Pick n Pay defers R850m dividend as Covid-19 bites

RETAILER Pick n Pay is holding onto about R850m in cash by not paying a final dividend, warning that the disruptions caused by Covid-19 has disrupted trade in more profitable goods such as liquor and tobacco.

The group would have paid a final dividend of 173.06c a share for its year to end-March 1, saying on Tuesday that while the trading outlook remained uncertain, SA’s economy was likely to contract significantly in 2020.

The group said it had been unable to trade in key categories including liquor, tobacco and most clothing and general merchandise lines during SA’s lockdown. These categories make up about 20 percent of the group’s revenue, and have high margins compared with basic food and grocery lines, Pick n Pay said.

The group said on Tuesday that a robust trading performance in SA was offset by difficulties in some of its African operations, including Zimbabwe, where hyperinflation took a bite out of profits.

Profit for the period fell about 17.3 percent to R1.2bn, when compared to the 53 weeks to March 3 2019, with operations in Zambia and Zimbabwe reducing group earnings by 8.7 percentage points year-on year. Profit fell 11.5 percent when compared to the 52 weeks to February 24 2020.

The group manages its retail operations on a 52-week trading calendar where the reporting period will always send on a Sunday. To ensure calendar alignment, a 53rd week of trading is required about every six years and, and was included in the prior period.

The group’s Zimbabwe associate TM Supermarkets, is faced with severe currency shortages, currency devaluation, high levels of inflation, shortages of fuel and other staple goods, and shortages of power and water, Pick n Pay said.

Pick n Pay has written down the fair value of its investment in TM Supermarkets by R173.6m.

In Zambia, a weaker currency increased dollar-based operating costs, the group said.

In morning trade on Tuesday Pick n Pay’s share price was down 8.86 percent to R54.21, putting it on track for its worst one-day performance since December 2001, according to Infront data.

The retailer group’s share price has fallen 15.15 percent so far in 2020, while the JSE all share has fallen just over 12 percent.

-Business Day