Interim Results Presentation FOR THE 26 WEEKS ENDED JUNE 2019
01 FINANCIAL REVIEW 02 OPERATIONAL REVIEW 03 ADDITIONAL INFORMATION
01 Financial review
In Income S Statement June 2019 like-on-like Condensed Consolidated Income Statement 26 WEEKS 26 WEEKS 26 WEEKS 26 WEEKS 26 WEEKS JUNE 2019 IFRS 16 JUNE 2019 JUNE 2019 JUNE 2018 JUNE 2018 ADJUSTED Rm (REVIEWED) ADJUSTMENT (ADJUSTED) (ADJUSTED) (REVIEWED) (REVIEWED) % CHANGE • Depreciation Revenue 43,909.4 - 43,909.4 43,909.4 41,688.4 41,688.4 5.3 increased due to Sales Sa 43,832.4 - 43,832.4 43,832.4 41,558.4 41,558.4 5.5 Cost of sales (35,403.5) - (35,403.5) (35,403.5) (33,416.3) (33,416.3) (5.9) right-of-use (ROU) Gross p profit 8,428.9 - 8,428.9 8,428.9 8,142.1 8,142.1 3.5 assets Other income 76.6 - 76.6 76.6 127.9 127.9 (40.1) Depreciation and amortisation (1,548.4) 890.5 (657.9) (657.9) (546.7) (546.7) (20.3) • Occupancy costs Employment costs (3,967.4) - (3,967.4) (3,967.4) (3,653.8) (3,653.8) (8.6) decreased Occupancy costs (644.6) (1,210.8) (1,855.4) (1,855.4) (1,706.6) (1,706.6) (8.7) Other operating costs (2,026.2) - (2,026.2) (2,026.2) (1,698.5) (1,698.5) (19.3) • Finance costs Trading p profit b before i interest a and t taxation 318.9 (320.3) (1.4) (1.4) 664.4 664.4 (100.2) increased due to the Restructuring costs - - - - (110.3) (110.3) 100.0 Impairment of assets (46.9) - (46.9) (46.9) (8.5) (8.5) (451.8) recognition of the Insurance proceeds on items in PP&E 0.4 - 0.4 0.4 2.1 2.1 (81.0) lease liability Operating p profit/(loss) b before f foreign e exchange m movements a and i interest 272.4 (320.3) (47.9) (47.9) 547.7 547.7 (108.7) Foreign exchange loss (157.1) 75.2 (81.9) (81.9) 23.4 23.4 (450.0) • Taxation – temporary Operating p profit/(loss) b before i interest 115.3 (245.1) (129.8) (129.8) 571.1 571.1 (122.7) differences relate to - Finance costs (921.9) 556.5 (365.4) (365.4) (310.5) (310.5) (17.7) - Finance income 12.3 - 12.3 12.3 10.8 10.8 13.9 IFRS 16 Net finance costs (909.6) 556.5 (353.1) (353.1) (299.7) (299.7) (17.8) (Loss)/Profit b before t taxation (794.3) 311.4 (482.9) (482.9) 271.4 271.4 (278.0) Taxation (38.1) (64.8) (102.9) (102.9) (81.4) (81.4) (26.4) (Loss)/Profit f for t the p period (832.4) 246.6 (585.8) (585.8) 190.0 190.0 (408.3) (Loss)/Profit attributable to: - Owners of the parent (836.1) 246.6 (589.5) (589.5) 195.7 195.7 (401.2) - Non-controlling interests 3.7 - 3.7 3.7 (5.7) (5.7) 164.9 (Loss)/Profit f for t the p period (832.4) 246.6 (585.8) (585.8) 190.0 190.0 (408.3)
Bala lance S Sheet i impact Condensed Consolidated Statement of Financial Position DECEMBER 2018 IFRS 16 2019 JUNE 2019 AT ADOPTION OPENING BALANCE Rm (AUDITED) ADJUSTMENT (ADJUSTED) (REVIEWED) • ROU assets recognised due to ASSETS IFRS 16 adoption entry Non-current assets 14,165.8 8,530.0 22,695.8 22,086.7 • Lease liability raised on a Property, plant and equipment 9,109.5 - 9,109.5 8,820.5 present value basis of future lease Right-of-use asset 537.7 8,530.0 9,067.7 8,571.6 commitments Goodwill and other intangible assets 3,656.3 - 3,656.3 3,745.8 • Other non-current liabilities and Investments and other financial assets 119.2 - 119.2 143.6 provisions decreased to remove Deferred taxation 743.1 - 743.1 805.2 the full operating lease smoothing Current assets 20,605.2 (118.1) 20,487.1 17,353.9 liability which is allocated against Non-current assets classified as held for sale 11.6 - 11.6 166.7 the ROU asset Total assets 34,782.6 8,411.9 43,194.5 39,6 ,607.3 .3 EQUITY AND LIABILITIES Total equity 6,528.6 (227.1) 6,301.5 5,280.3 Non-current liabilities 3,694.5 8,784.3 12,478.8 11,502.5 Interest-bearing borrowings 1,606.0 - 1,606.0 2,267.6 Lease liability 648.1 10,060.6 10,708.7 9,056.6 Deferred taxation 76.7 - 76.7 86.5 Other non-current liabilities and provisions 1,363.7 (1,276.3) 87.4 91.8 Current liabilities 24,559.5 (145.3) 24,414.2 22,814.5 Total equity and liabilities 34,782.6 8,411.9 43,194.5 39,607.3
Gross profit Sales margin R43.8bn 19.2% Like-on-like 2018: R41.6 billion 2018: 19.6% Financial summary Trading loss before interest and tax Headline loss (excl restructure costs) (excl restructure costs) 26-week basis -R1.4m -R550.0m 2018: R664.4 million profit 2018: R283.5 million earnings Like-on-like basis excluding IFRS 16 impact in both periods
Our p ur poor p r per erform rmanc nce in s e in sum ummary Weaker sales growth: Margin pressure Expenses (down 36bps*, approx. R160m) (up 110bps*, approx. R900m) • Continued consumer pressure: • Greater participation of lower-margin • People, property & depreciation • GDP -3.2% Q1 Food & Liquor sales within expectations (75% of total) • Unemployment 29% • Increased customer-led promotional apart from employee insourcing • Low food inflation sales mix • Some pressure from 3.1% new space • 2 nd quarter slow-down, despite • Slower than expected recovery in our • Other expenses higher than Easter margin-management in Game and expected: security, generators’ diesel Masscash and maintenance, bad debts, credit card usage, new store pre-opening costs, IT support costs * As a percentage of sales Like-on-like basis excluding IFRS 16 impact in both periods
Sa Sales by g geo eogra raphy a and nd c categ egory Continued tough trading environment h 8.2% Durables sales h 2.7% Total Group: R43.8 bn Group Group Food & Liquor sales SA Sales Food & Liquor Durables 91.1% 56% 44% h 4 .9% h 7.9% h 1.3% Ex-SA Sales Food & Liquor Durables 8.9% 52% 48% h 1 4.6% h 8.8% h 11.8% h 6.4 % Constant Currency 26-week like-on-like basis excluding IFRS 16 impact in both periods
Gross pr Gr prof ofit ma margi gin • Lower sales participation Jun 18 of higher-margin Durable Jun 19 Goods products 19.6% 19.2% • Increased lower-margin promotional sales participation • Weak margin R8.1 billion R8.4 billion management in Game and Masscash • Stock aging in Game
Cost p pres ressures ures Total expenses grew at 11.8%, comparable expenses at 9.2% Depreciation Employment costs Occupancy costs Other operating expenses h 20.3% h 8.6% h 8.7% h 19.3% h 15.4 % COMPARABLE h 7.2 % COMPARABLE h 6.5% COMPARABLE h 14.3% COMPARABLE • Re-assessment of useful lives • Net 3.1% trading space • Increased credit card expenses • 46,500 FTEs (8% growth) due (IFRS) in 2018. Excluding this increase since June ‘18 and security costs (weak economy) to in-sourced temporary increase is 9.3% • Pressure from increased R50m contractors to permanent staff: • Completion of SAP Hybris municipal & electricity • IT system implementations in increase to benefits costs in Makro tariffs including costs of change management mode: costs • Impact of new stores • Net 16 stores opened since generators (load- expensed no longer capitalised June ’18 with space growth shedding) R50m of 3.1% • Pre-opening expenses R53.5m (2018: R18.6m): 7 new stores opened (June 2018: 5 new stores) Like-on-like basis excluding IFRS 16 impact in both periods
Fore rex, int x, interes erest a and nd t tax Rm Rm JUN 2019 JU JUN 2018 JU MOVEME MO MENT • Currency weaknesses 81.9 (23.4) 105.3 Foreign exchange loss/(gain) in Zambia & Nigeria • Increased average levels 353.1 299.7 53.4 Net finance costs of borrowing • Impairment of deferred 102.9 81.4 21.5 Tax expense tax assets and limited recognition of further deferred tax assets Like-on-like basis excluding IFRS 16 impact in both periods
Sales Sa es p per erform rmanc nce Total sales h 5.5%. Comparable sales h 3.6% Massdiscounters Masswarehouse Massbuild Masscash R9.4bn R13.4bn R6.7bn R14.3bn 2018: R9.1bn 2018: R12.9bn 2018: R6.4bn 2018: R13.1bn h 3.0% SALES h 3.7% SALES h 5.0% SALES h 9.1% SALES • Product inflation of 0.8% • Product inflation of 2.9% • Product inflation of 2.8% • Product inflation of 3.6% • Good Food growth in Game (9%): • Good sales growth in Liquor • Slow sales growth in SA stores: • Good Wholesale sales growth contributes 20% of total sales (11.9%) negative construction growth in 13.3%, benefitted from inflation • Ex-SA sales grew 5.8% in Rands • Durable sales impacted by 3 consecutive quarters • Retail sales growth 2.9% in very and was relatively flat in constant deflation • Good ex-SA growth of 25.5%, competitive environment currencies • New Makro store opened in and 19.2% in constant • Good ex-SA growth 14.6% and • Game SA sales up 3.5% and Cornubia in March ‘19 currencies (new stores) 10.4% in constant currencies customer count up 5.5%
Gross m marg rgin in Gross margin % down 36bps Massdiscounters Masswarehouse Massbuild Masscash R2.2bn R2.4bn R2.1bn R1.7bn 2018: R2.2bn 2018: R2.3bn 2018: R2.0bn 2018: R1.6bn 23.3% 17.5% 31.1% 12.0% i 20bps i 19bps h 23bps i 33bps • Increased inventory provisions • Lower sales participation in • Higher retail contribution driving • Lower collection of rebates and • Gen Merch sales pressure with Gen Merch higher margin margin support higher Food participation • Stabilising Massfresh trading • Competitive Retail market taking longer than anticipated
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