DURBAN - Retail giant Pick n Pay said yesterday the R200million in cost to company for its voluntary severance programme (VSP) would be recovered in full by the end of the financial year.
The group said the VSP aimed to improve efficiency and productivity of staff across the business by removing roles and functions no longer required. It resulted in the closure of 10percent of roles and functions.
Chief executive Richard Brasher said it was a part of a turnaround strategy started at the end of the 2014 financial year. “We started the voluntary severance programme in May and all the costs fell within this reporting period,” Brasher said. “But we are confident that at the end the business will function better.” He added since the turnaround strategy was started, the group had added 12500 new employees, growing the total number from 69500 to 82000.
“We have employed more people even though we have let others go,” Brasher said. In the results for the six months to end-August, Pick * Pay announced its ninth consecutive period of profit and turnover growth. The turnover increased 5.1percent to R39.3billion with like-for-like turnover growth of 1.8percent. The group said this reflected a difficult trading environment and significant investment in lower prices for its customers. Internal price inflation was restricted to 3.6percent, below CPI food inflation of 6.9percent.
Profit rose 14.9percent to R438.8m, up from R381.8m as compared to a year ago, while headline earnings per share (Heps) fell 24.9percent to 61.88cents a share, down from 82.43c. The group declared an interim dividend of 33.40c a share, 11.7percent higher than the 29.90c a year ago.
“This has been an important six months for Pick * Pay. Nine consecutive periods of profit and turnover growth demonstrate that we have the right plan to modernise our business, reduce our costs and deliver better value for customers,” Brasher said. The group opened 63 new stores, 40 company-owned outlets and 23 franchise stores in the period. One of its supermarkets, Boxer, celebrates its 40th anniversary this year.
Boxer opened 13 stores in the first half of the year and grew its presence in the Western Cape, with two new stores in Mitchells Plain and Worcester. It focuses on lower-to-middle income earners. In the rest of Africa, revenue rose 12.6percent year-on-year to R2.3bn. Profit before tax was up 22.3percent from R103.7m to R126.8m. The total number of stores outside South Africa rose to 142, including TM Supermarkets in Zimbabwe. The group said despite ongoing challenges in some markets it remained positive about its long-term prospects outside South Africa.
Nesan Nair, a Sasfin Securities senior portfolio manager, said the results were more or less in line with guidance but were skewed by the costs of the voluntary retrenchment programme. Pick * Pay shares rose 0.40percent on the JSE yesterday to close at R60.10.