Raymond Ackerman, chairman of Pick 'n Pay
Shake-up pays off for Pick 'n Pay
Both divisions performed strongly in the six months to end-August, helping the group report headline earnings 25.2% up at R64.9-million and earnings 24.1% up at 13.71c a share.
This was achieved on 13.5% higher turnover of R5.2-billion and a 29.5% rise in operating income to R110.4-million, indicating improved margins.
Raymond Ackerman gives no divisional breakdown, but says Group Enterprises is well over a third of profits. The group is well on the way to its goal that in five years (since the split two years ago) profits must be equally spread between both divisions.
The group increased its interest in Score Supermarkets, which had a particularly good year. Group Enterprises MD Gareth Ackerman says Score is growing dramatically. "It now has three stores in the middle of Soweto. Our focus is to capitalise on the former township areas and the rural areas."
Franchising has proved a major sweetener for the group, which now has five different franchise divisions.
At the end of the period it had 44 Pick 'n Pay Family stores, 45 Rite Valus, two Scores, 79 PNAs and 11 7-Elevens (Africa). It will have 275 franchised stores by the February year-end.
The past six months have been busy. The group renovated 20 Pick 'n Pay supermarkets and hypermarkets, opened eight new Family supermarkets, five Rite Valus, two franchised Scores, 28 PNAs (some were conversions of the acquired Paperbacks stores), 10 7-Elevens and two TM Supermarkets in Zimbabwe. In the second half it expects to open three Pick 'n Pay supermarkets, one Price Rite, five TM stores, six Family stores, nine franchised Rite Valus, 21 PNAs and 36 7-Elevens.
Gareth Ackerman says this is the group's new core competency. "We are moving more and more into proximity retailing and the formalisation of the garage-type store and spaza-type store."
Stationery chain PNA has been growing strongly, and the group will open the 100th store by the end of November. "We are positioning ourselves for a strong onslaught following the Woolworths/CNA purchase," says Raymond Ackerman.
The group is also focusing on ensuring it retains its position as the pre-eminent retailer in view of the expected merger of OK and Shoprite.
"We consciously turned down both CNA and OK, not because they are bad businesses but we have so much on our plate and we wouldn't be able to spend time focusing on what we are doing . . . this is a difference in philosophy which we think is right for us," says Raymond.
Just over a month ago the group made a bold move into financial services. Raymond Ackerman says the group's expectations of the sign-up have been greatly exceeded, with the initial launch in the Western Cape attracting over 8 000 account holders in just over a month.
Pick 'n Pay was surprised firstly at the lower end of the market, where it thought that as a savings product it was not that attractive and that it did not offer a product for the credit hungry. It was also surprised at the top end, where there has been an inflow of big money. Financial services will now roll out to other areas in SA.
There have been some operational problems relating to the call centre and staff getting used to the fact that checkouts now have a different function.
Raymond Ackerman says he is happy with several improvements in the results. "We were talking six months ago about getting stocks down and we have done that. The margin is improving, in the first half of last year it was 1.85%, now it is 2.1% and we could get up to 2.5%. Cash is at its highest level."
Outside of SA, TM Supermarkets in Zimbabwe has been growing surprisingly well. "We have a joint venture with them (the Zimbabwean partners) to move into Zambia and we are also looking at Mozambique. Our philosophy is to buy into an existing company and help them expand. We are going in with partners," says Raymond.
Gareth Ackerman says the group is focusing on offshore, but has not made any deals. Top of page