Trading disruptions impact Pick n Pay’s HY’ 2022 revenue growth

  • Revenue increased by 4.1%
  • Trading expenses grew to R8.9 billion
  • Headline earning per share up 40%
  • The Group recorded a non-cash R45.8 million net monetary loss on the revaluation of assets and liabilities in its Zimbabwean operations

Harare – South African retailer, Pick n Pay Stores posted a marginal turnover growth of 4.1% to R46 billion for the half year ended 29 August 2021 reflecting the trading disruptions effect which resulted in an estimated R1.7 billion loss of sales.

The continued COVID-19 lockdown restrictions and the civil unrest in KwaZulu-Natal and parts of Gauteng in July this year disrupted the Group’s trading operations during the half year.

Consequently, trading expenses increased 4.1% year-on-year to R8.9 billion including additional costs related to the civil unrest, such as heightened security measures, reinstatement of insurance covers, and additional repairs and maintenance costs.

Gross profit for the half year decreased 3.4% to R8.4 billion, with a contraction in the gross profit margin to 18.2% of turnover.

“The accumulated impact of trading disruptions over the past 18 months, with stringent Covid-19 trading restrictions in the prior period, complicates the comparable assessment of the Group’s underlying trading momentum

“This contraction in gross profit reflects the significant impact of trading disruptions over the period, most notably the civil unrest which resulted in estimated lost sales of R930 million, stock losses of R633 million and increased costs of operating across the supply chain of R60 million,” the Group’s chief executive officer, Pieter Boone said in a statement accompanying the financial results.

Over a two-year period, removing the estimated impact of all disruption, the Group sales grew an estimated 5.2% per annum (5.7% per annum in South Africa), a solid performance in a highly disrupted and increasingly challenging economy.

“The Group has benefited from strong performances from its Boxer, Pick n Pay Value and Clothing businesses, continued effective management of working capital, targeted capital investment, and pleasing momentum in its omnichannel offer,” Boone said.

Headline earnings per share including the Group’s share of non-cash hyperinflation accounting re-measurements in TM Supermarkets was up 40% to 61.28 cents per share from a comparative of 43.78 cents.

In the same light the Group’s operations in Zimbabwe, where it owns a 49% shareholding delivered another resilient trading and earnings performance in a difficult economic environment as the Group’s share of TM’s earnings, before any hyperinflation net monetary adjustments, grew 91.2% year-on-year to R56.6 million.

“The strong trading result reflects sustained market share gains and encouraging volume growth in the region, alongside disciplined cost and working capital management

“The result was characterised by some moderation of inflationary pressures in the region, resulting in a non-cash R45.8 million net monetary loss on the revaluation of assets and liabilities, compared with an R31.8 million gain in the prior year (both excluded from our comparable headline earnings per share, the Group’s main dividend driver),” Boone said.

However, Pick n Pay incurred capital losses of R7.2 million during the half year, against an R47.5 million charge in the prior period.

“Net capital losses include R58.1 million related to the sale, closure or impairment of underperforming stores, a net capital gain of R20.7 million on the recovery of insured assets at replacement value, and an R30.2 million capital gain on the Group’s assessment of the fair value of its investment in TM Supermarkets,” Boone said.

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