Retailer Pick ‘n Pay Stores on Tuesday reported an 11% increase in diluted headline earnings per share to 160,79 cents for the year ended February from 144,92 cents a year ago — an 11% increase.
Headline earnings per share before the reversal of a deferred tax asset of R46,4-million in relation to previous years’ Score operating losses was up 18% at 180,55 cents.
As this charge did not arise from current-year activity, the company considered a headline earnings calculation excluding this charge to reflect more fully the group’s result for the year, it said.
A final dividend of 107,25 cents per share was declared — up 18,5% — and the total dividend declared for the year increased by 18% to 134,25 cents.
The group reported a 12,1% rise in turnover to R39,3-billion, while its trading profit grew by 23,2% to R1,29-billion.
CEO Nick Badminton said the group is pleased with the result, particularly the second half of the financial year, where turnover increased by 13,9%. Current trading to date is bullish.
Group turnover growth of 12,1% was well ahead of inflation, with South African operations achieving growth of 12,6%. Internal inflation for the year within the Pick ‘n Pay business averaged 5,7%, while Boxer and Score experienced higher inflation for the 12 months.
Losses in Australia were more than halved.
The increase in trading profit led to an increase in trading margin to 3,3% from 3%, while the operating profit — at R1,33-billion — was affected by a decrease in interest received caused by average cash balances being lower than last year due to significant capital investment, increased dividend payments and share repurchases.
“The deferred tax asset has been reversed in light of Score’s disappointing current-year performance and to present a more conservative balance sheet. We have also impaired goodwill of R36,3-million relating to Score, although this has no effect on headline earnings,” Badminton said.
“The Pick ‘n Pay Retail division produced a solid performance, showing real growth in both turnover and group profit contribution,” he said.
Ten new corporate supermarkets were opened during the year, while two were converted to the Pick ‘n Pay Family franchise format. The Claremont store in Cape Town was temporarily closed while being redeveloped and will reopen during F09. For the year ahead, seven new stores have been confirmed for opening, Badminton said.
In the franchise division, 11 new Family Franchise stores were opened, including one in Namibia, while a further 20 will open during the next financial year, he noted.
The opening of two new Hypermarkets, both in the Pretoria area, marked a highlight of the year, and were the first Hypermarkets to open for about 14 years. Combined, the two stores occupy about 25 000 square metres of space and have attracted very favourable customer response. A further two Hypermarkets will open this year, providing good momentum for growth in the large-store format, Badminton said.
“The Retail division continues to expand its other-store formats, increasing the number of standalone Clothing stores to 24 and Liquor stores to 36 during the year. During the next financial year, we will open a further five Clothing and 20 Liquor stores.”
Within the Group Enterprises division, Score continued its conversion of stores to the Nambawane format, completing 18 conversions in the second half of the year. These additional refurbishments helped Score produce a better second-half performance. Nevertheless, the overall performance for the year was disappointing and various options are being reviewed in respect of the future direction of Score, he said.
Boxer performed particularly well despite toughening trading conditions, showing good real growth in both turnover and profit contribution. Boxer opened nine new stores and, during F08, will continue to expand its footprint by opening a further nine stores.
In Australia, Franklins more than halved its trading loss from Aus$19-million to Aus$8,8-million. Three new corporate stores were opened and five stores were closed. A further three new stores are planned for F08. An extensive refurbishment programme of a number of corporate stores will include expanding the customer offering.
Two of the first franchise stores were successfully launched, one a conversion from a corporate store. Since conversion, both franchise stores have shown good real growth in turnover. The roll-out of further franchise stores is now a priority and the company has recently concluded agreements for the conversion of a further four stores to the Franklins franchise system. This will take the total number of franchise stores to six, he said.
“We are confident that these conversions, together with others planned for F08, will give momentum to the expansion of this format. The additional capital investment in the Franklins business confirms the board’s commitment to growing our business in Australia,” he said.
Badminton said that a complete strategic review of the whole Pick ‘n Pay business has taken place and that many of the initiatives highlighted will be implemented during this financial year. Further operating efficiencies will be achieved through the roll-out of SAP.
“With the launch of our 40th birthday campaign and various other initiatives in place throughout the group, we are confident of being able to achieve good growth in headline earnings per share during t he 2008 financial year,” Badminton concluded. — I-Net Bridge