Wrap Text
Interim results for the 26 weeks ended 26 June 2016
Massmart Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1940/014066/06)
Share code MSM
ISIN ZAE000152617
("Massmart" or "the Group")
Interim results for the 26 weeks ended 26 June 2016
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 405 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.
Our financial highlights:
Sales
R42,310.9 m
Up by 8.7%
2015: R38,917.4 m
Operating profit before forex and interest
R944.3 m
Up by 19.2%
2015: R791.9 m
Operating profit before interest
R819.1 m
Up by 19.5%
2015: R685.2 m
Headline earnings before forex (taxed)
R406.0 m
Up by 14.2%
2015: R355.4 m
Headline earnings after forex (taxed)
R320.6 m
Up by 19.0%
2015: R269.3 m
Total dividend
per share
74.1 cents
Down by 49.2%
2015: 146.0 cents
Overview
In a trading environment that became increasingly difficult during the six months to June 2016, Massmart's total sales were R42.3 billion, an increase of 8.7% over the prior period. Comparable stores' sales growth was 6.4%, with product inflation of 5.8%.
Effective margin management and satisfactory expense control resulted in Group trading profit, excluding foreign exchange movements and interest, growing by 13.5% to R902.8 million, while headline earnings increased by 19.0% to R320.6 million.
The sales performances across our major product categories reflect the economic pressures within the South African consumer environment, with total Food & Liquor sales growing at 13.2% for the period while General Merchandise and DIY total sales grew by only 3.4%. Despite some extreme currency weakness and challenging operating environments, total sales growth from our non-South African stores was robust at 23.2% (16.5% in constant currencies).
Nine stores were opened, including one outside South Africa, during the six months and these represent new space growth of 2.4%. Our focus on optimising the Group's store footprint continued with seven under-performing stores being closed, resulting in an overall net space decrease of 0.1%. Our portfolio of 405 stores includes 38 outside South Africa and these represent 9.3% of the Group's sales.
South African environment
As expected, the South African consumer economy weakened during the six months under review. This became particularly evident from April as Food price increases accelerated and the weaker Rand began impacting prices of imported General Merchandise. These pressures, coupled with negligible economic growth, severely constrained consumers' discretionary spending on durable goods to support spending on non-and semi-durables. We anticipate that this situation will make trading for the remainder of 2016 difficult.
Consequently, Massmart's sales growth softened in General Merchandise and DIY. By contrast, Food and Liquor sales' growth accelerated with higher inflation but also due to very effective trading and positive price-gaps to competitors across our Retail and Wholesale businesses.
The recent rains however, may be an early indication that crops planted later this year will be harvested successfully, potentially resulting in lower prices across most commodity categories in early 2017. If the sustained recent Rand strength should start reducing General Merchandise price pressure and, provided the consumer confidence levels increase, we may see better sales of appliances, hi-tech, multimedia and home improvement products in 2017.
Our businesses focused intensely on sourcing well-priced merchandise and formulating deals that offer our customers exceptional value, resulting in market share growth across all major categories. We remain driven by our commitment to Saving People Money So They Can Live Better, and estimate that we saved customers approximately R783 million during the period.
African environment
Many countries in Sub-Saharan Africa continue to struggle with the dual challenges of a strong US Dollar and weaker commodity prices. A few countries saw severe currency weakness which was compounded by shortages of foreign currency needed to settle imports into those countries. Despite this, sales in our non-SA stores remain robust with total sales growth of 23.2% (and 16.5% in constant currencies) and represent average annual sales of R207.8 million per store.
Non-SA sales currently represent 22.1% of Game's total sales, 8.5% of Massbuild and 13.4% of Masscash Wholesale respectively. We continue to seek new store opportunities across selected African countries and later this year we expect to open a new store in Nigeria, with three further non-SA store openings planned for 2017.
Divisional operational review
Massdiscounters
comprises the 139-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 7.6% and comparable sales grew by 2.4% with product inflation of 4.4%. This sales performance was boosted by strong Food sales in South Africa, where Game's total sales growth was 3.3%, and a great sales performance in our non-SA stores where total Rand sales increased by 25.7% (and by 20.1% in local currencies). DionWired performed exceptionally and reported good sales growth and significantly higher trading profit.
Our Fresh roll-out continues with 82 Game stores now offering this category, and Food and Liquor sales comprise 21.8% of Game's total sales.
Our focus on improving the Game customer proposition over the last two years, addressing the merchandise execution and driving supply chain efficiencies manifested in a very positive margin and expense performance, and so Massdiscounters' trading profit before interest and tax increased by 110.8%.
Earlier this month we announced Albert Voogd as the incoming Massdiscounters CEO. Albert (51) is Dutch, has an MSc in Business Administration, and is an experienced retail veteran across Developed and Emerging markets. He was with Ahold for more than 20 years, and has worked in Europe, the USA and South America. Outgoing CEO Robin Wright, whose drive and energy played a very significant part in the improved Game performance, will be retiring but will continue to work with Massmart on specific projects.
Two Game stores (including one in Zambia) and one DionWired store were opened and one DionWired store was closed, increasing trading space by 1.3% to 540,117m2.
Masswarehouse
comprises the 20-store Makro warehouse-club trading in Food, General Merchandise and Liquor in South Africa; and The Fruitspot.
Total sales for the period increased by 9.2% and comparable sales grew by 7.2% with product inflation of 5.5%. Given the dynamics of the consumer environment, sales growths in Food and Liquor were higher than these figures while growth in General Merchandise was lower.
In April we had a very successful store opening near Carnival Mall, east of Johannesburg, and it continues to perform well. Total online sales in General Merchandise and Liquor grew by 100% in the six months to June. Fruitspot performed well in a period of significant volatility in price and supply.
Although there was much cost pressure within the business, very good tactical trading resulted in an effective margin performance and so Makro increased trading profit before interest and tax by 10.1%.
The new Makro store increased trading space by 10.5% to 216,313m2.
Massbuild
comprises 102 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, Mozambique and Zambia.
Massbuild grew total sales for the period by 5.8%, with comparable sales increasing by 0.8% and product inflation of 4.0%. Given the difficult consumer economy and lower confidence levels amongst upper-income customers, coupled with substantially less construction activity generally, there was declining sales growth in Builders Warehouse with negative comparable growth in some months. Also impacting sales growth, by about 1%, are significantly lower sales of load-shedding products but this negative effect annualises in August 2016.
Builders Express sales remain solid as customers respond to this convenient shopping experience and, outside South Africa, the Builders Warehouse format continues to exceed expectations with total sales in non-SA stores growing by 60.3%. Our smaller format Builders Superstore now comprises nine stores and saw strong sales and profit growth.
Despite the sales pressure, good margin management and effective expense control resulted in Massbuild's trading profit before interest and tax increasing by 6.4%.
One Builders Warehouse store was closed in Mozambique; a Builders Express store and a Builders Superstore were opened; and one Builders Trade Depot store was closed. Net trading space decreased by 0.6% to 446,300m2.
Masscash
comprises 68 Wholesale Cash & Carry and 52 Retail stores trading in South Africa, Botswana, Lesotho, Mozambique, Namibia and Swaziland; and Shield, a voluntary buying association.
Total sales increased by 10.3%, comparable sales increased by 10.9% and product inflation was 7.9%. Competition remained intense within the South African Wholesale and Retail Food environments. The severe economic pressure that consumers are experiencing is evident in the very heavy customer traffic experienced in-store around the few days of the month that customers have money following social grant payouts and salary and wage payments. Food inflation accelerated from April 2016 as drought-induced commodity prices escalated.
The Jumbo Crown Mines store that was destroyed by fire in February 2016 is being rebuilt for opening early in 2017 and the resultant direct losses are fully covered by insurance. The loss of this significant trading store causes Masscash Wholesale's comparable sales growth of 11.1% to be higher than total sales growth. Masscash Retail, through the Cambridge and Rhino formats, traded well, reporting comparable sales growth of 12.3%.
Effective margin management in the face of intense competitive pressure enabled Masscash to grow trading profit before interest and tax by 12.9%.
Two Wholesale stores were closed; whilst three Retail stores were opened and two were closed, resulting in net trading space decreasing by 7.1% to 346,069m2.
Financial review
Financial performance
Total Group sales for the six months to June 2016 increased by 8.7% over the prior period, with comparable sales growth of 6.4%. Product inflation was 5.8%, suggesting real comparable volume growth of 0.6%. Inflation in General Merchandise, Food & Liquor and Home Improvement increased to 6.1%, 6.2% and 3.6% respectively. Our non-SA businesses represented 9.3% (2015: 8.2%) of total sales and increased by 23.2% in Rands.
During the six months to June 2016, nine stores were opened and seven were closed, resulting in a total of 405 stores at June 2016. Net trading space decreased by 0.1% from December 2015 to 1,548,799m2.
The Group's gross margin of 19.3% is slightly higher than that of the prior year of 18.9%. The improved margin was mostly driven from business and category mix improvements. Total operating expenses increased by 11.2% over the prior period and comparable expenses increased by 7.5%.
Employment costs, the Group's biggest cost category, increased by 9.4% (with a comparable increase of 8.1%), partly due to new stores which led to a 3.2% increase in fulltime-equivalent personnel, combined with the conversion of contractor staff into fulltime employees. Occupancy costs increased by 11.8%, mainly due to store openings since June 2015 and high increases in electricity and rates. Depreciation and amortisation increased by 16.2% over the prior period, primarily as a result of an increase in capital expenditure on higher depreciating assets like IT hardware and software. Other operating expenses increased by 9.7%. The cost of our investment in upgrading our IT infrastructure, as well as pre-store opening expenses for the Makro Carnival Mall store of R16.9 million, are included in this expense category.
The results for the period are favourably affected by a net insurance gain of R41.5 million arising from the excess of the insured replacement value over the net book value of the assets destroyed by the fire at the Jumbo Crown Mines store in February 2016.
Included in operating profit are net realised and unrealised foreign exchange losses of R125.2 million (2015: loss of R106.7 million). As our African footprint has expanded, so too has our exposure to foreign currency fluctuations which have been particularly volatile during this period. In response, we are actively managing the value and currency of our foreign-denominated loan balances, where practicable, and we take out foreign exchange contracts on select exposures. All foreign-denominated inventory orders are however automatically covered forward.
Excluding foreign exchange movements, earnings before interest, tax, depreciation and amortisation (EBITDA) of R1.5 billion increased over the prior period by 21.9%.
Net finance costs have grown to R279.2 million (2015: R234.8 million), mainly aggravated by two interest rate increases during 2016.
The Group's effective tax rate of 30.1% is lower than the prior period's 31.9%.
Headline earnings and Headline EPS increased by 19.0% and 19.3% respectively over the prior period. Adjusting for the effect of the foreign exchange movements in both periods, Headline earnings and Headline EPS increased by 14.2% and 14.5% respectively.
Financial position
Inventories have increased by 10.1% since June 2015, slightly higher than sales growth, mainly as a result of the new stores opened during the period and strategic inventory positions to maintain price competitiveness. Inventory days only increased by one day to 62 days. Trade and other receivables increased by 5.3% resulting in debtors' days decreasing by one day to nine days. Creditors' days decreased to 56.0 days (2015: 57.6 days) as we early-settled some foreign-denominated creditor balances in non-SA countries to limit potential currency volatility.
The net book value of property, plant and equipment increased by 7.9% over the prior period. Investment and expansionary expenditure have been focused on new stores, IT infrastructure and the refurbishment of existing stores.
The annual rolling return on equity was 22.4 % for the period (2015: 20.4%) and excluding foreign exchange movements, this figure was 24.5% (2015: 22.8%).
Operating cash utilised amounted to R2.4 billion, R0.8 billion higher than the prior period, primarily as a result of the movement in inventory and creditors discussed already. Total capital expenditure of R747.5 million comprises: R346.7 million on replacement expenditure including store refurbishments and our IT systems' investment; and R400.8 million on expansionary expenditure, and is in line with expectation.
Our people
Massmart's performance depends on our 45,500 colleagues whose dedication, commitment and hard work ensure that our in-store experience consistently exceeds the expectations of our customers. We would like to thank every colleague for their customer service and support, including those in our offices and distribution centres, knowing that part of the Group's steadily improving performance comes from their efforts.
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;
-To expand further into Food Retail and the Fresh categories through new stores and our existing formats, and to increase Massbuild's market presence in South Africa;
-Measured Sub-Saharan African expansion through Builders Warehouse, Game and Masscash and in the next two years we anticipate opening five new stores representing African space growth of about 12.0%; and
-We continue to expand and improve our ecommerce offerings in DionWired, Makro and Masscash Wholesale. A Massbuild online project to serve the contractor and professional market should be operational before the end of 2016.
Directorate
With effect from 31 August 2016, our lead non-Executive Director, Chris Seabrooke, handed over the chairman roles of the Audit and Risk Committees to Moses Kgosana and will also cease to be a member of both committees after 16 years of membership. The Board would like to pay tribute to the effective and valuable role Chris played as chairman of these key sub-committees over the past five years. Chris remains deputy chairman of the Board, chairman of the Remuneration committee and a member of the Nomination committee.
Prospects
For the 34 weeks to 21 August 2016, total sales increased by 8.3% and comparable sales increased by 5.9%. For the remainder of 2016, the South African economic environment will likely continue to constrain consumer spending across key Group categories including General Merchandise and Home Improvement/DIY, whilst our substantial Food and Liquor categories will likely continue to outperform. Notwithstanding the current uncertainty, should the currency strengthen and Food pricing move into disinflation, it is possible that trading in 2017 may be relatively better than 2016. Trading conditions in most non-SA countries where we have stores are unlikely to deteriorate further provided there are no exogenous shocks.
The financial information on which this outlook statement is based has not been reviewed and reported on by the Company's external auditors.
Dividend
Massmart's current dividend policy is to declare and pay an interim and final cash dividend representing a 2.0 times dividend cover unless circumstances dictate otherwise. Notice is hereby given that a gross interim cash dividend of 74.10 cents per share, in respect of the period ended 26 June 2016 has been declared. The number of shares in issue at the date of this declaration is 217,136,334.
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 62.985 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:
Tuesday, 13 September 2016
First trading day ex dividend on the JSE:
Wednesday, 14 September 2016
Record date:
Friday, 16 September 2016
Payment date:
Monday, 19 September 2016
Share certificates may not be dematerialised or rematerialised between Wednesday, 14 September 2016 and Friday, 16 September 2016, 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
24 August 2016
Johannes van Lierop
Chief Financial Officer
Divisional operational review
26 weeks 26 weeks Comparable Estimated 52 weeks
June 2016 % of June 2015 % of Period % sale % sales December 2015 % of
Rm (Reviewed) sales (Reviewed) sales % growth growth inflation (Audited) sales
Sales 42,310.9 38,917.4 8.7 6.4 5.8 84,731.8
Massdiscounters 9,654.1 8,973.6 7.6 2.4 4.4 19,514.1
Masswarehouse 11,748.3 10,759.2 9.2 7.2 5.5 23,675.9
Massbuild 5,962.4 5,637.1 5.8 0.8 4.0 12,010.6
Masscash 14,946.1 13,547.5 10.3 10.9 7.9 29,531.2
Trading profit before interest and tax 911.3 2.2 806.7 2.1 13.0 2,349.7 2.8
Massdiscounters 62.4 0.6 29.6 0.3 110.8 235.4 1.2
Masswarehouse 508.1 4.3 461.3 4.3 10.1 1,198.7 5.1
Massbuild 259.6 4.4 243.9 4.3 6.4 693.6 5.8
Masscash 81.2 0.5 71.9 0.5 12.9 222.0 0.8
The 'trading profit before interest and tax' above is the amount per the Condensed Consolidated Income Statement less the BEE transaction IFRS 2 charge.
Condensed consolidated income statement
26 weeks 26 weeks 52 weeks
June 2016 June 2015 % December 2015
Rm (Reviewed) (Reviewed) change (Audited)
Revenue 42,466.3 38,980.7 8.9 84,857.4
Sales 42,310.9 38,917.4 8.7 84,731.8
Cost of sales (34,138.3) (31,545.8) (8.2) (68,689.6)
Gross profit 8,172.6 7,371.6 10.9 16,042.2
Other income 63.0 63.3 (0.5) 125.6
Depreciation and amortisation (536.6) (461.7) (16.2) (946.2)
Employment costs (3,541.2) (3,236.8) (9.4) (6,784.3)
Occupancy costs (1,582.3) (1,415.7) (11.8) (2,865.6)
Other operating costs (1,672.7) (1,525.4) (9.7) (3,245.8)
Trading profit before interest and taxation 902.8 795.3 13.5 2,325.9
Impairment of assets (note 2) (50.9) (3.4) (25.7)
Insurance proceeds on items in PP&E (note 2) 92.4 - -
Operating profit before foreign exchange movements and interest 944.3 791.9 19.2 2,300.2
Foreign exchange loss (note 3) (125.2) (106.7) (17.3) (149.8)
Operating profit before interest 819.1 685.2 19.5 2,150.4
- Finance costs (294.1) (252.5) (16.5) (507.7)
- Finance income 14.9 17.7 (15.8) 32.4
Net finance costs (279.2) (234.8) (18.9) (475.3)
Profit before taxation 539.9 450.4 19.9 1,675.1
Taxation (162.5) (143.8) (13.0) (505.9)
Profit for the period 377.4 306.6 23.1 1,169.2
Profit attributable to:
- Owners of the parent 356.3 281.6 26.5 1,112.8
- Non-controlling interests 21.1 25.0 (15.6) 56.4
Profit for the period 377.4 306.6 23.1 1,169.2
Basic EPS (cents) 164.7 129.9 26.8 513.5
Diluted basic EPS (cents) 162.0 127.9 26.7 506.1
Dividend (cents):
- Interim 74.1 146.0 (49.2) 146.0
- Final - - - 112.2
- Total 74.1 146.0 (49.2) 258.2
Headline earnings
52 weeks
26 weeks 26 weeks December
June 2016 June 2015 % 2015
Rm (Reviewed) (Reviewed) change (Audited)
Reconciliation of profit for the period to headline earnings
Profit for the period attributable to owners of the parent 356.3 281.6 26.5 1,112.8
Impairment of assets (note 2) 50.9 3.4 25.7
Loss/(Profit) on disposal of tangible and intangible assets 4.8 (1.4) 2.3
Profit on sale of assets classified as held for sale - (1.1) (5.2)
Compensation from 3rd parties for items of PP&E that were impaired, lost or given up (92.4) - (1.2)
Foreign currency translation reserve re-classified to the Income Statement - (12.9) (12.7)
Total tax effects of adjustments 1.0 (0.3) (2.9)
Headline earnings 320.6 269.3 19.0 1,118.8
Foreign exchange loss after taxation 85.4 86.1 111.0
Headline earnings before foreign exchange (taxed) 406.0 355.4 14.2 1,229.8
Headline EPS (cents) 148.2 124.2 19.3 516.3
Headline EPS before foreign exchange (taxed) (cents) 187.7 164.0 14.5 567.5
Diluted headline EPS (cents) 145.8 122.4 19.1 508.8
Diluted headline EPS before foreign exchange (taxed) (cents) 184.6 161.5 14.3 559.3
Condensed consolidated statement of comprehensive income
52 weeks
26 weeks 26 weeks December
June 2016 June 2015 % 2015
Rm (Reviewed) (Reviewed) change (Audited)
Profit for the period 377.4 306.6 23.1 1,169.2
Items that will not subsequently be re-classified to the Income Statement: - - 5.0
Net post retirement medical aid actuarial profit - - 5.0
Items that will subsequently be re-classified to the Income Statement: (263.4) (36.4) (21.2)
Foreign currency translation reserve (270.5) (28.9) (24.2)
Cash flow hedges - effective portion of changes in fair value (29.4) (8.7) 4.4
Fair value movement on available-for-sale financial assets (1.4) (2.2) (3.5)
Income tax relating to components of other comprehensive income 37.9 3.4 2.1
Total other comprehensive loss for the period, net of tax (263.4) (36.4) (16.2)
Total comprehensive income for the period 114.0 270.2 (57.8) 1,153.0
Total comprehensive income attributable to:
- Owners of the parent 92.9 245.2 1,096.6
- Non-controlling interests 21.1 25.0 56.4
Total comprehensive income for the period 114.0 270.2 (57.8) 1,153.0
Condensed consolidated statement of financial position
December
Rm June 2016 June 2015 % 2015
(Reviewed) (Reviewed) change (Audited)
ASSETS
Non-current assets 12,168.1 11,433.3 12,031.2
Property, plant and equipment 8,237.8 7,631.8 7.9 8,117.8
Goodwill and other intangible assets 2,981.5 2,960.3 2,999.1
Investments and other financial assets 179.8 161.7 165.1
Deferred taxation 769.0 679.5 749.2
Current assets 17,369.2 16,110.3 18,687.6
Inventories 11,590.9 10,530.8 10.1 11,934.5
Trade and other receivables 4,052.7 3,848.2 5.3 4,697.4
Taxation 276.2 202.7 50.8
Cash on hand and bank balances 1,449.4 1,528.6 2,004.9
Non-current assets classified as held for sale 10.6 3.0 11.5
Total assets 29,547.9 27,546.6 30,730.3
EQUITY AND LIABILITIES
Total equity 5,503.7 5,212.5 5,791.1
Equity attributable to owners of the parent 5,404.0 5,033.0 7.4 5,636.0
Non-controlling interests 99.7 179.5 155.1
Non-current liabilities 4,906.1 3,368.6 3,053.4
Interest-bearing borrowings (note 4) 3,562.7 2,184.7 1,819.6
Deferred taxation 95.2 70.2 73.5
Other non-current liabilities and provisions 1,248.2 1,113.7 1,160.3
Current liabilities 19,138.1 18,965.5 21,885.8
Trade, other payables and provisions 15,115.1 14,512.2 4.2 20,077.7
Taxation 233.4 155.7 155.6
Bank overdrafts 2,618.0 3,267.1 446.4
Interest-bearing borrowings 1,171.6 1,030.5 1,206.1
Total equity and liabilities 29,547.9 27,546.6 30,730.3
Condensed consolidated statement of cash flows
December
June 2016 June 2015 2015
Rm (Reviewed) (Reviewed) (Audited)
Operating cash before working capital movements 1,666.4 1,308.0 3,384.4
Working capital movements (4,095.2) (2,925.3) 372.0
Cash (utilised in)/generated from operations (2,428.8) (1,617.3) 3,756.4
Taxation paid (266.4) (347.7) (631.0)
Net interest paid (194.7) (175.4) (437.0)
Investment income - - 40.3
Dividends paid (266.2) (622.8) (958.3)
Cash (outflow)/inflow from operating activities (3,156.1) (2,763.2) 1,770.4
Investment to maintain operations (346.7) (365.5) (983.7)
Investment to expand operations (400.8) (289.2) (710.7)
Investment in subsidiaries - (28.2) (16.9)
Proceeds on disposal of property, plant and equipment 11.6 7.8 38.7
Proceeds on disposal of assets classified as held for sale - 16.1 23.1
Other net investing activities 0.3 3.5 3.9
Cash outflow from investing activities (735.6) (655.5) (1,645.6)
Increase/(decrease) in non-current liabilities 1,680.2 52.4 (314.1)
(Decrease)/increase in current liabilities (62.5) 197.7 372.3
Non-controlling interests acquired (156.4) (2.2) (60.1)
Net acquisition of treasury shares (26.2) (22.2) (23.6)
Cash inflow/(outflow) from financing activities 1,435.1 225.7 (25.5)
Net (decrease)/increase in cash and cash equivalents (2,456.6) (3,193.0) 99.3
Foreign exchange movements (270.5) (28.9) (24.2)
Opening cash and cash equivalents 1,558.5 1,483.4 1,483.4
Closing cash and cash equivalents (1,168.6) (1,738.5) 1,558.5
Condensed consolidated statement of changes in equity
Equity
attributable Non-
Share Share Other Retained to owners controlling
Rm capital premium reserves profit of the parent interests Total
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 - - - (914.1) (914.1) (52.7) (966.8)
Total comprehensive income - - (16.2) 1,112.8 1,096.6 56.4 1,153.0
Changes in non-controlling interests - - (18.7) - (18.7) (41.4) (60.1)
IFRS 2 charge and Share Trust transactions - - 218.5 (23.6) 194.9 - 194.9
Treasury shares acquired - (58.3) 1.2 - (57.1) - (57.1)
Balance as at December 2015 (Audited) 2.2 675.1 735.3 4,223.4 5,636.0 155.1 5,791.1
Dividends declared - - - (243.6) (243.6) (31.2) (274.8)
Total comprehensive income - - (263.4) 356.2 92.8 21.1 113.9
Changes in non-controlling interests - - (132.8) - (132.8) (45.3) (178.1)
IFRS 2 charge and Share Trust transactions - - 105.1 (26.2) 78.9 - 78.9
Treasury shares acquired - (27.8) 0.5 - (27.3) - (27.3)
Period ended June 2016 (Reviewed) 2.2 647.3 444.7 4,309.8 5,404.0 99.7 5,503.7
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) (35.6) (625.3)
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)
IFRS 2 charge and Share Trust transactions - - 99.3 (22.2) 77.1 - 77.1
Treasury shares acquired - (34.6) - - (34.6) - (34.6)
Period ended June 2015 (Reviewed) 2.2 698.8 614.0 3,718.0 5,033.0 179.5 5,212.5
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, in terms of IFRS 5, 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
2016 Level Level Level 2015 Level Level Level 2015 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 157.2 - 157.2 - 138.8 - 138.8 - 188.1 - 188.1 -
- Investment in cell captives and other 155.6 - 155.6 - 134.4 - 134.4 - 139.3 - 139.3 -
- FEC asset (de-designated) 1.6 - 1.6 - 4.4 - 4.4 - 48.8 - 48.8 -
Financial asset designated as a cash flow hedging instrument 2.2 - 2.2 - 3.2 - 3.2 - 20.7 - 20.7 -
- FEC asset 2.2 - 2.2 - 3.2 - 3.2 - 20.7 - 20.7 -
Loans and receivables 14.2 - 14.2 - 13.5 - 13.5 - 13.9 - 13.9 -
- Employee share trust loans 14.2 - 14.2 - 13.5 - 13.5 - 13.9 - 13.9 -
Available-for-sale financial assets 3.6 3.6 - - 6.3 6.3 - - 4.9 4.9 - -
- Listed investments 3.6 3.6 - - 6.3 6.3 - - 4.9 4.9 - -
Non-current assets classified as held for sale 10.6 - - 10.6 7.0 - - 7.0 11.5 - - 11.5
187.8 3.6 173.6 10.6 168.8 6.3 155.5 7.0 239.1 4.9 222.7 11.5
Financial liabilities at amortised cost 3,671.9 - 3,671.9 - 2,880.2 - 2,880.2 - 2,522.0 - 2,522.0 -
- Medium-term loan and bank loans 3,671.9 - 3,671.9 - 2,880.2 - 2,880.2 - 2,522.0 - 2,522.0 -
Financial liabilities at fair value through profit or loss 9.4 - 9.4 - 2.1 - 2.1 - 5.6 - 5.6 -
- FEC liability (de-designated) 9.4 - 9.4 - 2.1 - 2.1 - 5.6 - 5.6 -
Financial liability designated as a cash flow hedging instrument 12.1 - 12.1 - 3.4 - 3.4 - 2.1 - 2.1 -
- FEC liability 12.1 - 12.1 - 3.4 - 3.4 - 2.1 - 2.1 -
3,693.4 - 3,693.4 - 2,885.7 - 2,885.7 - 2,529.7 - 2,529.7 -
There were no transfers of financial instruments between Level 1, Level 2 and Level 3 fair value measurements during the period ended June 2016.
The financial assets and financial liabilities have been presented based on an analysis of their respective natures, characteristics and risks.
Additional information
June 2016 June 2015 December 2015
(Reviewed) (Reviewed) (Audited)
Net asset value per share (cents) 2,488.8 2,317.0 2,595.6
Ordinary shares (000's):
- In issue 217,136.3 217,136.3 217,136.3
- Weighted average (net of treasury shares) 216,359.4 216,764.1 216,688.8
- Diluted weighted average 219,885.3 220,020.1 219,892.9
Preference shares (000's):
- Black Scarce Skills Trust 'B' shares in issue 2,840.5 2,840.5 2,840.5
Capital expenditure (Rm):
- Authorised and committed 489.1 844.7 953.4
- Authorised not committed 1,312.9 1,047.4 1,033.9
Operating lease commitments (2016 - 2029) (Rm) 17,549.9 15,270.1 15,575.7
US dollar exchange rates: - period end (R/$) 15.06 12.11 15.23
- average (R/$) 15.41 11.90 12.74
Share Data
Closing share price at
24 Jun 2016
R127.00
Share price (26 week high)
R141.80
Share price (26 week low)
R82.03
Market cap
R27.6bn
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 provisional reviewed 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.
2. In the current year, the majority of the impairment of assets of R50.9 million and the insurance compensation income of R92.4 million are as a result of the Jumbo Crown Mines' store fire that occurred within the Masscash Division. Inventories in the store, of R93.1 million, were written off and insurance proceeds to the same value were recognised in the 'Cost of Sales' line. In the prior period, the impairment of assets was as a result of store closures.
3. The majority of Massmart's realised and unrealised foreign exchange loses of R125.2 million (June 2015: R106.7 million) arose as a result of its Rand-denominated intercompany loans to its African subsidiaries, as well as in settling its Rand- denominated foreign creditors. Despite Massmart's increased investment into the rest of Africa; the weakening of the average basket of other African currencies against the Rand; and the volatility of the Rand against the US Dollar, Massmart managed to contain its foreign exchange exposure.
4. Massmart secured a new R2.0 billion term facility in the current period, maturing in two parts: R1.4 billion in five years and R600 million in three years.
5. There were no significant subsequent events after the current period end.
6. 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 2016, the Supplier Development Fund had a closing balance of R105.3 million (June 2015: R140.8 million). A net amount of R26.6 million remains unpaid to Walmart (June 2015: R248.5 million), which has been accounted for in 'trade, and other receivables' and 'trade, other payables and provisions'. The Group has a medium-term loan with Walmart that is repayable in April 2018, 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.
7. 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 and 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 Group'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).
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
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, 2196, South Africa
Directorate
K Dlamini (Chairman), CS Seabrooke (Deputy Chairman), GRC Hayward* (Chief Executive Officer), A Clarke***, NN Gwagwa, R Kgosana, P Langeni, E Ostale****, JP Suarez**, JJM van Lierop* (Chief Financial Officer)
* Executive ** USA *** UK ****Chile
MASSDISCOUNTERS
General merchandise discounter and food retailer
Sales
R9,654.1 m
UP BY 7.6%
2015: R8,973.6 m
Trading profit before interest and tax
R62.4 m
UP BY 110.8%
2015: R29.6 m
Game
139 Stores
South Africa, Botswana, Ghana, Kenya, Lesotho, Malawi, Mozambique, Namibia, Nigeria, Tanzania, Uganda, Zambia
DionWired
24 STORES
South Africa
MASSWAREHOUSE
Warehouse club
Sales
R11,748.3 m
UP BY 9.2%
2015: R10,759.2 m
Trading profit before interest and tax
R508.1 m
UP BY 10.1%
2015: R461.3 m
Makro
Fruitspot
20 STORES
South Africa
MASSBUILD
Home improvement retailer and building materials supplier
Sales
R5,962.4 m
UP BY 5.8%
2015: R5,637.1 m
Trading profit before interest and tax
R259.6 m
UP BY 6.4%
2015: R243.9 m
Builders Warehouse
38 STORES
South Africa, Botswana, Mozambique, Zambia
Builders Express
42 STORES
South Africa
Builders Trade Depot
13 STORES
South Africa
Builders Superstore
9 STORES
South Africa
MASSCASH
Food wholesaler, retailer and buying association
Sales
R14,946.1 m
UP BY 10.3%
2015: R13,547.5 m
Trading profit before interest and tax
R81.2 m
UP BY 12.9%
2015: R71.9 m
68
WHOLESALE STORES
South Africa, Botswana, Lesotho, Mozambique, Namibia, Swaziland
52
RETAIL STORES
South Africa
BUYING ASSOCIATIONS
South Africa, Botswana, Namibia, Swaziland
Johannesburg
25 August 2016
Sponsor: Deutsche Securities(SA) Proprietary Limited
Date: 25/08/2016 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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