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Gold set for a major shake-u... Rumours fuel financials frenz... Cape looks good with the sun in Capricor... Dragnet of economic slowdown catches Pe... Yorkcor adds its weight to Safcol priva... Still a hidden hand in Gauteng's house o... Hardware to software gives Usko leading ... |
Dragnet of economic slowdown catches Pep
The retail group, which operates across all sectors, is feeling the strain, writes MARCIA KLEIN
THE slowdown in the economy in the latter half of 1997 is evident in the results of Pepkor, the retail group which operates across all income sectors. Subsidiaries, which include Pep, Shoprite Checkers, OK Bazaars, Ackermans, Stuttafords, Cashbuild and significant UK and African interests, turned in a mixed performance, resulting in the group reporting a 7% rise in net profit to R238.3-million in the six months to December on 23% higher turnover of R9.7-billion. The turnover rise reflects the acquisition by subsidiary Shoprite of OK Bazaars and the acquisition of UK-based WEW Group. These were but a few of several changes: A 7% drop in operating profit reflected the exclusion of Smart Centre, a sharp drop in Pep's operating profit and the consolidation of OK Bazaars. Pepkor paid less tax, utilising losses. Associates' earnings were sharply up as RAG is equity accounted. Subsidiary Pep's results were disappointing. It has often been said that Pep, which trades in the lower income groups, is immune to the vagaries of the economy because even in bad times, consumers trade down, and move from credit to cash. On a like-for-like basis, its turnover grew 4% and its earnings dropped 6%. Pepkor CE Jan le Roux says its traditional markets were hardest hit by rising unemployment and consequent impoverishment. A new managing and financial director have been brought in to beef up management. Pep continued to expand into Africa. It operates 18 stores in Zambia, will open its second in Mozambique and its first in Malawi, Kenya and Ghana. Le Roux says the retail market has been particularly tough. Retailer Liaison Committee figures show that sales for all clothing were up just 3% in December, traditionally the busiest month. Shoprite, now Africa's largest food retailer since it took over the OK, reported 19% higher earnings of 19.7c on 35% higher turnover of R6.5-billion. Shoprite has been hard at work turning the OK around, and seems to have made great strides. MD Whitey Basson expects the OK to begin to making a contribution to group profits by next financial year. The Hyperama and furniture division have been separated from the core business, and there is much speculation they will be sold off. Le Roux says this is not a priority. OK head office was closed down and the staff complement reduced by 1 500. Since end-December, Pepkor has bought the 80-store Australian retail chain Best & Less. Pepkor has been working on the Australian acquisition since June last year. "It was brought to us by a SA merchant bank and when we went to look at it, it was like a photocopy of Ackermans." The company, which fits into the Pepkor ethos of cash retailing to the C-D income groups, will continue to be run by its existing, competent team of managers. Commenting on the UK interests, which are now in a focused group, Le Roux says that since Johann Visser took over as MD in March 1997, the performance has been excellent. He was particularly pleased with the WEW acquisition. Five years ago, WEW was sold to a third party for £52-million, but its performance has gone down to such an extent that Pepkor bought it last year for £6.5-million. Le Roux reiterated that Cashbuild and Stuttafords were not for sale. Stuttafords, now run under the leadership of former Smart Centre MD Charles Fox, will move back into the niche it should occupy - an exclusive shop selling branded quality merchandise. While subsidiaries across the group have shown some progress in Africa, Le Roux says Africa is "just the cherry on the top", as the number of stores opened in the whole of Africa are less than those opened in South Africa in any year. The group does expect significant growth from the UK and Australian operations, but Le Roux emphasises there are enough financial resources in the group to expand aggressively in these areas without scaling down expansion elsewhere. He has set a target - that operational activities other than Africa will make up 10% of earnings a share for the year. In Australia, he hopes to double the size of the business in the next five years.
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