WE RE DEDICATED TO REVIEWED CONSOLIDATED RESULTS FOR THE 26 WEEKS ENDED 29 JUNE Divisional operational review

Transcription

1 WE RE DEDICATED TO REVIEWED CONSOLIDATED RESULTS FOR THE 26 WEEKS ENDED 29 JUNE 2014 Massmart is a managed portfolio of four divisions, each focused on highvolume, low-margin, low-cost distribution of mainly branded consumer goods for cash, in 12 countries in sub-saharan Africa comprising 381 stores. The Group is the second largest distributor of consumer goods in Africa, the leading retailer of general merchandise, liquor and home improvement equipment and supplies, and the leading wholesaler of basic foods. Overview With the backdrop of a difficult South African trading environment, for the 26 weeks ended 29 June 2014 Massmart s total sales of R35.7 billion increased by 10.2% over the prior comparable period. Comparable stores sales growth was 7.1% with product inflation of 4.8%. Given the weak South African consumer environment, we focused on offering the customer value, being innovative and aggressively controlling costs. With the exception of Game South Africa, we achieved most of these objectives. Two Divisions, Massbuild and Masscash, grew trading profit ahead of sales while, due to new stores in the prior period, Makro s growth in trading profit was slightly below sales growth. Massdiscounters was compromised by continued soft sales in Game South Africa resulting in significantly lower trading profit compared to the prior comparable period. Group operating profit, excluding foreign exchange movements and interest, was 3.8% below the prior period s comparable figure. Higher net interest paid from funding several property acquisitions and an adverse movement in foreign exchange resulted in headline earnings decreasing by 25.5% while, excluding foreign exchange movements, headline earnings declined by 5.7%. Environment The causes and consequences of the current tepid state of the South African consumer economy are generally understood. It is too soon to be sure but it is possible that the knock-on effect of the five-month long mining sector labour strike has had a greater direct and indirect adverse impact on South African industries, the associated work-forces and their families, than is fully understood. Certainly, our stores in towns immediately affected by mining unrest and regions traditionally associated with migrant mine labour, have experienced significant sales declines. The gradually tightening interest rate cycle will make things more difficult for middle-income customers and possibly upper-income customers too. Signs of declining food inflation suggest potential relief for lower- and middle-income customers as, for example, maize prices fall sharply on the back of one of the best crops in South Africa in 30 years. Upper-income customers appear resilient for the meantime. South African retailers are facing a weaker consumer environment, accompanied by some inflation volatility, higher interest rates and negligible economic growth, all factors which seem likely to persist for 2014 and possibly In response, some have even sought growth beyond the African continent. Locally, retailers continue to compete aggressively with price and product, especially over month-end which has, notably, become the only time when many customers are spending. In response to the environment, the Massmart Divisions managed costs tightly and concentrated on offering customers value through exciting deals, innovative promotions, keen pricing, and collaboration with suppliers. Inventory levels were managed closely, ensuring that in-stock service levels were high. We sought ways to make it easier for customers to shop with us by, for example, having a single credit account and trade-card for customers to use across all four Massbuild formats; launching General Merchandise online in Makro; listing products online that are not available in our stores; and giving smart-tablets to our sales teams in some of our wholesale and contractor businesses to rapidly process enquiries and orders. For the past year we have defended multiple legal actions filed or threatened by three of the dominant food retailers in South Africa. These actions are based on lease exclusivity clauses that seek to restrict competition for the benefit of the dominant retailers. To date, we have been served with, or have had threats of, legal actions at multiple Game stores. We will vigorously defend these actions as we believe the blanket enforcement of these clauses to be intuitively anti-competitive. In addition, we will shortly lodge a formal complaint with the Competition Commission against each retailer who has filed legal action against us. The economic performances of those 11 non-south African countries where we operate our 31 stores have been mostly positive. We remain excited about the significant potential of sub-saharan Africa but feel that this will likely evolve over the longer term. Divisional operational review Massdiscounters comprises the 126-store General Merchandise discounter and Food retailer Game, which trades in South Africa, Botswana, Ghana, Lesotho, Malawi, Mozambique, Namibia, Nigeria, Tanzania, Uganda and Zambia; and the 22-store Hi-tech retailer DionWired. Total sales for the 26-week period increased by 8.0%, and comparable sales increased by 4.0% with product inflation of 3.1%. Given the difficult consumer environment, particularly up to the middle-income level, Game South Africa s comparable sales only grew by 0.4% causing severe pressure on profitability, resulting in Massdiscounters trading profit before interest and tax decreasing by 78.8%. The roll-out of Dry Groceries and Fresh continues with 55 Game stores now offering both of these categories. Food sales growth in these comparable stores is exceptionally strong at 20.1%. DionWired s total sales growth was 12.6% and this brand has become the destination store within this category. We continue to learn much from our DionWired online offering which now comprises 2.1% of total Massdiscounters sales (June 2013: 1.4%). Game Africa s total Rand sales and sales in local currencies increased by 20.2% and 13.2% respectively. Profit growth was just below sales growth due partly to the anticipated drag of lower sales levels in our new stores opened in Nigeria. Kano, in Nigeria, opened in May 2014 with significant preopening costs. Six Game stores (one in Nigeria) and one DionWired store were opened, and each brand closed a store, increasing trading space by 16,436m² (3.5%). Masswarehouse comprises the 19-store Makro warehouseclub trading in Food, General Merchandise and Liquor in South Africa; and The Fruitspot. Makro traded exceptionally well in a difficult environment total sales for the 26-week period increased by 12.2% and comparable sales increased by 9.4% with product inflation of 5.5%. The stores opened in 2011 and 2012 are showing accelerating sales growth and contributing strongly to profits. The success of the General Merchandise online offering, launched in March 2014, is in line with expectations. Makro s trading profit before interest and tax increased by 7.8%, with profitability partially impacted by the cost-drag of the two new stores opened in Our Food business has benefited from increased sales to retail customers and we have gained additional share in the retail and wholesale liquor market. The Fruitspot grew sales and profit. There will be no new stores in the 2014 financial year. Massbuild comprises 93 stores, trading in DIY, Home Improvement and Building Materials, under the Builders Warehouse, Builders Express, Builders Trade Depot and Builders Superstore brands in South Africa, Mozambique and Botswana. Confirming its market-leading position, Massbuild grew total sales for the 26-week period by 14.2% and comparable sales by 8.8% with product inflation of 5.3%. Builders Warehouse and Builders Express performed exceptionally while Builders Trade Depot struggled following the disruption caused by store closures and an IT implementation project in late June June Period Comparable Estimated December 2014 % of 2013 % of % % sales % sales 2013 % of Rm (Reviewed) sales (Reviewed)* sales growth growth inflation (Audited) sales Sales 35, , ,263.4 Massdiscounters 8, , ,740.6 Masswarehouse 9, , ,675.1 Massbuild 4, , ,583.6 Masscash 12, , ,264.1 Trading profit before interest and tax (1.4) 2, Massdiscounters (78.8) Masswarehouse Massbuild Masscash Trading profit excludes several items. A detailed reconciliation between trading and operating profit can be found at the top of page 4. * including the effect of Walmart integration and related costs. 1

2 The Mozambique-based Kangela business was closed in late The four Builders Warehouse stores in Botswana and Mozambique grew sales and profits. Massbuild s trading profit before interest and tax increased by 16.4%. One Builders Warehouse store was opened and one closed; two Builders Express stores were opened and two closed; and one Builders Superstore was opened, resulting in net trading space increasing by 3,359m² (0.8%). Masscash comprises 75 Wholesale Cash and Carry and 46 Retail stores trading in South Africa, Botswana, Lesotho, Mozambique, Namibia and Swaziland; and Shield, a voluntary buying association. In extremely competitive South African wholesale and retail environments, creditably total sales for the 26-week period increased by 8.7% and comparable sales increased by 6.8% with product inflation of 5.0%. Total sales growth in our non- South African Wholesale businesses was pleasing at 12.0% and, adjusting for this, sales growth in our South African Wholesale businesses was only 1.4%. Retail performed very well, gaining share, improving profitability and reporting strong customer price-perception. Masscash s trading profit before interest and tax increased by 48.4%. Two Cambridge stores were opened and three were closed, resulting in net trading space decreasing by 1,175m² (0.3%). Financial review Statement of comprehensive income Total Group sales growth was 10.2%, with comparable sales growth of 7.1%. Product inflation was 4.8%, suggesting real comparable volume growth of 2.3%. General Merchandise s inflation increased to 4.7%, Food and Liquor s inflation increased to 4.5% and Home Improvement inflation increased to 5.3%. Sales in our African businesses represented 7.8% of total sales and sales in our continuing African businesses increased by 16.7% in Rands. During the period, 13 stores were opened and eight stores were closed, resulting in a total of 381 stores at June Net trading space increased by 1.3% to 1,499,928m². The Group s gross profit of 18.64% is lower than the prior comparable period of 18.73%. This is as a combination of an increased Africa contribution and improved gross margins in Massbuild and Masscash, offset by a weaker margin performance in Game South Africa and a greater Food contribution at lower margins across the Group. Total operating expenses (excluding foreign exchange movements) increased by 11.3%, with comparable operating expenses increasing by 7.7%. Employment costs, the Group s largest cost category, increased by 12.9%. The 14.5% increase in depreciation and amortisation is due to the Group acquiring many of our key previously lease-held properties over the past few years, which in turn caused a lower than usual increase in occupancy costs of only 7.9%. Included in this figure are the costs of services such as rates and taxes which increased by approximately 20%. Included in operating profit is a net realised and unrealised foreign exchange translation loss of R7.9 million (June 2013: R133.8 million gain). Excluding foreign exchange movements, earnings before interest, tax, depreciation and amortisation (EBITDA) of R1.1 billion increased over the prior comparable period by 3.6%. Net interest paid of R154.9 million increased as a result of the Group s capital expansion programme, including the acquisition of certain key properties, and some inefficiencies in working capital levels. At R4.2 billion, the Group s average borrowings are higher than the prior comparable period s figure. The Group s effective tax rate of 30.4% (June 2013: 31.1%) should normalise at just below 30.0%. The non-controlling interests comprise store managers holdings in Masscash stores and non-controlling interests in acquired Masscash businesses. Headline earnings and Headline EPS each decreased by 25.5% over the prior comparable period. Adjusting for the effect of the foreign exchange movements in both periods results in a decrease in headline earnings and a decrease in Headline EPS of 5.7%. Statement of financial position Working capital was managed effectively in all Divisions other than Massdiscounters which, due to the soft comparable sales, made slow progress with the over-stocked position. Days in inventory at June 2014 were marginally better at 61 days (June 2013: 62 days) for the Group. The net book value of property, plant and equipment increased by 11.4% compared to June 2013, as a result of acquiring some of our key properties and the investment in new stores. Subsequent to June 2014, a further two previously lease-held properties, the Builders Warehouse Northriding store and the Massmart Head Office buildings in Sunninghill, with an aggregate value of R542.5 million, have been acquired. The Group s gearing ratio (debt:equity) increased to 38.1% (June 2013: 34.4%). The annual rolling return on equity was 25.5% at June 2014 (June 2013: 26.6%). Excluding foreign exchange movements, this figure was 26.6% (June 2013: 25.7%). Statement of cash flows Operating cash utilised amounted to R1.4 billion during this six month period. Excluding the effect of the prior year s 53rd week, operating cash improved compared to the prior comparable period. Total capital expenditure of R0.6 billion is significantly lower than the prior comparable period, and comprises R332.2 million on maintenance and R263.0 million on expansionary expenditure, which is in line with expectation. This decrease is largely as a result of the R575.0 million acquisition of seven Makro stores in the prior comparable period. Directorate In March 2014, Mark Lamberti was appointed Chief Executive Officer (CEO) of the Imperial Holdings Limited and resigned as Chairman of Massmart. Kuseni Dlamini was appointed the new Chairman of Massmart with effect from 10 April Grant Pattison resigned as CEO with effect from 1 June 2014 and Guy Hayward, previously Chief Operating Officer, was appointed to succeed him. Grant remains on the Board until the end of December In December 2013 David Cheesewright was promoted to President and CEO of Walmart International. Shelley Broader succeeded him as President and CEO of the Walmart EMEA region in May Shelley, previously CEO of Walmart Canada, now has responsibility for Walmart s retail operations and business development across Europe, the Middle East, sub- Saharan Africa and Canada. As a result of these changes, David has resigned and Shelley has been appointed in his place. Jeff Davis, appointed following the Walmart acquisition in June 2011, resigned and in his place Andy Clarke has been appointed to the Board. Andy is the President and CEO of Asda Stores Ltd, the United Kingdom s second-largest supermarket retailer. The appointments of Shelley and Andy and the resignations of David and Jeff were effective 16 July Ilan Zwarenstein has advised the Board of his intention to resign as Group Finance Director with effect from 28 February 2015 to pursue different career opportunities. The process of engaging a suitable replacement is now underway and the generous notice period given by Ilan should ensure a seamless handover of responsibilities. The Board would like to thank Ilan for his considerable contribution to the Group over the past nine years and wish him well in his future endeavours. Strategic priorities Our areas of strategic focus remain unchanged. Improving the profitability of the core business over the medium-term is a priority and we are making good progress in this regard. Expanding into Food Retail and Fresh in our existing formats continues apace. Expansion into Africa remains a priority and in the next two years we anticipate opening 13 new stores representing African space growth of about 50%. We continue to expand and improve our ecommerce offerings and are gaining invaluable insights from our colleagues in Asda and Walmart ecommerce. Finally, we will focus on selectively owning more of our current and future stores, will rationalise stores in certain over-traded markets, and will continue to invest in product quality and safety. Sales update and prospects For the 34 weeks to 24 August 2014, total sales increased by 10.0% and comparable sales increased by 7.1%. Given the difficult consumer environment it seems likely that these sales trends will continue for the remainder of 2014 and so we remain focused on offering our customers exceptional value and innovation. We expect that the results for the full-year will be affected by the ongoing weak economic environment as experienced in the interim reporting period. The financial information on which this outlook statement is based has not been reviewed or reported on by the Company s external auditors. Dividend Massmart has maintained the dividend at the same level as the prior comparable period. Notice is hereby given that a gross final cash dividend of cents per share, in respect of the period ended 29 June 2014, has been declared. There were no STC credits available for use as part of this declaration. The number of shares in issue at the date of this declaration is 217,116,844. The dividend has been declared out of income reserves and will be subject to the Dividend Tax rate of 15% which will result in a net dividend of cents per share to those shareholders who are not exempt from paying Dividend Tax. Massmart s tax reference number is 9900/196/71/9. The salient dates relating to the payment of the dividend are as follows: Last day to trade cum dividend on the JSE: Friday, 12 September 2014 First trading day ex dividend on the JSE: Monday, 15 September 2014 Record date: Friday, 19 September 2014 Payment date: Monday, 22 September 2014 Share certificates may not be dematerialised or rematerialised between Monday, 15 September 2014 and Friday, 19 September 2014, both days inclusive. Massmart shareholders who hold Massmart ordinary shares in certificated form ( certificated shareholders ) should note that dividends will be paid by cheque and by means of an electronic funds transfer ( EFT ) method. Where the dividend payable to a particular certificated shareholder is less than R100, the dividend will be paid by EFT only to such certificated shareholder. Certificated shareholders who do not have access to any EFT facilities are advised to contact the company s transfer secretaries, Computershare Investor Services at Ground Floor, 70 Marshall Street, Johannesburg 2001; PO Box 61051, Marshalltown 2107; on ; or on (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 27 August 2014 Ilan Zwarenstein Group Finance Director MASSDISCOUNTERS MASSWAREHOUSE MASSBUILD MASSCASH 23.1% R8,225.8m 27.1% R9,659.4m 13.6% R4,847.9m 36.2% UP BY 8.0% UP BY 12.2% UP BY 14.2% R12,926.7m UP BY 8.7% 3.8% R27.4m 55.7% R406.5m 25.5% R186.2m 15.0% DOWN BY 78.8% UP BY 7.8% UP BY 16.4% R109.8m UP BY 48.4% 2

3 Condensed consolidated income statement Rm (Reviewed) (Reviewed) % change (Audited) Revenue 35, , ,512.9 Sales 35, , ,263.4 Cost of sales (29,010.2) (26,306.4) (10.3) (58,926.4) Gross profit 6, , ,337.0 Other income Depreciation and amortisation (409.2) (357.4) (14.5) (731.1) Impairment of assets (note 3) (14.9) (41.6) Employment costs (2,885.1) (2,555.8) (12.9) (5,423.5) Occupancy costs (1,311.0) (1,215.2) (7.9) (2,555.3) Other operating costs (1,423.2) (1,300.9) (9.4) (2,750.3) Operating profit before foreign exchange movements and interest (3.8) 2,084.7 Foreign exchange (loss)/profit (7.9) Operating profit before interest (19.6) 2,152.5 Finance costs (176.6) (142.0) (24.4) (283.8) Finance income Net finance costs (154.9) (124.3) (24.6) (255.1) Profit before taxation (27.0) 1,897.4 Taxation (164.1) (230.2) 28.7 (555.3) Profit for the period (26.2) 1,342.1 Profit attributable to: Owners of the parent (27.3) 1,283.0 Non-controlling interests (7.5) 59.1 Profit for the period (26.2) 1,342.1 Basic EPS (cents) (27.3) Diluted basic EPS (cents) (27.1) Dividend (cents): Interim Final Total Headline earnings Reconciliation of profit for the period to headline earnings Profit attributable to owners of the parent ,283.0 Impairment of assets (note 3) (Profit)/Loss on disposal of fixed assets (1.3) Loss on disposal of business Total tax effects of adjustments 0.5 (2.7) (3.8) Headline earnings (25.5) 1,334.5 Headline earnings before foreign exchange (taxed) (5.7) 1,285.7 Headline EPS (cents) (25.5) Headline EPS before foreign exchange (taxed) (cents) (5.7) Diluted headline EPS (cents) (25.2) Diluted headline EPS before foreign exchange (taxed) (cents) (5.4) Condensed consolidated statement of other comprehensive income Rm (Reviewed) (Reviewed) % change (Audited) Profit for the period ,342.1 Items that will not be re-classified subsequently to the income statement: 5.7 Post-retirement medical aid actuarial gain 5.7 Items that will be re-classified subsequently to the income statement: (60.7) Foreign currency translation reserve (49.4) Cash flow hedges (14.3) Revaluation of listed shares (1.2) (0.1) 4.7 Revaluation of available for sale financial asset 6.4 Income tax relating to components of other comprehensive income 4.2 (13.6) (3.1) Total other comprehensive (loss)/income for the period, net of tax (60.7) Total comprehensive income for the period (43.3) 1,403.6 Total comprehensive income attributable to: Owners of the parent ,344.5 Non-controlling interests Total comprehensive income for the period (43.3) 1,403.6 Our financial highlights: UP BY 10.2% R35,659.8 m 2013: R32,369.4 m OPERATING PROFIT BEFORE FOREX AND INTEREST DOWN BY 3.8% R702.9 m 2013: R730.3 m CASH UTILISED BY OPERATIONS UP BY 117.5% R1,381.8 m 2013: R635.2 m HEADLINE EARNINGS BEFORE FOREX DOWN BY 5.7% R369.8 m 2013: R392.2 m HEADLINE EARNINGS AFTER FOREX DOWN BY 25.5% R364.1 m 2013: R488.5 m DIVIDEND PER SHARE UNCHANGED 146 cents 2013: 146 cents 3

4 Reconciliation between trading and operating profit Rm (Reviewed) (Reviewed) (Audited) Profit before interest and taxation Trading profit before interest and taxation ,145.4 Walmart integration and related costs (note 4) (74.9) Trading profit before interest and taxation* ,145.4 Impairment of assets (note 3) (14.9) (41.6) Loss on disposal of business (1.8) (1.8) BEE transaction IFRS 2 charge (note 5) (12.1) (7.9) (17.3) Operating profit before foreign exchange movements and interest ,084.7 * including effect of Walmart integration and related costs. Condensed consolidated statement of financial position Rm (Reviewed) (Reviewed) % change (Audited) ASSETS Non-current assets 9, , ,111.8 Property, plant and equipment 6, , ,988.1 Goodwill and other intangible assets 2, , ,928.8 Investments and other financial assets Deferred taxation Current assets 14, , ,036.1 Inventories 9, , ,115.5 Trade, other receivables and prepayments 3, , ,712.5 Taxation Cash and bank balances 1, , ,196.1 Total 24, , ,147.9 EQUITY AND LIABILITIES Total equity 5, , ,369.6 Equity attributable to owners of the parent 4, , ,173.0 Non-controlling interests Non-current liabilities 2, , ,206.4 Interest-bearing borrowings 1, , ,178.7 Deferred taxation Other non-current liabilities and provisions (note 6) Current liabilities 17, , ,571.9 Trade, other payables and provisions 13, , ,101.2 Taxation Bank overdrafts 2, , Interest-bearing borrowings Total 24, , ,147.9 Condensed consolidated statement of cash flows Rm (Reviewed) (Reviewed) (Audited) Operating cash before working capital movements 1, , ,984.0 Working capital movements (2,519.3) (1,901.8) Cash (utilised by)/generated from operations (1,381.8) (635.2) 3,736.6 Taxation paid (461.1) (364.3) (732.8) Net interest paid (154.9) (124.3) (255.1) Investment income 79.2 Dividends paid (597.0) (595.9) (913.4) Cash (outflow)/inflow from operating activities (2,594.8) (1,719.7) 1,914.5 Investment to maintain operations (332.2) (265.0) (780.2) Investment to expand operations (263.0) (971.5) (1,306.8) Proceeds on disposal of property, plant and equipment Proceeds on disposal of assets classified as held for sale Other net investing activities (6.7) 30.2 (247.4) Cash outflow from investing activities (582.2) (1,199.0) (2,306.3) Cash inflow from financing activities Net decrease in cash and cash equivalents (2,772.3) (2,663.9) (98.8) Foreign exchange movements (49.4) Opening cash and cash equivalents 1, , ,639.9 Closing cash and cash equivalents (1,233.4) (1,019.2) 1,

5 Condensed consolidated statement of changes in equity Equity Ordinary attributable Nonshare Share Other Retained to owners of controlling Rm capital premium reserves profit the parent interests Total Balance as at December 2012 (Audited) , , ,915.3 Dividends declared (913.4) (913.4) (913.4) Total comprehensive income , , ,403.6 Changes in non-controlling interests (7.2) (3.4) Distribution to non-controlling interests (30.9) (30.9) Share trust transactions and IFRS 2 charge (121.8) Treasury shares acquired (8.8) (8.8) (8.8) Balance as at December 2013 (Audited) , , ,369.6 Dividends declared (597.0) (597.0) (597.0) Total comprehensive income (60.7) Changes in non-controlling interests (25.4) (25.4) (7.7) (33.1) Distribution to non-controlling interests (45.7) (45.7) Share trust transactions and IFRS 2 charge 51.2 (11.2) Treasury shares acquired (8.1) (8.1) (8.1) 26 weeks ended June 2014 (Reviewed) , , ,041.0 Balance as at December 2012 (Audited) , , ,915.3 Dividends declared (595.9) (595.9) (595.9) Total comprehensive income Changes in non-controlling interests (1.6) (1.6) (0.5) (2.1) Distribution to non-controlling interests (30.0) (30.0) Share trust transactions and IFRS 2 charge 66.9 (100.7) (33.8) (33.8) Treasury shares acquired (7.2) (7.2) (7.2) 26 weeks ended June 2013 (Reviewed) , , ,802.1 Fair values of financial instruments For financial instruments traded in an active market (level 1), fair value is determined using stock exchange quoted prices. For other financial instruments (level 2), appropriate valuation techniques, including recent market transaction and other valuation models, have been applied and significant inputs include market yield curves and exchange rates. FAIR VALUE HIERARCHY (Rm) Financial instruments carried at fair value in the statement of fi nancial position: (Reviewed) Level 1 Level 2 (Reviewed) Level 1 Level 2 (Audited) Level 1 Level 2 Financial assets at fair value through profit or loss Investment in a trading and logistics structure Investment in insurance cell captive on extended warranties Investment in insurance cell captive on premium contributions Investment in insurance cell captive on life cover FEC Asset Available-for-sale financial assets Assets measured at fair value Financial liabilities at fair value through profit or loss Liabilities measured at fair value There were no transfers between Level 1 and Level 2 fair value measurements during the six months ending June 2014 and no transfers into or out of Level 3. Additional information June 2014 June 2013 December 2013 (Reviewed) (Reviewed) (Audited) Net asset value per share (cents) 2, , ,382.7 Ordinary shares (000 s): In issue 217, , ,109 Weighted average (net of treasury shares) 216, , ,935 Diluted weighted average 218, , ,268 Preference shares (000 s): 2,236 1,521 2,348 Black Scarce Skills Trust B shares held by the participants (note 5) Capital expenditure (Rm): Authorised and committed 1, ,249.3 Authorised not committed Gross operating lease commitments ( ) (Rm) 15, , ,445.7 US dollar exchange rates period end (R/$) average (R/$) Directorate D Dlamini (Chairman), CS Seabrooke (Deputy Chairman), GRC Hayward* (Chief Executive Officer), S Broader**, A Clarke***, NN Gwagwa, P Langeni, G Pattison*, JP Suarez****, I Zwarenstein* (Group Finance Director) * Executive ** Canada *** UK **** USA Massmart Holdings Limited ( the Company or the Group ) JSE code MSM ISIN ZAE 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 For more information Call +27 (0) Visit Share Data: 30 Dec Jun 2014 Closing price, 27 June 2014 R Share price (26 week high) R Share price (26 week low) R Market cap Reuters: MSMJ.J Bloomberg: MSM SJ R28.8 billion 5

6 Operational overview MASSDISCOUNTERS GENERAL MERCHANDISE DISCOUNTER AND FOOD RETAILER MASSWAREHOUSE WAREHOUSE CLUB MASSBUILD HOME IMPROVEMENT RETAILER AND BUILDING MATERIALS SUPPLIER MASSCASH FOOD WHOLESALER, RETAILER AND BUYING ASSOCIATION +5 STORES FROM 143 TO 148 INCREASE IN TRADING SPACE: +3.5% NO STORE MOVEMENT 19 INCREASE IN TRADING SPACE: 195,794 SQM +1 STORE FROM 92 TO 93 INCREASE IN TRADING SPACE: +0.8% 413,905 SQM -1 STORE FROM 122 TO 121 DECREASE IN TRADING SPACE: -0.3% 398,462 SQM 491,767 SQM DC SPACE: 178,488 SQM DC SPACE: 51,300 SQM DC SPACE: 61,733 SQM DC SPACE: 31,801 SQM 126 stores, BOTSWANA, GHANA, LESOTHO, MALAWI, MOZAMBIQUE, NAMIBIA, NIGERIA, TANZANIA, UGANDA, ZAMBIA 19 stores 34 stores, BOTSWANA, MOZAMBIQUE 39 stores 75 wholesale stores, BOTSWANA, LESOTHO, MOZAMBIQUE, NAMIBIA, SWAZILAND 22 stores 15 stores 5 stores 46 retail stores Buying associations, BOTSWANA, SWAZILAND Notes 1. These condensed consolidated interim results have been prepared in accordance with the requirements of International Financial Reporting Standards (IFRS), its interpretations issued by the IFRS Interpretations Committee, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Council, presentation and disclosure as required by International Accounting Standard (IAS) 34 Interim Financial Reporting, the JSE Limited Listings Requirements and the requirements of the Companies Act 71 of 2008 of South Africa. The accounting policies are consistent in all material respects with those applied in the most recent annual financial statements. 2. During the current period, the only Massmart shares acquired in the market were by the Massmart Employee Share Trust where 0.3 million shares (0.1% of average shares in issue) were bought at an average price of R totalling R35.4 million. During the prior comparable period, the Massmart Employee Share Trust acquired 0.9 million shares (0.4% of average shares in issue) at an average price of R totalling R175.3 million. 3. The impairment of assets in the current period relates to the impairment of tangible assets in Masscash as a result of store closures. There was no impairment of assets in the prior comparable period. 4. Walmart integration and related costs in the prior comparable period comprise professional fees, integration costs, expatriate employment costs, share-based payments, travel, consulting costs and other direct expenses relating to the Walmart transaction. At June 2014, the Supplier Development Fund had a closing balance of R191.9 million (June 2013: R218.5 million). A net amount of R184.5 million remains unpaid to Walmart (June 2013: R130.9 million), which has been accounted for in trade, other receivables and prepayments and trade, other payables and provisions. The Walmart transaction costs are behind us and integration costs are now included as part of our normal operating costs. 5. The 2006 Massmart BEE transaction, gave rise to an IFRS 2 Share-based Payment charge of R12.1 million (June 2013: R7.9 million). The B preference shares were issued to the Black Scarce Skills Trust. 6. Other non-current liabilities and provisions include the lease smoothing liability of R842.4 million (June 2013: R755.0 million). 7. There were no significant business combinations during the current or prior comparable periods. 8. After the interim reporting period, the acquisitions of two properties that had previously been leased were finalised. The transactions resulted in Massmart gaining control of the Northriding Builders Warehouse store on 31 July 2014, and the Massmart Head Office buildings in Sunninghill on 1 August The impact is an increase in Property, Plant and Equipment of R542.5 million, and a cash outflow of R542.5 million. With the exception of these acquisitions, there were no significant subsequent events after the period end that would have impacted the financial information presented. 9. Massmart and its divisions enter into certain transactions with related parties in the normal course of business. Details of these are, and will be, disclosed in Massmart s Integrated Annual Report. Transactions between the Company and Wal-Mart Stores Inc. (its ultimate Holding Company), were accounted for in the Walmart transaction, integration and related costs in the prior comparable period in the condensed consolidated income statement. Further detail relating to these costs is disclosed in note 4 above. During the prior comparable period the Group secured a medium-term loan with Walmart repayable after five years. Interest of 7.46% is repaid quarterly. The loan of R600.0 million is accounted for under non-current interestbearing borrowings. As a 52.4% shareholder, Wal-Mart Stores Inc. will also be receiving a dividend based on their number of shares held. 10. The condensed consolidated interim results for the 26 weeks ended June 2014 have been reviewed by independent external auditors, Ernst & Young Inc. and their unmodified review report is available for inspection at the Company s registered office. The review was performed in accordance with ISRE 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity. Any reference to future financial performance included in this announcement has not been reviewed or reported on by the Group s external auditors. The auditor s report does not necessarily report on all of the information contained in this announcement/financial results. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor s engagement they should obtain a copy of the auditor s report together with the accompanying financial information from the issuer s registered office. The preparation of the Group s condensed consolidated interim results was supervised by the Group Finance Director, Ilan Zwarenstein, BCom, BAcc, CA(SA). 6