Source: Supermarket & Retailer
Makro and Game owner Massmart says that its losses for the half year ending 29 June 2020 will be slightly lower than previously expected – but it still expects to take a significant hit.
In a sales statement published on Thursday (20 August), Massmart said it expects headline losses for the period to be between 31% and 41% lower than the same period last year.
While this is down significantly, it is a slight improvement from the over 50% decline projected in June. The slight boost has been attributed to lighter lockdown restrictions which came into effect during that month.
The group anticipates a R1 billion to R1.1 billion headline loss for the period, extended from a loss of R800 million recorded in 2019.
“June 2020 marked an improvement in sales in comparison to sales in prior months during the national level 5 and 4 Covid-19 lockdown periods,” the group said.
“Liquor, general merchandise and home improvement sales benefited from pent-up consumer demand, resulting in total sales for June increasing by 0.8% compared to the same period last year.”
However, this was still not enough to improve sales figures from last year. For the 26-week period ended 28 June 2020, Massmart’s total sales amounted to R39.6 billion, representing a decrease of 9.7% on the same period last year, with comparable store sales decreasing by the same level. Internal product inflation is estimated at 3.7%.
Total sales from South African stores for the 26-week period decreased by 10.6%, while comparable sales decreased by 10.5%.
“The Covid-19 national lockdown in South Africa had a significant impact on the trading performance of the Massmart Group. For the 9-week period from 30 March 2020 to 31 May 2020, total sales were R4.6 billion lower than the same period last year,” the group said.
Operating costs attributable to the execution of safety protocols in group stores – in accordance with regulated requirements – amounted to R62 million on a YTD basis, while the group added that other indirect costs related to the pandemic increased by R13 million.
Further, Massmart said its earnings are expected to be adversely affected by the impairment of the carrying value of some store level assets, as well as retrenchment costs relating to the announced closure of all of the Dion Wired and 11 Masscash stores.
A possible sale of the Masscash stores is also currently under review, it said. Mashcash includes: CBW, Jumbo Cash and Carry, Trident, Shield, Cambridge Food and the Rhino Group.
By Paul Burkhardt, Bloomberg/Fin24
Eskom, South Africa’s struggling power utility, expects to report a loss of more than R15 billion in the year to March 31, a record for any state company.
The anticipated loss, revealed by Chief Financial Officer Calib Cassim at a tariff application hearing in Cape Town on Monday, will exacerbate Eskom’s already dire financial position – it is saddled with R419 billion of debt – and increase pressure on the government to help bail it out.
The utility has said its situation is unsustainable and suggested the state take some of its debt onto its own balance sheet, an option not favored by President Cyril Ramaphosa.
Eskom’s loss estimate may be on the conservative side, according to Peter Attard Montalto, the London-based head of capital markets research at Intellidex, a research company.
“We are now expecting a loss closer to R20 billion for the year, despite a reduction in the investment pace,” he said.
The loss of about R15 billion was targeted notwithstanding that Eskom may need to spend more on capital expenditure and maintenance, the utility’s media desk said in an emailed reply to questions.
A turnaround plan is currently being discussed with the government, and will be made public once the process has been concluded, while talks are being held with a number of lenders to secure required funding, it said.
The Department of Public Enterprises, which oversees the utility, didn’t immediately respond to messages seeking comment.
Eskom has proposed that it be allowed to raise tariffs by 15% annually for three years to help it bring its debt under control, but Attard Montalto sees it as unlikely that South Africa’s power regulator will grant its request because it abides by a strict formula when determining how costs should be allowed to feed into prices.
“With Eskom likely to get a lower award than asked for, it is likely to run a significant loss in the next fiscal year as well,” he said.
According to a report by the Financial Mail, Edgars may “effectively run out capital towards the end of 2019”.
After Bain Capital paid R25-billion for the company, the retailer’s balance sheet saw debt of R17.3-billion – an amount that nearly sank the company as the 2008 financial crisis hit.
Since 2012, Edcon has lost an estimated 22% of its clothing and footwear market share where it once held more than 50% of the sector, according to Financial Mail.
Edcon still owes an estimated R7-billion to its lenders.
On a positive note, Stats SA reported that retail sales grew 2.5% for the year to August — almost twice the 1.4% annualised growth reported in July.
The problem is, says the Financial Mail, that Edcon is making a loss, and “someone has to fund the loss”. This falls to the shareholders and the problem under discussion is “how long will they fund these losses”?
Edcon’s most recent set of accounts, for the year to March 2018, saw sales down 4.8% to R24.1-billion. Trading losses ballooned to R1.36-billion from R373-million in 2017. Even though R20-billion in debt was written off in 2016, Edcon incurred R1.53-billion in “financing costs” to repay remaining debt. The three months to June were no better: sales were down 8.8%, and the quarter saw trading losses of R225-million.
The lack of customers are evident at even flagship Edgars stores. “At Melrose Arch, most of the initial space Edgars occupied is boarded up, reinforcing the impression of a gradually disintegrating department store,” reports Financial Mail.
As many as one in five South Africans used to shop at one of the 1 350 stores owned by Edcon. Despite the downward trend, Edgars has remained SA’s largest nonfood retailer, accounting for nearly a third of the clothing and footwear market.
The company employs more than 27 000 staff members, with an indirect effect on a further 100 000 people.
By Sunita Menon for Sunday Times
The South African Revenue Service (SARS) has undershot Treasury’s revised revenue target for 2017-18.
SARS collected R1.216-trillion for 2017-18‚ Finance Minister Nhlanhla Nene said at the announcement of the preliminary revenue results in Pretoria on Tuesday. Tax revenues amounted to R700 million‚ or 0.06%‚ short of the revised estimate announced in the February 2018 budget‚ but still represents growth of R72.4 billion or 6.3% from 2016-17.
Malusi Gigaba‚ who was finance minister at the time‚ announced in the budget in February that tax collection of R1.217-trillion was expected — up slightly from the previous estimate of R1.214-trillion but still much lower than the ambitious R1.265-trillion target announced in 2017.
Treasury still expects a R48.2-billion revenue shortfall for 2017-18‚ which it says reflects weak growth‚ administrative challenges at SARS‚ and increased tax avoidance.
Under the watch of suspended commissioner Tom Moyane‚ SARS has in recent years reported revenue shortfalls on a scale not seen since the 2008 financial crisis.
SARS collected a gross amount of R1.415-trillion in 2017-18‚ which was offset by refunds of R234.3 billion. Personal income tax contributed R462 billion‚ value-added tax (VAT) contributed R297 billion‚ company income tax contributed R220 billion and customs contributed R49 billion.
An improved trend in revenue collection in the latter part of 2017 was offset by a contraction in March‚ because of timing issues and base effects relating to bringing collections forward.
“Up until February we were right on track but the collections in March broke this‚” said SARS head of research Randall Carolissen.
Nene said: “Tax compliance is one of the key determinants of revenue collection. SARS has seen a decline in compliance.
“Ninety percent of the budget comes from revenue collections and forms the basis of our fiscal framework‚” he said.
The 2018 budget demonstrated that growth was expected to be higher and that the government had made significant changes to the fiscal framework‚ including revising the expenditure ceiling downwards‚ Nene said.
The revenue estimated for 2018-19 is R1.345-trillion‚ which represents growth of 10.3%.
On 30 March, 2017, President Jacob Zuma gutted his own cabinet, firing Finance Minister Pravin Gordhan. Overnight, R86-billion was wiped off the South African economy in the banking sector alone.
The latest industrial revolution will not only bring us 3D printing and biotechnology advances, but the loss of 5-million jobs in the next five years, according to a report prepared for the Davos forum of business and political elites.
The South African Post Office (Sapo) is bleeding cash to the tune of about R100-million a month and it made a net loss of R285-million in the first three months of the current financial year, MPs were told this week.
Xerox has announced that it will cut 3 000 jobs company-wide. This comes after bad numbers in the second quarter.
The cuts are part of “a restructuring effort on the services side of the business”.