PnP 'optimistic' about year ahead

Johannesburg - South African retailer Pick n Pay (PIK) on Thursday reported an 18.1% rise in diluted headline earnings per share to 230.62c for the year ended February 2009 from 195.28c a year ago.

The final dividend per share of 134.25c for Pick n Pay Stores and 65.52c for Pick n Pay Holdings brings the total dividend for the year to 170.00c and 82.97c respectively - an increase of 14%.

Group turnover was 17.4% higher at R49.9bn, with a growth of 17.3% in Southern Africa and 18.2% in Australia. The Franklins increase in Australian dollars was 3.5%.

Trading profit margin is down from 3.6% to 3.4%, as a result of significant price investment to help consumers (gross profit margin down 0.4% to 19.0%). The effect is cushioned by a reduction in expenses of 0.2% of turnover. Operating profit grew to R1.735bn from R1.521bn before.

"We are pleased with this result considering the current economic climate and the tightening of consumer spending. Consumers have been particularly hard hit by high food inflation, erratic fuel prices and high interest rates," the group commented.

It added that Franklins Australia saw a substantial turnaround witha swing of R52m to a R23.5m trading profit before capital profits in the current year. The key drivers to this significant improvement are further increased operating efficiencies and double digit turnover growth from refurbished stores.

The success of the 11 fully refurbished stores in the current year is not only producing good turnover growth and increased profitability but is also starting to open doors with landlords for prospective new stores. During the 2010 financial year the group will complete another14 store refurbishments, the group noted.

"We are delighted by the outstanding turnaround achieved by Franklins which has now established a solid foundation for long term growth in Australia," it said.

Hypermarkets traded strongly, especially in the new format and refurbished stores, while supermarkets continued to show robust turnover growth, particularly from the new look refurbished stores such as Claremont, Benmore and Bedfordview. "Based on this positive uplift in turnover from the 23 supermarkets (11 corporate, 12 franchise) refurbished in the current year, we will be expanding our `new look' refurbishment programme in the year ahead to another 54 stores (21 corporate, 33 franchise)," the group noted.

Pick n Pay Retail Strategy implementation continues to deliver according to plan. Pick n Pay has seen great customer acceptance of New Hypermarket (Woodmead) and Supermarket (Claremont, Benmore and Bedfordview) branding and "look and feel" as well as the re-launched private label products, new store fresh foods initiativesn Pick n Pay Express forecourt stores and converted Score stores.

Score conversions are on track with 38 complete, achieving substantially higher turnovers. "Next year we plan to convert a further29 stores. The only stores remaining to be converted in the 2011 financial year are a few in Botswana," it noted.

Phase 1 of the Longmeadow Distribution Centre is now complete with all set-up costs fully absorbed. The distribution centre now supplies all 263 inland stores. Phase II will expand the facility to accommodate central distribution, automatic replenishment and strategic buy-ins. This will commence during the 2010 financial year.

Boxer produced another very solid result with a significant increase in turnover and profit.

"We continue to expand our store footprint. Including Score store conversions we opened 67 new stores in the current year and plan to open a further 58 next year," it said.

Looking ahead, the group added that "given the tough trading conditions and the investment phase we are in, we are pleased with this result."

"We remain optimistic for the year ahead due to our strategic investments now starting to bear fruit, the relief brought to our customers by lower interest rates and reducing inflation. We forecast improved growth in 2010 headline earnings per share over that achieved this year," it said.

- I-Net Bridge