NOTICE AND PROXY OF ANNUAL GENERAL MEETING AND SUMMARISED GROUP ANNUAL FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 1 MARCH 2020 CONTENTS 2 Letter to shareholders 4 Review of operations 18 Group statement of comprehensive income 19 Group statement of financial position 20 Group statement of changes in equity 21 Group statement of cash flows 22 Notes to the financial information 44 Appendices to the financial information 51 Number of stores 52 Remuneration report 77 Notice of annual general meeting 86 Curricula vitae of directors to be elected 89 Analysis of ordinary shareholders 90 Analysis of B shareholders 91 Corporate information Form of proxy (attached) www.picknpayinvestor.co.za 1 Pick n Pay Stores Limited LETTER TO SHAREHOLDERS DEAR SHAREHOLDER ELECTRONIC PARTICIPATION The Pick n Pay Stores Limited Group (Group) presents to you the results for our 2020 financial period through A. Shareholders or their duly appointed proxies who wish to participate in the AGM via electronic communication our summarised audited Group annual financial statements. The reviewed preliminary condensed consolidated (participants) must either: annual financial statements were approved by the Board of directors on 11 May 2020, followed by the approval of the audited annual financial statements on 19 June 2020. (i) register online using the online registration portal at www.smartagm.co.za; or (ii) apply to Computershare, by delivering the duly completed electronic participation form to: The 2020 audited Group annual financial statements were prepared under the supervision of Pick n Pay’s a. First Floor, Rosebank towers, 15 Biermann Avenue, Rosebank 2196; or Chief Finance Officer, Lerena Olivier CA(SA), and were audited by our duly appointed external auditors, b. posting it to Private Bag X9000, Saxonwold, 2132 (at the risk of the participant); or Ernst & Young Inc. c. sending it by email to [email protected]; In addition, this publication contains the detailed notice of our 52nd annual general meeting (AGM) to be held at so as to be received by Computershare by no later than 08:30 on Tuesday, 4 August 2020. 08:30 on Tuesday, 4 August 2020. The electronic participation form can be found as an insert in this Notice of AGM. Given the lockdown resulting from the COVID-19 pandemic, our AGM will be conducted entirely by electronic communication, as permitted by the Companies Act, No 71 of 2008, as amended and by Pick n Pay’s Memorandum Computershare will first validate such requests and confirm the identity of the shareholder in terms of Incorporation. Please refer to the important details set out on page 3 under the heading Electronic Participation. of section 63(1) of the Companies Act. If the request is validated, further details will be provided on using the electronic communication facility to participate electronically in the AGM. To ensure that you have the documentation needed to inform voting at the 2020 AGM we have included the remuneration report in this publication. B. The Company will inform participants who notified Computershare in accordance with A above by no later than 08:30 on Tuesday, 4 August 2020 by email of the relevant details through which participants can If you are unable to participate in the AGM, you may vote by proxy. Instructions on how to participate via proxy are participate electronically. contained in the enclosed Notice of AGM and the form of proxy. Should you have any questions, please contact our offices or our transfer secretaries, Computershare Investor Services Proprietary Limited. C. The cost of electronic participation in the AGM is for the expense of the participant and will be billed separately by the participant’s own service provider. As we have previously indicated, the changing financial reporting requirements and corporate governance demands over the past few years have resulted in voluminous annual reports. In order to promote sustainability, D. The participant acknowledges that the electronic communication services are provided by third parties and printed copies of the Group’s 2020 Integrated Annual Report will be made available to shareholders on request. indemnifies the Company against any loss, injury, damage, penalty or claim arising in any way from the use or possession of the electronic services, whether or not the problem is caused by any act or omission on the Our 2020 Integrated Annual Report will be made available on the Company’s website, www.picknpayinvestor.co.za, part of the participant or anyone else. In particular, but not exclusively, the participant acknowledges that he/ on 3 July 2020. If you would prefer to receive a printed copy please contact me on +27(0)21 658 1000 or via email she will have no claim against the Company, whether for consequential damages or otherwise, arising from at [email protected]. the use of the electronic services or any defect in it or from total or partial failure of the electronic services and connections linking the participant via the electronic services to the AGM. Yours sincerely E. The Company cannot guarantee there will not be a break in electronic communication that is beyond Debra Muller its control. Company Secretary 1 July 2020 2 3 www.pnp.co.za Pick n Pay Stores Limited INTRODUCTION A. FY20 FINANCIAL RESULT: SOUTH AFRICAN OPERATIONS DELIVER IN A CHALLENGING The Pick n Pay Group is publishing its FY20 financial REVIEW OF OPERATIONS ECONOMY results in the unprecedented circumstances of the The Group traded in difficult economic conditions FEEDING THE NATION IN CHALLENGING TIMES COVID-19 pandemic, with the country operating under a National State of Disaster. throughout the year, with low growth, high unemployment, rising household costs and constrained consumer We embrace our responsibility to help feed the nation spending in all regions. Pro forma as an essential service provider. Our Pick n Pay and Group Comparable Turnover growth of 4.7% (South Africa: 52 weeks to 53 weeks to 52 weeks to Pro forma Boxer teams are working tirelessly with our suppliers 1 March 3 March 24 February % and partners to maintain an effective supply chain 5.1%) was delivered against a strong base in the KEY FINANCIAL INDICATORS 2020 2019* 2019* change and to ensure our stores are well-stocked with food previous year, and reflects deteriorating economic conditions throughout the year, and a final quarter Turnover – comparable# R89.2 billion R87.2 billion R85.2 billion 4.7 and groceries. In fulfilling this role, the safety and disrupted by lengthy power outages (load shedding) # well-being of our colleagues and customers is our Turnover – reported R89.3 billion R88.3 billion R86.3 billion 3.5 in South Africa, alongside some supply chain labour top priority. True to our values, we have also provided Gross profit margin 19.7% 19.1% 19.1% disruption. Viewed over a two-year period, the Group over 5 million meals to the most vulnerable in our has delivered comparable compound annual sales Trading profit R3 148.0 million R3 054.9 million R2 915.9 million 8.0 communities across the country, through our Feed growth of 6%, ahead of the South African retail market. Trading profit margin 3.5% 3.5% 3.4% the Nation campaign. We are particularly pleased with the progress and Comparable profit before tax and capital items We set out in this report: performance of our Boxer business, together with our (Comparable PBT)** R1 870.7 million R1 883.0 million R1 756.4 million 6.5 A. A review of our performance over the FY20 Pick n Pay stores serving lower- and middle-income Comparable PBT margin 2.1% 2.1% 2.0% customers. Exceptional quality and value are driving financial year – which ended on 1 March 2020. positive volume growth for the Group in this important Comparable PBT – South Africa R1 780.6 million R1 658.8 million R1 545.2 million 15.2 This was four days before the first confirmed section of the market. Comparable PBT margin – South Africa 2.1% 2.0% 1.9% COVID-19 case in South Africa, and the result was not impacted by the pandemic Profit for the period, after tax R1 194.7 million R1 444.6 million R1 349.7 million (11.5) By unlocking further efficiency gains, the Group has lifted the gross profit margin to 19.7%, and has Reported HEPS♦ 287.89 cents 300.58 cents 280.60 cents 2.6 B. A summary of our actions in response to the COVID-19 outbreak, up to the time of publication restricted the growth in trading expenses to 6.3% Reported diluted HEPS (DHEPS)♦ 286.39 cents 296.83 cents 277.11 cents 3.3 of this report year-on-year, and just 2.9% in the second half. Comparable HEPS♦ 278.81 cents 300.58 cents 280.60 cents (0.6) C. A comment on current trading conditions and the Operations in Zambia and Zimbabwe impacted the ♦ Comparable DHEPS 277.36 cents 296.83 cents 277.11 cents 0.1 uncertain outlook for the remainder of our FY21 result, reducing Group earnings by 8.7% pts year-on- financial year * IFRS 16 Restatement – the financial information presented for the prior period is on a restated basis, with the full retrospective year. However, the Group’s result was protected by adoption of IFRS 16 Leases (IFRS 16). Refer to note 15 of the summarised financial statements for further information. D. An update on progress in delivering our long- a resilient performance from the core South African business, which lifted its Comparable Profit before # Comparable Turnover – following a strategic change in arrangements with cellular airtime and data providers this year, the Group term plan, which has strengthened our ability now only transacts airtime and data on an agency basis.