Still strug­gling Im­pres­sive HEPS

Finweek English Edition - - Marketplace - Ed­i­to­rial@fin­week.co.za

The re­tailer an­nounced HEPS will be down by more than 20% largely due to the costs associ­ated with re­trench­ing 3 500 staff dur­ing the pe­riod. This is part of the con­tin­ued at­tempt to get the busi­ness to bet­ter lev­els of prof­itabil­ity com­bined with cen­tral dis­tri­bu­tion, prod­uct price cuts and its loy­alty pro­gramme. How­ever, all the ev­i­dence since the new CEO, Richard Brasher, started in Fe­bru­ary 2013 shows that Pick n Pay re­mains a very hard busi­ness to turn around in terms of im­proved profit mar­gins. I con­tinue to pre­fer Sho­prite**, which has bet­ter mar­gins and ex­po­sure to the rest of the con­ti­nent. ADvTECH is­sued a trad­ing up­date and it is ex­pect­ing HEPS to be 4% to 7% higher, but if you re­move some odd­i­ties from the last set of re­sults (set­tle­ment from a le­gal mat­ter and one-off costs associ­ated with the Mar­avest ac­qui­si­tion and the rights is­sue) you get HEPS of 20% to 25%. I have been do­ing my re­search on this stock and am likely to be adding it to my long-term in­vest­ment port­fo­lio, but I am wait­ing for the re­sults due on 21 Au­gust. ■ *fin­week is a pub­li­ca­tion of Me­dia24, a sub­sidiary of Naspers. **The writer owns shares in Sho­prite.

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