| Tue 18 Nov 2003, 15:47 | | Results of the Massmart Annual General Meeting and |
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Massmart Holdings Limited - Results of the Massmart Annual General Meeting and
statement by the Chief Executive Officer
Massmart Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1940/014066/06)
Share code: MSM ISIN: ZAE000029534
("Massmart" or "the company")
Results of the Massmart Annual General Meeting and statement by the Chief
Executive Officer
Shareholders are advised that at the Massmart Annual General Meeting held on
Tuesday 18 November 2003, the requisite majority of shareholders passed all the
ordinary resolutions and the two special resolutions, as set out in the notice
of meeting dated 14 October 2003.
The text of the statement made by the Chief Executive Officer, Mark Lamberti, at
the Annual General Meeting follows:
Introduction
At this time last year I commented in some depth on the challenges created for
retailers by the rapid rise in inflation and cautioned that those challenges
would continue and maybe even increase as inflation declined. In particular I
identified the challenges of measuring real sales and profits, forecasting
accurately and controlling inventory and costs.
Twelve months later and almost five months into the new financial year,
inflation is substantially lower and while our comments of a year ago have
proven to be accurate, I am pleased to report on our progress in adapting to the
current economic realities.
The Current Financial Year
As mentioned on the release of the 2003 results and expanded on in the 2003
Annual Report, the first quarter of the current financial year was expected to
be difficult as a result of the stronger R/$ exchange rate, a dramatic decline
in imported and local producer price inflation, a substantial decline in
consumer inflation and the impact of these factors on inventory valuation,
growth, foreign earnings and competition. We predicted a gradual increase in
sales growth in the second quarter as the anniversary of the September 2002 peak
in inflation was reached and falling interest rates took effect and improved
growth in our second half - January to June 2004.
To date these predictions have proven to be accurate and we are pleased with our
progress, performance, and achievements within this environment.
Since early 2003 each of Massmart"s divisions have devoted considerable effort
to expense control, tight working capital management, the clearance of slow
moving or overpriced merchandise, aggressive merchandising and marketing and the
pursuit of their strategic growth objectives.
In this regard the following are noteworthy achievements for the first 20 weeks
of the current financial year:
-Massdiscounters, our retail discount division comprising Game and Dion, has
traded well through Game South Africa where customer count is up over 15% in
recent weeks, but the stronger exchange rate has depressed performance in
foreign countries, which account for almost 9% of the Division"s sales. Dion"s
growth is subdued relative to some very aggressive new product launches in the
same period last year. Despite these factors, the Division"s sales are in line
with budget. The implementation of new replenishment software earlier this year
has enabled the improvement of merchandise availability to customers at
inventory levels now 15% lower than at the same time last year. Expenses,
debtors and working capital have been well controlled. Game will open a new
store in Kampala in May 2004 extending Massmart"s footprint to nine countries in
sub-Saharan Africa.
-Masswarehouse, our large warehouse store division, comprises Makro and the
recently acquired Builders Warehouse and Tile Warehouse chains. Makro has
enjoyed a strong sales performance, driven mainly by enthusiastic customer
response to the innovation, pricing, and promotion of general merchandise and a
new store. Good expense and working capital control has produced profits well
ahead of the same time last year. Progress is being made with the integration
of the Builders Warehouse and Tile Warehouse chains, which are trading in line
with expectations. The major integration priorities surround the installation
of inventory and accounting systems that comply with Massmart"s standards and
provide a foundation for the envisaged rapid growth of these chains to establish
a national footprint. In this regard new Builders Warehouse and Tile Warehouse
stores will be opened at Strubens Valley on the West Rand towards the end of
this month and in Rustenburg in March. A number of new store opportunities are
under consideration.
-Masscash, our cash and carry wholesale division serving resellers of mainly
basic food to the lower income market, comprises CBW and Jumbo. CBW has made
sound progress with its strategic objectives, but sales have been depressed by
lower inflation or deflation in some categories, a softer lower income consumer
market, and a propensity for independent traders to hold lower levels of
inventory in anticipation of falling prices. In times of high inflation and
rising prices, the independent trader erred towards higher than necessary stock
levels. Today the converse is the case and throughout the supply chain, more
efficient control of inventories is in evidence. New CBW stores have been
successfully opened in Klerksdorp and Kimberly and the division has concluded
the acquisition of a six-store cash & carry chain in Botswana and the
acquisition of another small local cash & carry business still subject to
approval by the Competitions Commission. In addition to the factors referred to
above, Jumbo"s sales growth has been depressed by the closure of the oversized
Isipingo store in August and its profits have been depressed by a 6 day strike
in three stores in October and our decision to trade aggressively to retain
market share. We continue to make progress towards our objective of
establishing Jumbo as a sustainable cash and carry format nationally focussed
predominantly on health and beauty aids to the lower income consumer. A new
store will be opened in Nelspruit in April and the Durban outlet will be
relocated to larger more accessible premises in March.
-Masstrade, the division that houses our Shield and Furnex buying associations,
continues to make progress with integration and new member growth, while
performing ahead of our sales and profit expectations.
-The 15 new or acquired stores referred to in the divisional reports above will
generate estimated additional annual sales in excess of R1.4b in their first
full year.
-Group sales are in line with budget, 14.4% ahead of last year. Comparable
store sales growth is 6.7%.
-This growth must be seen in the context of an estimated decline in Massmart"s
internal average inflation rate on sales, across all divisions and product
categories to 3% over the for the first 20 weeks to last Sunday compared to 14%
in the comparable period last year.
-Sales growth across all divisions improved in late October and has been
particularly strong in the past two weeks.
-In preparation for the important Christmas season and thereafter the Back to
School/Back to Work trading period, inventories throughout the group are
adequate, current and extremely competitively priced. We are confident of our
ability to serve our customers with exciting merchandise of exceptional value.
Prospects
At last years Annual general meeting we predicted a steady, protracted growth of
consumer spending in 2003 and 2004. The interest rate cuts of the past year,
Minister Manual"s recent announcement of a more expansionary budgetary stance
and the early signs of international economic recovery suggest that in the
absence of any major exogenous shocks, the South African consumer economy will
be strong if not buoyant well into 2005.
We are confident that Massmart"s portfolio is well placed to benefit from this
situation and to sustain the Group"s record of sales and profit growth.
We remain dedicated to providing our customers with excellent value, through
innovative aggressive merchandising and a low cost operating philosophy while
mitigating the effects of uncontrollable factors through tight working capital
management and a rapid response to relevant performance metrics.
In the short term we anticipate a good Christmas season with one more trading
day than last year and improving sales and profit growth in the second half as
the difference in inflation declines on the comparable period.
For the year to June 2004, Massmart will perform at the forefront of the sector.
Johannesburg
18 November 2003
Date: 18/11/2003 03:35:23 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
