Feb 17, 2004
Shoprite Holdings has reported a 17.2% growth in operating profit to R315,7m, before foreign exchange differences, for the six months to 31 December. This was achieved on a turnover growth of 5.8% to R13,436bn. Headline earnings, before adjusting for foreign exchange differences, increased 45% to 39,0c.
In light of these results the board has declared an interim dividend of 16,5c per share, an increase of 17.9% over 2003's 14c.
The Shoprite Group's businesses outside South Africa – it operates in 13 countries on the continent as well as on two Indian Ocean islands – increased 28% at constant conversion rates. Of these Zambia and Namibia were the biggest contributors to group income. However, due to the continued strengthening of the rand, turnover in rand terms dipped 3.4% to R1,115bn. The Group now operates 79 stores outside South Africa and during the review period opened its first outlets in Angola and Ghana.
Where the rand had strengthened 15% against the US dollar in the corresponding period of 2002 this rate slowed to 9% over the last six months of 2003. This resulted in a R31,5m foreign exchange loss compared to R61,0m in the corresponding six months in 2002.
The group's net profit margin - foreign exchange differences excluded - increased from 2.13% to 2.36%. Chief Executive Whitey Basson said this was achieved through increased efficiencies, improvements in distribution and a further reduction in the already very low shrinkage level.
Basson said he considered a 17.2% increase in operating profit commendable in a deflationary environment. Food inflation in the Shoprite RSA chain of 257 supermarkets and by far the biggest contributor to profits, was less than 1% in contrast to the previous reporting period when it reached a high of 18%. Although customer numbers increased 5.9%, the growth of just 1.1% in basket size shows the difficult economic conditions lower income groups face."
Despite strike action in October and November, sales in the Shoprite chain increased 7% for the full six months. In December turnover advanced strongly to 10.4% as the chain started regaining lost market share.
Basson said the repositioning of Checkers for a more affluent sector of the market was bearing fruit. Customer support was growing as well as basket size. The chain's operating profit jumped 34% and management expected Checkers to continue its strong growth.
The new Usave format was proving very successful. These no-frill stores, of which 30 were opened in the past year, sell a limited range of core consumables and are finding wide acceptance, especially in rural areas both inside South Africa and beyond its borders. Its 41 stores are almost without exception trading profitably and a further nine are being planned for the near future.
Basson said the non-core furniture division consisting of OK Furniture and House & Home grew turnover 22.6% to R847,8m and operating profit 34.8% to R73,6m. "The furniture division has shown consistent growth since its acquisition albeit initially off a low base, and is now starting to generate industry-acceptable returns."
Looking to the future Basson said no material changes were envisaged in the business environment during the second half of the financial year. "We are therefore confident the group will at the least maintain its present level of profitability."