South African supermarket operator Shoprite Holdings said it has maintained its "robust and established" growth pattern, booking an increase in half-year profits.
Earnings for the six month period earnings grew 19.6% to ZAR1.70bn (US$191.3m), the company reported today (20 February). Total sales grew 13.8% to ZAR46.72bn.
CEO Whitey Basson said the growth was largely due to "on-going and very substantial" investments in infrastructure over the last few years.
Looking ahead, Basson said there were no signs the cost pressures on consumers were about to ease, but said he did not expect market conditions to change materially for the rest of the financial year. He added: "[I am] nevertheless confident the group will be able to maintain its present levels of growth and profitability."
SHOPRITE CONTINUES STRONG GROWTH CURVE
The Shoprite group has maintained its robust and established growth pattern in the six months to December 2012 by increasing total sales by 13,8% (2011: 13,2%) to R46,723 billion. This growth in turnover produced a 16,0% higher trading profit (2011: 16,7%) of R2,510 billion.
The net profit for the period under review increased by 19,6% to R1,697 billion while headline earnings of R1,690 billion were 18,9% higher. However, the growth in headline earnings per share of 12,5% (2011:18,6%) was partially diluted by the group’s successful capital raising in March last year, resulting in an additional 27,1 million shares in issue.
Based on these results the board declared an interim dividend of 123 cents per share which is 12,8% above the 109 cents of a year ago.
The group’s chief executive officer, Whitey Basson, said sales were buoyant in the first three months of the period under review but then slowed down in the second quarter when market conditions became increasingly strained. “This was particularly noticeable in December when the retail sector as a whole experienced a very subdued Christmas season.”
Basson said the group achieved growth under far more trying conditions. “This is largely due to our on-going and very substantial investments in infrastructure over the last few years which are now producing handsome dividends. The capacity created by our growing network of distribution centres enables us to expand our store footprint at a rapid rate, both within and beyond the country’s borders.
“We opened no fewer than 74 supermarkets in the 12 months to December, 56 inside South Africa and 18 beyond its borders. The 56 local supermarkets enabled the Supermarkets RSA division to grow turnover by 11,5% outpacing the 8,2% growth in the local food retail sector, thereby making further gains in market share.
“Our expansion programme further assisted us in our goal for the Shoprite Group to generate viable job opportunities. During the period under review we managed to create over 6 700 new jobs, bringing our total staff compliment to almost 109 000 employees.
Discussing the various divisions of the business, Basson said they all reported acceptable growth despite the sluggish trading environment. Supermarkets RSA returned a trading profit of R2,072 billion generated by the 915 outlets operated at the end of December. In an environment in which internal inflation was restricted to a low 4,6% (against an official figure of 5,4%), the 11,5% increase in turnover represents real growth of 6,9,%.
The Supermarkets Non-RSA, aided by a weakening rand, increased turnover by 28,2% and by 13,4% on a like-for-like basis. Taken at constant currencies the growth was still an impressive 23,5%. The division now operates 179 outlets outside the borders of South Africa with a further 13 scheduled to open in the second half of the financial year.
Basson said the durable-goods sector had been more heavily impacted by market conditions than food retailing because of its largely non-essential nature. After a strong start by the group’s furniture division in the first quarter, the trading environment worsened towards the end of the period under review and sales growth slowed to 4,8% while deflation averaged 1,2%. Growth was achieved without sacrificing margins.
Looking ahead, Basson said there were no signs that the cost pressures on consumers were about to ease. Consequently, he did not expect market conditions to change materially for the rest of the financial year but was nevertheless confident that the group would be able to maintain its present levels of growth and profitability.
