World of Business | |
World of Business | |
1431 VIEWS | |
![]() |
Monday, August 03, 2020 / 11:38 AM / By Shoprite Holdings Ltd / Header Image Credit: THISDAYLIVE
Trading Environment
This
operational update, inclusive of voluntary earnings per share (EPS) and
headline earnings per share (HEPS) guidance, is more comprehensive than usual
for the purpose of providing shareholders and investors with an understanding
of how the Group has traded during the COVID-19 pandemic.
Despite
difficult circumstances, in a year incorporating the COVID-19 lockdown and
accompanying regulations governing trade, transport and operations, the Group
increased total sale of merchandise for the 52 weeks to 28 June 2020 (including
the impact of hyperinflation in the prior year) by 6.4% to approximately R156.9
billion. Like-for-like growth for the year was 4.4%.
The
Shoprite Group remained committed to meeting the demands of our customers,
whilst focusing on value and remaining solution oriented. This was evidenced,
inter alia, by our digital voucher innovation, ongoing private label
development and the conversion of our Checkers Food Services (CFS) business to
include a consumer facing offering. In addition, the rapid scaling of our
innovative Checkers Sixty60 digital shopping application, which after a test
phase introduction in November 2019, was operational from 87 stores nationwide
by June 2020.
As
a Group, our initiatives pertaining to inventory and capital management began
early in our financial year and carried on unabated despite the nationwide
lockdown. From a liquidity and net debt standpoint, the Group has managed to
meaningfully improve its financial position since reporting in February 2020 on
our first half results. The transaction involving the sale of our distribution
centres to Equites Property Fund Limited is in its final phase of Competition
Commission approval and we anticipate transfer will be affected during the
first half of the 2021 financial year.
Supermarkets
RSA's sales growth (inclusive of liquor) of 8.7% for the year was underpinned
by a strong second half, in which sales grew 7.5%, notwithstanding a high
second half base in the prior year during which fourth quarter sales grew by
9.4%. As a result of lockdown, customer visits for the year declined by 7.4%,
however, average basket spend increased by 18.4%. Superb execution across the
business coupled with considerable efforts from our suppliers resulted in
volume growth of 2.3% for the year. Market share figures insofar as they are
available (up to the end of May 2020) reflect consecutive monthly market
share gains for the past 15 months.
In
equally, if not more difficult circumstances resulting from COVID-19 lockdown
regulations, Supermarkets Non-RSA's second half reported an increase in sales
of 0.1%, resulting in an overall decline in sales of 1.4% for the year but in
constant currency increased by 6.6%.
Nigeria - Discontinued Operations
Following
approaches from various potential investors, and in line with our re-evaluation
of the Group's operating model in Nigeria, the Board has decided to initiate a
formal process to consider the potential sale of all, or a majority stake, in
Retail Supermarkets Nigeria Limited, a subsidiary of Shoprite International
Limited.
As
such, Retail Supermarkets Nigeria Limited may be classified as a discontinued
operation when Shoprite reports its results for the year. Any further updates
will be provided to the market at the appropriate time.
Source: Shoprite
Group Segmental Sales
Segmental
sales growth for the twelve months to June 2020 is as follows:
*
Including the impact of hyperinflation in the comparative period.
The
following information provides context to the Group's sales growth for the
year:
Supermarkets RSA
Supermarkets Non-RSA
Furniture
Other Operating Segments
The
Group's Other operating segments, representing 6.9% of Group sales and
comprising OK Franchise, Transpharm, MediRite Pharmacies, CFS and Computicket,
achieved sales growth of 3.9% for the year. This was achieved despite lockdown
limitations impacting CFS, given that its primary customers (the restaurant and
hospitality industry) were closed during lockdown, as well as Computicket, with
lockdown restrictions having a significant impact on events and travel related
ticketing. Notwithstanding these restrictions, the businesses' ability to adapt
and innovate resulted in second half sales increasing by 3.5%.
COVID-19 Costs
The
Group believes it is appropriate to highlight the COVID-19 costs incurred
pertaining to compliance with national lockdown regulations together with
managing and protecting our employees, customers, stores, inventory and
distribution infrastructure. In this regard, the Group has incurred a net total
of R327.2 million spent across the areas of health and safety, security, mobile
clinics, personal protective equipment, temperature scanners, store and
distribution centre sanitation, employee meals, communication costs and remote
network access for employees. The most significant spend pertained to R116.9
million paid to our employees, inclusive of an appreciation bonus to assist
them with the difficulties we anticipated would accompany the nationwide
lockdown.
Impairment of Non-financial Assets
Impairments
for the year approximate R1.3 billion, mainly in the Supermarkets Non-RSA and
Furniture segments as a result of the deterioration in the current and future
economic outlook. Impairments, net of income tax, form part of items of a
capital nature and as such impact EPS but not HEPS.
Voluntary Trading Update
The
following information is supplied in order to assess the impact of the
impairments raised and the aforementioned COVID-19 costs on the Group's results
for the year.
Furthermore,
due to the potential classification of our Nigerian business as a discontinued
operation, we present continuing operations excluding Nigeria as an
alternative.
For
ease of comparison of the like-for-like relative performance of the operations,
we have included an adjusted basic HEPS which excludes the after tax effect of
exchange rate gains or losses and the impact of hyperinflation. In addition, we
have calculated this metric to exclude once-off COVID-19 costs.
*The
adjusted basic HEPS and continuing operations information provided, constitutes
pro forma financial information in terms of JSE Listing Requirements.
Impact of the Group's pro forma constant currency disclosure
The
Group discloses unaudited constant currency information to indicate the
Supermarkets Non-RSA operating segment performance in terms of sales growth,
excluding the effect of foreign currency fluctuations. To present this
information, current year sales for entities reporting in currencies other than
ZAR are converted from local currency actuals into ZAR at the prior year's
actual average exchange rates on a country-by-country basis.
For
the year ended 28 June 2020, the Angolan economy was assessed not to be
hyperinflationary, whilst it was assessed to be hyperinflationary during the
prior year ended 30 June 2019. As such, in respect of Angola, the constant
currency information has been prepared excluding the impact of hyperinflation.
The
table below sets out the percentage change in sales, based on the actual
results for the financial year, in reported currency and constant currency for
the following major currencies. The total impact on Supermarkets Non-RSA is
also reflected after consolidating all currencies in this segment.
Statement on pro forma financial information
The
pro forma financial information contained in this announcement, which is the
responsibility of the Group's directors, has been prepared for illustrative
purposes only and may not fairly present the results of operations.
The
information contained in this announcement has not been reviewed or reported on
by the Group's external auditors.
Group annual results release and presentation update
As
experienced by many companies, the lockdown has created practical difficulties
in finalising our annual financial statements. Consequently, the Group plans to
publish and present its 2020 year end results on Tuesday, 8 September 2020.
Related Link
Financing Retail Trade in Nigeria - Being a presentation by Olufemi Awoyemi at the CVL International Summit & Honours Award on Retail Trade, Lagos, November 30, 2016.
Related News - Shoprite
1.
Appeal Court Affirms $10m Damages against
Shoprite Group ... Thisday, May 31, 2020 ...
2.
AIC gets $10 million
damages from Shoprite for contract breach Guardian, Jan
16, 2018
3.
Shoprite,
Resilient plan 10 shopping malls for Nigeria
4.
Shoprite African
stores double profit
5.
Shoprite sells out
to Brait for R13bn
6.
Shoprite Opens at
The Palms
7.
Shoprite to launch
in Nigeria
Related News - World of Business