Results presentation for the 52 weeks ended 2 March 2014 Contents - PDF document

Results presentation for the 52 weeks ended 2 March 2014

Contents Results presentation Introduction 03 Headlines 05 Results overview 09 Progress on our plan 19 Summarised financial statements Review of operations 38 Consolidated statement of comprehensive income 46 Consolidated statement of fjnancial position 47 Consolidated statement of changes in equity 48 Consolidated statement of cash fmows 49 Notes to the fjnancial information 50 Supplementary information Number of stores 55 Corporate information 56

Results presentation 52 weeks ended 2 March 2014 NOTES Pick n Pay Results presentation for the annual fjnancial period ended 2 March 2014 1

Agenda Introduction Gareth Ackerman Headlines Richard Brasher Results overview Bakar Jakoet Progress on our plan Richard Brasher 2 NOTES 2 Pick n Pay Results presentation for the annual fjnancial period ended 2 March 2014

Introduction Gareth Ackerman Chairman NOTES Pick n Pay Results presentation for the annual fjnancial period ended 2 March 2014 3

Introduction  Encouraged by improving performance  Pick n Pay has always been on the side of the customer  We are facing a more challenging economic environment  This means fighting rising costs that increase burdens on customers: inflation, rent, rates  We can make a difference – e.g. bank interchange fees 4 NOTES 4 Pick n Pay Results presentation for the annual fjnancial period ended 2 March 2014

Headlines Richard Brasher CEO NOTES Pick n Pay Results presentation for the annual fjnancial period ended 2 March 2014 5

What we said at the half year  We had made a better start to the year and were a stronger business than we had been six months earlier  We were encouraged but not satisfied in our pursuit of a sales-led recovery  We had a clear strategy to:  Strengthen our core South African business  Establish the rest of Africa as a second engine of growth  Build a high performance culture 6 NOTES 6 Pick n Pay Results presentation for the annual fjnancial period ended 2 March 2014

Full year headlines Normalised trading As previously calendar Comparable reported % change on 364 Days 364 Days pro-forma change 368 Days prior year as 2014 2013 % 2013 published Turnover R63.1bn R58.6bn 7.7 R59.3bn 6.5 Trading profit R1 010m R752m 34.4 R852m 18.5 HEPS 138.51 cents 96.66 cents 43.3 111.30 cents 24.4 Total annual DPS 92.30 cents 84.00 cents 9.9 Dividend cover 1.5 times 1.3 times The Group implemented a 52-week financial reporting calendar in February 2013. The 2014 financial period consists of 364 trading days of turnover and related gross profit, compared with 368 days in the prior year. Reviewing turnover and gross profit on a comparable 364-day basis is more meaningful and as such, the results are presented on a comparable pro-forma basis (unless otherwise stated). 7 NOTES Pick n Pay Results presentation for the annual fjnancial period ended 2 March 2014 7

Headlines  Pleased with result but still not satisfied  Sales growth ahead of last year, with more new stores and some improvement in the shopping experience. But more to be done in a challenging trading environment  Improvement in profit reflects strong financial control. Trading expenses as a percentage of turnover reduced from 17.1% to 16.7%. Like-for-like expenses up only 0.8%  Strategy remains customer-driven and sales-led. Lower costs enable us to invest more in customer offer and shopping trip, driving turnover  The hard work has begun in earnest – focusing relentlessly on the fundamentals of good retailing 8 NOTES 8 Pick n Pay Results presentation for the annual fjnancial period ended 2 March 2014

Results overview Bakar Jakoet CFO NOTES Pick n Pay Results presentation for the annual fjnancial period ended 2 March 2014 9

Key indicators Normalised As trading Comparable previously % change calendar pro-forma reported on prior  7.7% turnover growth 364 Days 364 Days change 368 Days year as in challenging market 2014 2013 % 2013 published environment Till sales R73.0bn R67.8bn 7.6 R68.5bn 6.5  Investment in gross Turnover R63.1bn R58.6bn 7.7 R59.3bn 6.5 margin in second half of year to drive turnover Gross margin 17.5% 17.5% 17.4%  Strong profit growth Trading profit R1 010m R752m 34.4 R852m 18.5 driven by improved cost efficiencies Trading margin 1.6% 1.3% 1.4% Profit before tax R833m R708m 17.6 R809m 3.0  R104m impairment on intangible assets in HEPS - cents 138.51 96.66 43.3 111.30 24.4 current year The Group implemented a 52-week financial reporting calendar in February 2013. The 2014 financial period consists of 364 trading days of turnover and related gross profit, compared with 368 days in the prior year. Reviewing turnover and gross profit on a comparable 364-day basis is more meaningful and as such, the results are presented on a comparable pro-forma basis (unless otherwise stated). 10 NOTES 10 Pick n Pay Results presentation for the annual fjnancial period ended 2 March 2014

Earnings per share Normalised As trading previously calendar Comparable reported % change  The difference in HEPS 364 Days 364 Days pro-forma 368 Days on prior and EPS attributable to 2014 2013 change 2013 year as profits and losses of a cents cents % cents published capital nature HEPS 138.51 96.66 43.3 111.30 24.4  R104 million impairment Basic EPS 122.01 100.50 21.4 115.14 6.0 of intangible assets in current year relating to centralisation of structures and support systems  R5m loss on sale of equipment in current year  R20m profit on sale of property in prior year 11 NOTES Pick n Pay Results presentation for the annual fjnancial period ended 2 March 2014 11

Dividends per share As previously reported 364 Days 368 Days % change on  In line with our review 2014 2013 prior year as of all aspects of the cents cents published business, the Board Interim dividend moderated its annual 14.80 14.75 0.3% dividend cover to 1.5 times headline earnings Final dividend 77.50 69.25 11.9% per share Total Dividend 92.30 84.00 9.9% 12 NOTES 12 Pick n Pay Results presentation for the annual fjnancial period ended 2 March 2014

Sales analysis 364 Days 2014 (% change)  Continued investment in Like for like till sales growth 3.5 price – internal inflation of 5.3% vs CPI of 5.8% Like for like turnover growth 2.7 for the period Growth in net new selling space at end of period  111 new stores opened 3.4 (m 2 ) in the period Customer growth  Total units sold during 3.2 (# of transactions) the year up 2.5% Basket size growth 3.4 (average transaction value) 13 NOTES Pick n Pay Results presentation for the annual fjnancial period ended 2 March 2014 13

Gross margin  Maintained overall 17,5% 17,5% margin in competitive trading environment  Continued improvements in supply chain efficiencies  Re-investment in the customer offer FY'13 FY'14 (% of turnover) 14 NOTES 14 Pick n Pay Results presentation for the annual fjnancial period ended 2 March 2014

Trading expenses Normalised trading calendar  Trading expenses down 364 Days 364 Days 0.4% of turnover, 2014 2013 Change LFL despite opening 111 Rm Rm % % new stores Trading expenses 10 530 10 002 5.3 0.8  Like-for-like expenses increased by only 0.8%  Above CPI wage rate Employee costs 5 326 4 952 7.6 3.2 increase offset by higher productivity and better labour scheduling Occupancy 1 614 1 501 7.6 2.6  Savings on administrative costs driven by the reduction Operations 2 581 2 364 9.2 4.1 in consultancy fees  Further to go in reducing Merchandising and costs and increasing 1 010 1 186 -14.8 -17.9 administration productivity 15 NOTES Pick n Pay Results presentation for the annual fjnancial period ended 2 March 2014 15

Africa Normalised As trading Comparable previously % change calendar pro-forma reported on prior  Continued strong 364 Days 364 Days change 368 Days year as financial performance, 2014 2013 % 2013 published like-for-like growth Segmental of 9.4% revenue R3 242m R2 535m 27.9 R2 577m 25.8  Trading in 6 countries Trading margin 4.3% 3.6% 3.6% outside SA  Closed Mozambique and Profit before tax R140m R90m 55.6 R93m 51.5 Mauritius franchise operations Stores 98 95 16 NOTES 16 Pick n Pay Results presentation for the annual fjnancial period ended 2 March 2014

Cash flow summary 52 weeks ended FY’13 2 Mar 2014 As reported  Cash position improved Rm Rm through stronger working capital Cash generated before working capital 2 109 1 902 management Change in working capital 784 -1 000  Focused inventory Dividends and net interest paid -498 -672 management removed 4 days stock on hand Tax paid -270 -312  Increased investment in Operating activities 2 125 -82 new stores Investing activities -1 219 -1 117  Raised additional funding Financing activities 236 -335 under DMTN programme to benefit from Net movement 1 142 -1 534 competitive interest rates in capital markets Cash and cash equivalents at end of period 870 -270 17 NOTES Pick n Pay Results presentation for the annual fjnancial period ended 2 March 2014 17