People

Build world-class retail capabilities

Through the expansion of the business we have created more than 3 200 new positions (including franchise), notwithstanding the closing down or sale of many Score stores.

Investment in our people remains a cornerstone of our success. Their development (through our extensive training programmes) and well-being (through better pay and benefits) are very important to us. HIV/Aids education and support remain critical to us maintaining a healthy workforce.

Sustainability

Create a sustainable future

Sustainability in Pick n Pay is about reducing costs, sound governance and using our influence to encourage positive change, all of which ultimately helps drive innovation.

We have implemented many new initiatives within the Group with the clear focus being on energy saving, reducing our carbon footprint, and recycling. Sustainable practices are becoming a new way of life at Pick n Pay and we are confident that not only will they cultivate a more sustainable environment but will also lead to increased operating efficiencies.We continue to facilitate ways that customers can help the environment. As an example, we have recently launched an initiative to encourage customers to significantly reduce the use of plastic bags.

We continue to expand the number of Enterprise development initiatives we support; we now have 67 Black-owned franchise stores and will be expanding our successful Support Bakery initiative in Johannesburg and rolling it out to Cape Town. For more information on the sustainability in Pick n Pay please refer to our sustainability report.

GROUP ENTERPRISES DIVISION

Score Supermarkets

As mentioned above we are closing down the Score operation and sub-letting the majority of its leases to black entrepreneurs to operate Pick n Pay Family franchise stores. We are converting as many of the remainder as possible to Boxer. Those that are unsuitable for either Pick n Pay or Boxer will be sold or closed.

In the current year, we closed 38 stores for conversion to Pick n Pay Family stores (27) and Boxer (9) with another 18 stores either closed or sold. In the year ahead, we will close a further 50 stores, of which 25 are confirmed for conversion to Family stores and 4 to Boxer. By the end of February 2010 this will leave 14 stores in Botswana, which will be converted to Pick n Pay Family franchise stores early in the 2011 financial year.

Boxer Superstores

Boxer produced another very solid result with a significant increase in turnover and profit. In addition to the 9 Score stores taken over in the current year, Boxer opened 6 new stores and plan to open a further 4 new stores and convert another 4 Score stores in the 2010 financial year.

FRANKLINS AUSTRALIA

Franklins produced a substantial turnaround in profitability, with a swing of R52.0 million to a R23.5 million trading profit in the current year. The key drivers to this significant improvement are further increased operating efficiencies, double-digit turnover growth from refurbished stores and its successful customer loyalty programme.

The 11 fully refurbished stores in the current year are producing good turnover growth and increased profitability. Moreover, their success is also starting to open doors with landlords for prospective new stores. During the 2010 financial year we will complete another 14 store refurbishments. By the end of next year about half of the Franklins stores will offer full service supermarkets with extensive deli, produce and fresh food ranges.

Franklins’ business model continues to prove resilient in the challenging Australian retail environment as consumers seek new ways to save money and as they respond well to the company’s increased promotion of weekly specials. Another factor in Franklins’ favour during these tough times is the huge success of their loyalty programme. In a recent independent survey, which evaluated ease of use and customer benefits, Franklins’ loyalty card came out on top, ahead of their two main rivals. The programme now has 630 000 members whose purchases account for 60% of Franklins’ turnover.

We are delighted by the outstanding turnaround achieved by Franklins, which has now established a solid foundation for long-term growth in Australia.

EXECUTIVE RETIREMENTS AND APPOINTMENTS

During the year Paul Connellan and Chris van Rooyen retired from the Retail board and Duncan Pentz, who was head of Hypermarkets, elected to take up a Family franchise opportunity. I thank them for their many years of dedicated service to the Company and wish them all the best in their future endeavours.

We recently announced some key executive appointments in the Retail Division: Kevin Korb as Foods Director, Neal Quirk as Operations Director and Dharmalingum Dass as head of Hypermarkets. Adrian Naude, Head of Group Enterprises (GE), requested additional operational experience and has therefore moved to the position of General Manager of the Pick n Pay Gauteng region. In his stead, Dallas Langman has been seconded to run the GE division for two years.

We wish them all the very best in their new positions.

GENERAL COMMENTS AND PROSPECTS

Given the tough trading conditions and the investment phase we are in, we are pleased with this result. We remain optimistic for the year ahead due to our strategic investments now starting to bear fruit and the relief to be brought to consumers by lower interest rates and reducing inflation. We forecast improved growth in 2010 headline earnings per share over that achieved this year. (This forecast financial information has not been reviewed and reported on by the Group’s independent auditors.)

I wish to thank all our employees for their dedication and support during the past year and look forward to working with them in what is going to be another exciting year ahead.

Nick Badminton
Chief Executive Officer