Feb 17, 2003


​In the six months to the end of December 2002, Shoprite Holdings increased its turnover by 15.6% to R12, 694 billion in a market characterised by rapidly increasing food inflation. 

The operating profit of R269 million, which represents an increase of 35% over the previous year, was adversely affected by a largely unrealised foreign exchange loss of R61 million (previous year’s profit R51, 7 million), mainly as a result of the strengthening of the Rand. 

Headline earnings per share reduced from 32,6c to 26,9c because of this unrealised loss. Should the unrealised foreign exchange rate fluctuations be excluded, the group shows a 40.3% growth in headline earnings, or earnings per share of 35,5 sent.

The Board of Directors declared a dividend of 14,0c per share (2002: 11c). Dividend cover is 1,9 times.

Whitey Basson, managing director of the Shoprite Group said that to remain price-competitive, Shoprite was obliged to purchase stock on a large scale because of the rapid increase in food inflation. "We nevertheless succeeded in reducing the total real stock during the period under review, considering the high food inflation as well as the 38 new stores opened during the past 12 months, 20 of them during November and December 2002.”

With more than R1 billion in cash at hand at the closing date and a strong balance sheet, the group is well positioned for further investments in the retail trade.

Shoprite has continued to be the market leader with low prices and the total value of price increases were not passed on to the consumer. Operating costs were kept in check by advanced management practices, strict internal discipline and continuous training.

Basson said that Shoprite's non-South African activities have continued to grow with an increase in turnover of 34%, if the exchange rate fluctuations are excluded. Non-South Africa contributed 10.8% (2001: 9.7%) to the turnover of the supermarket division.

It is gratifying that there was an increase in profits of 52%, before exchange rate fluctuations, in non-South Africa businesses during the period under review. These profits currently represent 19.7 % of group operating profit before exchange rate fluctuations. The group is now doing profitable business in all African countries except Uganda, Tanzania and Egypt.

Basson said that the group is satisfied with its African investments, in spite of the fact that premises are difficult to obtain and that this causes delays in expansion. Further openings in existing countries are being investigated and a store is being built in Angola. During the past 12 months, the Group established 18 stores outside South Africa and now operates 62 supermarkets in 13 countries elsewhere in Africa and on the adjoining islands.

The long-term prognosis for stronger African currencies looks promising, seen against the background that 10 of the 13 countries in which we are trading had a lower inflation rate than South Africa during the period under review. 

To ensure critical mass in Uganda and Tanzania, the number of stores in these countries was increased by six during the period under review, while the location of various stores in Egypt was improved. Here the turnover is now close to budget. Growth in existing business there amounts to more than 38% and it is even more gratifying that the trading density per m² is almost triple that of South Africa.

During the second half of the calendar year, Shoprite will for the first time move outside Africa when it opens its first supermarket in Mumbai in India. The group is the first South African retailer to penetrate the Indian subcontinent, a step taken in consultation with local partners. Mr Basson said that Shoprite has over many years familiarised itself with the product needs of the Indian community in Kwazulu-Natal and believes that this experience will stand it in good stead in India.

“South African business was satisfactory and in addition to an increase of 4.8% in customer numbers, we also experienced an increase in our market share in existing branches during December. The demand for conventional supermarkets in traditional trading areas in South Africa is close to saturation. We are therefore focussing mainly on the improved utilisation of retail space, rather than arbitrary expansion, and opening stores in under-serviced areas." 

Basson said that the separation of the group's two main trademarks – Shoprite and Checkers – was carried out successfully. "Consumers have widely welcomed the new positioning of Checkers, its more attractive appearance and wider range of products.

“The furniture department did well despite a more difficult market as a result of the increase in interest rates. We have now developed a furniture group that is starting to meet market norms with an operating profit of R54,5 million. A possible listing during the next few years is being considered to keep our non-strategic businesses apart from our core food business. The integration of OK Furniture and House & Home, which previously formed part of the Hyperama management, has also been completed.”

Basson concluded that the next 6 months are full of challenges, mainly as a result of the strengthening of the Rand, possible lower inflation on food prices and higher than average salary increases as a result of the new sector determination.

He welcomed the new wage stipulations for lower-paid persons, as this will regulate labour relations better and he trusts that this, together with possible tax concessions, will have a positive effect on the expendable income of the lower income group.

Latest Articles