Shoprite space expansion drives growth

Shoprite space expansion drives growth

Shoprite Holdings has booked an increase in half-year sales and profits despite what South Africa-based grocer described as "difficult" domestic trading conditions.

The retailer said sales were up 9.7% on the year, climbing to ZAR51.09bn (US$4.76bn).

CEO Whitey Basson said Shoprite's businesses in other African markets drove sales. "Our turnover was supported by the strong growth we achieved elsewhere in Africa," Basson said.

Shoprite said it invested in new store openings at a faster rate than its competitors.

As a result of the group's increased investment levels, margins were slightly down - dipping to 5.3% from 5.4%.

However, profitability was boosted in part by currency exchange - which added ZAR4.3m compared to a loss of ZAR41.4m last year. Trading profit increased 7.5%, climbing to ZAR2.69bn. Net profit rose 7.1% to ZAR1.82bn.

Headline earnings per share, a closely-watched metric in South Africa, rose 7.9% to 341.0 cents.

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Results for the 6 months ended December 2013
Tuesday, 25 February 2014
(Reg. No. 1936/007721/06)
(ISIN: ZAE 000012084)
(JSE Share code: SHP)
(NSX Share code: SRH)
(LuSE Share code: SHOPRITE)
("the Group")

RESULTS FOR THE 6 MONTHS ENDED DECEMBER 2013

Key information
- Turnover increased 9.7% - from R46.572 billion to R51.090 billion.
- Trading profit was up 7.5% to R2.690 billion.
- Headline earnings per share rose 7.9% to 341.0 cents (2012: 315.9 cents).
- Dividend per share declared was 132 cents (2012: 123 cents) an increase of 7.3%.

Whitey Basson, chief executive, commented:
In the six months to December 2013 the Shoprite Group grew total turnover by 9.7% to R51.090 billion in an environment which, within South Africa, has remained difficult. Our turnover was supported by the strong growth we achieved elsewhere in Africa. Despite the present challenging trading conditions locally we have continued our long term investment strategy in new stores adding more trading space to our portfolio than any of our competitors. Sales in December were negatively impacted by approximately R260 million in our decision to close all RSA stores on the 15th of that month, the day of the funeral of former President Nelson Mandela. We did so as a mark of respect at his passing and also out of recognition for the huge debt we owe him for creating a climate of dynamic growth which took Shoprite way beyond the borders of this country. 

24 February 2014

Enquiries:
Shoprite Holdings Limited                                                Tel: (021) 980 4000
Whitey Basson, chief executive
Carel Goosen, deputy managing director

De Kock Communications                                               Tel: (021) 422 2690
Ben de Kock                                                                     Cell: 076 390 7725


OPERATING ENVIRONMENT
The trading conditions prevalent in the corresponding period in 2012 persisted in the six months under review. Strikes in several sectors have become an entrenched part of the South African business landscape while violent protests over service delivery are on the increase countrywide. Unemployment hovered above the 24% mark, a situation exacerbated by the State's lower levels of investment in infrastructure following the 2010 Soccer World Cup. Middle- and lower-income consumers, many of them overburdened with debt, are struggling to make ends meet due to spiralling increases in their living expenses and transport costs. The consequent lack of disposable income has a severe impact on the retail environment in which competition for the consumer's rand has greatly intensified in the six months under review.

COMMENTS ON THE RESULTS

Statement of Comprehensive Income

Total turnover
Total turnover increased by 9.7% for the period - from R46.572 billion to R51.090 billion, boosted by the strong performance of the Group's non-RSA operations.

Expenses
Depreciation and amortisation grew 8% to R688 million mainly due to the Group's continued investment in new and refurbished stores and in information technology. Other expenses increased by 14.6% also due to the increased turnover and new stores opened as well as the escalation in electricity and other energy costs. The rise
of 5.9% in employee benefits to R3.833 billion includes new staff appointed for the net 104 stores opened during the last 12 months.

Trading margin
The trading margin decreased slightly to 5.3% from 5.4% and reflects the effects of the slower growth in turnover as well as the high upfront costs associated with the new store openings.

Exchange rate profits
The Group recorded a small exchange rate profit of R4.3 million compared to a loss of R41.4 million in the corresponding period. This positive swing was mainly because the Group obtained approval from the Malawian authorities to reclassify short-term borrowings in Malawi into long-term borrowings during the second half of the
previous financial year.

Finance costs and interest received
The increase in net interest paid resulted from the capital expenditure on new stores and information technology. The interest paid was partially offset by interest received from the investment of the surplus cash.

Statement of Financial Position

Property, plant and equipment and intangible assets
The increase is due to the investment in a net 104 additional stores, vacant land purchased for strategic purposes, investment in information technology to support inventory management, distribution centre developments as well as normal asset replacements.

Inventory
The increase is due to the provisioning of a net 82 supermarkets and 23 furniture stores and purchases in anticipation of a weaker rand. Inventory levels were further affected by more subdued festive season trading than expected as well as store closures on the 15th of December.

Original source: Shoprite Holdings