Wrap Text
Reviewed consolidated results for the 53 weeks ended 29 December 2013
Massmart Holdings Limited
("the Company" or "the Group")
JSE code MSM
ISIN ZAE000152617
Company registration number
1940/014066/06
REVIEWED CONSOLIDATED RESULTS FOR THE 53 WEEKS ENDED 29 DECEMBER 2013
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 376 stores. 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.
OVERVIEW
For the 53 weeks ended on 29 December 2013, Massmart's total sales increased by 9.8%
over the previous year's 52-week period. Boosted by the additional week's sales and the
foreign exchange translation profit caused by the weakening Rand, operating profit increased
by 26.0% and headline earnings increased by 29.9%.
The difficult South African consumer environment was reflected in 52-week comparable stores'
sales of 3.8% with product inflation of 2.7%. This is the sixth year that Massmart's product
inflation has been below South African Consumer Price inflation.
Adjusting for foreign exchange translation movements in both years, Walmart transaction costs
in the prior year and the 53rd week, the Group's underlying operating profit performance
decreased by 7.0%. This was an improvement on the half-year's performance as management
responded with greater cost control and margin management given the deteriorating sales
environment.
All Divisions performed well relative to their chosen markets other than Game South Africa
which was caught in the very difficult trading environment of selling durable goods to financially
challenged low- and middle-income consumers.
Pleasing progress was made in the implementation of the Group's strategies and operationally
and strategically we are much better positioned than a year ago.
ENVIRONMENT
Commentators are forecasting a difficult South African consumer economy in 2014. The recent
interest rate hike seems certain to make things more difficult for middle-income customers who,
as suggested by the consumer credit statistics, are in a weak financial position. By contrast, the
upper-income customer appears to be in a better financial position but their spending will be
dependent on their confidence levels.
We seem to be in an unusual retail cycle. Retailers' recent results confirm that sales of non-
durables and semi-durables are out-performing those of durables, a situation typical of a higher
interest rate cycle where interest rates had been increased to curb inflation. But interest rates
have until recently been at historical lows and so one might expect the opposite sales trends.
This suggests that cyclical retailers are starting a rising interest rate cycle already under some
pressure, and so managing cyclicality is becoming a key management skill.
As the economic landscape is changing, so is the customer landscape, particularly in our
historically core categories of General Merchandise and Wholesale Food. The change in
technology to tablets and smart phones, for example, is changing the spending patterns in
many of the General Merchandise categories including digital cameras, laptops and toys. This
mega-trend, amongst many other minor ones in General Merchandise categories, requires
us to reposition both our offering and space allocation. The 2012 demise of a major South
African wholesale food competitor and its subsequent disposal to independent operators is
changing the distribution patterns of basic food across South Africa and requires us to trade
in new ways.
In both the Home Improvement and Food Retail industries we are leading change, albeit being
relatively new entrants into Food Retail.
The economic performances of countries outside South Africa have been mostly positive.
The weaker Rand bolstered our reported Rand performance of our non-South African operations.
Currency liquidity and pricing remains the greatest risk.
DIVISIONAL OPERATIONAL REVIEW
MASSDISCOUNTERS
Comprises the 121-store General Merchandise discounter and Food retailer Game, which
trades in South Africa, Botswana, Ghana, Lesotho, Malawi, Mocambique, Namibia, Nigeria,
Tanzania, Uganda and Zambia; and the 22-store Hi-tech retailer DionWired.
Total Divisional sales for the 53-week period increased by 8.6%. Comparable sales for the
52-week period increased by 1.0% with product inflation of 0.5%.
Given the hardening middle-income environment, Game South Africa's comparable sales
showed a decline of 2.6% which caused severe pressure on profitability and so Massdiscounters'
trading profit before interest and tax decreased by 39.3%. The roll-out of Dry Groceries and
Fresh continues with 48 Game stores now offering both these categories. Food sales growth in
these comparable stores is exceptionally strong.
DionWired's total sales growth was 19.5% and this brand has become the destination store
within this category. Game Africa's total Rand sales and sales in local currencies increased by
22.0% and by 14.7%, respectively. profit growth in both businesses was slightly below sales
growth.
Three DionWired stores and 11 Game stores were opened, and four Game stores were closed,
increasing space by 33,949m2 (7.7%).
MASSWAREHOUSE
Comprises the 19-store Makro warehouse-club trading in Food, General Merchandise and
Liquor in South Africa; and Fruitspot.
Total Divisional sales for the 53-week period increased by 14.4%. Comparable sales for
the 52-week period increased by 4.0% with product inflation of 2.1%. The new Alberton,
Johannesburg, store is trading exceptionally well. The relocated Amanzimtoti, Durban, store
is also trading well but, as with most store relocations, has not yet seen significant new
incremental sales and is carrying higher current costs. Makro's trading profit before interest
and tax increased by 13.4%.
Two stores were opened and one store was closed, increasing space by 16,592m2 (9.3%).
MASSBUILD
Comprises 92 stores, trading in DIY, Home Improvement and Building Materials, under the
Builders Warehouse, Builders Express, Builders Trade Depot and Builders Superstore brands in
South Africa, Botswana and Mocambique.
Total Divisional sales for the 53-week period increased by 11.9%. Comparable sales for the
52-week period increased by 8.2% with product inflation of 4.1%. Despite its leading market
position, Massbuild invested heavily in its operating capacity this year: opening the highest
number of stores ever; converting Builders Trade Depot onto our SAP IT platform; opening a
national Distribution Centre in Johannesburg; opening two stores of the new format, Builders
Superstore, aimed at lower-income consumers; and opening a new store in Botswana and two
new stores in Mocambique. Trading profit before interest and tax increased by 26.7%.
Six Builders Warehouse stores were opened; five Builders Express stores were opened and
two closed; three Builders Trade Depot stores were closed and one was sold; and two Builders
Superstores were opened, resulting in net trading space increasing by 14,675 m2 (3.7%).
MASSCASH
Comprises 75 Wholesale Cash and Carry and 47 Retail Cash and Carry stores trading in South
Africa, Botswana, Lesotho, Mocambique, Namibia and Swaziland; and Shield, a voluntary
buying association.
Total Divisional sales for the 53-week period increased by 6.5%. Comparable sales for the
52-week period increased by 3.8 % with product inflation of 4.2%. Trading in the Wholesale
environment was difficult given the pressure on lower-income consumers, low product inflation
and a very competitive market. Our first store in Mocambique is trading well and we continue
to seek more sites in this and other southern African countries. Cambridge management has
done an exceptional task of stabilising the control environment and installing a common IT
platform and this business began to show strong trading performances towards the end of the
financial year. Comparable sales growth was 7.8%. Masscash's trading profit before interest
and tax increased by 4.1%.
One Wholesale store and five Retail stores were opened; and three Wholesale and two Retail
stores were closed. Net trading space increased by 2,519m2 (0.6%).
52 weeks
53 weeks 52 weeks 52 weeks comparable Estimated 26 weeks
Dec 2013 % of Dec 2013 % of Dec 2012 % of 53 weeks 52 weeks % sales % sales Dec 2012 % of
Rm (Reviewed) sales (Pro forma) sales (Reviewed)* sales % growth % growth growth inflation (Audited)* sales
Sales 72,263.4 70,790.7 65,839.5 9.8 7.5 3.8 2.7 36,122.6
Massdiscounters 16,740.6 16,294.2 15,408.6 8.6 5.7 1.0 0.5 8,422.1
Masswarehouse 19,675.1 19,271.7 17,200.9 14.4 12.0 4.0 2.1 9,630.2
Massbuild 9,583.6 9,441.3 8,561.0 11.9 10.3 8.2 4.1 4,663.1
Masscash 26,264.1 25,783.5 24,669.0 6.5 4.5 3.8 4.2 13,407.2
Trading profit before
interest and tax 2,145.4 3.0 1,994.4 2.8 2,147.8 3.3 (0.1) (7.1) 1,361.9 3.8
Massdiscounters 366.6 2.2 326.9 2.0 604.2 3.9 (39.3) (45.9) 406.5 4.8
Masswarehouse 990.2 5.0 939.5 4.9 873.0 5.1 13.4 7.6 502.5 5.2
Massbuild 507.6 5.3 467.6 5.0 400.7 4.7 26.7 16.7 257.5 5.5
Masscash 281.0 1.1 260.4 1.0 269.9 1.1 4.1 (3.5) 195.4 1.5
Trading profit excludes several items. A detailed reconciliation between trading and operating profit can be found below the 'Headline Earnings' table on page 3.
* including effect of Walmart integration and related costs and excluding Walmart transaction costs.
To make comparisons with the prior financial year meaningful, all current year income statement figures in this announcement are given as 52-week and 53-week results,
and certain comparisons are based on the 52-week results.
STORE PROFILE UPDATE:
+10 STORES
FROM 133 TO 143
INCREASE IN TRADING SPACE: +7.7%
MASSDISCOUNTERS
TOTAL COVERAGE: 475,331 SQM
+1 STORE
FROM 18 TO 19
INCREASE IN TRADING SPACE: +9.3%
MASSWAREHOUSE
TOTAL COVERAGE: 195,794 SQM
+7 STORES
FROM 85 TO 92
INCREASE IN TRADING SPACE: +3.7%
MASSBUILD
TOTAL COVERAGE: 410,546 SQM
+1 STORE
FROM 121 TO 122
INCREASE IN TRADING SPACE: +0.6%
MASSCASH
TOTAL COVERAGE: 399,637 SQM
FINANCIAL REVIEW
Statement of comprehensive income
Total Group sales growth for the 53-week period ended 29 December 2013 was 9.8%. For
the 52-week period, total and comparable sales growths were 7.5% and 3.8% respectively.
The Group's product inflation was 2.7% for the year suggesting real comparable volume
growth of 1.1%. General Merchandise's inflation slowed to 0.1%, Food and Liquor's inflation
slowed to 4.1% and Home Improvement inflation increased to 3.7%. Sales in our African
businesses represented 7.7% of total sales and increased by 16.6% in Rands and 10.9% in
local currencies.
During the year, 15 stores were closed, one store was sold and 35 stores were opened,
resulting in a total of 376 stores at December 2013. Net trading space increased by 4.8% to
a total of 1,481,308m2.
The Group's gross profit of 18.46% is lower than that of the prior year of 18.65%. This is as
a result of a combination of an increased contribution from Game Africa and an improved margin
performance in Massbuild; both of which were offset by the difficult trading conditions in
Wholesale Food, a greater overall Food contribution at a lower margin and General Merchandise
margins in Game SA being under pressure throughout the year.
Total expenses (excluding foreign exchange movements and Walmart transaction, integration
and related costs) increased by 10.4% over the comparable 52-week period. Employment
costs, the Group's most significant cost, increased by 14.3% for the 52-week period. The
impact of the Group's continued investment in capacity and growth can be seen in the 10.6%
higher depreciation and amortisation charge and the 10.8% increase in occupancy costs.
These increases relate to the opening of the Massbuild National Distribution Centre and
35 new stores. During the year new store pre-opening costs amounted to R108.5 million
(2012: R70.3 million). Comparable expenses increased by 7.2%. During the prior year
the Group incurred a cost of R140.0 million relating to increasing the value of the Supplier
Development Fund as required by the Competition Appeal Court.
Included in operating profit are net realised and unrealised foreign exchange translation gains of
R67.8 million (December 2012: R231.6 million loss). During the year the Rand weakened
against the Group's basket of African currencies. The loss in the prior year related in most part
to the devaluation of the Malawian Kwacha.
Excluding foreign exchange movements, earnings before interest, tax, depreciation and
amortisation (EBITDA) of R2.9 billion increased over the prior year by 9.0% (52 weeks: 3.2%).
Net interest paid of R255.1 million increased as a result of the Group's capital expenditure
programme, including the acquisition of certain key properties, and some inefficiencies in
working capital levels. At R4.3 billion, the Group's average borrowings are higher than the
prior year's figure of R3.2 billion and approximately R600.0 million of this relates to acquired
properties.
The Group's effective tax rate of 29.3% (December 2012: 34.8%) should normalise at just
below 30.0%.
The minority interests comprise store managers' holdings in Masscash stores and minorities in
acquired Masscash businesses.
Headline earnings increased by 29.9% (52 weeks: 19.9%) and headline EPS increased by
29.5% (52 weeks: 19.5%) over the prior year. Adjusting for the effect of the foreign exchange
movements in both years results in an increase in headline earnings of 7.7% (52 weeks:
decrease of 0.9%).
Statement of financial position
Working capital was managed effectively in all Divisions other than Massdiscounters which is
over-stocked given the lower sales in Game SA. Days in inventory at December 2013 were
63.7 (December 2012: 65.9 days) for the Group.
The net book value of property, plant and equipment increased by 54.8% compared to
December 2012. This was largely the result of the R575.0 million acquisition of seven Makro
stores.
The Group's gearing ratio (debt:equity) increased to 39.8% (December 2012: 28.5%). The
annual rolling return on equity was 26.9% at December 2013 (December 2012: 21.9%).
Excluding foreign exchange movements, this figure was 25.9% (December 2012: 25.4%).
Statement of cash flows
Operating cash generated of R3.7 billion is a combination of growth in cash-earnings coupled
with an improved working capital performance. Total capital expenditure of R2.1 billion is
significantly higher than the prior year, and comprises R752.1 million on maintenance and
R1.3 billion on expansionary expenditure. This increase is largely a result of the R575.0 million
acquisition of seven Makro stores.
Acquisition of properties
Massmart has continued with its stated intention to acquire strategic properties from which
it operates. There are currently two separate transactions to acquire properties, totalling
approximately R550.0 million, where we are awaiting transfer.
DIRECTORATE
The Group's non-Executive Chairman, Mark Lamberti, has been appointed CEO of the Imperial
Group, from 1 March 2014. As a consequence, he has chosen to relinquish his directorships
of other public companies and has advised that he will in due course resign as Chairman of
Massmart. A Board-led succession process is underway.
STRATEGIC PRIORITIES
We have made good progress on our five strategic priorities of: Improving margin; Strategic
discipline; Africa expansion; Innovation; and Building trust.
As part of these priorities, in 2014 the Group will invest in new retail formats and new
categories. We will be trialing new formats in East and West Africa; will open more low-income
home improvement stores in South Africa; and will launch new e-commerce offerings in our
brands. New or extended categories include Fresh; Clothing; and Food Retail. Additionally,
we will focus on owning more of our stores, will rationalise some stores in certain over-traded
markets, and will continue to invest in product quality and safety.
PROSPECTS
For the 8 weeks to 23 February 2014, total sales increased by 9.5% and comparable sales
increased by 7.7%, a much stronger start to the financial year than we anticipated.
Whilst too early to be confident about this new trend, the strong start suggests a better overall
performance this year than last year. Whilst we remain cautious about the economy, we are
much more positive about the business as we reap the rewards from the operational focus of
last year.
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 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 217,109,044.
Notice is hereby given that a gross final cash dividend of 275.00 cents per share in respect of
the period ended 29 December 2013 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, 13 March 2014
first trading day ex dividend on the JSE: Friday, 14 March 2014
Record date: Thursday, 20 March 2014
Payment date: Monday, 24 March 2014
Share certificates may not be dematerialised or rematerialised between Friday, 14 March 2014
and Thursday, 20 March 2014, 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, on (011) 370 5000, or on 086 110 09818 (fax), 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 Group financial Director
26 February 2014
FINANCIAL HIGHLIGHTS:
SALES
UP BY 9.8%
R72,263.4 million
2012: R65,840 million
OPERATING PROFIT
BEFORE FOREX
UP BY 7.5%
R2,084.7 million
2012: R1,940 million
CASH GENERATED
FROM OPERATIONS
UP BY 96.0%
R3,736.6 million
2012: R1,906 million
HEADLINE EARNINGS
BEFORE FOREX
UP BY 7.7%
R1,285.7 million
2012: R1,194 million
HEADLINE EARNINGS
AFTER FOREX
UP BY 29.9%
R1,334.5 million
2012: R1,027 million
DIVIDEND
PER SHARE
421 cents
2012: 421 cents
CONDENSED CONSOLIDATED INCOME STATEMENT
53 weeks 53rd week 52 weeks 52 weeks 26 weeks
December 2013 pro forma December 2013 December 2012 53 weeks 52 weeks December 2012
Rm (Reviewed) adjustment (Pro forma) (Reviewed) % change % change (Audited)
Revenue 72,512.9 1,477.6 71,035.3 66,050.3 9.8 7.5 36,234.5
Sales 72,263.4 1,472.7 70,790.7 65,839.5 9.8 7.5 36,122.6
Cost of sales (58,926.4) (1,192.6) (57,733.8) (53,563.0) (10.0) (7.8) (29,523.2)
Gross profit 13,337.0 280.1 13,056.9 12,276.5 8.6 6.4 6,599.4
Other income 249.5 4.9 244.6 210.8 18.4 16.0 111.9
Depreciation and amortisation (731.1) - (731.1) (661.2) (10.6) (10.6) (342.6)
Impairment of assets (note 3) (41.6) - (41.6) (21.6) (92.6) (92.6) (5.4)
Employment costs (5,423.5) (66.0) (5,357.5) (4,686.5) (15.7) (14.3) (2,487.5)
Occupancy costs (2,555.3) (10.8) (2,544.5) (2,296.5) (11.3) (10.8) (1,225.6)
Foreign exchange profit/(loss) 67.8 - 67.8 (231.6) (76.7)
Walmart transaction, integration and related costs
(note 4) - - - (348.9) 100.0 100.0 (205.2)
Other operating costs (2,750.3) (57.2) (2,693.1) (2,533.0) (8.6) (6.3) (1,243.2)
Operating profit 2,152.5 151.0 2,001.5 1,708.0 26.0 17.2 1,125.1
finance costs (283.8) (5.4) (278.4) (217.4) (30.5) (28.1) (106.0)
finance income 28.7 0.1 28.6 90.0 (68.1) (68.2) 45.6
Net finance costs (255.1) (5.3) (249.8) (127.4) (100.2) (96.1) (60.4)
profit before taxation 1,897.4 145.7 1,751.7 1,580.6 20.0 10.8 1,064.7
Taxation (555.3) (42.7) (512.6) (549.6) (1.0) 6.7 (342.3)
profit for the year 1,342.1 103.0 1,239.1 1,031.0 30.2 20.2 722.4
profit attributable to:
Owners of the parent 1,283.0 103.0 1,180.0 972.3 691.8
Preference shareholders (note 5) - - - 5.0 1.4
Non-controlling interests 59.1 - 59.1 53.7 29.2
profit for the year 1,342.1 103.0 1,239.1 1,031.0 30.2 20.2 722.4
Basic EPS (cents) 591.4 47.5 543.9 449.8 31.5 20.9 319.7
Diluted basic EPS (cents) 585.1 47.0 538.1 443.2 32.0 21.4 315.4
Dividend (cents): -
- Interim 146.0 146.0 - -
- final 275.0 275.0 421.0 275.0
- Total 421.0 421.0 421.0 - - 275.0
HEADLINE EARNINGS
Reconciliation of net profit for the year to
headline earnings
Net profit attributable to owners of the parent 1,283.0 103.0 1,180.0 972.3 691.8
Impairment of assets (note 3) 41.6 - 41.6 21.6 5.4
Loss on disposal of fixed assets 11.9 - 11.9 16.4 6.2
Loss on disposal of business 1.8 - 1.8 16.5 4.4
Fair value adjustment on assets classified as
held for sale - - - 8.3 0.4
Total tax effects of adjustments (3.8) - (3.8) (8.1) (2.7)
Headline earnings 1,334.5 103.0 1,231.5 1,027.0 29.9 19.9 705.5
Headline earnings before foreign exchange (taxed) 1,285.7 103.0 1,182.7 1,193.8 7.7 (0.9) 760.7
Headline EPS (cents) 615.2 47.5 567.7 475.2 29.5 19.5 326.0
Headline EPS before foreign exchange (taxed) (cents) 592.7 47.5 545.2 552.3 7.3 (1.3) 351.5
Diluted headline EPS (cents) 608.6 47.0 561.6 468.1 30.0 20.0 321.7
Diluted headline EPS before foreign exchange
(taxed) (cents) 586.4 47.0 539.4 544.1 7.8 (0.9) 346.9
RECONCILIATION BETWEEN TRADING AND OPERATING PROFIT
profit before interest and taxation
Trading profit before interest and taxation 2,145.4 151.0 1,994.4 2,356.7 1,427.1
Walmart integration and related costs (note 4) - - - (208.9) (65.2)
Trading profit before interest and taxation* 2,145.4 151.0 1,994.4 2,147.8 1,361.9
Asset impairments (note 3) (41.6) - (41.6) (21.6) (5.4)
Walmart transaction costs (note 4) - - - (140.0) (140.0)
Loss on disposal of business (1.8) - (1.8) (16.5) (4.4)
Fair value adjustment on assets classified as
held for sale - - - (8.3) (0.4)
BEE transaction IFRS 2 charge (note 6) (17.3) - (17.3) (21.8) (9.9)
Foreign exchange profit/(loss) 67.8 - 67.8 (231.6) (76.7)
Operating profit before interest and taxation 2,152.5 151.0 2,001.5 1,708.0 1,125.1
* including effect of Walmart integration and related costs
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
53 weeks 53rd week 52 weeks 52 weeks 26 weeks
December 2013 pro forma December 2013 December 2012 53 weeks 52 weeks December 2012
Rm (Reviewed) adjustment (Pro forma) (Reviewed) % change % change (Audited)
profit for the year 1,342.1 103.0 1,239.1 1,031.0 722.4
Other comprehensive income
Items that will not be re-classified subsequently
to the income statement
PRMA actuarial profit 5.7 - 5.7 - -
Items that will be re-classified subsequently
to the income statement:
Foreign currency translation reserve 47.2 - 47.2 6.0 25.1
Cash flow hedges 7.0 - 7.0 (10.7) (5.8)
Revaluation of available for sale investments 4.7 - 4.7 1.7 1.6
Income tax relating to components of other
comprehensive income (3.1) - (3.1) 2.9 1.6
Other comprehensive income for the year, net of tax 55.8 - 55.8 (0.1) 22.5
Total comprehensive income for the year 1,403.6 103.0 1,300.6 1,030.9 36.2 26.2 744.9
Total comprehensive income attributable to:
Owners of the parent 1,344.5 103.0 1,241.5 972.2 714.3
Preference shareholders (note 5) - - - 5.0 1.4
Non-controlling interests 59.1 - 59.1 53.7 29.2
Total comprehensive income for the year 1,403.6 103.0 1,300.6 1,030.9 36.2 26.2 744.9
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
December 2013 December 2012
Rm (Reviewed) (Audited) % change
ASSETS
Non-current assets 10,111.8 7,595.1
Property, plant and equipment 5,988.1 3,868.2 54.8
Goodwill and other intangible assets 2,928.8 2,945.3
Investments and loans 522.8 385.3
Deferred taxation 672.1 396.3
Current assets 16,036.1 15,422.2
Inventories 10,115.5 9,691.5 4.4
Trade, other receivables and prepayments 3,712.5 3,681.7 0.8
Taxation 12.0 17.0
Cash and bank balances 2,196.1 2,032.0
Non-current assets classified as held for sale - 2.5
Total 26,147.9 23,019.8
EQUITY AND LIABILITIES
Total equity 5,369.6 4,915.3
Equity attributable to equity holders of the parent 5,173.0 4,739.7 9.1
Non-controlling interests 196.6 175.6
Non-current liabilities 2,206.4 1,183.4
Long-term interest-bearing borrowings 1,178.7 671.8
Other non-current liabilities and provisions (note 7) 941.1 474.9
Deferred taxation 86.6 36.7
Current liabilities 18,571.9 16,921.1
Trade, other payables and provisions 17,101.2 15,669.3 9.1
Taxation 331.3 298.5
Bank overdrafts 607.8 392.1
Short-term interest-bearing borrowings 531.6 561.2
Total 26,147.9 23,019.8
ADDITIONAL INFORMATION
53 weeks 52 weeks 26 weeks
Year ended Year ended Year ended
December 2013 December 2012 December 2012
(Reviewed) (Reviewed) (Audited)
Net asset value per share (cents) 2,382.7 2,185.1 2,185.1
Ordinary shares (000's):
- In issue 217,109 216,910 216,910
- Weighted average 216,935 216,142 216,414
- Diluted weighted average 219,268 219,393 219,313
Preference shares (000's):
- Black Scarce Skills Trust 'B' shares held by the
participants (note 6) 2,348 1,755 1,755
Capital expenditure (Rm):
- Authorised and committed 1,249.3 954.8 954.8
- Authorised not committed 783.4 715.5 715.5
Gross operating lease commitments
(2014 - 2028) (Rm) 14,445.7 13,383.4 13,383.4
US dollar exchange rates: - year-end (R/$) 10.52 8.59 8.59
- average (R/$) 9.61 8.20 8.47
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
53 weeks 52 weeks 26 weeks
December 2013 December 2012 December 2012
Rm (Reviewed) (Reviewed) (Audited)
Operating cash before working capital movements 2,984.0 2,681.8 1,707.5
Working capital movements 752.6 (775.5) 1,110.0
Cash generated from operations 3,736.6 1,906.3 2,817.5
Taxation paid (732.8) (601.5) (369.1)
Net interest paid (255.1) (127.4) (60.4)
Investment income 79.2 0.1 -
Dividends paid (913.4) (864.7) (317.0)
Cash inflow from operating activities 1,914.5 312.8 2,071.0
Net investment to maintain operations (752.1) (629.4) (333.3)
Investment to expand operations (1,306.8) (685.1) (402.6)
Businesses acquired - (383.6) -
Other net investing activities (247.4) 33.4 (25.3)
Cash outflow from investing activities (2,306.3) (1,664.7) (761.2)
Cash inflow from financing activities 293.0 135.6 (367.8)
Net (decrease)/increase in cash and cash equivalents (98.8) (1,216.3) 942.0
Foreign exchange movements 47.2 6.0 25.1
Opening cash and cash equivalents 1,639.9 2,850.2 672.8
Closing cash and cash equivalents 1,588.3 1,639.9 1,639.9
FAIR VALUES OF FINANCIAL INSTRUMENTS
For financial instruments traded in an active market (level 1), fair value is determined using stock exchange quoted prices.
For other financial instruments (level 2), appropriate valuation techniques,including recent market transaction and other
valuation models, have been applied and significant inputs include market yield curves and exchange rates.
Fair value hierarchy December 2013 Level 1 Level 2
financial instruments in the statement of financial position: (Rm) (Rm) (Rm)
Assets
financial assets at fair value through profit or loss 244.3 - 244.3
Investment in a trading and logistics structure 117.4 - 117.4
Investment in insurance cell captive on extended warranties 44.5 - 44.5
Investment in insurance cell captive on premium contributions 55.9 - 55.9
FEC asset 26.5 - 26.5
Available-for-sale financial assets - listed investments 12.2 12.2 -
Total 256.5 12.2 244.3
Liabilities
financial liabilities at fair value through profit or loss - FEC liability 2.7 - 2.7
Total 2.7 - 2.7
There were no transfers between Level 1 and Level 2 fair value measurements
during the 12 months ending December 2013 and no transfers into or out of Level 3.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Equity
attributable
Ordinary to equity Non-
share Share General Retained holders of controlling
Rm capital premium reserves profit the parent interests Total
Balance as at December 2011 (Reviewed) 2.2 750.1 583.1 3,322.7 4,658.1 206.5 4,864.6
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)
Release of amotisation of trrademark reserve - - (76.5) 76.5 - - -
Treasury shares realised/(acquired) - 2.0 (0.5) - 1.5 - 1.5
Balance as at December 2012 (Reviewed) 2.2 752.1 323.3 3,662.1 4,739.7 175.6 4,915.3
Dividends declared - - - (913.4) (913.4) (30.9) (944.3)
Total comprehensive income - - 61.5 1,283.0 1,344.5 59.1 1,403.6
Changes in non-controlling interests and distribution
to minorities - - 3.8 - 3.8 (7.2) (3.4)
Share trust transactions and IFRS 2 charge - - 129.0 (121.8) 7.2 - 7.2
Treasury shares realised/(acquired) - (8.8) - - (8.8) - (8.8)
53 weeks ended December 2013 (Reviewed) 2.2 743.3 517.6 3,909.9 5,173.0 196.6 5,369.6
Balance as at June 2012 (Audited) 2.2 750.6 614.7 2,989.4 4,356.9 207.9 4,564.8
Dividends declared - - - (317.0) (317.0) - (317.0)
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) (61.5) (75.1)
Share trust transactions and IFRS 2 charge - - (224.1) 220.0 (4.1) - (4.1)
Release of amortisation of trademark reserve - - (76.5) 76.5 - - -
Treasury shares realised/(acquired) - 1.5 0.3 - 1.8 - 1.8
26 weeks ended December 2012 (Audited) 2.2 752.1 323.3 3,662.1 4,739.7 175.6 4,915.3
NOTES
1. These condensed consolidated financial statements have been prepared in accordance with the
framework concepts and the measurement and recognition requirements of International financial
Reporting Standards (IFRS), its interpretations issued by the IFRS Interpretations Committee, the
SAICA financial Reporting Guides as issued by the Accounting Practices Committee and financial
Pronouncements as issued by the financial Reporting Council, presentation and disclosure
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 are consistent in all
material respects with those of the previous financial year, except for:
IFRS 7 Disclosures - Offsetting financial Assets and financial Liabilities - Amendments to IFRS 7
IFRS 10 Consolidated financial Statements, IAS 27 Separate financial Statements
IFRS 11 Joint Arrangements, IAS 28 Investments in Associates and Joint Ventures
IFRS 12 Disclosure of Interests in Other Entities
IFRS 13 Fair Value Measurement
IAS 19 Employee Benefits (Revised)
2. During the current year, the only Massmart shares acquired in the market were by the Massmart
Employee Share Trust where 1.2 million shares (0.6% of average shares in issue) were bought
at an average price of R186.76 totalling R223.0 million. During the prior year, the Massmart
Employee Share Trust acquired 1.4 million shares (0.6% of average shares in issue) at an average
price of R174.61 totalling R244.5 million.
3. The impairment of assets in the current year relates to the impairment of acquired goodwill
in Masscash and tangible assets in Masscash and Makro, as a result of store closures. The
impairment of assets in the prior period relates to the impairment of acquired goodwill and tangible
assets in Masscash, as a result of store closures.
4. Walmart transaction, integration and related costs in the prior year comprise professional
fees, integration costs, expatriate employment costs, share-based payments, travel, consulting
costs and other direct expenses relating to the Walmart transaction, as well as the additional
R140.0 million being the increase in the Supplier Development Fund required by the judgement
of the Competition Appeal Court. Only the R140.0 million has been excluded from the prior year
trading profit numbers. At December 2013 the Supplier Development Fund has a closing balance of
R202.5 million (December 2012: R225.4 million). Of the Walmart integration and related costs, a net
amount of R126.0 million remains unpaid to Walmart (December 2012: R76.2 million) and has been accounted
for in trade and other payables. The Walmart transaction costs are behind us and integration costs are
now included as part of our normal operating costs.
5. The preference shareholders' dividend amount of R5.0 million in the prior year represents the
December 2011 interim cash dividend of 252 cents, and the June 2012 final cash dividend
of 146 cents, paid to all Thuthukani beneficiaries. The Thuthukani dividend was equivalent to
100% of the ordinary dividend for the prior year. On 1 October 2012, the final conversion of
'A' preference shares to ordinary shares through the Thuthukani Trust occurred and as such there
was no preference dividend paid in the current year.
6. The Massmart BEE transaction, which came into operation in October 2006, gave rise to an IFRS 2
Share-based Payment charge of R17.3 million (December 2012: R21.8 million). The 'A' and 'B'
preference shares were issued to the Thuthukani Trust and the Black Scarce Skills Trust respectively.
On 1 October 2012, the final conversion of 'A' preference shares to ordinary shares through the
Thuthukani Trust occurred.
7. Other non-current liabilities and provisions include the net lease smoothing liability of R822.2 million
(December 2012: R302.7 million).
8. There were no businesses acquired in the current year. The net asset value of the businesses
acquired during the prior comparative year was R67.7 million on the date of acquisition.
9. Massmart finalised the acquisition of Capensis Investments 241 (Pty) Ltd on 25 January 2013,
and now controls seven Makro properties previously lease held. The impact is: an increase in PPE
of R1,354.6 million; a release of both the lease smoothing position of R437.0 million and the bare
dominium option of R122.0 million; and a final cash outflow during this year of R575.0 million.
10. There were no significant subsequent events after the year-end.
11. 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), were accounted for in
Walmart transaction, integration and related costs in the prior years in the condensed consolidated
income statement. Further detail relating to these costs is disclosed in note 4 above. During the
year the Group secured a medium-term loan with Walmart repayable after five years. Interest of
7.46% is repaid quarterly. The loan of R600.0 million is accounted for under interest-bearing
non-current liabilities. As a 52% shareholder, Walmart will also be receiving a dividend based on
their number of shares held.
12. The pro forma financial effects, for which the directors of Massmart are responsible, are provided
for illustrative purposes only to show the effect of the additional week of trading in the current year
on the financial information of Massmart allowing for a like-on-like comparison of the 52-week
periods. These pro forma adjustments are not expected to have a continuing effect as they will only
occur in every 53-week year.
Because of its nature, the pro forma financial effects may not fairly present the Group's financial
position, changes in equity, results of operations or cash flows.
The pro forma financial effects have been prepared using accounting policies that comply with
International financial Reporting Standards. The accounting policies are consistent with those
applied in the previous financial year.
The pro forma financial effects have been compiled from the financial information for the 53 weeks
ended December 2013.
13. Due to Christmas trading, Massmart's earnings are weighted towards the six months to December.
In the 53 weeks ended December 2013, Christmas fell into the 53rd week of trading in the
financial year, and so is excluded from the 52-week like-on-like comparison numbers.
14. Independent external auditors, Ernst & Young Inc. have reviewed the results of the 53 weeks
ended December 2013 and the 52 weeks ended December 2012, as well as the pro forma
results of the 52 weeks ended December 2013. Their unmodified review report is available for
inspection at the Company's registered office. The reviews were performed in accordance with
ISRE 2410 Review of Interim financial Information Performed by the Independent Auditor of the
Entity and ISAE 3420- Assurance engagements to report on the compilation of pro forma financial
information included in a prospectus. 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 financial statements was supervised by
the Group 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* (Group Financial Director)
*Executive **USA ***UK
Massmart Holdings Limited
("the Company" or "the Group")
JSE code MSM
ISIN ZAE000152617
Company registration number
1940/014066/06
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.
For more information
www.massmart.co.za
Share Data: 24/02/2014
MSM Share Price 113.00
MSM 53-week high* 208.00
MSM 53-week low* 110.00
MSM market cap (m) 24,533.32
Reuters: MSMJ.J
Bloomberg: MSM SJ
* taking into account intra-day high and low
prices.
Date: 27/02/2014 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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