Financial Results for the 26 weeks ended 23 June 2013
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Massmart announced its interim results for the 26 weeks to June 2013, reporting a total sales increase of 8.9%, while comparable sales increased by 5.5%.
Sales in Massmart’s African businesses represented 7.6% of total sales and increased by 10.7%.
Headline earnings increased 51.9% due to a large positive swing in foreign exchange movements. Adjusting for the effect of the forex, however, headline earnings decreased 9.4%. Excluding forex, earnings before interest, tax, depreciation and amortisation (EBITDA) of R1.1 billion increased over the prior period by 1.4%.
With most South African GDP forecasts for 2013 being revised downwards, it is clear that economic growth is below the level required to meaningfully create jobs and to compensate for energy and services price-inflation. The Group’s sales have slowed as lower income customers remain under economic pressure.
Commenting on the results, Grant Pattison, Massmart CEO said: “The Group’s results mostly reflect declining economic growth and declining disposable income levels and we don’t expect to see any improvement in the short term.”
The weaker rand should translate into higher product inflation, although demand weakness should mitigate this to some extent.
According to Pattison, a key strategic priority for the Group is the delivery of category innovation in Fresh, Clothing and Ecommerce, with progress being made in these three areas. An example is the introduction of George, a clothing brand owned by Asda, Walmart’s UK subsidiary, into Game and Makro stores.
“George clothing will be available in Game and Makro in November, and will complement our offering and make it easier for our customers to do all their shopping with us. Walmart has assisted us to innovate in this area with very little risk attached,” he said.
Makro will stock babywear while the Essentials range and babywear will be rolled out to 40 Game stores. “Our Fresh store footprint has grown to 89 stores, with Game showing strong comparable food sales growth. The new Makro stores with the enhanced deli, bakery and butchery offering have stimulated sales in other categories in Makro.
“DionWired is now the leading online electronic goods retailer growing online sales 220% on last year. We had 1.2million visitors to our site this year.
“Our new Buildrite brand represents an exciting initiative to drive building material sales aimed at previously under-serviced areas and in townships. Importantly, it is our first brand
to be built on Walmart’s everyday low price philosophy.” The first two Buildrite stores will be opened in November.
Pattison said growth in Africa, outside of South Africa, continued to be a priority for the group, particularly Food Retail expansion. “Following the successful opening of a Builders
Warehouse in Francistown, Botswana we have four more Builders stores planned for Mozambique and Zambia and have secured sites in Kenya and Angola for Game. We have developed a new food format which we will be trialling in West Africa before the end of the year and continue to look at east Africa as well.”
Massdiscounters total sales increased 9% with comparable sales growing 3.7%. The rollout of Fresh at Game continues with 31 stores now offering Fresh. Food sales growth in comparable stores is exceptionally strong. Weak comparable sales growth of 1% at Game SA caused a decline in profit, although Game Africa and DionWired performed well.
Masswarehouse grew total sales by 13.7% with comparable sales growth of 6.9%. Massmart acquired control of seven Makro sites for a cash consideration of R575 million, which will
reduce the group’s exposure to existing rental costs.
Massbuild delivered an exceptional performance in a tough environment, with comparable sales growing 9%. The first Massbuild Regional Distribution Centre, opened in April 2013, will distribute products in Southern Africa.
Masscash total sales increased 5.6% with comparable sales growing 4.2%, slightly bolstered by the Rhino acquisition in March 2012. The division opened its first Mozambique wholesale store in Xai Xai in April 2013 which is already reporting positive trading trends.
“We expect to see sales growth under pressure for the remainder of the year and will focus on gaining market share through superior retail offerings,” Pattison said. For the 34 weeks to 18 August, total sales increased 9.2%, and comparable sales increased 5.3%, continuing the trends towards the close of the financial period.
A final cash dividend of 146 cents per share has been declared.
Issued by Brunswick Group LLP 011 502 7300
For Media Enquiries Brian Leroni, Massmart Group Corporate Affairs Executive Annaleigh Vallie, Communications Manager 011 517 00000
Cecilia de Almeida Brunswick 083 325 9169 Gordon Kgaugelo Letsoalo Brunswick 079 510 6127
Notes to Editors
Massmart is a managed portfolio of four divisions, each focused on high-volume, low-margin, low-cost distribution of mainly branded consumer goods for cash, in 12 countries in sub-Saharan Africa comprising 359 stores.
The Group is the second largest distributor of consumer goods in Africa, the leading retailer of general merchandise, liquor and home improvement equipment and supplies, and the leading wholesaler of basic foods.