………….are you inspired?

New 'Pick n Pay' Logo designed by Landor (UK) 1

COST OF NEW LOGO: R110 000 000

COST OF NEW UNIFORMS: R28 000 000

TOTAL COST: UNKNOWN

Pick n Pay Shop Stewards’ AlliancePick n Pay Shop Stewards’ Alliance

2012 Company Update

June 2012Labour Research Service

www.lrs.org.za

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COMPANY REPORT – Pick n Pay to February COMPANY REPORT – Pick n Pay to February 20122012

Company report ◦Performance◦Growth◦Ownership◦Employees◦Directors’ Fees◦Outlook & strategies

Company report ◦Performance◦Growth◦Ownership◦Employees◦Directors’ Fees◦Outlook & strategies

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OPPORTUNITIES FOR ORGANISING, CAMPAIGNING, EDUCATING, SOLIDARITY in 2012

and beyond

…BE PREPAREDTo engage with the company, understand the companyYou know your experience of the company – but the Annual Report what is management telling shareholders and the public – how do they relate?What is their strategy, how will the union respond?Requesting / downloading copies of the annual report?

◦ Response?

…BE PREPAREDTo engage with the company, understand the companyYou know your experience of the company – but the Annual Report what is management telling shareholders and the public – how do they relate?What is their strategy, how will the union respond?Requesting / downloading copies of the annual report?

◦ Response?

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We are not chasing growth in Africa for

growth's sake - we're chasing

growth for profit's sake

– Deputy CEO van Rensburg 2012

We are not chasing growth in Africa for

growth's sake - we're chasing

growth for profit's sake

– Deputy CEO van Rensburg 2012

For us to double the number of stores in the rest of Africa in the next five to 10 years is absolutely conceivable. We just don’t have plans for it yet. – Acting CEO Ackerman 2012

Stores in June 2010 – June 2011Stores in June 2010 – June 2011

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Growth in store numbers

EMPLOYEES / STAFF / WORKERSEMPLOYEES / STAFF / WORKERS

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Overview year – February 2012: Overview year – February 2012: ‘‘We have not been as good as we couldWe have not been as good as we could

have been’have been’Sales improve but no profit recovery –

analysts scepticalSold Franklins – R1.2 bn Launched SmartshopperAccelerated store roll out – 88 stores in SA, 3 in AfricaImproved distribution capability – DCs up and runningNegotiated flexible working conditions – labour cost

containmentMarked improvement in second half performance

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With no captain and a demotivated crew, it’s hard to see this ship sailing any

time soon. – Analysts on 2012 results

Sales rising slowlySales rising slowly Sales increase of 8.1% on 2011 to R55,634,400,000 (2011 4%) Total number of stores outside SA, both owned and franchised represent 7.7% of the group's till

sales. (Shoprite is 11.3%)

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Company ProfitsCompany ProfitsProfits down for a second year – drop 25% in 2011, another 14% in 2012.

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Our labour cost has been well controlled and with our newflexible labour agreement, there is significant potential forimprovement.

Our labour cost has been well controlled and with our newflexible labour agreement, there is significant potential forimprovement.

Performance comparison – bottom of the listPerformance comparison – bottom of the listPerformance comparison – bottom of the listPerformance comparison – bottom of the list 2009 2010 2011

Shoprite Revenue 59,318,600,000 67,402,440,000 72,297,777,000

Massmart Revenue 43,128,700,000 47,451,000,000 53,089,500,000

Pick n Pay Revenue 50,135,800,000 49,323,800,000 52,216,700,000 Massmart Changes in Revenue 10% 12%

Shoprite Changes in Revenue 14% 7%

Pick n Pay Changes in Revenue -2% 6%

Shoprite Profit 3,018,100,000 3,399,088,000 3,876,368,000

Massmart Profit 1,902,000,000 1,820,000,000 1,504,100,000

Pick n Pay Profit 1,734,480,000 1,812,000,000 1,356,100,000 Shoprite Changes in Profit 13% 14%

Massmart Changes in Profit -4% -17%

Pick n Pay Changes in Profit 4% -25%

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Directors’ fees – up up up…Directors’ fees – up up up…

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• Directors’ salaries up on average 15% on 2011 to average salary of R2,424,956. Average remuneration of R3,212,200

• The Annual report states that PAY FOR PERFORMANCE is key, but more than 84% of annual remuneration is guaranteed.

For 4.5 Directors Guaranteed pay percentage

Salary + Benefits R12,249,900

Total including bonus R14,454,900 84%

Chief Executive fees 2011Chief Executive fees 2011

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CEO - Nick Badminton – Golden Handshake of R10 100 000 on leaving the company at the end of 2012 year

Year Salary Per month Per Week Increase

2008 R 2 672 000 R 222, 667 R 51, 424

2009 R 3 031 500 R 252, 625 R 58, 343 13%

2010 R 3 310 500 R 275, 875 R 63, 712 9%

2011 R 3 544 500 R 295, 375 R 68, 216 7%

2012 R 3 921 100 R 326, 758 R 75, 464 11%

Wage Gap – CEO: WorkerWage Gap – CEO: Worker

Work out your wage gap:1. Take CEO Annual Rem: _ R14, 959,7002. Take your monthly wage: _______________3. Convert to ZAR using the exchange rate at year end: 4. Multiply by 12:___________________5. Calculate CEO Annual Rem ÷ the answer to 3. 6. The answer is how many years it would take you to

earn what the CEO tool home in 2011

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In South Africa, this means a wage gap of 416 years – it would take a minimum wage full-time worker 416 years to earn what Nick Badminton took home in his final year

at Pick n Pay.

In South Africa, this means a wage gap of 416 years – it would take a minimum wage full-time worker 416 years to earn what Nick Badminton took home in his final year

at Pick n Pay.

Increases – Fees: PerformanceIncreases – Fees: Performance

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Dividends – Shareholders SmileDividends – Shareholders SmileDividends – Shareholders SmileDividends – Shareholders Smile

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Pick n Pay’s dividend policy has been unhealthy to the point where the

company has struggled to fund normal growth – Senior analyst 2012

ShareholdersShareholders

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‘There is no plan at this stage to change this structure’ – Ackerman 2012

Shareholder - Pick n Pay Stores Percentage Owned at year-end 2011

Pick n Pay Holdings Limited 53.6

Government Employees Pension Fund 10.2Liberty Life Assurance of Africa Ltd 1.7Sanlam 1.0

Shareholder – Pick n Pay Holdings Percentage Owned at year-end 2011Ackerman Family Trust 48.3Investec Opportunity Fund 2.2Pick n Pay Employee Share Trust 1.7Nedgroup Investments Value Fund 1.1Liberty Group 1.0Symmetry Inflation Plus Fund No. 1.0The Mistral Trust (Ackerman family) 1.0

OWNERS - SHAREHOLDERS

Ackerman Family – Shares worth – around R5, 418, 429, 240 on 6 June 2012GEPF - Shares worth around R 444, 720,000

Context going forward for the company – pressures on customersContext going forward for the company – pressures on customersContext going forward for the company – pressures on customersContext going forward for the company – pressures on customers

Higher electricity prices – for company and consumersImpact of European slump on SA economy Little growth in consumer disposable income due to

unemployment increases, industrial action

…however, management claims :Encouraging signs Momentum continuing into FY 2013Lots to be done but tremendous energy in the

business

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Annual Report 2012:

Unlike labour, business is not in alliance with the governing party, and often struggles to have its voice heard above those with more privileged access to national policy debates.

Outlook and strategy update…Outlook and strategy update…

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They also ignored the global trend towards centralised distribution, and as a result are now running a marathon at a sprinter’s pace in

order to make up for lost time - 2012

"I don’t believe it will make much money from it.“ – senior analyst 2012

"I don’t believe it will make much money from it.“ – senior analyst 2012

THE COMING OF WALMART THE COMING OF WALMART … …“the competition is not in our core business”“the competition is not in our core business”

THE COMING OF WALMART THE COMING OF WALMART … …“the competition is not in our core business”“the competition is not in our core business”

Large mergers take time, the impact of this merger will not be all at once - PNP seems unprepared…but

Competition for sites Increasing importsCentralised distribution – unprepared…not just Walmart, but the impact on other sector

strategies – Shoprite, Woolworths?Take-over target

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Key challenges for workers / unions / the Key challenges for workers / unions / the Alliance…Alliance…Key challenges for workers / unions / the Key challenges for workers / unions / the Alliance…Alliance…

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1)Walmart – increasing loss of market share – pressure on workers to compensate for this.

2)Take over target – impact on working conditions 3)Staff numbers continue to drop to store openings -

increased use of outsourcing, labour brokers. 4)Labour flexibility seen as a vital life line to profits –

while they rake in millions in salaries and dividends. 5)Further centralisation of power in the hands of the

family6)The franchise challenge continues and is exacerbated

by BP deal7)Failing strategy – workers will bear the brunt,

management will harden further

Clarity / Questions / Clarity / Questions / Comments / CorrectionsComments / Corrections

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Is this your experience of working for Pick n Is this your experience of working for Pick n Pay?Pay?Is this your experience of working for Pick n Is this your experience of working for Pick n Pay?Pay?

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Our employees Our vision – our employees will work for the most sought-after employer in the retail industry, with access to recognition,opportunities, working conditions and competitive remuneration.Our engagement – we communicate actively and comprehensively with our people through initiatives which include management updates, employee surveys, monthly publications, in-house television and radio, employee conferences, skillsdevelopment and training and ongoing engagement with our union.