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Shoprite Holdings Limited (Zambia) HY 2014 results
 

Shoprite Holdings Limited (Zambia) HY 2014 results

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Shoprite Holdings Limited (Zambia) HY 2014 results

Shoprite Holdings Limited (Zambia) HY 2014 results

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    Shoprite Holdings Limited (Zambia) HY 2014 results Shoprite Holdings Limited (Zambia) HY 2014 results Document Transcript

    • (Reg. No. 1936/007721/06) (ISIN: ZAE 000012084) (JSE Share code: SHP) (NSX Share code: SRH) (LuSE Share code: SHOPRITE) (“the Group”) RESULTS FOR THE 6 MONTHS ENDED DECEMBER 2013 Key information – Turnover increased 9.7% – from R46.572 billion to R51.090 billion. – Trading profit was up 7.5% to R2.690 billion. – Headline earnings per share rose 7.9% to 341.0 cents (2012: 315.9 cents). – Dividend per share declared was 132 cents (2012: 123 cents) an increase of 7.3%. Whitey Basson, chief executive, commented: In the six months to December 2013 the Shoprite Group grew total turnover by 9.7% to R51.090 billion in an e ­ nvironment which, within South Africa, has remained difficult. Our turnover was supported by the strong growth we achieved elsewhere in Africa. Despite the present challenging trading conditions locally we have continued our long term investment strategy in new stores adding more trading space to our portfolio than any of our c ­ ompetitors. Sales in December were negatively impacted by approximately R260 million in our decision to close all RSA stores on the 15th of that month, the day of the funeral of former President Nelson Mandela. We did so as a mark of respect at his passing and also out of recognition for the huge debt we owe him for creating a climate of dynamic growth which took Shoprite way beyond the borders of this country. 24 February 2014 Enquiries: Shoprite Holdings Limited Whitey Basson, chief executive Carel Goosen, deputy managing director De Kock Communications Ben de Kock Tel: (021) 980 4000 Tel: (021) 422 2690 Cell: 076 390 7725 1
    • OPERATING ENVIRONMENT The trading conditions prevalent in the corresponding period in 2012 persisted in the six months under review. Strikes in several sectors have become an entrenched part of the South African business landscape while violent protests over service delivery are on the increase countrywide. Unemployment hovered above the 24% mark, a situation exacerbated by the State’s lower levels of investment in infrastructure following the 2010 Soccer World Cup. Middle- and lower-income consumers, many of them overburdened with debt, are struggling to make ends meet due to spiralling increases in their living expenses and transport costs. The consequent lack of disposable income has a severe impact on the retail environment in which competition for the consumer’s rand has greatly intensified in the six months under review. COMMENTS ON THE RESULTS Statement of Comprehensive Income Total turnover Total turnover increased by 9.7% for the period – from R46.572 billion to R51.090 billion, boosted by the strong performance of the Group’s non-RSA operations. Expenses Depreciation and amortisation grew 8% to R688 million mainly due to the Group’s continued investment in new and refurbished stores and in information technology. Other expenses increased by 14.6% also due to the increased turnover and new stores opened as well as the escalation in electricity and other energy costs. The rise of 5.9% in employee benefits to R3.833 billion includes new staff appointed for the net 104 stores opened during the last 12 months. Trading margin The trading margin decreased slightly to 5.3% from 5.4% and reflects the effects of the slower growth in turnover as well as the high upfront costs associated with the new store openings. Exchange rate profits The Group recorded a small exchange rate profit of R4.3 million compared to a loss of R41.4 million in the c ­ orresponding period. This positive swing was mainly because the Group obtained approval from the Malawian authorities to reclassify short-term borrowings in Malawi into long-term borrowings during the second half of the previous financial year. Finance costs and interest received The increase in net interest paid resulted from the capital expenditure on new stores and information technology. The interest paid was partially offset by interest received from the investment of the surplus cash. Statement of Financial Position Property, plant and equipment and intangible assets The increase is due to the investment in a net 104 additional stores, vacant land purchased for strategic purposes, investment in information technology to support inventory management, distribution centre developments as well as normal asset replacements. Inventory The increase is due to the provisioning of a net 82 supermarkets and 23 furniture stores and purchases in a ­ nticipation of a weaker rand. Inventory levels were further affected by more subdued festive season trading than expected as well as store closures on the 15th of December. 2
    • OPERATIONAL REVIEW NUMBER OF OUTLETS DECEMBER 2013 YEAR TO DATE (12 MONTHS) SUPERMARKETS – SHOPRITE – CHECKERS – CHECKERS HYPER – USAVE HUNGRY LION FURNITURE – OK FURNITURE – HOUSE & HOME OK FRANCHISE TOTAL STORES DEC 12 929 443 170 29 287   165   327 276 51   400   1821 OPENED 88 38 14 1 35 CLOSED 6 2 2 0 2 11 12 29 29 0 6 2 4 31 54 159 78 DEC 13 1011 479 182 30 320   164   350 303 47   377   1902 CONFIRMED NEW STORES TO JUNE 2015 193 81 25 4 83 18 40 33 7 3 254 All the divisions operating within South Africa were affected by the prevailing economic conditions. Under the circumstances their results are satisfactory and were assisted by the Group’s well-managed infrastructure that remained relentlessly focused on reducing supply line costs. In December 2013 the Group operated in 16 countries compared to 17 in 2012 after ceasing operation in Zimbabwe. Despite the pressure on sales, the Group did not slow the pace of its store development programme thereby s ­ acrificing like-for-like growth through cannibalisation in the short term. In keeping with the Group’s strategy to utilise ­ pportunities within its reach, it opened 69 corporate stores in the reporting period. o Supermarkets RSA At a time when consumer confidence was at its lowest level in a decade, Supermarkets RSA increased turnover by 7.6% from R35.583 billion to R38.275 billion. This produced a trading profit of R2.185 billion which was 5.4% higher than in the corresponding period (2012: R2.073 billion). Internal food inflation during the six months a ­ veraged 3.8% compared to an official food inflation figure of 5.2%. On the day of the funeral of former President Nelson Mandela all RSA supermarket stores were closed as a mark of respect. An estimated R260 million was lost in sales which were not recovered, impacting turnover growth for the reporting period by 0.7%. Consumers’ lack of disposable income was particularly noticeable in the turnover growth in Shoprite, the Group’s core brand, which operates 382 supermarkets in South Africa having gained a net 19 outlets during the reporting period. Much of the chain’s focus has been on alleviating the plight of low-income consumers through support programmes such as a R20 million food subsidy campaign to confirm its positioning as the brand offering the lowest prices. It continued to be the haven for social grant recipients and the number of grants paid out in stores almost doubled. Both Checkers’ supermarkets and hyper stores saw slower growth off its high base and in an environment of intensified competition. Much work was done on improving product ranges and in-store experiences for c ­ ustomers. The focus continued to be on what is known as its “famous for” departments such as its Steakhouse Classic meats, local and international wines, speciality cheeses and Coffee Collection as part of its long term r ­epositioning strategy. The brand has been increasing its presence in the country through the opening of both supermarkets (now 177) and Hypers (now 30). Usave gained a net 16 new stores in the reporting period to bring its total number of outlets to 259. The brand continued to grow market share by maintaining its promise of offering the lowest prices in respect of its limited product range. Usave is increasingly establishing a loyal following of price-conscious consumers, especially in rural and semi-urban areas. 3
    • Supermarkets Non-RSA The Group’s non-RSA supermarkets continued their strong growth across the 15 countries in which it trades in Africa and on the islands in the Indian Ocean. Sales increased by 28.1% in rand terms, and by 14.9% in constant currencies. Growth was supported by the rand weakening more against the US dollar than did the currencies of some of the countries in which the Group trades. During the reporting period a net 10 new stores were opened with a further 13 confirmed to start ­rading by the end of the current financial year. The Group now operates 163 t supermarkets outside the borders of South Africa. Furniture Against the general trend the Furniture Division achieved an overall sales increase of 10.5%, due to strong growth in the dominant OK Furniture and smaller OK Power Express brands, both aimed at lower-income consumers. The growth was achieved notwithstanding deflation of 1.7% in major product categories and margins. Credit exposure was carefully monitored and arrears kept within acceptable levels. During the reporting period the total number of outlets increased to 350 reflecting a net gain of 14 stores. A further 20 are expected to start trading before the end of the current financial year. Other Operating Segments The OK Franchise division showed healthy turnover growth of 8.9% on existing business, but a lower total growth due to the withdrawal of two buying groups. After a period of consolidation following the acquisition of the Metcash franchise business of 148 stores two years ago, membership has stabilised at 377, with 339 of these in South Africa and 38 in Namibia. Since June 2013 the division has recruited 16 new members and is looking f ­orward to improved growth in the second half of the financial year. The Group’s pharmacy division consisting of MediRite, which at the end of the reporting period operated 150 pharmacies in Shoprite and Checkers stores, and Transpharm, a wholesale pharmaceutical company, continued to extend its presence in the health-care sector. MediRite increased sales by 18.2% in South Africa with the number ­ of prescriptions filled growing to 2.4 million. It will be opening eight pharmacies in Shoprite supermarkets in Angola in the near future to bring its number of outlets there to 11. Transpharm lost turnover due to a change in promotional strategy for independent pharmacies. This, however, increased profitability. Computicket was affected by general market conditions and the fact that the cost of major overseas shows had become prohibitively expensive for local promoters due to the weakening of the rand against the American dollar. To maintain its position as the country’s foremost ticketing business, Computicket is undertaking an extensive systems upgrade to create a state-of-the-art booking engine, which will greatly increase its agility in handling extreme peaks in ticket demand. GROUP PROSPECTS AND OUTLOOK The board does not expect any improvement in the trading environment within South Africa in 2014. At the same time our business outside the borders of the country continues to ­ lourish and a number of new stores are to come f on stream before year-end. Strict cost control measures are rigorously applied throughout the business while we are constantly refining our extensive distribution network which is a major strength of the Group. Against this background the board is confident that the Shoprite Group will be able to maintain its present level of profitability growth in the second half of the financial year. DIVIDEND NO 130 The board has declared an interim dividend of 132 cents (2013: 123 cents) per ordinary share, payable to shareholders on Monday, 24 March 2014. The dividend has been declared out of income reserves. The last day to trade cum dividend will be Thursday, 13 March 2014. As from Friday, 14 March 2014, all trading of Shoprite Holdings Ltd shares will take place ex dividend. The record date is Thursday, 20 March 2014. Share certificates may not be dematerialised or rematerialised between Friday, 14 March 2014, and Thursday, 20 March 2014, both days inclusive. 1. Local dividend tax rate is 15%. 2. There are no STC credits available. 3.  Net local dividend amount is 112.20 cents per share for shareholders liable to pay Dividends Tax and 132.00 cents per share for shareholders exempt from paying Dividends Tax. 4.  The issued share capital of Shoprite Holdings Ltd as at the date of this declaration is 570 579 460 ordinary shares; and 5. Shoprite Holdings Ltd’s tax reference number is 9775/112/71/8. 4
    • ACCOUNTABILITY The condensed consolidated interim financial statements are prepared in accordance with International Financial Reporting Standard, IAS 34: Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the 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 previous consolidated annual financial statements, with the exception of adopting the following new accounting standards: IFRS 10: Consolidated Financial Statements The objective of IFRS 10 is to establish principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. The Group has revised its accounting policies on the consolidation of subsidiaries and concluded that the adoption of IFRS 10 did not result in any material change in the consolidation of the Group. IFRS 11: Joint Arrangements IFRS 11 eliminates the previous policy choice of proportionate consolidation for jointly controlled entities. Equity accounting becomes mandatory for participants in joint ventures. Previously, the Group proportionately c ­onsolidated all joint ventures which entailed that it included its share of the assets, liabilities, income and e ­ xpenses of jointly controlled entities on a line-by-line basis in its financial statements. Under the equity method, the investment in joint ventures is initially recognised at cost and the carrying amount is increased or decreased to recognise the Group’s share of the profit or loss and movements in other comprehensive income of joint v ­ entures after the date of acquisition. The Group’s share of the profit or loss of joint ventures is recognised as a single line item in profit or loss under the equity method. The change from proportionate consolidation to equity accounting resulted in a change in individual asset, liability, income, expense and cash flow line items with no impact on equity or profit attributable to owners of the parent. The impact of the application of IFRS 11 on the Group’s results is disclosed in note 5. IFRS 13: Fair Value Measurement IFRS 13 aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRS. IFRS 13 was adopted and applied prospectively and it was assessed that the adoption did not result in any material impact on the f ­inancial results of the Group. The preparation of these results has been supervised by Mr M Bosman, CA(SA). There have been no material changes in the affairs or financial position of the Group and its subsidiaries from 31 December 2013 to the date of this report. The information contained in the interim report has neither been audited nor reviewed by the Group’s external auditors. By order of the board CH Wiese Chairman JW Basson Chief Executive Cape Town 24 February 2014 5
    • Condensed Consolidated Statement of Comprehensive Income % R’000 Sale of merchandise Cost of sales GROSS PROFIT Other operating income Depreciation and amortisation Operating leases Employee benefits Other expenses TRADING PROFIT Exchange rate gains/(losses) Items of a capital nature OPERATING PROFIT Interest received Finance costs Share of profit of associates and joint ventures PROFIT BEFORE INCOME TAX Income tax expense PROFIT FOR THE PERIOD Notes OTHER COMPREHENSIVE INCOME, NET OF INCOME TAX Items that may be reclassified subsequently to profit or loss Foreign currency translation differences change 9.70% 9.80% 9.31% 15.39% 8.01% 18.15% 5.94% 14.61% 7.46% -110.28% -127.04% 8.94% -10.92% 6.62% -56.93% 7.79% 9.42% 7.12% Unaudited Audited Unaudited and restated and restated 6 months 6 months for the year ended ended ended Dec ‘13 51 089 765 (40 675 090) 10 414 675 1 176 072 (688 067) (1 278 207) (3 832 833) (3 101 932) 2 689 708 4 254 (2 437) 2 691 525 119 177 (216 125) 3 779 2 598 356 (770 685) 1 827 671 Dec ‘12 46 572 295 (37 045 013) 9 527 282 1 019 239 (637 064) (1 081 861) (3 618 041) (2 706 491) 2 503 064 (41 376) 9 013 2 470 701 133 779 (202 706) 8 774 2 410 548 (704 309) 1 706 239 Jun ‘13+ 92 457 126 (73 156 023) 19 301 103 2 607 466 (1 335 722) (2 213 048) (7 145 301) (5 822 395) 5 392 103 (3 843) (30 882) 5 357 378 258 793 (429 967) 5 414 5 191 618 (1 576 310) 3 615 308 514.81% 104 518 17 000 537 727 464.37% 94 667 16 774 513 354 4258.85% 9 851 226 24 373 12.13% 1 932 189 1 723 239 4 153 035 PROFIT ATTRIBUTABLE TO: Owners of the parent Non-controlling interest 7.12% 7.43% -48.55% 1 827 671 1 822 748 4 923 1 706 239 1 696 671 9 568 3 615 308 3 597 711 17 597 TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owners of the parent Non-controlling interest 12.13% 12.46% -48.55% 1 932 189 1 927 266 4 923 1 723 239 1 713 671 9 568 4 153 035 4 135 438 17 597 7.43% 340.6 317.1 672.3 Share of foreign currency translation d ­ ifferences of associates and joint ventures TOTAL COMPREHENSIVE INCOME FOR THE PERIOD Basic and diluted earnings per share (cents) 2 T +  he audited June 2013 figures have been restated for the adoption of IFRS 11. These restatements have not been subject to an audit. Refer to note 5. 6
    • Condensed Consolidated Statement of Financial Position Unaudited Audited Unaudited and restated and restated Dec ‘13 Dec ‘12 Jun ‘13+ ASSETS NON-CURRENT ASSETS Property, plant and equipment Investment in associates and joint ventures Loans and receivables Deferred income tax assets Intangible assets Fixed escalation operating lease accruals 14 506 870 12 778 952 182 166 15 357 425 028 1 093 163 12 204 12 345 720 10 748 795 152 186 11 676 421 803 1 000 687 10 573 13 303 320 11 653 008 168 535 10 325 420 093 1 039 155 12 204 CURRENT ASSETS Inventories Trade and other receivables° Derivative financial instruments Current income tax assets Loans and receivables Cash and cash equivalents 25 402 805 13 270 676 4 319 302 16 449 25 870 17 768 7 752 740 22 057 714 10 597 430 3 854 965 — 203 139 19 093 7 383 087 20 119 543 10 310 046 3 471 597 23 576 172 232 18 908 6 123 184 57 033 331 918 57 071 39 966 708 34 735 352 33 479 934 647 328 3 672 069 (320 146) 11 961 534 15 960 785 60 935 16 021 720 647 328 3 672 069 (320 146) 9 418 014 13 417 265 60 165 13 477 430 647 328 3 672 069 (320 146) 11 184 825 15 184 076 68 194 15 252 270 5 022 385 3 879 500 239 240 278 953 624 692 — 4 838 176 3 766 856 159 335 367 351 538 679 5 955 4 846 522 3 823 591 195 930 251 354 575 368 279 18 922 603 17 649 584 327 778 652 944 98 589 185 561 8 147 16 419 746 15 560 607 324 272 174 317 88 856 264 997 6 697 13 381 142 12 725 130 327 755 180 799 133 457 7 567 6 434 TOTAL LIABILITIES 23 944 988 21 257 922 18 227 664 TOTAL EQUITY AND LIABILITIES 39 966 708 34 735 352 33 479 934 R’000 Notes Assets held for sale TOTAL ASSETS EQUITY CAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY HOLDERS Share capital Share premium Treasury shares Reserves NON-CONTROLLING INTEREST TOTAL EQUITY LIABILITIES NON-CURRENT LIABILITIES Borrowings Deferred income tax liabilities Provisions Fixed escalation operating lease accruals Trade and other payables 1 CURRENT LIABILITIES Trade and other payables° Borrowings Current income tax liabilities Provisions Bank overdrafts Shareholders for dividends 1 +  he audited June 2013 figures have been restated for the adoption of IFRS 11. These restatements have not been subject to an audit. T Refer to note 5. R °  eclassified December 2012. Refer to note 42 of the annual financial statements for the financial period ended June 2013. 7
    • 8 Dividends distributed to shareholders BALANCE AT DECEMBER 2013 (1 150 557) 15 960 785 (12 182) 60 935 (1 162 739) 16 021 720 1 927 266 1 822 748 104 518 1 932 189 1 827 671 15 184 076 14 (1 696 418) 15 184 076 537 727 4 135 438 3 597 711 12 745 042 14 (1 041 462) 13 417 265 17 000 1 713 671 1 696 671 12 745 042 Total 104 518 4 923 4 923 15 252 270 UNAUDITED 6 MONTHS ENDED DECEMBER 2013 BALANCE AT JUNE 2013 Total comprehensive income Profit for the period Recognised in other comprehensive income Foreign currency translation differences 68 194 14 (1 708 496) 15 252 270 (12 078) 68 194 17 597 17 597 62 675 (12 078) 60 165 9 568 9 568 62 675 Proceeds from deferred shares issued Dividends distributed to shareholders BALANCE AT JUNE 2013 537 727 4 153 035 3 615 308 12 807 717 AUDITED 12 MONTHS ENDED JUNE 2013 BALANCE AT JUNE 2012 Total comprehensive income Profit for the period Recognised in other comprehensive income Foreign currency translation differences 14 (1 053 540) 13 477 430 17 000 1 723 239 1 706 239 12 807 717 Total equity Proceeds from deferred shares issued Dividends distributed to shareholders BALANCE AT DECEMBER 2012 Total comprehensive income Profit for the period Recognised in other comprehensive income Foreign currency translation differences UNAUDITED 6 MONTHS ENDED DECEMBER 2012 BALANCE AT JUNE 2012 R’000 Noncontrolling interest Condensed Consolidated Statement of Changes in Equity 647 328 — 647 328 647 328 14 — 647 314 647 328 14 — 647 314 Share capital 3 672 069 — 3 672 069 3 672 069 — 3 672 069 3 672 069 — 3 672 069 Share premium (320 146) — (320 146) (320 146) — (320 146) (320 146) — (320 146) Treasury shares Attributable to equity holders 1 184 997 104 518 104 518 1 080 479 1 080 479 537 727 537 727 542 752 559 752 17 000 17 000 542 752 Other reserves (1 150 557) 10 776 537 1 822 748 1 822 748 10 104 346 (1 696 418) 10 104 346 3 597 711 3 597 711 8 203 053 (1 041 462) 8 858 262 1 696 671 1 696 671 8 203 053 Retained earnings
    • Condensed Consolidated Statement of Cash Flows Unaudited Audited Unaudited and restated and restated 6 months R’000 Notes 6 months for the year ended ended ended Dec ‘13 Dec ‘12 Jun ‘13+ Consisting of: Cash and cash equivalents Bank overdrafts 3.1 3.2 3.3 3.4 3 390 675 2 691 525 (18 560) 843 702 (20 960) 1 190 268 4 685 975 129 349 (160 255) 8 388 (1 161 026) (111 756) (1 946 017) 45 1 444 703 6 115 617 1 187 521 2 470 701 (16 838) 844 293 (534 727) 284 879 3 048 308 143 368 (153 276) 7 249 (1 051 798) (806 330) (1 984 195) 6 086 (790 588) 7 900 677 1 121 394 5 357 378 (39 581) 1 568 468 (534 727) (1 901 690) 4 449 848 284 076 (327 351) 14 298 (1 707 017) (1 592 460) (3 009 799) 13 052 (1 875 353) 7 900 677 6 859 7 567 179 8 001 7 118 090 90 293 6 115 617 7 752 740 (185 561) 7 567 179 CASH FLOWS FROM OPERATING ACTIVITIES Operating profit Less: investment income Non-cash items Payments for cash settlement of share appreciation rights Changes in working capital Cash generated from operations Interest received Interest paid Dividends received Dividends paid Income tax paid CASH FLOWS UTILISED BY INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES NET MOVEMENT IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at the beginning of the period Effect of exchange rate movements on cash and cash ­equivalents CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 7 383 087 (264 997) 7 118 090 6 123 184 (7 567) 6 115 617 +  he audited June 2013 figures have been restated for the adoption of IFRS 11. These restatements have not been subject to an audit. ­ T Refer to note 5. 9
    • Condensed Operating Segment Information ANALYSIS PER REPORTABLE SEGMENT Unaudited December 2013 R’000 Sale of merchandise External Inter-segment Trading profit Depreciation and amortisation* Total assets R’000 Sale of merchandise External Inter-segment Trading profit Depreciation and amortisation* Total assets Furniture Other ­operating segments Consolidated 7 347 355 3 760 7 351 115 2 111 194 — 2 111 194 3 356 648 28 787 3 385 435 51 089 765 1 361 223 52 450 988 2 184 682 322 044 134 022 48 960 2 689 708 662 347 126 386 25 562 10 966 825 261 27 121 702 7 101 063 3 496 963 2 246 980 39 966 708 Unaudited and restated December 2012 Other Supermarkets ­operating Non-RSA Furniture segments Consolidated Supermarkets RSA Supermarkets Non-RSA 38 274 568 1 328 676 39 603 244 Supermarkets RSA 35 583 201 1 031 370 36 614 571 5 736 530 2 930 5 739 460 1 910 523 — 1 910 523 3 342 041 18 517 3 360 558 46 572 295 1 052 817 47 625 112 2 072 980 254 524 120 887 54 673 2 503 064 573 325 91 671 22 936 10 098 698 030 24 042 901 5 513 980 2 994 141 2 184 330 34 735 352 Audited and restated June 2013+ Furniture Other ­operating segments Consolidated 11 656 635 5 751 11 662 386 3 561 555 — 3 561 555 6 530 977 39 423 6 570 400 92 457 126 2 166 563 94 623 689 4 514 085 599 856 130 652 147 510 5 392 103 1 203 559 201 014 48 841 21 163 1 474 577 22 291 102 6 327 461 3 021 476 1 839 895 33 479 934 Supermarkets RSA Supermarkets Non-RSA 70 707 959 2 121 389 72 829 348 Trading profit Depreciation and amortisation* R’000 Sale of merchandise External Inter-segment Total assets +  he audited June 2013 figures have been restated for the adoption of IFRS 11. These restatements have not been subject to an audit. T Refer to note 5. * Represent gross depreciation and amortisation before appropriate allocations of distribution cost. 10
    • Condensed Operating Segment Information (continued) GEOGRAPHICAL ANALYSIS Unaudited December 2013 Outside South Africa South Africa Consolidated R’000 Sale of merchandise – external 42 938 412 8 151 353 51 089 765 Non-current assets** 10 741 238 3 143 081 13 884 319 Unaudited and restated December 2012 Outside South Africa South Africa R’000 Sale of merchandise – external Consolidated 40 197 957 46 572 295 9 461 215 Non-current assets** 6 374 338 2 298 840 11 760 055 Audited and restated June 2013+ Outside South Africa South Africa R’000 Sale of merchandise – external 79 574 757 12 882 369 92 457 126 9 915 841 Non-current assets** + Consolidated 2 788 526 12 704 367 T   he audited June 2013 figures have been restated for the adoption of IFRS 11. These restatements have not been subject to an audit. Refer to note 5. N ­ **  on-current assets consist of property, plant and equipment, intangible assets and fixed escalation operating lease accruals. 11
    • Selected Explanatory Notes to the Condensed Consolidated Interim Results for the 6 months ended December 2013 Unaudited 6 months ended Dec ‘13 R’000 1. 1.1 BORROWINGS Consisting of: Shoprite Holdings Ltd preference share capital Shoprite International Ltd preference share capital Convertible bonds (note 1.1) First National Bank of Namibia Ltd Unaudited Audited and restated and restated 6 months for the year ended ended Dec ‘12 Jun ‘13 2 450 456 4 133 816 70 556 4 207 278 2 450 374 4 024 760 63 544 4 091 128 2 450 440 4 077 946 70 510 4 151 346 4 548 075 (470 129) 4 077 946 202 120 (146 250) 4 133 816 4 445 459 (470 129) 3 975 330 196 882 (147 452) 4 024 760 4 445 459 (470 129) 3 975 330 396 318 (293 702) 4 077 946 Convertible bonds The Group issued 6.5% convertible bonds for a principal amount of R4.5 billion on 2 April 2012. The bonds mature five years from the issue date at their nominal value of R4.5 billion or can be converted into shares at the holders’ option at the maturity date at the rate of 5 919.26 shares per R1 million. The Group holds, subject to conditions, rights on early redemption. The values of the liability component and the equity conversion ­ component were determined at issuance of the bond. The fair value of the liability component was calculated using a market interest rate for an equivalent non-convertible bond at initial recognition. The residual amount, representing the value of the equity conversion option, is included in shareholders’ equity in other reserves, net of income taxes. The convertible bond recognised in the statement of financial position is calculated as follows: Face value of convertible bonds at the beginning of the period* Equity component* Liability component at the beginning of the period Interest expense Interest paid Liability component at the end of the period *  he transaction costs have been allocated to the equity and liability components T ­ based on their relative day one values. The fair value of the liability component of the convertible bonds amounted to R4.3 billion (Dec ‘12: R4.4 billion; Jun ‘13: R4.3 billion) at the statement of financial position date. The fair value is calculated using cash flows discounted at a rate based on the borrowings rate of 8.6% (Dec ‘12: 7.6%; Jun ‘13: 8.6%). The carrying values of all other financial instruments a ­ pproximate their fair values. 12
    • Selected Explanatory Notes to the Condensed Consolidated Interim Results for the 6 months ended December 2013 (continued) Unaudited 6 months ended Dec ‘13 R’000 2. EARNINGS PER SHARE Profit attributable to owners of the parent Re-measurements Profit on disposal of property Profit on disposal of assets held for sale Loss on disposal and scrapping of plant, equipment and intangible assets Impairment of property, plant and equipment and assets held for sale Impairment of goodwill Insurance claims paid (Profit)/loss on other investing activities Re-measurements included in equity-accounted profit of ­ ssociates and joint ventures a Income tax effect on re-measurements Headline earnings 1 822 748 2 810 (1 422) — 2 724 Unaudited Audited and restated and restated 6 months for the year ended ended Dec ‘12 Jun ‘13 1 696 671 (9 016) — (19 326) 10 283 34 041 — — 1 500 (365) — — — 30 30 607 13 585 — 2 193 373 (808) 1 824 750 (3) 2 719 1 690 374 Number of shares ‘000 ‘000 Number of ordinary shares – In issue – Weighted average 3 597 711 31 400 (7 598) (41 946) 518 (14 841) 3 614 270 ‘000 535 143 535 143 Diluted earnings per share is unchanged from basic earnings per share, as the inclusion of the dilutive potential ordinary shares would increase earnings per share and is therefore not dilutive. Convertible debt outstanding at the reporting date (refer note 1.1), which were anti-dilutive in the current period, could potentially have a dilutive impact in the future. 13 535 143 535 143 340.6 341.0 Earnings per share – Basic and diluted earnings – Basic and diluted headline earnings 535 143 535 143 Cents 317.1 315.9 672.3 675.4
    • Selected Explanatory Notes to the Condensed Consolidated Interim Results for the 6 months ended December 2013 (continued) Unaudited 6 months ended Dec ‘13 R’000 3. 3.1 3.2 3.3 3.4 CASH FLOW INFORMATION Non-cash items Depreciation of property, plant and equipment Amortisation of intangible assets Net fair value losses/(gains) on financial instruments Exchange rate (gains)/losses Profit on disposal of property Profit on disposal of assets held for sale Loss on disposal and scrapping of plant, equipment and intangible assets Impairment of property, plant and equipment and assets held for sale Impairment of goodwill Movement in provisions Movement in cash-settled share-based payment accrual Movement in fixed escalation operating lease accruals 753 281 71 980 7 129 (4 254) (1 422) — 2 724 Unaudited Audited and restated and restated 6 months for the year ended ended Dec ‘12 Jun ‘13 628 971 69 059 (3 257) 41 376 — (19 326) 10 283 1 332 567 142 010 (23 807) 3 843 (7 598) (41 946) 34 041 Cash flows utilised by investing activities Investment in property, plant and equipment and intangible assets to expand operations Investment in property, plant and equipment and intangible assets to maintain operations Investment in assets held for sale Proceeds on disposal of property, plant and equipment and intangible assets Proceeds on disposal of assets held for sale Other investing activities Acquisition of operations Cash flows from financing activities Proceeds from deferred shares issued Increase in borrowing from First National Bank of Namibia Ltd 14 — — (19 459) 104 405 32 241 844 293 30 607 13 585 (92 389) 97 899 79 656 1 568 468 (2 911 164) (827 021) 4 928 453 1 190 268 Changes in working capital Inventories Trade and other receivables Trade and other payables — — (7 486) (30 387) 52 137 843 702 (1 933 879) (841 573) 3 060 331 284 879 (1 441 485) (506 122) 45 917 (1 901 690) (1 325 740) (1 729 401) (2 584 204) (653 002) — (326 320) — (698 721) (3 602) 38 178 — (3 880) (1 573) (1 946 017) 88 739 53 102 (10 860) (59 455) (1 984 195) 156 485 212 045 (9 297) (82 505) (3 009 799) — 45 45 14 6 072 6 086 14 13 038 13 052
    • Selected Explanatory Notes to the Condensed Consolidated Interim Results for the 6 months ended December 2013 (continued) Unaudited 6 months ended Dec ‘13 R’000 4. 5. SUPPLEMENTARY INFORMATION Contracted capital commitments Contingent liabilities Net asset value per share (cents) 1 572 104 215 518 2 983 Unaudited Audited and restated and restated 6 months for the year ended ended Dec ‘12 Jun ‘13 1 283 651 57 125 2 507 1 736 798 125 569 2 837 Unaudited 6 months ended Dec ‘12 R’000 Unaudited for the year ended Jun ‘13 R’000 IMPACT OF THE APPLICATION OF IFRS 11 In terms of IFRS 11: Joint Arrangements, the Group ceased proportionate consolidation of its investment in joint ventures and now accounts for this investment using the equity method in accordance with IAS 28: Investments in Associates and Joint Ventures. The Group has applied the change in accounting policy in accordance with the transitional provisions of IFRS 11 from the beginning of the earliest period presented (1 July 2012). The Group recognised its investment in joint ventures as at 1 July 2012 as the aggregate of the carrying amounts of the assets and liabilities that were previously proportionately ­onsolidated. c This is the deemed cost of the Group’s investment in its joint ventures at initial recognition for purposes of applying equity accounting. As per the requirements of IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors, the relevant comparative information has been restated. The effect of the restatement is reflected below. (Decrease)/increase 5.1 5.2 5.3 Impact on statement of comprehensive income Sale of merchandise Operating profit Profit before income tax Income tax expense Profit for the period (150 (6 (2 (2 863) 827) 187) 187) — (290 (1 (2 (2 188) 658) 235) 235) — Impact on statement of financial position Non-current assets Current assets Non-current liabilities Current liabilities (19 117) 9 316 (4 205) (5 596) (27 978) 18 641 (5 367) (3 970) Impact on statement of cash flows Cash flows from operating activities Cash flows utilised by investing activities (18 679) 16 738 (26 225) 29 094 15
    • DIRECTORATE AND ADMINISTRATION Executive directors JW Basson (chief executive), CG Goosen (deputy managing director), B Harisunker, AE Karp, EL Nel, BR Weyers Executive alternate directors JAL Basson, M Bosman, PC Engelbrecht Non-executive director CH Wiese (chairman) Independent non-executive directors JJ Fouché, EC Kieswetter, JA Louw, ATM Mokgokong, JG Rademeyer, JA Rock Non-executive alternate director JD Wiese Company secretary PG du Preez Registered office Cnr William Dabs and Old Paarl Roads, Brackenfell, 7560, South Africa. PO Box 215, Brackenfell, 7561, South Africa, Telephone: +27 (0)21 980 4000, Facsimile: +27 (0)21 980 4050, Website: www.shopriteholdings.co.za Transfer secretaries South Africa: Computershare Investor Services (Pty) Ltd, PO Box 61051, Marshalltown, 2107, South Africa, Telephone: +27 (0)11 370 5000, Facsimile: +27 (0)11 688 5238, Website: www.computershare.com Namibia: Transfer Secretaries (Pty) Ltd, PO Box 2401, Windhoek, Namibia Telephone: +264 (0)61 227 647, Facsimile: +264 (0)61 248 531 Zambia: ShareTrack Zambia, Plot 5 Katemo Road, Rhodes Park, Lusaka, Zambia PO Box 37283, Lusaka, Zambia, Telephone: +260 (0)211 236 783, Facsimile: +260 (0)211 236 785, Website: www.sharetrackzambia.com Sponsors South Africa: Nedbank Capital, PO Box 1144, Johannesburg, 2000, South Africa Telephone: +27 (0)11 295 8525, Facsimile: +27 (0)11 294 8525, Website: www.nedbank.co.za Namibia: Old Mutual Investment Group (Namibia) (Pty) Ltd, PO Box 25549, Windhoek, Namibia Telephone: +264 (0)61 299 3264, Facsimile: +264 (0)61 299 3528 Auditors PricewaterhouseCoopers Incorporated, PO Box 2799, Cape Town, 8000, South Africa Telephone: +27 (0)21 529 2000, Facsimile: +27 (0)21 529 3300 16