Full integrated annual report - African Bank - Investoreports

66
Retail business unit
Results at a glance continued
Gross margin increased from 44,0% in 2010 to 44,2% for the current year, despite the challenging trading
environment. The improvement was driven mainly by enhanced logistics, improved buying and better
promotions campaign management.
Total operating costs before value share recoveries increased by 4% to R3 096 million. Cost control remained
a strong focus, with further savings achieved across all areas of the business, notwithstanding certain upfront
costs in terms of changes to the logistics and distribution network. This included accelerating the voluntary
retrenchment of staff impacted by these changes.
Store effi ciencies continued to improve, with sales per square metre increasing by 7% and sales per
employee growing by 22%. The furniture credit sales mix increased from 60% to 64% of total sales and credit
merchandise sales grew 13% to R3,0 billion (2010: R2,7 billion). Signifi cantly, the store infrastructure provided
the opportunity for the additional R1,7 billion in non-furniture related credit sales for African Bank.
Looking ahead
Trading conditions are expected to remain muted. The recent decline in the value of the Rand has not caused
immediate pressure, but more sustained weakness could cause an increase in durable goods infl ation and
hence consumer pressure and reduced margins and will require caution in respect of the management of
imports.
Despite the cost pressures on consumers, growth in consumption is expected to remain low but positive with
some relief from a low interest rate environment as well as the continued higher wage and salary settlements.
The ongoing development of the footprint, further category development in bedding, lounge, cellular phones
and electrical ranges, and the expansion of the group’s insurance offering, are expected to provide impetus
to growth in the year ahead.
Integrated report 2011 | African Bank Investments Limited