Our Divisionson a 26-week basis

Total sales of R9.4 billion increased by 3.0% and comparable sales were up 0.7% with year-to-date product inflation of 0.8%. In South Africa, Game’s total sales increased by 3.5% while comparable sales increased by 1.7%, an improved first-half sales performance showing positive volume growth. Customer count increased by 5.5% while basket sizes decreased as customers purchase more Food items.

Game Africa’s total sales increased by 5.8% in Rands and decreased by 0.2% in constant currencies.  Significantly weaker currencies in Zambia and Nigeria (where eight of our 26 ex-SA Game stores are based) impacted sales and profitability. DionWired’s sales were below those of the prior period from a lack of new product ranges and innovation and reduced upper-consumer spending.

Disappointingly trading disciplines have not been re-established as robustly as intended during 2019 which continued to cause poor margin management. Margins were also impacted by higher inventory provisions. Expenses increased by 11.1% over June 2018 (a comparable increase of 9.1%), due to the impact of US Dollar leases in our ex-SA stores, increased IT support costs, higher SAP ERP system project costs and higher supply chain and logistics costs. There have been several changes to the Massdiscounters’ executive team during the period:

• CEO Albert Voogd resigned with effect from July 2019 and has been replaced, in the interim, by Andrew Stein. Andrew has been with Massmart for 10 years and has worked in both Cambridge and Makro;

• Riaan Turton was appointed Finance Director;

• Katherine Madley was appointed Marketing Director; and

• Neville Hatfield has been appointed Merchandise Director with effect from July 2019. Neville has been the Merchandise Director at Builders Warehouse since 2006 and prior to that had been the Merchandise Director at Game.

Three Game stores were opened during the period and two DionWired stores were closed. Massdiscounters’ trading space increased by 1.3% to 568,103m².

Total sales of R13.4 billion increased by 3.7% and comparable sales grew by 1.9%, with product inflation of 2.9%. Comparable sales growth in Food & Liquor was 3.7% and General Merchandise sales growth was down 1.7%. As noted in the Group overview, the second quarter of 2019 saw an increase in sales growth of Food & Liquor but a decline in sales growth in General Merchandise.

Slower sales relating to General Merchandise continues to dampen gross margin %, with the margin achieved being 20bps lower than last year. Masswarehouse has  seen expenses grow by 9.0% in total, while comparable expense growth of 6.0% was slightly higher than general inflation and cost increases. Expenses grew as a consequence of the new Makro store which opened in March 2019 (adding 6.5% more space), as well as the impact of on-boarding temporary employees as new permanent employees as a result of legislative requirements. Included in expenses for the six months is approximately R14.0 million of pre-opening expenses associated with the opening of the new Makro Cornubia store.

The accounting and IT system issues in Massfresh took longer to stabilise than anticipated and so margins remained unacceptably low although they improved during the period.  Total sales decreased by 9.8%.

The Cornubia store, north of Durban, was opened in March 2019 increasing Masswarehouse’s trading space by 6.5% to 246,125m².

Massbuild grew total sales by 5.0% to R6.7 billion, with comparable sales increasing by 1.8% and product inflation of 2.8%. As noted in our December 2018 commentary, contractors’ sales remain under pressure and were below the prior period. Assisted by stores opened in 2018, total Rand sales growth in our ex-SA stores was 25.5% while comparable sales grew by 12.3%.

Margins were well managed despite an increase in the participation of promotional sales even though we have not changed our promotional intensity or cadence in Builders Warehouse. As a result of three new stores, total expenses grew by 9.4% and comparable expenses grew by 6.2%.

The product range on the Builders Warehouse Online platform has increased by 47%. Click-and-collect delivery (already available in all South African metropolitan stores) was launched in Botswana during the period.

The Builders Warehouse ‘store of the future’ was opened in May 2019, in Boksburg in Johannesburg east, as a technology prominent store and includes features such as WiFi, 44 high-definition screens, flatpack modular furniture, complete hardware and do-it-yourself service experiences, three-dimensional printing capabilities, and self-checkout processes. In addition to this, two Builders Superstores and one Builders Express stores were opened in South Africa, resulting in a net trading space increase of 1.8% to 476,582m².

Total sales of R14.3 billion increased by 9.1%, while comparable sales increased by 8.2%. Year-to-date product inflation was 3.6%. Sales in our Wholesale business grew by 13.3% and by only 2.9% in our Retail business (Cambridge and Rhino). Total sales from our ex-SA stores grew by 14.6% and by 10.4% in constant currencies.

Competitive pressure remained intense across both our Wholesale and Retail businesses which both consequently reported margin pressure.  Compounding this financial performance was expense growth of 14.4%, with comparable expense growth of 12.7%. Expenses were mainly impacted by depreciation charges and occupancy costs which increased by 9.5% mainly as a result of significant increases relating to utilities, rates and taxes, and the impact of on-boarding temporary employees as new permanent employees as a result of legislative requirements.

Masscash CEO Kevin Vyvyan-Day has announced his resignation with effect from the end of August 2019 and will be replaced, in the interim, by Deepa Sita. Deepa has been the Finance and Commercial Director at Makro since 2016 and she has extensive experience in the South African FMCG market.

There were no new stores with trading space remaining at 388,714m².