Shoprite African operations deliver strong results

For the year to June, primarily grocer retailer Shoprite's 194 outlets in 16 African countries delivered a 36.9% growth in turnover to R5.895 billion.

"Contributing to the value of our operations outside of South Africa is the fact that, as a group, we are now exposed to several economies and are no longer dependent on a single one," said the group's CE Whitey Basson.

Basson added that the group invested heavily in supply chains, information technology capabilities and international sourcing skills, because trading in Africa was still logistically difficult.

The group's local divisions also performed well with the exception of furniture divisions, which suffered under declining consumer demand in the wake of high interest rates and tougher credit-granting laws.

The furniture division managed a 5.6% rise in turnover to R2.258 billion, which in Basson's view is "notable achievement" given the competitive and virtually deflationary environment in which it operated.

Trading profit, including forex gains/losses, fell 25.9% to R151.7 million.

However, the supermarkets division, the group's core business, grew revenue by 23.3% to R47.393 billion, boosted partly by the group's decision to cut margins.

"The cut in margins led to a substantial shift in consumer support for Shoprite and reflected in the increase of 11.2% in the number of customer transactions in South Africa. This resulted in a turnover growth of 25.0% and a market share gain of just over 1%, the highest in the sector," said Basson.

The group, however, took a R286 million loss in trading profit as results of the decision to cut margins.

Earlier Shoprite reported a 54.1% increase in diluted headline earnings per share to 298.6 cents for the year ended June 2008, beating an I-Net Bridge's consensus forecast of 279 cents from eight analysts.

A final dividend of 106 cents per share was declared, up 60.6% from the previous year's 66 cents. The total dividend for the year amounted to 155 cents, up 53.5% from a year ago.

Trading profit was up 43.7% to R2.297 billion and total turnover increased 22.3% to R47.652 billion.

"The past year was an excellent one for the Group both in terms of growth in turnover and profit despite major concerns experienced in the market such as global food shortages and a further drop in supplier service levels," said Basson.

Source: I-Net Bridge

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