The adoption of IFRS 16 will mean the group’s net debt for the 53 weeks ended March 3 will increase to R17bn

Retailer Pick n Pay said its total debt had increased to R17bn from R1.6bn for the 53 weeks ended March 3, as a result of accounting changes.

The company now had R15.4bn in theoretical lease liabilities, following the adoption of the International Financial Reporting Standards (IFRS) 16 standards.

One of the changes in that accounting standard is that companies must bring all their leases on to their balance sheets.

“This is purely the accounting consequence of IFRS 16, and it is important to note that the position does not reflect, or alter, the group’s careful and considered approach to long-term debt and its disciplined management of cash,” Pick n Pay said in a statement.

“The group has no long-term debt, and its major short-term debt providers have confirmed that the standard will not have any impact on the group’s risk profile, its liquidity and its ability to raise funds,” the statement read.

The accounting changes had no effect on group turnover or cash flow, but profit before tax decreased by R311.1m from the R2.2bn it reported previously.

Headline earnings decreased by R219.1m, due to the maturity of the group’s lease portfolio.

The company had reported headline earnings of R1.6bn for the period.