Pick n pay delivers in a tough market

*Pick n Pay follows a 52-week retail financial calendar, which requires the inclusion of an additional week every six years. The 2019 financial year is a 53-week period, and its results are not directly comparable with 2018. Additional pro forma financial information was provided on an equivalent 52-week basis, to assist stakeholders with their assessment of the Group’s comparable performance. The information below is on a 52-week comparable basis.

HIGHLIGHTS

• Market-leading sales performance with turnover up 7.1% (7.4% in South Africa)
• Selling price deflation of 0.3% underlines exceptional value for customers
• Like-for-like turnover growth of 4.8% contributing to 5.1% volume growth
• 110 net new stores adding 2.3% to turnover growth
• Better buying helped gross profit margin to increase from 18.9% to 19.0% despite investment in price
• Expense growth contained below turnover growth
• Strong working capital management - borrowings reduced by R665.0 million; net interest paid down 38.5%
• HEPS up 18.0%, with diluted HEPS up 18.8%
• Total annual dividend of 231.10 cents per share, up 22.4% - over R1billion for shareholders

[Cape Town] Pick n Pay today published its annual financial results for the year ending 03 March 2019. 

Headline earnings per share grew 18.0%, with diluted HEPS up 18.8%.  Profit before tax (PBT) was up 17.3%, with the PBT margin improving from 2.2% to 2.4%. 

Consistent, successful execution of the company’s long-term growth strategy has delivered compound annual earnings growth of 23.7% over six years.

In a challenging trading environment, the company has continued to deliver on the objectives set out in its long-term plan: a relentless focus on improving cost and operational effectiveness enabled the Group to invest in a winning customer offer through lower prices, more attractive promotions, better and more innovative products, compelling value-added services, and brighter and more modern stores – without sacrificing earnings growth. 

Steps taken to reduce costs in 2018 enabled the company to invest decisively in the customer and outperform the market in FY2019.  Across the year, the company reduced prices on thousands of products, particularly on fresh produce, meat, and commodities and delivered a sustained programme of fewer, deeper and more effective promotions. This produced exceptional value for customers, with internal selling price deflation of 0.3% against CPI food of 3.4%.

Successful execution of this plan was evident in the company’s market-leading turnover growth of 7.1%, and like-for-like turnover growth of 4.8%.  The company’s core South Africa division - comprising Pick n Pay and Boxer - delivered turnover growth of 7.4%. 

The company’s volume growth of 5.1% represented its strongest underlying trading performance for many years. 

Other progress over the year included:

• Improved fresh offer - strong sales growth, improved availability, less waste
• Own brand participation up to 21%, with plans to accelerate
• Strong growth in supplementary offer - with clothing, liquor and online all performing well
• Broad refurbishment programme, with 103 stores modernised across all formats
• Range optimisation driving lower stock-holdings, like-for-like inventory down 10.5% year-on-year
• DC centralisation up from 65% last year to over 75%
• Smart Shopper up to 7.2-million active members, offered R6.6-billion in personalised discounts last year, with redemptions up almost 30%
• Launched Smart Shopper partnership with BP to offer Smart Shopper points on fuel purchases  - over one million people have benefitted to date
• Value added services income up 41.5% year-on-year, including new partnership with TymeBank

The Group’s performance was anchored by a strong result from its core South Africa division, with profit before tax in the region up 23.8%.  Operations in the Rest of Africa remained resilient despite difficult trading conditions. The Group’s result takes full account of the operating challenges experienced outside South Africa, including the earnings impact of a constrained consumer environment in Zambia and currency devaluation in Zimbabwe. Profit before tax from the Group’s Rest of Africa division was down 16.2% year-on-year. The company has commenced development on one store in Nigeria, due to open this year, with plans for two more.

Commenting on the result, CEO Richard Brasher said:

“I want to thank everyone at Pick n Pay and Boxer for their hard work in delivering an outstanding result in a difficult economy. 

“In tough times, success depends on having the right plan, and delivering on that plan, whatever the circumstances.  This result is built on a clear, long-term strategy to create a leaner and more cost-effective business which gives customers exceptional value, quality, innovation and service. We have raised our game in a difficult economy when customers have needed us most.

“Six years of hard work has made us a much better business for customers - with great prices, an exciting fresh offer, innovation in own brand products, and an exciting array of services, in brighter and more modern stores.

“Our Boxer business has had a great year.  It has performed exceptionally well in this tough economy and has firmly established itself as South Africa’s leading limited-range discount supermarket.

“Income from value-added services grew 41.5%.  Our new banking partnership with TymeBank has given customers another reason to shop with Pick n Pay and Boxer.  TymeBank have opened over 250, 000 accounts in our stores in just 3 months.

“Over the past six years we have changed the trajectory of Pick n Pay.  This has been a very good year, and there is more to come in 2019 and beyond.”

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