Pick n Pay Stores Group

Directors' report
for the period ended 2 March 2014

PICK N PAY STORES LIMITED AND ITS SUBSIDIARIES

Nature of business

The Company, which is domiciled and incorporated in the Republic of South Africa and listed on the JSE, the recognised securities exchange in South Africa, is an investment holding company. The Group comprises trading subsidiaries that retail food, groceries and general merchandise throughout southern Africa, both on an owned and franchise basis. The Group also acquires and develops strategic retail and distribution sites.

Overview of financial results and activities

The overviews of financial results and activities of the Group are contained in the Chief Finance Officer's report.

Audit committee

We draw your attention to the audit committee report where we set out the responsibilities of the committee and how it has discharged these responsibilities during the period.

Dividends declared

The directors have declared a final dividend (dividend 92) of 77.50 cents per share out of income reserves. The dividend is subject to dividend withholding tax at 15% where shareholders are subject to this tax. The last day to trade in order to participate in the dividend (CUM dividend) will be Friday, 6 June 2014. The shares will trade EX dividend from the commencement of business on Monday, 9 June 2014 and the record date will be Friday, 13 June 2014. The dividends will be paid on Tuesday, 17 June 2014. Refer to note 7 for a detailed analysis.

Share capital

The issued ordinary share capital remained unchanged during the period at 480 397 321 shares.

At period end, the Pick n Pay Employee Share Purchase Trust held 1 974 529 (2013: 2 046 597) shares in the Company and 9 193 760 (2013: 9 115 753) shares in Pick n Pay Holdings Limited RF and a subsidiary company held 1 848 703 (2013: 1 845 803) shares in Pick n Pay Holdings Limited RF, all of which are accounted for as treasury shares. These shares are held to meet obligations of options granted.

Going concern

These financial statements have been prepared on the going-concern basis.

The Board has performed a formal review of the Company and its subsidiaries’ ability to continue trading as going concerns in the foreseeable future and, based on this review, considers that the presentation of the financial statements on this basis is appropriate.

The Group ensures that it complies with the liquidity and solvency requirements for any dividend payment and provision of financial assistance as per the requirements of the Companies Act, 2008.

Competition Commission

In June 2009, the Competition Commission initiated an investigation into various practices of supermarket retailers, examining competition concerns relating to grocery retail, including buyer power, category management, information exchange and long-term lease agreements. The Group co-operated fully with the Competition Commission in providing all information requested. After investigation, the Competition Commission informed retailers that they wished to further examine long-term exclusive lease agreements. All other concerns were dismissed.

The Competition Commission conducted an investigation into whether or not long-term exclusive lease agreements, as entered into between landlords and Pick n Pay and other national retail chains, were anti-competitive.

In January 2014, the Competition Commission informed the Group that they had concluded that the investigation did not warrant referral to the Competition Tribunal for determination.

Accordingly, all matters under investigation in regard to supermarket retailers have been concluded with a notice of non-referral of complaint, confirming the Group’s belief that no anti-competitive behaviour existed.

Legal proceedings

The Company and its subsidiaries are not involved, and have not in the 2014 annual financial period been involved, in any legal or arbitration proceedings which may have or have had a material effect on the financial position of the Pick n Pay Group of Companies, nor is the Company aware of any such proceedings that are pending or threatened.

Special resolutions

On 25 June 2013 the Company’s shareholders approved the following special resolutions as tabled in the notice to the annual general meeting:

Directors’ fees for the 2014 annual financial period
Shareholders approved the directors’ fees.

Provision of financial assistance to related or inter-related companies and others
The shareholders resolved, in terms of the provisions of section 45 of the Companies Act, that the Company may from time to time provide direct or indirect financial assistance to any director, prescribed officer, related company, inter-related company or member of a related or inter-related company on such terms and conditions as determined by the Board.

General approval to repurchase Company shares
Shareholders resolved that the Company or any of its subsidiaries may acquire issued shares of the Company or its holding company, upon such terms and conditions and in such amounts as the directors of the Company may determine from time to time.

Acquisition of such shares is subject to the Memorandum of Incorporation of the Company, the provisions of the Companies Act, 2008, and the Listings Requirements of the JSE, provided further that acquisitions of shares in the Company by the Company and its subsidiaries may not, in the aggregate, exceed in any one financial year 5% of the Company’s issued share capital.

On 12 February 2014 the Company’s shareholders approved the following special resolution as tabled in the notice to the extraordinary general meeting:

Pick n Pay Limited Forfeitable Share Plan (FSP)
Shareholders approved the forfeitable share incentive plan for senior management of the Company. Until the date of this report, no shares have been issued under the FSP. Refer to page 61 of the remuneration report for more detail.

Directors and secretary

In terms of the Company’s Memorandum of Incorporation the directors listed below retire by rotation and they offer themselves for re-election.

Gareth Ackerman
Hugh Herman
Ben van der Ross

Information pertaining to the directors and the Company Secretary appear here.

Holding company

The holding company is Pick n Pay Holdings Limited RF (listed on the JSE).

Directors’ interest in shares

	2014   %	2013   %
Beneficial	0.9	1.0
Non-beneficial	27.5	27.5
Total	28.4	28.5

The directors’ interest in shares is their effective direct shareholding in the Company (excluding treasury shares) and their effective indirect shareholding through Pick n Pay Holdings Limited (excluding treasury shares). For further details refer to the remuneration report.

Subsidiary companies

Details of subsidiary companies are presented in note 5 of the Company financial statements.

Borrowings

The Group’s overall level of debt (including bank overdrafts and overnight borrowings) decreased from R2 729.6 million to R2 154.9 million.