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Turnover: R 88.000bnTrading Profit: R 16.000bnTrading Margin: 18.18%
Stores: 1,076Employees: 54,400
Listed: Yes
 
Pick n Pay

INTRODUCTION

Pick n Pay is a retail business in the fast moving consumer goods industry on the African continent – that believes doing good, is good business.

It was 1967 when consumer champion Raymond Ackerman purchased the first four Pick n Pay stores in Cape Town. Since then the Group’s vision has grown and expanded to encompass stores in South Africa, Namibia, Botswana, Zambia, Swaziland and Lesotho. In addition, Pick n Pay owns a 49% share of a Zimbabwean supermarket chain, TM Supermarkets.

We procure quality products at the best available prices. By operating a lean and efficient business,
supported by a strong and talented team, we are able to provide our customers with a tailored range of high-quality food, grocery and general merchandise products at competitive prices. Through our ongoing investment in the customer offer, we are able to drive sales and grow value for all our stakeholders.
 

STRATEGY

The Pick n Pay Group developed its strategic turnaround plan in 2014. Its objective is to restore the business to a position of long-term sustainable growth. In promulgating the plan, the Group explained that a sustainable recovery would need to be achieved in a planned, considered and balanced way over a number of years, avoiding short-term actions which might weaken the business in the longer term.

The strategic focus of the business:

GROW SALES IN LINE WITH, OR AHEAD OF THE MARKET, BY PROVIDING GREAT VALUE, SERVICE AND INNOVATION FOR CUSTOMERS
Focus here is on delivering a first-class fresh, convenience and grocery offer, which gives customers unbeatable prices, value and service. The business is also developing a strong multi-platform and multi-channel retail offer, including standalone clothing and liquor stores and a burgeoning online business. In addition, the Group aims to continue to build its Boxer business into a thriving national limited-range discount format, and to continue to grow sales outside South Africa in a planned and prudent way.

ACHIEVE HIGH LEVELS OF OPERATING EFFICIENCY AND LOWER COSTS TO ENABLE
MAXIMUM REINVESTMENT IN THE CUSTOMER OFFER:

Focus here is on completing the centralisation of the Group’s supply chain and other services,
reducing the cost and improving the accuracy and responsiveness of distribution. The Group also aims to improve the efficiency and cost-effectiveness of its employee costs, both in stores and in its head office structures, while minimising increases in rentals, rates, electricity, water and other charges.

RESTORE THE UNDERLYING PROFIT MARGIN TO A HISTORICALLY SUSTAINABLE LEVEL:
The Group regards a sustained improvement in its underlying profit margin as a lead indicator of
progress in achieving a balanced turnaround characterised both by sustained sales growth and
greater operating efficiency.
 

CHAIRMAN'S REPORT

to our 2019 Year End Results presentation.

I’d like to start by congratulating the Pick n Pay and Boxer teams. This has been an exceptional performance. The team have delivered consistently on a good plan. By doing so with vigour, focus and enthusiasm, volume growth this year represents the company’s strongest underlying trading performance for many years. Importantly, we have delivered a compound annual growth in dividends declared of 20.2% over the last 5 years. It has been a very good year indeed.

I’m particularly pleased with the way the team has kept prices down for customers, just when they need it most. To record deflation of 0.3% is a credit to the Pick n Pay and Boxer teams, and a clear symbol of our commitment to our customers.

With Pick n Pay increasing its store footprint, Boxer has also grown very strategically over the past few years and as a result, we are reaching more customers than ever before, right across South African society.

Customer journey

We’ve known from day one that caring for our people, serving our customers, focusing on our efficiency and participating in the communities in which we work and live are the best ways to build a better future. Not only for our business but for all South Africans.

As we have grown, our customers have grown with us. In many ways, their demands are similar to what they were when Raymond Ackerman founded the business in 1967 – to get great value products with good service from a caring, ethical company. But today, the customer journey is much more complex and technological. While consumer savviness has always been there, it now demands more of us. Customers look to us for a clear sign of our obligation to low prices, value for money, ethical sourcing, environmental sustainability, healthy product choices and transparent labelling, amongst other expectations.

To mark our half-centenary and in celebration of our commitment to consumer sovereignty, this year we launched People n Planet. This is the umbrella under which all our sustainable development programmes fall. In short, People n Planet is our commitment to reduce the impact we have on the environment and increase the one we have on every life we touch. It is our promise to take bigger steps and leave smaller footprints.

Sustainability is still a subject that for many is peripheral to doing business. A soft pledge from a company wishing to position itself positively in the eyes of customers and shareholders. But I’d like to be clear: People n Planet isn’t just a part of our business – it IS our business. It is a journey we have been on since the late 1980s.

Our sustainability strategy is linked inextricably to our business strategy. What we do aligns with seven of the 17 United Nations Sustainable Development Goals most relevant to our business. For today, I’d like to focus on three areas of activity which are critical not only to our continued success but to South Africa’s:

· The creation of economic opportunity
· The sourcing of alternatives to plastic
· The development of skills for our country

Leveraging our Supply chain

Our business touches the lives and livelihoods of millions of South Africans. Our direct supply chain sustains hundreds of thousands of jobs. As we grow, our impact grows. This is why we source 96% of our products locally in various countries where we trade. But more than that: entrepreneurs are job creators, they are innovators, and they help the economy develop skills.

Our Enterprise and Supplier Development Programme has done incredible work to assist small businesses enter the retail market by putting their products in front of our customers. We’ve committed considerable investment to this sourcing programme and our customers are loving it.

I’d like to call out just one example of our ESD programme. Dikeledi Mosime’s mother used to work for Pick n Pay in our Deli section, which enabled her to secure a bursary for her daughter. Dikeledi subsequently used her many talents to create Tin Pac, the only promotional gifting manufacturer in South Africa and a stable supplier to Pick n Pay.

Transforming the supply chain is yet another imperative where our impact can best be felt. In the 2019 financial year, we spent over half a billion Rand with small black-owned businesses. I’m delighted that R220m of this was spent on small, black women-owned businesses.

Our spaza to Market store conversion programme in conjunction with provincial governments and other funding partners continues to grow and the results so far are outstanding. This inspiring project develops entrepreneurs and brings quality products and services at great prices closer to communities who need them most.

Plastic reduction

A recurring theme of concern for our customers is reducing the amount of plastic in the supply chain.

In August last year, we introduced our new blue 100% recycled and recyclable plastic bag. By switching to the new blue plastic bags, 2 000 tonnes of plastic will be kept out of the environment every year. We’ve also introduced netted fruit and veg bags at selected stores as an alternative to plastic carrier bags.

We’re also making an enormous effort to cut down on packaging through a number of interventions, including having loose serve fresh produce. We’ve also cut down on packaging in our own brand products.

But it is the ubiquitous plastic shopping bag that continues – for price and convenience reasons – to be popular, and this is why we are increasing the range of reusable bag options:

· Our green R5 Budget bag is a low-cost reusable carrier bag that joined Pick n Pay’s current range of reusable bags in February 2019. It’s made out of two 500ml green bottles and is strong and durable.
· Our original Goodness Bag is still enormously popular. We’ve added a range of 100% RPET reusable bags to this range too.
· In an effort to further mainstream reusable bags, in April we gave away 20,000 reusable bags to Smart Shoppers in stores throughout the country.

Our efforts are having an impact. Over the last year, we have seen a 21% increase in the number of people purchasing reusable bags in-store. And the number of customers who bought a plastic bag when purchasing five or more products has started to show signs of dropping. We are working closely with the Consumer Goods Council in finding industry-wide solutions, with a priority given to reducing single use plastic.

People n Planet is having a considerable impact through a wide range of initiatives, from turning our stores into children’s learning centres, to our Schools Club which reaches over 3,000 schools, to our water resilience programme, community gardens, our food donations to Food Bank, and so much more. These are not supplementary programmes to our retail business. They are an integral part of who Pick n Pay is, and who we want to be, for our customers. I would urge you to read more about what we are doing, or pay us a visit.

Developing our people

Retail is still the biggest employer in South Africa. The world of retail holds enormous opportunity for development, and retail jobs are a great ladder to progression within the business and outside it. For those prepared to work hard, the prospect of advancement is always promising. Last year, we promoted 500 of our people, recognising their skills and development.

A skilled workforce is central to our economic potential. Training is mostly effective if it is combined with a proper job, which is why we combine excellent training with good jobs. We offer over 330 different training programmes to our people, ranging from basic literacy and numeracy through to computer-based training and management and leadership programmes. Last year, we invested just under R67-million in training and education, across 800 training interventions, reaching over 16,000 of our people.

As always, the three values on which our business is built are central to our operating ethos. These are consumer sovereignty, business efficiency, and doing good is good business.

In building a sustainable business, we are looking forward to working with the new government as we engage with them in an effort to build our economy. It has never been more important for business to play a supporting and advisory role in public policy. In this, we will be working hard to increase co-operation between different departments to bring better coherence to policy decisions. These include issues such as security for retail stores during social grant pay-outs, which has reached very worrying levels. Another is tackling obesity in South Africa by working to promote healthy lifestyles.

We will continue our work with the Consumer Goods Council, BUSA and others in partnership with government.

South Africa has lost too many years and it’s now time to put our foot on the accelerator.

Before closing, I have one more very important thing to say.

We have issued an announcement this morning that Bakar Jakoet, our CFO, will retire from his role once we identify and appoint a suitable successor.

Bakar’s contribution to the company over 34 years has been immense. He has been a colleague and a leader within the company for over two-thirds of Pick n Pay’s history.

His rise within the company in the earlier part of his career bore testimony to his immense ability and determination – as well as showing that my father always ran the business with the right values so that individuals with talent could grow and succeed whatever their background.

Bakar’s tenure as CFO has been invaluable over an extremely important period in our history. We have benefited immeasurably from the leadership and continuity he has provided. He is a leader outside the business too – and a great role model for the new South Africa.

Although Bakar reached the technical retirement age a few years ago, we persuaded him to stay on for a while, and that has been very important for the company.

Thank you Bakar, for all you have done for Pick n Pay over your distinguished career. A personal thank you also for your friendship.

All good things sadly have to come to an end. But for Bakar and Pick n Pay I am delighted that they will not fully come to an end. We have persuaded Bakar to remain on the Board as a non-executive director after his retirement.

So we will continue to benefit from his wisdom, guidance, leadership and friendship in the years to come.

Thank you, Bakar.

This has been an exceptional year. We are building momentum. You can look forward to much more from Pick n Pay.





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SUMMARY

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Boxer Build

Boxer Build


Hardware
31 Stores
Boxer Liquors

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Liquor
34 Stores
Boxer Punch

Boxer Punch


General Supermarkets
34 Stores
Boxer Superstores

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