RETAIL: Pick n Pay Shows Good Performance
Recent Western Cape Business News
Turnover for the Pick n Pay group for the six months ended 31 August 2008 increased 16.4% to R23.6 billion. Trading profit grew 16.7% with the trading profit margin remaining at 2.9% for the six months.
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. The company considers continuing operations to be a more accurate indicator of the performance of the Group and figures are thus reflective of this consideration.
CEO Nick Badminton said that the Group was pleased with the result in an environment of tightening consumer spending, and was particularly satisfied with the progress of a number of key strategic initiatives under way.
Diluted headline earnings per share (D-HEPS) at 89.76 cents increased by 21.5% over last year. However, due to the dilutive effect of issuing 20 million new ordinary shares on the conversion of the convertible debentures on 31 December 2007, HEPS at 90.31 cents increased by 15.2%.
The interim dividend was increased to 35.75 cents for Pick n Pay Stores Limited and 17.45 cents per share for Pick n Pay Holdings Limited, both a 15% increase over last year.
“During the six months under review, we opened four corporate stores (three Boxer stores and one Hypermarket) and in the second half, we will open a further 13 new corporate stores (one Hypermarket, five supermarkets, four Boxer stores and three Franklins stores). The new world-class Claremont store in Cape Town was the company’s most successful supermarket opening in over a decade. Benmore will be reopened at the end of the month with a similar look to Claremont, while Bedfordview will also be reopened at the end of October.
“Hypers had a strong trading period showing good growth in both turnover and profit contribution. Turnovers were particularly strong in the new format and refurbished Hypers. Another new format Hyper had been opened at Woodmead and we will also open another new Hypermarket on the Durban South Coast in the next six months. Woodmead Hyper opened in the first six months with Durban South Coast Hyper opening in November. The Ottery refurbishment will open in November.”
“Supermarkets performed well with particularly strong growth achieved in our Family franchise stores. We opened six new Franchise stores and completed 16 Score conversions in the current six months. In the next six months, a further five new Family and five new corporate stores will be opened. In addition four more corporate stores will be converted to Family stores and another 11 Score conversions completed.”
The implementation of the Score conversion to Pick n Pay black owned franchise stores is now in full swing with 23 stores successfully converted to date and a further six to complete by Christmas. Nine stores have been transferred to Boxer, six leases ceded outside the group and nine permanently closed. 39 will be converted next year.
Boxer continues to perform exceptionally well with very strong growth in both turnover and operating profit.
“We are particularly delighted with our performance in Australia and the investment we have made in this business is proving fruitful. Franklins had a very good trading period and realised an operating profit before interest and capital profits of R1.5 million versus a loss for the same period last year of R40.3 million. This significant turnaround over last year is due to increased operating efficiencies, high double digit turnover growth from refurbished stores and the success of the customer loyalty programme.
“During the period under review we converted one Franklins corporate store to franchise, bringing the total number of franchise stores to seven. Three new corporate stores will be opened in the remainder of the financial year.
Badminton said that the company had continued during the period to invest in strategy implementation, including SAP, where Pick n Pay was starting to reap the benefits of prompt and more accurate information and improved control. Pick n Pay would complete the installation in inland regions over the next 18 months.
Another major focus area in the company was in distribution, where the first phase of transferring its distribution capabilities to Longmeadow was now complete. Pick n Pay was stabilising the operation and the next phase of expanding central distribution benefits will commence in 2009. It is currently being primarily used for tactical buy-ins of merchandise to combat the effects of inflation.
He said that the company was pleased with customer acceptance of the new convenience food range and had recently launched the re-branded PnP house brands (“PnP no name” and “PnP”). Early indications had shown a very favourable response from customers.
Pick n Pay also announced the first trial of its new format Pick n Pay Daily supermarket. This format is targeted at those customers who shop frequently with smaller basket sizes. It contains a merchandise range of approximately 6,500 lines giving customers a good product selection in a convenience store format.
“We are also delighted that in partnership with BP, we will be opening two trial Pick n Pay Express stores in November and December this year. This will offer true convenience shopping for forecourt customers and we are very excited about the potential of this format.”
The company had also paid attention to its sustainability performance, changing the way it operates by introducing more environmentally responsible policies. These include installing video conferencing facilities in all regional centres to dramatically reduce air travel and increasing re-cycling and power saving initiatives. In the last six months, travel costs of more than R4-million had been saved.
Said Badminton: “We are pleased with this result, given trading conditions. The current turmoil in world markets is of concern, with further tightening of economic conditions. Despite this challenge, all our strategic investments will position us very well for the future. We remain confident that the Group will achieve a good growth in headline earnings per share, from continuing operations, for the full financial year.”
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