| Mon 14 Jun 2004, 8:52 | | Of all the things Pick 'n Pay sells, Franklins is |
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Of all the things Pick `n Pay sells, Franklins is not one
June 14, 2004
By Dirk De Vynck
Cape Town - Franklins, Pick `n Pay`s Australian supermarket chain, is not for sale and the group, which turned over R4.2 billion down under in the past financial year, has plans to grow the business.
Responding to a shareholder question on Pick `n Pay`s plans for Franklins at the company`s annual general meeting on Friday, chairman and founder Raymond Ackerman said it was a long-term investment and the strategy was to first build Franklins - which consists of small, limited-range stores - into a profitable entity.
This would give the group a solid foundation and could lead to the development of similar formats to those used in South Africa.
Already Pick `n Pay derives 14.4 percent of its R29.3 billion revenue from Australia.
Sean Summers, the chief executive of Pick `n Pay, said talk about the possible sale of Franklins centred on the value it offered. `If Franklins was for sale, many people would line up to acquire the group. Also, a lot of companies would like to see the back of Pick `n Pay in Australia,` he said.
Summers defended the decision to end Franklins` distribution deal with Australia`s Metcash Trading - in which locally listed Metro Cash & Carry has a 61 percent stake - in January next year even though the move would cost the company money in the short term.
He said Pick `n Pay had considered the ramifications and from January Franklins would manage its own distribution network.
The opening of franchises would be a key growth area in Australia, and holding on to the distribution arrangement would have created a conflict with Metcash Trading, which supplied its own IGA stores.
Summers said the cost of setting up the network would be expensive for Franklins, but would not make a material difference as far as the bigger group was concerned.
Aubrey Zelinsky, Franklins` managing director, said although the capital expenditure on the distribution network would draw on the business in the current book year, the projection was that the company would be profitable in the 2006 financial year.
Zelinsky said Franklins` trading loss had shrunk since the group was acquired by Pick `n Pay in the 2000/01 financial year. Franklins showed a trading loss of R5.5 million in the 2004 financial year compared with R56.2 million the previous year.
As for Pick `n Pay`s trading performance since its February year end, Summers said that it continued to show strong real growth in sales.
Remedies implemented at the Score division, which was the one unit that had disappointed, were having the desired results, he added.
Despite being hit by an extortion attempt, which Ackerman has described as possibly the most challenging time in the company`s history, turnover still increased by 11.8 percent to R29.3 billion.
Headline earnings a share increased by 14.1 percent to R1.1738.
The share price of Pick `n Pay Stores rose 7c to R16.87 on Friday, bucking a 0.11 percent decline in the food and drug retailers sector.
