Notes to the annual financial statements

Pick n Pay Stores Limited
 
     
 
18.   Discontinued operations            
18.1   InterFrank Group Holdings Pty Limited (Franklins)           
  In July 2010, subject to approval by the Australian competition regulator, the Australian Competition and Consumer Commission (ACCC), we accepted an offer from Metcash Trading Limited (Metcash) to acquire our Australian operation, Franklins, for AUD215 million. The ACCC reviewed the proposed transaction under its informal merger clearance process and opposed the sale to Metcash on the basis that it believes the sale is likely to lead to substantial lessening of competition in the market for the wholesale supply of groceries to independent retailers in New South Wales.
Following the ACCC’s decision, the parties announced that they proposed to proceed with the transaction and this led the ACCC to commence legal proceedings in the Federal Court of Australia in December 2010, seeking to prevent the parties from completing the transaction. We and Metcash agreed with the ACCC to an expedited hearing, which commenced in mid-March 2011. We believe the ACCC’s assessment of the likely competitive effects of the transaction is flawed and together with Metcash, have vigorously defended the proceedings. The judgement of the Court is expected before 30 June 2011.
Should the Federal Court of Australia prevent the acquisition by Metcash, we remain committed to the sale of Franklins and anticipate selling the Franklins stores, either individually or in groups, under a competitive tender process.
Franklins has been presented as a discontinued operation at 28 February 2011 and the comparative information has been restated accordingly. 
      GROUP
      2011  
Rm  		     2010*
Rm  
  The salient financial information of the discontinued operation is as follows:            
  Statement of comprehensive income            
  Revenue     5 617.4       5 673.3  
  Turnover     5 613.0       5 666.0  
  Trading expenses     1 281.6       1 319.8  
  Loss on sale of equipment and vehicles     (7.0)      (5.6) 
  Trading (loss)/profit for the year     (123.2)      14.4  
  Interest received     4.4       7.3  
  (Loss)/profit for the year after tax     (123.4)      16.3  
  Statement of financial position            
  Non-current assets     1 428.9       1 246.3  
  Equipment and vehicles (note 9)    528.3       396.8  
  Goodwill (note 8)    744.8       700.3  
  Software development (note 8)    34.6       36.9  
  Land and buildings (note 9)    99.9       92.2  
  Deferred tax asset (note 14)    21.3       20.1  
  Current assets     691.2       809.2  
  Trade and other receivables     45.4       48.9  
  Inventory     530.2       512.7  
  Cash and cash equivalents     115.6       247.6  
  Total assets (2011 – held for sale)    2 120.1       2 055.5  
  Equity            
  Capital and reserves     1 293.5       1 080.3  
  Current liabilities (2011 – held for sale)           
  Trade and other payables     826.6       975.2  
  Total equity and liabilities     2 120.1       2 055.5  
  Cash flow statement            
  Net cash from operating activities     13.9       149.8  
  Net cash utilised in investing activities     (151.4)      (174.0) 
  Net cash from/(utilised in) financing activities     10.0       (9.9) 
  Goodwill of R744.8 million is considered fully recoverable through the sale of the business to Metcash. The selling price of AUD215 million exceeds the current fair value of Franklins’ net assets.            
  The Group remains confident that the Court will allow the sale to Metcash to proceed. However, should the transaction be blocked, the Group will find alternative buyers for its Franklins Stores.            
18.2   Score Supermarkets Operating Limited            
  The Group closed the store operations of its subsidiary, Score Supermarkets Operating Limited. The closure was complete at 28 February 2010.            
  The salient financial information of the discontinued operation is as follows:            
  Statement of comprehensive income            
  Revenue     —       580.9  
  Turnover     —       579.8  
  Trading expenses     —       (238.1) 
  Loss on sale of equipment and vehicles     —       (1.3) 
  Trading loss for the year     —       (107.1) 
  Interest received     —       1.1  
  Tax     —       (1.5) 
  Loss for the year after tax     —       (107.5) 
  Loss from operations     —       (104.5) 
  Losses recognised on the remeasurement of the carrying value of assets     —       (3.0) 
  Statement of financial position            
  Non-current assets            
  Operating lease asset     —       14.5  
  Current assets            
  Trade and other receivables     —       15.7  
  Total assets     —       30.2  
  Equity            
  Capital and reserves     —       (119.8) 
  Non-current liabilities            
  Operating lease liability     —       45.9  
  Current liabilities     —       104.1  
  Bank overdraft     —       46.9  
  Trade and other payables     —       57.9  
  Tax     —       (0.7) 
  Total equity and liabilities     —       30.2  
  Cash flow statement            
  Net cash utilised in operating activities     —       (212.7) 
  Net cash from investing activities     —       56.8  
  Net cash from financing activities     —       —  
 
* In 2010, references to discontinued operations include both Franklins (18.1) and Score (18.2) and relevant amounts need to be added together to agree to disclosures within the financial statements.
 
 

 

  
 
Integrated Annual Report 2011|www.picknpay.co.za