Wrap Text
Reviewed consolidated results for the 26 weeks ended 29 June 2014
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 29 JUNE 2014
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 381 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
With the backdrop of a difficult South African trading environment, for the 26 weeks ended 29 June 2014
Massmart's total sales of R35.7 billion increased by 10.2% over the prior comparable period. Comparable stores' sales
growth was 7.1% with product inflation of 4.8%.
Given the weak South African consumer environment, we focused on offering the customer value, being innovative and
aggressively controlling costs. With the exception of Game South Africa, we achieved most of these objectives. Two
Divisions, Massbuild and Masscash, grew trading profit ahead of sales while, due to new stores in the prior period, Makro's
growth in trading profit was slightly below sales growth. Massdiscounters was compromised by continued soft sales in
Game South Africa resulting in significantly lower trading profit compared to the prior comparable period.
Group operating profit, excluding foreign exchange movements and interest, was 3.8% below the prior period's
comparable figure. Higher net interest paid from funding several property acquisitions and an adverse movement in
foreign exchange resulted in headline earnings decreasing by 25.5% while, excluding foreign exchange movements, headline
earnings declined by 5.7%.
Environment
The causes and consequences of the current tepid state of the South African consumer economy are generally understood. It is
too soon to be sure but it is possible that the knock-on effect of the five-month long mining sector labour strike has had a greater
direct and indirect adverse impact on South African industries, the associated work-forces and their families, than is fully
understood. Certainly, our stores in towns immediately affected by mining unrest and regions traditionally associated with
migrant mine labour, have experienced significant sales declines.
The gradually tightening interest rate cycle will make things more difficult for middle-income customers and
possibly upper-income customers too. Signs of declining food inflation suggest potential relief for lower- and middle-income
customers as, for example, maize prices fall sharply on the back of one of the best crops in South Africa in 30 years.
Upper-income customers appear resilient for the meantime.
South African retailers are facing a weaker consumer environment, accompanied by some inflation volatility, higher
interest rates and negligible economic growth, all factors which seem likely to persist for 2014 and possibly 2015. In
response, some have even sought growth beyond the African continent.
Locally, retailers continue to compete aggressively with price and product, especially over month-end which has,
notably, become the only time when many customers are spending.
In response to the environment, the Massmart Divisions managed costs tightly and concentrated on offering customers
value through exciting deals, innovative promotions, keen pricing, and collaboration with suppliers. Inventory levels
were managed closely, ensuring that in-stock service levels were high. We sought ways to make it easier for customers
to shop with us by, for example, having a single credit account and trade-card for customers to use across all four
Massbuild formats; launching General Merchandise online in Makro; listing products online that are not available in our
stores; and giving smart-tablets to our sales teams in some of our wholesale and contractor businesses to rapidly process
enquiries and orders.
For the past year we have defended multiple legal actions filed or threatened by three of the dominant food retailers in
South Africa. These actions are based on lease exclusivity clauses that seek to restrict competition for the benefit of the
dominant retailers. To date, we have been served with, or have had threats of, legal actions at multiple Game stores. We
will vigorously defend these actions as we believe the blanket enforcement of these clauses to be intuitively anti-competitive.
In addition, we will shortly lodge a formal complaint with the Competition Commission against each retailer who has filed
legal action against us.
The economic performances of those 11 non-South African countries where we operate our 31 stores have been mostly
positive. We remain excited about the significant potential of sub-Saharan Africa but feel that this will likely evolve over the
longer term.
Divisional operational review
Massdiscounters – comprises the 126-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 22-store Hi-tech
retailer DionWired.
Total sales for the 26-week period increased by 8.0%, and comparable sales increased by 4.0% with product inflation of
3.1%. Given the difficult consumer environment, particularly up to the middle-income level, Game South Africa's
comparable sales only grew by 0.4% causing severe pressure on profitability, resulting in Massdiscounters' trading profit
before interest and tax decreasing by 78.8%. The roll-out of Dry Groceries and Fresh continues with 55 Game stores now
offering both of these categories. Food sales growth in these comparable stores is exceptionally strong at 20.1%.
DionWired's total sales growth was 12.6% and this brand has become the destination store within this category. We
continue to learn much from our DionWired online offering which now comprises 2.1% of total Massdiscounters' sales
(June 2013: 1.4%).
Game Africa's total Rand sales and sales in local currencies increased by 20.2% and 13.2% respectively. Profit growth
was just below sales growth due partly to the anticipated drag of lower sales levels in our new stores opened in Nigeria.
Kano, in Nigeria, opened in May 2014 with significant pre-opening costs.
Six Game stores (one in Nigeria) and one DionWired store were opened, and each brand closed a store, increasing
trading space by 16,436m(2) (3.5%). Masswarehouse – comprises the 19-store Makro warehouse-
club trading in Food, General Merchandise and Liquor in South Africa; and The Fruitspot.
Makro traded exceptionally well in a difficult environment – total sales for the 26-week period increased by 12.2% and
comparable sales increased by 9.4% with product inflation of 5.5%. The stores opened in 2011 and 2012 are showing
accelerating sales growth and contributing strongly to profits. The success of the General Merchandise online offering,
launched in March 2014, is in line with expectations. Makro's trading profit before interest and tax increased by 7.8%, with
profitability partially impacted by the cost-drag of the two new stores opened in 2013. Our Food business has benefited
from increased sales to retail customers and we have gained additional share in the retail and wholesale liquor market.
The Fruitspot grew sales and profit. There will be no new stores in the 2014 financial year.
Massbuild – comprises 93 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, Mozambique and Botswana.
Confirming its market-leading position, Massbuild grew total sales for the 26-week period by 14.2% and comparable
sales by 8.8% with product inflation of 5.3%. Builders Warehouse and Builders Express performed exceptionally
while Builders Trade Depot struggled following the disruption caused by store closures and an IT implementation project in
late 2013.
26 weeks 26 weeks 53 weeks
June June Period Comparable Estimated December
2014 % of 2013 % of % % sales % sales 2013 % of
Rm (Reviewed) sales (Reviewed)* sales growth growth inflation (Audited) sales
Sales 35,659.8 32,369.4 10.2 7.1 4.8 72,263.4
Massdiscounters 8,225.8 7,618.1 8.0 4.0 3.1 16,740.6
Masswarehouse 9,659.4 8,608.9 12.2 9.4 5.5 19,675.1
Massbuild 4,847.9 4,246.9 14.2 8.8 5.3 9,583.6
Masscash 12,926.7 11,895.5 8.7 6.8 5.0 26,264.1
Trading profit before interest and tax 729.9 2.0 740.0 2.3 (1.4) 2,145.4 3.0
Massdiscounters 27.4 0.3 129.0 1.7 (78.8) 366.6 2.2
Masswarehouse 406.5 4.2 377.0 4.4 7.8 990.2 5.0
Massbuild 186.2 3.8 160.0 3.8 16.4 507.6 5.3
Masscash 109.8 0.8 74.0 0.6 48.4 281.0 1.1
Trading profit excludes several items. A detailed reconciliation between trading and operating profit can be found below the
Condensed Consolidated Statement of Other Comprehensive Income.
* including the effect of Walmart integration and related costs.
The Mozambique-based Kangela business was closed in late 2013. The four Builders Warehouse stores in Botswana
and Mozambique grew sales and profits. Massbuild's trading profit before interest and tax increased by 16.4%.
One Builders Warehouse store was opened and one closed; two Builders Express stores were opened and two closed; and
one Builders Superstore was opened, resulting in net trading space increasing by 3,359m(2) (0.8%).
Masscash – comprises 75 Wholesale Cash and Carry and 46 Retail stores trading in South Africa, Botswana, Lesotho,
Mozambique, Namibia and Swaziland; and Shield, a voluntary buying association.
In extremely competitive South African wholesale and retail environments, creditably total sales for the 26-week period
increased by 8.7% and comparable sales increased by 6.8% with product inflation of 5.0%. Total sales growth in our non-
South African Wholesale businesses was pleasing at 12.0% and, adjusting for this, sales growth in our South African
Wholesale businesses was only 1.4%. Retail performed very well, gaining share, improving profitability and reporting strong
customer price-perception. Masscash's trading profit before interest and tax increased by 48.4%.
Two Cambridge stores were opened and three were closed, resulting in net trading space decreasing by 1,175m(2) (0.3%).
Financial review
Statement of comprehensive income
Total Group sales growth was 10.2%, with comparable sales growth of 7.1%. Product inflation was 4.8%, suggesting real
comparable volume growth of 2.3%. General Merchandise's inflation increased to 4.7%, Food and Liquor's inflation
increased to 4.5% and Home Improvement inflation increased to 5.3%. Sales in our African businesses represented 7.8%
of total sales and sales in our continuing African businesses increased by 16.7% in Rands.
During the period, 13 stores were opened and eight stores were closed, resulting in a total of 381 stores at June 2014. Net
trading space increased by 1.3% to 1,499,928m(2).
The Group's gross profit of 18.64% is lower than the prior comparable period of 18.73%. This is as a combination of
an increased Africa contribution and improved gross margins in Massbuild and Masscash, offset by a weaker margin
performance in Game South Africa and a greater Food contribution at lower margins across the Group.
Total operating expenses (excluding foreign exchange movements) increased by 11.3%, with comparable operating
expenses increasing by 7.7%. Employment costs, the Group's largest cost category, increased by 12.9%. The 14.5% increase
in depreciation and amortisation is due to the Group acquiring many of our key previously lease-held properties over the past
few years, which in turn caused a lower than usual increase in occupancy costs of only 7.9%. Included in this figure are the
costs of services such as rates and taxes which increased by approximately 20%.
Included in operating profit is a net realised and unrealised foreign exchange translation loss of R7.9 million (June 2013:
R133.8 million gain).
Excluding foreign exchange movements, earnings before interest, tax, depreciation and amortisation (EBITDA) of
R1.1 billion increased over the prior comparable period by 3.6%.
Net interest paid of R154.9 million increased as a result of the Group's capital expansion programme, including the
acquisition of certain key properties, and some inefficiencies in working capital levels. At R4.2 billion, the Group's average
borrowings are higher than the prior comparable period's figure.
The Group's effective tax rate of 30.4% (June 2013: 31.1%) should normalise at just below 30.0%.
The non-controlling interests comprise store managers' holdings in Masscash stores and non-controlling interests in
acquired Masscash businesses.
Headline earnings and Headline EPS each decreased by 25.5% over the prior comparable period. Adjusting for the effect
of the foreign exchange movements in both periods results in
a decrease in headline earnings and a decrease in Headline EPS of 5.7%.
Statement of financial position
Working capital was managed effectively in all Divisions other than Massdiscounters which, due to the soft comparable
sales, made slow progress with the over-stocked position. Days in inventory at June 2014 were marginally better at
61 days (June 2013: 62 days) for the Group.
The net book value of property, plant and equipment increased by 11.4% compared to June 2013, as a result
of acquiring some of our key properties and the investment in new stores. Subsequent to June 2014, a further two
previously lease-held properties, the Builders Warehouse Northriding store and the Massmart Head Office buildings in
Sunninghill, with an aggregate value of R542.5 million, have been acquired.
The Group's gearing ratio (debt:equity) increased to 38.1% (June 2013: 34.4%). The annual rolling return
on equity was 25.5% at June 2014 (June 2013: 26.6%). Excluding foreign exchange movements, this figure was
26.6% (June 2013: 25.7%).
Statement of cash flows
Operating cash utilised amounted to R1.4 billion during this six month period. Excluding the effect of the prior year's
53rd week, operating cash improved compared to the prior comparable period. Total capital expenditure of R0.6 billion
is significantly lower than the prior comparable period, and comprises R332.2 million on maintenance and R263.0 million
on expansionary expenditure, which is in line with expectation. This decrease is largely as a result of the R575.0 million
acquisition of seven Makro stores in the prior comparable period.
Directorate
In March 2014, Mark Lamberti was appointed Chief Executive Officer (CEO) of the Imperial Holdings Limited and resigned
as Chairman of Massmart. Kuseni Dlamini was appointed the new Chairman of Massmart with effect from 10 April 2014.
Grant Pattison resigned as CEO with effect from 1 June 2014 and Guy Hayward, previously Chief Operating Officer, was
appointed to succeed him. Grant remains on the Board until the end of December 2014.
In December 2013 David Cheesewright was promoted to President and CEO of Walmart International. Shelley Broader
succeeded him as President and CEO of the Walmart EMEA region in May 2014. Shelley, previously CEO of Walmart
Canada, now has responsibility for Walmart's retail operations and business development across Europe, the Middle East, sub-
Saharan Africa and Canada. As a result of these changes, David has resigned and Shelley has been appointed in his place.
Jeff Davis, appointed following the Walmart acquisition in June 2011, resigned and in his place Andy Clarke has been
appointed to the Board. Andy is the President and CEO of Asda Stores Ltd, the United Kingdom's second-largest supermarket
retailer. The appointments of Shelley and Andy and the resignations of David and Jeff were effective 16 July 2014.
Ilan Zwarenstein has advised the Board of his intention to resign as Group Finance Director with effect from 28 February 2015
to pursue different career opportunities. The process of engaging a suitable replacement is now underway and the generous
notice period given by Ilan should ensure a seamless handover of responsibilities. The Board would like to thank Ilan for his
considerable contribution to the Group over the past nine years and wish him well in his future endeavours.
Strategic priorities
Our areas of strategic focus remain unchanged. Improving the profitability of the core business over the medium-term
is a priority and we are making good progress in this regard. Expanding into Food Retail and Fresh in our existing formats
continues apace. Expansion into Africa remains a priority and in the next two years we anticipate opening 13 new
stores representing African space growth of about 50%.
We continue to expand and improve our ecommerce offerings and are gaining invaluable insights from our colleagues in Asda
and Walmart eCommerce. Finally, we will focus on selectively owning more of our current and future stores, will rationalise
stores in certain over-traded markets, and will continue to invest in product quality and safety.
Sales update and prospects
For the 34 weeks to 24 August 2014, total sales increased by 10.0% and comparable sales increased by 7.1%. Given
the difficult consumer environment it seems likely that these sales trends will continue for the remainder of 2014 and so
we remain focused on offering our customers exceptional value and innovation. We expect that the results for the full-year will
be affected by the ongoing weak economic environment as experienced in the interim reporting period.
The financial information on which this outlook statement is based has not been reviewed or reported on by the Company's
external auditors.
Dividend
Massmart has maintained the dividend at the same level as the prior comparable period. Notice is hereby given that a
gross final cash dividend of 146.00 cents per share, in respect of the period ended 29 June 2014, has been declared.
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 217,116,844.
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 124.10 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:
Friday, 12 September 2014
First trading day ex dividend on the JSE:
Monday, 15 September 2014
Record date:
Friday, 19 September 2014
Payment date:
Monday, 22 September 2014
Share certificates may not be dematerialised or rematerialised between Monday, 15 September 2014 and
Friday, 19 September 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
Guy Hayward Ilan Zwarenstein
Chief Executive Officer Group Finance Director
27 August 2014
MASSDISCOUNTERS MASSWAREHOUSE MASSBUILD MASSCASH
SALES SALES SALES SALES
R8,225.8m R9,659.4m R4,847.9m R12,926.7m
UP BY 8.0% UP BY 12.2% UP BY 14.2% UP BY 8.7%
TRADING PROFIT TRADING PROFIT TRADING PROFIT TRADING PROFIT
BEFORE INTEREST BEFORE INTEREST BEFORE INTEREST BEFORE INTEREST
AND TAX AND TAX AND TAX AND TAX
R27.4m R406.5m R186.2m R109.8m
DOWN BY 78.8% UP BY 7.8% UP BY 16.4% UP BY 48.4%
Our financial highlights:
SALES
UP BY 10.2%
R35,659.8 m
2013: R32,369.4 m
OPERATING PROFIT BEFORE
FOREX AND INTEREST
DOWN BY 3.8%
R702.9 m
2013: R730.3 m
CASH UTILISED BY
OPERATIONS
UP BY 117.5%
R1,381.8 m
2013: R635.2 m
HEADLINE EARNINGS
BEFORE FOREX
DOWN BY 5.7%
R369.8 m
2013: R392.2 m
HEADLINE EARNINGS
AFTER FOREX
DOWN BY 25.5%
R364.1 m
2013: R488.5 m
DIVIDEND
PER SHARE
UNCHANGED
146 cents
2013: 146 cents
Condensed consolidated income statement
26 weeks 26 weeks 53 weeks
June June December
2014 2013 2013
Rm (Reviewed) (Reviewed) % change (Audited)
Revenue 35,756.5 32,466.0 10.1 72,512.9
Sales 35,659.8 32,369.4 10.2 72,263.4
Cost of sales (29,010.2) (26,306.4) (10.3) (58,926.4)
Gross profit 6,649.6 6,063.0 9.7 13,337.0
Other income 96.7 96.6 0.1 249.5
Depreciation and amortisation (409.2) (357.4) (14.5) (731.1)
Impairment of assets (note 3) (14.9) – (41.6)
Employment costs (2,885.1) (2,555.8) (12.9) (5,423.5)
Occupancy costs (1,311.0) (1,215.2) (7.9) (2,555.3)
Other operating costs (1,423.2) (1,300.9) (9.4) (2,750.3)
Operating profit before foreign exchange movements
and interest 702.9 730.3 (3.8) 2,084.7
Foreign exchange (loss)/profit (7.9) 133.8 67.8
Operating profit before interest 695.0 864.1 (19.6) 2,152.5
Finance costs (176.6) (142.0) (24.4) (283.8)
Finance income 21.7 17.7 22.6 28.7
Net finance costs (154.9) (124.3) (24.6) (255.1)
Profit before taxation 540.1 739.8 (27.0) 1,897.4
Taxation (164.1) (230.2) 28.7 (555.3)
Profit for the period 376.0 509.6 (26.2) 1,342.1
Profit attributable to:
Owners of the parent 350.0 481.5 (27.3) 1,283.0
Non-controlling interests 26.0 28.1 (7.5) 59.1
Profit for the period 376.0 509.6 (26.2) 1,342.1
Basic EPS (cents) 161.3 222.0 (27.3) 591.4
Diluted basic EPS (cents) 159.9 219.4 (27.1) 585.1
Dividend (cents):
– Interim 146.0 146.0 – 146.0
– Final – – – 275.0
– Total 146.0 146.0 421.0
Headline earnings
Reconciliation of profit for the period
to headline earnings
Profit attributable to owners of the parent 350.0 481.5 1,283.0
Impairment of assets (note 3) 14.9 – 41.6
(Profit)/Loss on disposal of fixed assets (1.3) 7.9 11.9
Loss on disposal of business – 1.8 1.8
Total tax effects of adjustments 0.5 (2.7) (3.8)
Headline earnings 364.1 488.5 (25.5) 1,334.5
Headline earnings before foreign exchange (taxed) 369.8 392.2 (5.7) 1,285.7
Headline EPS (cents) 167.8 225.2 (25.5) 615.2
Headline EPS before foreign exchange (taxed) (cents) 170.5 180.8 (5.7) 592.7
Diluted headline EPS (cents) 166.4 222.6 (25.2) 608.6
Diluted headline EPS before foreign exchange (taxed) (cents) 169.0 178.7 (5.4) 586.4
Condensed consolidated statement of other comprehensive income
26 weeks 26 weeks 53 weeks
June June December
2014 2013 2013
Rm (Reviewed) (Reviewed) % change (Audited)
Profit for the period 376.0 509.6 1,342.1
Items that will not be re-classified subsequently
to the income statement: – – 5.7
Post-retirement medical aid actuarial gain – – 5.7
Items that will be re-classified subsequently
to the income statement: (60.7) 46.2 55.8
Foreign currency translation reserve (49.4) 4.8 47.2
Cash flow hedges (14.3) 48.7 7.0
Revaluation of listed shares (1.2) (0.1) 4.7
Revaluation of available for sale financial asset – 6.4 –
Income tax relating to components of other
comprehensive income 4.2 (13.6) (3.1)
Total other comprehensive (loss)/income for the period,
net of tax (60.7) 46.2 61.5
Total comprehensive income for the period 315.3 555.8 (43.3) 1,403.6
Total comprehensive income attributable to:
Owners of the parent 289.3 527.7 1,344.5
Non-controlling interests 26.0 28.1 59.1
Total comprehensive income for the period 315.3 555.8 (43.3) 1,403.6
Reconciliation between trading and operating profit
26 weeks 26 weeks 53 weeks
June June December
2014 2013 2013
Rm (Reviewed) (Reviewed) (Audited)
Profit before interest and taxation
Trading profit before interest and taxation 729.9 814.9 2,145.4
Walmart integration and related costs (note 4) – (74.9) –
Trading profit before interest and taxation* 729.9 740.0 2,145.4
Impairment of assets (note 3) (14.9) – (41.6)
Loss on disposal of business – (1.8) (1.8)
BEE transaction IFRS 2 charge (note 5) (12.1) (7.9) (17.3)
Operating profit before foreign exchange movements and interest 702.9 730.3 2,084.7
* including effect of Walmart integration and related costs.
Condensed consolidated statement of financial position
June June December
2014 2013 2013
Rm (Reviewed) (Reviewed) % change (Audited)
ASSETS
Non-current assets 9,905.7 9,335.8 10,111.8
Property, plant and equipment 6,154.1 5,525.7 11.4 5,988.1
Goodwill and other intangible assets 2,903.8 2,970.8 2,928.8
Investments and other financial assets 193.8 247.3 522.8
Deferred taxation 654.0 592.0 672.1
Current assets 14,978.4 13,434.4 16,036.1
Inventories 9,774.7 8,991.2 8.7 10,115.5
Trade, other receivables and prepayments 3,624.7 3,228.6 12.3 3,712.5
Taxation 161.7 25.6 12.0
Cash and bank balances 1,417.3 1,189.0 2,196.1
Total 24,884.1 22,770.2 26,147.9
EQUITY AND LIABILITIES
Total equity 5,041.0 4,802.1 5,369.6
Equity attributable to owners of the parent 4,871.8 4,628.9 5.2 5,173.0
Non-controlling interests 169.2 173.2 196.6
Non-current liabilities 2,515.1 2,102.0 2,206.4
Interest-bearing borrowings 1,454.6 1,101.7 1,178.7
Deferred taxation 94.9 68.8 86.6
Other non-current liabilities and provisions (note 6) 965.6 931.5 941.1
Current liabilities 17,328.0 15,866.1 18,571.9
Trade, other payables and provisions 13,942.1 12,845.9 8.5 17,101.2
Taxation 152.1 327.4 331.3
Bank overdrafts 2,650.7 2,208.2 607.8
Interest-bearing borrowings 583.1 484.6 531.6
Total 24,884.1 22,770.2 26,147.9
Condensed consolidated statement of cash flows
26 weeks 26 weeks 53 weeks
June June December
2014 2013 2013
Rm (Reviewed) (Reviewed) (Audited)
Operating cash before working capital movements 1,137.5 1,266.6 2,984.0
Working capital movements (2,519.3) (1,901.8) 752.6
Cash (utilised by)/generated from operations (1,381.8) (635.2) 3,736.6
Taxation paid (461.1) (364.3) (732.8)
Net interest paid (154.9) (124.3) (255.1)
Investment income – – 79.2
Dividends paid (597.0) (595.9) (913.4)
Cash (outflow)/inflow from operating activities (2,594.8) (1,719.7) 1,914.5
Investment to maintain operations (332.2) (265.0) (780.2)
Investment to expand operations (263.0) (971.5) (1,306.8)
Proceeds on disposal of property, plant and equipment 19.7 4.8 25.6
Proceeds on disposal of assets classified as held for sale – 2.5 2.5
Other net investing activities (6.7) 30.2 (247.4)
Cash outflow from investing activities (582.2) (1,199.0) (2,306.3)
Cash inflow from financing activities 404.7 254.8 293.0
Net decrease in cash and cash equivalents (2,772.3) (2,663.9) (98.8)
Foreign exchange movements (49.4) 4.8 47.2
Opening cash and cash equivalents 1,588.3 1,639.9 1,639.9
Closing cash and cash equivalents (1,233.4) (1,019.2) 1,588.3
Condensed consolidated statement of changes in equity
Equity
Ordinary attributable Non-
share Share Other Retained to owners of controlling
Rm capital premium reserves profit the parent interests Total
Balance as at December 2012 (Audited) 2.2 752.1 323.3 3,662.1 4,739.7 175.6 4,915.3
Dividends declared – – – (913.4) (913.4) – (913.4)
Total comprehensive income – – 61.5 1,283.0 1,344.5 59.1 1,403.6
Changes in non-controlling interests – – 3.8 – 3.8 (7.2) (3.4)
Distribution to non-controlling interests – – – – – (30.9) (30.9)
Share trust transactions and IFRS 2 charge – – 129.0 (121.8) 7.2 – 7.2
Treasury shares acquired – (8.8) – – (8.8) – (8.8)
Balance as at December 2013 (Audited) 2.2 743.3 517.6 3,909.9 5,173.0 196.6 5,369.6
Dividends declared – – – (597.0) (597.0) – (597.0)
Total comprehensive income – – (60.7) 350.0 289.3 26.0 315.3
Changes in non-controlling interests – – (25.4) – (25.4) (7.7) (33.1)
Distribution to non-controlling interests – – – – – (45.7) (45.7)
Share trust transactions and IFRS 2 charge – – 51.2 (11.2) 40.0 – 40.0
Treasury shares acquired – (8.1) – – (8.1) – (8.1)
26 weeks ended June 2014 (Reviewed) 2.2 735.2 482.7 3,651.7 4,871.8 169.2 5,041.0
Balance as at December 2012 (Audited) 2.2 752.1 323.3 3,662.1 4,739.7 175.6 4,915.3
Dividends declared – – – (595.9) (595.9) – (595.9)
Total comprehensive income – – 46.2 481.5 527.7 28.1 555.8
Changes in non-controlling interests – – (1.6) – (1.6) (0.5) (2.1)
Distribution to non-controlling interests – – – – – (30.0) (30.0)
Share trust transactions and IFRS 2 charge – – 66.9 (100.7) (33.8) – (33.8)
Treasury shares acquired – (7.2) – – (7.2) – (7.2)
26 weeks ended June 2013 (Reviewed) 2.2 744.9 434.8 3,447.0 4,628.9 173.2 4,802.1
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 (Rm)
June June December
Financial instruments carried at fair value 2014 2013 2013
in the statement of financial position: (Reviewed) Level 1 Level 2 (Reviewed) Level 1 Level 2 (Audited) Level 1 Level 2
Financial assets at fair value through profit or loss 116.1 – 116.1 231.1 – 231.1 244.3 – 244.3
Investment in a trading and logistics structure – – – 112.8 – 112.8 117.4 – 117.4
Investment in insurance cell captive on
extended warranties 48.0 – 48.0 – – – 44.5 – 44.5
Investment in insurance cell captive
on premium contributions 62.6 – 62.6 36.8 – 36.8 55.9 – 55.9
Investment in insurance cell captive on life cover 0.1 – 0.1 – – – – – –
FEC Asset 5.4 – 5.4 81.5 – 81.5 26.5 – 26.5
Available-for-sale financial assets 11.0 11.0 – 13.8 13.8 – 12.2 12.2 –
Assets measured at fair value 127.1 11.0 116.1 244.9 13.8 231.1 256.5 12.2 244.3
Financial liabilities at fair value through profit or loss 13.7 – 13.7 5.4 – 5.4 2.7 – 2.7
Liabilities measured at fair value 13.7 – 13.7 5.4 – 5.4 2.7 – 2.7
There were no transfers between Level 1 and Level 2 fair value measurements during the six months ending June 2014 and no transfers into or out of Level 3.
Additional information
26 weeks 26 weeks 53 weeks
June 2014 June 2013 December 2013
(Reviewed) (Reviewed) (Audited)
Net asset value per share (cents) 2,243.9 2,132.8 2,382.7
Ordinary shares (000's):
– In issue 217,117 217,039 217,109
– Weighted average (net of treasury shares) 216,951 216,893 216,935
– Diluted weighted average 218,824 219,413 219,268
Preference shares (000's): 2,236 1,521 2,348
– Black Scarce Skills Trust ‘B' shares held by the participants (note 5)
Capital expenditure (Rm):
– Authorised and committed 1,363.0 873.7 1,249.3
– Authorised not committed 637.8 853.7 783.4
Gross operating lease commitments (2014 – 2028) (Rm) 15,017.7 14,148.9 14,445.7
US dollar exchange rates – period end (R/$) 10.59 10.16 10.52
– average (R/$) 10.69 9.16 9.61
Directorate Massmart Holdings Limited ("the Company" or "the Group") For more information
D Dlamini (Chairman), JSE code MSM Call +27 (0) 11 517 0000
CS Seabrooke (Deputy Chairman), ISIN ZAE000152617 Visit www.massmart.co.za
GRC Hayward* (Chief Executive Officer), Share Data: 30 Dec 2013 – 27 Jun 2014
Company registration number 1940/014066/06
S Broader**, A Clarke***, Closing price, 27 June 2014 R132.58
NN Gwagwa, P Langeni, Registered office Massmart House, 16 Peltier Drive, Sunninghill Ext 6, 2191
Company secretary P Sigsworth Share price (26 week high) R147.47
G Pattison*, JP Suarez****, Share price (26 week low) R110.00
I Zwarenstein* (Group Finance Director) Sponsor Deutsche Securities (SA) (Proprietary) Limited, 3 Exchange Square, 87 Maude Street, Sandton, Johannesburg, 2196, South Africa
Market cap R28.8 billion
* Executive ** Canada *** UK **** USA Transfer secretaries Computershare Investor Services (Proprietary) Limited, 70 Marshall Street, Johannesburg, 2001, South Africa Reuters: MSMJ.J
Registered auditors Ernst & Young Inc., 102 Rivonia Road, Sandton, Johannesburg, South Africa Bloomberg: MSM SJ
Operational overview
MASSDISCOUNTERS
GENERAL MERCHANDISE DISCOUNTER
AND FOOD RETAILER
+5 STORES
FROM 143 TO 148
INCREASE IN TRADING SPACE: +3.5%
TOTAL TRADING SPACE:
491,767 SQM
DC SPACE: 178,488 SQM
MASSWAREHOUSE
WAREHOUSE CLUB
NO STORE MOVEMENT
19
INCREASE IN TRADING SPACE: –
TOTAL TRADING SPACE:
195,794 SQM
DC SPACE: 51,300 SQM
MASSBUILD
HOME IMPROVEMENT RETAILER
AND BUILDING MATERIALS SUPPLIER
+1 STORE
FROM 92 TO 93
INCREASE IN TRADING SPACE: +0.8%
TOTAL TRADING SPACE:
413,905 SQM
DC SPACE: 61,733 SQM
MASSCASH
FOOD WHOLESALER, RETAILER
AND BUYING ASSOCIATION
-1 STORE
FROM 122 TO 121
DECREASE IN TRADING SPACE: -0.3%
TOTAL TRADING SPACE:
398,462 SQM
DC SPACE: 31,801 SQM
Notes
1. These condensed consolidated interim results have been prepared in accordance with the 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 International Accounting Standard (IAS) 34 Interim Financial Reporting, the JSE Limited
Listings Requirements and the requirements of the Companies Act 71 of 2008 of South Africa. The accounting policies are consistent
in all material respects with those applied in the most recent annual financial statements.
2. During the current period, the only Massmart shares acquired in the market were by the Massmart Employee Share Trust
where 0.3 million shares (0.1% of average shares in issue) were bought at an average price of R128.73 totalling R35.4 million.
During the prior comparable period, the Massmart Employee Share Trust acquired 0.9 million shares (0.4% of average shares
in issue) at an average price of R193.57 totalling R175.3 million.
3. The impairment of assets in the current period relates to the impairment of tangible assets in Masscash as a result of store
closures. There was no impairment of assets in the prior comparable period.
4. Walmart integration and related costs in the prior comparable period comprise professional fees, integration costs, expatriate
employment costs, share-based payments, travel, consulting costs and other direct expenses relating to the Walmart
transaction. At June 2014, the Supplier Development Fund had a closing balance of R191.9 million (June 2013: R218.5 million).
A net amount of R184.5 million remains unpaid to Walmart (June 2013: R130.9 million), which has been accounted for
in 'trade, other receivables and prepayments' and 'trade, other payables and provisions'. The Walmart transaction costs are
behind us and integration costs are now included as part of our normal operating costs.
5. The 2006 Massmart BEE transaction, gave rise to an IFRS 2 Share-based Payment charge of R12.1 million (June 2013:
R7.9 million). The 'B' preference shares were issued to the Black Scarce Skills Trust.
6. Other non-current liabilities and provisions include the lease smoothing liability of R842.4 million (June 2013: R755.0 million).
7. There were no significant business combinations during the current or prior comparable periods.
8. After the interim reporting period, the acquisitions of two properties that had previously been leased were finalised. The transactions
resulted in Massmart gaining control of the Northriding Builders Warehouse store on 31 July 2014, and the Massmart Head Office
buildings in Sunninghill on 1 August 2014. The impact is an increase in Property, Plant and Equipment of R542.5 million, and
a cash outflow of R542.5 million. With the exception of these acquisitions, there were no significant
subsequent events after the period end that would have impacted the financial information presented.
9. 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 Wal-Mart Stores Inc. (its ultimate Holding Company), were accounted for in the
'Walmart transaction, integration and related costs' in the prior comparable period in the condensed consolidated income
statement. Further detail relating to these costs is disclosed in note 4 above. During the prior comparable period 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 non-current interest-bearing borrowings. As a 52.4% shareholder, Wal-Mart Stores
Inc. will also be receiving a dividend based on their number of shares held.
10. The condensed consolidated interim results for the 26 weeks ended June 2014 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. Any reference to future financial performance included in this announcement has not
been reviewed or reported on by the Group's external auditors. The auditor's report does not necessarily report on all of the
information contained in this announcement/financial results. Shareholders are therefore advised that in order to obtain a
full understanding of the nature of the auditor's engagement they should obtain a copy of the auditor's report together
with the accompanying financial information from the issuer's registered office.
The preparation of the Group's condensed consolidated interim results was supervised by the Group Finance Director,
Ilan Zwarenstein, BCom, BAcc, CA(SA).
Date: 28/08/2014 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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