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Shoprite Group treasury shares in Zambia have disappeared at a cost to the SA company of R70m.
Chief executive Whitey Basson told analysts in Sandton on Tuesday that it was uncertain that the shares would be recovered, so a provision was made. If they are rediscovered, the provision will be written back in the current year.
“They are shares in Shoprite Group in SA but they are blocked in Zambia. They were issued at the time we listed in Zambia with a view to gradual release over time. We thought they were with the transfer secretaries but they weren’t. We might well find them. If there were foul play, we would hope to get them back but in the meantime we decided to provide for the loss in full.”
Because the shares are blocked, Shoprite shares in Zambia trade at half their value in SA, so there is a very large arbitrage opportunity for anyone who can sell Zambian registered shares into the SA market.
The R70m was only 2.8% of Shoprite Group’s R2.52bn taxed profit for the year. If the shares are recovered, the write-back of R70m could give a handy effective R140m start to the in the current year.
The Zambian setback was a rare blaps in Africa’s biggest retail group. Diluted headline earnings growth of 12% was a bit short of market expectations but it shaded most Shoprite’s rivals and was achieved in spite of numerous difficulties.
First, this year was 52 weeks, not 53 as in 2010. Second, because of higher profits at higher tax rates in certain African countries, the tax rate rose to 34.7% (32.7%). Third in the current year 14.6m workdays were lost to strike action. Fourth, a million jobs have been lost in SA in the past two years and the unemployment rate rose to 25%.
Electricity and water costs rose R266m to more than R1bn. That was serious for a company with a pre-tax profit margin of only 5.4%. Electricity tariffs also reduced disposable incomes across the economy. Municipal rates rose 45%.
Inflation, normally a retailer’s best friend, was hardly measurable. The strong rand made imports cheaper but reduced the translation of non-SA earnings. There were 78 new stores and more than 7 000 new jobs were generated in the group.
CEO Whitey Basson was satisfied that some 64% of SA shoppers buy at his stores – up from 47% in 2005. He was happy that Shoprite won many awards including No 1 supermarket in the Sunday Times Top brands survey.
Basson is happy with African expansion. It is in six of the fastest growing economies in the world. The population of SA’s largest cities was 15.2m, while those in Nigeria house 25.9m. SA GDP per capita is higher at $10 700, compared to Nigeria’s $25 00 and Angola’s $8 200.
The group was successful at home as well. Shoprite sold 900m eggs and 9 352km of boerewors, enough to reach from Cape Town to Delhi.
While the supermarkets and furniture showed growth around about inflation, the smaller businesses, such as liquor, Hungry Lion and Computicket outperformed. The distribution centres and the IT systems improved efficiency.
Shoprite is number 135 retailer in the world and has set its sights on being in the top 100. It would love to get back into India and has heard encouraging sounds from the Indian government.
[moneyweb.co.za]
Chief executive Whitey Basson told analysts in Sandton on Tuesday that it was uncertain that the shares would be recovered, so a provision was made. If they are rediscovered, the provision will be written back in the current year.
“They are shares in Shoprite Group in SA but they are blocked in Zambia. They were issued at the time we listed in Zambia with a view to gradual release over time. We thought they were with the transfer secretaries but they weren’t. We might well find them. If there were foul play, we would hope to get them back but in the meantime we decided to provide for the loss in full.”
Because the shares are blocked, Shoprite shares in Zambia trade at half their value in SA, so there is a very large arbitrage opportunity for anyone who can sell Zambian registered shares into the SA market.
The R70m was only 2.8% of Shoprite Group’s R2.52bn taxed profit for the year. If the shares are recovered, the write-back of R70m could give a handy effective R140m start to the in the current year.
The Zambian setback was a rare blaps in Africa’s biggest retail group. Diluted headline earnings growth of 12% was a bit short of market expectations but it shaded most Shoprite’s rivals and was achieved in spite of numerous difficulties.
First, this year was 52 weeks, not 53 as in 2010. Second, because of higher profits at higher tax rates in certain African countries, the tax rate rose to 34.7% (32.7%). Third in the current year 14.6m workdays were lost to strike action. Fourth, a million jobs have been lost in SA in the past two years and the unemployment rate rose to 25%.
Electricity and water costs rose R266m to more than R1bn. That was serious for a company with a pre-tax profit margin of only 5.4%. Electricity tariffs also reduced disposable incomes across the economy. Municipal rates rose 45%.
Inflation, normally a retailer’s best friend, was hardly measurable. The strong rand made imports cheaper but reduced the translation of non-SA earnings. There were 78 new stores and more than 7 000 new jobs were generated in the group.
CEO Whitey Basson was satisfied that some 64% of SA shoppers buy at his stores – up from 47% in 2005. He was happy that Shoprite won many awards including No 1 supermarket in the Sunday Times Top brands survey.
Basson is happy with African expansion. It is in six of the fastest growing economies in the world. The population of SA’s largest cities was 15.2m, while those in Nigeria house 25.9m. SA GDP per capita is higher at $10 700, compared to Nigeria’s $25 00 and Angola’s $8 200.
The group was successful at home as well. Shoprite sold 900m eggs and 9 352km of boerewors, enough to reach from Cape Town to Delhi.
While the supermarkets and furniture showed growth around about inflation, the smaller businesses, such as liquor, Hungry Lion and Computicket outperformed. The distribution centres and the IT systems improved efficiency.
Shoprite is number 135 retailer in the world and has set its sights on being in the top 100. It would love to get back into India and has heard encouraging sounds from the Indian government.
[moneyweb.co.za]
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