Pick n Pay Stock Rises on ‘Relief’ at Dividend Payout Plan

Pick n Pay Stores Ltd. (PIK), South Africa’s second-largest grocer, rose to a one-month high after the company announced plans for a limited dividend reduction and an expansion strategy in Africa.

Pick n Pay gained 1.9 percent to 37.36 rand at the close in Johannesburg, the highest price since Sept. 21. That pared the stock’s decline in the past year to 12 percent.

“There is relief over the dividend, which is still at a healthy payout ratio,” David Shapiro, a director at Johannesburg-based Sasfin Securities, said by phone. Pick n Pay is “making changes and showing they have Africa plans.”

First-half net income fell 46 percent to 191 million rand ($24 million) because of the cost of introducing a customer- loyalty program and developing a central distribution network, the Cape Town-based company said in a stock-exchange statement today. Sales rose 7.4 percent to 27.1 billion rand, and Chief Executive Nick Badminton said second-half revenue growth is set to improve.

The interim dividend is being scaled back to 22.5 cents a share from 37 cents a year earlier, in line with a drop in headline earnings, which excludes one-time gains or costs, Pick n Pay said.

Zimbabwe Approval

The retailer also said it secured approval for the purchase of an additional 20 percent stake in TM Supermarkets from Zimbabwe’s Indigenization Board and that it plans to open more stores in Zambia, Mauritius and Mozambique this year and in 2012.

“We have just under 100 new stores in the pipeline, locally and in the rest of Africa,” Badminton said in an interview. “Growth in Africa is going to take some time, but the stores we have already opened are performing well.”

Pick n Pay, which is exiting Australia after selling its Franklins unit to Metcash Ltd. (MTS) last month, is also considering Malawi, the Democratic Republic of Congo and Angola as locations for expansion, Badminton said.

The company’s first-half revenue growth exceeded the 3 percent increase posted by South Africa’s retail industry, and has accelerated since the beginning of August, he said.

“Growth in the past six weeks has been above what we’ve seen in the previous six months,” Badminton said. “I am pretty confident our second half will be better than the first.”

To contact the reporters on this story: Robert Brand in Cape Town at rbrand9@bloomberg.net; Janice Kew in Johannesburg at jkew4@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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