Shoprite reports solid increase in earnings

South African supermarket group Shoprite Holdings on Wednesday reported a 33,3% increase in diluted headline earnings per share from continuing operations to 194,3 cents for the year ended June from 145,8 cents a year ago.

The group’s total dividend is envisaged to increase by 38,4% to 101 cents per share. It is envisaged that a final dividend of 66 cents per share—up from 46 cents in 2006—will be declared during October, making the total dividend for the year 101 cents from 2006’s 73 cents.

Trading profit was up 27,6% to R1,598-billion, while turnover increased by 16,2% to R38,95-billion, driven mainly by the higher disposable income of a growing black middle class, new store openings and aggressive promotions in the major chains.

The group’s non-South African supermarkets achieved 29,4% sales growth, the group said.

Chief executive Whitey Basson said the results of the supermarket division were affected by industrial action during the first quarter of the financial year.

“A decline in supplier service levels affected stock availability, but was somewhat countered by the performance of our supply chain through our own distribution centres. Our management and staff have performed exceptionally well under these conditions and were assisted by a buoyant market,” he said.

The group’s operations outside South Africa are performing well and the results underpinned its belief that the continent will produce excellent results over the long term, he said.

Although the group’s focus remains on basic food items at the most competitive prices, it also responded to consumers’ demand for a more extensive offering of perishable and value-added products with their higher margins. These contributed significantly to the 17,7% increase in gross profit, as did the continued strong sales of non-food lines.

Shoprite said a major contributor to the increase in expenses was the aggressive store opening and refurbishment programme. The 10,1% increase in staff costs was offset by the growth in staff productivity.

The trading-profit growth of 27,6% is the result of the strong growth in turnover combined with the continuing advances in operational efficiencies, it said.

The trading margin increased to 4,1%, a factor of strong top-line growth and low cost inflation.

Looking ahead, Basson said the group’s number of stores and geographic spread across Africa bode well for future growth.—I-Net Bridge

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