Divisional Operational Review

  June   June   Comparable Estimated
  2010 % of 2009 % of Year % sales % sales
Rm (Reviewed) sales (Audited) sales % growth growth inflation
Sales 47,451.0   43,128.7   10.0 2.6 (0.4)
Massdiscounters 12,164.9   11,206.0   8.6 3.2 (4.2)
Masswarehouse 11,501.2   11,102.4   3.6 3.6 2.8
Massbuild 6,366.9   5,604.6   13.6 3.4 1.8
Masscash 17,418.0   15,215.7   14.5 1.1 (0.6)
Trading profit before              
interest and tax 2,104.4 4.4 2,097.5 4.9 0.3    
Massdiscounters 642.7 5.3 680.0 6.1 (5.5)    
Masswarehouse 700.8 6.1 713.0 6.4 (1.7)    
Massbuild 277.3 4.4 222.6 4.0 24.6    
Masscash 483.6 2.8 481.9 3.2 0.4    
Trading profit before tax 2,267.5 4.8 2,348.9 5.4 (3.5)    
Massdiscounters 690.3 5.7 746.6 6.7 (7.5)    
Masswarehouse 758.6 6.6 802.6 7.2 (5.5)    
Massbuild 308.5 4.8 270.1 4.8 14.2    
Masscash 510.1 2.9 529.6 3.5 (3.7)    

Trading profit excludes foreign exchange movements. A detailed reconciliation between trading and operating profit can be found below the ‘Additional information’ table over the page.

Massdiscounters – comprises the 91-store General Merchandise retail discounter Game, which trades in South Africa, Botswana, Ghana, Malawi, Mauritius, Mozambique, Namibia, Nigeria, Tanzania, Uganda and Zambia; and the 11-store Hi-tech retailer DionWired which trades in South Africa.

Divisional comparable store sales increased by 3.2% with estimated deflation of 4.2%. Total sales increased by 8.6% and trading profit before interest and tax decreased by 5.5%. Game SA performed well with comparable sales growth of 10.9% and it increased profits ahead of sales growth. Trading profit from Game Africa is down 29% as we suffered from African currency weakness and struggling domestic economies, but still maintained good levels of profitability. DionWired’s rapid store expansion and solid trading saw sales increase by 52.8%.

With seven Game stores and five DionWired stores opening and three Game stores closed, space increased by 4.0%. The new Gauteng Regional Distribution Centre (RDC) opened and several small warehouses closed.

Masswarehouse – comprises the 13-store Makro warehouse club trading in Food, General Merchandise and Liquor in South Africa (and two Zimbabwean stores, not consolidated in the Group results).

Divisional store sales increased by 3.6% with estimated inflation of 2.8% and trading profit before interest and tax decreased by 1.7%. Declining food inflation and intense retail competition adversely affected Makro’s sales and margins. Liquor sales were good throughout the year while General Merchandise sales began recovering late in the year.

No new stores were opened, although construction began on a new Makro store in Vanderbijlpark, to open in October 2010, and good progress is being made in securing several other sites. The re-engineering of the supply chain continues to gain momentum.

Massbuild – comprises 76 outlets, trading in DIY, Home Improvement and Builders Hardware, under the Builders Warehouse, Builders Express and Builders Trade Depot brands in South Africa.

Divisional comparable store sales increased by 3.4% with estimated inflation of 1.8%. Boosted by new stores and acquisitions, total sales increased by 13.6% and trading profit before interest and tax increased by 24.6%.

In the current negative residential building market, this is a very good trading performance that reflects the intensive management focus over the past few years. Homeowners’ efforts to maintain and improve their homes managed to compensate for the decline in new homes built. We completed the integration of all the formats under one management team and made several strategic and opportunistic acquisitions. The largest of these is Pupkewitz in Namibia, which we expected to have completed by June 2010 but remains yet to be fully approved by the Namibian authorities.

With two Builders Warehouse stores, four Builders Express stores and two Builders Trade Depot stores opened or acquired, and three closed, net trading space increased by 7.6%.

Masscash – comprises 77 Wholesale and 20 Retail Cash and Carry stores trading in South Africa, Botswana, Lesotho, Mozambique and Namibia, and Shield, a voluntary buying association.

Divisional comparable store sales increased by 1.1% with estimated deflation of 0.6%. Through acquisitions, total sales increased by 14.5% and trading profit before interest and tax increased by 0.4%.

Food deflation dominated trading, putting pressure on sales and gross margins. Despite the difficult environment, management maintained its focus on transforming the Division to position itself to compete nationally in both the wholesale and retail markets. Cambridge Food has been chosen as the national corporate-owned retail brand and Saverite the franchise brand.

Retail sales totalled R1.8 billion for the financial year.

Eight new wholesale cash and carry stores and ten new retail cash and carry stores were opened or acquired. Net trading space increased by 18.8%.