Integrated

Annual Report

2018


NAVIGATING OUR REPORTING SUITE

NAVIGATING OUR REPORTING SUITE

Our six capitals

Our ability to create long-term sustainable value for stakeholders depends on the use of various capitals within our business. The International Integrated Reporting <IR> Framework supports integrated financial reporting, and, in particular, the reporting of the Group's business model across these six forms of capital. Refer to "Our business model" on pages 20 to 21 for more information.

Financial

Human

Manufactured

Social and relationship

Intellectual

Natural


Our key stakeholders

The Group is committed to open and constructive engagement with all our stakeholders. Our business model and strategy are designed to consider and address the issues and concerns most relevant to our key stakeholders. Refer to the "Engaging with our stakeholders" section on pages 38 to 41 for more information.

Customers

Community

Employees

Suppliers

Franchisees

Shareholders


Our business acceleration pillars

The second stage of our strategic long-term plan is organised around seven business acceleration pillars. These pillars represent the material growth opportunities that can materially affect our ability to create value over the short, medium and long term. Refer to our "Strategic focus" section on pages 44 to 51 for more information.

Better for customers

A flexible and winning estate

Efficient and effective operations

Every product, every day

A winning team

Boxer–
a national brand

Rest of Africa – a second engine of growth


Previous

OUR BUSINESS
MODEL



Our business model describes how the Pick n Pay Group creates long-term sustainable value for all its stakeholders – through the effective and balanced use of our
capitals, while keeping the customer at the centre of everything we do. Our business model is underpinned by strong corporate and social governance, with our unique
values at its core.

OUR CAPITALS

OUR PRIMARY BUSINESS ACTIVITIES AND VALUE DRIVERS

The Group is a food, grocery, clothing and general merchandise retailer, selling a wide range of products at competitive prices under our Pick n Pay and Boxer brands. The Group’s operating model utilises its capital inputs in its retail operations in the most effective and efficient manner in order to optimise its capital outputs and outcomes for all.

The Group has created value for our stakeholders for over 50 years. Our business model maintains a virtuous circle which balances the needs of our stakeholders in a fair and effective manner while managing the trade-offs between our capitals.

This virtuous circle enables growing and sustainable returns for shareholders, while supporting ongoing investment in the communities which we serve and meaningful reinvestment into our business and our people.


Our capital outputs include the wide range of products and services that we sell to our customers under our Pick n Pay and Boxer brands – this includes food, groceries, clothing, general merchandise and other value-added services. As a result of our retail operations, we produce by-products and waste, and we remain committed to reducing our environmental impact.

OUR CAPITAL OUTCOMES

Financial capital

 
A tough trading year resulted in muted turnover growth of 5.3%
Successful strategic initiatives drove improvements in our customer offer, resulting in strong quarter four turnover growth of 7.3%
Gross profit margin maintained at 18.7%, with operating efficiency supporting price investment

Manufactured capital

 
Reached new customers and communities by opening 125 net new stores
Improved our customer offering through the refurbishment of 61 company-owned stores and opening of two new distribution centres

Intellectual capital

 
Modernised our Smart Shopper loyalty programme
Strengthened procurement through buy better programme
Launched Pick n Pay Fast Pay
Partnered with TymeDigital to launch low-cost banking services
Launched our new mobile-enabled online shopping website
Introduced 730 new or refreshed own-brand products in store

Human capital

 
Pick n Pay implemented a voluntary severance programme (VSP), reducing its workforce by 10%, which has improved the productivity and efficiency of the Pick n Pay team
Delivered 31 595 training interventions, reaching almost 11 000 staff

Social and relationship capital

 
Partnered with eight new spaza store owners, bringing safe, modern and high-quality grocery offer to previously underserved customers
Supported our communities by assisting learners through Pick n Pay School Clubs and raising funds through Pick n Pay Pink Walks for breast cancer research

Natural capital

Energy use per square metre reduced by 37% compared to our 2008 baseline, a 3% improvement on last year
We diverted 54% of our waste from landfill, a total of just over 18 000 tonnes
Substantive action taken to reduce our water consumption, with a 13% decrease on last year

Strong performance

Satisfactory progress

Read on to find out more about our capital trade-offs and the value we create.