Adele Shevel

Adele Shevel

Management of South Africa's second largest food retailer, Pick n Pay, yesterday seemed more upbeat than they have been for some time as benefits from strategic investments start to bear fruit.

The retailer is turning around market share losses from the past two years. Australia is doing much better than previously, the conversion of Score to Pick n Pay or Boxer has been successful and investments in a new distribution centre and SAP are benefiting the company.

Chief executive Nick Badminton said it was a year characterised by an aggressive focus on gross margin to keep prices low for consumers battling high interest rates, high food inflation and a slowing economy.

In the past year Pick n Pay opened 67 new outlets, helping turnover for the year ending February grow 17,4percent to R49,9billion. It plans to open 58 new stores next year.

Trading profit rose 11,2percent but the trading profit margin was down from 3,6percent to 3,4percent as a result of investments to help consumers.

Franklins Australia showed improved trading. Turnover grew 18,2percent in rands and 3,5percent in Australian dollars, delivering R23,5million trading profit before capital profits through better operating efficiencies and better sales at refurbished stores.

Shane Watkins, executive director of Silkroad Fund Managers, says "at last management appear to believe that they have a sustainable business in Australia". He expects Franklins will no longer be a drag on the group and in time contribute positively to earnings.

The newly converted Score to Pick n Pay franchise stores have worked well, and in some cases turnovers have more than doubled. The plan is to convert a further 25 stores next year.

The company declared a dividend for the year of 170 cents, an increase of 14percent - in line with the company's 40-year history of paying increased dividends.

Cash generated from operations increased on the back of robust trading and improved working capital management.

The company will spend R1,4billion on opening 58 new stores, refurbishments, distribution improvements and the completion of the SAP roll-out.