Our six capitals
Our ability to create long-term sustainable value for stakeholders
depends on the use of various capitals within our business. The
International Integrated Reporting
Financial
Human
Manufactured
Social and relationship
Intellectual
Natural
Our key stakeholders
The Group is committed to open and constructive engagement with all our stakeholders. Our business model and strategy are designed to consider and address the issues and concerns most relevant to our key stakeholders. Refer to the "Engaging with our stakeholders" section on pages 38 to 41 for more information.
Customers
Community
Employees
Suppliers
Franchisees
Shareholders
Our business acceleration pillars
The second stage of our strategic long-term plan is organised around seven business acceleration pillars. These pillars represent the material growth opportunities that can materially affect our ability to create value over the short, medium and long term. Refer to our "Strategic focus" section on pages 44 to 51 for more information.
Better for customers
A flexible and winning estate
Efficient and effective operations
Every product, every day
A winning team
Boxer–
a national brand
Rest of Africa – a second engine of growth
The summarised financial result is presented on a restated and normalised basis.
As per annual financial statements 25 February 2018 Rm |
% of turnover |
% change |
Normalised 26 February 2017 Rm |
% of turnover |
|||
Revenue | 83 504.8 | 5.5 | 79 134.6 | ||||
---|---|---|---|---|---|---|---|
Turnover
TurnoverTurnover growth of 5.3%, with like-for-like growth of 2.2%, reflects the tough trading environment over the year and substantially lower levels of inflation. |
81 560.1 | 5.3 | 77 486.1 | ||||
Cost of merchandise sold | (66 309.8) | 5.2 | (63 029.5) | ||||
Gross profit
Gross profitGreater price competitiveness was achieved without any sacrifice in margin through a combination of better buying and strong cost discipline. |
15 250.3 | 18.7 | 5.5 | 14 456.6 | 18.7 | ||
Other trading income
Other trading incomeOther trading income includes income from value-added services, which grew 30.1% year on year. |
1 760.6 | 2.2 | 15.6 | 1 522.4 | 2.0 | ||
Franchise fee income | 400.1 | 0.5 | 14.4 | 349.8 | 0.5 | ||
Operating lease income | 446.1 | 0.6 | 29.2 | 345.3 | 0.4 | ||
Commissions, dividends received and other income | 914.4 | 1.1 | 10.5 | 827.3 | 1.1 | ||
Trading expenses | (15 191.0) | 18.6 | 6.7 | (14 243.4) | 18.4 | ||
Employee costs
Employee costsExcluding the cost of the VSP of R250.0 million, employee costs grew just 0.4% year-on-year, falling to 7.9% of turnover (FY17: 8.3%). |
(6 688.7) | 8.2 | 4.3 | (6 414.0) | 8.3 | ||
Occupancy
Occupancy costsOccupancy costs up 7.2% on a like-for-like basis, driven by above-inflation increases in rates and security costs, and the ongoing addition of strategic head leases to protect the tenancy of key franchise sites. |
(3 086.6) | 3.8 | 15.2 | (2 678.9) | 3.5 | ||
Operations | (3 178.8) | 3.9 | 7.3 | (2 961.7) | 3.8 | ||
Merchandising and administration | (2 236.9) | 2.7 | 2.2 | (2 188.8) | 2.8 | ||
Trading profit
Trading profitTrading profit margin unchanged at 2.2%. Excluding the once-off cost of the VSP, trading profit margin improved to 2.5%, an indication of the Group’s sustainable profit performance. |
1 819.9 | 2.2 | 4.9 | 1 735.6 | 2.2 | ||
Finance income | 184.1 | 0.2 | 46.0 | 126.1 | 0.2 | ||
Finance costs
Finance costsThe Group’s investment in capital programmes has resulted in increased gearing over the year and an increased interest bill. |
(331.2) | 0.4 | 51.5 | (218.6) | 0.3 | ||
Share of associate's income | 116.3 | 0.1 | 45.0 | 80.2 | 0.1 | ||
Profit before tax before capital items | 1 789.1 | 2.2 | 3.8 | 1 723.3 | 2.2 | ||
Losses on capital items | (21.0) | (46.3) | |||||
Profit before tax | 1 768.1 | 2.2 | 5.4 | 1 677.0 | 2.2 | ||
Tax | (471.8) | 0.6 | 2.3 | (461.0) | 0.6 | ||
Profit for the period | 1 296.3 | 1.6 | 6.6 | 1 216.0 | 1.6 |
Cents | % change | Cents | ||||
Earnings per share | ||||||
Basic | 273.64 | 9.0 | 250.98 | |||
Diluted | 268.33 | 9.7 | 244.65 | |||
Headline | 276.98 | 7.1 | 258.65 | |||
Diluted headline | 271.61 | 7.7 | 252.13 |
The Group eliminated its pyramid control structure in the prior year through the unbundling of the Pick n Pay Holdings Limited RF Group. The simplified Group structure is more cost-effective in administration and improves the Group’s appeal to investors.
The unbundling transaction had no impact on trading profit or headline earnings last year; however, it resulted in a number of material non-recurring movements on certain individual categories of other trading income and trading expenses, as detailed below:
Normalised 26 February 2017 Rm |
% of turnover |
Non-recurring items 26 February 2017 Rm |
As per annual financial statements 26 February 2017 Rm |
||
Revenue | 79 134.6 | (412.3) | 79 546.9 | ||
Turnover | 77 486.1 | – | 77 486.1 | ||
Cost of merchandise sold | (63 029.5) | – | (63 029.5) | ||
Gross profit | 14 456.6 | 18.7 | 14 456.6 | ||
Other trading income | 1 522.4 | 2.0 | (412.3) | 1 934.7 | |
Dividend in specie | – | (412.3) | 412.3 | ||
Franchise fee income | 349.8 | 0.5 | – | 349.8 | |
Operating lease income | 345.3 | 0.4 | – | 345.3 | |
Commissions, dividends received and other income | 827.3 | 1.1 | – | 827.3 | |
Trading expenses | (14 243.4) | 18.4 | 412.3 | (14 655.7) | |
Employee costs | (6 414.0) | 8.3 | 205.8 | (6 619.8) | |
Occupancy | (2 678.9) | 3.5 | – | (2 678.9) | |
Operations | (2 961.7) | 3.8 | – | (2 961.7) | |
Merchandising and administration | (2 188.8) | 2.8 | 206.5 | (2 395.3) | |
Trading profit | 1 735.6 | 2.2 | – | 1 735.6 |
Other trading income – included a dividend in specie of R412.3 million, representing the value of the Pick n Pay Stores Limited shares (now held as treasury shares) received by the Group on the unbundling of Pick n Pay Holdings Limited RF (PWK).
Employee costs – the Group operates an employee share incentive scheme where eligible employees were granted share options in PWK. These share options were cancelled and replaced with Pick n Pay Stores Limited share options, in terms of the shareholder approval received at the general meeting held on 25 July 2016.
Employee costs included R205.8 million of share-based payment expenses related to the increase in the market value of PWK share options prior to the unbundling, as well as the cancellation and replacement cost of these options.
Merchandising and administration costs – included a net fair value loss of R206.5 million in respect of the Group’s investment in PWK. This fair value movement was as a result of the increased market value of PWK shares prior to the unbundling, and the subsequent write-off of the investment on the receipt of the dividend in specie distribution.