Divisional operational review

  June   June     Comparable Estimated 
  2012 % of 2011 % of Year % sales % sales 
Rm (Reviewed) sales (Reviewed) sales % growth growth inflation 
Sales 61,209.1   52,950.1   15.6 9.6 1.8 
Massdiscounters 14,805.7   13,332.5   11.0 4.4 (3.3)
Masswarehouse 15,370.6   12,722.9   20.8 11.6 1.9 
Massbuild 8,138.0   7,271.0   11.9 9.3 1.4 
Masscash 22,894.8   19,623.7   16.7 11.6 6.1 
Trading profit before
interest and tax
2,265.3 3.7 2,182.9 4.1 3.8    
Massdiscounters 749.8 5.1 744.0 5.6 0.8    
Masswarehouse 844.5 5.5 749.0 5.9 12.8    
Massbuild 389.8 4.8 315.1 4.3 23.7    
Masscash 281.2 1.2 374.8 1.9 (25.0)    
Trading profit before tax 2,456.8 4.0 2,331.6 4.4 5.4    
Massdiscounters 813.0 5.5 782.0 5.9 4.0    
Masswarehouse 906.3 5.9 803.2 6.3 12.8    
Massbuild 435.3 5.3 354.7 4.9 22.7    
Masscash 302.2 1.3 391.7 2.0 (22.8)    

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

Massdiscounters – comprises the 107-store General Merchandise retail discounter Game, which trades in South Africa, Botswana, Ghana, Malawi, Mozambique, Namibia, Nigeria, Tanzania, Uganda and Zambia; and the 18-store Hi-tech retailer DionWired.

Comparable store sales increased by 4.4% with estimated product deflation of 3.3%. Total sales increased by 11.0% and trading profit before tax increased by 4.0%. Game South Africa’s comparable sales growth was low as a result of the middle-income consumer, product deflation and some cannibalisation from the new Makro stores. Africa performed superbly and increased sales and profits significantly as the African currencies (with the exception of Malawi), strengthened. DionWired had another year of great sales and profit growth.

Foodco continues to expand and comprises 20 stores (including three in Africa), and is performing at or above expectations. Significantly, the third and final Massdiscounters RDC was commissioned which now completes the South African network. Whilst these facilities are expensive in the short term, they provide a significant opportunity for leverage in the medium to long term.

Eight Game stores and five DionWired stores opened, and one Game store closed, increasing space by 27,592 m2 (7.1%).

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

Comparable store sales increased by 11.6%, with estimated product inflation of 1.9%. Total sales grew by 20.8% and trading profit before tax increased by 12.8%.

This was a busy year with three new stores, an expanded DC and the January 2012 acquisition of Fruitspot. Despite the cost pressures of the three new stores and associated opening costs, the business remained tightly controlled and well managed. If adjusted for the once-off store opening costs, trading profit increased by 14.5%.

Three stores were opened and one closed, increasing space by 17,609 m2 (13.7%). A further two stores will be opened during the period to December 2012.

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 9.3% with estimated product inflation of 1.4%. Total sales increased by 11.9% and trading profit before tax increased by 22.7%.

The Builders Warehouse and Builders Express brands continued to transform the South African home improvement market. Builders Trade Depot’s performance improved despite the depressed level of housing construction activity.

The first non-South African Builders Warehouse was opened in Gaborone, Botswana, and has traded better than expected. At least two other non-South African stores have been approved and should be opened in calendar 2013.

One Builders Warehouse store and two Builders Express stores were opened resulting in net trading space increasing by 8,602 m2 (2.2%). One Builders Trade Depot store was converted to a Builders Express store.

Masscash – comprises 80 Wholesale Cash and Carry stores and 43 Retail Cash and Carry trading in South Africa, Botswana, Lesotho, Namibia and Swaziland; and Shield, a voluntary buying association.

Comparable store sales increased by 11.6% with estimated product inflation of 6.1%. Total sales increased by 16.7% but disappointingly, trading profit before tax decreased by 22.8%.

This Division traded hard in a competitive environment and invested heavily in Food Retail stores, skills, distribution, IT systems and brand-building. This investment came at a cost, compounded by some operational errors and a failed small acquisition. Trading trends in the final quarter to June 2012 were encouraging and both the Wholesale and Retail parts of this Division are poised for growth. We look forward to improving profitability from the Wholesale Division, bolstered by food inflation, whilst investing for growth in the Retail Division.

Rhino, comprising 15 stores, was acquired with effect from March 2012 and is trading well.

One Wholesale store and five new Retail stores were opened, whilst one Wholesale store and two Retail stores were closed, bringing the total number of Wholesale stores to 80 and Retail stores to 43. Net trading space increased by 38,512 m2 (11.2%).