PG Group plc reported an overall dip in pre-tax profit for the first six-month period ending 31st October 2022, from €8.6 million last year to €8.5 million, it shared in its Half-Yearly Report 2022-23 on Thursday.
The Malta-based major retailer chalked the dip in profit to an overall increase in costs, not least of which stemmed from increases in importing food products. Despite the increase in costs, PG Group recorded a 13.8 per cent surge in revenue, indicating that demand has not waned, but that consumers are changing buying patterns.
Indeed, revenue for the six months in question amounted to €80.8 million, an improvement from the €71 million registered in the same period last year.
However, its Board of Directors remarked that the period under review was filled with international turmoil that led to “high inflation” in food and prices of other products. It explained that a recent internal exercise based on the food commodities imported by the group indicated that “cost prices incurred during the period were 7.3 per cent higher than in 2021”. This increase in sales prices has “inevitably been felt” by its clientele, which has prompted an “element of change in buying patterns, occasionally towards cheaper brands or towards cheaper food alternatives,” the Board of Directors explained.
Inflation, coupled with a 12 per cent increase in finance costs, led to the drop in pre-tax profit.
During the six months under review, PG Group aimed to reduce the impact of inflationary pressures on its customers, enhancing the scale of its “direct buying and has sought to ensure, across all major categories, that it offers an entry level product that can match the alternatives available on the market”, while also absorbing “an element of the cost price increases incurred”.
While this had an impact on its overall profit, its efforts were recognised by the market, resulting in the rise in turnover. This increase contributed to “enhanced efficiency” in its Pavi (Qormi) and Pama (Mosta) supermarkets, allowing it to offset the impact of higher operating costs.
PG Group also registered growth in franchise operations, with Zara and Zara Home sales registering nine per cent increases in turnover. The Board of Directors remarked that the two brands “continue to offer good quality products at affordable prices, and have maintained their popularity with local consumers”. It added that its sales growth was “particularly gratifying” when considering that in the same period in 2021, the brands had registered “record sales” in the immediate aftermath of the COVID-19 pandemic.
The group’s total assets at 31st October 2022 expanded to €122.2 million from the €110.5 million registered at 30th April 2022, while total equity also increased to €58.2 million from €55.7 million.
The Board of Directors resolved to distribute a net interim dividend of €2.25 million in respect of the first six months of the financial year ending 30th April 2023. These dividends were paid on 9th December 2022 to the ordinary shareholders registered on PG Group’s books as at 2nd December 2022.
While PG Group enjoyed a “consistent performance” during the first half of the year, it still started it off fully aware of the “uncertain economic and political outlook” and is proceeding with “cautious optimism”.
The Board of Directors also noted that “the broad economic outlook moving ahead appears less negative than it appeared at the commencement of the financial year, even if the conflict in Ukraine remains a cause for great concern and uncertainty”. Additionally, it is encouraged by the “influx of new customers” that PG Group has enjoyed in recent months, with its absorption of price increases set to “translate into higher customer loyalty in the longer term”.
Since it was set up in November 2016, PG Group has grown to become a key player in Malta’s retail sector. Its business activities include the Pavi and Pama supermarkets, Pama Shopping Mall in Mosta, along with the Zara and Zara Home franchises in Sliema and Mosta respectively.
