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Swing to cash boosts Pepkor
RESULTS
THE huge expansion in credit sales over the past two years has taken its toll on retailers who rely on credit and have been extending it indiscriminately to up their sales. But Pepkor, the owner of Shoprite and Pep, cashed in during the year to June as hard-pressed consumers were forced to buy on price and to buy with cash as their credit facilities were stretched to the limit. Pepkor this week reported a 34% hike in earnings to 126.7c a share compared with the same period last year, turnover was 20% up at R15-billion and operating profit was 40% higher at R547.7-million. The results, says managing director Jan le Roux, reflect excellent performances by all of its interests. Compared with the same period last year, Pep, which has been sluggish for a few years, increased earnings 50% despite a modest 8% rise in turnover to R2-billion. Shoprite's earnings were 26% up on 19% higher turnover of R9.4-billion. Cashbuild, which has been repositioned as a focused mass discounter of building materials, continued its recovery to report real growth for the first time in years. Retail chain Ackermans, which has also been repositioned, steamed ahead with a 50% rise in operating profit. Careful stock management and mark-downs enabled Stuttafords to increase its operating profit 70% on a marginal rise in turnover. For the first time since it was bought, UK-based Brown & Jackson was profitable at operating level. UK operations Poundstretcher and Your More Store have been consolidated into Brown & Jackson. Le Roux says the group's results, especially those of Pep Stores, indicate there has been a huge swing back to cash. Pep Store had considerably outperformed the Retailer Liaison Committee sales figures, where clothing sales had declined. He says the results prove Cashbuild's new concept is working and it has successfully transformed from a wholesale to a retail format. They also prove that the repositioning of Ackermans has worked well. "We are happy that management knows what it is doing, now it is a matter of accelerating the expansion." Commenting on the BOE-Christo Wiese-NBS Boland deal, Le Roux says: "We take it as a compliment that a new, powerful financial institution (Orion) takes a 20% interest in our group. This facilitates a close relationship in terms of in-store financial services and the development of these services. There is currently a pilot project with Boland Bank and Shoprite, but it is early days. The scope is wide, it depends on what financial institutions choose to introduce, from paying accounts to paying premiums on policies." Pepkor did well on the R432-million sale of Waltons to Bidvest, realising net profit of R91-million. Le Roux says it would have taken time and "strenuous management input" to return it to full profitability, so it decided to divest and focus on its core businesses. While the trading environment will remain tough in the coming year, a good performance is expected from all of its divisions. In addition, Pepkor will benefit from improved asset management, especially at Pep, a better performance from operations in the UK and the redeployment of funds from the Waltons deal.
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