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Business Unit performance*
for the 52 weeks ended 27 December 2020
Trading General Merchandise, Food and Liquor
15.5%
R16.7bn
Sales
2019: R19.8 billion
36.2%
(R532.5m)
Trading loss
2019: (R391.0 million)^*
%
27.4%
Gross profit
2019: 25.1%
149 stores
in South Africa, Botswana, Ghana, Kenya, Lesotho, Malawi, Mozambique, Namibia, Nigeria, Tanzania, Uganda, Zambia
Dec 2019: 173

As part of the turnaround plan, and as previously announced, the Group successfully closed 23 DionWired stores during the period.

Game’s total sales for the 52 weeks of R16.7 billion was 15.5% lower than December 2019, while comparable stores sales contracted by 13.2%. Product inflation was estimated at 5.0%.

Trading restrictions in South Africa resulted in reduced categories permitted to be traded during the course of the year. Furthermore, reduced mall foot traffic, adjusted trading hours and sub-optimal in-stocks as a result of systems issues and vendor supply issues significantly impacted sales during the course of the year. Lost sales from the Covid-19 pandemic impact is estimated to be R0.9 billion. Online sales increased by 77.5% compared to the prior period. Teething issues from the SAP S/4 HANA ERP system, implemented on 1 June 2020, also negatively impacted sales. Sales from the South African Game stores declined by 13.2%. Sales from the rest of Africa stores decreased by 10.0% in Rands and by 12.3% in constant currencies due to continued currency weaknesses during the period.

Reduced stock obsolescence from improved stock management and optimising product and promotional mix from the shift towards the EDLP proposition improved gross margin by 230bps to 27.4% from 25.1% in the prior year.

Cost saving initiatives implemented resulted in savings in occupancy costs from successful rental re-negotiations, better supplier price negotiations and efficiencies realised through improved overtime scheduling. Expenses decreased by 3.8% and comparable expenses decreased by 1.2%. Included in this are the IT costs associated with the system implementation. Impairments relating to loss-making stores were also recognised during the period.

One Game and 23 DionWired stores were closed during the period resulting in reduced trading space of 5.0% to 533,793m2 (2019: 561,874m2). No new stores were opened during the period.

Trading DIY, Home Improvement and building materials
2.1%
R13.9bn
Sales
2019: R14.2 billion
21.7%
R1,032.6m
Trading profit
2019: R848.5 million^*
%
35.9%
Gross profit
2019: 33.7%
120 stores
in South Africa, Botswana, Kenya, Mozambique and Zambia
Dec 2019: 118

Builders total sales of R13.9 billion represents a decrease of 2.1% since December 2019, while comparable store sales declined by 2.9%, with product inflation estimated at 6.0%.

Trading restrictions resulted in the temporary closure of all South African Builders stores under lockdown level 5 in April 2020. Lost sales from the Covid-19 pandemic impact is estimated to be R1.0 billion. Sales from South African stores declined by 3.0% and by 3.6% on a comparable store sales basis. Sales from the rest of Africa stores increased by 8.0% with a 10.8% increase in constant currencies and by 4.4% and 12.9% respectively on a comparable store sales basis. Efforts made in online fulfilment practices have been beneficial with online sales increasing by 111.0% compared to the prior period.

Yard sales were down significantly compared to the prior year due to the suspension of the construction industry during the lockdown period with the industry battling to recover for the balance of the year. This decrease was offset by an increase in retail sales as consumers continued to prioritise home improvement and DIY projects. This, combined with optimising product and promotional mix improved gross margin by 220bps compared to December 2019.

Expenses were well managed and efforts made in cost saving initiatives continue to reap benefits. Furthermore rental relief contributed to an overall decline in occupancy cost. Expenses increased by only 0.2% during the period, with a 1.1% decrease on a comparable basis.

Two Builders Warehouse stores, one store in South Africa and the business unit’s first store in Kenya, were opened during the period. This along with one Builders Express store being opened as well as one Builders Superstore in South Africa being closed during the period, resulted in a net 2.9% increase in trading space to 440,716m2 (2019: 428,369m2).

FOOD RETAILER
13.5%
R8.3bn
Sales
2019: R9.6 billion
17.2%
(R363.5m)
Trading loss
2019: (R310.2 million)^*
%
19.1%
Gross profit
2019: 17.2%
63 stores
in South Africa
Dec 2019: 61

Cambridge and Rhino total sales of R8.3 billion declined by 13.5%, and by 14.8% on a comparable store sales basis. Product inflation was estimated at 7.1%. Sales were further impacted by temporary store closures during the period due to positive Covid-19 cases and store sanitisations. Lost sales from the Covid-19 pandemic impact is estimated to be R0.8 billion.

Increased commodities and retail sales and optimising product and promotional mix with the EDLP proposition led to gross margin improving by 19.1% compared to the prior year.

Continued focus on working capital initiatives led to minimal stock obsolescence and stable stock aging. Expenses increased by only 0.9% with a 0.5% decrease on a comparable basis. Impairments relating to lossmaking stores as well as the goodwill balance were also recognised during the period.

Two Cambridge stores were opened in South Africa during the period, resulting in a 1.6% increase in trading space to 123,398m2 (2019: 121,432m2).

The Group had previously announced that we had identified a potential buyer for eight of the 11 Masscash stores which entered into a consultation process in terms of section 189 and section 189A of the Labour Relations Act 66 of 1995, as amended (the LRA) at the beginning of the 2020 financial year. On 16 February 2021, the Competition Tribunal approved the transaction covering those eight stores with a condition linked to employment security. The potential sale of the remaining three stores is still being contemplated. Subsequent to the announcement of the aforementioned 11 Masscash stores, a decision was taken to divest the Qwa Qwa Masscash store. A suitable buyer was found for the store and the transaction will close shortly.

Trading General Merchandise, Food and Liquor
7.3%
R27.2bn
Sales
2019: R29.4 billion
16.8%
R864.1m
Trading profit
2019: R1,039.1 million^*
%
18.2%
Gross profit
2019: 17.8%
22 stores
in South Africa, including Massfresh, housing the Group’s fresh produce, fresh meat and bakery operations, including The Fruitspot
Dec 2019: 22

Makro, Fruitspot and the meat processing plant total sales of R27.2 billion decreased by 7.3% compared to December 2019, with comparable stores sales contracting by 7.8%. Product inflation was estimated at 4.1%, and margins improved by 40bps compared to December 2019. Lost sales from the Covid-19 pandemic impact is estimated to be R2.6 billion.

At Makro, shifting consumer patterns emerging from the lockdown led to an increase in retail customers, and a reduction in wholesale and commercial customers. Makro also partnered with OneCart during the period further enabling the sale and delivery of over 11,000 grocery items and 124 liquor items. Online sales increased by 40.2% during the period.

The Fruitspot business was negatively impacted by distressed hotel, catering and restaurant industries.

Expenses were well managed despite increased bad debts (mainly from the liquor and hospitality industries), stock obsolescence and increased IT costs related to the Hybris web and fulfillment platform. This increase was offset against rental savings as a result of relief provided by landlords as well as successful rental re-negotiations. Expenses decreased by 1.9% during the period, with a 3.4% decrease on a comparable basis. Impairments relating to the Fruitspot business were also recognised during the period.

There were no stores opened or closed during the period and trading space remained unchanged at 251,632m2 (2019: 251,632m2).

TRADING FOOD (WHOLESALE) AND BUYING ASSOCIATION
1.8%
R20.4bn
Sales
2019: R20.7 billion
328.7%
R172m
Trading profit/(loss)
2019: (R75.2 million)^
%
11.7%
Gross profit
2019: 10.5%
69 stores
in South Africa, Botswana, Lesotho, Mozambique, Namibia, Swaziland and Zambia; and Shield, a voluntary buying association.
Dec 2019: 69

Cash & Carry total sales of R20.4 billion declined by 1.8%, and similarly on a comparable store sales basis. Product inflation was estimated at 6.1%. Sales from South African stores declined by 1.2% and by the same percentage on a comparable store sales basis. Sales from the rest of Africa stores decreased by 5.3% with a 7.0% decrease in constant currencies and by the same percentage on a comparable store sales. Sales were impacted by the significant reduction of hospitality and commercial consumers, which also led to an increase in bad debts. Lost sales from the Covid-19 pandemic impact is estimated to be R0.8 billion.

Optimising product and promotional mix from the EDLP proposition and shelf-pricing improvements led to improved margins of 120bps compared to December 2019.

A focus on expense management and cost saving initiatives were realised in travel and consulting fees. Expenses decreased by 0.1% during the period, with a similar decrease in comparable expenses. Certain loss-making stores resulted in impairment expenses during the period.

There were no stores opened or closed during the period and trading space remained unchanged at 261,958m2 (2019: 261,958m2).

 

* Restated according to the new operating structure of the Group as required by IFRS 8. Refer to note 2.
^ Business Unit trading profit/(loss) includes Corporate allocations.