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ANNUAL FINANCIAL STATEMENTS 

Corporate governance and 

approval of 

annual financial statements ____________________________________34 

Auditors’ report ______________________________________________36 

Currency of annual financial statements __________________________36 

Directors’ report ______________________________________________37 

Accounting policies ___________________________________________39 

Income statement _____________________________________________40 

Balance sheet ________________________________________________41 

Cash flow statement __________________________________________42 

Notes to the annual 

financial statements ___________________________________________43 

Interest in subsidiaries and 

associated companies __________________________________________57

CORPORATE 

GOVERNANCE and approval of annual financial statements 

The Board subscribes to the principles of transparent 

and honest corporate governance as set out in the 

Code of Corporate Practices and Conduct in the King 

Report (“the Code”), and in all material respects complies 

with the requirements thereof. In line with their respective 

codes of ethics group companies endeavour at all times 

t o maintain the highest standard of integrity in dealing 

with their clients, staff, shareholders and suppliers and in 

doing so to ensure the largest measure of credibility, trust 

and stability. 

Group structure 

Pepkor is an investment holding company with investments 

in listed and unlisted companies. These operating 

companies have independent boards of directors on which 

representatives of Pepkor serve in a non-executive capacity. 

All Pepkor’s subsidiaries are committed to the principles of 

sound corporate governance as contained in the Code, and 

as far as practicable comply with all the essential aspects 

thereof. Pepkor encourages these companies to comply 

fully with the Code, and to disclose any cases in which such 

compliance is not possible. 

Board of directors 

P e p k o r ’s Board consists of eleven directors, six of whom 

hold executive positions in the group. The Chairman of the 

Board is an executive director. The composition of the 

Board provides for proper deliberation of all matters 

requiring the Board’s attention thereby ensuring balance of 

power and authority. The Board meets at least four times a 

year. Particulars of the members of the Board are furnished 

on page 21 of the annual report. 

Audit committee 

The Pepkor audit committee, normally consisting of three 

members, all of whom are non-executive directors, meets 

at least twice a year in order to evaluate matters such as 

accounting practices, internal control systems, auditing and 

financial reporting. The audit committee is also charged 

with identifying and reporting to the Board on critical 

areas of risk, which includes Y2000 compliance, that have 

been identified for the group in collaboration with the 

management. 

The audit committee functions in terms of a written 

mandate from the Board, and the external auditors have 

unrestricted access to the committee. Relevant members of 

the executive management are also invited to attend 

meetings in order to assist the committee in carrying out its 

task. The audit committee receives feedback on the activities 

of the audit committees of the company’s subsidiaries and 

also has access to the minutes of these meetings. It is policy 

that all chairmen of the audit committees of the company’s 

subsidiaries be directors of P e p k o r. 

Remuneration committee 

The remuneration of the executive directors is subject 

t o the approval of the executive chairman of the comp 

a n y and the chairman’s salary is determined by nonexecutive 

directors. 

Employment equity 

The company pursues a policy of equal opportunities and 

no discrimination. Since the group’s operations are vested 

in separate subsidiary companies, each of which operate in 

unique circumstances, those companies implement such 

staff development and affirmative action programmes as 

are required by their particular circumstances and similarly 

provide for employee participation. 

Internal control 

The directors accept final responsibility for the internal 

control systems of the group. As an investment holding 

company the adequacy and effectiveness of internal 

financial control is regularly appraised independently by 

the audit committees of the subsidiary companies and their 

external auditors. It is the management’s responsibility to 

ensure that relevant legislation and regulations are 

complied with and that adequate internal financial control 

systems are developed and maintained in order to provide 

reasonable assurance regarding: 

page 34

– the completeness and accuracy of the accounting records; 

– the integrity and reliability of the annual financial 

statements; and 

– the safeguarding of the business undertaking’s assets. 

The effectiveness of any internal financial control system 

depends upon strict observance of prescribed measures. Nonobservance 

of such measures by staff is always a risk. 

Consequently even a strict internal control system can only 

provide reasonable assurance as regards financial reporting 

and the safeguarding of assets. An evaluation of the group’s 

internal financial control systems was made on 30 June 1999, 

and on the basis of this evaluation the Board is of the opinion 

that the internal control systems in respect of financial 

reporting and the safeguarding of assets against unauthorised 

use or disposal complied with acceptable criteria. 

Year 2000 compliance 

Year 2000 compliance is dealt with under the Financial 

review which is to be found on page 22 of the annual 

report. 

59 have been approved by the Board. 

Signed on behalf of the Board of Directors 

C H Wiese 

Chairman 

C Moore 

Financial director 

25 August 1999 

Approval of annual financial 

statements 

The responsibility for preparing and submitting the annual 

financial statements was delegated to the management. 

The financial statements were prepared in accordance with 

generally accepted accounting practice and are in accordance 

with the group’s accounting records and policy 

which have been applied on a consistent basis. 

The directors accept final responsibility for the integrity, 

objectivity and reliability of the annual financial statements 

and subscribes to the concept of transparency in financial 

reporting. The external auditors are responsible for 

reporting on the annual financial statements. The directors 

are of the opinion that the group has sufficient resources at 

its disposal to carry on the undertaking in the foreseeable 

future and the annual financial statements have 

accordingly been prepared on a going concern basis. 

The directors’ report, annual financial statements and 

group annual financial statements as set out on pages 37 to 

page 35

AUDITORS’ 

REPORT 

Report of the independent auditors 

to the members of Pepkor Limited 

We have audited the annual financial statements and group 

annual financial statements set out on pages 37 to 59 for the 

year ended 30 June 1999. These financial statements are the 

responsibility of the directors of the company. Our 

responsibility is to express an opinion on these financial 

statements based on our audit. 

Scope 

We conducted our audit in accordance with statements of 

South African Auditing Standards. These standards 

require that we plan and perform the audit to obtain 

reasonable assurance that the financial statements are free 

of material misstatement. An audit includes 

• examining, on a test basis, evidence supporting the 

amounts and disclosures included in the financial 

statements; 

• assessing the accounting principles used and significant 

estimates made by management; and 

• evaluating the overall financial statement presentation. 

We believe that our audit provides a reasonable basis for 

our opinion. 

Audit opinion 

In our opinion, the financial statements fairly present, in all 

material respects, the financial position of the company and 

the group at 30 June 1999 and the results of their operations 

and cash flows for the year then ended in accordance with 

generally accepted accounting practice and in the manner 

required by the Companies Act. 

PricewaterhouseCoopers Inc. 

Registered Accountants and Auditors 

Chartered Accountants (SA) 

Bellville 


CURRENCY OF ANNUAL 

FINANCIAL STATEMENTS 

The annual financial statements are expressed in South African Rand. The approximate Rand cost of a unit of the 

following currencies at year-end was: 

1999 1998 

USA Dollar 6,06 5,87 

Pound Sterling 9,66 9,77 

Australian Dollar 4,02 3,73 

German Mark 3,29 3,24 

Japanese Yen (100) 4,99 4,22 

page 36

DIRECTORS’ 

REPORT 

Pepkor Limited and its subsidiaries 

Share capital 

During January 1999, 5 758 782 shares have been issued at 

a premium of 1 995 cents per share in settlement of the 

purchase price at the acquisition of the shares in Pep 

Limited held by minority shareholders, resulting in Pep 

Limited becoming a wholly-owned subsidiary. 

Full details of the company’s authorised and issued share 

capital are set out in the notes to the annual financial 

statements. 

Business of the group 

Pepkor Limited is an investment holding company with 

investments in subsidiaries and associated companies and 

at year-end the company controlled mainly the following 

investments: 

Subsidiaries 

– Pep Limited 

Pep Stores retailing for cash clothing, footwear, 

blankets and household softs/hardware from premises 

situated in the Republic of South Africa, Namibia, 

Botswana, Lesotho, Swaziland, Zambia, Mozambique 

and Ghana. 

Power Sales retailing for cash clothing, footwear, 

blankets and household textiles from premises situated 

i n Zimbabwe. 

Pep Manufacturing, manufacturing operations 

situated in the Western Cape as well as in Malawi, 

allied to the clothing retail. 

– Shoprite Holdings Limited 

Shoprite Checkers retailing for cash food, clothing and 

household softs/hardware from premises situated in 

the Republic of South Africa, Botswana, Zambia, 

Mozambique and Namibia. 

OK Bazaars and Hyperama retailing for cash food, 

clothing and household softs/hardware and on credit 

in household furniture from premises situated in the 

Republic of South Africa, Lesotho and Swaziland. 

Shoprite Checkers Properties which owns fixed property 

in the Republic of South Africa, Namibia, Zambia 

a n d Mozambique strategic to the group’s activities. 

– Ackermans Limited 

Ackermans retailing for cash clothing, footwear, blankets 

and household softs/hardware from premises situated in 

the Republic of South Africa, Namibia, Botswana, 

Swaziland, Lesotho, Zambia and Mozambique. 

– Brown & Jackson plc 

Poundstretcher and What Everyone Wants retailing for 

cash clothing, toiletries and household softs from 

premises situated in the United Kingdom. 

Your More Store retailing for cash clothing, footwear, 

blankets and household softs/hardware from premises 

situated primarily in Scotland. 

– Cashbuild Limited 

Cashbuild retailing for cash building materials from 

premises situated in the Republic of South Africa, 

Botswana, Lesotho, Namibia and Swaziland. 

– Stuttafords 

Stuttafords retailing on credit and for cash, clothing 

and household softs/hardware from premises situated 

in the Republic of South Africa. 

– Best & Less 

Best & Less retailing for cash, clothing and household 

textiles from premises situated in Australia. 

– Sundry 

Pepkorfin, which renders certain head office services 

in the group. 

Associated companies 

– Retail Apparel Group Limited 

Smart Centre, Bee Gee, Guys & Girls, Patrick Daniel 

and Arthur Kaplan Jewellers, retailing on credit and 

for cash, clothing, footwear, household softs and 

jewellery from premises situated in the Republic of 

South Africa, Namibia, Mozambique, Lesotho, 

Zambia and Botswana. 

page 37

DIRECTORS’ 

REPORT 

Pepkor Limited and its subsidiaries 

Pepkor Limited’s interest in its subsidiaries and associated 

companies, as well as their individual activities, is set out in 

the annual financial statements. 

Group results 

Earnings 

After taking into account the income of associated 

companies and outside shareholders’ interest, the group 

achieved earnings per share, before exceptional items, of 

125,1 cents (1998: 151,8 cents). 

Details of the results of Pepkor Limited and the group are 

contained in the income statement. 

The attributable interest of Pepkor Limited in the taxed 

profits and losses, after exceptional items, of its subsidiaries 

for the year was as follows: 

At 30 June 1999 the directors of Pepkor Limited held a 

direct interest of 0,1% (1998: 0,1%) and an indirect, nonbeneficial 

interest of 0,4% (1998: 0,7%) of the issued share 

capital of the company. Indirect holdings through listed 

companies have not been included. No material change in 

the shareholding of directors has occurred between the end 

of the financial year and the date of this report. 

Holding company 

The company’s holding company is Pepgro Limited. 

Secretary 

The name and address of the secretary appear elsewhere in 

the annual report. 

1999 1998 

Total profits R532,8 million R439,0 million 

Total losses R345,2 million R145,5 million 

Dividends 

An interim dividend of 40 cents (1998: 36 cents) per share 

w a s paid on 26 March 1999. A final dividend of 10 c e n t s 

( 1998 : 14 cents) per share is payable on 23 September 1999 to 

shareholders registered in the company’s register at the close 

of business on Friday, 10 September 1999. This brings the total 

dividend for the year to 50 cents (1998: 50 cents) per share. 

Directorate 

The names of the directors are listed elsewhere in the annual 

report. On 1 February 1999 Mr T R Hlongwane was 

appointed as a director. Mr J F le Roux resigned as a director 

on 30 May 1999, whereas Mr M G Loubser retired as a 

director on 30 June 1999. 

In terms of the articles of association of the company 

M e s s r s J W B a s s o n , J J Fouché, T R Hlongwane and W C 

van der Merwe retire as directors of the company at the 

annual general meeting, but being eligible offer themselves 

for re-election. 

page 38

Pepkor Limited and its subsidiaries for the year ended 30 June 1999 

The annual financial statements are prepared on the 

historical cost basis, with the exception of certain 

fixed assets which are adjusted for revaluations as detailed 

b e l o w, and incorporate the following principal policies 

which are in all respects consistent with those of the 

previous year: 

1. Consolidated annual financial statements 

The consolidated annual financial statements include 

the accounts of the company and all its subsidiaries. 

The excess of cost over net asset value at the date of 

acquisition of interests in subsidiaries is written off 

against retained income. 

2. Associated companies 

All companies, except subsidiaries, in which the group 

has a long-term interest and where it has the ability to 

exercise significant influence over financial and 

operating decision making, are regarded as associated 

companies and being equity accounted. The excess of 

cost over net asset value at the date of acquisition of 

interests in associated companies is written off against 

retained income. 

3. Foreign currency 

Amounts in foreign currency, resulting from trading, 

are converted to Rand at the contracted exchange rate. 

Exchange rate differences which occur at settlement 

o r conversion are fully accounted for in the income 

statement in the period in which it occurred. 

4. Foreign subsidiaries 

Assets and liabilities of foreign subsidiaries are 

converted to Rand at the exchange rates ruling at yearend, 

whereas their income statement and cash flow 

statement items are converted to Rand at weighted 

average rates of exchange during the financial year. 

Differences arising on conversion are taken directly to 

non-distributable reserves. 

5. Turnover 

Turnover of the group is the total of all sales of the 

c o m p a n y ’s subsidiaries, after elimination of intergroup 

sales. 

6. Income 

Some subsidiaries sell household furniture on instalment 

sale agreement. Profit on instalment sale agreements is 

accounted for on the date of sale. Financing income is 

recognised as income on the sum of digits method. 

7. Deferred taxation 

Deferred taxation is provided at prevailing rates on the 

comprehensive basis on all timing differences, after 

taking into account estimated or assessed losses. 

Deferred taxation debits are only created to the extent 

that it does not result in a net deferred taxation debit. 

ACCOUNTING 

POLICIES 

8. Fixed assets 

Land and buildings are regarded as investment properties 

and reflected at cost or valuation. Land and 

buildings are not depreciated. 

M a c h i n e r y, equipment, vehicles and aircraft are depreciated 

at rates appropriate to the various classes 

o f assets involved, taking into account the estimated 

useful life of the individual items. 

Improvements to leasehold property are carried at cost 

and written off over the period of the lease. 

Assets obtained in terms of finance lease agreements 

are capitalised. 

Fixed assets are depreciated over the following periods: 

Machinery: 

3 to 10 years 

Equipment: 

3 to 10 years 

Vehicles: 

3 to 5 years 

Aircraft: 

25 years 

9. Bank balances 

Actual bank balances are reflected. Outstanding 

cheques are included in accounts payable and 

provisions and outstanding deposits in bank balances 

and cash. 

10.Inventories 

Inventories are valued at the lower of cost or net 

realisable value. Cost for the group is determined on 

the following bases: 

– Raw material 

The lower of a predetermined standard cost or 

actual cost. 

– Work in progress 

Direct costs which include raw material, direct 

labour and attributable production overheads. 

– Merchandise 

Manufactured in the group’s factories: 

Direct costs which include raw material, direct 

labour and attributable production overheads. 

Purchased from other suppliers: 

Average cost less an adjustment for obsolete and 

slow moving inventories. 

– Goods in transit 

Invoice value of raw material and merchandise not 

yet received. 

– Consumable goods 

Actual cost. 

The basis of determining cost by some of the non-RSA 

subsidiaries is the last-in-first-out-method, but is adjusted 

for the group to the abovementioned bases of 

valuation. The group’s interest in the profit after taxation, 

resulting from the adjustment originating outside the 

RSA, is transferred to non-distributable reserves. 

page 39

INCOME 

STATEMENT 

Pepkor Limited and its subsidiaries for the y ear ended 30 June 

COMPANY 

GROUP 

1998 1999 1999 1998 

R’000 R’000 Notes R’000 R’000 

Turnover 25 501 404 20 769 406 

(731) (896) Operating profit/(loss) 1 518 540 458 877 

(139 793) (88 123) Net finance charges 2 79 233 (18 023) 

139 062 87 227 Profit before exceptional items 439 307 476 900 

(1 157) – Exceptional items 3 (64 871) 3 746 

137 905 87 227 Profit before income of associated companies 374 436 480 646 

Income of associated companies 4 904 35 386 

137 905 87 227 Profit before taxation 375 340 516 032 

Taxation 5 39 231 43 792 

137 905 87 227 Profit after taxation 336 109 472 240 

Outside shareholders’ interest 6 129 943 128 677 

137 905 87 227 Net profit 206 166 343 563 

433 667 462 280 Retained income at beginning of the year 316 570 627 062 

571 572 549 507 Retained income 522 736 970 625 

109 292 110 968 Appropriated 144 237 654 055 

109 292 110 968 Dividends distributed to ordinary shareholders 110 968 109 292 

Excess of cost over net asset value on 

acquisition of interests in subsidiaries 

and associated companies written off 76 162 511 287 

Transfer (from)/to non-distributable reserves 7 (42 893) 33 476 

462 280 438 539 Retained income at end of the year 378 499 316 570 

Earnings per share (cents) 

– before exceptional items 8.1 125,1 151,8 

– after exceptional items 8.2 94,1 159,5 

– headline earnings 8.3 124,1 157,8 

Dividend (cents per share) 50,0 50,0 

page 40

BALANCE 

SHEET 

Pepkor Limited and its subsidiaries at 30 June 

COMPANY 

GROUP 

1998 1999 1999 1998 

R’000 R’000 Notes R’000 R’000 

1 611 121 1 702 233 Ordinary shareholders’ funds 2 149 453 2 052 275 

10 809 11 097 Share capital 9 11 097 10 809 

1 133 050 1 247 615 Share premium 10 1 247 615 1 133 050 

467 262 443 521 Reserves 11 890 741 908 416 

Outside shareholders’ interest 12 737 788 716 097 

Interest-bearing debt 1 308 666 1 288 392 

Long-term loans 13 186 248 328 153 

Short-term loans 14 551 701 533 925 

Bank overdrafts 570 717 426 314 

1 611 121 1 702 233 Capital employed 4 195 907 4 056 764 

Represented by – 

Fixed assets 15 2 269 948 2 159 480 

1 602 797 1 687 301 Investments 469 695 690 524 

1 567 109 1 651 613 Interest in subsidiaries 16 

Interest in associated companies 17 123 045 130 659 

35 688 35 688 Other investments 18 346 650 559 865 

50 326 48 765 Current assets 6 741 353 6 127 864 

Inventories 19 3 762 036 3 838 256 

50 326 48 765 Amounts owing by subsidiaries 16 

Accounts receivable 20 1 600 269 1 596 053 

Bank balances and cash 1 379 048 693 555 

1 653 123 1 736 066 Total assets 9 480 996 8 977 868 

42 002 33 833 Interest-free liabilities 5 285 089 4 921 104 

11 737 11 639 Accounts payable and provisions 21 5 232 821 4 850 710 

30 265 22 194 Dividends declared 52 268 45 851 

Deferred taxation – 24 543 

1 611 121 1 702 233 Employment of capital 4 195 907 4 056 764 

page 41

CASH FLOW 

STATEMENT 


COMPANY 

GROUP 

1998 1999 1999 1998 

R’000 R’000 Notes R’000 R’000 

31 106 (31 910) Cash retained from operations 933 183 570 033 

(731) (895) Operating profit/(loss) 518 540 458 877 

Non-cash items 22.1 320 446 471 983 

134 (98) Decrease/(increase) in working capital 22.2 438 919 (116 449) 

139 793 88 123 Net finance charges (72 706) 18 023 

(1) – Taxation paid 22.3 (49 402) (115 080) 

Import duties paid (90 894) – 

Proceeds from the cancellation of 

lease agreements 22 084 4 361 

139 195 87 130 Cash flow from operations 1 086 987 721 715 

(108 089) (119 040) Dividends paid (119 040) (108 089) 

Dividends paid to outside 

shareholders of subsidiaries (34 764) (43 593) 

(31 106) 31 910 Investment activities 22.4 (271 142) (1 116 077) 

– – Net cash flow 662 041 (546 044) 

Financing activities 23 452 426 560 

Proceeds from share issue of subsidiaries 3 178 332 991 

Interest-bearing debt raised 596 763 820 351 

Interest-bearing debt repaid (576 489) (726 782) 

– – Net movement in bank balances and cash 685 493 (119 484) 

Change in bank balances and cash 

Balance at beginning of the year 693 555 654 737 

Net movement 685 493 (119 484) 

Obtained with take-overs – 162 507 

Decrease on disposal of operations – (4 205) 

Balance at end of the year 1 379 048 693 555 

page 42

NOTES TO THE ANNUAL 


Pepkor Limited and its subsidiaries for the year ended 30 June 

COMPANY 

GROUP 

1998 1999 1999 1998 

R’000 R’000 R’000 R’000 

1. Operating profit 

Determined after taking into account the 

following expenditure: 

Cost of sales 21 755 624 17 194 650 

Depreciation of fixed assets 380 769 301 957 

Operating lease – land and buildings 933 999 727 662 

76 112 Directors’ remuneration 

87 147 For services as directors 

14 475 18 259 For full-time management 

14 562 18 406 

(14 486) (18 294) Paid by subsidiaries 

Provision for post-retirement medical benefits 25 550 (14 784) 

Retirement benefit contributions 132 258 81 944 

Foreign exchange losses/(profits) 37 006 (3 400) 

105 128 Auditors’ remuneration 12 942 9 968 

108 123 Audit fees – for this year 8 141 6 935 

Audit fees – under/(over) provided in the 

(3) 5 previous year 844 (213) 

Fees for other services 3 957 3 246 

92 148 Fees paid for outside services 73 949 48 050 

Administrative 5 903 6 779 

Technical 67 406 40 730 

92 148 Secretarial 640 541 

(Profit)/loss on sale and scrapping of 

fixed assets (5 794) 21 837 

2. Net finance charges 

2.1 Investment income 

112 599 79 550 From subsidiaries 

112 295 79 327 Dividends 

304 223 Interest 

Interest received 192 915 97 026 

27 194 8 576 Dividends – unlisted investments 29 182 55 778 

Dividends – listed investments 418 507 

Interest paid on loan against investment – (4 200) 

139 793 88 126 222 515 149 111 

– 3 2.2 Interest paid 301 748 131 088 

(139 793) (88 123) 2.3 Total 79 233 (18 023) 

2.4 During the period under review interest in the 

amount of R88 565 000 has been received in 

respect of amounts owing by share incentive 

trusts, whereas these loans did not exist on 

30 June 1999 any more. A corresponding amount 

of interest is included in interest paid. 

page 43




COMPANY 

GROUP 

1998 1999 1999 1998 

R’000 R’000 R’000 R’000 

3. Exceptional items 

Net (loss)/profit on disposal of investments (11 635) 25 192 

Payment of import levies in respect of previous 

financial periods (90 894) – 

Profit at the cancellation of lease agreements 22 084 4 361 

(Loss)/profit on disposal of land and buildings (1 145) 4 329 

Provision for store closure written back 15 142 – 

Impairment write-off on fixed assets – (26 624) 

(1 157) – Provision against interest in subsidiaries 

Other 1 577 (3 512) 

(1 157) – (64 871) 3 746 

Taxation – current 1 858 – 

Taxation – deferred – 9 021 

Associated companies – other (505) – 

Outside shareholders’ interest (4 347) 3 801 

(1 157) – (67 865) 16 568 

4. Income of associated companies 

Dividends received 6 527 – 

Attributable (loss)/profit before taxation (4 793) 35 386 

Attributable exceptional items before taxation (830) – 

904 35 386 

5. Taxation 

5.1 Resulting from – 

Normal activities 41 414 52 813 

Exceptional items (2 183) (9 021) 

39 231 43 792 

5.2 Classification – 

South African normal taxation (3 308) 23 216 

Foreign taxation 42 539 20 576 

39 231 43 792 

5.3 Consisting of – 

Current taxation 55 825 52 287 

Prior year taxation (1 983) (4 633) 

Non-resident shareholders’ tax 469 2 753 

Secondary tax on companies 9 463 6 596 

Deferred taxation (24 543) (13 211) 

39 231 43 792 

page 44




COMPANY 

GROUP 

1998 1999 1999 1998 

R’000 R’000 R’000 R’000 

5. Taxation (continued) 

5.4 Reconciliation of tax rate 

35,0 30,0 South African normal tax rate 30,0 35,0 

(35,0) (30,0) Net adjustment (19,5) (26,5) 

0,3 – Exceptional items (2,6) (2,1) 

(35,3) (30,0) Exempt income/non-deductible expenses (19,2) (14,5) 

Creation of tax losses 32,3 4,0 

Utilisation of tax losses (31,7) (16,5) 

Tax rate adjustment (1,6) 0,8 

Secondary tax on companies 2,5 0,6 

Prior year taxation (0,3) (0,4) 

Non-resident shareholders’ tax 0,2 0,2 

Other adjustments 0,9 1,4 

– – Effective tax rate 10,5 8,5 

402 402 5.5 Calculated tax losses at year-end 1 715 470 1 780 816 

Applied in reduction of the provision for 

deferred taxation 53 010 27 023 

402 402 Net calculated tax losses 1 662 460 1 753 793 

141 121 The utilisation of the tax relief of 498 738 613 828 

calculated at current tax rates on the net 

calculated tax losses is dependent on 

sufficient future taxable income in the 

companies concerned. 

5.6 Credits in respect of secondary tax on 

5 561 – companies (STC) at year-end 41 036 84 456 

695 – The utilisation of the STC relief of 5 130 10 557 

calculated at current rates is dependent on 

the future distribution of dividends in the 

companies concerned. 

The distribution of dividends from reserves 

will result in STC at 12,5%. No provision for 

STC on dividends from reserves is made as 

it is not envisaged that dividends will be 

declared from these reserves. 

6. Outside shareholders’ interest 

Resulting from– 

Normal activities 125 596 132 478 

Exceptional items 4 347 (3 801) 

129 943 128 677 

page 45




COMPANY 

GROUP 

1998 1999 1999 1998 

R’000 R’000 R’000 R’000 

7. Transfer (from)/to non-distributable reserves 

Attributable retained income of associated 

companies (36 366) 35 082 

Foreign currency translation reserve (7 433) – 

LIFO reserve in respect of non-RSA subsidiaries 873 1 930 

Capital redemption reserve fund 33 – 

Surplus on revaluation of land and buildings – (3 536) 

(42 893) 33 476 

8. Earnings per share 

8.1 Before exceptional items: 

Based on net profit of 274 031 326 995 

and the weighted average number of shares 

in issue of (’000) 219 057 215 462 

8.2 After exceptional items: 

Based on net profit of 206 166 343 563 


in issue of (’000) 219 057 215 462 

8.3 Headline earnings: 

Based on headline earnings of 271 912 340 037 

Net profit 206 166 343 563 

Attributable exceptional items (refer 3) 67 865 (16 568) 

(Profit)/loss on sale and scrapping of fixed 

assets after taxation and outside shareholders’ 

interest (2 119) 13 042 


in issue of (’000) 219 057 215 462 

9. Share capital 

9.1 Authorised: 

15 000 15 000 300 000 000 Ordinary shares of 5 cents each 15 000 15 000 

250 000 Variable rate redeemable cumulative 

3 3 preference shares of 1 cent each 3 3 

15 003 15 003 15 003 15 003 

9.2 Issued: 

221 936 384 (1998: 216 177 602) Ordinary 

10 809 11 097 shares of 5 cents each 11 097 10 809 

9.3 The unissued share capital is under the control 

of the directors who may issue it on such 

terms and conditions as they in their discretion 

deem fit. 

page 46




COMPANY 

GROUP 

1998 1999 1999 1998 

R’000 R’000 R’000 R’000 

10. Share premium 

863 642 1 133 050 Share premium at the beginning of the year 1 133 050 863 642 

270 141 114 887 Received during the year 114 887 270 141 

(733) (322) Share issue costs (322) (733) 

1 133 050 1 247 615 1 247 615 1 133 050 

11. Reserves 

4 982 4 982 11.1 Non-distributable reserves 512 242 591 846 

Goodwill realised on sale of branches 

510 510 to a subsidiary 

Reserve on acquisition of subsidiary 415 415 

Profit on share issue of subsidiaries 246 881 245 963 

LIFO reserve in respect of non-RSA 

subsidiaries 7 720 6 847 

Surplus on revaluation of land 

4 396 4 396 and buildings 51 544 42 077 

Foreign currency translation reserve 205 160 259 689 

76 76 Capital redemption reserve fund 522 489 

Attributable retained income of 

associated companies – 36 366 

11.2 Distributable reserve 

462 280 438 539 Retained income 378 499 316 570 

467 262 443 521 890 741 908 416 

12. Outside shareholders’ interest 


Ordinary shares 735 338 706 602 

Non-redeemable preference shares (refer 12.2) 2 450 2 450 

Convertible preference shares – 7 045 

12.2 A rate of 5% applies to preference shares 

of R2 100 000, whereas preference shares 

of R350 000 carry dividends at a rate of 

6%. 

737 788 716 097 

page 47




COMPANY 

GROUP 

1998 1999 1999 1998 

R’000 R’000 R’000 R’000 

13. Long-term loans 

13.1 Secured 

Finance lease obligations repayable in equal 

instalments over periods up to 6 years and 

interest-bearing at varying market rates 

(refer 13.4) 32 147 39 042 

Repayable in quarterly instalments of 

R67 032 and interest-bearing at 14,0% 

(refer 13.5) 2 985 3 388 

35 132 42 430 

13.2 Unsecured 

Finance lease obligations repayable in equal 

instalments over periods up to 8 years and 

interest-bearing at varying market rates 14 544 20 343 

Repayable in half-yearly instalments until 2004 

and interest-bearing at 15,6% 19 016 22 646 

Repayable in half-yearly instalments until 

2001 and interest-bearing at 16,3% 115 690 169 293 





Repayable in monthly instalments of 

R10 980 and interest-bearing at 13% 453 529 

292 333 388 175 

13.3 Total 

Secured 35 132 42 430 

Unsecured 292 333 388 175 

Redemptions within 12 months transferred 

to short-term loans (refer 14.3) (141 217) (102 452) 

186 248 328 153 

13.4 Secured by finance lease agreements in 

respect of fixed assets with a book value of 58 089 57 363 

13.5 Secured by a first mortgage bond over land 

and buildings with a book value of 8 181 11 373 

page 48




COMPANY 

GROUP 

1998 1999 1999 1998 

R’000 R’000 R’000 R’000 

14. Short-term loans 

14.1 Secured 

Short-term loan secured by a deposit of 

R484 906 900 included in bank balances 

and cash, serving as collateral 410 479 – 

14.2 Unsecured 

Holding company 5 5 568 

Other – 425 905 

5 431 473 

14.3 Total 

Secured 410 479 – 

Unsecured 5 431 473 

Short-term portion of long-term loans 

(refer 13.3) 141 217 102 452 

551 701 533 925 

15. Fixed assets 

15.1 Owned assets 

15.1.1 Machinery, equipment, vehicles and aircraft 

Cost 2 473 787 2 047 691 

Aggregate depreciation 1 307 852 966 587 

1 165 935 1 081 104 

15.1.2 Improvements to leasehold property 

Cost 292 357 259 202 

Amounts written off 100 921 75 732 

191 436 183 470 

15.1.3 Land and buildings 

At cost 483 089 636 053 

At valuation 313 090 135 449 

A register containing details is available for 

inspection at the registered office of the company. 

The directors are of the opinion that the market 

value of land and buildings, which are not 

depreciated, exceeds its book value. 

796 179 771 502 

15.1.4 Total 2 153 550 2 036 076 

page 49




COMPANY 

GROUP 

1998 1999 1999 1998 

R’000 R’000 R’000 R’000 

15. Fixed assets (continued) 

15.2 Leased assets 

15.2.1 Machinery, equipment and vehicles 

Cost 33 760 29 576 

Aggregate depreciation 26 601 15 535 

7 159 14 041 

15.2.2 Land and buildings 

At cost 89 025 88 013 

At valuation 20 214 21 350 

A register containing details is available 

for inspection at the registered office of the 

company. The directors are of the opinion 

that the market value of land and buildings, 

which are not depreciated, exceeds its book 

value. 

109 239 109 363 

15.2.3 Total 116 398 123 404 

15.3 Total fixed assets 2 269 948 2 159 480 

Machinery, Improvements 

equipment, 

to 

vehicles and leasehold Land and 

aircraft property buildings 

15.4 Reconciliation of book value 

Book value at beginning 1 095 145 183 470 880 865 

Additions 490 034 35 578 50 183 

Disposals and scrappings (56 538) (2 390) (39 130) 

Depreciation (355 547) (25 222) – 

Revaluation – – 13 500 

Book value at end 1 173 094 191 436 905 418 

page 50




COMPANY 

GROUP 

1998 1999 1999 1998 

R’000 R’000 R’000 R’000 

16. Interest in subsidiaries 


947 735 947 735 Shares at cost 

714 936 797 879 Amounts owing 

(45 236) (45 236) Provision against interest in subsidiaries 

1 617 435 1 700 378 

(50 326) (48 765) Current accounts transferred to current assets 

1 567 109 1 651 613 

16.2 The company has granted an option in terms 

of which 20 202 020 Shoprite Holdings Limited 

shares can be sold to the company within 2 years 

for an amount of R228 771 000, which amount 

escalates annually by approximately 12,0%. 

16.3 The company has granted an option in terms 

of which 2 600 000 Cashbuild Limited shares 

can be sold to the company within 4 years for 

an amount of R10 970 000, which amount 

escalates annually by approximately 11,3%. 

17. Interest in associated companies 

17.1 Net asset value at acquisition of interest 106 376 108 762 

Attributable post-acquisition reserves 16 669 21 897 

123 045 130 659 

17.2 Market value of listed shares 70 675 306 484 

18. Other investments 


Amounts owing by share incentive trusts 37 469 253 579 

Listed investments (refer 18.2) 3 632 3 689 

35 688 35 688 Unlisted investments (refer 18.2) 278 461 318 438 

Loan against investment – (35 000) 

Loans to directors (refer 18.3) 6 784 8 484 

Staff and other loans 12 427 9 376 

Other 7 877 1 299 

35 688 35 688 346 650 559 865 

18.2 Market value of listed investments 6 503 8 987 

Directors’ valuation of unlisted 

35 688 35 688 investments 278 461 318 438 

A register containing details of investments 

is available for inspection at the registered 

office of the company. 

page 51




COMPANY 

GROUP 

1998 1999 1999 1998 

R’000 R’000 R’000 R’000 

18. Other investments (continued) 

18.3 Loans to directors 

Balance at beginning of the year 8 484 7 111 

Increase at conversion of 

foreign asset – 1 849 

Loans repaid (1 700) (476) 

Currency of loan 

GB Pound 

Interest rate 7,0% 

The loan is repayable in equal amounts 

after 2 and 3 years respectively. 

6 784 8 484 

19. Inventories 


Raw material 10 493 33 598 

Work in progress 6 361 12 603 

Merchandise 3 650 689 3 712 214 

Trading inventories 3 667 543 3 758 415 

Goods in transit 94 244 78 920 

Consumable goods 249 921 

3 762 036 3 838 256 

19.2 The following amounts have been included 

at net realisable value: 

Raw material 3 256 913 

Work in progress 562 94 

Merchandise 749 291 724 457 

Goods in transit 485 – 

Consumable goods 60 – 

753 654 725 464 

20. Accounts receivable 

Trade accounts, less provision for 

doubtful debts 896 702 1 054 817 

Other debtors and debit balances, 

including payments in advance 703 567 541 236 

1 600 269 1 596 053 

page 52




COMPANY 

GROUP 

1998 1999 1999 1998 

R’000 R’000 R’000 R’000 

21. Accounts payable and provisions 

10 744 10 646 Creditors and accrued expenses 5 188 232 4 821 317 

993 993 Taxation payable 44 589 29 393 

11 737 11 639 5 232 821 4 850 710 

22. Cash flow information 

22.1 Non-cash items 

Depreciation 380 769 301 957 

(Profit)/loss on sale and scrapping 

of fixed assets (5 794) 21 837 

Foreign currency translation differences (54 529) 148 189 

320 446 471 983 

22.2 Decrease/(increase) in working capital 

Inventories 76 220 (181 098) 

Accounts receivable (4 216) (303 785) 

134 (98) Creditors and accrued expenses 366 915 368 434 

134 (98) 438 919 (116 449) 

22.3 Taxation paid 

Taxation per income statement (40 055) (35 094) 

(1) – Increase/(decrease) in taxation payable 15 196 (66 775) 

Decrease in deferred taxation (24 543) (13 211) 

(1) – (49 402) (115 080) 

22.4 Investment activities 

Acquisition of fixed assets (575 795) (844 438) 

Proceeds on disposal of fixed assets 102 707 220 751 

122 370 31 910 Decrease in amounts owing by subsidiaries 

Acquisition of further interests in existing 

(153 476) – subsidiaries (2 451) (47 702) 

Acquisition of shares in associated companies (234) (13 102) 

Acquisition of unlisted investments (103 312) (13 988) 

Proceeds on disposal of shares in 

associated companies 1 933 42 000 

Proceeds on disposal of unlisted investments 94 882 130 800 

Decrease/(increase) in amounts owing 

by share incentive trusts 216 110 (160 196) 

Proceeds on disposal of listed investments – 9 609 

Cost at acquisition of operations – (439 608) 

Other investment activities (4 982) (203) 

(31 106) 31 910 (271 142) (1 116 077) 

page 53




COMPANY 

GROUP 

1998 1999 1999 1998 

R’000 R’000 R’000 R’000 

23. Contingent liabilities 

23.1 Guarantees issued in respect of debt of – 

602 145 428 852 Subsidiaries 

– 250 000 Share incentive trusts 670 824 15 776 

602 145 678 852 670 824 15 776 

23.2 The company also guarantees the obligations 

of certain subsidiaries in terms of lease 

agreements in respect of land and buildings. 

24. Capital commitments 

Contracted for 341 426 91 740 

Not contracted for 519 988 448 421 

861 414 540 161 

Commitments for the 12 months after 

the accounting date 689 323 520 161 

Commitments for succeeding years 172 091 20 000 

Funds to meet this expenditure will be 

provided from the company and group’s 

own resources and by borrowings. 

25. Borrowing powers 

In terms of the articles of association of the 

company, the borrowing powers of Pepkor 

Limited are unlimited. 

26. Financial instruments 

Financial instruments, other than derivatives, 

consist of investments, loans, accounts receivable, 

bank balances and cash and accounts payable 

resulting from normal business transactions. 

Except for the total exposure represented by 

the respective balance sheet items, no other 

exceptional concentration of risk has been 

included. Funds are invested at banks with 

acceptable credit ratings only and accounts 

receivable comprise a wide spread client base, 

which is subject to stringent credit approval 

and control. 

The group is exposed to interest rate risk due 

to the extent of borrowings and market related 

interest rate arrangements, with the exception 

of debt in the amount of R342 065 000, which 

bears interest at fixed rates. 

861 414 540 161 

page 54




COMPANY 

GROUP 

1998 1999 1999 1998 

R’000 R’000 R’000 R’000 

26. Financial instruments (continued) 

The group has no risk of illiquidity due to 

unutilised banking facilities and unlimited 

borrowing powers. 

Derivative instruments, in the form of forward 

foreign exchange contracts, are being applied, 

subject to the risk assessment of management, 

to hedge against the currency risk in respect of 

foreign liabilities. Derivative instruments have 

also been applied to hedge against interest rate risk 

in respect of debt of R342 065 000. 

The book value of financial instruments 

approximate the fair values thereof with the 

exception of listed investments. 

27. Related parties 

Related party relationships exist between the 

company, its holding company, subsidiaries, 

associated companies and the directors of the 

company. All intergroup transactions have been 

eliminated in the annual financial statements and 

there are no other material transactions with 

related parties. Details of the remuneration of the 

directors and their shareholding, are disclosed 

elsewhere in the annual financial statements. 

28. Retirement benefits 

28.1 Pension fund/provident fund 

The group provides retirement benefits to more 

than half of its employees through monthly 

contributions to various pension and provident 

funds, which contributions are charged to income. 

Al funds are subject to the Pension Fund Act, 

1956, and the pension funds are required to be 

actuarially valued every 3 years. Except for four 

funds to which no new members are admitted, all 

funds are defined contribution plans. 

According to the latest actuarial valuations, the 

funds are financially sound. 

28.2 Medical aid 

Although there are no contractual obligations, 

certain group companies provide post-retirement 

medical benefits by funding a portion of the 

medical aid contributions of pensioners. Full 

provision for this expense is made with reference 

to actuarial valuations in respect of future medical 

contributions. At year-end the total provision for 

post-retirement medical benefits amounts to 194 160 165 212 

page 55




COMPANY 

GROUP 

1998 1999 1999 1998 

R’000 R’000 R’000 R’000 

29. Share incentive schemes 

29.1 In terms of the rules of the Pepkor Limited Share 

Incentive Trust the trustees are empowered to 

acquire and allocate shares and to grant share 

options, which in total may not exceed 5% of the 

issued share capital of the company. 

Number of shares 

The movements during the accounting period 

were as follows: 

321 941 277 574 Balance at beginning of the period 

(44 367) (257 574) Shares released to employees 

277 574 20 000 

29.2 In terms of the rules of the Pep Limited Share 

Incentive Trust the trustees are empowered to 

acquire and allocate shares and to grant share 

options, which in the case of Pepkor Limited, 

together with the shares held by the Pepkor 

Limited Share Incentive Trust, may not exceed 

5% of the issued share capital of that company. 

In the case of Pepgro Limited, a limit of 5% of the 

issued share capital of that company also applies, 

added to the shares held by the Pepgro Limited 

Share Incentive Trust. 



for shares in Pepkor Limited were as follows: 

– – Balance at beginning of the period 

– 622 560 Shares obtained with delisting of Pep Limited 

– 5 037 700 Shares acquired 

– (54 800) Shares released to employees 

– (74 600) Shares disposed of 

– 5 530 860 



for shares in Pepgro Limited were as follows: 

– – Balance at beginning of the period 

– 9 181 346 Shares acquired 

– 9 181 346 

page 56

INTEREST IN SUBSIDIARIES 

AND ASSOCIATED COMPANIES 

Annexure A 

Percentage 

shares 

Issued held by 

share group 

capital 1999 1998 

R % % 

Percentage 

shares 

Issued held by 

share group 

capital 1999 1998 

R % % 

Subsidiaries 

Pep Limited 

– Clothing retail 

Pep Ltd 123 577 497 100 94 

Pep Beleggings 500 000 100 94 

Pep Stores (SA) 100 100 94 

Pep Botswana Holdings Ltd P270 000 70 66 

Pep Namibia Holdings Ltd N$22 510 141 78 73 

At The Ready Wholesalers Z$564 000 80 75 

Pep (Africa) Ltd M W K 2 100 94 

– Manufacturing 

A c r y t e x 4 000 100 94 

Belmor Manufacturing Z$108 000 80 75 

Sara Lee Fashions Z$10 000 80 75 

– Services 

Pep Finance 1 100 94 

Shoprite Holdings Limited 

– Food retail 

Shoprite Holdings Ltd 616 305 708 61 61 

OK Bazaars (1998) 1 710 000 61 61 

Shoprite (OFS and 

Northern Cape) 2 61 61 

Shoprite (Tr a n s v a a l ) 2 000 61 61 

Shoprite Checkers Ltd 756 332 530 61 61 

– Food distribution 

F r e s h m a r k 1 000 61 61 

– Property investments 

Shoprite Checkers Properties Ltd 25 432 608 61 61 

Shoprite Property Holdings 1 61 61 

Brown & Jackson plc 

– Variety retail 

Brown & Jackson plc £22 368 057 70 70 

Poundstretcher Ltd £20 000 000 70 70 

Your More Store Ltd £7 866 820 70 70 

WEW Group plc £3 634 901 70 70 

Cashbuild Limited 

– Building materials retail 

Cashbuild Ltd 232 249 57 57 

Cashbuild (RSA) 54 000 57 57 

– Services 

Cashbuild Management 

S e r v i c e s 1 57 57 

O t h e r 


Ackermans Ltd 250 000 100 100 

Best & Less A $ 2 100 100 

– Variety retail 

Stuttafords Department Stores 1 000 75 90 

– Services 

P e p k o r f i n 4 100 100 

– Investments 

Retail Holdings Ltd £65 020 000 100 100 

Associated companies 

Retail Apparel Group Limited 


Retail Apparel Group Ltd 200 000 27 27 

Notes: 

1. General information in respect of subsidiaries as required in terms of paragraphs 69 and 70 of the Fourth Schedule to the Companies 

Act is set out in respect of only those subsidiaries, the financial position or results of which are material for a proper appreciation of 

the affairs of the group. Afull list of subsidiaries and associated companies is available on request. 

2. All companies are private companies unless stated otherwise. 

page 57

INTEREST IN 

SUBSIDIARIES 

Annexure B 

The financial interest of Pepkor Limited in subsidiaries at 30 June 

COMPANY 

1999 1998 

Name of subsidiary R’000 R’000 

1. Shares at cost 

Pep Limited 373 682 373 682 

Grocash Limited 3 775 3 775 

Ackermans Limited 85 862 85 862 

Pepkor Clothing Industries Limited 27 27 

Pepkorfin (Proprietary) Limited 551 551 

Stat-Hold (Proprietary) Limited 240 240 

Retail Holdings Limited 479 343 479 343 

Wilfred Meyersohn & Company (Proprietary) Limited – – 

Smart-Hold Limited 4 255 4 255 

Grocehold (Proprietary) Limited – – 

Cash-Hold Limited – – 

Garhold (Proprietary) Limited – – 

Big D Discount Hyper Limited – – 

W M Twee (Proprietary) Limited – – 

947 735 947 735 

2. Amounts owing 

Pepkorfin (Proprietary) Limited 797 879 714 936 

page 58

INTEREST IN SIGNIFICANT 

ASSOCIATED COMPANIES 

Annexure C 

1999 1998 

Retail Apparel Group Limited R’000 R’000 

1. Effective interest 26,6% 27,2% 

2. Abridged balance sheet 

Ordinary shareholders’ funds 463 172 456 886 

Outside shareholders’ interest 2 227 2 519 

Interest-bearing debt 484 861 385 064 

Capital employed 950 260 844 469 

Fixed assets 75 867 74 534 

Investments 10 678 – 

Current assets 1 018 399 968 699 

Total assets 1 104 944 1 043 233 

Interest-free liabilities 154 684 198 764 

Employment of capital 950 260 844 469 

3. The attributable interest of Pepkor Ltd in – 

Profit before taxation 1 734 35 386 

Exceptional items before taxation (830) – 

Taxation 824 (11 182) 

Net profit 1 728 24 204 

page 59

ADMINISTRATION 

Main bankers 

ABSA Bank 

First National Bank 

Nedbank 

Standard Bank 

Attorneys 

Jan S de Villiers & Son 

Main brokers 

BOE Securities (Proprietary) Limited 

Transfer secretaries 

Mercantile Registrars Limited 

11 Diagonal Street 

Johannesburg, 2001 

Telephone: (011) 370 5000 

Facsimile: (011) 370 5271 

Registered office/number 

Pepkor Limited 

Registration number 65/07765/06 

Incorporated in South Africa 

36 Stellenberg Road 

Parow Industria, 7490 

Telephone: (021) 933 5137 

Facsimile: (021) 931 0848 

Company secretary 

J F Pienaar 

PO Box 6100 

Parow East, 7501 

Auditors 

PricewaterhouseCoopers Inc. 

Secretarial certification 

In accordance with section 268G(d) of the Companies Act, Act 61 of 1973, as amended (“the Act”), it is hereby 

certified that the company has lodged with the Registrar of Companies all such returns as are required of a public 

company in terms of the Act and that such returns are true, correct and up to date. 

J F Pienaar 

Secretary 


Project management: De Kock &Kerkhoff Communication Consultants 

Design, typesetting, page make-up and reproduction: Graphicor 

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