Fresh idea puts Pick 'n Pay in the lead

Published 26 years ago

Cape Town - Pick 'n Pay, the blue chip retailer, yesterday reported an 18 percent increase in attributable earnings to R77 million as hefty investments in the "Fresh" store concept ensured strong market share gains in the six months to end-August.

Headline earnings came in 16 percent higher at 15,9c while the dividend was lifted 18 percent to 5,6c a share.

Managing director Sean Summers said the company regained its top position in food retailing "after a great deal of hard work in refurbishing stores and a spectacular performance from Score and our franchising operations".

Retail sources estimated that Pick 'n Pay had edged ahead of Shoprite-Checkers-OK in the market share stakes. Estimates put Pick 'n Pay's latest share of the food retail market at nearly 38 percent.

Raymond Ackerman, the chairman, highlighted the company's 14,7 percent increase in turnover to R6 billion, which was achieved in difficult trading conditions.

He stressed trading profit - up just 3,3 percent at R67,6 million - was stated "very conservatively" after writing off goodwill on the acquisition of a 25 percent interest in TM Supermarkets in Zimbabwe, the acquisition of the remaining share capital in TranSwitch Services and the loss on the sale of a 75 percent stake in PNA/Paperbacks.

However, interest received jumped almost 40 percent to R62 million, pushing operating profit up 15,2 percent to R127,2 million.

Ackerman said investment income should be treated as operating income because stock management was "part and parcel" of Pick 'n Pay's trading. "We'll be paying particular attention to stocks in the second half and try to get even more interest income."

Pick 'n Pay's operating margin increased to 2,1 percent after the company's R550 million investment in the "Fresh" supermarket strategy and technology upgrades in the past 18 months.

"Despite this hefty investment, our cash reserves are still a healthy R867,5 million, a figure which excludes the R100 million we have in deposits in Pick 'n Pay Financial Services."