Aug 23, 2006


Shoprite Holdings has produced excellent results for the 52 weeks to end June 2006, posting a trading profit of R1,253bn, 21,3% higher than for the 53 weeks of 2005. The group achieved an annual compound trading profit growth of 33,3% during the last 20 years. 

Shoprite CEO Whitey Basson said after several years of restructuring and consolidating its activities into a coherent whole, the business was now reaping the rewards. “The South African operation of our supermarket brands fared exceptionally well in terms of both turnover and trading profit growth, while our non-RSA operation improved considerably on its 2005 results.” 

The group increased total sales in its 846 corporate stores by 12,8% (52 weeks: 15,1%) from R29,704bn to R33,511bn to which the non-RSA operation contributed R3,355bn, up 18,6% in rand terms. 

The trading margin of 3,7%, the highest ever, was achieved mainly from an increased non-food sales participation, better return on the non-RSA operations, efficiencies in supply chain management and the rigorous control of shrinkage, kept well below internationally acceptable levels. 

Diluted headline earnings per share adjusted for exchange differences rose 10,4% (52 weeks: 19,8%) to 145,0 cents while the net asset value per share was 36,5% higher at 598 cents. 

Based on these results, the Shoprite board has proposed a final dividend of 46c a share (2005: 28c) to bring the total distribution for the year to 73c a share. In the process the dividend cover has been reduced from 2,6 times to 2 times in line with the target set by the board a year ago in line with the decline in real interest rates over the last few years. 

Basson said consumer confidence remained high throughout the reporting period while the growing emerging middle class was increasingly influencing store locations and product selections. In the second half of the year the downward pressure on prices of staples in particular started to ease and food inflation began to rise, averaging only 4,1% (Source: Statistics South Africa) for the year. 

In this climate the group’s three supermarket chains in South Africa - Shoprite, Checkers and Usave - which generate 80,8% of group turnover, boosted their number of customer transactions by 10,1% while also increasing market share at the expense of major competitors. 

Shoprite embarked on an extensive store upgrade programme mainly to match the higher spending power of the new emerging middle class. It is not only improving the shopping environment, but also extending merchandise ranges with more aspirational products. 

In the same period Checkers strengthened its more up-market positioning, supporting it with extensive promotional and advertising campaigns that resulted in a more clearly defined customer base for the chain. It simultaneously grew the Checkers store base to 134 supermarkets and hyper stores. 

The group’s Money Market, which operates service kiosks in all its supermarkets, during the year entered the field of basic banking services and is making a meaningful contribution to overall profits. One of its services, introduced during the year, allows money transfers between all the group’s supermarkets at a fee substantially lower than charged by other financial service providers. 

The furniture division, trading mainly through OK Furniture and House & Home, increased turnover in its 198 stores to R1,875bn in an extremely competitive market still characterised by deflation in certain major product categories. With margins under pressure, trading profit grew 4,3% to R200,5m, (52 weeks: 9,0%). 

Referring to the group’s operations outside South Africa that comprise 130 corporate stores and employs 8,873 people, Basson said they had benefited from the higher GDP growth on the continent and the increases in commodity prices. 

During the year the group started to broaden its focus to include the oil-rich West African countries believing it well placed to benefit there from consumers’ higher disposable income. It opened its first supermarket in Lagos, Nigeria, in December 2005 and was investigating further opportunities there as well as in neighbouring countries. 

Discussing the 2007 financial year Basson said Shoprite Holdings was entering a new era of information-based management which he believed would have a far-reaching effect on the business. “We have invested extensively in some of the most advanced information technology systems that will greatly improve inventory and human resource management at store level. I therefore believe our major brands are particularly well positioned to benefit from forces currently at work in the economy.” 

The Shoprite group, which now employs 65,841 people, which includes 1,489 graduates have directly created some 14 000 jobs during the last three years. It trained 26,442 people over the past year, is at the forefront of skills development in its sector and the largest contributor of skills levies to the Wholesale and Retail Sector and Education Training Authority (W&RSeta) and now boast with a training compliment of 717 management employees. 

Of the total value added of R4,896bn created by the Group during 2006, 5,7% or R279m was paid in dividends to shareholders, 10,6 % or R518m was paid in taxes, 22% or R1,07bn was re-invested in the business, and 59,9% or R2,93bn was paid out as employment benefits to staff. 

The Shoprite group plans to open 91 stores as part of a R545m capital investment programme during the 2007 financial year, creating a further approximately 4,270 new jobs in South Africa and 1,120 in countries outside South Africa. 

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