Financial results for 53 weeks ending 29 june 2008 – massmart delivers strong results in challenging consumer environment
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In an economic environment dominated by rising food and fuel prices and higher interest rates, Massmart, Africa’s third largest distributor of consumer goods today announced strong overall results for the year ending June 2008.
The Group’s four high-volume, low-cost, low-margin distribution divisions showed a balanced performance, with Masswarehouse and Masscash producing strong profit growth whilst Massdiscounters and Massbuild grew profits near their rate of sales growth.
However, the general tightening in consumer spending was evident in slightly lower real Group sales growth, a greater response to demonstrable value in promotions and entry-price point brands, and a shift in the method of payment with declining credit card usage.
- For the 53 weeks to 29 June 2008 total sales increased by 14,3% and total sales for the 52-week period increased by 12,1%. Sales inflation was 7.5%
- Comparable-store sales for the 52-week period increased by 10,8%
- Gross profit of 18,36%, just higher than the prior year’s 18,31%
- Headline earnings before Massmart’s BEE transaction grew by 22,9% (52-weeks: 17,9%) while
- Headline EPS before Massmart’s BEE transaction grew by 23,8% (52-weeks: 18,7%)
- Return on equity of 53,0% at June 2008, higher than 52,3% at June 2007
- Final cash dividend of 163 cents per share, representing a 1,7 times dividend cover
- Total expenses increased by only 10,8% and improved as a percentage of sales over the prior year
Strategic and Operational Review
- Net trading space increased by 1,9% to a total of 1 012 784 m² and total stores stands at 242 following eight store closures and 12 store openings
- Strong Food and Liquor sales grew 17,1%; General Merchandise sales growth held steady at 11,2%; Home Improvement sales grew 14,4% although slowed through the year
- Potential new unweighted store space growth of 5,1%, 6,0% and 3,5% in 2009, 2010 and 2011 respectively
- Group inventory levels at June 2008 were slightly higher than normal due to the continuing supply constraints requiring higher food and liquor inventory levels in Makro and Masscash
- Completion of the Regional Distribution Center in Cape Town marks a new era of logistics for Massmart
- Conclusion of rework of the Group’s major private-label brands
Commenting on the results, Massmart CEO Grant Pattison said “We are pleased with the performance of the Group although we still see much room for improvement in the core business as we pursue world-class standards. Given the current economic environment we are cautious about the year ahead, but are confident in our business model and the South African consumer economy, and are excited about the opportunities that are available to ensure medium to long-term growth.”
Pattison confirmed that the Group is making satisfactory progress across all dimensions of their strategic plans under Vision 2011, which include a focus on leadership and transformation, supply chain, private label, financial services, organic growth, new formats and sustainability.
Pattison continued: “Our focus on supplier BEE scorecards, environmental awareness in procurement, and anticipating regulatory changes has positioned us well for the future. In addition we continue to invest in organic and non-organic growth opportunities, which will provide superior returns in the medium to long-term.”
Total sales increased by 12.1% and comparable sales increased by 10.9% for the 7 weeks to 17 August 2008.
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