Pick n Pay misses dividend targets

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Pick n Pay missed dividend estimates as South Africa’s third-largest grocer incurred extra costs to keep the lights on at its stores amid nationwide load shedding. Lower profits and implementation of the Ekuseni turnaround plan also weighed on the group’s financials.

A dividend of R1,85 a share was declared for the 12 months ended February 26, the Cape Town-based company said in a statement on Thursday. That compared with a R1,92 median estimate of eight analysts surveyed by Bloomberg. Sales rose 8,9 percent to R106,6 billion.

Last year, the grocer announced a three-year target of R3 billion in savings, even as it faces inflationary pressures and the increased cost of adding standby generators, rooftop solar panels and refrigerated trailer trucks as the country grapples with the worst levels of load shedding on record.

Shareholders should also expect a smaller cut of the group’s profits starting in the 2024 financial period as Pick n Pay looks for liquidity to support its Ekuseni turnaround strategy which was launched in May 2022.

    In line with this, the board has moved to amend the group’s dividend policy from a cover ratio of 1.3x (76 percent payout ratio) to a range of between 1.5x (67  percent payout ratio) and 1.8x (56 percent payout ratio).

“The new policy will contribute towards the group having the necessary balance sheet flexibility to support the elevated capital expenditure required by the Ekuseni plan. The cover will likely tend towards the upper end of the range over FY24 and FY25. The group notes that the upper end of the cover range remains broadly in line with the FY22 (fixed) covers of its retail peers.”

Pro forma headline earnings per share (Heps), which also contributed to the lower dividend cut for shareholders, was 16,3 percent lower this period at 242,37 US cents, down from US289,64 cents.

The dramatically lower figure “excludes the R145,2 million business interruption insurance proceeds received and accounted for in FY23, but previously included in FY22 pro forma earnings as it relates to losses incurred during FY22”.

Investors were less than pleased with the retailer’s full-year performance. Its share price fell by over 8 percent in early trade on Thursday, to around R37, bringing the total decrease to nearly 30 percent in the last six months.Moneyweb/Bloomberg