Pick n Pay results flat after tough year

The group declared a final dividend of 134.75 cents, bringing the total dividend to 174.5 cents - up 2.6% on a year ago's 170 cents.

Turnover for the year was up 9.8% to R54.734 billion, with Pick n Pay and Boxer growing by 11.5% and Franklins Australia by 1.4% in Australian Dollars.

Profit from continuing operations was 10.5% higher at R1.296 billion, but trading profit for the year decreased by 2.5% to R1.653 billion as a direct result of the reduction in gross profit margin from 19.0% to 18.6%.

Prices reflect on profit

"The drop in trading profit margin clearly demonstrates our continued investment in prices on basic foods. However, the overall decrease was counteracted by enhanced operational efficiencies, especially in our supply chain," said CEO Nick Badminton.

He added that the past financial year had been an exceptionally tough trading period with the recessionary climate biting especially hard during the second half.

"While it was tempting to use a deflationary food environment to attempt margin recovery, we continued to keep prices for consumers as low as possible. We believe this will pay loyalty dividends to us down the line," Badminton said.

Pick n Pay and Boxer increased turnover by 11.5% for the year, but second half of the year saw growth rates drop substantially as food inflation abated and customers remained cautious.

New stores

During the year the group opened five new Pick n Pay corporate supermarkets, 20 new Boxer stores and 38 new Pick n Pay franchise stores, including five Express stores and Score conversions.

In the year ahead it plans to open a further 27 supermarkets under the Pick n Pay and Boxer brands and are working on opening substantially more new stores for the years thereafter.

It also completed the closure of the Score retail trading operation with a total of 70 stores now converted to Pick n Pay and Boxer.

The consolidations of the three northern regions into one team will be completed by August 2010.

Label sales

During the period, Pick n Pay reported strong double-digit growth in fresh and private label sales, both being primary areas of focus and also added a further five sites to its Express network in conjunction with BP.

These continue to exceed expectations and the group plans an accelerated rollout of this format.

Franklins Australia turnover increased by 1.4% to AUS$861.1 million and before capital items produced a profit of R21.9 million which was on par with last year.

The impact of the three-year, AUD50 million store refurbishment program continues to be positive with completed stores achieving double-digit sales growth and improved profitability.

The program saw 18 refurbishments this year and a further 8 are planned for the next financial year. Franklins' Loyalty Club achieved substantial membership growth and cardholders now exceeds 780 000.

Expansion

Badminton confirmed the group's expansion into Africa: "We are due to open our first corporate store in Zambia midyear, we have signed up franchise partners in Mozambique and we have identified sites for expansion into Mauritius."

Looking ahead, Badminton said: "Given current trading conditions, we are satisfied with this result.

We are confident that we will start to reap the benefits of our strategic initiatives by expanding our store footprint, continuing to improve the shopping experience, driving operating efficiencies through the supply chain, SAP and operating cost reductions. All of these initiatives position us well to benefit from the anticipated upturn in the economy."

Badminton said the group expects trading for the first six months of the 2011 financial year to remain difficult, but he is confident the company would start reaping the benefits from strategic initiatives put in place over the past year.

"We expect that the 5.5% reduction in interest rates over the past 15 months and significantly reduced food inflation will ease the strain on consumers' disposable income," he said.