Pick n Pay posts lower first half earnings

Headline earnings per share declined to 41.11 cents from 75.31 cents.

An interim dividend of 22.50 cents per share was declared from 37.00 cents a year ago.

Revenue was at R27.21 billion from R25.35 billion previously, while trading profit was down 31.7% to R492.2 million.

Pick n Pay said it had seen encouraging turnover growth, above the market for the first time in a few years, however the investments it had made in transforming the company into a world class retailer had had a material impact on earnings.

The group said the 13.7% increase in operating expenses over last year reflected the investment phase it was in.

"General expense control was satisfactorily maintained during the six months, with the majority of the increase in expenses being contributed by Smart Shopper," it said.

Group turnover at R27.1 billion for the period was 7.4% above last year, with strong growth from like-for-like stores. EBITDA (earnings before interest, tax, depreciation and amortisation) was down 17.8% to R882.4 million. Net cash from operating activities was at R1 190 million, up from R185.9 million for the same period last year, due to improved working capital management.

During the period, Pick n Pay opened four corporate supermarkets, five franchise supermarkets, 14 corporate liquor stores, six franchise liquor stores, and nine clothing stores.

In the next 6 months, it planned to open nine new supermarkets - six corporate and three franchise, 12 liquor stores, six clothing stores, nine Boxer superstores and three Punch stores.

The company would also open two more stores in Zambia, one in Mozambique and two in Mauritius.

"We are still waiting for approval from the Zimbabwean Indigenisation Board in order to purchase an additional 24% of TM Supermarkets in Zimbabwe, to take our stake to 49%," it said.

Further to its announcement to retrenchment about 3,137 workers within its non-management bargaining unit, Pick n Pay said it had just completed a Commission for Conciliation, Mediation and Arbitration (CCMA) facilitation process with the South African Commercial, Catering and Allied Workers Union (SACCAWU), without the parties reaching a solution to retrenchments.

"We will do everything feasible to minimise dismissals," the group said.

Pick n Pay commented that it had completed the sale of its Australian operations Franklins to Metcash. The sale proceeds, subject to final working capital adjustments, would be approximately R1.3 billion, all of which would be invested in its core South African operations.

"Although the ACCC [Australian Competition and Consumer Commission] have appealed the court's decision, we are very confident that the initial verdict, which was comprehensively in our favour, will be upheld. In the unlikely event of the ACCC succeeding with their appeal, Pick n Pay has agreed to share any divestiture costs or penalties equally with Metcash," it said.

Adding that since it had concluded the sale of Franklins on 30 September, it had continued to be disclosed as a discontinued operation at 31 August, and its results had been reflected separately from continuing operations.

Looking ahead, the group welcomed Richard van Rensburg as Deputy CEO, and said its loyalty programme Smart Shopper, the investment in building a specialised category buying function, and supply chain improvements were initiatives that would enable it to better serve its customers in the future.

"Notwithstanding the challenges facing the group and the scale of the work still to come, there have been a number of highlights over the last 6 months, which give us a renewed momentum going forward," Pick n Pay said.