Wrap Text
Reviewed consolidated results for the 26 weeks ended 23 December 2012
Massmart Holdings Limited
("the Company" or "the Group")
JSE code MSM
ISIN ZAE000152617
Company registration number
1940/014066/06
REVIEWED CONSOLIDATED RESULTS FOR THE 26 WEEKS ENDED 23 DECEMBER 2012
The Group is the second largest distributor of consumer goods in Africa,
the leading retailer of general merchandise, liquor and home improvement
equipment and supplies, and the leading wholesaler of basic foods.
Massmart is a managed portfolio of four divisions, each focused
on high-volume, low-margin, low-cost distribution of mainly branded
consumer goods for cash, in 12 countries in sub-Saharan Africa
comprising 359 stores.
Overview
For the 26 weeks ended 23 December 2012, Massmart's total sales increased
by 14.7% over the prior comparative period, while operating profit and headline
earnings declined by 17.7% and 21.2% respectively. Excluding costs relating
to the Walmart transaction and integration, which include the additional
R140 million related to the Competition Appeal Court ruling, and foreign
exchange movements, operating profit increased by 6.1% and headline earnings
by 5.8%.
Comparable sales increased by 7.3% and period-weighted product inflation was
3.7% reflecting positive volume growth for the Group. There was evidence of
slower growth amongst middle- and lower-income customers towards the end
of the period.
Massbuild and Masscash performed well, growing profit ahead of sales growth;
Masswarehouse increased profits, although at a rate below sales growth, as they
absorbed the opening costs of two new Makro stores; and Massdiscounters'
profits declined as comparable sales increased by only 2.6%.
Cash flow from operations was strong at R2.8 billion, although the Group is
slightly over-stocked due to the sales slow-down in Massdiscounters.
With the Walmart transaction and integration now behind us, the Group is
focused on operational disciplines, strategic implementation and extracting
returns from the investments made over the past several years in Supply Chain
and Food Retail.
Environment
During the third quarter of calendar 2012 we could only see the effect of the
South African labour unrest in our sales in the affected towns. We did however
notice a marked slow-down in sales from November, which was only interrupted
for the last two weeks of Christmas trade. We assume the economic effect of that
unrest started flowing into the broader economy in the fourth quarter.
South African inflation has remained relatively benign, despite large increases
in fuel and energy costs, which will likely eventually result in higher levels of
inflation. In our product categories, inflation remains low at 3.7%, suggesting
that national inflation occurred at higher levels outside that for consumer goods.
Our Food and Liquor inflation increased to 6.8% but has since paused and
may now possibly decline. The weaker Rand is likely to bring further inflation in
General Merchandise and Home Improvement.
As consumer expenditure slowed, we saw increased discounting amongst most
retailers and the inevitable fight to hold or gain market share, which is positive
for consumers.
Examining both our own recent internal sales trends and other listed retailers'
sales updates, it seems that upper-end consumers are in better shape than
middle- and lower-end consumers. The middle-income customers are impacted
by inflation and possibly over-extended credit, while lower-income customers are
affected by inflation and possibly the labour unrest.
Divisional operational review
Massdiscounters
Comprises the 114-store General Merchandise discounter and Food retailer
Game, which trades in South Africa, Botswana, Ghana, Lesotho, Malawi,
Mozambique, Namibia, Nigeria, Tanzania, Uganda and Zambia; and the
19-store Hi-tech retailer DionWired.
Divisional comparable sales increased by 2.6% with product inflation of 0.8%.
Total sales increased by 7.7% but disappointingly trading profit before tax
decreased by 14.8% as Game South Africa's comparable sales growth slowed
to 1.0%. Game Africa and DionWired performed well however, with profit
increasing well ahead of sales in both businesses. Game Africa's total Rand
sales increased by 8.7% and by 9.2% in local currencies.
Foodco continues to expand with 27 stores now in the format (including five
in Africa), and is performing at or above expectations. Significantly the final
and Durban-based Regional Distribution Centre (RDC) was commissioned which
now completes the national network. Whilst these facilities are expensive in the
short-term, they provide a significant opportunity for positive operational and
trading leverage in the medium- to long-term.
In January 2013, Massdiscounters' CEO, Jan Potgieter, resigned. Jan was with
Massdiscounters for eight years, six of them as CEO and we thank him for his
contribution to the growth and development of the business. Robin Wright is
acting CEO.
Seven Game stores and one DionWired store were opened, increasing space by
23,952 m2 (5.8%).
26 weeks 26 weeks
December December Period
2012 % of 2011 % of %
Rm (Reviewed) sales (Reviewed) sales growth
Sales 36,122.6 31,492.2 14.7
Massdiscounters 8,422.1 7,819.2 7.7
Masswarehouse 9,630.2 7,799.9 23.5
Massbuild 4,663.1 4,240.1 10.0
Masscash 13,407.2 11,633.0 15.3
Trading profit
before interest
and tax 1,427.1 4.0 1,335.7 4.2 6.8
Massdiscounters 426.5 5.1 498.3 6.4 (14.4)
Masswarehouse 518.1 5.4 446.2 5.7 16.1
Massbuild 271.0 5.8 215.8 5.1 25.6
Masscash 211.5 1.6 175.4 1.5 20.6
Trading profit
before tax 1,498.5 4.1 1,424.7 4.5 5.2
Massdiscounters 449.6 5.3 528.0 6.8 (14.8)
Masswarehouse 535.1 5.6 474.7 6.1 12.7
Massbuild 292.6 6.3 236.8 5.6 23.6
Masscash 221.2 1.6 185.2 1.6 19.4
Trading profit excludes several items. A detailed reconciliation between trading and
operating profit can be found below the Condensed Statement of Cash Flows table.
Masswarehouse
Comprises the 18-store Makro warehouse-club trading in Food, General
Merchandise and Liquor in South Africa; and Fruitspot.
Divisional comparable sales increased by 8.6% with product inflation of 3.4%.
Total sales grew by 23.5%, boosted by the five new store openings since
September 2011, and trading profit before tax increased by 12.7%. Despite the
anticipated higher cost levels from the new stores, including pre-opening costs
of R28.2 million (2011: R34.8 million), Makro is trading strongly and remains
well managed. Growth in trading profit before interest for Makro's comparable
stores was in line with their rate of sales growth for the period.
In September 2012, Doug Jones became MD of Masswarehouse following Kevin
Vyvyan-Day's move to Cambridge in Masscash.
Two stores were opened, increasing space by 24,847 m² (17.0%).
Massbuild
Comprises 85 stores, trading in DIY, Home Improvement and Builders Hardware,
under the Builders Warehouse, Builders Express and Builders Trade Depot
brands in South Africa and Botswana.
Divisional comparable sales increased by 9.7% with estimated product
inflation of 2.7%. Total sales increased by 10.0% and trading profit before
tax increased by 23.6%. The strong financial performance reflects the superb
efforts of management and employees to: improve customer service; optimise
merchandise levels; merchandise innovatively; and control expenses.
Builders Warehouse and Builders Express continued to transform the South
African Home Improvement market. Builders Trade Depot's performance
improved but sales remain soft given the tepid South African residential housing
market.
In its second year of operation, Builders Warehouse Gaborone is performing
ahead of expectations. During 2013 and 2014, we hope to open two stores
in Mozambique, one in Zambia and a second in Botswana. In April 2013, we
will open our national Distribution Centre (DC) to the north of Johannesburg.
As we have seen with other DCs, in the first year of operation there is a significant
adverse expense impact particularly from the lease-smoothing charge.
One Builders Express store was opened resulting in net trading space increasing
by 2,084 m2 (0.5%).
Masscash
Comprises 79 Wholesale Cash and Carry and 44 Retail Cash and Carry stores
trading in South Africa, Botswana, Lesotho, Namibia and Swaziland; and Shield,
a voluntary buying association.
Divisional comparable sales increased by 8.6% with estimated product inflation
of 6.4%. Total sales increased by 15.3%, bolstered by the Rhino acquisition in
March 2012, and trading profit before tax increased by 19.4%.
This Division traded hard in an increasingly competitive environment. Profitability
continues to improve in the Wholesale Division, and in the Retail Division we are
beginning to see the positive results of our investments in the prior year in new
stores, structures and DC capacity.
Rhino, acquired in March 2012 and now comprising 18 stores, continues to
trade well.
In September 2012, Kevin Vyvyan-Day became CEO of Cambridge within
Masscash.
One Retail Store and three Wholesale stores were acquired and two new Retail
stores were opened, whilst five Wholesale stores and one Retail store were
closed. Net trading space increased by 12,462 m² (3.3%).
26 weeks 52 weeks 52 weeks 52 weeks
Comparable Estimated December December Year June
% sales % sales 2012 % of 2011 % of % 2012 % of
growth inflation (Reviewed) sales (Reviewed) sales growth (Audited) sales
Sales 7.3 3.7 65,839.5 57,066.5 15.4 61,209.1
Massdiscounters 2.6 0.8 15,408.6 14,157.8 8.8 14,805.7
Masswarehouse 8.6 3.4 17,200.9 13,929.5 23.5 15,370.6
Massbuild 9.7 2.7 8,561.0 7,728.7 10.8 8,138.0
Masscash 8.6 6.4 24,669.0 21,250.5 16.1 22,894.8
Trading profit
before interest
and tax 2,356.7 3.6 2,233.9 3.9 5.5 2,265.3 3.7
Massdiscounters 678.0 4.4 768.7 5.4 (11.8) 749.8 5.1
Masswarehouse 916.4 5.3 798.1 5.7 14.8 844.5 5.5
Massbuild 445.0 5.2 341.4 4.4 30.3 389.8 4.8
Masscash 317.3 1.3 325.7 1.5 (2.6) 281.2 1.2
Trading profit
before tax 2,530.6 3.8 2,400.7 4.2 5.4 2,456.8 4.0
Massdiscounters 734.6 4.8 823.4 5.8 (10.8) 813.0 5.5
Masswarehouse 966.7 5.6 855.5 6.1 13.0 906.3 5.9
Massbuild 491.1 5.7 381.7 4.9 28.7 435.3 5.3
Masscash 338.2 1.4 340.1 1.6 (0.6) 302.2 1.3
Trading profit excludes several items. A detailed reconciliation between trading and operating profit can be found
below the Condensed Statement of Cash Flows table.
Financial review
Statement of comprehensive income
Total Group sales growth for the 26 weeks ended 23 December 2012 was
14.7% with comparable sales growth of 7.3%. Sales in our African businesses
represented 7.3% of total sales and increased by 9.5% in Rands and 9.0% in
local currencies.
The Group's product inflation was 3.7% for the period. General Merchandise
moved into inflation of 0.8%, while Food and Liquor's inflation increased to
6.8% and Home Improvement inflation increased to 2.7%.
During the period, six stores were closed, 13 stores opened and four acquired,
resulting in a total of 359 stores at December 2012. Net trading space increased
by 4.7% to a total of 1,413,573m2.
The Group's gross margin of 18.27% is higher than that of the prior period of
17.70%. This is from improved gross margin performances in Massbuild and
Makro and a higher contribution from Game Africa.
Due to the new stores, specifically the Makro stores, the investment in the
Retail Food supply chain and infrastructure, and IT upgrades across most
Divisions, total expenses (excluding foreign exchange movements and Walmart
costs) increased by 23.2%. The impact of the Group's continued investment
in capacity and growth can be seen in the 24.3% higher depreciation and
amortisation charge and 23.9% increase in occupancy costs. Comparable
expenses increased by 11.0%.
Included in operating profit are net realised and unrealised foreign exchange
losses of R76.7 million (2011: R82.4 million profit). Whilst the Rand closed
stronger than the Group's African basket of currencies, the gains were
overshadowed by the losses of the weaker Malawian Kwacha.
Excluding forex and Walmart costs, earnings before interest, tax, depreciation
and amortisation (EBITDA) of R1.8 billion increased over the prior period by
9.6%.
Direct costs incurred in connection with the Walmart integration and acquisition
were R205.2 million, comprising R65 million for integration activities and
R140 million being the increase in the Supplier Development Fund required by
the judgement of the Competition Appeal Court. The Walmart integration related
costs will normalise over the next 12 months to approximately R50.0 million
annually.
Net interest paid of R60.4 million increased as a result of the Group's capital
expenditure programme and higher working capital levels. At R1.78 billion, the
Group's average net borrowings are 32.8% higher than the prior period's figure
of R1.34 billion.
The Group's effective tax rate of 32.1% (2011: 31.2%) should normalise at
30.0%.
The minority interests comprise store managers' holdings in Masscash stores
and minorities in acquired Masscash businesses. This period's figure is lower
due to the prior year sale of Kawena and the acquisition of several store
managers' minority interests in Masscash Wholesale.
Headline earnings decreased by 21.2% and headline EPS decreased by 21.6%.
Adjusting for the effect of the forex and Walmart costs in both periods however,
shows an increase of 5.8% and 5.3%, respectively.
Statement of financial position
Working capital was managed effectively in Massbuild and Masscash, while
Massdiscounters is over-stocked given the lower sales in Game SA and Makro is
carrying higher stock levels from its new stores. Days in inventory at December
2012 were 59.9 (2011: 59.0 days) for the Group.
The net book value of property, plant and equipment increased by 19.5%
compared to December 2011. This was largely the result of the new stores and
the new Massdiscounters' RDC which opened in July 2012.
The Group's gearing ratio (debt:equity) increased to 37.7% (2011: 28.8%) due
to the funding of the strategic investments and the investment in working capital.
The annual rolling return on equity was 21.9% at December 2012 (2011: 24.4%).
Excluding the Walmart costs and forex, this figure was 31.2% (2011: 32.3%).
Statement of cash flows
Operating cash generated of R2.82 billion was 21.3% lower than the prior
period, partly reflecting the high level of over-stocked inventory. Total capital
expenditure of R735.9 million is 2.2% lower than the prior period, and
comprises R333.3 million on replacement and R402.6 million on expansionary
expenditure.
Change in financial year-end and reviewed financial
information
To align with Walmart, with effect from this reporting cycle Massmart has
changed its financial year from end of June to end of December. To assist with
future comparisons, reviewed 52-week financial statements are included for the
periods ended December 2011 and 2012.
Acquisition of Makro stores
With effect from the end of January 2013, Massmart acquired control of seven
Makro stores that had previously been lease-held. The cash consideration paid
for control amounted to R575 million. We expect that the income statement
effect of this transaction will be neutral in 2013 but then positive with significant
annual cashflow benefits.
Highlights
UP BY 14.7%
R36,123m
SALES
2011: R31,492m
UP BY 6.1%
R1,407m
OPERATING PROFIT
BEFORE WALMART
COSTS AND FOREX
2011: R1,326m
DOWN BY 21.3%
R2,818m
CASH GENERATED
FROM OPERATIONS
2011: R3,580m
UP BY 5.8%
R917m
HEADLINE EARNINGS
BEFORE WALMART
COSTS AND FOREX
2011: R866m
UP BY 5.3%
424 cents
HEADLINE EPS
BEFORE WALMART
COSTS AND FOREX
2011: 402 cents
UP BY 9.1%
275 cents
DIVIDEND
PER SHARE
2011: 252 cents
Strategic agenda
The legal aspects of the Walmart transaction and the integration activities
are complete and we are now able to focus on improving the operations and
implementing our Strategic Agenda.
We are focused on "Saving you money, so you can live better", and becoming
Africa's most trusted retailer.
The first phase of our Group-wide supply chain investments will be finished
by the end of 2013, when we will have completed the network of three
Massdiscounters' RDCs, three Makro Regional Warehouses, one Cambridge DC
and one Massbuild Central DC. Alongside investments in skills and systems,
this completes the reengineering of Massmart's supply chain. The benefits of
the investment should be visible in the next five to ten years as the network is
optimised.
We have also completed the first phase of our investments in Retail Food in
Cambridge, Game Foodco, Makro Fresh and Saverite. We have successfully
established ourselves into the Food Retail market with an estimated presence
of R10 billion. From this base the Food Retail business should grow in size and
profitability, from organic growth and conversions.
We continue to expand Game and Builders Warehouse into Africa. Several
new sites have been approved in existing African markets and Game sites have
also been approved in Angola and Kenya, both of which are new markets for
Massmart. The Africa Food Retail strategy remains in the planning phase.
Despite the new targets in BBBEE Codes of Good Practice and the dilution of our
BBBEE transaction as part of the Walmart transaction, we have still maintained
a Level 4 status.
Walmart transaction and integration
In this period the Competition Appeal Court set down the final ruling of the
Walmart transaction. There were two material adjustments being: the increase
in the Supplier Development Fund from R100 million to R240 million; and the
re-employment of the 503 previously retrenched employees.
The employees impacted by the retrenchment at Game were all offered
re-instatement. Of the 316 employees who responded to this offer, 237 have
been re-instated and the remaining 79 have received various other benefits.
The Supplier Development Fund is operational and has already made significant
progress in wine, paint and chemical manufacture, and fresh produce.
The Walmart transaction costs are behind us and integration costs are now
included as part of our normal operating costs.
Prospects
For the eight weeks to 17 February 2013, total sales increased by 11.4%
and comparable sales increased by 5.7%, continuing the trends experienced
towards the close of the financial year.
The South African consumer environment remains difficult and we are
concerned that sales growth may be under some pressure for the remainder
of the financial year. It is our objective that if the current sales trends continue,
growth in the Group's trading profit (excluding foreign exchange movements and
Walmart costs) may equal sales growth.
Value extracted from integration will be invested in price.
The financial information on which this outlook statement is based has not been
reviewed or reported on by the Company's external auditors.
Distribution and dividend policy
Massmart's previous dividend policy was to declare and pay an interim and
final cash dividend representing a 1.70 times dividend cover. In light of the
new Dividend Tax introduced with effect from 1 April 2012 ("Dividend Tax"),
the Group's dividend cover has been adjusted to reflect the benefit to the
Company of no longer paying the Secondary Tax on Companies ("STC") on the
net dividend.
Consequently, Massmart's new dividend policy is to declare and pay an interim
and final cash dividend representing a 1.55 times dividend cover unless
circumstances dictate otherwise. There were no STC credits available for use
as part of this declaration. The number of shares in issue at the date of this
declaration is 216,910,195.
Notice is hereby given that a gross final cash dividend of 275.00 cents per
share in respect of the period ended 23 December 2012, has been declared.
The dividend has been declared out of income reserves and will be subject to
the Dividend Tax rate of 15% which will result in a net dividend of 233.75 cents
per share to those shareholders who are not exempt from paying dividend tax.
Massmart's tax reference number is 9900/196/71/9.
The salient dates relating to the payment of the dividend are as follows:
Last day to trade cum dividend on the JSE Thursday, 14 March 2013
First trading day ex dividend on the JSE Friday, 15 March 2013
Record date Friday, 22 March 2013
Payment date Monday, 25 March 2013
Share certificates may not be dematerialised or rematerialised between Friday,
15 March 2013 and Friday, 22 March 2013, both days inclusive.
Massmart shareholders who hold Massmart ordinary shares in certificated
form ("certificated shareholders") should note that dividends will be paid by
cheque and by means of an electronic funds transfer ("EFT") method. Where the
dividend payable to a particular certificated shareholder is less than R100, the
dividend will be paid by EFT only to such certificated shareholder.
Certificated shareholders who do not have access to any EFT facilities are
advised to contact the Company's transfer secretaries, Computershare Investor
Services at Ground Floor, 70 Marshall Street, Johannesburg, 2001, PO Box
61051, Marshalltown 2107, (011) 370 5000, 086 110 09818, in order to make
the necessary arrangements to take delivery of the proceeds of their dividend.
Massmart shareholders who hold Massmart ordinary shares in dematerialised
form will have their accounts held at their CSDP or broker credited electronically
with the proceeds of their dividend.
On behalf of the Board
Grant Pattison Ilan Zwarenstein
Chief Executive Officer Financial Director
27 February 2013
Condensed income statement
26 weeks 26 weeks 52 weeks 52 weeks 52 weeks
December December December December June
2012 2011 2012 2011 2012
Rm (Reviewed) (Reviewed) % change (Reviewed) (Reviewed) % change (Audited)
Revenue 36,234.5 31,547.1 14.9 66,050.3 57,177.8 15.5 61,362.9
Sales 36,122.6 31,492.2 14.7 65,839.5 57,066.5 15.4 61,209.1
Cost of sales (29,523.2) (25,917.3) (13.9) (53,563.0) (46,767.6) (14.5) (49,957.1)
Gross profit 6,599.4 5,574.9 18.4 12,276.5 10,298.9 19.2 11,252.0
Other income 111.9 54.9 103.8 210.8 111.3 89.4 153.8
Depreciation and amortisation (342.6) (275.6) (24.3) (661.2) (530.4) (24.7) (594.2)
Impairment of assets (note 3) (5.4) (0.3) (21.6) (10.3) (109.7) (16.5)
Employment costs (2,487.5) (2,137.1) (16.4) (4,686.5) (4,066.9) (15.2) (4,336.1)
Occupancy costs (1,225.6) (989.0) (23.9) (2,296.5) (1,826.6) (25.7) (2,059.9)
Foreign exchange profit/(loss) (76.7) 82.4 (231.6) 89.6 (358.5) (72.5)
Other operating costs (1,243.2) (902.2) (37.8) (2,533.0) (1,783.9) (42.0) (2,192.0)
Operating profit before
Walmart costs 1,330.3 1,408.0 (5.5) 2,056.9 2,281.7 (9.9) 2,134.6
Walmart transaction, integration
and related costs (note 5) (205.2) (41.7) (392.1) (348.9) (450.5) 22.6 (185.4)
Loss on disposal of
Makro Zimbabwe (38.6) 100.0
Operating profit 1,125.1 1,366.3 (17.7) 1,708.0 1,792.6 (4.7) 1,949.2
Finance costs (106.0) (72.5) (46.2) (217.4) (154.6) (40.6) (183.9)
Finance income 45.6 24.4 86.9 90.0 40.0 125.0 68.8
Net finance costs (60.4) (48.1) (25.6) (127.4) (114.6) (11.2) (115.1)
Profit before taxation 1,064.7 1,318.2 (19.2) 1,580.6 1,678.0 (5.8) 1,834.1
Taxation (342.3) (410.9) 16.7 (549.6) (633.7) 13.3 (618.2)
Profit for the period 722.4 907.3 (20.4) 1,031.0 1,044.3 (1.3) 1,215.9
Profit attributable to:
Owners of the parent 691.8 893.0 972.3 993.2 1,173.5
Preference shareholders (note 6) 1.4 2.5 5.0 24.0 6.1
Non-controlling interests 29.2 11.8 53.7 27.1 36.3
Profit for the period 722.4 907.3 (20.4) 1,031.0 1,044.3 (1.3) 1,215.9
Basic EPS (cents) 319.7 414.9 (22.9) 449.8 472.9 (4.9) 544.4
Diluted basic EPS (cents) 315.4 406.3 (22.4) 443.2 456.2 (2.8) 532.7
Dividend (cents):
Interim 252.0 (100.0) 252.0 (100.0) 252.0
Final 275.0 100.0 421.0 134.0 214.2 146.0
Total 275.0 252.0 9.1 421.0 386.0 9.1 398.0
Headline earnings
Reconciliation of net profit for the
period to headline earnings
Net profit attributable to
owners of the parent 691.8 893.0 972.3 993.2 1 173.5
Impairment of assets (note 3) 5.4 0.3 21.6 10.3 16.5
Loss/(Profit) on disposal
of fixed assets 6.2 2.4 16.4 (1.8) 12.6
Loss on disposal of business 4.4 16.5 34.9 12.1
Fair value adjustment on
assets classified as
held for sale 0.4 8.3 7.9
Total tax effects of adjustments (2.7) (0.5) (8.1) 1.0 (5.9)
Headline earnings 705.5 895.2 (21.2) 1,027.0 1,037.6 (1.0) 1,216.7
Headline earnings before
Walmart costs and foreign
exchange (taxed) 916.5 865.9 5.8 1,466.4 1,373.9 6.7 1,415.8
Headline EPS (cents) 326.0 416.0 (21.6) 475.2 494.0 (3.8) 564.5
Headline EPS before Walmart
Costs and foreign exchange
(taxed) (cents) 423.5 402.3 5.3 678.5 654.1 3.7 656.9
Diluted headline EPS (cents) 321.7 407.3 (21.0) 468.1 476.6 (1.8) 552.3
Diluted headline EPS before
Walmart costs and foreign
exchange (taxed) (cents) 417.9 394.0 6.1 668.4 631.1 5.9 642.7
Statement of comprehensive income
26 weeks 26 weeks 52 weeks 52 weeks 52 weeks
December December December December June
2012 2011 2012 2011 2012
Rm (Reviewed) (Reviewed) % change (Reviewed) (Reviewed) % change (Audited)
Profit for the period 722.4 907.3 1,031.0 1,044.3 1,215.9
Foreign currency translation reserve 25.1 86.7 6.0 95.2 67.6
Cash flow hedges (5.8) 16.2 (10.7) 44.6 11.3
Revaluation of listed shares 1.6 0.1 1.7 0.1 0.2
Income tax relating to components
of other comprehensive income 1.6 (4.5) 2.9 (12.5) (3.2)
Other comprehensive income
for the period, net of tax 22.5 98.5 (0.1) 127.4 75.9
Total comprehensive income
for the period 744.9 1,005.8 (25.9) 1,030.9 1,171.7 (12.0) 1,291.8
Total comprehensive income
attributable to:
Owners of the parent 714.3 991.5 972.2 1,120.6 1,249.4
Preference shareholders (note 6) 1.4 2.5 5.0 24.0 6.1
Non-controlling interests 29.2 11.8 53.7 27.1 36.3
Total comprehensive income
for the period 744.9 1,005.8 (25.9) 1,030.9 1,171.7 (12.0) 1,291.8
Condensed statement of financial position
December December June
2012 2011 2012
Rm (Reviewed) (Reviewed) % change (Audited)
ASSETS
Non-current assets 7,595.1 6,291.6 7,175.8
Property, plant and equipment 3,868.2 3,236.1 19.5 3,520.6
Goodwill and other intangible assets 2,945.3 2,348.9 2,868.5
Investments and loans 385.3 458.1 456.5
Deferred taxation 396.3 248.5 330.2
Current assets 15,422.2 14,972.3 11,895.9
Inventories 9,691.5 8,385.2 15.6 7,615.6
Trade, other receivables and prepayments 3,681.7 3,522.5 4.5 2,953.9
Taxation 17.0 54.4 21.0
Cash and bank balances 2,032.0 3,010.2 1,305.4
Non-current assets classified as held for sale 2.5 103.2
Total 23,019.8 21,263.9 19,174.9
EQUITY AND LIABILITIES
Total equity 4,915.3 4,864.6 4,564.8
Equity attributable to equity holders of the parent 4,739.7 4,658.1 1.8 4,356.9
Non-controlling interests 175.6 206.5 207.9
Non-current liabilities 1,183.4 928.9 1,486.0
Non-current liabilities: interest-bearing 671.8 376.8 852.7
Other non-current liabilities and provisions (note 7) 474.9 527.7 604.8
Deferred taxation 36.7 24.4 28.5
Current liabilities 16,921.1 15,470.4 12,982.2
Trade, other payables and provisions 15,669.3 14,554.7 7.7 11,441.7
Taxation 298.5 235.7 259.0
Bank overdrafts 392.1 160.0 632.6
Short-term borrowings 561.2 520.0 648.9
Liabilities associated to assets classified as held for sale 141.9
Total 23,019.8 21,263.9 19,174.9
Condensed statement of cash flows
26 weeks 26 weeks 52 weeks 52 weeks 52 weeks
December December December December June
2012 2011 2012 2011 2012
Rm (Reviewed) (Reviewed) (Reviewed) (Reviewed) (Audited)
Operating cash before working capital movements 1,707.5 1,640.3 2,681.8 2,536.8 2,614.6
Working capital movements 1,110.0 1,939.4 (775.5) 450.3 53.9
Cash generated from operations 2,817.5 3,579.7 1,906.3 2,987.1 2,668.5
Taxation paid (369.1) (363.2) (601.5) (691.4) (595.6)
Net interest paid (60.4) (48.1) (127.4) (114.6) (115.1)
Investment income 3.8 0.1 18.4 3.9
Dividends paid (317.0) (291.1) (864.7) (826.7) (838.8)
Cash inflow from operating activities 2,071.0 2,881.1 312.8 1,372.8 1,122.9
Net investment to maintain operations (333.3) (324.3) (629.4) (413.6) (620.4)
Investment to expand operations (402.6) (427.9) (685.1) (920.8) (710.4)
Other net investing activities (25.3) 47.7 (350.2) 9.0 (277.2)
Cash outflow from investing activities (761.2) (704.5) (1,664.7) (1,325.4) (1,608.0)
Cash (outflow)/inflow from financing activities (367.8) (157.5) 135.6 707.7 345.9
Net increase/(decrease) in cash and cash equivalents 942.0 2,019.1 (1,216.3) 755.1 (139.2)
Foreign exchange profit 25.1 86.7 6.0 95.2 67.6
Opening cash and cash equivalents 672.8 744.4 2,850.2 1,999.9 744.4
Closing cash and cash equivalents 1,639.9 2,850.2 1,639.9 2,850.2 672.8
Reconciliation between trading and operating profit
26 weeks 26 weeks 52 weeks 52 weeks 52 weeks
December December December December June
2012 2011 2012 2011 2012
Rm (Reviewed) (Reviewed) (Reviewed) (Reviewed) (Audited)
Profit before interest and taxation
Trading profit before interest and taxation 1,427.1 1,335.7 2,356.7 2,233.9 2,265.3
Asset impairments (note 3) (5.4) (0.3) (21.6) (10.3) (16.5)
Walmart transaction, integration and related costs (note 5) (205.2) (41.7) (348.9) (450.5) (185.4)
Loss on disposal of business (4.4) (16.5) (38.6) (12.1)
Fair-value adjustment on assets classified as held for sale (0.4) (8.3) (7.9)
BEE transaction IFRS 2 charge (note 4) (9.9) (9.8) (21.8) (31.5) (21.7)
Foreign exchange loss (76.7) 82.4 (231.6) 89.6 (72.5)
Operating profit before interest and taxation 1,125.1 1,366.3 1,708.0 1,792.6 1,949.2
Profit before taxation
Trading profit before taxation 1,498.5 1,424.7 2,530.6 2,400.7 2,456.8
Corporate net interest (131.8) (137.1) (301.3) (281.4) (306.6)
Asset impairments (note 3) (5.4) (0.3) (21.6) (10.3) (16.5)
Walmart transaction, integration and related costs (note 5) (205.2) (41.7) (348.9) (450.5) (185.4)
Loss on disposal of business (4.4) (16.5) (38.6) (12.1)
Fair-value adjustment on assets classified as held for sale (0.4) (8.3) (7.9)
BEE transaction IFRS 2 charge (note 4) (9.9) (9.8) (21.8) (31.5) (21.7)
Foreign exchange loss (76.7) 82.4 (231.6) 89.6 (72.5)
Operating profit before taxation 1,064.7 1,318.2 1,580.6 1,678.0 1,834.1
Condensed statement of changes in equity
Equity
attributable
Ordinary to equity Non-
share Share General Retained holders of the controlling
Rm capital premium reserves profit parent interests Total
Six months ended December 2012 (Reviewed)
Opening balance 2.2 750.6 614.7 2,989.4 4,356.9 207.9 4,564.8
Issue of share capital (net of costs)
Dividends declared (317.0) (317.0) (39.6) (356.6)
Total comprehensive income 22.5 693.2 715.7 29.2 744.9
Changes in non-controlling interests
and distribution to minorities (13.6) (13.6) (21.9) (35.5)
Share trust transactions and
IFRS 2 charge (224.1) 220.0 (4.1) (4.1)
Treasury shares realised 1.5 0.3 1.8 1.8
Total 2.2 752.1 399.8 3,585.6 4,739.7 175.6 4,915.3
Six months ended December 2011 (Reviewed)
Opening balance 2.0 743.9 444.4 2,775.6 3,965.9 215.8 4,181.7
Issue of share capital (net of costs) 0.2 0.2 0.2
Dividends declared (291.1) (291.1) (19.6) (310.7)
Total comprehensive income 98.5 895.5 994.0 11.8 1,005.8
Changes in non-controlling interests
and distribution to minorities (3.0) (3.0) (1.5) (4.5)
Share trust transactions and
IFRS 2 charge 41.3 (57.3) (16.0) (16.0)
Treasury shares realised 6.2 1.9 8.1 8.1
Total 2.2 750.1 583.1 3,322.7 4,658.1 206.5 4,864.6
Year ended December 2012 (Reviewed)
Opening balance 2.2 750.1 583.1 3,322.7 4,658.1 206.5 4,864.6
Issue of share capital (net of costs)
Dividends declared (864.7) (864.7) (58.9) (923.6)
Total comprehensive income (0.1) 977.3 977.2 53.7 1,030.9
Changes in non-controlling interests
and distribution to minorities (10.6) (10.6) (25.7) (36.3)
Non-controlling interests relating
to acquisitions (20.5) (20.5) (20.5)
Share trust transactions and
IFRS 2 charge (151.6) 150.3 (1.3) (1.3)
Treasury shares realised/(acquired) 2.0 (0.5) 1.5 1.5
Total 2.2 752.1 399.8 3,585.6 4,739.7 175.6 4,915.3
Year ended December 2011 (Reviewed)
Opening balance 2.0 253.4 371.3 3,230.8 3,857.5 152.2 4,009.7
Issue of share capital (net of costs) 0.2 481.6 481.8 481.8
Dividends declared (826.6) (826.6) (24.1) (850.7)
Total comprehensive income 127.4 1,017.2 1,144.6 27.1 1,171.7
Changes in non-controlling interests
and distribution to minorities (35.4) (35.4) (13.7) (49.1)
Non-controlling interests relating
to acquisitions 65.0 65.0
Share trust transactions and
IFRS 2 charge 169.4 (98.7) 70.7 70.7
Treasury shares realised/(acquired) 15.1 (49.6) (34.5) (34.5)
Total 2.2 750.1 583.1 3,322.7 4,658.1 206.5 4,864.6
Year ended June 2012 (Audited)
Opening balance 2.0 743.9 444.4 2,775.6 3,965.9 215.8 4,181.7
Issue of share capital (net of costs) 0.2 0.2 0.2
Dividends declared (838.8) (838.8) (38.9) (877.7)
Total comprehensive income 75.9 1,179.6 1,255.5 36.3 1,291.8
Changes in non-controlling interests
and distribution to minorities (5.3) (5.3)
Non-controlling interests relating
to acquisitions (20.5) (20.5) (20.5)
Share trust transactions and
IFRS 2 charge 113.8 (127.0) (13.2) (13.2)
Treasury shares realised 6.7 1.1 7.8 7.8
Total 2.2 750.6 614.7 2,989.4 4,356.9 207.9 4,564.8
Additional information
26 weeks 26 weeks 52 weeks 52 weeks 52 weeks
December December December December June
2012 2011 2012 2011 June 2012
(Reviewed) (Reviewed) (Reviewed) (Reviewed) (Audited)
Net asset value per share (cents) 2,185.1 2,158.0 2,185.1 2,158.0 2,015.9
Ordinary shares (000's):
In issue 216,910 215,853 216,910 215,853 216,124
Weighted average 216,414 215,209 216,142 210,028 215,539
Diluted weighted average 219,313 219,778 219,393 217,690 220,284
Preference shares (000's):
Thuthukani Trust A' shares held by the participants (notes 4 and 6) 1,395 1,395 1,053
Black Scarce Skills Trust B' shares held by the participants (note 4) 1,755 1,425 1,755 1,425 1,740
Capital expenditure (Rm):
Authorised and committed 954.7 386.3 954.7 386.3 472.1
Authorised not committed 715.6 529.9 715.6 529.9 598.3
Gross operating lease commitments (2013 2027) (Rm) 13,383.4 11,812.7 13,383.4 11,812.7 12,271.0
US dollar exchange rates: period-end (R/$) 8.59 8.16 8.59 8.16 8.40
average (R/$) 8.47 7.57 8.20 7.23 7.75
NOTES
1. These condensed financial statements have been prepared in accordance with the framework concepts and the measurement and recognition requirements
of International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the Financial
Reporting Pronouncements as issued by the Financial Reporting Standards Council, the information as required by IAS 34 Interim Financial Reporting, the
JSE Listings Requirements and the requirements of the Companies Act of South Africa. The accounting policies applied are consistent with that of the previous
financial year, except for the IAS 1: Presentation of Financial Statements with regard to the presentation of items within the Statement of Comprehensive
Income. The adoption of the amendment to IAS 1 has no impact on these Condensed Financial Statements.
2. During the current period the only Massmart shares acquired in the market were by the Massmart Employee Share Trusts where 0.7 million shares (0.3% of
average shares in issue) were bought at an average price of R174.38 totalling R124.5 million. During the comparative six-month period, the Massmart
Employee Share Trusts acquired 0.6 million shares (0.3% of average shares in issue) at an average price of R154.99 totalling R86.3 million.
3. The impairment of assets in the current period relates to the impairment of leasehold improvements in Masscash. The impairment of assets in the comparative
six-month period relates to the closure of the Game Mauritius store.
4. The Massmart BEE transaction, which came into operation in October 2006, gave rise to an IFRS 2 Share-based Payment charge of R9.9 million
(2011: R9.8 million). The A' and B' preference shares were issued to the Thuthukani Trust and the Black Scarce Skills Trust, respectively.
5. Walmart transaction, integration and related costs comprise professional fees, integration costs, expatriate employment costs, share-based payments, travel,
consulting costs and other direct expenses relating to the Walmart transaction, of which certain amounts remain unpaid at the reporting date, as well as the
additional R140 million being the increase in the Supplier Development Fund required by the judgement of the Competition Appeal Court.
6. The preference shareholders' dividend amount of R1.4 million (2011: R2.5 million) represents the June 2012 final cash dividend of 146 cents
(2011: 134 cents) paid to all Thuthukani beneficiaries. The Thuthukani dividend was equivalent to 100% of the ordinary dividend for the current and
prior year.
7. Other non-current liabilities and provisions include the net lease smoothing liability of R302.7 million (2011: R354.5 million).
8. The net asset value of the businesses acquired during the year was R22.8 million on the date of acquisition. There were no businesses acquired in the
comparative six-month period.
9. With effect from the end of January 2013, Massmart acquired control of seven Makro stores that had previously been lease-held. The cash consideration paid
for control amounted to R575 million. We expect that the income statement effect of this transaction will be neutral in 2013 but then positive, with significant
annual cash flow benefits.
10. Massmart and its divisions enter into certain transactions with related parties in the normal course of business. Details of these are, and will be, disclosed
in Massmart's Integrated Annual Report. Transactions between the Company and Walmart (its Holding Company), are accounted for in Walmart transaction,
integration and related costs in the Condensed income statement. Further detail relating to these costs is disclosed in note 5 above. As a 51% shareholder,
Walmart will also be receiving a dividend based on their number of shares held.
11. Due to Christmas trading, Massmart's earnings are weighted towards the six months to December.
12. The results of the 26 weeks and 52 weeks ended December 2012, have been reviewed by independent external auditors, Ernst & Young Inc., and their
unmodified review report is available for inspection at the Company's registered office. The review was performed in accordance with ISRE 2410 Review of
Interim Financial Information Performed by the Independent Auditor of the Entity. The results of the 26 weeks and 52 weeks ended December 2011 as well as
the 52 weeks ended June 2012, were reviewed/audited by independent external auditors, Deloitte & Touche, and their unmodified review report is available for
inspection at the Company's registered office. The review was performed in accordance with ISRE 2410 Review of Interim Financial Information Performed by
the Independent Auditor of the Entity. Any reference to future financial performance included in this announcement has not been reviewed or reported on by the
Group's external auditors. The preparation of the Group's condensed consolidated reviewed results was supervised by the Financial Director, Ilan Zwarenstein,
BCom, BAcc, CA(SA).
Directorate
MJ Lamberti (Chairman),
CS Seabrooke (Deputy Chairman),
GM Pattison* (Chief Executive Officer),
D Cheesewright***,
JA Davis**,
NN Gwagwa,
GRC Hayward* (Chief Operating Officer),
P Langeni,
JP Suarez**,
I Zwarenstein* (Financial Director)
* Executive ** USA *** UK
Registered office
Massmart House
16 Peltier Drive
Sunninghill Ext 6, 2191
Company secretary
P Sigsworth
Sponsor
Deutsche Securities (SA)
(Proprietary) Limited
Transfer secretaries
Computershare Investor Services
(Proprietary) Limited
Registered auditors
Ernst & Young Inc.*
Previous registered auditors
Deloitte & Touche*
* Scope defined in note 12
For more information
T: (+27 11) 517 4444
www.massmart.co.za
BRUNSWICK
R Pinker
T: (+27 11) 502 7300
Date: 28/02/2013 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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