PIK Pick n Pay Stores Group - Trading and Earnings Update Pick n Pay Stores Limited Incorporated in the Republic of South Africa Registration number: 1968/008034/06 Share Code: PIK ISIN code: ZAE000005443 (Pick n Pay or the Group) Pick n Pay Stores Group - Trading and Earnings Update Shareholders are advised that Pick n Pay Stores Limited (the Group) is in the process of finalising its FY21 interim financial results for the 26 weeks ended 30 August 2020, which are due to be published on 20 October 2020. The Groups first-half performance began on 2 March 2020, and was delivered almost entirely in the unprecedented conditions of Covid-19, in particular the State of Disaster which began on 15 March 2020. Over this period, the Group has successfully pursued two primary goals: feeding the nation in a safe and reliable way as an essential provider of food and groceries, and delivering on our long-term plan to build a leaner, more agile and more modern business, attuned to the needs of our customers. Although Group sales and earnings have been negatively impacted by the pandemic and the measures taken by government to contain it, we are proud of our achievement against both objectives in a challenging time. Feeding the nation in unprecedented times Our teams have worked effectively to deliver the stringent safety and hygiene standards required to combat Covid-19, to keep our stores open and full, and to keep our business and colleagues working. Even in the most challenging periods to date, we have maintained a reliable supply chain, high levels of availability, and excellent service levels. We also innovated to serve customers in new ways, for example to meet an increased demand for online shopping by rapidly introducing an on-demand grocery service. Our team, together with our customers, have raised over R80 million in hunger relief efforts, providing 20 million meals to vulnerable families. Covid-19 and the measures taken to contain it have inevitably had a substantial impact on the Groups sales and earnings over the first half of the financial year. Trade restrictions imposed by the South African government, and by other jurisdictions across southern Africa, impacted up to 20% of the Groups revenue at different stages of the nationwide lockdown, and disproportionately affected higher-margin categories including liquor, clothing and general merchandise. Sales were also impacted by reduced trading hours and limits on the number of customers in stores to uphold physical distancing requirements, and by temporary store closures following the identification of positive Covid-19 cases among staff. GDP in South Africa contracted over 17% year-on-year in the second quarter of the calendar year, placing extreme financial pressure on many households. However, relative to areas of discretionary spend, core food and grocery remained resilient. Sales performance Against this background, Group turnover increased 2.6% year-on-year, with like-for-like growth of 1.0%. Turnover from South African operations increased 3.4%, with like-for-like growth of 1.7%. The Group continued to provide exceptional value for customers, with internal selling price inflation in South Africa contained at 3.4% over the period, against CPI Food inflation of 4.3%. Core retail sales Core retail sales - including food, groceries and general merchandise, but excluding liquor, clothing and tobacco - grew 8.7% year-on-year (6.4% like-for-like), with 9.9% growth in South Africa (7.6% like- for-like). The 4.2% volume growth in the Groups core food and grocery offer in South Africa demonstrates the underlying strength and competitiveness of the Groups performance over the period. Liquor, tobacco and clothing The Groups liquor and tobacco categories were most affected by government trade restrictions, with full prohibition over liquor sales for 15 weeks of the 26-week trading period, and reduced trading hours for all but the first three weeks of the half-year. The sale of cigarettes and other tobacco products was prohibited between 27 March and 17 August. This inevitably had a profound impact on liquor and tobacco sales, with negative growth of 47.5% over the period. Clothing sales were prohibited during the Level 5 lockdown, and were subject to some continuing restrictions under Level 4. The Groups clothing turnover decreased 4.2% in South Africa, delivering market share gains in key categories. Earnings performance As previously communicated to shareholders, in our earnings update provided on 4 August 2020, the Groups earnings over the period have been impacted by three specific factors: 1. Government trading restrictions arising from Covid-19. As noted above, Covid-19 trade restrictions disproportionately affected higher-margin categories, including liquor, clothing and general merchandise. However, the negative gross profit margin impact is expected to be partly offset by progress in optimising the Groups central procurement and supply chain channel. 2. R150 million additional costs as a result of the Covid-19 crisis. Operating expenses will reflect costs directly related to the Groups Covid-19 operational response. These include additional safety and hygiene costs of R80 million, a R50 million appreciation bonus paid to 50 000 front-line staff, in recognition of their essential service under difficult circumstances, and security and communication costs of R20 million. 3. R100 million once-off costs of the Groups voluntary severance programme. Once-off compensation payments to colleagues who volunteered for the voluntary severance programme (VSP) in Pick n Pay at the beginning of the financial year will total around R100 million. The VSP is a major step forward in making the business more competitive and more sustainable. The full cost of VSP compensation payments has been borne in the first half of the financial year, and is expected to be fully recouped through cost savings in the second half of the year. The Groups first-half earnings performance will therefore reflect the full impact of extraordinary trading and operating conditions in the first months of Covid-19, and the once-off cost of a programme which has increased the cost-efficiency of the Group. As well as delivering for customers and communities through the crisis, the Group has maintained momentum on improving the efficiency and productivity of its operations, and the relevance of its offer, in line with its long-term plan. The Group launched Project Future in January 2020, and has made excellent progress in achieving its target of reducing costs by R1 billion over two years. The Group expects the FY21 interim financial results to fall within the following ranges: 26 weeks to 26 weeks to 26 weeks to 30 August 2020 30 August 2020 1 September 2019 Current period Current period Prior period Expected range Expected range % growth cents per share cents per share Reported earnings metrics, including hyperinflation net monetary gains in Zimbabwe: Headline earnings per share (HEPS) -50% to -60% 36.51 to 45.64 91.28 Diluted HEPS -50% to -60% 36.24 to 45.30 90.61 Earnings per share (EPS) -55% to -65% 28.46 to 36.59 81.31 Diluted EPS -55% to -65% 28.25 to 36.32 80.71 Comparable earnings metrics, excluding hyperinflation net monetary gains in Zimbabwe: Comparable HEPS -50% to -60% 34.01 to 42.51 85.03 Comparable HEPS, excluding once-off VSP costs -35% to -45% 46.77 to 55.27 85.03 The Group looks forward to presenting its FY21 interim financial results to shareholders in the coming weeks, where it will demonstrate balance sheet stability and successful cash and working capital management alongside its resilient earnings performance. We extend our sincere thanks to our management team, front-line staff, suppliers and franchise partners across the country who have responded with such skill and determination to keep our stores open, safe and full throughout the crisis. Shareholders are advised that Pick n Pay plans to release its interim financial results for the 26 weeks ended 30 August 2020 on SENS before the market opens on Tuesday, 20 October 2020. A live online result presentation will follow at 9:30am. All interested stakeholders are invited to watch the live webcast which can be accessed using the following link: www.corpcam.com/PicknPay20102020. The slides accompanying the live result presentation will be available on the Pick n Pay Investor Relations website at www.picknpayinvestor.co.za shortly before the commencement of the presentation on 20 October 2020. A playback of the webcast will be made available on our website approximately 2 hours after the presentation. The financial information on which this trading statement is based has not been reviewed by or reported on by the Groups external auditors. By order of the Board Cape Town 7 October 2020 Sponsor: Investec Bank Limited Date: 07-10-2020 02:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.