Notes to the financial information
for the period ended 31 August 2014

1. BASIS OF PREPARATION AND ACCOUNTING POLICIES

The condensed consolidated interim financial statements are prepared in accordance with International Financial Reporting Standards, IAS 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards Council and the requirements of the Companies Act of South Africa. The accounting policies applied in the preparation of these interim financial statements are in terms of International Financial Reporting Standards and are consistent with those applied in the financial statements for the 52 weeks ended 2 March 2014. These interim financial statements have been prepared by the Finance Division under the supervision of the Chief Financial Officer, Mr Bakar Jakoet CA(SA), and have not been audited or reviewed by the Group's external auditors, KPMG Inc.

2.	RELATED-PARTY TRANSACTIONS
	During the period, certain companies within the Group entered into transactions with each other. These intra-group transactions are eliminated on consolidation. Related parties are unchanged from those reported at 2 March 2014. For further information please refer to note 27 of the 2014 Group financial statements and note 8 of the 2014 Company financial statements.

3.	SHARE CAPITAL
		Unaudited 26 weeks to 31 August 2014 Rm	Unaudited 26 weeks to 1 September 2013 Rm	Audited 52 weeks to 2 March 2014 Rm
	Authorised
	800 000 000 (2013: 800 000 000) ordinary shares	10.0	10.0	10.0
	of 1.25 cents each
	Issued
	527 249 082 (2013: 527 249 082) ordinary shares
	of 1.25 cents each	6.6	6.6	6.6

	26 362 454 of the unissued shares of the Company may be utilised, and is available, to settle the Company's obligations under the employee share schemes.

	The holders of ordinary shares are entitled to receive dividends as declared and are entitled to one vote per share at meetings of the Company.

4. OPERATING Segments

Unaudited

South
Africa
Rm

Rest of
Africa
Rm

Total
operations
Rm

2014

Total segment revenue

31 030.1

1 732.4

32 762.5

External revenue

31 030.1

1 422.5

32 452.6

Direct deliveries*

–

309.9

Segment external turnover

30 688.1

1 422.5

32 110.6

Segmental profit**

230.8

135.1

365.9

Other information

Statement of comprehensive income

Interest received

23.5

2.5

26.0

Interest paid

(59.9)

–

(59.9)

Depreciation and amortisation

416.3

11.0

427.3

Share of associate's income

–

11.1

Statement of financial position

Total assets

12 853.1

1 019.0

13 872.1

Total liabilities

11 014.5

321.2

11 335.7

2013

Total segment revenue

29 046.9

1 506.1

30 553.0

External revenue

29 046.9

1 231.1

30 278.0

Direct deliveries*

–

275.0

Segment external turnover

28 836.5

1 231.1

30 067.6

Segmental profit**

176.8

94.5

271.3

Other information

Statement of comprehensive income

Interest received

19.1

0.1

19.2

Interest paid

73.8

0.3

74.1

Depreciation and amortisation

469.2

9.6

478.8

Share of associate's income

–

14.4

Statement of financial position

Total assets

12 299.7

924.5

13 224.2

Total liabilities

10 388.9

533.4

10 922.3

Direct deliveries are issues to franchisees directly by Group suppliers facilitated through the Group's supply chain, these are not included in revenue on the statement of comprehensive income

Segmental profit is the reported measure used for evaluating the Group's operating segments performance. On an overall basis the segmental profit is equal to the Group's reported profit before tax. The Rest of Africa segment's segmental profit comprises the segment's trading result and directly attributable costs only. No allocations are made for indirect or incremental cost incurred by the South Africa segment relating to the Rest of Africa segment.

5.	BASIC, HEADLINE AND DILUTED EARNINGS PER SHARE
			Unaudited 26 weeks to 31 August 2014 Cents per share	Unaudited 26 weeks to 1 September 2013 Cents per share	Audited 52 weeks to 2 March 2014 Cents per share
		Basic	26.72	19.86	60.61
		Diluted basic	25.79	19.50	59.10
		Headline	26.51	20.24	68.83
		Diluted headline	25.59	19.88	67.13

			Rm	Rm	Rm
	5.1	Basic and headline earnings
		Reconciliation between basic and headline earnings:
		Basic earnings (profit for the period)	137.9	102.8	312.9
		Adjustments:	(1.1)	2.0	42.5
		(Profit)/loss on sale of property, plant and equipment	(1.6)	2.8	3.0
		Tax effect of profit/(loss) on sale of property, plant and equipment	0.5	(0.8)	(0.8)
		Impairment of intangible assets	–	–	56.0
		Tax effect of impairment of intangible assets	–	–	(15.7)

		Headline earnings	136.8	104.8	355.4
		Basic earnings (profit for the period)	137.9	102.8	312.9
		Dilutive effect of share options	(3.2)	(1.2)	(4.7)
		Diluted basic earnings	134.7	101.6	308.2
		Headline earnings	136.8	104.8	355.4
		Dilutive effect of share options	(3.2)	(1.2)	(5.3)
		Diluted headline earnings	133.6	103.6	350.1

			000's	000's	000's
	5.2	Number of shares
		Weighted average number of ordinary shares in issue	516 170.7	517 564.5	516 247.1
		Diluted weighted average number of ordinary shares in issue	522 231.5	520 970.6	521 495.3
		Number of shares in issue	527 249.1	527 249.1	527 249.1

6.	RECLASSIFICATIONS
	6.1	Other trading income
		In line with the reclassification done during the 52 weeks ended 2 March 2014, trading income of R82.7 million previously included under cost of merchandise sold has been reclassified and disclosed separately. This has been done to improve visibility of all other trading income, specifically commissions received. The prior period has been restated to align with current year disclosures.

			Unaudited 26 weeks to 31 August 2014 Rm	Unaudited 26 weeks to 1 September 2013 Rm	Adjustment Rm	Unaudited 26 weeks to 1 September 2013 As previously stated Rm

		Gross profit	5 685.9	5 373.8	(82.7)	5 456.5
		Other trading income	316.0	273.9	82.7	191.2


	6.2	Trading expenses
		The Group completed the centralisation of its buying, operational and finance support functions during the previous year. As a result the Group reviewed all allocations of trading expenses in the statement of comprehensive income for the 52 weeks ended 2 March 2014 to ensure that it accurately reflected the new operating costs structures within the Group. Trading expenses presented for the 26 weeks ended 1 September 2013 have been adjusted in line with the full-period classifications. This reclassification had no impact on information presented for prior financial period-ends as the centralised operating structures and related cost implications have not been in effect during those periods.
			Unaudited 26 weeks to 31 August 2014 Rm	Unaudited 26 weeks to 1 September 2013 Rm	Adjustment Rm	Unaudited 26 weeks to 1 September 2013 As previously stated Rm
		Trading expenses	(5 616.2)	(5 330.7)	–	(5 330.7)
		Employee costs	(2 818.6)	(2 677.9)	–	(2 677.9)
		Occupancy	(897.0)	(794.3)	75.3	(869.6)
		Operations	(1 281.2)	(1 282.0)	(108.9)	(1 173.1)
		Merchandising and administration	(619.4)	(576.5)	33.6	(610.1)


	6.3	Provisions
		In line with the reclassification done for the 52 weeks ended 2 March 2014 and in order to improve disclosure, provisions previously included under trade and other payables during the 26 weeks ended 1 September 2013 are now presented separately on the face of the statement of financial position and the related adjustments made to the statement of cash flows.


6.4	Operating segments
	Total segment revenue – Rest of Africa
	In line with reclassifications for the 52 weeks ended 2 March 2014, inter-segment revenue previously disclosed of R90.1 million has been removed as this was actual intra-segment revenue between businesses within the rest of Africa segment.
		Unaudited 26 weeks to 31 August 2014 Rm	Unaudited 26 weeks to 1 September 2013 Rm	Adjustment Rm	Unaudited 26 weeks to 1 September 2013 As previously stated Rm
	Total segment revenue – Rest of Africa	1 732.4	1 506.1	(90.1)	1 596.2
	External revenue	1 422.5	1 231.1	–	1 231.1
	Direct deliveries	309.9	275.0	–	275.0
	Inter-segment revenue	–	–	(90.1)	90.1

	Segment external turnover
	Segment external turnover presented previously inappropriately included direct deliveries of R275 million under the Rest of Africa segment. This was not included in the total external turnover and therefore resulted in the South Africa segment external turnover being understated by R275 million. In line with reclassifications for the 52 weeks ended 2 March 2014, the prior year segment external turnover has been restated to reflect the correct segmentation between the Rest of Africa and South Africa.
		Unaudited 26 weeks to 31 August 2014 Rm	Unaudited 26 weeks to 1 September 2013 Rm	Adjustment Rm	Unaudited 26 weeks to 1 September 2013 As previously stated Rm
	Total segment external turnover	32 110.6	30 067.6	–	30 067.6
	South Africa	30 688.1	28 836.5	275.0	28 561.5
	Rest of Africa	1 422.5	1 231.1	(275.0)	1 506.1


	Segmental profit
	Segmental profit previously included internal administration fees between South Africa and Rest of Africa of R29.4 million. This was not eliminated and therefore resulted in an overstatement of segmental profit under South Africa and an understatement of segmental profit under Rest of Africa. The prior year segmental profit has been restated to reflect the correct segmentation between South Africa and Rest of Africa. No such reclassification was required for the 52 weeks ended 2 March 2014.
		Unaudited 26 weeks to 31 August 2014 Rm	Unaudited 26 weeks to 1 September 2013 Rm	Adjustment Rm	Unaudited 26 weeks to 1 September 2013 As previously stated Rm
	Total segmental profit	261.0	271.3	–	271.3
	South Africa	125.9	176.8	(29.4)	206.2
	Rest of Africa	135.1	94.5	29.4	65.1

	Total assets
	Total assets for the Rest of Africa presented previously excluded the Group's investment in its associate, TM Supermarkets, and therefore resulted in the Rest of Africa segment total assets being understated by R148.3 million. The prior year total assets have been restated to reflect the correct segmentation between South Africa and Rest of Africa. No such reclassification was required during the 52 weeks ending 2 March 2014.
		Unaudited 26 weeks to 31 August 2014 Rm	Unaudited 26 weeks to 1 September 2013 Rm	Adjustment Rm	Unaudited 26 weeks to 1 September 2013 As previously stated Rm
	Total assets	13 872.1	13 224.2	–	13 224.2
	South Africa	12 853.1	12 299.7	(148.3)	12 448.0
	Rest of Africa	1 019.0	924.5	148.3	776.2

7. FINANCIAL INSTRUMENTS

All financial instruments held by the Group are measured at amortised cost, with the exception of derivative financial instruments and certain items included in trade and other payables. The latter are measured at fair value through profit or loss, are categorised into level 2 of the fair value hierarchy and are considered to be immaterial. Level 2 is defined as using inputs other than quoted prices that are observable for the asset or liability either directly (prices) or indirectly (derived from prices). The carrying value of all financial instruments approximate their fair value.

8. ISSUE OF SHARES IN RESPECT OF FORFEITABLE SHARE PLAN

Pick n Pay Stores Limited issued 6 925 000 shares in June 2014, in order to meet the share obligations under its new employee forfeitable share plan (FSP), which was approved by shareholders in February 2014. The FSP brings our approach to providing share incentives in line with international best practice, further aligning the interests of senior management with those of our shareholders.

The shares were awarded to FSP participants during August 2014. The participants, although benefiting from full voting rights and full rights to any dividends declared, cannot dispose of their shares during a three-year employment period. In addition, the shares are subject to further performance conditions linked to the Pick n Pay Stores Limited Group's compound annual growth in headline earnings per share. Should the employment condition or performance conditions not be met, the shares (or a portion thereof) are forfeited. Please refer to our 2014 integrated annual report for further information.

The total employee cost in respect of the FSP is recognised on a straight-line basis over the employment period, commencing on the award date. The current period expense is not material.

Notes to the financial information for the period ended 31 August 2014

1.

BASIS OF PREPARATION AND ACCOUNTING POLICIES

2.

RELATED-PARTY TRANSACTIONS

3.

SHARE CAPITAL

Authorised

Issued

4.

OPERATING Segments

Unaudited

2014

Total segment revenue

Segment external turnover

Segmental profit**

Other information

Statement of comprehensive income

Statement of financial position

2013

Total segment revenue

Segment external turnover

Segmental profit**

Other information

Statement of comprehensive income

Statement of financial position

5.

BASIC, HEADLINE AND DILUTED EARNINGS PER SHARE

5.1

Basic and headline earnings

Reconciliation between basic and headline earnings:

Basic earnings (profit for the period)

Headline earnings

Basic earnings (profit for the period)

Diluted basic earnings

Headline earnings

Diluted headline earnings

5.2

Number of shares

6.

RECLASSIFICATIONS

6.1

Other trading income

6.2

Trading expenses

6.3

Provisions

6.4

Operating segments

Segment external turnover

Segmental profit

Total assets

7.

FINANCIAL INSTRUMENTS

8.

ISSUE OF SHARES IN RESPECT OF FORFEITABLE SHARE PLAN

Notes to the financial information
for the period ended 31 August 2014