Press releases

Pick n pay lift heps 28% at full year and completes stage 1 of its recovery plan

Tuesday, 21 April 2015
  52 weeks   52 weeks      
Key financial indicators 1 March 2015   2 March 2014   % Change  
             
Turnover R66.9 billion   R63.1 billion   6.1  
Gross profit margin 17.8%   17.5%      
Trading profit R1 240.1 million   R1 010.3 million   22.7  
Trading profit margin 1.9%   1.6%      
Profit before tax R1 205.2 million   R833.1 million   44.7  
Profit before tax margin 1.8%   1.3%      
Profit after tax 861.7 million   583.7 million   47.6  
Basic earnings per share 178.79 cents   122.01 cents   46.5  
Headline earnings per share 177.26 cents   138.51 cents   28.0  
Total annual dividend per share 118.10 cents   92.30 cents   28.0  

[Cape Town, 21 April 2015] Pick n Pay has reported growth in headline earnings per share of 28.0% at the full year to end February 2015. The company lifted profit before tax to R1205.2m, up 44.7% on the previous year. The final dividend was up 27.1% to 98.5 cents with the total dividend for the year up 28.0% to 118.1 cents, maintaining the dividend cover of 1.5 times headline earnings per share.

This result marks the completion of the first stage of Pick n Pay’s long-term recovery plan. This stage set out to stabilise the business and key achievements include:

  • tighter financial control and tighter working capital management. Consistently stronger cash balances enabled the company to repay R700.0 million in medium-term DMTN Programme debt. This delivered a 40.2% reduction in net interest charges.
  • increasingly effective management of costs and greater operating efficiencies. Trading expenses increased only 3.8% on a like-for-like basis, well below CPI. Improvements are from a more efficient and effective store operating model, supported by progress across the entire supply chain
  • Improvement in the gross margin by 30 basis points from 17.5% to 17.8%, alongside investment in the customer offer through Brand Match and a stronger Smart Shopper programme.
  • Improvement in the profit before tax margin from 1.3% to 1.8% of turnover.

As a result, the Group has now delivered four consecutive reporting periods of profit growth.

In a challenging market, group turnover increased by 6.1% to R66.9-billion. Like-for-like turnover growth was 3.6%. Net new space grew 5.2%. The Group has taken a number of strategic actions which, while strengthening the quality of the estate, impacted turnover in the reporting period. These include the closure of 40 underperforming stores over the past two years, disruption to trading in hypermarkets and supermarkets undergoing refurbishment, and a cautious approach to corporate new space growth. The Group is determined to drive strong returns from new space, and has over the past year developed a stronger plan for future growth which builds on its stronger operating model and wider portfolio of formats.

Consumers have faced sustained pressure from rising electricity and other utility costs, higher interest rates, increases in taxes and pressure on prices from a weakening Rand.

Pick n Pay has helped to relieve this pressure by bearing down on inflation. Internal food selling price inflation fell to 6.3% in the second half of the year compared to 6.7% in the first half.

Operations outside South Africa grew segmental turnover by 13.6%, with segmental profit growing 34.6%. The Group plans to open its first stores in Ghana in the coming financial year.

CEO Richard Brasher said:

“This is an important result for Pick n Pay. The first stage of our recovery plan – which set out to stabilise the business – is now largely complete. We have strengthened our financial control, tightened our efficiency and introduced effective management disciplines. We are making progress in centralising our supply chain and transforming our store operating model. Customers are seeing the benefits in better availability and more competitive prices. I am grateful to everyone in the Pick n Pay Group for their hard work over the past two years.

“The second stage of our plan – changing the trajectory of the business – will deliver an even better Pick n Pay for customers, more improvements in operating efficiency, more growth, and a further strengthening of the balance sheet.

“I have always said that, to be sustainable, Pick n Pay’s recovery cannot be achieved overnight. It has to be planned and built on strong foundations. We have laid some enduring foundations over the past two years, improving the quality of our estate, sharpening our pricing and developing our plan for new space growth. In some cases these actions have impacted the short-term performance of the business. But they have strengthened Pick n Pay for the longer term – to the benefit of our customers, staff and shareholders.

“Two years ago Pick n Pay was in a precarious position. We are now stronger and more stable. We are ready for stage 2 of our journey. It will require more hard work. But we have gained momentum and are approaching the challenge with energy and enthusiasm.”

Highights of the reporting period included:

Better for customers

  • Brand Match building confidence in the competitiveness of Pick n Pay’s pricing
  • Introduction of Buy Aid attracting new customers
  • Smart Shopper a key differentiator; redemption of personalised vouchers up 68% over the past year
  • Value-added services added R241.2 million of revenue in FY15

  • A flexible and winning estate
  • Store numbers as at 1 March 2015: 1,189 stores and 2.2 million square metres (excluding TM supermarkets in Zimbabwe)
  • Opened 127 stores across all Pick n Pay and Boxer formats; closed 14 underperforming stores.
  • Plan developed for future space growth based on improved operating model

  • Efficient and effective operations
  • New Retail Office introducing a more efficient and effective operating model across all store formats
  • Already delivered substantial cost savings in participating stores, particularly on waste and shrink

  • Every product, every day
  • Doubled capacity of supply chain capability in Western Cape in FY15 by implementing a high- density pick tunnel at Philippi DC
  • Rolled-out the Enterprise Warehouse Management (EWM) SAP warehousing system in Longmeadow in Gauteng to improve picking efficiencies in the warehouse.
  • Working closely with suppliers to accelerate pace of centralisation, adding 90 suppliers during the year and increasing the level of central supply by more than 10%
  • Philippi DC successfully delivering every product, every day to all corporate stores in the Western Cape on a 24-hour lead time
  • On-shelf stock availability improved 2.5%

  • A winning team
  • Strengthened senior management team
  • Introduced new performance review and management systems for senior managers
  • Improvement in BBBEE score from Level 6 to 4 in FY15

  • Boxer - a national brand
  • A growing brand despite challenging trading conditions Rest of Africa - second engine of growth
  • Good growth outside SA; segmental revenue up 13.6%, segmental profit up 34.6%
  • Opened 2 stores in Zambia, 8 in Namibia
  • Refurbished 4 TM Supermarkets in Zimbabwe and rebranded 3 to Pick n Pay brand. Store total now 53; 8 under PnP banner
  • Will open first store in Ghana in 2016 ENDS

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