact of voluntary
severance programme*: 144.1 - -
Profit before tax - net employee costs 200.0 - -
Tax effect calculated at the Group's effective
tax rate (55.0) - -
Related profit attributable to forfeitable share
plan shares (0.9) - -
Normalised headline earnings for the period* 440.3 394.6 1 274.8
*During the period under review the Group embarked on a voluntary severance programme ("VSP"), through which
employees were offered 1.5 weeks of pay per completed year of service, plus four weeks of notice pay. The full cost of
the VSP is recorded in this result, offset only in part by the related savings during the reporting period. The cost of the
VSP will be fully recovered by the end of the financial year through resulting savings in employee costs. Normalised basic
and headline earnings is calculated by excluding the once-off net cost of the VSP. The once-off impact as presented is
the same for both basic and headline earnings.
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
27 August 28 August 26 February
2017 2016 2017
000's 000's 000's
3.2 Number of ordinary shares
Number of ordinary shares in issue (note 4.1) 488 450.3 488 450.3 488 450.3
Weighted average number of ordinary shares in
issue (excluding treasury shares) 478 623.8 478 738.5 482 237.5
Diluted weighted average number of ordinary
shares in issue 487 283.9 494 112.9 494 709.6
Reconciliation of weighted average number of
ordinary shares to diluted weighted average
number of ordinary shares
Weighted average number of ordinary shares in
issue (excluding treasury shares) 478 623.8 478 738.5 482 237.5
Dilutive effect of share options 8 660.1 15 374.4 12 472.1
Diluted weighted average number of ordinary
shares in issue 487 283.9 494 112.9 494 709.6
The outstanding forfeitable shares, granted in terms of the employee share scheme, that have
not met the performance hurdles, had no dilutive impact on the weighted average number of
shares for the current and prior period.
4. SHARE CAPITAL
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
27 August 28 August 26 February
2017 2016 2017
Rm Rm Rm
4.1 Ordinary share capital
Authorised
800 000 000 (2016: 800 000 000) ordinary shares
of 1.25 cents each 10.0 10.0 10.0
Issued
488 450 321 (2016: 488 450 321) ordinary shares
of 1.25 cents each 6.0 6.0 6.0
000's 000's 000's
The number of shares in issue at end of period
is made up as follows:
Treasury shares held by the Group 10 819.3 5 833.5 6 531.8
Shares held under the forfeitable share plan 2 881.0 9 490.0 9 336.5
Shares held outside the Group 474 750.0 473 126.8 472 582.0
Total shares in issue at end of period 488 450.3 488 450.3 488 450.3
The Company can issue new shares to settle the Group's obligations under its employee share
schemes, but issues in this regard are limited to, in aggregate, 5% of total issued share capital
or 24 422 516 (2016: 24 422 516) shares. To date 10 743 000 (2016: 10 743 000) shares have
been issued, resulting in 13 679 516 (2016: 13 679 516) shares remaining for this purpose.
The holders of ordinary shares are entitled to receive dividends as declared and are entitled
to one vote per share at meetings of the Company.
4.2 B share capital Rm Rm Rm
Authorised
1 000 000 000 (2016: 1 000 000 000) unlisted,
non-convertible, non-participating, no par value
B shares - - -
Issued
259 682 869 (2016: 259 682 869) unlisted
non-convertible, non-participating, no par value
B shares - - -
B shares are stapled to certain ordinary shares and cannot be traded separately from each
other. Stapled ordinary shares, together with B shares, are subject to restrictions upon
disposal. Refer to note 7 for further detail.
The holders of B shares are entitled to the same voting rights as holders of ordinary shares, but
are not entitled to any rights to distributions by the Company or any other economic benefits.
5. TREASURY SHARES
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
27 August 28 August 26 February
2017 2016 2017
Rm Rm Rm
At beginning of period 554.3 63.5 63.5
Share purchases 332.9 185.5 345.4
Take-up of share options by employees (48.0) (145.1) (266.9)
Shares received upon unbundling (note 7) - 412.3 412.3
Shares delivered to forfeitable share plan
participants - - -
At end of period 839.2 516.2 554.3
000's 000's 000's
The movement in the number of treasury
shares is as follows:
At beginning of period 15 868.3 9 675.4 9 675.4
Shares purchased during the period 5 429.4 2 367.4 4 332.7
Shares sold during the period pursuant to the
take-up of share options by employees (1 232.4) (2 136.2) (4 016.5)
Shares delivered to forfeitable share plan
participants (6 365.0) - -
Shares allocated under forfeitable share plan - - 1 417.0
Shares received upon unbundling (note 7) - 5 416.9 4 459.7
At end of period 13 700.3 15 323.5 15 868.3
Comprises of:
Shares allocated under forfeitable share plan 2 881.0 9 490.0 9 336.5
Shares held by the Group 10 819.3 5 833.5 6 531.8
6. OPERATING SEGMENTS
South Rest of Total
Africa Africa operations
Unaudited Rm Rm Rm
26 weeks to 27 August 2017
Total segment revenue 38 106.4 2 303.3 40 409.7
External revenue 38 106.4 1 892.7 39 999.1
Direct deliveries* - 410.6 410.6
Segment external turnover 37 398.6 1 872.5 39 271.1
Profit before tax** 278.4 126.8 405.2
Other information
Statement of comprehensive income
Finance income 93.7 3.0 96.7
Finance costs 167.3 - 167.3
Depreciation and amortisation 512.5 21.9 534.4
Impairment loss on property, plant and
equipment 1.4 - 1.4
Share of associate's income - 40.0 40.0
Statement of financial position
Total assets 16 652.5 1 837.2 18 489.7
Total liabilities 14 579.1 468.1 15 047.2
Investment in associate - 333.3 333.3
Additions to non-current assets 755.2 22.9 778.1
26 weeks to 28 August 2016
Total segment revenue 36 700.0 2 045.0 38 745.0
External revenue 36 700.0 1 637.8 38 337.8
Direct deliveries* - 407.2 407.2
Segment external turnover 35 733.0 1 624.1 37 357.1
Profit before tax** 424.4 103.7 528.1
Other information
Statement of comprehensive income
Finance income 57.5 2.8 60.3
Finance costs 94.7 - 94.7
Depreciation and amortisation 491.3 15.2 506.5
Impairment loss on available-for-sale financial
instruments 13.9 - 13.9
Share of associate's income - 28.5 28.5
Statement of financial position
Total assets 15 714.4 1 400.5 17 114.9
Total liabilities 13 296.2 343.1 13 639.3
Investment in associate - 286.3 286.3
Additions to non-current assets 746.6 29.2 775.8
* Direct deliveries are issues to franchisees directly by Group suppliers, these are not included in revenue on the
statement of comprehensive income.
** Segmental profit before tax is the reported measure used for evaluating the Group's operating segments performance.
On an overall basis the segmental profit before tax is equal to the Group's reported profit before tax. The Rest of
Africa segment's segmental profit before tax comprises the segment's trading result and directly attributable costs
only. No allocations are made for indirect or incremental cost incurred by the South Africa segment relating to the
Rest of Africa segment.
7. RELATED PARTY TRANSACTIONS
During the period under review, in the ordinary course of business, certain companies within
the Group entered into transactions with each other. These inter-group transactions and
related balances are eliminated on consolidation.
The Pick n Pay Holdings Group included the ultimate holding company, Pick n Pay Holdings
Limited RF, an investment holding company listed on the JSE (a stock exchange in South
Africa). The Company was formed with the sole purpose of holding a controlling interest in
Pick n Pay Stores Limited (and thereby creating the Pick n Pay Store Group), resulting in a
pyramid control structure.
During the previous period under review at the General Meeting held on 25 July 2016,
shareholders approved the unbundling of the Pick n Pay Holdings Group in order to remove the
pyramid control structure. As a result of the unbundling, related party transactions occurred.
This included a dividend in specie share distribution by Pick n Pay Holdings Limited RF, of
R412.3 million, to entities within the Pick n Pay Stores Group who at the time held shares
in Pick n Pay Holdings Limited RF. The dividend in specie consisted of shares in Pick n Pay
Stores Limited. It also included the creation and issuance of a new class of unlisted voting
shares (B shares) in Pick n Pay Stores Limited (refer to note 4.2). These shares were issued
to the existing controlling shareholders of Pick n Pay Holdings Limited RF so as to retain the
control structure of the Group as before the unbundling.
Related parties are unchanged from those reported at 26 February 2017. For further information
please refer to note 27 of the 2017 audited Group annual financial statements and note 8 of
the 2017 audited Company annual financial statements.
8. FINANCIAL INSTRUMENTS
All financial instruments held by the Group are measured at amortised cost, with the exception
of derivative financial instruments and financial instruments at fair value through profit or
loss, as set out below:
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
27 August 28 August 26 February
2017 2016 2017
Rm Rm Rm
Derivative financial instruments - liabilities
Forward exchange contracts - level 2 1.5 3.5 11.7
Financial instruments at fair value through
profit of loss
Investment in Guardrisk Insurance Company Limited
- level 2 18.8 23.4 13.7
The fair value of financial instruments that are not traded in active markets are determined
by using valuation techniques. If all significant inputs required to fair value an instrument
are observable, the instruments are included in level 2.
The carrying value of all other financial instruments approximate their fair value.
There have been no transfers between level 1, level 2 and level 3 of the fair value hierarchy
during the period.
9. COMMITMENTS
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
27 August 28 August 26 February
2017 2016 2017
Rm Rm Rm
Authorised capital expenditure
Contracted for 752.4 1 112.3 275.1
Property 8.3 28.6 26.5
Furniture, fittings, equipment and vehicles 712.0 1 018.6 230.1
Intangible assets 32.1 65.1 18.5
Not contracted for 62.6 75.2 1 524.9
Property - - 30.4
Furniture, fittings, equipment and vehicles 60.7 60.7 1 404.9
Intangible assets 1.9 14.5 89.6
Total commitments 815.0 1 187.5 1 800.0
NUMBER OF STORES
26 February Converted Converted 27 August
COMPANY-OWNED 2017 Opened Closed openings closures 2017
Pick n Pay 661 27 (4) 4 (1) 687
Hypermarkets 20 - - - - 20
Supermarkets 237 5 (1) 1 (1) 241
Local 31 3 - 1 - 35
Clothing 156 13 (2) - - 167
Liquor 214 6 (1) 2 - 221
Pharmacy 3 - - - - 3
Boxer 229 13 (1) - - 241
Superstores 144 7 (1) - - 150
Build 31 - - - - 31
Liquor 34 6 - - - 40
Punch 20 - - - - 20
Total company-owned 890 40 (5) 4 (1) 928
FRANCHISE
Pick n Pay
Supermarkets 299 2 (5) 1 (2) 295
Family 279 2 (5) 1 (2) 275
Mini-markets 19 - - - - 19
Daily 1 - - - - 1
Spaza 6 - - - - 6
Express 111 4 - - - 115
Clothing 17 - - - - 17
Liquor 181 17 - - (2) 196
Total franchise 614 23 (5) 1 (4) 629
TOTAL GROUP STORES 1 504 63 (10) 5 (5) 1 557
TM Supermarkets 56 - - - - 56
TOTAL WITH TM
SUPERMARKETS 1 560 63 (10) 5 (5) 1 613
AFRICAN FOOTPRINT
- included in total stores
above 140 4 (2) - - 142
Pick n Pay company-owned 17 - - - - 17
Boxer company-owned 5 2 - - - 7
Pick n Pay franchise 62 2 (2) - - 62
TM Supermarkets -
associate 56 - - - - 56
AFRICAN FOOTPRINT
- by country 140 4 (2) - - 142
Botswana 12 - - - - 12
Lesotho 3 - - - - 3
Namibia 38 1 (2) - - 37
Swaziland 14 3 - - - 17
Zambia 17 - - - - 17
Zimbabwe 56 - - - - 56
CORPORATE INFORMATION
PICK N PAY STORES LIMITED JSE LIMITED SPONSOR
Registration number: 1968/008034/06 Investec Bank Limited
JSE share code: PIK 100 Grayston Drive
ISIN: ZAE000005443 Sandton, 2196
BOARD OF DIRECTORS AUDITORS
Executive Ernst & Young Inc.
Richard Brasher (CEO)
Richard van Rensburg (deputy CEO) ATTORNEYS
Aboubakar (Bakar) Jakoet (CFO) Edward Nathan Sonnenberg
Suzanne Ackerman-Berman
Jonathan Ackerman PRINCIPLE TRANSACTIONAL BANKERS
Absa Limited
Non-executive First National Bank
Gareth Ackerman (Chairman)
David Robins COMPANY SECRETARY
Debra Muller
Independent non-executive email address: demuller@pnp.co.za
Alex Mathole
Audrey Mothupi PROMOTION OF ACCESS TO
David Friedland INFORMATION ACT
Jeff van Rooyen Information officer - Penny Gerber
Hugh Herman email address: PennyGerber@pnp.co.za
Lorato Phalatse
REGISTERED OFFICE INVESTOR RELATIONS
Pick n Pay Office Park David North
101 Rosmead Avenue email address: dnorth@pnp.co.za
Kenilworth
Cape Town, 7708 Kerry Becker
Tel +27 21 658 1000 email address: KerryBecker@pnp.co.za
Fax +27 21 797 0314
WEBSITE
Postal address Pick n Pay: www.picknpay.co.za
PO Box 23087 Investor relations: www.picknpayinvestor.co.za
Claremont
Cape Town, 7735 CUSTOMER CARELINE
Tel +27 800 11 22 88
REGISTRAR email address: customercare@pnp.co.za
Computershare Investor Services Proprietary
Limited ONLINE SHOPPING
Rosebank Towers Tel +27 860 30 30 30
15 Biermann Avenue www.picknpay.co.za
Rosebank, 2196
Tel +27 11 370 5000
Fax +27 11 688 5248
Postal address
PO Box 61051
Marshaltown, 2107
Date: 17/10/2017 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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