South African retailing group Shoprite Holdings Plc announced a 19% fall in trading profit when its half year results for 2018 were published on SENS on 26th February 2019.
The company suffered multiple factors disrupting the trading environment according to a press statement from CEO Pieter Engelbrecht issued to SENS. The CEO put the blame squarely on the external operating environment, with economic conditions that he described left their core customers under significant financial pressure. Some of the other causes of eroded performance included Angolan hyperinflation, mishaps in the company’s SAP implementation, warehouse disruptions and a shortage of furniture stock, according to Bloomberg Intelligence.
PRETAX profit in the financials under review were the lowest in 9 years. However, it is the share price that has gradually tumbled since its peak in March 2018. The share price has lost 38% of its value during that period. However, when compared to the JSE All Share Index, prior to the tumble, it actually outperformed the index. Following its tapering, it has now leveled on par with the all share index.
The company remains upbeat despite the tough results. They served a record number of customers and sold record product volumes, up 1.7% and 0.2% respectively, whilst supermarket space growth was 1.9%.
Shareholders will be keen to know that the board declared an interim dividend of 156 cents (2017: 205 cents) per ordinary share, payable to shareholders on Monday, 18 March 2019. The dividend has been declared out of income reserves. In non-profit accounting, an “operating reserve” is the unrestricted cash on hand available to sustain an organization, and non-profit boards usually specify a target of maintaining several months of operating cash or a percentage of their annual income, called an Operating Reserve Ratio, according to Investopedia.com. This is a sure way of keeping investors keen on the stock.
