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2019 Integrated Annual Report 2019 Integrated Annual Report Contents SOUTH AFRICA’S MOST INFLUENTIAL BRAND PICK N PAY 2019 2019 INTEGRATED ANNUAL REPORT INTEGRATED ANNUAL REPORT www.pnp.co.za CONTENTS How our 2019 Integrated Annual Report tells CHAPTER 1 our value creation story 02 INTRODUCING How we compiled this report and what OUR 2019 INTEGRATED you need to know about it 04 ANNUAL REPORT A message from our Chairman 06 About us 10 What sets us apart 12 CHAPTER 2 Our store footprint 14 THIS IS PICK N PAY Our store formats 16 Creating value through our business model 22 The environment we operate in 28 CHAPTER 3 OUR BUSINESS Material issues, risks and opportunities 32 IN CONTEXT Engaging with our stakeholders 38 We are pleased CHAPTER 4 OUR STRATEGY Strategic focus 44 to provide our 2019 A message from our CEO 56 Integrated Annual Report Our CFO’s financial review 60 to our stakeholders CHAPTER 5 Annual financial result 68 OUR PERFORMANCE Five-year review 74 Value-added statement 77 Governance overview by our lead independent director 80 CHAPTER 6 Our governance structure 82 OUR GOVERNANCE Our Board of directors 88 Remuneration report 92 Analysis of ordinary shareholders 114 CHAPTER 7 Analysis of B shareholders 115 SHAREHOLDERS’ Shareholders’ information 116 INFORMATION Corporate information IBC iv www.pnp.co.za 1 Integrated Annual Report 2019 1 INTRODUCING OUR 2019 INTEGRATED ANNUAL REPORT 1 INTRODUCING OUR 2019 INTEGRATED ANNUAL REPORT OUR SUSTAINABLE BUSINESS FOCUS AREAS THE SEVEN SDGs HOW OUR 2019 INTEGRATED ANNUAL We add to this value through our sustainability strategy, which is inextricably linked to our business MOST RELEVANT TO strategy. The infographic below illustrates how our sustainability strategy is aligned with our OUR BUSINESS REPORT TELLS OUR VALUE CREATION STORY stakeholder needs and with the seven United Nations Sustainable Development Goals (SDGs) most relevant to our business. HOW WE CREATE VALUE HOW TO NAVIGATE OUR Pick n Pay has played a valuable role in the economic and social Building an VALUE-CREATION STORY development of southern Africa for over five decades – and our belief inclusive and WHAT WE DEPEND ON TO ethical value that doing good is good business ensures that we are focused on Promoting CREATE VALUE CUSTOMERS chain Our ability to create sustainable creating value not only for our shareholders but for all our stakeholders. healthy living stakeholder value depends on the use Our ability to create value depends on the successful execution of a customer-led, of six broad capitals: SUPPLIERS innovative and forward-looking strategy. Sustainable value creation requires the effective management of trade-offs between the capitals we rely on in our business, and meaningful Strategic Financial Human COMMUNITY Being response to and balanced interactions between our different stakeholder groups within the various retail environmentally Social and market, regulatory, social and environmental contexts in which we operate. In response, areas of Manufactured FRANCHISEES sustainable relationship our business maintains a virtuous circle, the details of which are explained throughout this sustainability report, with a focus on sustainable strategy execution that considers our stakeholders, our Intellectual Natural operating context and our material issues, risks and opportunities. EMPLOYEES Advancing Refer to pages 22 to 25 for more employee information. SHAREHOLDERS Doing opportunity and good in the local diversity XT THE RELATIONSHIPS NTE O community O R UR C 28 ead S WE RELY ON NG age m TR TI p ore A A om fr T We are committed to open and R fr om E E re G P o pa Y constructive engagement with our O m ge R ad We provide a 4 stakeholders. Our business model and U e 4 O R competitive strategy consider and address the OUR COMMITMENT TO THE UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS customer offer issues and concerns most relevant to Our customers not only seek great value products with good service from a caring, ethical company, our key stakeholders in order to create but they also look to us for ethical sourcing, environmental sustainability, healthy product choices, lasting value. We build a We source transparent labelling and more. high-performance and buy products culture and Customers Suppliers Our virtuous effectively and circle enables growing team of retail responsibly and sustainable returns specialists Community Franchisees for shareholders, while THE VALUE WE CREATE FOR STAKEHOLDERS supporting ongoing investment We provide an inclusive and diverse spectrum of customers in southern Africa with Employees Shareholders in the communities we serve, meaningful reinvestment into convenient and reliable access to high-quality, safe and competitively priced products and our business and our people, value-added services, in outstanding stores and underpinned by great service. Refer to pages 38 to 41 for more and responsible ways to information. The economic do business to reduce and social We run We provide direct employment to 90 000 people across our owned and franchise our environmental businesses – augmented by a focus on training and skills development and a commitment OUR BUSINESS upliftment impact. cost-effective to diversity and career advancement based on merit. ACCELERATION PILLARS of the communities and efficient The Group is in the second stage of its we serve leads to operations growth for all We create substantial economic development and employment opportunities across three-stage strategic long-term plan Most inclusive (refer to page 45). Stage 2 – Change the our value chain, procuring goods and services from 10 000 local suppliers and service retailer in South trajectory – is organised around seven , providers, including many small to medium-sized businesses that have been mentored Africa, serving S S business acceleration pillars. These E U IE through our enterprise development programmes. S customers across the S T pillars represent the material growth R T O S I e A U I N a K R L U 2 opportunities that will accelerate the d E diverse spectrum of IA T 3 m H KE R R e or O Y TE O ag We give back to the communities we serve through investment aimed at economic and growth trajectory of the business and e L African societies A P p fr DE R M OP m materially affect our ability to create value om R U D ro social upliftment, including education and literacy programmes, housing, nutrition and p S O N f ag A ore over the short, medium and long term. e KS m 38 RIS ad poverty-relief schemes and through the support of cultural and theatrical projects, sports Re development and environmental programmes. Better for 1 5 A winning team customers We support our franchisees and Market store partners to build profitable and sustainable 2 A flexible and 6 Boxer – a winning estate national brand businesses through mutually beneficial partnerships built on the strength of the Pick n Pay OUR BUSINESS MODEL brand and supported by efficient and effective distribution and administrative platforms. Efficient and Rest of Africa – a 3 effective 7 second engine of This virtuous circle informs our business model, which describes how we use and operations growth transform the capitals we depend on to create long-term sustainable value for We provide our shareholders with a consistent and sustainable return on investment 4 Every product, through a rigorous focus on capital efficiency and strategy execution that takes a every day stakeholders. Read more about our business model, including our capital trade-offs, outputs, outcomes and the value created and distributed among our stakeholders, sustainable long-term view. Refer to pages 45 to 52 for more from page 22. information. 2 www.pnp.co.za 3 Integrated Annual Report 2019 1 INTRODUCING OUR 2019 INTEGRATED ANNUAL REPORT 1 INTRODUCING OUR 2019 INTEGRATED ANNUAL REPORT ABOUT THE FORWARD-LOOKING To best meet the needs of our various stakeholders, we produce HOW WE COMPILED THIS REPORT AND INFORMATION CONTAINED IN THIS REPORT a suite of publications that are tailored to meet our readers’ This report contains certain forward-looking statements which specific information requirements, and comply with the reporting WHAT YOU NEED TO KNOW ABOUT IT relate to the possible future performance and financial position frameworks detailed below. of the Group. All forward-looking statements are solely based on the views and considerations of the directors. These statements INTEGRATED ANNUAL REPORT 2019 THE SCOPE AND BOUNDARY OF THIS REPORT involve risk and uncertainty as they relate to events and depend We are pleased to present A review of the Group’s strategy, material issues, risks and This report covers the integrated financial and non-financial performance of on circumstances that may or may not occur in the future. our 2019 integrated annual opportunities and our operational and financial performance for the Pick n Pay Stores Limited, its subsidiaries and its associate for the 53 weeks ended The Group does not undertake to update or revise any of these period. The report includes relevant extracts of the 2019 annual report for the 53 weeks ended 3 March 2019, with relevant comparisons to previous periods, and is consistent with forward-looking statements publicly, whether to reflect new financial result, disclosure on environmental and social sustainability, 3 March 2019. information and performance indicators included in internal management reporting. information, future events or otherwise. These forward-looking our governance structures and our remuneration report. statements have not been reviewed or reported on by the • The King IV Report on Corporate Governance™ for The audit, risk and compliance committee The Group follows a 52-week retail financial calendar, which requires the inclusion of an 1 Group’s external auditors. South Africa 2016 (King IV) has reviewed the 2019 integrated annual additional week every few years. The 2019 financial year is a 53-week period, and its • The Global Reporting Initiative’s Standards (for reporting report and recommended it for approval financial results, prepared under International Financial Reporting Standards (IFRS), are non-financial information) to the Board.
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