Divisional operational review

  26 weeks   26 weeks         52 weeks  
  December   December   Period Comparable Estimated June  
  2011 % of 2010 % of % % sales % sales 2011 % of
Rm (Reviewed) sales (Reviewed) sales growth growth inflation (Audited) sales
Sales 31,492.2   27,375.8   15.0 9.2 1.1 52,950.1  
Massdiscounters 7,819.2   6,993.9   11.8 4.6 (5.0) 13,332.5  
Masswarehouse 7,799.9   6,593.3   18.3 11.6 2.3 12,722.9  
Massbuild 4,240.1   3,782.4   12.1 8.7 0.5 7,271.0  
Masscash 11,633.0   10,006.2   16.3 10.9 5.2 19,623.7  
Trading profit before interest and tax 1,335.7 4.2 1,284.7 4.7 4.0     2,182.9 4.1
Massdiscounters 498.3 6.4 473.6 6.8 5.2     744.0 5.6
Masswarehouse 446.2 5.7 397.1 6.0 12.4     749.0 5.9
Massbuild 215.8 5.1 189.5 5.0 13.9     315.1 4.3
Masscash 175.4 1.5 224.5 2.2 (21.9)     374.8 1.9
Trading profit before tax 1,424.7 4.5 1,355.6 5.0 5.1     2,331.6 4.4
Massdiscounters 528.0 6.8 486.6 7.0 8.5     782.0 5.9
Masswarehouse 474.7 6.1 422.4 6.4 12.4     803.2 6.3
Massbuild 236.8 5.6 209.8 5.5 12.9     354.7 4.9
Masscash 185.2 1.6 236.8 2.4 (21.8)     391.7 2.0

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

Massdiscounters – comprises the 106-store General Merchandise retail discounter Game, which trades in South Africa, Botswana, Ghana, Malawi, Mozambique, Namibia, Nigeria, Tanzania, Uganda and Zambia; and the 16-store Hi-tech retailer DionWired.

Comparable store sales increased by 4.6% with estimated deflation of 5.0%. Total sales increased by 11.8% and trading profit before tax increased by 8.5%. Game South Africa’s sales growth was lower than expected, indicative of pressure on middle-income consumers but also continued product deflation and the anticipated cannibalisation of some stores’ sales to other Massmart brands. Our African stores are trading well with comparable Rand sales up 18.1% (and 12.4% in constant currency) and DionWired performed exceptionally.

Foodco continues to expand with 15 stores (nine refurbished and six new) now in the format, including two in Africa, and is performing at or above expectations.

With seven Game stores and three DionWired stores opening, and one Game store closing, trading space increased by 5.9%.

Masswarehouse – comprises the 16-store Makro warehouse club trading in Food, General Merchandise and Liquor in South Africa.

Comparable store sales increased by 11.6% with estimated inflation of 2.3%, while total sales increased by 18.3% and trading profit before tax increased by 12.4%. Trading profit includes store pre-opening costs which were R22 million higher than in the prior period.

Makro had an excellent performance, particularly as three new stores were opened, and one closed, with the associated management distraction and initial cost inefficiencies. All new stores include the Fresh offering and one store was converted, bringing to five the number of Makro stores trading with Fresh.

The acquisition of Fruitspot was effective 2 January 2012 and will assist Makro with its procurement and distribution of fresh and processed fruit and vegetables.

With three stores opened and one closing, trading space increased by 15.9%.

Massbuild – comprises 84 outlets, trading in DIY, Home Improvement and Builders Hardware, under the Builders Warehouse, Builders Express and Builders Trade Depot brands in South Africa and Botswana.

Comparable store sales increased by 8.7% with estimated inflation of 0.5%. Total sales increased by 12.1% and trading profit before tax increased by 12.9%.

This was a strong performance in a weak market, suggesting further market share gains in South Africa. The first non-South African Builders Warehouse store opened in Gaborone, Botswana, and has received phenomenal local support, indicating great potential for this format elsewhere in Africa.

With one Builders Warehouse store and two Builders Express stores opened, trading space increased by 2.2%.

Masscash – comprises 80 Wholesale stores and 28 Retail stores, including Cambridge Food, trading in South Africa, Botswana, Lesotho, Namibia and Swaziland, and Shield, a voluntary buying association.

Divisional comparable store sales increased by 10.9% with estimated inflation of 5.2%. Total sales increased by 16.3% but, disappointingly, trading profit before tax decreased by 21.8%.

Despite a good sales performance, trading profit declined as a result of our investments in growth, price and capacity as we build the Cambridge and Saverite brands and supply chains.

The acquisition of Rhino Cash & Carry, comprising 14 stores, will be effective 1 March 2012, and will increase our total annualised Retail Cash & Carry sales to approximately R5 billion. It is a condition of the Competition Tribunal’s ruling that Rhino needs to dispose of four stores by the end of June 2012, with the possibility of a further three-month extension.

With five new Retail stores opened and two closed, trading space increased by 3.2%.