Lockdown restrictions have cut earnings in half, says Pick n Pay
JOHANNESBURG - Pick n Pay yesterday flagged that its earnings would more than halve in the six months to the end of August following the country’s Covid-19 lockdown restrictions.
The company blamed the restrictions, increased costs as a result of the pandemic and the once-off costs of its voluntary severance programme (VSP), which was launched in March, for the decline in profit.
It said in a trading guidance that headline earnings per share for the 26 weeks to August 30, excluding any impact from hyperinflation accounting in Zimbabwe, would decline more than 50percent, or more than 42.52cents, on the 85.03c of the previous corresponding period.
Chief executive Richard Brasher said the group had carefully preserved cash through tight working capital management and a focus on critical capital and operational spend.
“I want shareholders to understand and be reassured that the impact on our first-half earnings that we are announcing today derives solely from the specific circumstances of the pandemic, the impact of measures taken by government and ourselves to mitigate it, and the once-off costs of our VSP which has made the group leaner and more competitive,” said Brasher.
The group said yesterday that 1400 employees took the VSP, which it said was a major step forward in making the business more competitive and more sustainable, alongside other strategic actions designed to improve the group’s performance.
“In subsequent years, the reduction in employee numbers will have a positive impact on the operating costs of the group,” the company said.
Pick * Pay said the cost of compensation payments to departing employees would be borne in the first half of the group’s current financial year.
“However, the programme is expected to be cost-neutral for the full 2021 financial year, as compensation packages will be fully through cost savings in the second half of the year,” said the company.
The group said trading in certain key product categories - including alcohol, tobacco, clothing, general merchandise and hot foods - was prohibited during level 5.
Pick * Pay said these categories made up about 20percent of revenues, with higher gross profit margins relative to basic food and grocery lines.
“Alongside the substantial impact of these trading restrictions, the group has experienced some disruption to trade through store closures following the identification of positive Covid-19 cases among staff,” said the company.
On Monday, Shoprite said it recorded sales growth of 8.7percent, including alcohol, from South African supermarkets during the year ended June, underpinned by a strong second half, in which sales grew 7.5 percent.
The group said Shoprite and Usave reported full-year sales growth of 6.7percent, while Checkers and Checkers Hyper reported full-year growth of 13.5percent.
Pick * Pay shares declined 5.37percent to close at R42.30 yesterday.