The directors are responsible for the preparation and fair presentation of the annual financial statements of the Company and Group, comprising the directors’ report, the statements of financial position as at June 2013, the statements of comprehensive income, changes in equity and cash flows for the year then ended, and the notes to the financial statements, which include a summary of significant accounting policies and other explanatory notes, in accordance with International Financial Reporting Standards (IFRSs) and the requirements of the Companies Act of South Africa.
The directors are satisfied that the information contained in the annual financial statements fairly represents the financial position at year-end and the financial performance and cash flows of the Company and Group. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and for maintaining adequate accounting records and an effective system of risk management as well as the preparation of the supplementary schedules included in these financial statements.
The directors believe that the Company and Group have adequate resources to continue trading as a going concern in the foreseeable future. The annual financial statements support the viability of the Company and the Group. The Group’s external auditors, PricewaterhouseCoopers Incorporated, audited the Company and Group annual financial statements, and their report is presented on page 5. The external auditors were given unrestricted access to all financial records and related data, including minutes of all meetings of shareholders, the board of directors and committees of the board.
The directors believe that all representations made to the independent auditors during their audit are valid and appropriate. Approval of Annual Financial Statements The Company and Group annual financial statements of Shoprite Holdings Ltd, as identified in the first paragraph, were approved by the Board of directors on 19 August 2013 and signed on its behalf by: CH Wiese Chairman JW Basson Chief Executive Officer Certificate of the Company Secretary
In terms of section 88(2)(e) of the Companies Act no 71 of 2008 (as amended) I, PG du Preez, in my capacity as Company Secretary, confirm that for the year ended 30 June 2013, the Company has lodged with the Companies and Intellectual Property Commission, all such returns as are required of a public company in terms of the Companies Act and that all such returns and notices are true, correct and up to date. PG du Preez Company Secretary 19 August 2013 Directors’ Report Shoprite Holdings Ltd and its Subsidiaries 2 NATURE OF BUSINESS
Shoprite Holdings Limited (“Shoprite Holdings”) is an investment holding company listed on the Johannesburg Stock Exchange Limited (“JSE”) in the “food retailers & wholesalers” sector. Secondary listings are also maintained on the Namibian and Zambian Stock Exchanges. supermarket premises or developing new shopping centres to accommodate one of the Group’s supermarket formats. New retail developments and the redevelopment of existing properties are supervised through every stage of the planning-, design- and construction process. SHOPRITE INVESTMENTS LTD: SHOPRITE HOLDINGS COMPRISES OF THE
FOLLOWING MAIN SUBSIDIARIES: As a wholly owned subsidiary of Shoprite Holdings, Shoprite Investments conducts the Group’s treasury function and financing of credit sales to third parties. SHOPRITE CHECKERS (PTY) LTD: Supermarkets: Serves a broad customer base through our Shoprite, Checkers, Checkers Hyper and Usave store formats. Supply Chain Management: Supplies the Group’s outlets in South Africa and 16 Non-RSA countries. The Group prides itself in running a state-ofthe-art distribution operation and became the first South African retailer to receive the ISO 9002 accreditation for import and export handling.
Fast Foods: The Hungry Lion chain now boasts modern, well-designed stores with an inescapable focus on fried chicken and operates outlets within South Africa, Botswana, Zambia, Lesotho, Swaziland, Namibia, Angola and the Democratic Republic of Congo. Franchise: The OK Franchise Division’s stores offer a wide range of perishable and non-perishable food items and liquor under the OK, Friendly Grocer, 7-Eleven, Megasave en Sentra brands. Freshmark: Freshmark is the Group’s fruit and vegetable procurement and distribution arm and supplies fresh produce to the Group’s retail outlets.
As one of the largest buyers of fresh produce in South Africa, Freshmark also imports fruit and vegetables to ensure a wide variety and continuity of traditionally seasonal fresh produce. Liquor Stores: Trading under the Shoprite and Checkers LiquorShop brands respectively, the liquor shops have extended the Group’s offering by providing a selection of wines, beers and a wide range of premium spirits to its customers. Meat Markets: The Group’s meat market division is the largest retailer of fresh meat on the African continent.
Customers are served through in-store butcheries that employ qualified butchers and technicians. Money Markets: Money Markets offer a comprehensive range of financial services and products to the Group’s customers through dedicated in-store service counters. Furniture: The Furniture division offers furniture, electrical appliances and home entertainment products to customers for cash or credit through its OK Furniture, OK Power Express and House & Home outlets in South Africa, Botswana, Namibia, Swaziland, Lesotho, Zambia, Mozambique and Angola.
Pharmacies and wholesale distribution: MediRite’s in-store pharmacies offer consumers an easy access to affordable healthcare and healthcare professionals. These in-store dispensaries currently operate throughout South Africa and also in Angola and Swaziland. The Group’s pharmaceutical wholesaler, Transpharm, sells and distributes a wide range of pharmaceutical products and surgical equipment to hospitals and clinics, dispensing doctors, veterinary surgeons and private and corporate pharmacies.
Properties: This division is tasked with the responsibility of expanding the supermarket portfolio through the identification and leasing of new SHOPRITE HOLDINGS LTD ANNUAL FINANCIAL STATEMENTS 2013 COMPUTICKET (PTY) LTD: As a premier ticketing solution provider and one of the most recognised brand names, Computicket offers theatre, concert, festival, sport and cinema tickets along with bus tickets and gift vouchers through a network of outlets located across South Africa and Namibia, a call centre as well as the Computicket website. Computicket also offers travel packages.
SHOPRITE INTERNATIONAL LTD: Incorporated in the Republic of Mauritius, Shoprite International is the holding company for the majority of the Group’s non-South African retail and property investments. SHOPRITE INSURANCE COMPANY LTD: Provides first and third party short-term insurance to the Group and its customers. OTHER GROUP SUBSIDIARIES: The interests of Shoprite Holdings in other subsidiaries are set out on page 69 of the Annual Financial Statements. FINANCIAL REVIEW The Group’s headline earnings per share amounts to 675,4 cents for the year (2012: 607,0 cents).
Details of the profit of Shoprite Holdings and its subsidiaries are contained in the statement of comprehensive income on page 7 with reference to the operating segment information on page 23. The financial position of Shoprite Holdings and its subsidiaries are recorded in the statement of financial position on page 6. Further details are furnished in the notes to the annual financial statements on page 10 to 68. The Group’s net asset value per share as at 30 June 2013 was 2 837 cents (2012: 2 382 cents). DISTRIBUTION TO SHAREHOLDERS PREFERENCE DIVIDENDS
Details are reflected in note 27 to the Group’s Annual Financial Statements. ORDINARY DIVIDENDS An interim cash dividend (no. 128) of 123 cents per share was paid on 18 March 2013. A final dividend (no. 129) of 215 cents per share, is payable on 16 September 2013, bringing the total dividend for the year to 338 cents (2012: 303 cents) per ordinary share. 3 SHARE CAPITAL The authorised share capital of Shoprite Holdings remained unchanged at 650 000 000 (six hundred and fifty million) ordinary shares of 113,4 cents (one hundred and thirteen comma four cents) each.
There was no movement in the number of issued Shoprite Holdings ordinary shares which remained at 570 579 460 shares of 113,4 cents each. On 28 June 2012, shareholders approved the issue of an additional 13 803 405 non-convertible, non-participating, no par value deferred shares in the share capital of Shoprite Holdings to Thibault Square Financial Services (Pty) Ltd pursuant to the issue of 27 100 000 ordinary shares during the previous reporting period. These deferred shares were however only issued on 25 July 2012.
As at 30 June 2013, 35 436 472 (6,2%) ordinary shares were held as treasury shares by a wholly owned subsidiary of Shoprite Holdings. GOING CONCERN The annual financial statements of the Group were prepared on a going concern basis. The Board has performed a formal review of the Group’s results and its ability to continue trading as a going concern in the foreseeable future. The directors of Shoprite Holdings confirm that they are satisfied that the Group has adequate resources to continue in business for the foreseeable future.
During the reporting period the following special resolutions were passed by main Group subsidiaries: SHOPRITE CHECKERS (PTY) LTD – Special resolution number 1: Approval of new Memorandum of Incorporation; and – Special resolution number 2: Financial Assistance to Subsidiaries, Related and inter-related entities. SHOPRITE INVESTMENTS LTD – Special resolution number 1: Approval of new Memorandum of Incorporation. COMPUTICKET (PTY) LTD – Special resolution number 1: Approval of new Memorandum of Incorporation. SHOPRITE INTERNATIONAL LTD
Special resolution number 1: Approval of new Constitution. SHOPRITE INSURANCE COMPANY LTD – Special resolution number 1: Approval of new Memorandum of Incorporation. BORROWINGS DIRECTORS AND SECRETARY Shoprite Holdings has unlimited borrowing powers in terms of its Memorandum of Incorporation. The Group’s overall level of debt increased from R4 035 million to R4 151 million during the financial year under review. The directors’ names and details are furnished on pages 8 and 9 and the company secretary’s name, business and postal address on page 67 of the Integrated Report.
In terms of the Memorandum of Incorporation of Shoprite Holdings (“the MOI”), no less than one third of the non-executive directors shall retire by rotation at each Annual General Meeting. Dr CH Wiese, Messrs EC Kieswetter, JA Louw and JF Malherbe retire as directors, in terms of paragraph 33. 5. 1 of the MOI of the Company, at the Annual General Meeting. Dr CH Wiese, Messrs EC Kieswetter and JA Louw have offered themselves for re-election as directors of Shoprite Holdings. The board supports the re-election of these directors. SPECIAL RESOLUTIONS
At the Annual General Meeting of Shoprite Holdings held on 29 October 2012, shareholders approved the following special resolutions: – Special resolution number 1: Remuneration payable to Non-Executive Directors; – Special resolution number 2: Financial Assistance to Subsidiaries, Related and inter-related entities; – Special resolution number 3: Financial Assistance for Subscription of Securities; – Special resolution number 4: General Approval to repurchase shares; and – Special resolution number 5: Approval of new Memorandum of Incorporation as proposed by the Board. Directors’ Report (continued)
The company’s directors are responsible for the preparation and fair presentation of these consolidated and separate financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error. AUDITOR’S RESPONSIBILITY Our responsibility is to express an opinion on these consolidated and separate financial statements based on our audit.
We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated and separate financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. OPINION In our opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of Shoprite Holdings Limited as at 30 June 2013, and its consolidated and separate financial performance and its consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa. OTHER REPORTS REQUIRED BY THE COMPANIES ACT
As part of our audit of the consolidated and separate financial statements for the year ended 30 June 2013, we have read the Directors’ Report, the Audit Committee’s Report and the Company Secretary’s Certificate for the purpose of identifying whether there are material inconsistencies between these reports and the audited consolidated and separate financial statements. These reports are the responsibility of the respective preparers. Based on reading these reports we have not identified material inconsistencies between these reports and the audited consolidated and separate financial statements.
The most significant assumptions and estimates used in applying the Group’s accounting policies relate to the following: a) Impairment of assets: The Group performs a review of loss-making stores and considers the need for the impairment of assets under these circumstances. This determination requires significant judgment. The Group evaluates amongst other things, the duration and extent of the losses, the near-term business outlook for the store, and the possible redeployment of the assets between stores. Refer to notes 3, 9 and 26.
Useful lives of assets: In determining the depreciation and amortisation charge for property, plant and equipment and intangible assets, management applies judgment in estimating the useful lives and residual values of these different asset classes. Refer to notes 3, 9 and 21. c) Income taxes: The Group is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the worldwide accrual for income taxes. The Group recognises liabilities for anticipated uncertain income tax positions based on estimates of potential additional taxes due.
With regards to deferred income tax assets for unutilised income tax losses, judgment is also required to whether sufficient future taxable income will be available against which these losses can be utilised. Refer to notes 1. 11 and 28. d) Allowances for doubtful debts: Trade receivables include instalment sale debtors and franchise debtors for which allowances for impairment are made in accordance with the accounting policy in note 1. 15. These calculations involve the discounting of projected future cash flows and require the use of estimates.
Details regarding the allowances are set out in note 12. e) Employee benefit accruals and provisions: Various assumptions are applied in determining the valuations of post-retirement medical benefits, share based payment accruals and long term employee benefits as set out in notes 1. 20, 1. 22, 14, 17 and 35. Estimates and assumptions that have a significant risk of causing a material adjustment to the carrying value of assets and liabilities in a subsequent year relate to the following: income taxes; allowances for doubtful debts and employee benefit allowances.
All estimates and underlying assumptions are based on historical experience and various other factors that management believes are reasonable under the circumstances. The results of these estimates form the basis of judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and any affected future periods.
Use of adjusted measures The measures listed below are presented as management believes it to be relevant to the understanding of the Group’s financial performance. These measures are used for internal performance analysis and provide additional useful information on underlying trends to equity holders. These measures are not defined terms under IFRS and may therefore not be comparable with similarly titled measures reported by other entities.
It is not intended to be a substitute for, or superior to, measures as required by IFRS. a) Trading profit on the face of the statement of comprehensive income, being the Group’s operating results excluding foreign exchange rate differences and income or expenditure of a capital nature. b) Income or expenditure of a capital nature on the face of the statement of comprehensive income, being all re-measurements excluded from the calculation of headline earnings per share in accordance with the guidance contained in SAICA Circular 3/2012: Headline Earnings.
The principal items that will be included under this measure are: gains and losses on disposal and scrapping of property, plant and equipment, intangible assets and assets held for sale; impairments or reversal of impairments; any non-trading items such as gains and losses on disposal of investments, operations and subsidiaries. c) Interest received on the face of the statement of comprehensive income, being only interest received on call and operating bank account balances.
Subsidiaries Subsidiaries are entities (including special purpose entities) which are, directly or indirectly, controlled by the Group. Control is established where the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another.