Shoprite Nigeria earned $162 million in revenue for the 12 months ending June 2020, a -6.3% drop from $173 million in 2019. It made a loss after tax of $5 million, compared to a $20 million loss in 2019. The losses are mainly because of currency devaluation in foreign exchange.
Shoprite’s sale of its shares in Nigeria is currently constrained by tax exposures and an old lawsuit for breach of contract.
Shoprite, which has spent 15 years in Nigeria, stated that customer visits for the year declined by 7.4% due to the pandemic lockdowns. The company blames weaker Nigerian operations on Covid-19 induced lockdowns which negatively affected earnings.
In April 2020 the Board approved the Group’s intention to dispose of a majority stake in its Nigeria subsidiary, Retail Supermarkets Nigeria Ltd. The Group embarked on a process to actively identify a strategic partner that will improve the performance and operational efficiencies of the business in Nigeria.
At the reporting date, management had received interest from potential buyers. The due diligence process is currently in progress and expected to be completed by the end of September 2020. Management considers it highly probable that a majority stake or the Group’s entire shareholding will be sold after the reporting date.
The associated assets and liabilities are consequently presented as held for sale in the 2020 statement of financial position.
Pieter Engelbrecht, Chief Executive Officer:
In a challenging year,we are proud to report the Group’s 6.4% increase in sales to a record R156.9 billion. Despite significant COVID-19 lockdown restrictions impacting the Group to varying degrees, our core Supermarkets RSA operating segment increased sales by 8.7%, representing a R9.8 billion increase to R122.4 billion. Our Supermarkets Non-RSA continuing operations’ sales declined by 1.4% in rand terms, however, it increased by 6.6% in constant currency terms.
As evidenced by our results, our core business, Supermarkets RSA, made up of Shoprite, Usave, Checkers and Checkers Hyper, remained focused on their respective customer segments and continued to execute on their value proposition. Pleasingly, our South African supermarket business reported 2.3% volume growth, coupled with 16 months of consecutive market share gains up to and including June 2020. It was, without doubt, a milestone year strategically, with the successful launch of our industry-first digital shopping application Checkers Sixty60 and our Checkers Xtra Savings Rewards Programme, which ended the year with 4.7 million customers registered.
As previously articulated, the Group has embarked on a process to consider the sale of either a majority stake or the entire shareholding in our Nigeria subsidiary and, as required by IFRS 5: Non-current Assets Held for Sale and Discontinued Operations, it is now reported as a discontinued operation.
Overall, it has been a difficult six months for Supermarkets Non-RSA given lockdown regulations which impacted store openings, days and hours of trade, as well as severely restricting transport in some countries, impeding our employees and customers’ ability to get to our stores.
Notwithstanding lockdown regulations resulting in the closure of our furniture and liquor stores, the Group reported a 20 basis point increase in trading margin to 5.3% after adjusting for the impact of hyperinflation. This is a considerable achievement and is a result of excellent sales growth, improved gross margin and commendable expense management, despite significant COVID-19 related costs.
We approached COVID-19 lockdown conservatively given our view of the economic contraction and job losses that would follow in what can only be described as a devastating year for South Africa. In doing so we prioritised two things – the health and safety of our employees and customers and the preservation of jobs for our people.
2020 was a team effort across the business, executing day-to-day operational excellence whilst delivering on a number of strategic initiatives. I am, as such, very proud of Shoprite, our people and these results.