Wrap Text
PRESS RELEASE
Masssmart Delivers Sparkling Earnings In Maiden Year On JSE
Massmart Holdings has produced a sparkling set of results for its first full
year as a JSE-listed company.
Boosted by record trading profits from all divisions, improved margins
virtually across the board, and a favourable tax rate, the retail and
wholesale group increased its headline earnings from R106-million to R212-
million in the year to 30 June 2001.
This is equivalent to headline EPS of 108 cents (previous year: 76,5 cents)
- which is comfortably ahead of the consensus forecast - out of which a
final dividend of 21 cents (making a total of 36 cents for the year) will be
paid to shareholders.
The results do not include the contribution from Jumbo Cash & Carry, 22
Browns and Weirs stores, and liquor wholesaler Sip `n Save - all of which
were recently conditionally acquired from Rebhold for R490-million. If the
Competitions Tribunal approves the acquisition - a decision is expected
within the next month - Massmart's turnover, headline earnings and headline
EPS for the year will rise to R11,6-billion, R216-million and 109,9 cents
respectively.
Trading profit (before interest) for the year rose by 27 per cent from
R201,5-million to R256,5-million - on a nine per cent increase in sales
(from R10,4-billion to R11,3-billion). Trading profit (before interest) as a
percentage of turnover was 2,3 against 1,9 previously.
Strong cash generation during the year is reflected in a 375 per cent jump -
to R307-million - in cash flow from operations.
This is the fifth consecutive year that Massmart has reported strongly
improved profits and returns that are well ahead of expectations and
previous-year results.
Executive chairman Mark J Lamberti says Massmart's performance is the result
of steady progress with the implementation of strategies formulated in the
mid nineties, one imperative of which is the pursuit of quality sales, which
render a higher operating margin and cash flow.
Looking ahead, Lamberti has more good news for shareholders.
"Although new store development will slow in the coming year, merchandise
and marketing innovation, improved operational efficiencies and tighter
working capital management will produce earnings growth in excess of sales
growth. The group is dedicated to the production of cash earnings and high
returns on equity," he says.
"We remain confident that Massmart will produce a growth in earnings per
share at the forefront of the retail sector, in line with our expectations
on listing. This will be significantly enhanced if the Competitions Tribunal
approves the acquisition of Jumbo and the 22 Browns and Weirs stores,"
Lamberti adds.
He points out that the portfolio, merchandise mix, strategies, structures,
systems and processes of Massmart have been configured to realise relatively
superior profitability and profit growth from high volume low cost mass
merchandising in a slow growth environment.
Ends
ADDITIONAL INFORMATION
Massmart Holdings results for the year to 30 June 2001
OPERATING RESULTS
- Massmart's sales growth - 2,6 per cent of which was attributable to
seven new stores opened during the year - was depressed by the exclusion
of sales in Zimbabwe, the loss (as a result of a fire) of the flagship
Makro store at Woodmead, the decision by Shield to abandon high volume
unprofitable business and the closure of one Dion store.
Group sales were nevertheless in line with that reported by national
statistics.
- The maintenance of market share was gratifying in the light of an
internal inflation rate of about four per cent. Food grew eight per cent,
liquor six per cent, and general merchandise - including apparel - 10 per
cent.
- Return on average equity was 34 per cent.
- Massmart increased its share of CCW - the peri-urban and rural chain of
22 cash and carry warehouses - from 84 to 90 per cent effective
1 January 2001.
MAKRO
Makro was the jewel in the Massmart crown, with a 76 per cent increase in
trading profit before interest. Comparable store sales growth of 8,1 per
cent and excellent control of margins, assets and costs resulted in the
strong growth of profits and improved pre- and post-interest returns on
sales. The re-built Makro Woodmead store will be reopened in time for the
2001 Christmas season.
MASSDISCOUNTERS
Procurement, merchandising and promotional disciplines were reinstated -
concurrent with a focus on the reduction of slow moving merchandise. There
was an improvement in sales, profits and cash flow in the second half
following numerous management changes, including the replacement of the
managing director. Comparable store sales grew 5,2 per cent for the year.
SHIELD
The performance of this division was unsatisfactory and a new managing
director was appointed to formulate and implement the strategy, structures
and systems necessary to reposition Shield as a more valuable business
partner to its independent members.
CCW
Comparable store sales growth of 14,2 per cent and the opening of three new
outlets produced a growth in sales of 29 per cent. Margins, expenses,
shrinkage, and working capital were well controlled - resulting in a
pleasing growth of profits and improved pre-interest returns on sales.
OPERATING ENVIRONMENT
According to executive chairman Mark J Lamberti:
- Consumer confidence was negative throughout the financial year, with the
exception of the first quarter of 2001, when it was neutral.
- Estimated retail sales grew 3,4 per cent in the first half of the year
compared with 2,9 per cent in the second half. (Source: Central
Statistical Services). A more positive growth trend has emerged since May
2001.
- South African retailers' share of consumer spending has declined, while
ill-conceived retail property developments exacerbate the surplus of
retail space.
- The profile of discretionary spending continues to evolve, demanding a
considered but rapid response by all participants in the supply chain for
consumer goods.
- Many (of the those participants) who failed to identify the actual
product and service needs of consumers have resorted to aggressive price
competition - forsaking their strategic positioning and, in some cases,
their viability in favour of short-term unprofitable sales growth.
- The laudable efforts of the South African Revenue Services to outlaw
duty and VAT evasion have yet to penetrate all sectors of retail and
wholesale distribution. Besides the obvious loss of revenue to the fiscus,
illegal trading undermines the profitability of legitimate industry
participants and acts as a deterrent to fixed investment and job creation.
Ends
Sharenet Sites 
