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COMMENTARY

THE GROUP

In a market characterised by declining disposable income and increasing pressure on consumers across the spectrum, management continued to lower gross margin, which reduced during the year from 19,9% to 19,3%, putting back into the pockets of our beleaguered customers approximately R356 million. The result was that sales grew faster at 24,5% than the cost base resulting in an improvement of 28,1% in trading profit. Trading margin increased to its highest level of 4,96% from 4,82% in 2008.

 

Supermarkets in South Africa

Despite sales weakening in the second half of the year, the Group’s supermarket operation in South Africa outgrew the rest of the market by increasing sales by 22,8% to R46,551 billion and gaining 1,5 percentage points in market share to 30%. The Group now operates 593 supermarkets in South Africa.
  
Shoprite, the biggest of the three chains with 310 supermarkets, 12 more than a year ago, increased turnover by 20,9% to R27,180 billion, representing 58,4% of the South African supermarkets’ turnover. Research confirmed Shoprite best delivers on the most important needs of most shoppers. Its number of customers grew by 6,2%.

Checkers, with its 154 stores opened a net nine stores in the reporting period and grew turnover by 23,1% to R17,7 billion. Checkers supermarkets became South Africa’s fastest-growing food retail chain for the 12 months to end June. Focusing on both price and lifestyle, the chain showed a strong increase of 11,8% in the value per customer transaction.

Usave, the small-format, limited-range chain, operates 129 outlets having gained a net 36 stores during the year. It continued to grow at a brisk pace, increasing turnover by 57,7%. The low cost chain has become increasingly attractive to price conscious consumers as it manages to be cheaper than most supermarkets in South Africa.

Supermarkets outside South Africa

This business, consisting of 102 supermarkets in 16 countries, grew turnover by 39,9% in rand terms on a continent hardly affected by the global credit crisis, and contributed 13,6% to total supermarket turnover.

 

OK Franchise

The franchise division made strong gains during the year, growing turnover substantially above food inflation to 26,5%. With overhead costs well under control, the division reported a significantly higher trading profit. It showed a net gain of 13 members, bringing the total to 265.

 

Furniture

For the furniture division the 12 months to end June was a challenging time. In a deteriorating trading environment it managed to raise turnover by 13,9%. A welcome development was an increase in the demand for credit. The division continued its strong expansion drive, opening a net of 28 stores to bring the total to 264.

 

CORPORATE GOVERNANCE

The Group is committed to the principles embodied in the Code of Corporate Practice and Conduct in the King Report 2002 (“the Code”). The Group complies with the significant requirements incorporated in the Code and in the Listings Requirements of the JSE Ltd.

 

DIVIDEND no 121

The Board has declared a final dividend of 130,0 cents (2008: 106,0 cents) per share, payable to shareholders on Monday, 21 September 2009. This brings the total dividend for the year to 200,0 cents per ordinary share (2008: 155,0 cents). The last day to trade cum dividend will be Friday, 11 September 2009. As from Monday, 14 September 2009 all trading of Shoprite Holdings Ltd shares will take place ex dividend. The record date is Friday, 18 September 2009.

Share certificates may not be dematerialised or rematerialised between Monday, 14 September 2009, and Friday, 18 September 2009, both days inclusive.

 

ACCOUNTABILITY

These condensed consolidated preliminary results have been prepared in accordance with International Financial Reporting Standards (“IFRS”), IAS 34: Interim Reporting and Schedule 4 of the South African Companies Act (Act no 61 of 1973), as amended. The accounting policies are consistent with those used in the annual financial statements for the financial period ended June 2008.

 

Auditors’ review opinion

The condensed consolidated preliminary results for the year ended June 2009 have been reviewed by PricewaterhouseCoopers Inc. The auditors’ unqualified review opinion is available for inspection at the Company’s registered office.

 

PROSPECTS

The board expects trading conditions to be challenging in the new financial year. The board nevertheless believes the Group is still better placed than most to weather present market conditions and to, once again, achieve satisfactory results.

By order of the Board

CH Wiese	JW Basson
Chairman	Chief executive

Cape Town
24 August 2009