South Africa - Johannesburg - 17 October 2019 - The new Flagship Pick n Pay the 1st of its kind in the Country was opened in Nicol Way North of Johannesburg. Picture: Simphiwe Mbokazi/African News Agency(ANA)
South Africa - Johannesburg - 17 October 2019 - The new Flagship Pick n Pay the 1st of its kind in the Country was opened in Nicol Way North of Johannesburg. Picture: Simphiwe Mbokazi/African News Agency(ANA)

Pick n Pay’s sales drop R2.8bn due to disruptions

By Dineo Faku Time of article published Oct 21, 2020

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JOHANNESBURG - Pick n Pay, which posted interims knocked by Covid-19 disruption, said yesterday that it had agreed to purchase on-demand online grocery service Bottles to take advantage of the growth in online sales following the pandemic.

Pick n Pay chief executive Richard Brasher said the past seven months had seen a surge in demand for online groceries in South Africa.

“Together with our franchise partners, we have responded by expanding the number of stores which deliver or offer a click and collect services. Our sales growth has more than doubled, and we have seen a 200 percent increase in active customers,” he said.

Pick n Pay reported a fall in earnings during the six months to August after sales fell due to the lockdown restrictions.

The group lost about R2.8 billion in sales in the six months to end of August due to measures taken by governments to contain the spread of the Covid-19 pandemic. Headline earnings declined 56.3 percent year-on-year excluding hyperinflation in Zimbabwe, reflecting the impact of R150 million of additional operating costs directly related to the Covid-19 pandemic and R100m in one-off costs of a voluntary severance programme (VSP).

More than 1 400 employees left the group due the VSP. Headline earnings were down 38.6 percent excluding the once-off costs of the VSP. Brasher said the pandemic had been unprecedented.

“There was no handbook, no rule book, no clarity on what has to be done where. People have had to respond in an agile fashion. I would like to give credit to the grocery industry,” said Brasher.

Trading restrictions affected up to 20 percent of revenue at different stages of the lockdown, and sales were further hit by reduced trading hours, limits on the number of customers in stores and temporary store closures. Trading profit fell 25.4 percent to R885.6m from R1.2bn a year earlier, while turnover rose 2.6 percent to R44.2bn, up from R43.1bn during the six months to end of September last year.

Turnover from South African operations was up 3.4 percent to R42.7bn from R41.3bn last year. Core retail sales – including food, groceries and general merchandise, but excluding liquor, clothing and tobacco – grew 8.7 percent year-onyear or 6.4 percent like-for-like, with 9.9 percent growth in South Africa, or 7.6 percent like-for-like. Alcohol and tobacco sales plummeted 47.5 percent as a direct result of regulations.

Brasher said the restrictions reflected in the group’s results were as a result of what the company could sell, not its inability to sell.

“Honest, tax-paying, legitimate businesses should not have been disadvantaged at the benefit of criminals. If it was to ensure that no one drank too much or nobody smoked too much, it was not the reality. All it meant was professional and legitimate companies did what they were told and the rest did what they liked,” said Brasher.

The group more than halved its interim dividend per share to 18.74 cents during the half-year ended August, from 42.80c a share a year earlier.

The group said it would also pay a 173.06c final dividend that was deferred in April because of uncertainty around the Covid-19 pandemic.

Chief financial officer Lerena Olivier said the strong balance sheet underpinned the dividend and that through careful cash and liquidity management.

“We are now back to the same levels of funding at the end of February, before Covid-19. We are, therefore, in a very strong position to look towards the dividend declaration. We have also taken advantage of the low-interest rate environment to turn out some of our short term commitments into six and 12 months funding,” she said. Pick n Pay shares closed 2.17 percent higher at R52.66.

BUSINESS REPORT

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