Pick n Pay reports higher earnings

Diluted HEPS from continuing operations amounted to 98.85 cents from 89.76 cents and diluted HEPS 84.64 cents from 80.53 cents before.

The group declared an interim dividend per share of 39.75 cents for Pick n Pay Stores (+11.2%) and 19.31 cents for Pick n Pay Holdings (+10.6%).

Operating profit at R927.8 million was 35.9% above last year, and included a profit on the sale of certain properties of R190.9 million.

Turnover for the Pick n Pay group for the period increased 12.3% to R26.6 billion.

Pick n Pay and Boxer increased turnover 15.3%, which resulted in market share gains from continuing operations.

The group said the trading profit margin dropped to 2.8%, from 2.9% last year, following a drop in gross profit margin for the period to 18.6% from 18.8% last year.

This was a consequence of investing in keeping prices down on certain fast selling lines, among other things.

The results of Score Supermarkets have been disclosed as discontinued as the company is closing down its operations with the majority of its property leases being sub-let for operation as Pick n Pay Family franchises, it said.

Tough six months

CEO Nick Badminton said that the six months had been "very tough" and that the Group had performed satisfactorily in this environment, but very well on a number of key strategic initiatives under way.

He said significant progress had been made in the effort to transform Pick n Pay and some very positive results had been seen to date.

"These included a market share gain of 0.4% from continuing operations, with significant gains in every fresh food category, together with a 26% sales growth increase in its private label offer, the latter reflecting the consumer trend to value for money," said Badminton.

The group noted that the Score-to-Pick n Pay franchise conversion process was almost complete, with sales from 48 conversions currently almost as high as that from 126 Score stores previously.

On the forecourt

The three Pick n Pay Express stores on BP forecourts were performing ahead of expectations and a further two would be opened in the next month.

Looking at the supply chain, the group said the efficiency of its Longmeadow operations had improved markedly and strike rates were now exceeding 90%.

In addition to the Score conversions, five new Pick n Pay supermarkets were opened with a further seven due to open in the second half of the year.

Boxer converted eight Score stores in the period and will convert another two in the second six months as well as open two new stores.

"The accelerated refurbishment of Pick n Pay Supermarkets will see an anticipated 34 franchise and corporate refurbishments this financial year.

"The enhanced turnover growth experienced by the stores completed to date gives us the confidence to accelerate the programme further and we plan to refurbish of a further 60 stores, including franchise stores, in the next financial year," said Badminton.

Electricity hike takes its toll

He noted that a number of factors had a significant impact on the earnings growth.

"Importantly, electricity costs soared and look set to escalate further. These costs grew markedly from 3.1% of expenses for the six months ended August 08 to 3.8% of costs for this period.

"The impact of Eskom's increases is expected to result in a 40% increase in our electricity bill for the full year, with more to come in subsequent years.

"Looking ahead, the Competition Commission investigation into food pricing is ongoing and we continue to give the process our full co-operation."

Notwithstanding the worst recession in decades, the group said it had not been distracted from delivering headline growth throughout the period and from introducing the strategic imperatives and changes to the business that were required.

"We are bullish about the next five years as more of the foundation we have laid translates into visible benefit."

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