Massmart in talks to sell 14 Game stores in east and west Africa
MASSMART said on Friday that it had put up 14 Game stores in east and west African for sale to focus on its core strengths as the group’s losses narrowed in the half-year to the end of June.
Massmart has begun a formal process to divest of five Game stores in Nigeria, four in Ghana, three in Kenya, one in Uganda and one in Tanzania.
During the group’s virtual financial results presentation on Friday, chief executive Mitchell Slape said the company was in discussion with potential purchasers to take over the stores.
“We have reached the conclusion that the performance and complexity in running the 14 stores in five markets in east and west Africa is something, frankly, that we needed to address,” said Slape.
The decision to sell Game stores in east and west Africa comes a year after a review of the group’s portfolio outside of the Southern African Development Community.
Currency devaluations, low commodity prices and high inflation saw Africa’s retail giant Shoprite last week announce plans to exit its Uganda and Madagascar markets.
As part of its turnaround strategy, Massmart has sold its Dion Wired stores, and a week ago announced the sale of Cambridge Food, Rhino and Massfresh, as well as 12 Cash and Carry stores to Shoprite. The deal, which was expected to close early next year, was subject to regulatory approvals.
“What is encouraging is that the BEE ownership structure is going to improve with this transaction. I think the most important reason why I think the regulatory process should move with speed is that we have 7 000 employees and jobs that sit in those businesses. We are confident that in the management of a business that is set up to focus on food, those jobs are going to be saved. That is a key element of the transaction,” said Slape.
Massmart recognised an impairment expense of R597.7 million, the majority of which related to Game’s SAP system software asset.
The group said Game’s total sales of R7.6 billion for the 26 weeks to June 27 were 8.7 percent lower than the same period last year, while comparable store sales contracted by 6.9 percent.
Group sales of R41.3bn for the 26 weeks to June 27 represented total growth of 4.4 percent, and comparable store sales growth of 4.8 percent.
The gross margin increased by 43 basis points, and expenses decreased by 1.8 percent resulting in a trading profit of R444.2m, an increase of 266.6 percent from the previous year.
The group incurred a net loss of R1.072bn, an improvement of 8.1 percent from the prior period loss of R1.166bn. The headline loss was
R645.4m, a 40.8 percent improvement from the headline loss of R1.09bn in the prior period.
Massmart withheld a dividend payment because of the headline loss and the need to preserve cash “as a result of the subdued economic outlook, as well as the continued evaluation of the civil unrest impact”.