Massmart expects better times ahead

A big positive is the completion of Massmart's integration with Walmart. "You can't do a transaction of that scale without being distracted," says Pattison.

Also behind Massmart is a five-year, R5bn expansion programme that included entry into food retail and a complete upgrade of its supply chain.

The impact of the changes is reflected in the 52 weeks to December, in which Massmart's adjusted operating profit fell 7%. "I always said 2013 would be a tough year for us," says Pattison. "At the halfway stage I expected a worse outcome."

Also weighing heavily on profits in 2013 was a sea change in consumer electronics products such as cameras and laptops, which are losing ground to smartphones and tablets. "It was a big change for us but we are through it," says Pattison.

Massmart has also resolved problems in its Cambridge food store unit, says Pattison. "We now have 45 Cambridge stores and are targeting 200."

Introduction of food retail into Game stores under the Foodco brand is also progressing well, says Pattison. With 48 Foodcos, Massmart is at the halfway stage of full coverage of Game.

Pattison leaves no doubt about Massmart's big ambitions in food retail. "We are agents of change in the sector," he says. Massmart's food sales rose 20% in 2013 to a Financial Mail estimate of about R12bn, 17% of group sales.

Massmart has equally big ambitions in Africa, where it has a strong presence in 11 countries. "We have been in Africa for 20 years and have critical mass," says Pattison. "It is now a matter of expansion and adding new store formats."

The stage appears set for a rebound in Massmart's profits. On a 20 p:e, down from its peak 44 p:e, the share is worth strong consideration.

Source: Financial Mail