Governance reports

Corporate governance – Pick n Pay Stores Limited

A summary of major risks and mitigation strategies is presented in the table below:

Strategic and market risk

Risk Risk mitigation
Brand and reputation The Group operates within a governance philosophy that seeks to protect and enhance our brands and reputation. A core to this philosophy is built upon the continued maintenance of ethical business practices and the highest level of integrity. Recent enhancements to the Pick n Pay brand have been achieved through the new fresh Pick n Pay logos, the relaunch of private label brands, the continuous improvement of the quality of fresh foods and the Pick n Pay Express stores initiative in partnership with BP. We are aware of the constant need to differentiate the brands from competitors in terms of service offering and product range and this remains a key focus area.
Competition The Group continuously monitors market trends and sets its strategy accordingly to ensure that Pick n Pay remains the market leader. Two main pillars of Group strategy is to defend and grow LSM 8-10 and bring Pick n Pay to LSM 4-7. The former has been achieved by listening to our customers and providing quality products and services at affordable prices. The latter has been achieved by the conversion of Score stores into black owned Pick n Pay franchise stores and the opening of further stores in that market, both of which have allowed us to increase our share of the LSM 4-7 market. Boxer is also becoming a major player in that market.
   
Financial risk  
Risk Risk mitigation
Volatility of profit margins Market conditions and its effect on profitability are continuously reviewed by management and the Board. At all times, in an increasingly competitive marketplace, the drive for unit sales growth and cost efficiencies are the primary drivers to protect profit margins. The former is driven by a focus of striving for high levels of customer satisfaction.
Going concern The going concern of the Group is reviewed by the Board at least twice a year and includes a review of adequate levels of capital to continue operations and implement strategy.
Liquidity and credit risk The Group’s balance sheet is categorised by high levels of liquidity and a low debt ratio, supported by high levels of cash generation. Increasing credit risk as result of an expanding franchise division is closely monitored and, where appropriate, remedial action taken. The Group’s working capital liquidity is supported by committed banking facilities.
   
Operational risk  
Risk Risk mitigation
Product quality and third-party liability Product safety and quality is carefully scrutinised by our internal quality control and food safety technicians. Where any indications exist of a product flaw, the product is immediately uplifted and returned to the supplier. Merchandise is purchased from reputable suppliers and house brand’s safety and quality is carefully scrutinised by food safety technicians. Appropriate levels of insurance are in place.
Safeguarding of assets Group assets are insured against loss and business continuity plans are in place, where required. Surveillance cameras in place which are monitored to ensure the safeguarding of assets.
Supply chain Pick n Pay places much emphasis on forging good relationships with suppliers to ensure that the partnership is mutually beneficial to both parties. Electronic Data Interchange has recently been put in place to improve delivery and communication levels between Pick n Pay and suppliers. Central distribution has been embarked upon via Longmeadow to improve lead times and product quality, which falls in line with our longer-term strategy of moving towards regional central distribution.
Sustainable food supply The Group is well aware of the effects of climate change on food supply and supports initiatives that promote sustainable food supply. Examples of this are our involvement with South African Sustainable Seafood Initiative and our extensive involvement in farming enterprise development.
   
Legislative risk  
Risk Risk mitigation
Compliance with legislation Pick n Pay has an in-house compliance officer to monitor and assess impacts of legislation on the business. This department makes use of external specialists where necessary. Each region has a risk and compliance manager whose responsibility it is to ensure compliance with current and impending legislation.

 

Code of conduct

The Group has endorsed a comprehensive code of conduct founded on the highest levels of honesty, integrity and respect. All employees are expected to comply with the code at all times. The Board confirms that systems and procedures have been implemented to entrench the values and ethics laid down in the code of conduct, and to monitor compliance with the code.

All new staff members receive training on the code of conduct at induction. These values are continuously instilled through ongoing communication and training. A function of the Human Resources division is to monitor compliance with the code across the Group, to follow up complaints, to review disciplinary measures and the outcomes thereof, and to ensure the consistent application of disciplinary measures.

Further information on our code is available on our website.

Dealing in Group company shares

All dealings in Pick n Pay Holdings Limited and Pick n Pay Stores Limited shares by both Company and subsidiary company directors (where required by the JSE) and the Company Secretary are reported on the JSE Limited Securities Exchange News Service (SENS) within 48 hours of the trade having been made. Before these trades are entered into they must be preapproved by duly authorised directors of the company concerned.

In addition to the above JSE regulated approval process, all sales of Pick n Pay Group shares must be approved internally as follows:

  • The Chairman, by the lead non-executive director.
  • The CEO and other directors of the Board, by the Chairman.
  • Exco members, by the Chairman and the CEO.
  • Management board members and other senior executives, by the CEO and Head of Human Resources, respectively.

All employees and Group entities are not permitted to trade in the Group’s which start at the close of business on the last day of each financial reporting period and end with the publication of the respective result on SENS.

Party political support

While it is our policy to support social initiatives across party lines, we do not support any individual political party, financially or otherwise.

Directors’ attendance at board meetings
          AGM
Director 21 April 2009 12 June 2009 20 Oct 2009 22 Feb 2010 12 June 2009
RD Ackerman (Chairman to 1 March 2010) P P P P P
GM Ackerman (Chairman from 1 March 2010) P P P P P
NP Badminton (CEO) P P P P P
W Ackerman P P P P P
DG Cope (CFO) P P P P P
HS Herman P P P P P
C Nkosi P P P P P
D Robins P P P P P
BJ van der Ross P P P P P
RSJ van Rensburg (appointed 30 June 2009) — — P P —
J van Rooyen P P P P P
P = Present          

 

Aspects of King III under review

Over the next financial year the Board will consider application of the following King III proposals:

  • Whether the Board’s performance will be evaluated independently.
  • The disclosure of the remuneration of the top 3 executives from 1 March 2010 (other than directors) in the Remuneration report.
  • Whether independent assurance of the sustainability report is required.
  • Whether internal audit will be the subject of an independent quality review. However we do perform an internal quality self-assessment using a toolkit developed by the Institute of Internal Auditors.

 

 

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