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Profit at Shoprite Holdings grew quicker than sales in the year to June, vindicating shareholders who successfully fought off the private equity bid for the supermarket group.

August 8, 2007 By Tom Robbins Cape Town – Profit at Shoprite Holdings grew quicker than sales in the year to June, vindicating shareholders who successfully fought off the private equity bid for the supermarket group. Shoprite Holdings said yesterday that basic earnings a share for the year to June “on a continued operation basis” were expected to be between 25 percent and 35 percent higher than a year ago. Last month, the firm said annual sales grew 16.2 percent to R38.9 million, but yesterday added the profit growth figure in terms of JSE requirements. The requirements state that firms should publish trading updates “as soon as they are reasonably certain” profit will be more than 20 percent higher than in the previous period. But the retailer said profit growth on a non-continued basis would be lower, at between 15 percent and 25 percent higher. This was after the company had a once-off boost in the previous year due to the sale of a property portfolio, while in friendly talks with private equity buyers Brait. Brait offered R28 a share, but shareholders rejected the price as too low, arguing that there was greater benefit in remaining invested than selling at the offer price. Mark Ansley, portfolio manager at Cadiz African Harvest, said Shoprite Holdings had invested heavily in distribution centres, information technology systems as well as in Africa in recent years, noting that this capital expenditure was starting to bear fruit. Ansley said the company’s target market positioning was allowing it to benefit from the country’s upwardly mobile consumers. He said the Shoprite chain was in “a fantastic position” as it captured those moving from shopping at wholesalers to supermarkets. The Checkers chain in turn captured middle market customers with growing disposable incomes. In last month’s update, the supermarket group said the Shoprite chain had lifted sales 14.2 percent, despite losses caused by the strike last year. Checkers grew by 15 percent, but the star performer was the African division, with turnover up 29.1 percent. Shoprite shares gained 50c to R30.75. The food and drug retailers sector gained 0.46 percent.