Wrap Text
Reviewed Interim Condensed Consolidated Results for the period ended 28 June 2015
Massmart Holdings Limited
("the Company" or "the Group")
JSE code MSM
ISIN ZAE000152617
Company registration number 1940/014066/06
Reviewed interim condensed consolidated results for the period ended 28 June 2015
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 13 countries in sub-Saharan Africa, comprising 398 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.
For the 26 weeks ended 28 June 2015 Massmart's total sales of R38.9 billion increased by 9.1% over the prior comparable period.
Comparable stores' sales growth was 6.9% and product inflation 3.7%, suggesting good volume growth.
Group operating profit, excluding foreign exchange movements and interest, grew by 12.7% which was lower than
we'd hoped but is satisfactory given the soft economic environment. This performance was achieved by
effective margin management which lifted gross margins to 18.9% and robust expense control which kept comparable
expense growth below sales growth. Higher net interest paid from funding significant property acquisitions in 2013-14,
and an adverse movement in foreign exchange translations, resulted in headline earnings decreasing by 26.0% while,
excluding foreign exchange movements, headline earnings declined by 3.9%.
During the reporting period, a net six stores were opened or acquired, including two new stores in Africa, resulting in
a net space increase of 0.8% and a total of 398 stores, 35 of these in Africa, at June 2015.
Environment
As we noted at Massmart's May 2015 Annual General Meeting, the South African consumer economy
remains constrained and we anticipate further negative pressure, including Food inflation, interest rates and the Rand
exchange rate. More recently we have seen a 25bps increase in interest rates and further weakening of the Rand. The
South African manufacturing sector is in technical recession, and measured consumer confidence is at a 14-year low,
both partly caused by ongoing electricity outages.
Cost inflation from most sources of product or services is high and compounded by infrastructural inefficiency. Weak
demand is driving business to search aggressively for cost-efficiencies and, as a last resort to pass price increases
on to the consumer. Other options are to invest for ex-South African or ex-African growth and to be measured about new
domestic investment.
All participants - suppliers, service providers, retailers and wholesalers - are competing keenly for profitability and market
share, causing heightened margin pressure across the retail value chain. This intense competition is good news for customers.
Massmart's sales remained resilient for most of this six-month period but slowed markedly in June, caused partly by the
base-effect of the 2014 Soccer World Cup. Sales were soft in July but have been firmer in August.
Sales of large appliances, hi-tech, multimedia and home improvement remain steady, but may be impacted should
upper-income customers' confidence levels fall further.
For several years all Massmart stores have had dedicated back-up generators and so, with few exceptions, we have traded
through electricity outages. Indeed, some indicators would suggest that outages result in increased footfall to our
standalone Makro and Builders Warehouse stores.
Many countries in Sub-Saharan Africa are facing double-dip economic challenges from the stronger US Dollar and weaker
commodity prices, which brings currency volatility and weakness. Regardless, we remain excited about the long-term
growth opportunity across several African countries. This perspective is reinforced by recent successful store openings
of Game stores in Kenya and Zambia and the success of the Builders Warehouse growth strategy outside South Africa.
Divisional operational review
Massdiscounters
comprises the 134-store General Merchandise and Food discounter Game, which trades in South Africa, Botswana, Ghana,
Kenya, Lesotho, Malawi, Mozambique, Namibia, Nigeria, Tanzania, Uganda and Zambia; and the 24-store Hi-tech retailer
DionWired.
Total sales for the period increased by 9.1%. Comparable sales grew by 4.1% with product inflation of 2.1%. Game SA saw
good trading with total sales growth of 9.3% and trading profit up by 12.1%. Game Africa's total
Rand sales and sales in local currencies increased by 9.7% and 14.2% respectively but profit was below that recorded
for the prior comparable period due to expense inflation, operational challenges and currency devaluations.
DionWired's total sales growth was 7.9%. The online offering represents 1.5% of total sales (June
2014: 2.1%), slightly lower due to changes in aspects of our offering. We are excited that nine stores have been
selected recently to become Apple White Stores.
Massdiscounters' trading profit before interest and tax increased by 8.0%.
The roll-out of Fresh continues with 74 Game stores now offering this category, and Food sales comprise 19.8% of
Game's total sales. Food comparable sales growth remains strong at 14.1%. Recent customer intercept
research has shown that 20% of Game customers regard Game as a food destination and that the majority of these food
customers cross-shop our general merchandise categories.
We are encouraged by Minister Patel's April announcement of an inquiry into, amongst other things,
tenancy arrangements in shopping malls. Some major food retailers continue to defend lease exclusivities, inhibiting
competition and in some cases preventing smaller businesses from entering shopping centres. Regardless of how these
restrictions may be characterised by the major retailers, we believe them to be intuitively anti-competitive.
Four Game stores (two in Africa) and one DionWired store were opened, increasing trading space by 3.1% to
521,892m2. We are excited about this week's opening of our first power-centre, being a
new Game store adjacent to the Builders Warehouse store in Matola, Mozambique.
Masswarehouse
comprises the 19-store Makro warehouse-club trading in Food, General Merchandise and Liquor in South Africa; and The
Fruitspot.
Makro's total and comparable sales for the period increased by 11.4% each, with product inflation of
4.3%. This sales performance demonstrates customers responding strongly to our value proposition. The growth in
Makro's trading profit before interest and tax was pleasing at 13.5%. The business traded superbly
in a challenging environment that saw margin pressure across Food, Liquor and General Merchandise, and delivered great
expense control too.
Much is being learnt from the General Merchandise and Liquor online offerings, launched in March and October 2014
respectively, and we remain excited at the potential of this channel. Analysis of online customer purchasing behavior
has indicated that click-and-collect customers typically make further purchases in-store when collecting their online
purchases. Whilst still effectively in test-phase, the new Makro Pick-up locker project demonstrates our willingness to
innovate, and during September 2015 we will launch a Commercial Customer online solution.
There were no new stores in the period but we anticipate opening a new store near Carnival Mall in the east of
Johannesburg in April 2016.
Massbuild
comprises 99 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 Mozambique.
Massbuild grew total sales for the period by 16.3%. Comparable sales increased by 10.6% with product inflation of 5.1%.
Sales growth in Builders Warehouse and Builders Express remains strong and suggests continued market share gains as
customers respond to this superb offering to retail and professional customers. Sales outside of South Africa already
represent 6% of Massbuild sales and grew by 68%, bolstered by the strong performance of the Matola, Mozambique, store
opened in July 2014.
Massbuild's trading profit before interest and tax increased by an exceptional 31.0%.
One Builders Warehouse store was opened; one Builders Express store was opened and one closed; and two Builders Trade
Depot stores were closed. Net trading space at the end of the period decreased marginally by 0.5% to
434,534 m2. We are looking forward to the opening of our first Builders Warehouse store in Zambia towards
the end of 2015.
Masscash
comprises 73 Wholesale Cash & Carry and 49 Retail stores trading in South Africa, Botswana, Lesotho, Mozambique,
Namibia and Swaziland; and Shield, a voluntary buying association.
In the vibrant and very competitive South African Wholesale and Retail Food environments, total sales increased by
4.8%. Comparable sales increased by 3.9% with product inflation of 3.6%. Wholesale, in particular, was affected by
Commodities' deflation - its highest participation category. Despite this,
Wholesale's market share has increased since 2014. Total sales growth in our non-South African
Wholesale businesses, representing 20% of Wholesale sales, was 5.6% as performance was affected by trading challenges
in Botswana.
Masscash Retail traded well in an increasingly competitive Retail Food market, reporting comparable sales growth of
6.3%. Profit performance was compromised this period due to new store roll-outs, increased security costs, and the
costs and distraction of the SAP roll-out, the first phase of which was effected in the KZN region this period.
Masscash's trading profit before interest and tax decreased by 34.5%.
Three Retail stores were opened and one was closed, and some Wholesale stores were re-sized, resulting in net trading
space at the end of the period decreasing slightly by 0.3% to 399,393 m2.
Financial review
Financial performance
Total Group sales growth was 9.1% over the prior comparable period, with comparable sales growth of 6.9%. Product
inflation was 3.7%, suggesting real comparable volume growth of 3.2%. General Merchandise inflation remained steady at
3.6%, Food & Liquor and Home Improvement inflation decreased to 3.3% and 5.2% respectively. Sales in our African
businesses represented 8.2% of total sales and increased by 14.6% in Rands.
During the period, 10 stores were opened and four were closed, resulting in a total of 398 stores at June 2015. Net
trading space increased by 0.8% to 1,551,613 m2.
The Group's gross margin of 18.9% was higher than that of the prior comparable period of 18.6%. A
large portion of this increase stems from increased sales in Massbuild and Masswarehouse, at higher margins.
Total operating expenses (excluding foreign exchange movements) increased by 9.9% over the prior comparable period.
Comparable operating expenses were well-controlled and increased by 7.3%. Employment costs, the
Group's most significant cost, increased by 12.2%, largely due to the opening of new stores which
led to a 3.3% increase in full-time equivalent employees. Occupancy costs increased by 8.0%. Depreciation and
amortisation increased by 12.8% over the prior comparable period.
Included in operating profit is a net realised and unrealised foreign exchange translation loss of R106.7 million (June
2014: R7.9 million loss).
The majority of the foreign exchange loss is as a result of the weakening of the average basket of African currencies
against the Rand. The weakening of the Rand against the US Dollar exacerbated this loss.
Excluding foreign exchange movements, earnings before interest, tax, depreciation and amortisation (EBITDA) of
R1.3 billion increased over the prior comparable period by 11.5%.
Year-on-year interest-bearing debt has increased by R1.8 billion. The Group's strategy to own key properties,
and continued expansion have been drivers of the increase. More specifically, three significant leaseheld property
transactions in the second half of 2014 occurred at an aggregate cost of R739.2 million. Over and above these
acquisitions, property, plant and equipment has increased by a further R738.5 million as the Group has
continued to invest in new stores and to refurbish existing stores. Finally, at reporting date, creditors
fund R376.9 million less of inventory and debtors than in the prior comparable period. The result of the increase
in debt is that net interest paid has grown to R234.8 million, further aggravated by interest rate increases.
The Group's effective tax rate is 31.9% (June 2014: 30.4%).
The non-controlling interests comprise store managers' holdings in Masscash stores and non-controlling
interests in acquired Masscash businesses.
Headline earnings and headline earnings per share (HEPS) decreased by 26.0% over the prior comparable period largely as
a result of the significant foreign exchange loss incurred. Adjusting for the effect of the foreign exchange movements
in both periods results in a decrease in headline earnings and in HEPS of 3.9% and 3.8% respectively.
Financial position
Inventories have increased year-on-year as a result of new stores, stock days however have remained stable at 61 days.
Debtors have increased at a slightly slower rate than sales.
Trade creditor days at 57.6 are slightly under the prior comparable period's 59.7 as a result of some early settlement
discounts taken.
The net book value of property, plant and equipment increased by 24.0% compared to June 2014, as a result of acquiring
some of our key properties and the investment in new stores.
The Group's gearing ratio (debt:equity) increased to 53.0% (June 2014: 38.1%), for the reasons
explained above. The annual rolling return on equity was 20.4% at June 2015 (June 2014: 25.5%). Excluding foreign
exchange movements, this figure was 22.8% (June 2014: 26.6%).
Operating cash utilised amounted to R1.6 billion. Total capital expenditure of R0.7 billion comprises: R0.4 billion on
replacement expenditure; and R0.3 billion on expansionary expenditure, and is in line with expectations.
Strategic priorities
Our areas of strategic focus remain unchanged:
To drive the growth and profitability of the core South African business over the medium-term is a priority. Although
we are making good progress in this regard, we are constrained by the short-term trading environment;
To expand further into Food Retail and Fresh in our existing formats;
Sub-Saharan African expansion remains a priority and in the next two years we anticipate opening eight new stores representing
African space growth of about 21.9%; and
We continue to expand and improve our ecommerce offerings.
Regarding Africa, Massmart can take three different formats into Africa - being Game, Builders Warehouse
and Cash & Carry - as we meet our promise to Save People Money So They Live
Better. With limited in-country infrastructure, expensive resources and volatile economies, we will continue a patient
and measured roll-out of stores. Higher sales densities - the average annual sales per African store
is R192 million - deliver highly profitable stores which comfortably exceed any likely foreign
exchange currency translation losses.
Prospects
For the 33 weeks to 16 August 2015, total sales increased by 8.7% and comparable sales increased by 6.8%. Whilst we
remain confident and resolute about delivering our strategic priorities, we are concerned that for the next
12-18 months the South African and most sub-Saharan consumer economies are unlikely to be
supportive. In addition, Massmart's South African performance may be hampered by our relative
exposure to General Merchandise in a tightening interest rate cycle.
The financial information on which this forward-looking 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 interim cash dividend of 146.0 cents per share, in respect of the period ended 28 June 2015, has been declared.
The number of shares in issue at the date of this declaration is 217,136,334.
The Group's Board of Directors will be reassessing Massmart's dividend level given the Group's higher actual and anticipated
capital expenditure and, with effect from the 2015 final dividend, is likely to adjust the dividend cover to levels similar
to retail peers.
The dividend has been declared out of income reserves as defined in the Income Tax Act, 1962, and will be subject to
the South African dividend withholding tax ("DWT") 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, 11 September 2015
First trading day ex dividend on the JSE:
Monday, 14 September 2015
Record date:
Friday, 18 September 2015
Payment date:
Monday, 21 September 2015
Share certificates may not be dematerialised or rematerialised between Monday, 14 September 2015 and Friday, 18
September 2015, 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
Chief Executive Officer
Johannes van Lierop
Chief Financial Officer
26 August 2015
Our financial highlights:
Sales
R38,917.4 m
Up by 9.1%
2014: R35,659.8 m
Operating profit before forex and interest
R791.9 m
Up by 12.7%
2014: R702.9 m
Operating profit before interest
R685.2 m
Down by 1.4%
2014: R695.0 m
Headline earnings before forex
R355.4 m
Down by 3.9%
2014: R369.8 m
Headline earnings after forex (taxed)
R269.3 m
Down by 26.0%
2014: R364.1 m
Dividend per share
146.0 cents
Unchanged
2014: 146.0 cents
Divisional trading review
52 weeks
26 weeks 26 weeks Comparable Estimated December
June 2015 % of June 2014 % of Period % sales % sales 2014 % of
Rm (Reviewed) sales (Reviewed) sales % growth growth inflation (Audited) sales
Sales 38,917.4 35,659.8 9.1 6.9 3.7 78,173.2
Massdiscounters 8,973.6 8,225.8 9.1 4.1 2.1 17,955.2
Masswarehouse 10,759.2 9,659.4 11.4 11.4 4.3 21,554.8
Massbuild 5,637.1 4,847.9 16.3 10.6 5.1 10,822.8
Masscash 13,547.5 12,926.7 4.8 3.9 3.6 27,840.4
Trading profit
before interest and
tax 806.7 2.1 729.9 2.0 10.5 2,061.7 2.6
Massdiscounters 29.6 0.3 27.4 0.3 8.0 180.7 1.0
Masswarehouse 461.3 4.3 406.5 4.2 13.5 1,044.3 4.8
Massbuild 243.9 4.3 186.2 3.8 31.0 537.6 5.0
Masscash 71.9 0.5 109.8 0.8 (34.5) 299.1 1.1
Trading profit excludes several items. A detailed reconciliation between trading and operating profit can be found
below the 'Condensed consolidated income statement' table.
Condensed consolidated income statement
26 weeks 26 weeks 52 weeks
June June December
2015 2014 Period 2014
Rm (Reviewed) (Reviewed) % change (Audited)
Revenue 38,980.7 35,756.5 9.0 78,319.0
Sales 38,917.4 35,659.8 9.1 78,173.2
Cost of sales (31,545.8) (29,010.2) (8.7) (63,610.8)
Gross profit 7,371.6 6,649.6 10.9 14,562.4
Other income 63.3 96.7 (34.5) 145.8
Depreciation and amortisation (461.7) (409.2) (12.8) (846.6)
Impairment of assets (note 3) (3.4) (14.9) 77.2 (24.6)
Employment costs (3,236.8) (2,885.1) (12.2) (6,109.0)
Occupancy costs (1,415.7) (1,311.0) (8.0) (2,678.8)
Other operating costs (1,525.4) (1,423.2) (7.2) (3,033.3)
Operating profit before foreign
exchange movements and interest 791.9 702.9 12.7 2,015.9
Foreign exchange loss (note 4) (106.7) (7.9) (49.8)
Operating profit before interest 685.2 695.0 (1.4) 1,966.1
Finance costs (252.5) (176.6) (43.0) (386.8)
Finance income 17.7 21.7 (18.4) 41.5
Net finance costs (234.8) (154.9) (51.6) (345.3)
Profit before taxation 450.4 540.1 (16.6) 1,620.8
Taxation (143.8) (164.1) 12.4 (483.4)
Profit for the period 306.6 376.0 (18.5) 1,137.4
Profit attributable to:
Owners of the parent 281.6 350.0 (19.5) 1,079.8
Non-controlling interests 25.0 26.0 (3.8) 57.6
Profit for the period 306.6 376.0 (18.5) 1,137.4
Basic EPS (cents) 129.9 161.3 (19.5) 497.8
Diluted basic EPS (cents) 127.9 159.9 (19.9) 492.9
Dividend (cents):
Interim 146.0 146.0 - 146.0
Final - - - 275.0
Total 146.0 146.0 - 421.0
Reconciliation between trading profit and operating profit before foreign exchange movements, interest and taxation
26 weeks 26 weeks 52 weeks
June 2015 June 2014 December 2014
Rm (Reviewed) (Reviewed) (Audited)
Profit before interest and taxation
Trading profit before interest and taxation 806.7 729.9 2,061.7
Impairment of assets (note 3) (3.4) (14.9) (24.6)
BEE transaction IFRS 2 charge (11.4) (12.1) (21.2)
Operating profit before foreign exchange
movements and interest 791.9 702.9 2,015.9
Headline earnings
26 weeks 26 weeks 52 weeks
June June December
2015 2014 Period 2014
Rm (Reviewed) (Reviewed) % change (Audited)
Reconciliation of profit for the period
to headline earnings
Profit for the period attributable to
owners of the parent 281.6 350.0 (19.5) 1,079.8
Impairment of assets (note 3) 3.4 14.9 24.6
(Profit)/loss on disposal of tangible
and intangible assets (1.4) (1.3) 1.4
Profit on sale of assets classified as
held for sale (1.1) - -
Foreign currency translation reserve
re-classified to the Income Statement (12.9) - -
Total tax effects of adjustments (0.3) 0.5 (0.3)
Headline earnings 269.3 364.1 (26.0) 1,105.5
Headline earnings before foreign
exchange (taxed) 355.4 369.8 (3.9) 1,141.4
Headline EPS (cents) 124.2 167.8 (26.0) 509.7
Headline EPS before foreign exchange
(taxed) (cents) 164.0 170.5 (3.8) 526.2
Diluted headline EPS (cents) 122.4 166.4 (26.4) 504.7
Diluted headline EPS before foreign
exchange (taxed) (cents) 161.5 169.0 (4.4) 521.1
Condensed consolidated statement of comprehensive income
26 weeks 26 weeks 52 weeks
June June December
2015 2014 Period 2014
Rm (Reviewed) (Reviewed) % change (Audited)
Profit for the period 306.6 376.0 (18.5) 1,137.4
Items that will not subsequently be
re-classified to the Income Statement: - - (8.9)
Post retirement medical aid actuarial
loss - - (8.9)
Items that will subsequently be
re-classified to the Income Statement: (36.4) (60.7) (55.6)
Foreign currency translation reserve (28.9) (49.4) (53.7)
Cash flow hedges - effective portion of
changes in fair value (8.7) (14.3) 1.4
Fair value movement on
available-for-sale financial assets (2.2) (1.2) (3.7)
Income tax relating to components of
other comprehensive income 3.4 4.2 0.4
Total other comprehensive loss for the
period, net of tax (36.4) (60.7) (64.5)
Total comprehensive income for the
period 270.2 315.3 (14.3) 1,072.9
Total comprehensive income attributable
to:
Owners of the parent 245.2 289.3 1,015.3
Non-controlling interests 25.0 26.0 57.6
Total comprehensive income for the
period 270.2 315.3 (14.3) 1,072.9
Condensed consolidated statement of financial position
June June December
2015 2014 2014
Rm (Reviewed) (Reviewed) % change (Audited)
ASSETS
Non-current assets 11,433.3 9,905.7 15.4 11,018.3
Property, plant and equipment 7,631.8 6,154.1 24.0 7,239.2
Goodwill and other intangible assets 2,960.3 2,903.8 1.9 2,958.7
Investments and other financial assets 161.7 193.8 (16.6) 158.2
Deferred taxation 679.5 654.0 3.9 662.2
Current assets 16,110.3 14,978.4 7.6 17,870.1
Other current financial assets (note 6) - - - 229.3
Inventories 10,530.8 9,774.7 7.7 11,228.8
Trade and other receivables 3,848.2 3,624.7 6.2 4,288.3
Taxation 202.7 161.7 25.4 56.3
Cash on hand and bank balances 1,528.6 1,417.3 7.9 2,067.4
Non-current assets classified as held
for sale 3.0 - 18.0
Total assets 27,546.6 24,884.1 10.7 28,906.4
EQUITY AND LIABILITIES
Total equity 5,212.5 5,041.0 3.4 5,527.2
Equity attributable to owners of the
parent 5,033.0 4,871.8 3.3 5,334.4
Non-controlling interests 179.5 169.2 6.1 192.8
Non-current liabilities 3,368.6 2,515.1 33.9 3,236.8
Interest-bearing borrowings (note 7) 2,184.7 1,454.6 50.2 2,133.9
Deferred taxation 70.2 94.9 (26.0) 61.3
Other non-current liabilities and
provisions (note 8) 1,113.7 965.6 15.3 1,041.6
Current liabilities 18,965.5 17,328.0 9.5 20,142.4
Trade, other payables and provisions 14,512.2 13,942.1 4.1 18,518.9
Taxation 155.7 152.1 2.4 208.3
Bank overdrafts (note 7) 3,267.1 2,650.7 23.3 584.0
Interest-bearing borrowings (note 7) 1,030.5 583.1 76.7 831.2
Total equity and liabilities 27,546.6 24,884.1 10.7 28,906.4
Condensed consolidated statement of cash flows
26 weeks 26 weeks 52 weeks
June 2015 June 2014 December 2014
Rm (Reviewed) (Reviewed) (Audited)
Operating cash before working capital movements 1,308.0 1,137.5 2,983.4
Working capital movements (2,925.3) (2,519.3) (295.1)
Cash (utilised)/generated from operations (1,617.3) (1,381.8) 2,688.3
Taxation paid (347.7) (461.1) (683.4)
Net interest paid (175.4) (154.9) (345.3)
Dividends paid (622.8) (597.0) (914.0)
Cash (outflow)/inflow from operating activities (2,763.2) (2,594.8) 745.6
Investment to maintain operations (365.5) (326.1) (857.4)
Investment to expand operations (289.2) (263.0) (1,322.1)
Investment in subsidiaries (28.2) (6.1) (14.4)
Proceeds on disposal of property, plant and
equipment 7.8 19.7 32.5
Proceeds on disposal of assets classified as held
for sale 16.1 - -
Other net investing activities 3.5 (6.7) 14.9
Cash outflow from investing activities (655.5) (582.2) (2,146.5)
Cash inflow from financing activities 225.7 404.7 1,349.7
Net decrease in cash and cash equivalents (3,193.0) (2,772.3) (51.2)
Foreign exchange movements (28.9) (49.4) (53.7)
Opening cash and cash equivalents 1,483.4 1,588.3 1,588.3
Closing cash and cash equivalents (note 7) (1,738.5) (1,233.4) 1,483.4
Condensed consolidated statement of changes in equity
Equity
attributable
to owners Non-
share Share Other Retained of the controlling
Rm capital premium reserves profit parent interests Total
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 - - - (914.0) (914.0) - (914.0)
Total comprehensive
income - (64.5) 1,079.8 1,015.3 57.6 1,072.9
Changes in
non-controlling
interests - - (27.6) - (27.6) (11.0) (38.6)
Distribution to
non-controlling
interests - - - - - (50.4) (50.4)
IFRS 2 charge and Share
Trust transactions - - 125.1 (27.4) 97.7 - 97.7
Treasury shares acquired - (9.9) (0.1) - (10.0) - (10.0)
Balance as at December
2014 (Audited) 2.2 733.4 550.5 4,048.3 5,334.4 192.8 5,527.2
Dividends declared - - - (589.7) (589.7) - (589.7)
Total comprehensive
income - - (36.4) 281.6 245.2 25.0 270.2
Changes in
non-controlling
interests - - 0.6 - 0.6 (2.7) (2.1)
Distribution to
non-controlling
interests - - - - - (35.6) (35.6)
IFRS 2 charge and Share
Trust transactions - - 99.3 (22.2) 77.1 - 77.1
Treasury shares acquired - (34.6) - - (34.6) - (34.6)
26 weeks ended June
2015 (Reviewed) 2.2 698.8 614.0 3,718.0 5,033.0 179.5 5,212.5
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)
IFRS 2 charge and Share
Trust transactions - - 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
Fair value hierarchy
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
transactions and other valuation models, have been applied and significant inputs include market yield curves and
exchange rates. For non-current assets classified as held for sale (level 3) fair value less costs to sell has been
determined based on the sale agreements. The table below reflects 'Financial instruments' and 'Non-current assets
classified as held for sale' carried at fair value, and those 'Financial instruments' and 'Non-current assets
classified as held for sale' that have carrying amounts that differ from their fair values, in the Statement of
Financial Position.
June June December
2015 Level Level Level 2014 Level Level Level 2014 Level Level Level
Rm (Reviewed) 1 2 3 (Reviewed) 1 2 3 (Audited) 1 2 3
Financial
assets at
fair value
through
profit or
loss 138.8 - 138.8 - 112.5 - 112.5 - 155.1 - 155.1 -
Investment in
cell captives
and other 134.4 - 134.4 - 110.7 - 110.7 - 125.2 - 125.2 -
FEC asset
(de-designated) 4.4 - 4.4 - 1.8 - 1.8 - 29.9 - 29.9 -
Financial
asset
designated as
a cash flow
hedging
instrument 3.2 - 3.2 - 3.6 - 3.6 - 13.7 - 13.7 -
FEC asset
(designated) 3.2 - 3.2 - 3.6 - 3.6 - 13.7 - 13.7 -
Loans and
receivables 13.5 - 13.5 - 31.7 - 31.7 - 30.3 - 30.3 -
Employee
share trust
loans 13.5 - 13.5 - 31.7 - 31.7 - 30.3 - 30.3 -
Available-for-sale
financial
assets 6.3 6.3 - - 11.0 11.0 - - 8.4 8.4 - -
Listed
investments 6.3 6.3 - - 11.0 11.0 - - 8.4 8.4 - -
Non-current
assets
classified as
held for sale 7.0 - - 7.0 - - - - 22.0 - - 22.0
168.8 6.3 155.5 7.0 158.8 11.0 147.8 - 229.5 8.4 199.1 22.0
Financial
liabilities
at amortised
cost 2,880.2 - 2,880.2 - 1,728.6 - 1,728.6 - 2,653.0 - 2,653.0 -
Medium-term
loan and bank
loans 2,880.2 - 2,880.2 - 1,728.6 - 1,728.6 - 2,653.0 - 2,653.0 -
Financial
liabilities
at fair value
through
profit or
loss 2.1 - 2.1 - 8.0 - 8.0 - 4.5 - 4.5 -
FEC liability
(de-designated) 2.1 - 2.1 - 8.0 - 8.0 - 4.5 - 4.5 -
Financial
liability
designated as
a cash flow
hedging
instrument 3.4 - 3.4 - 5.7 - 5.7 - 2.2 - 2.2 -
FEC liability
(designated) 3.4 - 3.4 - 5.7 - 5.7 - 2.2 - 2.2 -
2,885.7 - 2,885.7 - 1,742.3 - 1,742.3 - 2,659.7 - 2,659.7 -
There were no transfers of financial instruments between Level 1, Level 2 and Level 3 fair value measurements during the
period ended June 2015
Additional information
26 weeks 26 weeks 52 weeks
June 2015 June 2014 December 2014
(Reviewed) (Reviewed) (Audited)
Net asset value per share (cents) 2,317.0 2,243.9 2,456.9
Ordinary shares (000's):
In issue 217,136.3 217,116.8 217,118.1
Weighted average (net of treasury shares) 216,764.1 216,951.1 216,907.6
Diluted weighted average 220,020.1 218,823.7 219,055.0
Preference shares (000's):
Black Scarce Skills Trust 'B' shares in
issue 2,840.5 2,860.0 2,858.7
Capital expenditure (Rm):
Authorised and committed 844.7 1,363.0 864.1
Authorised not committed 1,047.4 637.8 1,155.1
Gross operating lease commitments (2015 - 2029)
(Rm) 15,270.1 15,017.7 15,482.1
US dollar exchange rates: - period end (R/$) 12.11 10.59 11.60
- average (R/$) 11.90 10.69 10.83
Share Data
29 Dec 2014 - 26 June 2015
Closing share price at 26 June 2015
R150.77
Share price (26 week high) R175.00
Share price (26 week low) R138.73
Market
Cap
R32.7bn
Reuters
MSMJ.J
Bloomberg
MSM SJ
Source: I-Net
Notes
1. These reviewed interim condensed consolidated results 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 Standards 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 and
methods of computation used in the preparation of the reviewed interim condensed consolidated results are in terms of
IFRS and are consistent in all material respects with those applied in the most recent annual financial statements, as
none of the amendments coming into effect in the current financial period have had an impact on the financial reporting
of the Group. During the current period the Group reassessed the designation of a number of its intercompany loans to
its foreign operations in Africa as per IAS 21. As a result, certain loans were designated as part of the
Group's net investment in these foreign operations and the associated foreign exchange gains and
losses have been recognised in the foreign currency translation reserve.
2. During the current period, 0.7 million Massmart shares (0.3% of average shares in issue) were acquired in the market by
the Massmart Employee Share Trust at an average price of R158.71 totalling R108.6 million. During the prior comparable
period, the Massmart Employee Share Trust acquired 0.3 million shares (0.1% of average shares in issue) at an average
price of R128.73 totalling R35.4 million.
3. The impairment of assets in the current and prior comparable periods relate to the impairment of tangible assets in
Masscash as a result of store closures.
4. Massmart's foreign exchange loss of R106.7 million (June 2014: R7.9 million) arose as a result of
its foreign- and Rand-denominated intercompany loans to its African subsidiaries, as well as its US-Dollar-denominated
liability to Walmart. In the current period, a combination of Massmart's increased investment into
the rest of Africa; the weakening of the average basket of other African currencies against the Rand; and the weakening
of the Rand against the US Dollar, resulted in a significant increase in Massmart's foreign exchange loss.
5. There were no significant business combinations during the current or prior comparable periods.
6. Massmart entered into an agreement in 2013 to acquire the Makro Amanzimtoti store. A current loan of R214.2 million was
provided to the seller in 2014 in anticipation of the transfer of the property. Transfer of the property was approved
in February 2015 and as a result the current loan was reversed and the property was recognised.
7. 'Interest-bearing borrowings' and 'Bank
overdrafts' have increased by R250.1 million and R2.7 billion respectively since year-end. This
additional funding has been used to fund inventory for new stores, as well as to settle year-end trade creditors.
'Closing cash and cash equivalents' balances year-on-year have reduced by R505.1
million primarily as a result of multiple property acquisitions in the second half of 2014.
8. 'Other non-current liabilities and provisions' include the lease smoothing
liability of R976.0 million (June 2014: R842.4 million).
9. There were no significant subsequent events after the current period end.
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. At June 2015,
the Supplier Development Fund had a closing balance of R140.8 million (June 2014: R191.9 million). A net amount of
R248.5 million remains unpaid to Walmart (June 2014: R184.5 million), which has been accounted for in
'Trade, other receivables and prepayments' and 'Trade, other
payables and provisions'. The Group has a medium-term loan with Walmart repayable after five years,
on which interest of 7.46% is paid quarterly. The loan of R600.0 million is accounted for under interest-bearing
non-current liabilities. As a 52.4% shareholder, Wal-Mart Stores, Inc. will also be receiving a dividend based on their
number of shares held.
11. These reviewed interim condensed consolidated results 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 reviewed interim condensed consolidated financial statements was
supervised by the Chief Financial Officer, Johannes van Lierop, Bachelor of Business Economics, RA (Amsterdam).
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
3 Exchange Square,
87 Maude Street, Sandton, Johannesburg, 2196, South Africa
Transfer secretaries
Computershare Investor Services (Proprietary) Limited,
70 Marshall Street, Johannesburg, 2001 South Africa
Registered auditors
Ernst & Young Inc.
102 Rivonia Road, Sandton, Johannesburg, South Africa
Directorate
K Dlamini (Chairman), CS Seabrooke (Deputy Chairman), GRC Hayward* (Chief Executive Officer), S Broader**,
A Clarke***, NN Gwagwa, P Langeni, JP Suarez**, J van Lierop* (Chief Financial Officer)
* Executive ** USA *** UK
MASSDISCOUNTERS
General merchandise and food discounter
Sales
R8,973.6 m
UP BY 9.1%
Trading space
R29.6 m
UP BY 8.0%
Net new stores
5
FROM 153 to 158
Trading space
521,892 SQM
Game
Game Liquor
134 STORES
South Africa, Botswana, Ghana,
Kenya, Lesotho, Malawi,
Mozambique, Namibia, Nigeria,
Tanzania, Uganda, Zambia
DionWired
24 STORES
South Africa
MASSWAREHOUSE
Warehouse club Food, liquor and general merchandise
Sales
R10,759.2 m
UP BY 11.4%
Trading profit before interest and tax
R461.3 m
UP BY 13.5%
Net new stores
0
19 (UNCHANGED)
Trading space
195,794 SQM
Makro
Fruitspot
19 STORES
South Africa
MASSBUILD
Home improvement retailer and building materials supplier
Sales
R5,637.1 m
UP BY 16.3%
Trading profit before interest and tax
R243.9 m
UP BY 31.0%
Net new stores
-1
FROM 100 TO 99
Increase in trading space
6.3%
TO 434,534 SQM
Builders Warehouse
36 STORES
South Africa, Botswana, Mozambique
Builders Express
41 STORES
South Africa
Builders Trade Depot
14 STORES
South Africa
Builders Superstore
8 STORES
South Africa
MASSCASH
Food wholesaler, retailer and buying association
Sales
R13,547.5 m
UP BY 4.8%
Trading profit before interest and tax
R71.9 m
UP BY 34.5%
Net new stores
2
FROM 122 TO 122
Trading space
0.3%
399,393 SQM
CBW
Jumbo
Trident
73 WHOLESALE STORES
South Africa, Botswana, Lesotho, Mozambique, Namibia, Swaziland
Cambridge Food
Rhino Cash & Carry
49 RETAIL STORES
South Africa
Shield
Liquorland
Saverite
BUYING ASSOCIATIONS
South Africa, Botswana, Namibia, Swaziland
Date: 27/08/2015 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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