RESULT OVERVIEW – CONTINUING OPERATIONS

We are pleased with this result considering the current economic climate and the tightening of consumer spending.  Consumers have been particularly hard hit by high food inflation, erratic fuel prices and high interest rates.

As disclosed more fully in note 8 below, the results of Score Supermarkets have been disclosed as a discontinued operation as we are winding down the business and sub-letting many of its sites to black franchisees as Pick n Pay Family stores.

Turnover
Group turnover at R49.9 billion is 17.4% above last year, with a growth of 17.3% in the Southern Africa and 18.2% in Australia.  The Franklins increase in Australian Dollars is 3.5%.   

Trading profit
Trading profit margin is down from 3.6% to 3.4%. This is as a result of significant price investment to help consumers (gross profit margin down 0.4% to 19.0%) The effect is cushioned by a reduction in expenses of 0.2% of turnover.

Interest
Interest received increased over last year due to average interest rates and better average cash balances.  Interest paid was also up on last year due to the R500 million term loan drawn down in June 2007 owing for a full year. 

Headline earnings per share (“HEPS”) and diluted HEPS
HEPS at 232.48 cents reflects an increase of 13.4%. Diluted HEPS shows an increase of 18.1% as last year’s base already allowed for the full dilution of the 20 million new ordinary shares issued on 31 December 2007.

Dividends per share
The final dividend per share of 134.25 cents for Pick n Pay Stores Limited and 65.52 cents for Pick n Pay Holdings Limited brings the total dividend for the year to 170.00 cents and 82.97 cents respectively, an increase of 14.0%.  

OPERATIONAL HIGHLIGHTS

• Franklins Australia saw a substantial turnaround with a swing of R52.0 million to a R23.5 million trading profit before capital profits in the current year. The key drivers to this significant improvement are further increased operating efficiencies and double digit turnover growth from refurbished stores.
  The success of the 11 fully refurbished stores in the current year is not only producing good turnover growth and increased profitability but is also starting to open doors with landlords for prospective new stores. During the 2010 financial year we will complete another 14 store refurbishments.
  We are delighted by the outstanding turnaround achieved by Franklins which has now established a solid foundation for long term growth in Australia.
• Hypermarkets traded strongly, especially in the new format and refurbished stores.
• Supermarkets continue to show robust turnover growth, particularly from our new look refurbished stores such as Claremont, Benmore and Bedfordview. Based on this positive uplift in turnover from the 23 supermarkets (11 corporate, 12 franchise) refurbished in the current year, we will be expanding our ‘new look’ refurbishment programme in the year ahead to another 54 stores (21 corporate, 33 franchise).
• Pick n Pay Retail strategy implementation continues to deliver according to plan
  - We have seen great customer acceptance of:

• New Hypermarket (Woodmead) and Supermarket (Claremont, Benmore and Bedfordview) branding and “look and feel”.
• Re-launched private label products.
• New store fresh foods initiatives.
• Pick n Pay Express forecourt stores.
• Converted Score stores.

• Score conversions are on track with 38 complete, achieving substantially higher turnovers. Next year we plan to convert a further 29 stores. The only stores remaining to be converted in the 2011 financial year are a few in Botswana. 
• SAP implementation is 65% complete, with the remaining Pick n Pay regions to be completed in the next 18 months.
• Phase 1 of the Longmeadow Distribution Centre is now complete with all set-up costs fully absorbed.  The distribution centre now supplies all 263 inland stores. Phase II will expand the facility to accommodate central distribution, automatic replenishment and strategic buy-ins. This will commence during the 2010 financial year.
• Sustainability – We have implemented many new initiatives within the Group around energy saving, reducing our carbon footprint, and recycling. Sustainable practices are becoming a new way of life at Pick n Pay and we are confident that not only will it cultivate a more sustainable environment but will also lead to increased operating efficiencies. We continue to facilitate ways that customers can help the environment. As an example, we have recently launched an initiative to encourage customers to significantly reduce the use of plastic bags. 

• Boxer produced another very solid result with a significant increase in turnover and profit.
• New stores – we continue to expand our store footprint. Including Score store conversions we opened 67 new stores in the current year and plan to open a further 58 next year.

GENERAL COMMENTS AND PROSPECTS

Given the tough trading conditions and the investment phase we are in, we are pleased with this result. We remain optimistic for the year ahead due to our strategic investments now starting to bear fruit, the relief brought to consumers by lower interest rates and reducing inflation. We forecast improved growth in 2010 headline earnings per share over that achieved this year.  (This forecast financial information has not been reviewed and reported on by the Group’s independent auditors).

For and on behalf of the board