INTEGRATED ANNUAL REPORT We are pleased to provide our 01 INTRODUCING OUR 2020 INTEGRATED ANNUAL REPORT Our report tells our value creation story 2 Our 2020 Integrated Annual Report 4 A message from our Chairman 6 Integrated Annual Report 02 THIS IS PICK N PAY to our stakeholders About us 11 What sets us apart 12 Our store footprint 14 Our store formats 16 Creating value through our business model 20 03 OUR BUSINESS IN CONTEXT The environment we operate in 26 Material issues, risks and opportunities 32 Engaging with our stakeholders 40 04 OUR STRATEGY Strategic focus 45 05 OUR PERFORMANCE A message from our CEO 56 Our CFO’s financial review 60 Summary of FY20 annual financial result 68 Five-year review 76 Value-added statement 79 06 OUR GOVERNANCE An overview by our lead independent director 82 Our governance structure 84 Our Board of directors 89 Remuneration report 94 07 SHAREHOLDERS’ INFORMATION Analysis of ordinary shareholders 114 Analysis of B shareholders 115 Shareholders’ information 116 Corporate information IBC 1 Integrated Annual Report 2020 INTRODUCING OUR 2020 INTEGRATED ANNUAL REPORT | 01 The value we create for our stakeholders OUR REPORT TELLS OUR The value we create for our stakeholders is summarised in our business model from page 20. For further detail on our key stakeholder groups, why we engage with them and the value derived from open and constructive VALUE CREATION STORY engagement during the year, refer to pages 40 to 43. Our enduring values How to navigate our value How we create value Customers Pick n Pay is a much-loved brand, Pick n Pay has played a valuable role in the economic creation story We provide an inclusive and diverse spectrum of customers valued within society, built on a and social development of southern Africa for over five in southern Africa with convenient and reliable access to high- We use six broad capitals decades – and our belief that doing good is good business quality, safe and competitively priced products and value-added genuine desire to make life better to create sustainable ensures that we create value not only for our shareholders services, in outstanding stores, and underpinned by great service. for our customers and to make but for all our stakeholders. stakeholder value: a positive contribution to the We ensure meaningful and balanced interactions communities in which we live and Financial between our different stakeholder groups within the various Community work. Our strong and unique family Human retail market, regulatory, social and environmental contexts values have guided the business in which we operate. Read more from page 26. We give back to the communities we serve through investment for 53 years, providing a solid Manufactured aimed at economic and social upliftment. This includes education and literacy programmes, housing, nutrition and poverty relief foundation for growth, innovation, Social and relationship Our business model maintains a virtuous circle schemes, such as our Feed the Nation campaign. In addition, we service excellence and generosity. support cultural and theatrical projects, sports development and Intellectual that considers our stakeholders and our operating context environmental programmes. and effectively manages the trade-offs between the capitals We are passionate about Natural on which we rely. Read more from page 20. our customers and will Refer to pages 20 to 24 for more information. fight for their rights Employees We successfully execute our customer-led, innovative and forward-looking strategy We provide direct employment to 90 000 people across our We consider and address our owned and franchise businesses – augmented by a focus on We live by honesty and integrity to create sustainable value. Read more from page 45. key stakeholders’ issues and training and skills development, and a commitment to diversity concerns to create lasting value: and career advancement that is based on merit. Customers We add to this value through We foster personal growth our sustainability strategy, and opportunity Community which supports our business strategy. Our sustainability Suppliers Employees strategy is aligned with our stakeholder needs and with the seven United Nations Sustainable Development Goals (SDGs) We create substantial economic development and employment Suppliers most relevant to our business. Read more from page 52. opportunities across our value chain, procuring goods and We take individual responsibility services from around 10 000 local suppliers and service providers. Franchisees This includes many small to medium-sized businesses that have been mentored through our enterprise development programmes. Shareholders We care for and respect each other Refer to pages 40 to 43 for more information. Franchisees We have six clear engines for We support our franchisees and market store partners by We support and participate long-term strategic growth: helping them build profitable and sustainable businesses through in our communities The Board is accountable for the Group’s performance and mutually beneficial partnerships. These partnerships are built Pick n Pay: South Africa’s ensures that the business is adequately positioned to on the strength of the Pick n Pay brand and are supported by 1 most trusted retailer create sustainable long-term value for all stakeholders. efficient and effective distribution and administrative platforms. We nurture leadership and vision, Sustainable value creation is measured 2 Boxer: Africa’s favourite discounter and reward innovation across the Group’s environmental, 3 Bearing down on costs social and governance objectives Shareholders as set out in our long-term strategy, and with reference 4 Value-added customer services to the effective management of our capitals and the balanced We provide our shareholders with a consistent and sustainable We are all accountable 5 Expansion in Africa and appropriate management of stakeholder needs. return on investment through a rigorous focus on capital efficiency and strategy execution that takes a sustainable long- Our ethical value system strengthens 6 Force for Good term view. our relationships with stakeholders. Refer to pages 45 to 51 for more information. Read more from page 40. 2 3 www.pnp.co.za Integrated Annual Report 2020 INTRODUCING OUR 2020 INTEGRATED ANNUAL REPORT | 01 OUR 2020 INTEGRATED Assurance on report content Reporting element Assurance status and provider ANNUAL REPORT Integrated Annual Report Reviewed by the directors and management, but has not been externally assured. Financial information The summarised financial information is extracted from the annual financial statements, which includes The scope and boundary of this report both audited and unaudited information. The audited information in the annual financial statements was We are pleased to present our 2020 audited by Ernst & Young Inc. (EY) who expressed an unmodified audit opinion thereon. Integrated Annual Report for the This report covers the integrated financial and non-financial performance 52 weeks ended 1 March 2020. of Pick n Pay Stores Limited, its subsidiaries and its associate (the Group) Selected non-financial Accredited service providers and agencies have verified selected non-financial performance metrics for the 52 weeks ended 1 March 2020. It contains relevant comparisons performance metrics contained in the report, including our carbon footprint and our BBBEE rating. The Board assumes accountability for the Group’s to previous periods, and is consistent with information and performance performance. The Board guides and oversees the All other non-financial Management has verified the processes for measuring all other non-financial information. indicators included in internal management reporting. The Integrated performance information business in the context of material and emerging risks Annual Report is our primary report to stakeholders. It is principally aimed and opportunities to ensure that our strategy remains at providers of financial capital, being our shareholders and debt providers; relevant and responsive. Board oversight includes taking however, it considers the information needs of all our stakeholders. into account environmental, social and governance Our approach to online reporting (ESG) issues as part of its decision-making processes Integrated reporting boundary to support sustainable stakeholder value creation. Our Integrated Annual Report is available online on the Group’s website at www.picknpayinvestor.co.za. Printed copies are available on Our reporting boundary is influenced by our broader macro-economic request from our Company Secretary, Debra Muller, at [email protected] or by fax at +27 21 797 0314. The Board is confident that this report provides environment across seven southern African countries, taking into account stakeholders with an accurate and balanced view of stakeholder needs. the Group’s performance, its strategy and its prospects We produce a suite of publications tailored to meet over the short, medium and long term. It further Our reports comply with addresses the material issues faced by the Group. The our stakeholders’ specific information requirements. the following reporting audit, risk and compliance committee reviewed this FINANCIAL REPORTING BOUNDARY Our reports comply with the reporting frameworks standards and frameworks: IAR AFS CGR AGM SLR Includes the risks and opportunities report and recommended it for approval to the Board. detailed in the table provided. The International Integrated within our