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Our business performance

Builders is the Southern African leader in Home Improvement, DIY and Building Materials. The four Builders’ store formats – Warehouse, Express, Trade Depot and Superstore – cater to different markets with their own personalised feel and service offering, which are complimented by our online platform. Builders stores offer exceptional value, a comprehensive range of competitively priced products, and helpful service.

TRADING DIY, HOME IMPROVEMENT AND BUILDING MATERIALS
2020 strategy

Ensure our successful integration with the Massmart Retail business unit

Continue to grow our Private Label sales participation, service offerings and omnichannel fulfilment

Continue to drive non-cyclical new revenue in the commercial space

Implement our omnichannel point of sale solution

Roll out more Builders stores of the future

Continue to invest in e-commerce by expanding the product range we have available online

Cost containment through continued focus in key areas

Opening of our frst store in Kenya

Our progress during the year

  • Grew our Private Label sales participation to 21% by adding and reviewing products in our Private Label range
  • Efforts we made in our online fulfilment practices have been beneficial, with online sales growing by 111% and online traffic growing by 56% to 49.7 million visitors during 2020
  • The first Builders store in Kenya opened in August 2020 and two additional stores opened in South Africa
  • Optimising our product and promotional mix improved our gross margin by 220bps
  • Good expense management resulted in expense growth of 0.2%

The challenges we faced

  • The Covid-19 pandemic and trading restrictions, which resulted in the temporary closure of all Builders South African stores under lockdown level 5 in April 2020, significantly impacted our operations and sales performance.
  • Yard sales were particularly impacted compared to the previous year as a result of the suspension of operations in the construction industry during the lockdown period, and the industry battled to recover during the rest of the year
  • Cement shortages experienced in the industry
  • Currency fluctuations in Africa, predominantly Zambia, resulted in significant foreign exchange losses being incurred
  • The Covid-19 pandemic and the consequent lockdowns weighed on the fragile economy, putting payment cycles under pressure as the industry struggled with counter party payments, for instance very slow government payments on housing projects, etc.

Our strategic focus going forward

  • Grow Builders’ store footprint
  • Maximise category offering across DIY and Trade
  • Complete the roll out of our Omnichannel point of sale solution
  • Continue to invest in e-commerce by expanding sales channels, fulfilment options, and product ranges

Future outlook

Builders will continue to invest in building a leading, interconnected Retail business. We remain committed to growth through optimising our current footprint, extending our store footprint where possible, and growing sales online. Our objective is to increase our market penetration by focusing on local relevance by ensuring we establish stores that benefit communities. We aim to be the market leader in Home Improvement, DIY and building products and services, with the best long-term prospects on the continent.

Game is a multi-category discount retailer of appliances, electronics, lifestyle merchandise, groceries, liquor and Value-Added Services, operating throughout South Africa and in 11 markets in the rest of sub-Saharan Africa.

TRADING GENERAL MERCHANDISE, FOOD AND LIQUOR
2020 strategy

Ensure our successful integration into the Massmart Retail business unit

Continue rebuilding Game’s brand identity and win with key growth segments such as millennials and young families

Continue improving range relevance by reinvigorating our groceries proposition, strengthening ownership categories (e.g. multimedia), and introducing new offerings with high margin potential

Improve stock availability through improved planning and accelerated replenishment

Enhance margins by launching the EDLP proposition in select categories, reducing promotion participation, introducing high margin categories and extended services

Deliver on the EDLP proposition and operate as an Every Day Low Cost discounter, introduce digital innovations in supply chain and store operations and institute lean store practices

Successfully transition to SAP S/4HANA to significantly improve stock availability, e-commerce order execution, pricing and promotions execution and inventory and Goods Not For Resale spend management

Review our Africa portfolio strategy

Reimagine Game’s future stores through format renewals and commence Centre of Excellence roll out

Our progress during the year

  • Achieved overall 230bps gross profit margin uplift through optimising promotional margin and mix, introducing higher-margin categories and extending EDLP proposition
  • Demonstrated excellent expense control, achieving negative SG&A growth of (3.8%)
  • Accelerated exit of Fresh (51 stores) and introduced Clothing (60 stores), which showed promising sales growth and strong margins
  • Held the highest market share in laptops, and maintained dominant market shares in televisions and large appliances
  • Rolled out Happy to Help customer service programme and launched three Centre of Excellence stores, driving improved customer experience
  • Launched three Game Reimagined store prototypes
  • Grew online sales by 77.5%, and launched 40 stores on the UberEats and 12 stores on the OneCart ondemand platforms
  • Closed 23 DionWired stores during the year

The challenges we faced

  • The Covid-19 pandemic and lockdown trading restrictions resulted in a decline in foot traffic at super-regional and regional malls, negatively impacted trading
  • Implementation issues with the SAP S/4HANA ERP system, together with poor vendor fill rates as a result of Covid-19, contributed to sub-optimal in-stock levels
  • In Africa US dollar-denominated leases placed upwards pressure on occupancy costs, while volatile customs regimes resulted in supply chain unpredictability and the high cost of goods sold
  • The South African middle-income consumer, impacted by the Covid-19 pandemic, job losses, fuel price increases and salary freezes had less disposable income

Our strategic focus going forward

  • Continue to rebuild Game’s rebel brand identity to win with key growth segments, including millennials and young families
  • Sustain strong margin performance at 28.5% while optimising the expense profile of the business
  • Successfully resolve remaining SAP S/4HANA challenges to fully leverage the system and significantly improve stock availability
  • Extend EDLP pricing model across additional categories and improve price perception, particularly in Essential categories
  • Roll out regional Centres of Excellence nationally and cascade down to full store portfolio to deliver quickly on format renewal ambitions
  • Complete Fresh exit/Clothing introduction in remaining stores, accelerate range innovation and grow Private Label participation
  • Increase online sales participation by extending sellable online range, launching Click-and-Collect and building distinctive final mile delivery capability
  • Implement new Game SA store operating model and embed new processes and ways of working post Section 189 process
  • Review Africa portfolio strategy

Future outlook

Our aim is for the Game business to break even during the 2021 financial year. This requires us to continue with the excellent progress made in restoring margin, managing costs and driving top-line growth in a difficult trading environment. We will also continue rolling out the Clothing range to additional stores as well as accelerating the Centre of Excellence format renewal programme.

Cambridge Food and Rhino Cash & Carry are food retailers with stores trading in all nine provinces of South Africa. At Cambridge and Rhino we offer our customer a wide range of quality national brands plus goods that we source and package under our own brand label across all major categories of fresh and perishable products, groceries, general merchandise and appropriate services, mostly for cash.

FOOD RETAILER
2020 strategy

Ensure the successful unbundling of Cambridge from Masscash and its integration into the newly formed Massmart Retail business unit under the evolved operating model

Ensure sales growth is supported by sustainable margin growth

Drive profitable sales through increased volumes, basket mix and better margin management

Deepen the clarity of the Retail strategy and ensure our Fresh departments remain a strategic differentiator

Portfolio assessment with robust reviews of loss making stores across the whole portfolio

Delivery of an ERP system and improved IT infrastructure

Maintain an unwavering culture of risk mitigation, compliance, ethical conduct and good corporate governance

Our progress during the year

  • Optimising product and promotional mix with the EDLP proposition, which led to our gross margin improving by 19.1% compared to the prior year
  • Improved range clarity and reduced SKU count of 25%
  • Reduced promotional participation by 8% • Buyer identified for seven stores marked for sale subsequent to a detailed portfolio review
  • A focus on expense management resulted in expenses increasing by only 0.9% for the year
  • All stores were migrated onto the same ERP system and a single stock file

The challenges we faced

  • The Covid-19 pandemic and various levels of national lockdowns materially reduced our foot traffic and customers’ disposable income, which directly affected our trading performance
  • The liquor restrictions and the lockdown affecting activities at transport nodes located close to our stores, further impacted trading performance

Our strategic focus going forward

  • Continue to build on margin gains achieved through EDLP proposition in the current year
  • Implement the Oasis rebate management system
  • Optimise DC income by engaging with suppliers to negotiate mutually beneficial distribution allowance
  • Reduce stock levels and optimise our internal infrastructure

Future outlook

The Group’s announcement in March 2021 of its intention to divest of its interest in the Cambridge Food and Rhino Cash & Carry businesses adds to the uncertainty within an already strained trading environment. We will, however, continue to focus on those elements which have brought success during the 2020 financial year, being margin growth and expense management and leverage these to the fullest extent possible.