Despite showing some progress on its much vaunted turnaround strategy, which saw Massmart report a HY2021 trade profit of R444.2 million compared to a loss of almost R267 million on HY2020 on Friday, the group is still in a position net and general loss.
Massmart, which owns Makro, Game and Builders Warehouse stores, said its group-wide trading profit for the interim period (26 weeks) ended June 27, 2021, represents a 266.6% increase over the semester. comparative.
However, impairments, largely linked to its beleaguered gaming chain, along with foreign exchange losses and interest expense, continue to hurt the group’s overall financial position.
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“Impairment expenses of R597.7 million were recognized during the period. Foreign exchange losses of R87.9 million decreased 21.7% compared to the previous period. Interest expenses of R870.1 million decreased by 5.1% compared to the previous year due to the decrease in average loans and lower interest rates, ”says Massmart in its statement of provisional results Sens.
“As a result of the above, the group incurred a net loss of R1072.5 million, an improvement of 8.1% compared to the previous year’s loss of R1,166.8 million, during the same period,” it adds. .
“The overall loss amounted to R645.4 million, a 40.8% improvement over the prior period’s overall loss of R1,090.3 million,” notes Massmart.
This shows that the group CEO Mitch Slape’s restructuring plan is taking shape, but is hampered by the challenges at Game, as well as the ongoing impact of the Covid-19 pandemic on the SA retail sector as a whole.
Massmart reported total group sales for the interim period of R41.3 billion, representing comparatively modest total sales growth and comparable store sales growth of 4.4% and 4.8%, respectively.
Most of its JSE-listed peers are showing higher sales growth.
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However, Massmart said in an earnings release that its gross margin had increased 43 basis points, while expenses decreased 1.8% during the half.
“The group’s performance was supported by strong earnings before interest and taxes. [PBIT] increases in Constructors [up 184%] and Massmart Wholesale [which includes Makro], up to 70%, “he said.
Massmart added that it “also benefited from the positive impact of restructuring interventions” that included “improved gross profit margins and exceptional delivery against cost savings targets” that aimed to “sustainably reestablish the group’s cost base. “.
“The group’s earnings were negatively affected by non-cash impairment charges of 597.7 million rand, allocated primarily to the Game SAP ERP software asset,” it noted however.
“The period has been characterized by a continuous control of expenses throughout the group and a growth in margins. This, coupled with Builders’ strong home improvements and Makro’s general merchandise and liquor sales, has contributed to a much better business profit performance, ”Slape said in a statement.
“We achieve this in a demanding business environment that is noted for: ongoing disruptions in liquor sales, poor demand for food, spirits, and consumables among our largest hotel, restaurant, and business-to-business catering customer; and restricted discretionary middle-income spending on durable goods, ”he added.