– Private label and Fresh

• We have had tremendous success in growing our private label and Fresh food sales by 15% and 17%, respectively.

– Express

• Pick n Pay Express with its 7 stores in the Western Cape continues to perform beyond expectations. We have now agreed with our partners, BP, to roll-out a further 50 Pick n Pay Express stores over the next 2 years.

– Increased
   transactions

• Each of our Supermarket, Franchise and Hyper formats is seeing an increase in the number of visits by customers. Although there has been a decrease in size of the average basket purchased during the year, we are pleased that our total transactions for the year from these 3 formats are up by 13.3 million.

– Score conversions

• The closure of the Score retail trading operation is now complete with a total of 70 stores converted to the Pick n Pay and Boxer brands. After accounting for the closure costs and for the provision for doubtful debts, it made a material improvement to profit compared to the old Score business.
  Conversion of these stores has not only ensured job security for the employees of the ailing Score business, but it increased the number employed in the converted stores by thousands. Sales growth in these stores is 178%.
  We look forward to the years ahead when we expect significant financial upside and improved performance for both franchisees and the Group from these converted stores.

– Price perception

• Our price checks show that Pick n Pay continues to offer customers exceptional value. Given the high standards of our stores, this is challenging to communicate to our customers.
  We will continue to ensure that we offer a better shopping experience at no extra cost.

– Supply chain

• Implementation of our supply chain strategy is progressing well with the extension to the Longmeadow distribution centre in Johannesburg due to be complete by June 2010. This will allow for over 1.2 million cases to be distributed per week to our inland stores, representing 60% of dry grocery volume. Longmeadow showed a significant improvement in performance during the year, increasing volumes by 57% and reducing the cost per case by 15%.
  Plans are now being finalised for the rollout of a further 5 national distribution centres over the next 3 years.

– SAP

• We have now completed our SAP implementation in all corporate stores with only franchise stores in the northern part of the country to be converted by August 2010. Once completed, SAP will provide a platform to reap significant efficiency improvements.

– Inland region

• The consolidation of our 3 northern regions into one team will be complete by August 2010. This will greatly improve our efficiency, particularly in administration and buying, whilst delivering a consistent pricing and merchandising strategy across the northern part of the country.

– GNFR

• We have embarked on many initiatives to drive cost out of the business, including the setting up of a central Goods Not For Resale (GNFR) division. GNFR will now procure nationally all those goods and services that the Company purchases and utilises that are not for resale in our stores.

– Expense control

• We have launched “Project fitness” to reduce costs within our business. This will involve streamlining all processes and resources to ensure that we operate at optimum efficiency.

- Investment in people

• As we transform our business we reassess internal capabilities and, where necessary, we will bring in external help and expertise. We have also identified, especially at store level, where we require intensified training to deliver the quality of service our customers demand.

– Energy

• Operating sustainably is a priority within the business: We have embarked on several energy saving projects.

– Business
   development

• We continue with social development initiatives. Our transformation of business now shows more than 120 black franchise owners and we continue our support of small entrepreneurial BEE projects.

– Recycling

• Importantly we play a role in helping our customers live sustainably, for example, we are putting recycling bins in all our stores.

For more information on sustainability refer to the Sustainability Report

 Nick Badminton
Chief Executive Officer