Commentary
The Group
Under challenging conditions all the segments showed satisfactory turnover growth despite the sharp drop in internal food inflation which averaged 2,2% for the year and reached a negative low of -2,3% for the month of June. The Group continued to grow strongly, adding a net 87 new stores to bring its total number of outlets in South Africa to 1 015 and outside its borders to 151. In a 53-week reporting period the Group increased turnover by 13,6% to R67,402 billion, generating a trading profit of R3,490 billion which was 18,7% higher than in the previous financial year.Stringent controls that reduced stock losses and further efficiencies and investments in information technology and logistics infrastructure, combined with cost controls in all areas of the business, resulted in a trading margin of 5,18%, up from last year's 4,96%. The Group now employs 88 000 people, of these, more than 10 000 work in its stores outside South Africa. The Group created almost 7 000 more jobs in the period under review and expect to create a further estimated 5 700 jobs during the next year.
Supermarkets RSA
Consumers turned in increasing numbers to the Group's three supermarket chains, which now serve customers in 55 million transactions every month. According to AMPS, 60% of the country's population now shop at Group supermarkets. The segment grew sales by 14,6% while the total South African food retailing market increased by 9,6%. This produced turnover of R53,367 billion for the period compared to R46,551 billion in the 2009 financial year and a trading profit that was 19,6% higher at R2,755 billion. According to the revised information now used by Nielsen, the Group held a 34,4% share of the market for the month of June and 32,6% for the year, the highest of all supermarket groups in South Africa, up from 31,4% a year ago.Shoprite, the Group's flagship brand, increased sales by 13,5%, having added a net 11 stores during the year. The value per transaction was up 6,6%. Due to its successful repositioning for higher-income consumers, Checkers increased turnover by 13,5% and the value per transaction by 7,5%. The small-format Usave chain experienced a year of exceptional growth, opening new stores at a rate of almost one a week. As a result turnover increased by 33,5%.
Supermarkets Non-RSA
In constant currency terms, turnover grew 18,0% in a low inflationary environment while contributing R7,164 billion to Group turnover. Due to the strength of the rand relative to the US dollar and the weakening of most African currencies in which the Group trades, this translated into a decline in turnover of 2,1% in rand terms compared to the previous year.Furniture
Spending on durable goods remained a low priority for most consumers. However, in the last three months of the year the Soccer World Cup fuelled sales of latest technology television sets. This spurt in sales helped the segment to report turnover growth of 16,7% to R3,003 billion with sales in existing stores up 10,9%. To achieve turnover growth in a fiercely contested market, profit margins were sacrificed with the result that trading profit dropped to R131,2 million (2009: R176,8 million).Other Operating Segments
This segment comprises the OK Franchise Division, MediRite and Transfarm, as well as Computicket. Their combined turnover increased by 34,4% to R3,869 billion and their trading profit by 155,0% to R118,2 million. Effective 24 December 2009 the Group acquired 100% of the Transfarm group, a pharmaceutical wholesaler, thereby greatly improving and securing its supply chain. The consideration paid was R190 million and the fair value of the net assets acquired was R114,1 million.
Corporate Governance
The Code of Practices as set out in the King Report on Corporate Governance for South Africa 2002 (King II) was effective until 28 February 2010. The board is of the opinion that Shoprite Holdings complied with and applied all the significant and appropriate requirements incorporated in King II and the JSE Listings Requirements.Dividend No 123
The Board has declared a final dividend of 147,0 cents (2009: 130,0 cents) a share, payable to shareholders on Monday, 20 September 2010. This brings the total dividend for the year to 227,0 cents per ordinary share (2009: 200,0 cents). The last day to trade cum dividend will be Friday, 10 September 2010. As from Monday, 13 September 2010, all trading of Shoprite Holdings Ltd shares will take place ex dividend. The record date is Friday, 17 September 2010. Share certificates may not be dematerialised or re-materialised between Monday, 13 September 2010, and Friday, 17 September 2010, 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 2009 with the following exceptions.
The Group adopted the revised IAS 1, Presentation of Financial Statements, IFRS 8, Operating Segments and Circular 3/2009 on Headline Earnings during the period under review. The presentation of the financial statements and operating segment disclosures have been changed according to the changes in IAS 1 and IFRS
Auditor's Review Opinion
The condensed consolidated preliminary results for the year ended June 2010 have been reviewed by PricewaterhouseCoopers Inc. The auditors' unqualified review opinion is available for inspection at the Company's registered office.
Prospects
Management does not expect market conditions to change markedly in the months ahead as the country's economic recovery continues to lack real momentum. Rising input costs are expected to impact food inflation, likely to start rising in the second half of the new financial year. By order of the Board
By order of the Board
| CH Wiese | JW Basson |
| Chairman | Chief executive |
Cape Town
23 August 2010