2018 was a transformational year for the Group, whose interim results were affected by a number of factors. While the first half performance is below expectations it is not a reflection of the fundamental strength of the business.
- Pieter Engelbrecht, chief executive officer.
The timing unfortunately coincided with the deterioration of the RSA and Non-RSA economies and consumer expenditure levels over this same period.
In the external operating environment, economic conditions have left the Group’s core customer under significant financial pressure, while currency devaluations severely impacted the performance of the Non-RSA operations.
Internal challenges, investment expenses and operational issues relating to the implementation of strategic decisions, including the roll out of the new SAP ERP system also affected earnings.
The results do not reflect on the underlying strength of the Group.
The Group served a record number of customers and sold record product volumes, up 1.7% and 0.2% respectively, grew supermarket trading space by 1.9% and created 1 758 new jobs. Strategic decisions to invest in convenience foods, its fresh offer, private label and its liquor footprint also continue to bear fruit.
The core South African supermarket operation, trading through 1 541 outlets and representing 74.0% of total sales, increased sales by 2.6% with a decline in trading profit of 15.1%. Performance was affected by zero inflation or deflation in core categories (in December customers still benefitted from 10 719 items at prices cheaper than a year before), the distressed financial position of customers and on-shelf product availability challenges.
The liquor division continues to be a standout performer, increasing turnover by 20.1% in RSA and gaining significant market share.
Trading in 14 countries in the rest of Africa and Indian Ocean Islands, Supermarkets Non-RSA recorded a decline of 13.3% in sales in rand terms and contributed 14.7% to the Group’s sales. Non-RSA sales growth remained positive in constant currency terms.
The Group’s 479 furniture stores increased turnover by 4.3%. Other operating segments, which include OK Franchise, Computicket, MediRite Pharmacy and Checkers Food Services, achieved turnover growth of 6.5%.
The positive sales trend emerging in the festive season has continued since January.
Economic tailwinds remain limited and the impact of load-shedding and political uncertainty ahead of the May 8th election make sales predictions difficult.