Wrap Text
Results for the 52 weeks ended 25 December 2016
Massmart Holdings Limited
("the Company" or "the Group")
JSE code MSM
ISIN ZAE000152617
Company registration number 1940/014066/06
Results for the 52 weeks ended 25 December 2016
Massmart, Africa's second largest retail group, comprises four divisions operating in 412 stores, across 13
sub-Saharan countries. Through our widely-recognised, differentiated, retail and wholesale formats, we have
leading shares in General Merchandise, Liquor, Home Improvement and basic wholesale Food markets.
Our key foundation of high volume, low cost and operational excellence are the enablers of our price leadership.
Overview
During a year where the sub-Saharan consumer environment became increasingly challenging,
Massmart's total sales were R91.3 billion, an increase of 7.7% over the prior year. Comparable stores'
sales growth was 5.4%, with product inflation of 6.7%. Currency weakness and challenging operating
environments saw total sales growth from our non-South African stores slow to 11.2% (13.4% in
constant currencies) from 23.2% for the six months to June 2016.
Good margin management and excellent expense control resulted in Group trading profit, excluding
foreign exchange movements and interest, growing by 11.9% to R2.6 billion, while headline earnings
increased by 15.6% to R1.3 billion.
19 stores were opened, including two outside South Africa, representing new space growth of 3.7%.
Our focus on optimising the Group's store footprint continued, with ten stores being closed, resulting in
a net space increase of 1.2%. Our portfolio of 412 stores includes 39 outside South Africa producing
8.7% of the Group's sales.
South African environment
The difficulties facing the South African consumer deteriorated in the latter half of 2016. The main
impact coming from weak underlying economic growth, compounded by high Food inflation which
averaged about 11.3% in the six months to December 2016 (per StatsSA). The Group's sales trends in
the final quarter to December 2016 were difficult to interpret usefully as November was distorted by
our extremely successful Black Friday campaigns, which likely softened early December sales, and an
additional trading day in the final Christmas week. South African comparable stores' sales growth was
5.6% for the year.
The divergent sales performances across our major product categories reflect the economic pressures
within the South African consumer environment, with total Food & Liquor sales growing at 11.7% for
the year while General Merchandise grew by only 1.5% and DIY total sales grew by 5.6%. It is clear
that General Merchandise continues to be negatively impacted by very low discretionary spending by
consumers.
African environment
Drought conditions in southern Africa remain severe and sales growths in this region slowed noticeably
in the latter part of 2016. Slightly more than 50% of the Group's ex-SA sales are non-Food (General
Merchandise and Home Improvement) and the difficult economic conditions exacerbated these categories'
performances. The Group's total sales growth in Rands was 11.2%. Comparable stores' Rand sales growth
was 3.1%, which at a category level was 9.4% in Food and 0.6% in non-Food. Currency weakness in Nigeria
and Mozambique significantly impacted our reported Rand sales growth.
Financial review
Financial performance
Massmart's total sales for the year to December 2016 increased by 7.7% over the prior year, with
comparable sales growth of 5.4%. Product inflation was estimated at 6.7%, suggesting a real
comparable volume decline of 1.3%. Inflation in General Merchandise, Food & Liquor and Home
Improvement increased to 5.9%, 7.7% and 4.7% respectively. Our non-SA businesses represented 8.7%
(2015: 8.4%) of total sales and grew by 11.2% in Rands and 13.4% in constant currencies, while
comparable sales growth in Rands from these territories was 3.1%.
Nineteen stores were opened and ten were closed, resulting in a total of 412 stores at December 2016.
Net trading space increased by 1.2% from December 2015 to 1,568,744m2 .
The Group's gross margin of 19.0% is marginally higher than that of the prior year of 18.9%, mostly
driven from business-mix and better category management. Operating expenses were tightly controlled,
increasing by 7.7% over the prior year, and great expense control resulted in comparable expense
growth of only 5.4%. Pleasingly expenses as a % of sales were held at 16.4%.
Growth in employment costs, the Group's biggest cost category, increased by 8.3% (with a comparable
increase of 7.5%). Occupancy costs increased by 9.3%, mainly due to store openings. Depreciation and
amortisation increased by 9.5%. Other operating expenses increased by 4.7%. The non-capital costs of
upgrading our IT infrastructure, as well as pre-opening store expenses of R50.9 million (2015: R56.2
million), are included in this expense category.
Included in operating profit is the net insurance gain of R45.0 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.
Net realised and unrealised foreign exchange losses of R141.8 million (2015: loss of R149.8 million)
are also included in operating profit. African currencies have been particularly volatile and mostly weaker
during the year. We have been actively managing the value and currency of our foreign-denominated
balances, where practicable, and we take out foreign exchange contracts on select exposures. All
foreign-denominated inventory orders are automatically covered forward.
Excluding foreign exchange movements, earnings before interest, tax, depreciation and amortisation
(EBITDA) of R3.7 billion increased over the prior year by 14.3%.
Net finance costs have grown to R571.9 million (2015: R475.3 million), mainly aggravated by two
interest rate increases during 2016. The Group's effective tax rate of 30.8% is in line with expectation
(2015: 30.2%).
Headline earnings and headline earnings per share (EPS) increased by 15.6% and 15.8% respectively
over the prior year. Adjusting for the effect of the foreign exchange movements in both years, Headline
earnings and Headline EPS increased by 12.9% and 13.1% respectively.
Financial position
During the past few years, investment spend has been focused on new IT infrastructure, store openings,
and the refurbishment of existing stores. The net book value of property, plant and equipment increased
by 4.3% over the prior year. Total capital expenditure of R1.8 billion comprises: R0.8 billion on
replacement expenditure including store refurbishments and our IT systems' investments; and
R1.0 billion on expansionary expenditure.
Interest-bearing borrowings increased due to a new term facility taken on in the year.
Operating cash before working capital movements amounted to R4.0 billion, a pleasing 17.7% higher
than the prior year.
Improving inventory management saw our Inventory balance decrease by 1.1% compared to December
2015, with inventory days reducing by five days to 58 days, despite store openings. Trade and other
receivables were in line with 2015 and so debtors' days stayed flat, at nine days. Creditors' days
decreased to 70 days (2015: 76 days) due partly to the lower inventory levels and from early-settling
some foreign-denominated creditor balances in non-SA countries to limit potential currency volatility.
Return on equity for the year improved to 22.0% (2015: 20.4%) and excluding foreign exchange
movements, this figure was 23.6% (2015: 22.4%).
Our people
The contribution of our 48,000 colleagues never goes unnoticed or unappreciated, especially in the
current environment where likely many of them and their own families were feeling the adverse consequences of
the weak economy. We would like to acknowledge and thank every colleague for their service and
support, including those in our administrative offices and distribution centres, knowing that part of the
Group's improving performance comes from their efforts.
Directorate and Executive Committee
With effect from November 2016, Joe Ralebepa joined the Group as General Counsel and the Massmart
Holdings Company Secretary. Richard Inskip joined in January 2017 as Group Supply Chain &
Logistics Executive to focus on leveraging the Group's transport, logistics and supply chain.
After 2.5 years on the Massmart Board, Walmart-appointee Andy Clarke has resigned with effect from
22 February 2017. Andy's deep retail experience contributed significantly to the
Group's retail thinking and execution, especially on Fresh and online, and we thank him for his
valuable service.
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 in South Africa;
Sub-Saharan African expansion through opening Builders Warehouse, Game and Masscash stores. In
the next two years we anticipate opening 11 new stores representing ex-SA space growth of about 26.2%; and
To expand, improve and refine our online / ecommerce offerings in DionWired, Makro and Massbuild.
Prospects
For the 8 weeks to 19 February 2017, total sales increased by 0.6% and comparable sales decreased by
1.5%. South African total and comparable sales growths are 2.5% and 0.4% respectively, while the
equivalents for ex-SA are both negative. Sales growth in January 2017 was negative but in February accelerated
positively. It is likely that several key economic drivers in SA will improve in 2017 - lower food price inflation,
some Rand strength and possibly lower interest rates. High levels of uncertainty and volatility complicate
any economic guidance however. Despite the slow start to the financial year, we have a reasonable expectation of a
satisfactory year ahead.
The financial information on which this outlook statement is based has not been reviewed and reported
on by the Company's external auditors.
Dividend
Notice is hereby given that a gross final cash dividend of 224.80 cents per share, in respect of the year
ended December 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 191.08 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, 14 March 2017
First trading day ex dividend on the JSE: Wednesday, 15 March 2017
Record date: Friday, 17 March 2017
Payment date: Monday, 20 March 2017
Share certificates may not be dematerialised or rematerialised between Wednesday, 15 March 2017 and
Friday, 17 March 2017, 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 Rosebank Towers, 15 Biermann Avenue, Rosebank,
Johannesburg, 2196; on 011 370 5000; or on 0861 100 9818 (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
22 February 2017
Performance highlights
Sales
R91,250.0 million
2015: R84,731.8 million
Up by 7.7%
Operating profit before interest
R2,483.4 million
2015: R2,150.4 million
Up by 15.5%
Headline earnings
R1,293.3 million
2015: R1,118.8 million
Up by 15.6%
Total dividend per share
298.9 cents
2015: 258.2 cents
Up by 15.8%
Our divisions
MASSDISCOUNTERS
Up 5.3%
Sales
R20,544.5 million
2015: R19,514.1 million
Up 54.8%
Trading profit*
R364.3 million
2015: R235.4 million
Massdiscounters comprises the 141-store General Merchandise and Food discounter Game, which
trades in South Africa and 11 other African countries; and the 24-store Hi-tech retailer DionWired in
South Africa.
Total sales for the year increased by 5.3% and comparable sales grew by 1.5% with product inflation of
4.8%. South African total and comparable sales growths were higher in the second half of 2016 while
ex-SA sales growth in Rands slowed dramatically.
Our two-year focus on Game's merchandise execution and addressing in-store and supply chain costs
manifested in a strong trading margin and expense performance, and so Massdiscounters' trading profit
before interest and tax increased by 54.8%. DionWired had an exceptional year with good sales, despite
a very challenging environment, and an impressive profit performance.
In the last quarter of 2016 we successfully trialled the new SAP point-of-sale system in 12 Game stores
in South Africa. We have therefore started the next phase of the point-of-sale roll-out, with all Game and
DionWired stores in SA likely to be converted by June 2017. The more significant SAP ERP
systems' implementation remains on schedule for mid-2018.
Our Fresh roll-out continues with 88 Game stores now offering this category. Although not yet in all
stores, Food and Liquor sales participation is already 23% and is achieving comparable growth of 11%.
Four Game stores (including one in Kenya and one in Zambia) were opened, whilst two DionWired
stores were opened and two closed, increasing trading space by 2.3% to 545,094m2 .
MASSWAREHOUSE
Up 11.0%
Sales
R26,270.3 million
2015: R23,675.9 million
Up 4.4%
Trading profit*
R1,251.3 million
2015: R1,198.7 million
Masswarehouse comprises the 20-store Makro warehouse-club trading in Food, General Merchandise
and Liquor in South Africa; and Massfresh, which houses the Group's fresh produce, fresh meat and
bakery operations including The Fruitspot a fruit and vegetable processor and distributor.
Total sales for the year increased by 11.0% and comparable sales grew by 7.6% with product inflation
of 6.5%. Total sales growths in Food and Liquor are higher than 11% while the lower General
Merchandise sales are reflective of soft discretionary spending. There were significant cost pressures
within the business, including new store pre-opening costs of R17.4 million, resulting in an
increase in trading profit before interest and tax of 4.4%.
Online sales more than doubled for the year and we continue to expand and improve the online
offering.
New Fruitspot facilities, which will improve our internal and external distribution efficiencies, were
opened in Cape Town and Durban in the latter part of 2016.
The April 2016 opening of a new Makro store near Carnival Mall, east of Johannesburg, and an
extension to the Strubens Valley store, in Johannesburg west, increased trading space by 11.3% to
217,907m2 .
MASSBUILD
Up 5.6%
Sales
R12,687.1 million
2015: R12,010.6 million
Up 2.7%
Trading profit*
R712.6 million
2015: R 693.6 million
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; and five Builders Warehouse stores in Botswana, Mozambique and Zambia.
Massbuild grew total sales for the year by 5.6%, with comparable sales increasing by 1.7% and product
inflation of 4.7%. Sales growth in our South African stores improved slightly in the second half of 2016
as a result of more effective promotions and good merchandise execution while our ex-SA stores' sales
growth in Rands decelerated markedly given the weakening economies in those countries.
Given the sales pressures and despite good expense control, the increase in Massbuild's trading profit
before interest and tax was 2.7%.
A pilot online offering for our contractor customers has progressed well. The online proposition is
exceptional with rich data and broad functionality, and will be available for general use shortly.
One Builders Warehouse store was closed in Mozambique. Two Builders Express stores and two
Builders Superstores were opened; and one Builders Trade Depot store was closed in South Africa. Net
trading space remained similar to 2015 at 449,212m2 .
MASSCASH
Up 7.5%
Sales
R31,748.1 million
2015: R29,531.2 million
Up 28.2%
Trading profit*
R284.7 million
2015: R222.0 million
Masscash comprises 54 Wholesale Cash & Carry and 57 Retail stores trading in South Africa; 12 Cash
& Carry stores in Botswana, Lesotho, Mozambique, Namibia and Swaziland; and Shield, a voluntary
buying association.
Total sales increased by 7.5%, comparable sales increased by 7.9% with product inflation of 9.3%.
Lower-income consumer demand was slightly mitigated by high Food inflation, particularly in
commodities. Competition and price-pressure was intense in both Retail and Wholesale but both
businesses responded very effectively. Cambridge and Rhino performed well, growing comparable
sales above 10%.
Effective margin management and good cost control enabled Masscash to grow trading profit before
interest and tax by 28.2%.
Four Wholesale stores were closed; and eight Retail stores were opened and two closed, resulting in net
trading space decreasing by 4.3% to 356,531m2 .
*Trading profit before interest and taxation
Divisional operational review
52 weeks 52 weeks
December December Comparable Estimated
2016 % of 2015 % of Year % sales % sales
Rm (Reviewed) sales (Audited) sales % growth growth inflation
Sales 91,250.0 84,731.8 7.7 5.4 6.7
Massdiscounters 20,544.5 19,514.1 5.3 1.5 4.8
Masswarehouse 26,270.3 23,675.9 11.0 7.6 6.5
Massbuild 12,687.1 12,010.6 5.6 1.7 4.7
Masscash 31,748.1 29,531.2 7.5 7.9 9.3
Trading profit* 2,612.9 2.9 2,349.7 2.8 11.2
Massdiscounters 364,3 1.8 235.4 1.2 54.8
Masswarehouse 1,251.3 4.8 1,198.7 5.1 4.4
Massbuild 712,6 5.6 693.6 5.8 2.7
Masscash 284,7 0.9 222.0 0.8 28.2
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
52 weeks 52 weeks
December December %
2016 2015 change
Rm (Reviewed) (Audited)
Revenue 91,564.9 84,857.4 7.9
Sales 91,250.0 84,731.8 7.7
Cost of sales (note 2) (73,948.9) (68,689.6) (7.7)
Gross profit 17,301.1 16,042.2 7.8
Other income 216.8 125.6 72.6
Depreciation and amortisation (1,036.5) (946.2) (9.5)
Employment costs (7,346.6) (6,784.3) (8.3)
Occupancy costs (3,133.2) (2,865.6) (9.3)
Other operating costs (3,397.8) (3,245.8) (4.7)
Trading profit before interest and taxation 2,603.8 2,325.9 11.9
Impairment of assets (note 2) (76.7) (25.7)
Insurance proceeds on items in PP&E (note 2) 98.1 -
Operating profit before foreign exchange movements and interest 2,625.2 2,300.2 14.1
Foreign exchange loss (note 3) (141.8) (149.8) 5.3
Operating profit before interest 2,483.4 2,150.4 15.5
- Finance costs (601.0) (507.7) (18.4)
- Finance income 29.1 32.4 (10.2)
Net finance costs (571.9) (475.3) (20.3)
Profit before taxation 1,911.5 1,675.1 14.1
Taxation (588.9) (505.9) (16.4)
Profit for the year 1,322.6 1,169.2 13.1
Profit attributable to:
- Owners of the parent 1,308.2 1,112.8 17.6
- Non-controlling interests 14.4 56.4 (74.5)
Profit for the year 1,322.6 1,169.2 13.1
Basic EPS (cents) 604.7 513.5 17.8
Diluted basic EPS (cents) 594.4 506.1 17.4
Dividend (cents):
- Interim 74.1 146.0 (49.2)
- Final 224.8 112.2 100.4
- Total 298.9 258.2 15.8
Headline earnings
52 weeks 52 weeks
December December %
Rm 2016 2015 change
(Reviewed) (Audited)
Reconciliation of profit for the year to headline earnings
Profit for the year attributable to owners of the parent 1,308.2 1,112.8 17.6
Impairment of assets (note 2) 76.7 25.7
Loss on disposal of tangible and intangible assets 6.7 2.3
Profit on sale of non-current assets classified as held for sale - (5.2)
Insurance proceeds for fixed assets impaired (98.1) (1.2)
Foreign currency translation reserve re-classified to the Income
- (12.7)
Statement
Total tax effects of adjustments (0.2) (2.9)
Headline earnings 1,293.3 1,118.8 15.6
Foreign exchange loss after taxation 95.3 111.0
Headline earnings before foreign exchange (taxed) 1,388.6 1,229.8 12.9
Headline EPS (cents) 597.8 516.3 15.8
Headline EPS before foreign exchange (taxed) (cents) 641.8 567.5 13.1
Diluted headline EPS (cents) 587.6 508.8 15.5
Diluted headline EPS before foreign exchange (taxed) (cents) 630.9 559.3 12.8
Condensed consolidated statement of comprehensive income
December December
2016 2015 %
Rm (Reviewed) (Audited) change
Profit for the year 1,322.6 1,169.2 13.1
Items that will not subsequently be re-classified to the Income
3.6 5.0
Statement:
Net post retirement medical aid actuarial profit 3.6 5.0
Items that will subsequently be re-classified to the Income Statement: (368.2) (21.2)
Foreign currency translation reserve (note 3) (376.9) (24.2)
Cash flow hedges - effective portion of changes in fair value (23.2) 4.4
Fair value movement on available-for-sale financial assets - (3.5)
Income tax relating to components of other comprehensive income 31.9 2.1
Total other comprehensive loss for the year, net of tax (364.6) (16.2)
Total comprehensive income for the year 958.0 1,153.0 (16.9)
Total comprehensive income attributable to:
- Owners of the parent 943.6 1,096.6
- Non-controlling interests 14.4 56.4
Total comprehensive income for the year 958.0 1,153.0 (16.9)
Condensed consolidated statement of financial position
December December %
Rm 2016 2015 change
(Reviewed) (Audited)
ASSETS
Non-current assets 12,517.6 12,031.2
Property, plant and equipment 8,470.2 8,117.8 4.3
Goodwill and other intangible assets 3,159.0 2,999.1 5.3
Investments and other financial assets 164.2 165.1
Deferred taxation 724.2 749.2
Current assets 19,348.3 18,687.6
Inventories 11,803.0 11,934.5 (1.1)
Trade, other receivables and prepayments 4,684.7 4,697.4 (0.3)
Taxation 58.3 50.8
Cash on hand and bank balances 2,802.3 2,004.9 39.8
Non-current assets classified as held for sale 17.7 11.5
Total assets 31,883.6 30,730.3
EQUITY AND LIABILITIES
Total equity 6,183.7 5,791.1
Equity attributable to owners of the parent 6,108.1 5,636.0 8.4
Non-controlling interests 75.6 155.1
Non-current liabilities 4,722.4 3,053.4
Interest-bearing borrowings 3,301.9 1,819.6 81.5
Deferred taxation 73.9 73.5
Other non-current liabilities and provisions 1,346.6 1,160.3
Current liabilities 20,977.5 21,885.8
Trade, other payables and provisions 19,634.0 20,077.7 (2.2)
Taxation 138.4 155.6
Bank overdrafts 180.6 446.4
Interest-bearing borrowings 1,024.5 1,206.1
Total equity and liabilities 31,883.6 30,730.3
Condensed consolidated statement of cash flows
December December
Rm 2016 2015
(Reviewed) (Audited)
Operating cash before working capital movements 3,984.9 3,384.4
Working capital movements (263.0) 372.0
Cash generated from operations 3,721.9 3,756.4
Taxation paid (573.9) (631.0)
Net interest paid (489.3) (437.0)
Investment income 50.0 40.3
Dividends paid (453.2) (958.3)
Cash inflow from operating activities 2,255.5 1,770.4
Investment to maintain operations (826.7) (983.7)
Investment to expand operations (953.7) (710.7)
Investment in subsidiaries (17.7) (16.9)
Proceeds on disposal of property, plant and equipment 27.3 38.7
Proceeds on disposal of assets classified as held for sale - 23.1
Other net investing activities (4.1) 3.9
Cash outflow from investing activities (1,774.9) (1,645.6)
Increase/(decrease) in non-current liabilities 1,463.4 (314.1)
(Decrease)/increase in current liabilities (223.0) 372.3
Non-controlling interests acquired (177.7) (60.1)
Net acquisition of treasury shares (103.2) (23.6)
Cash inflow/(outflow) from financing activities 959.5 (25.5)
Net increase in cash and cash equivalents 1,440.1 99.3
Foreign exchange movements (376.9) (24.2)
Opening cash and cash equivalents 1,558.5 1,483.4
Closing cash and cash equivalents 2,621.7 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 2.2 733.4 550.5 4,048.3 5,334.4 192.8 5,527.2
(Audited)
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 - - - (404.4) (404.4) (48.5) (452.9)
Total comprehensive income - - (364.6) 1,308.2 943.6 14.4 958.0
Changes in non-controlling
interests - - (132.3) - (132.3) (45.4) (177.7)
IFRS 2 charge and Share Trust - - 198.5 (28.1) 170.4 - 170.4
transactions
Treasury shares acquired - (106.1) 0.9 - (105.2) - (105.2)
Year ended December 2016
(Reviewed) 2.2 569.0 437.8 5,099.1 6,108.1 75.6 6,183.7
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.
December Level Level Level December Level Level Level
Rm 2016 1 2 3 2015 1 2 3
(Reviewed) (Audited)
Financial assets at fair value
through profit or loss 142.9 - 142.9 - 188.1 - 188.1 -
- Investment in cell captives
and other 140.9 - 140.9 - 139.3 - 139.3 -
- FEC asset (non-designated
hedge) 2.0 - 2.0 - 48.8 - 48.8 -
Financial asset designated as a
cash flow hedging instrument 3.1 - 3.1 - 20.7 - 20.7 -
- FEC asset 3.1 - 3.1 - 20.7 - 20.7 -
Loans and receivables 13.1 - 13.1 - 13.9 - 13.9 -
- Employee share trust loans 13.1 - 13.1 - 13.9 - 13.9 -
Available-for-sale financial
assets 2.4 2.4 - - 4.9 4.9 - -
- Listed investments 2.4 2.4 - - 4.9 4.9 - -
Non-current assets classified
as held for sale 20.8 - - 20.8 11.5 - - 11.5
182.3 2.4 159.1 20.8 239.1 4.9 222.7 11.5
Financial liabilities at
amortised cost 3,214.1 - 3,214.1 - 2,522.0 - 2,522.0 -
- Medium-term loan and bank
loans 3,214.1 - 3,214.1 - 2,522.0 - 2,522.0 -
Financial liabilities at fair
value through profit or loss 7.5 - 7.5 - 5.6 - 5.6 -
- FEC liability
(non-designated hedge) 7.5 - 7.5 - 5.6 - 5.6 -
Financial liability designated
as a cash flow hedging
instrument 3.5 - 3.5 - 2.1 - 2.1 -
- FEC liability 3.5 - 3.5 - 2.1 - 2.1 -
3,225.1 - 3,225.1 - 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 year ended December 2016.
The financial assets and financial liabilities have been presented based on an analysis of their respective
natures, characteristics and risks.
Additional information
December December
2016 2015
(Reviewed) ( Audited)
Net asset value per share (cents) 2,813.0 2,595.6
Ordinary shares (000's):
- In issue 217,136.3 217,136.3
- Weighted average (net of treasury shares) 216,352.8 216,688.8
- Diluted weighted average 220,091.9 219,892.9
Preference shares (000's):
- Black Scarce Skills Trust 'B' shares in issue 2,840.5 2,840.5
Capital expenditure (Rm):
- Authorised and committed 612.0 953.4
- Authorised not committed 1,147.8 1,033.9
Net operating lease commitments (2017 - 2030) (Rm) 19,084.7 15,575.7
US dollar exchange rates: - year end (R/$) 14.11 15.23
- average (R/$) 14.74 12.74
Share Data
28 Dec 2015 - 25 Dec 2016
Closing price, 23 Dec 2016 R122.59
Share price (52 week high R156.46
Share price (52 week low) R99.36
Market Cap (billions) R26.6
Shares in issue (millions) 217.1
Shares traded (millions) 115.1
Percentage of shares traded 53.0%
Reuters MSMJ.J
Bloomberg MSM SJ
Source: I-Net
Notes
1. These provisional reviewed 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 year have had an impact on the financial reporting of the Group.
2. In the current year, the majority of the impairment of assets of R76.7 million and the insurance
compensation income of R98.1 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 year, the impairment of assets was as a result of store closures.
3. The majority of Massmart's foreign exchange loss of R141.8 million (2015: R149.8
million) arose as a result of its short-term Rand-denominated intercompany loans to its African
subsidiaries, as well as the settlement of its Rand-denominated foreign creditors. On the Statement of
Financial Position, the Group's net investments in its African operations, as well as the foreign exchange
translation reserve, increased by R352.7 million (2015: R21.5 million) as a result of
translating the African operations' results from their respective functional currency into Rands.
4. There were no significant subsequent events after the year end.
5. 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 December 2016, the Supplier Development Fund had a closing balance of R72.2 million
(2015: R111.6 million). A net amount of R1.0 million remains unpaid to Walmart
(2015: R292.7 million), which has been accounted for in ‘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.
6. Due to Christmas trading, Massmart's earnings are weighted towards the six months to
December.
7. These provisional reviewed 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 Group's registered office. The Massmart Board take
full responsibility for the preparation of the Group's provisional reviewed condensed consolidated
financial statements which was supervised by the Chief Financial Officer, Johannes van Lierop, Bachelor
of Business Economics, RA (Amsterdam).
For more information call +27 11 517 0000 or visit massmart.co.za/results2016
Registered office
Massmart House,
16 Peltier Drive,
Sunninghill Ext 6, 2191
Company secretary
NJ Ralebepa
Sponsor
Deutsche Securities (SA) Proprietary Limited
3 Exchange Square, 87 Maude Street,
Sandton, Johannesburg, 2196, South Africa
Transfer secretaries
Computershare Investor Services Pty Ltd,
Rosebank Towers, 15 Biermann Avenue, Rosebank, Johannesburg, 2196,
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 **UK ***Chile ****USA *****Netherlands
Our stores
MASSDISCOUNTERS
General Merchandise discounter and Food retailer
Game
141 Stores
South Africa, Botswana, Ghana, Kenya, Lesotho,
Malawi, Mozambique, Namibia, Nigeria, Tanzania,
Uganda, Zambia
DIONWIRED
24 Stores
South Africa
MASSWAREHOUSE
Warehouse club
Makro
Fruitspot
20 Stores
South Africa
MASSBUILD
Home Improvement retailer and building materials supplier
Builders Warehouse
38 Stores
South Africa, Botswana, Mozambique, Zambia
Builders Express
43 Stores
South Africa
Builders Trade Depot
13
South Africa
Builders Superstore
10
South Africa
MASSCASH
Food wholesaler, retailer and buying association
66 WHOLESALE
South Africa, Botswana,
Lesotho, Mozambique,
Namibia, Swaziland
57 RETAIL
South Africa
BUYING ASSOCIATIONS
South Africa, Botswana, Swaziland
Date: 23/02/2017 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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