Pick n Pay delivers resilient performance with solid turnover growth, despite civil unrest

Cape Town: Pick n Pay today published its financial results for the year ended 27 February 2022.

The Group reported a resilient performance in a year marred by civil unrest and some continuing Covid restrictions on the sale of liquor. Group turnover increased by 5.2%, despite an estimated R2.7 billion in lost sales arising from the civil unrest in July 2021 (R1.8 billion) and the trading restrictions on liquor mainly in the first half of the year (R0.9 billion).

The Group recovered R958.7 million of material damage losses related to the unrest from SASRIA during FY22 and received R145.2 million of interim business interruption insurance payments in March 2022. 

The Group delivered sales growth of 7.4% in the fourth quarter as it recovered from the civil unrest, and accelerated this to 9.9% in the first eight weeks of FY23.

Selling price inflation was contained to only 2.9% for the year, against CPI Food inflation of 6.2%. Gross profit at 18.8% reflected material stock write-offs as a result of investment in lower prices for customers, and the civil unrest. Project Future, Pick n Pay’s modernisation programme, has delivered targeted cost savings of R1 billion over the past two years. This helped offset increased costs, particularly those incurred in security and insurance as a result of the civil unrest. Trading expenses were up 4.2% year-on-year.

Pro forma profit before tax and capital items (including R145.2 million of insurance recoveries received after year-end) increased 24.9%, and by 29.5% in South Africa - under very challenging conditions in Quarters 2 and 3.

A final dividend of 185.35 cents per share was declared, resulting in a total dividend for the FY22 year of 221.15 cents per share, up 23.0% in line with pro forma HEPS.

Highlights included:

• The resilience of the Group’s underlying sales performance - driven by the value offered by Pick n Pay Value and Boxer supermarkets
• Clothing had an outstanding year, with sales growth of 21%, gaining market share for the fourth consecutive year. Over 40% of sales were produced locally, and 66 new clothing stores will be opened in FY23
• Liquor sales increased by 57.2%
• Smart Shopper continues to be a strong differentiator with sales participation now at nearly 80%. South Africa’s best loyalty programme offers more data than any other South African grocery retailer, and enables Pick n Pay to personalise the offer to customers
• Through better buying, supply chain efficiency and cost discipline, Project Future allowed Pick n Pay to invest in lower prices for customers - internal selling price inflation was contained to 2.9% for the year
• The new Pick n Pay Eastport distribution centre is on track to open in FY24 – it will provide more flexibility and efficiency to support growth aspirations, and deliver better availability and fresher produce to customers
• Relaunch of on-demand grocery offer as Pick n Pay asap! delivered growth of over 300% since August 2021
• Stronger customer growth from 40 refurbished Pick n Pay Select supermarkets, and 139 new stores opened across all formats

Rest of Africa

The Pick n Pay Group operates across 171 stores in seven countries outside South Africa. The Rest of Africa segment delivered a resilient performance, contributing R4.5 billion of segmental revenue (up 8.4% in constant currency terms), despite headwinds including cost challenges, geopolitical uncertainty and hyperinflation.

The Rest of Africa segment contributed R119.0 million to Group profits, down 19.6% on last year. Lower earnings in the Rest of Africa segment were largely attributable to the persistently difficult trading conditions in Zambia, particularly over the first half of the year. The team delivered an encouraging recovery in the second half of the year, and countered inflationary cost pressures through improved operating efficiency and tight working capital management.

TM Supermarkets in Zimbabwe delivered another resilient sales and earnings performance with underlying volume growth up 23.5%. The Group re-assessed the fair value of its investment in TM Supermarkets at R106.0 million, from R69.7 million last year. The increase in the value of the investment recognises TM’s strong underlying FY22 operating performance, high levels of liquidity in the business, minimal exposure to foreign debt and the successful remittance of R20.1 million of dividends to South Africa.

Pick n Pay CEO Pieter Boone said:

 

Pick n Pay has now served South African customers for 55 years. Across all these years, there is no doubt that the civil unrest and violence of July 2021 presented the Group with the most challenging trading period in our history.

I was inspired by the way in which communities came together as a result of the riots. Across Pick n Pay and Boxer, our teams rose magnificently to the occasion, getting our stores repaired and trading again, and assisted affected communities with vital food and other aid.

I was pleased with our performance in a highly disrupted year, and the extraordinary recovery we made after the civil unrest. Our sales in the fourth quarter of the last financial year, and first quarter of this financial year, demonstrate our potential. In Boxer we have the fastest growing discounter in Africa. We have also delivered strong growth in Clothing and in Online. 

There is still significant value to be unlocked in Pick n Pay. I will be presenting our new Strategic Plan later today. I am confident that customers, shareholders and our people will benefit considerably from our new direction and energy.

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