| Wed 20 Oct 2004, 9:40 | | Pick 'n Pay thrilled as efficiency feeds bottom li |
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Pick `n Pay thrilled as efficiency feeds bottom line
October 20, 2004
By Audrey D` Angelo
Cape Town - `Excellent`, was Pick `n Pay chairman Raymond Ackerman`s description yesterday of the retailer`s 17.1 percent rise in interim headline earnings a share to 52.4c, despite food price deflation, and its 22 percent rise in trading profit to R350.6 million.
Ackerman also announced a 20 percent hike in the dividend for the six months to August, to 19.8c.
Chief executive Sean Summers said that lower selling prices had helped boost sales volumes. The company had kept the prices of basic foods as low as possible, and customers came from all sectors of the population.
But he warned that he expected food price inflation to rise by between 4 percent and 5 percent next year.
Pick `n Pay`s main rival, Shoprite, will release its interims in February. Evan Walker of Andisa Securities said they would probably be `reasonably comparable`, although inflation was likely to have picked up by then.
Shoprite and Massmart were the only retail companies comparable to Pick `n Pay from an investor`s point of view. `We like all three and think they will all trade reasonably well in the next 12 months,` said Walker.
`But Shoprite has a lot of catching up to do with Pick `n Pay`s dividend policy. Until then it will not be as highly rated,` he added. Summers said the results were enhanced by operational efficiencies, which were reflected in a rise in operating profit margins from 2.4 percent to 2.6 percent.
Pick `n Pay`s Australian venture, hit by the rand strengthening against the Australian dollar, and the sale of Boardmans after only one month of trading this year, limited the rise in group turnover to 9.3 percent.
Summers said that without those two factors, turnover would have grown 10.6 percent.
`Achieving real growth has been extremely tough and we are pleased with the result, especially when viewed against internal inflation in our Pick `n Pay retail business of approximately 3 percent, continuing deflation at Score and Boxer of approximately 5 percent and deflation in the New South Wales food market in Australia of 0.9 percent.`
Cash balances remained strong, ending on R1.4 billion after paying out R328.5 million in dividends and secondary tax on companies and R114.5 million on tax, and investing R251.1 million in property and assets.
Seven stores had been opened and another seven were due to open in the second half of the financial year.
Summers said there was still plenty of opportunity for expansion.
Pick `n Pay was `seriously understored` in the northwestern suburbs of Johannesburg and still had no store in Sandton.
The Family Store franchise brand had shown particularly good growth in turnover and Pick `n Pay was training black business people, through a scheme linked to Wits university, to become franchise owners.
This franchise operation was proving successful in Australia and he expected it to provide 75 percent of the expected growth there.
Profits in Australia would be helped by a changeover to Pick `n Pay`s own wholesale and distribution network, which would take over supplying its stores in February.
Summers said Score`s turnover showed real increases. Four stores were opened and Score was well on the way to returning to profitability.
Shares in Pick `n Pay rose 45c to R21.15 yesterday, while the general retailers sector advanced 1 percent.
