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Home Business

Lojaf Pick n Pay’s contributes to Group’s E2.1bn profit

Sifiso Sibandze by Sifiso Sibandze
April 27, 2020
in Business, Businesses
5 min read
0
Lojaf Pick n Pay’s contributes to Group’s E2.1bn profit

Pick n Pay Entrance

Mbabane: Pick n Pay Eswatini is counted among the contributors to Pick n Pay Group’s trading profit which increased 12.5 per cent to  E1.2 billion, while headline earnings per share rose 17.5 per cent to 91.28c.

Pick n Pay Eswatini is owned by Lojaf (PTY) Limited, a holding company of African Alliance Eswatini. Lojaf currently owns and operates all Pick n Pay stores in Eswatini under a franchise agreement with Pick n Pay Group. The stores owned by Lojaf are Pick n Pay Mbabane (The Mall), Pick n Pay Mashayitafula (Matsapha), Pick n Pay Mahhala (Matsapha), The Hub Pick n Pay (Manzini) and Pick n Pay Nhlangano, Pick n Pay Ezulwini (The Gables) and Pick n Pay Riverstone (Manzini).

Other grocer supermarkets under Pick n Pay Group are Boxer Super Stores in Pig’s Peak, Simunye, Manzini and Nhlangano.

According to the group’s unaudited condensed consolidated interim results for the 26 weeks ended September 1, 2019, operations outside South Africa (Pick n Pay Eswatini included), contributed E45.8 million to profit before tax.

Overall, Pick n Pay – South Africa’s second-largest grocer by market capitalisation, headed by former Tesco UK boss Richard Brasher, has continued to reap the benefits of its turnaround strategy, posting double-digit profit growth in the six months to end-September after an intensive focus on supply costs.

Improved gross profit margin

The results released on Tuesday reflect that the grocer had improved its gross profit margin to 19.8 per cent from 18.8 per cent — a measure of revenue minus cost of goods sold.

It had also managed to restrict internal selling price inflation to 2.2 per cent during the period, which refers to its rise in the direct cost of the goods it sells. The company has expanded its fresh foods offering in recent years, even as it consolidated its supply base, saying this was paying off particularly in SA.

 “In this environment, retailers have found it difficult to balance their two key objectives: delivering solid sales growth while maintaining profit margins,” Brasher said in a statement. “I am very pleased that we have succeeded in growing both our sales and our profits.” 

The company became more efficient by simplifying its product range and cutting waste, which enabled it to support customers during difficult economic conditions, he said.

Trading profit from its SA segment increased 16.4 per cent year on year, with the company upping its interim dividend 9.5 per cent to 42.80c a share.

Pick n Pay has about 1 858 stores, including Boxer stores and TM Supermarkets in Zimbabwe. Hyperinflation in Zimbabwe and tough consumer conditions in Zambia weighed on the group’s results, with its rest-of-Africa division’s contribution to group profit before tax falling 79.8 per cent to E27.5 million.

Challenges outside SA

The financial statement also says the group’s careful approach to growing and investing outside South Africa has helped to limit the impact of challenging conditions in the rest of Africa, adding that the consumer environment in Zambia remains difficult, and has been compounded by local currency weakness and import restrictions.

“Notwithstanding this, Pick n Pay stores in Zambia have delivered a 12.6 per cent growth in customer transactions, while delivering a substantial improvement in inventory cover. Economic conditions in Zimbabwe have been particularly difficult, with businesses and consumers grappling with political and social instability, high levels of inflation, currency devaluation and shortages of staple goods and services,” reads the statement in part.

 Despite current challenges, “the Pick n Pay Group is stronger as a result of our businesses in Zambia and Zimbabwe, alongside that of our franchise partners in Eswatini, Namibia, Botswana and Lesotho.”

Operational performance review

The Group’s goal is to deliver an ever more relevant, efficient and flexible business which gives more customers more reasons to shop at Pick n Pay and Boxer. In a constrained economy, Pick n Pay said the key is to provide lower prices and value-for-money, and the Group aims to achieve this without sacrificing earnings.  Performance highlights over the period reflect progress on this goal and include: competitive pricing, stronger fresh offer, greater relevance, differentiation through own brand, integrated loyalty programme and digital innovation through value-added services.

Result highlights

 By following a successful long-term strategy, the group has delivered another period of turnover growth and improved profit margins despite a difficult consumer environment

• A positive performance by the core South African operations resulted in overall earnings growth at Group level, despite challenges in Zambia and Zimbabwe

• Comparable Group turnover growth of 6.0 per cent, with like-for-like turnover growth of 2.9 per cent

 • South African operations delivered comparable turnover growth of 6.5 per cent, against a strong base last year, with like-for-like turnover growth of 3.5per cent

• Selling price inflation restricted to 2.2 per cent, below general price and food inflation, with like-for-like volume growth in South Africa of 1.3 per cent.

• Stronger performances across Pick n Pay and Boxer owned and franchise formats, with an increased relative contribution from company-owned stores lifting gross profit margin to 19.8 per cent

• Strong earnings contribution from core South African business, with trading profit up 16.4 per cent, and trading profit margin up from 2.5 per cent to 2.8 per cent of turnover

• On a comparable basis, excluding hyperinflation gains and losses, operations outside South Africa contributed R45.8 million to profit before tax.

• Comparable headline earnings per share, excluding the impact of hyperinflation accounting in Zimbabwe, and reflecting underlying operating performance, up 9.5 per cent.

• Interim dividend up 9.5 per cent to 42.80 cents per share in line with comparable growth in headline earnings per share, with plans to maintain a recalibrated dividend cover under IFRS 16 of 1.3 times earnings for the full year (equal to 1.5 times earnings cover pre-IFRS 16)

Tags: Pick n Pay Eswatini
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