South African retailer Pick ‘n Pay on Thursday reported a 17,1% rise in headline earnings per share to 153,02 cents for the year ended February from 130,7 cents a year ago. Diluted headline earnings per share rose to 144,92 cents from 124,84 cents before.
Turnover increased by 10% to R35,1-billion, while trading profit rose by 16,9% to R1,047-billion. The trading margin increased from 2,8% to 3%. Operating profit grew by 13% to R1,104-billion.
A final dividend of 90,5 cents was declared, making a total dividend of 113,8 cents — up 18%.
CEO Sean Summers said the group is pleased with the result, given a “very competitive trading environment”, continued low inflation and industrial action experienced in the middle of the financial year.
Group turnover growth of 10% was well ahead of very low levels of inflation, with Southern African operations achieving growth of 11,3%. Internal inflation for the year within the Pick ‘n Pay business averaged 3,5%, while Boxer and Score still experienced deflation in many categories for the majority of the financial year.
Headline earnings of R705,6-million, excluding exceptional items, increased by 15,2% for the year. As a result of the concentration effect of share repurchases mainly towards the end of the prior year, headline earnings per share were up 17,1%.
“Our retail division produced commendable increases in both turnover and profitability, despite increased competition. The continued low inflation rate, which averaged 3,5% for the year, has been great for consumers and continues to focus our attention on cost control,” Summers said.
During the year, eight new corporate supermarkets were opened, with a further 10 stores to be opened in the 2007 financial year. The very high number of new corporate supermarkets opened in the past three years is a result of the unprecedented growth in the retail property sector. However the group remains cautious and selective on assessing new opportunities.
Family and Mini Market franchise stores continue to make a significant contribution to the group. A total of 179 franchise stores are now open, with 11 new stores opened in the financial year and 24 planned for the year ahead.
“This planned growth in part is being underpinned by the activities of our Franchise Academy, which is focused on training previously disadvantaged individuals to become franchisees. The first six graduates from the academy graduated during the year and in the coming financial year will open their own franchise stores in partnership with more experienced traders. A second group of eight new students was enrolled into the academy and will graduate soon.
“The next financial year will see two new Hypermarkets opened, the first new Hypermarkets opened in many years, substantiating our confidence in large-format retail outlets.
“The retail division has been piloting the concept of liquor outlets adjacent to Hypermarkets and Supermarkets, which now number 22. Given the combination of discounting and convenience, this concept has enjoyed particularly high consumer support and the roll-out of this pilot will continue into this financial year.”
A further 10 clothing stores were opened during the year, bringing the total to 18 at year-end. Notwithstanding significant deflation in the market during the year, these outlets continue to receive good customer support and a further five will be opened in the 2007 financial year.
Score Supermarkets had a promising trading year and showed good real growth in turnover, and significantly reduced costs.
A key factor contributing to the turnaround at Score has been the development and customer acceptance of a completely new retail format under the “Score Nambawane” insignia. In the year ahead, the roll-out of this new format will include seven new stores and 28 conversions to this format, bringing the total number of outlets to 133 by the end of next year, of which 40 will be trading in the Nambawane format. The scanning roll-out will also be completed.
Boxer had another excellent trading year. Three new stores were opened, while eight stores will be opened in the next year, together with the completion of its roll-out of scanning in all stores.
“TM Supermarkets continues to trade under very trying circumstances with inflation [in Zimbabwe] reaching levels of over 900% and an exchange rate reaching over $16 500 to the rand,” Summers added.
Following the switchover to Pick ‘n Pay’s own distribution channels in Franklins, the business is far more efficient, as is evident in the trading loss in the second half of the year being reduced to R29,2-million from the R63,5-million incurred in the first half. The year ahead will se further significant reduction in the losses, he said.
“Importantly, we have now finalised our franchise model, which is currently being piloted and refined. In the year ahead, our main focus at Franklins will be the roll-out of our franchise format as well as the opening of three new corporate stores.”
Looking ahead, Summers is excited by the prospect of opening a significant number of new stores across all brands.
“We are currently forecasting a continued low inflationary environment, but notwithstanding this, we are confident that we will be able to achieve another good increase in headline earnings next year,” he concluded. — I-Net Bridge