PnP warns of a 20% drop in earn­ings

The Star Early Edition - - BUSINESS REPORT - Di­neo Faku

RE­TAILER Pick n Pay yes­ter­day flagged that both head­line earn­ings and earn­ings a share would drop more than 20 per­cent in the half year to June as costs re­lated to its vol­un­tary sev­er­ance pro­gramme (VSP) weighed heav­ily on its bal­ance sheet.

The coun­try’s sec­ond largest su­per­mar­ket chain store, cut 10 per­cent of its to­tal work­force in April through the vol­un­tary pack­ages.

The com­pany said the earn­ings fore­cast was based on a pre­lim­i­nary as­sess­ment of the VSP com­pen­sa­tion pay­ments, which was off­set in part by the ex­pected re­lated sav­ings dur­ing the re­port­ing pe­riod, the com­pany said.

Chief ex­ec­u­tive Richard Brasher said the sev­er­ance pack­ages was one of sev­eral steps the com­pany had un­der­taken to make the busi­ness more com­pet­i­tive.

“For rea­sons of tim­ing, it will have a ma­te­rial im­pact on our first-half re­sult. But it has made us a leaner and more ef­fi­cient busi­ness, and the re­duc­tion in our costs will give us more head­room to pro­vide cus­tomers with even lower prices and bet­ter value. Our plan is on track and we are a stronger and more sus­tain­able group as a re­sult,” Brasher said.

The VSP en­tailed em­ploy­ees be­ing of­fered 1.5 weeks of pay per com­pleted year of ser­vice, plus four weeks of no­tice pay as the re­tail in­dus­try came un­der pres­sure from the re­ces­sion and gross do­mes­tic prod­uct that shrank 0.7 per­cent on an an­nu­alised ba­sis in the first quar­ter.

Yes­ter­day Pick n Pay said that it had com­pleted the first stage of its turn­around strat­egy, which was to sta­bilise its fi­nances and op­er­a­tions.

It said it was mak­ing progress on the sec­ond stage, which was to change the tra­jec­tory of its per­for­mance and re­store a sus­tain­able profit mar­gin.

The com­pany said the sec­ond stage in the first half of the cur­rent fi­nan­cial year in­cluded per­ma­nent price re­duc­tions across more than 1 300 fresh and gro­cery prod­ucts as well as en­hanc­ing price com­pet­i­tive­ness for Pick n Pay.

The com­pany said it would mod­ernise its Smart Shop­per loy­alty pro­gramme to de­liver cus­tomers more im­me­di­ate and tai­lored weekly dis­counts on prod­ucts, re­duc­ing the em­pha­sis on award­ing points linked au­to­mat­i­cally to spend.

It said it also planned fur­ther progress in achiev­ing a cen­tralised sup­ply chain to de­liver more ef­fi­cient prod­uct re­plen­ish­ment, im­prove on-shelf avail­abil­ity, and re­duce cost.

It said it would re­move roles that were no longer re­quired to im­prove the ef­fi­ciency and pro­duc­tiv­ity of staff in all ar­eas of the busi­ness.

“The group is con­fi­dent that th­ese and other ac­tions will have the ef­fect of im­prov­ing the re­silience and com­pet­i­tive­ness of the group, and the value it of­fers to cus­tomers in what is cur­rently a chal­leng­ing con­sumer en­vi­ron­ment,” the com­pany said, ad­ding that it ex­pected the fi­nan­cial ben­e­fit to be re­alised from the 2019 fi­nan­cial year on­wards, with sig­nif­i­cant pos­i­tive im­pact on op­er­at­ing costs, mak­ing the group more com­pet­i­tive and sus­tain­able.

Pick n Pay shares rose 2.9 per­cent on the JSE yes­ter­day to close at R63.41.

PHOTO: SIMPHIWE MBOKAZI

Pick n Pay yes­ter­day said that it had com­pleted the first stage of its turn­around strat­egy, which was to sta­bilise its fi­nances and op­er­a­tions.

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