REVIEWED CONSOLIDATED RESULTS FOR THE 26 WEEKS ENDED 23 DECEMBER 2012 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 For the 26 weeks ended 23 December 2012, Massmart s total sales increased by 14.7% over the prior comparative period, while operating profi t and headline earnings declined by 17.7% and 21.2% respectively. Excluding costs relating to the Walmart transaction and integration, which include the additional R140 million related to the Competition Appeal Court ruling, and foreign exchange movements, operating profi t increased by 6.1% and headline earnings by 5.8%. Comparable sales increased by 7.3% and period-weighted product infl ation was 3.7% refl ecting positive volume growth for the Group. There was evidence of slower growth amongst middle- and lower-income customers towards the end of the period. Massbuild and Masscash performed well, growing profi t ahead of sales growth; Masswarehouse increased profi ts, although at a rate below sales growth, as they absorbed the opening costs of two new Makro stores; and Massdiscounters profi ts declined as comparable sales increased by only 2.6%. Cash fl ow from operations was strong at R2.8 billion, although the Group is slightly over-stocked due to the sales slow-down in Massdiscounters. With the Walmart transaction and integration now behind us, the Group is focused on operational disciplines, strategic implementation and extracting returns from the investments made over the past several years in Supply Chain and Food Retail. Environment During the third quarter of calendar 2012 we could only see the effect of the South African labour unrest in our sales in the affected towns. We did however notice a marked slow-down in sales from November, which was only interrupted for the last two weeks of Christmas trade. We assume the economic effect of that unrest started fl owing into the broader economy in the fourth quarter. South African infl ation has remained relatively benign, despite large increases in fuel and energy costs, which will likely eventually result in higher levels of infl ation. In our product categories, infl ation remains low at 3.7%, suggesting that national infl ation occurred at higher levels outside that for consumer goods. Our Food and Liquor infl ation increased to 6.8% but has since paused and may now possibly decline. The weaker Rand is likely to bring further infl ation in General Merchandise and Home Improvement. As consumer expenditure slowed, we saw increased discounting amongst most retailers and the inevitable fi ght to hold or gain market share, which is positive for consumers. Examining both our own recent internal sales trends and other listed retailers sales updates, it seems that upper-end consumers are in better shape than middle- and lower-end consumers. The middle-income customers are impacted by infl ation and possibly over-extended credit, while lower-income customers are affected by infl ation and possibly the labour unrest. Divisional operational review Massdiscounters Comprises the 114-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 19-store Hi-tech retailer DionWired. Divisional comparable sales increased by 2.6% with product infl ation of 0.8%. Total sales increased by 7.7% but disappointingly trading profi t before tax decreased by 14.8% as Game South Africa s comparable sales growth slowed to 1.0%. Game Africa and DionWired performed well however, with profi t increasing well ahead of sales in both businesses. Game Africa s total Rand sales increased by 8.7% and by 9.2% in local currencies. Foodco continues to expand with 27 stores now in the format (including fi ve in Africa), and is performing at or above expectations. Signifi cantly the fi nal and Durban-based Regional Distribution Centre (RDC) was commissioned which now completes the national network. Whilst these facilities are expensive in the short-term, they provide a signifi cant opportunity for positive operational and trading leverage in the medium- to long-term. In January 2013, Massdiscounters CEO, Jan Potgieter, resigned. Jan was with Massdiscounters for eight years, six of them as CEO and we thank him for his contribution to the growth and development of the business. Robin Wright is acting CEO. Seven Game stores and one DionWired store were opened, increasing space by 23,952 m² (5.8%). 26 weeks 26 weeks December December Period 2012 % of 2011 % of % Rm (Reviewed) sales (Reviewed) sales growth Sales 36,122.6 31,492.2 14.7 Massdiscounters 8,422.1 7,819.2 7.7 Masswarehouse 9,630.2 7,799.9 23.5 Massbuild 4,663.1 4,240.1 10.0 Masscash 13,407.2 11,633.0 15.3 Trading profit before interest and tax 1,427.1 4.0 1,335.7 4.2 6.8 Massdiscounters 426.5 5.1 498.3 6.4 (14.4) Masswarehouse 518.1 5.4 446.2 5.7 16.1 Massbuild 271.0 5.8 215.8 5.1 25.6 Masscash 211.5 1.6 175.4 1.5 20.6 Trading profit before tax 1,498.5 4.1 1,424.7 4.5 5.2 Massdiscounters 449.6 5.3 528.0 6.8 (14.8) Masswarehouse 535.1 5.6 474.7 6.1 12.7 Massbuild 292.6 6.3 236.8 5.6 23.6 Masscash 221.2 1.6 185.2 1.6 19.4 Trading profit excludes several items. A detailed reconciliation between trading and operating profit can be found below the Condensed Statement of Cash Flows table.
Massmart is a managed portfolio of four divisions, each focused on high-volume, low-margin, low-cost distribution of mainly branded consumer goods for cash, in 12 countries in sub-saharan Africa comprising 359 stores. Masswarehouse Comprises the 18-store Makro warehouse-club trading in Food, General Merchandise and Liquor in South Africa; and Fruitspot. Divisional comparable sales increased by 8.6% with product infl ation of 3.4%. Total sales grew by 23.5%, boosted by the fi ve new store openings since September 2011, and trading profi t before tax increased by 12.7%. Despite the anticipated higher cost levels from the new stores, including pre-opening costs of R28.2 million (2011: R34.8 million), Makro is trading strongly and remains well managed. Growth in trading profi t before interest for Makro s comparable stores was in line with their rate of sales growth for the period. In September 2012, Doug Jones became MD of Masswarehouse following Kevin Vyvyan-Day s move to Cambridge in Masscash. Two stores were opened, increasing space by 24,847 m² (17.0%). Massbuild Comprises 85 stores, trading in DIY, Home Improvement and Builders Hardware, under the Builders Warehouse, Builders Express and Builders Trade Depot brands in South Africa and Botswana. Divisional comparable sales increased by 9.7% with estimated product infl ation of 2.7%. Total sales increased by 10.0% and trading profi t before tax increased by 23.6%. The strong fi nancial performance refl ects the superb efforts of management and employees to: improve customer service; optimise merchandise levels; merchandise innovatively; and control expenses. Builders Warehouse and Builders Express continued to transform the South African Home Improvement market. Builders Trade Depot s performance improved but sales remain soft given the tepid South African residential housing market. In its second year of operation, Builders Warehouse Gaborone is performing ahead of expectations. During 2013 and 2014, we hope to open two stores in Mozambique, one in Zambia and a second in Botswana. In April 2013, we will open our national Distribution Centre (DC) to the north of Johannesburg. As we have seen with other DCs, in the fi rst year of operation there is a signifi cant adverse expense impact particularly from the lease-smoothing charge. One Builders Express store was opened resulting in net trading space increasing by 2,084 m² (0.5%). Masscash Comprises 79 Wholesale Cash and Carry and 44 Retail Cash and Carry stores trading in South Africa, Botswana, Lesotho, Namibia and Swaziland; and Shield, a voluntary buying association. Divisional comparable sales increased by 8.6% with estimated product infl ation of 6.4%. Total sales increased by 15.3%, bolstered by the Rhino acquisition in March 2012, and trading profi t before tax increased by 19.4%. This Division traded hard in an increasingly competitive environment. Profi tability continues to improve in the Wholesale Division, and in the Retail Division we are beginning to see the positive results of our investments in the prior year in new stores, structures and DC capacity. Rhino, acquired in March 2012 and now comprising 18 stores, continues to trade well. In September 2012, Kevin Vyvyan-Day became CEO of Cambridge within Masscash. One Retail Store and three Wholesale stores were acquired and two new Retail stores were opened, whilst fi ve Wholesale stores and one Retail store were closed. Net trading space increased by 12,462 m² (3.3%). 26 weeks 52 weeks 52 weeks 52 weeks Comparable Estimated December December Year June % sales % sales 2012 % of 2011 % of % 2012 % of growth inflation (Reviewed) sales (Reviewed) sales growth (Audited) sales Sales 7.3 3.7 65,839.5 57,066.5 15.4 61,209.1 Massdiscounters 2.6 0.8 15,408.6 14,157.8 8.8 14,805.7 Masswarehouse 8.6 3.4 17,200.9 13,929.5 23.5 15,370.6 Massbuild 9.7 2.7 8,561.0 7,728.7 10.8 8,138.0 Masscash 8.6 6.4 24,669.0 21,250.5 16.1 22,894.8 Trading profit before interest and tax 2,356.7 3.6 2,233.9 3.9 5.5 2,265.3 3.7 Massdiscounters 678.0 4.4 768.7 5.4 (11.8) 749.8 5.1 Masswarehouse 916.4 5.3 798.1 5.7 14.8 844.5 5.5 Massbuild 445.0 5.2 341.4 4.4 30.3 389.8 4.8 Masscash 317.3 1.3 325.7 1.5 (2.6) 281.2 1.2 Trading profit before tax 2,530.6 3.8 2,400.7 4.2 5.4 2,456.8 4.0 Massdiscounters 734.6 4.8 823.4 5.8 (10.8) 813.0 5.5 Masswarehouse 966.7 5.6 855.5 6.1 13.0 906.3 5.9 Massbuild 491.1 5.7 381.7 4.9 28.7 435.3 5.3 Masscash 338.2 1.4 340.1 1.6 (0.6) 302.2 1.3 Trading profit excludes several items. A detailed reconciliation between trading and operating profit can be found below the Condensed Statement of Cash Flows table.
REVIEWED CONSOLIDATED RESULTS FOR THE 26 WEEKS ENDED 23 DECEMBER 2012 Financial review Statement of comprehensive income Total Group sales growth for the 26 weeks ended 23 December 2012 was 14.7% with comparable sales growth of 7.3%. Sales in our African businesses represented 7.3% of total sales and increased by 9.5% in Rands and 9.0% in local currencies. The Group s product infl ation was 3.7% for the period. General Merchandise moved into infl ation of 0.8%, while Food and Liquor s infl ation increased to 6.8% and Home Improvement infl ation increased to 2.7%. During the period, six stores were closed, 13 stores opened and four acquired, resulting in a total of 359 stores at December 2012. Net trading space increased by 4.7% to a total of 1,413,573m². The Group s gross margin of 18.27% is higher than that of the prior period of 17.70%. This is from improved gross margin performances in Massbuild and Makro and a higher contribution from Game Africa. Due to the new stores, specifi cally the Makro stores, the investment in the Retail Food supply chain and infrastructure, and IT upgrades across most Divisions, total expenses (excluding foreign exchange movements and Walmart costs) increased by 23.2%. The impact of the Group s continued investment in capacity and growth can be seen in the 24.3% higher depreciation and amortisation charge and 23.9% increase in occupancy costs. Comparable expenses increased by 11.0%. Included in operating profi t are net realised and unrealised foreign exchange losses of R76.7 million (2011: R82.4 million profi t). Whilst the Rand closed stronger than the Group s African basket of currencies, the gains were overshadowed by the losses of the weaker Malawian Kwacha. Excluding forex and Walmart costs, earnings before interest, tax, depreciation and amortisation (EBITDA) of R1.8 billion increased over the prior period by 9.6%. Direct costs incurred in connection with the Walmart integration and acquisition were R205.2 million, comprising R65 million for integration activities and R140 million being the increase in the Supplier Development Fund required by the judgement of the Competition Appeal Court. The Walmart integration related costs will normalise over the next 12 months to approximately R50.0 million annually. Net interest paid of R60.4 million increased as a result of the Group s capital expenditure programme and higher working capital levels. At R1.78 billion, the Group s average net borrowings are 32.8% higher than the prior period s fi gure of R1.34 billion. The Group s effective tax rate of 32.1% (2011: 31.2%) should normalise at 30.0%. The minority interests comprise store managers holdings in Masscash stores and minorities in acquired Masscash businesses. This period s fi gure is lower due to the prior year sale of Kawena and the acquisition of several store managers minority interests in Masscash Wholesale. Headline earnings decreased by 21.2% and headline EPS decreased by 21.6%. Adjusting for the effect of the forex and Walmart costs in both periods however, shows an increase of 5.8% and 5.3%, respectively. Statement of financial position Working capital was managed effectively in Massbuild and Masscash, while Massdiscounters is over-stocked given the lower sales in Game SA and Makro is carrying higher stock levels from its new stores. Days in inventory at December 2012 were 59.9 (2011: 59.0 days) for the Group. The net book value of property, plant and equipment increased by 19.5% compared to December 2011. This was largely the result of the new stores and the new Massdiscounters RDC which opened in July 2012. The Group s gearing ratio (debt:equity) increased to 37.7% (2011: 28.8%) due to the funding of the strategic investments and the investment in working capital. The annual rolling return on equity was 21.9% at December 2012 (2011: 24.4%). Excluding the Walmart costs and forex, this fi gure was 31.2% (2011: 32.3%). Statement of cash flows Operating cash generated of R2.82 billion was 21.3% lower than the prior period, partly refl ecting the high level of over-stocked inventory. Total capital expenditure of R735.9 million is 2.2% lower than the prior period, and comprises R333.3 million on replacement and R402.6 million on expansionary expenditure. Change in financial year-end and reviewed financial information To align with Walmart, with effect from this reporting cycle Massmart has changed its fi nancial year from end of June to end of December. To assist with future comparisons, reviewed 52-week fi nancial statements are included for the periods ended December 2011 and 2012. Acquisition of Makro stores With effect from the end of January 2013, Massmart acquired control of seven Makro stores that had previously been lease-held. The cash consideration paid for control amounted to R575 million. We expect that the income statement effect of this transaction will be neutral in 2013 but then positive with signifi cant annual cashfl ow benefi ts. UP BY 14.7% R36,123m SALES 2011: R31,492m DOWN BY 21.3% R2,818m CASH GENERATED FROM OPERATIONS 2011: R3,580m UP BY 5.3% 424 cents HEADLINE EPS BEFORE WALMART COSTS AND FOREX 2011: 402 cents UP BY 6.1% R1,407m OPERATING PROFIT BEFORE WALMART COSTS AND FOREX 2011: R1,326m UP BY 5.8% R917m HEADLINE EARNINGS BEFORE WALMART COSTS AND FOREX 2011: R866m UP BY 9.1% 275 cents DIVIDEND PER SHARE 2011: 252 cents
Strategic agenda The legal aspects of the Walmart transaction and the integration activities are complete and we are now able to focus on improving the operations and implementing our Strategic Agenda. We are focused on Saving you money, so you can live better, and becoming Africa s most trusted retailer. The fi rst phase of our Group-wide supply chain investments will be fi nished by the end of 2013, when we will have completed the network of three Massdiscounters RDCs, three Makro Regional Warehouses, one Cambridge DC and one Massbuild Central DC. Alongside investments in skills and systems, this completes the reengineering of Massmart s supply chain. The benefi ts of the investment should be visible in the next fi ve to ten years as the network is optimised. We have also completed the fi rst phase of our investments in Retail Food in Cambridge, Game Foodco, Makro Fresh and Saverite. We have successfully established ourselves into the Food Retail market with an estimated presence of R10 billion. From this base the Food Retail business should grow in size and profi tability, from organic growth and conversions. We continue to expand Game and Builders Warehouse into Africa. Several new sites have been approved in existing African markets and Game sites have also been approved in Angola and Kenya, both of which are new markets for Massmart. The Africa Food Retail strategy remains in the planning phase. Despite the new targets in BBBEE Codes of Good Practice and the dilution of our BBBEE transaction as part of the Walmart transaction, we have still maintained a Level 4 status. Walmart transaction and integration In this period the Competition Appeal Court set down the fi nal ruling of the Walmart transaction. There were two material adjustments being: the increase in the Supplier Development Fund from R100 million to R240 million; and the re-employment of the 503 previously retrenched employees. The employees impacted by the retrenchment at Game were all offered re-instatement. Of the 316 employees who responded to this offer, 237 have been re-instated and the remaining 79 have received various other benefi ts. The Supplier Development Fund is operational and has already made signifi cant progress in wine, paint and chemical manufacture, and fresh produce. Distribution and dividend policy Massmart s previous dividend policy was to declare and pay an interim and fi nal cash dividend representing a 1.70 times dividend cover. In light of the new Dividend Tax introduced with effect from 1 April 2012 ( Dividend Tax ), the Group s dividend cover has been adjusted to refl ect the benefi t to the Company of no longer paying the Secondary Tax on Companies ( STC ) on the net dividend. Consequently, Massmart s new dividend policy is to declare and pay an interim and fi nal cash dividend representing a 1.55 times dividend cover unless circumstances dictate otherwise. 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 216,910,195. Notice is hereby given that a gross fi nal cash dividend of 275.00 cents per share in respect of the period ended 23 December 2012, has been declared. 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 233.75 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 Thursday, 14 March 2013 First trading day ex dividend on the JSE Friday, 15 March 2013 Record date Friday, 22 March 2013 Payment date Monday, 25 March 2013 Share certifi cates may not be dematerialised or rematerialised between Friday, 15 March 2013 and Friday, 22 March 2013, both days inclusive. Massmart shareholders who hold Massmart ordinary shares in certifi cated form ( certifi cated 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 certifi cated shareholder is less than R100, the dividend will be paid by EFT only to such certifi cated shareholder. Certifi cated 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, (011) 370 5000, 086 110 09818, 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. The Walmart transaction costs are behind us and integration costs are now included as part of our normal operating costs. Prospects For the eight weeks to 17 February 2013, total sales increased by 11.4% and comparable sales increased by 5.7%, continuing the trends experienced towards the close of the fi nancial year. The South African consumer environment remains diffi cult and we are concerned that sales growth may be under some pressure for the remainder of the fi nancial year. It is our objective that if the current sales trends continue, growth in the Group s trading profi t (excluding foreign exchange movements and Walmart costs) may equal sales growth. Value extracted from integration will be invested in price. The fi nancial information on which this outlook statement is based has not been reviewed or reported on by the Company s external auditors. On behalf of the Board Grant Pattison Chief Executive Offi cer 27 February 2013 Ilan Zwarenstein Financial Director
REVIEWED CONSOLIDATED RESULTS FOR THE 26 WEEKS ENDED 23 DECEMBER 2012 Condensed income statement 26 weeks 26 weeks 52 weeks 52 weeks 52 weeks December December December December June 2012 2011 2012 2011 2012 Rm (Reviewed) (Reviewed) % change (Reviewed) (Reviewed) % change (Audited) Revenue 36,234.5 31,547.1 14.9 66,050.3 57,177.8 15.5 61,362.9 Sales 36,122.6 31,492.2 14.7 65,839.5 57,066.5 15.4 61,209.1 Cost of sales (29,523.2) (25,917.3) (13.9) (53,563.0) (46,767.6) (14.5) (49,957.1) Gross profit 6,599.4 5,574.9 18.4 12,276.5 10,298.9 19.2 11,252.0 Other income 111.9 54.9 103.8 210.8 111.3 89.4 153.8 Depreciation and amortisation (342.6) (275.6) (24.3) (661.2) (530.4) (24.7) (594.2) Impairment of assets (note 3) (5.4) (0.3) (21.6) (10.3) (109.7) (16.5) Employment costs (2,487.5) (2,137.1) (16.4) (4,686.5) (4,066.9) (15.2) (4,336.1) Occupancy costs (1,225.6) (989.0) (23.9) (2,296.5) (1,826.6) (25.7) (2,059.9) Foreign exchange profit/(loss) (76.7) 82.4 (231.6) 89.6 (358.5) (72.5) Other operating costs (1,243.2) (902.2) (37.8) (2,533.0) (1,783.9) (42.0) (2,192.0) Operating profit before Walmart costs 1,330.3 1,408.0 (5.5) 2,056.9 2,281.7 (9.9) 2,134.6 Walmart transaction, integration and related costs (note 5) (205.2) (41.7) (392.1) (348.9) (450.5) 22.6 (185.4) Loss on disposal of Makro Zimbabwe (38.6) 100.0 Operating profit 1,125.1 1,366.3 (17.7) 1,708.0 1,792.6 (4.7) 1,949.2 Finance costs (106.0) (72.5) (46.2) (217.4) (154.6) (40.6) (183.9) Finance income 45.6 24.4 86.9 90.0 40.0 125.0 68.8 Net finance costs (60.4) (48.1) (25.6) (127.4) (114.6) (11.2) (115.1) Profit before taxation 1,064.7 1,318.2 (19.2) 1,580.6 1,678.0 (5.8) 1,834.1 Taxation (342.3) (410.9) 16.7 (549.6) (633.7) 13.3 (618.2) Profit for the period 722.4 907.3 (20.4) 1,031.0 1,044.3 (1.3) 1,215.9 Profit attributable to: Owners of the parent 691.8 893.0 972.3 993.2 1,173.5 Preference shareholders (note 6) 1.4 2.5 5.0 24.0 6.1 Non-controlling interests 29.2 11.8 53.7 27.1 36.3 Profit for the period 722.4 907.3 (20.4) 1,031.0 1,044.3 (1.3) 1,215.9 Basic EPS (cents) 319.7 414.9 (22.9) 449.8 472.9 (4.9) 544.4 Diluted basic EPS (cents) 315.4 406.3 (22.4) 443.2 456.2 (2.8) 532.7 Dividend (cents): Interim 252.0 (100.0) 252.0 (100.0) 252.0 Final 275.0 100.0 421.0 134.0 214.2 146.0 Total 275.0 252.0 9.1 421.0 386.0 9.1 398.0 Headline earnings Reconciliation of net profit for the period to headline earnings Net profit attributable to owners of the parent 691.8 893.0 972.3 993.2 1 173.5 Impairment of assets (note 3) 5.4 0.3 21.6 10.3 16.5 Loss/(Profit) on disposal of fixed assets 6.2 2.4 16.4 (1.8) 12.6 Loss on disposal of business 4.4 16.5 34.9 12.1 Fair value adjustment on assets classified as held for sale 0.4 8.3 7.9 Total tax effects of adjustments (2.7) (0.5) (8.1) 1.0 (5.9) Headline earnings 705.5 895.2 (21.2) 1,027.0 1,037.6 (1.0) 1,216.7 Headline earnings before Walmart costs and foreign exchange (taxed) 916.5 865.9 5.8 1,466.4 1,373.9 6.7 1,415.8 Headline EPS (cents) 326.0 416.0 (21.6) 475.2 494.0 (3.8) 564.5 Headline EPS before Walmart costs and foreign exchange (taxed) (cents) 423.5 402.3 5.3 678.5 654.1 3.7 656.9 Diluted headline EPS (cents) 321.7 407.3 (21.0) 468.1 476.6 (1.8) 552.3 Diluted headline EPS before Walmart costs and foreign exchange (taxed) (cents) 417.9 394.0 6.1 668.4 631.1 5.9 642.7
Statement of comprehensive income 26 weeks 26 weeks 52 weeks 52 weeks 52 weeks December December December December June 2012 2011 2012 2011 2012 Rm (Reviewed) (Reviewed) % change (Reviewed) (Reviewed) % change (Audited) Profit for the period 722.4 907.3 1,031.0 1,044.3 1,215.9 Foreign currency translation reserve 25.1 86.7 6.0 95.2 67.6 Cash flow hedges (5.8) 16.2 (10.7) 44.6 11.3 Revaluation of listed shares 1.6 0.1 1.7 0.1 0.2 Income tax relating to components of other comprehensive income 1.6 (4.5) 2.9 (12.5) (3.2) Other comprehensive income for the period, net of tax 22.5 98.5 (0.1) 127.4 75.9 Total comprehensive income for the period 744.9 1,005.8 (25.9) 1,030.9 1,171.7 (12.0) 1,291.8 Total comprehensive income attributable to: Owners of the parent 714.3 991.5 972.2 1,120.6 1,249.4 Preference shareholders (note 6) 1.4 2.5 5.0 24.0 6.1 Non-controlling interests 29.2 11.8 53.7 27.1 36.3 Total comprehensive income for the period 744.9 1,005.8 (25.9) 1,030.9 1,171.7 (12.0) 1,291.8 Condensed statement of financial position December December June 2012 2011 2012 Rm (Reviewed) (Reviewed) % change (Audited) ASSETS Non-current assets 7,595.1 6,291.6 7,175.8 Property, plant and equipment 3,868.2 3,236.1 19.5 3,520.6 Goodwill and other intangible assets 2,945.3 2,348.9 2,868.5 Investments and loans 385.3 458.1 456.5 Deferred taxation 396.3 248.5 330.2 Current assets 15,422.2 14,972.3 11,895.9 Inventories 9,691.5 8,385.2 15.6 7,615.6 Trade, other receivables and prepayments 3,681.7 3,522.5 4.5 2,953.9 Taxation 17.0 54.4 21.0 Cash and bank balances 2,032.0 3,010.2 1,305.4 Non-current assets classified as held for sale 2.5 103.2 Total 23,019.8 21,263.9 19,174.9 EQUITY AND LIABILITIES Total equity 4,915.3 4,864.6 4,564.8 Equity attributable to equity holders of the parent 4,739.7 4,658.1 1.8 4,356.9 Non-controlling interests 175.6 206.5 207.9 Non-current liabilities 1,183.4 928.9 1,486.0 Non-current liabilities: interest-bearing 671.8 376.8 852.7 Other non-current liabilities and provisions (note 7) 474.9 527.7 604.8 Deferred taxation 36.7 24.4 28.5 Current liabilities 16,921.1 15,470.4 12,982.2 Trade, other payables and provisions 15,669.3 14,554.7 7.7 11,441.7 Taxation 298.5 235.7 259.0 Bank overdrafts 392.1 160.0 632.6 Short-term borrowings 561.2 520.0 648.9 Liabilities associated to assets classified as held for sale 141.9 Total 23,019.8 21,263.9 19,174.9
REVIEWED CONSOLIDATED RESULTS FOR THE 26 WEEKS ENDED 23 DECEMBER 2012 Condensed statement of cash flows 26 weeks 26 weeks 52 weeks 52 weeks 52 weeks December December December December June 2012 2011 2012 2011 2012 Rm (Reviewed) (Reviewed) (Reviewed) (Reviewed) (Audited) Operating cash before working capital movements 1,707.5 1,640.3 2,681.8 2,536.8 2,614.6 Working capital movements 1,110.0 1,939.4 (775.5) 450.3 53.9 Cash generated from operations 2,817.5 3,579.7 1,906.3 2,987.1 2,668.5 Taxation paid (369.1) (363.2) (601.5) (691.4) (595.6) Net interest paid (60.4) (48.1) (127.4) (114.6) (115.1) Investment income 3.8 0.1 18.4 3.9 Dividends paid (317.0) (291.1) (864.7) (826.7) (838.8) Cash inflow from operating activities 2,071.0 2,881.1 312.8 1,372.8 1,122.9 Net investment to maintain operations (333.3) (324.3) (629.4) (413.6) (620.4) Investment to expand operations (402.6) (427.9) (685.1) (920.8) (710.4) Other net investing activities (25.3) 47.7 (350.2) 9.0 (277.2) Cash outflow from investing activities (761.2) (704.5) (1,664.7) (1,325.4) (1,608.0) Cash (outflow)/inflow from financing activities (367.8) (157.5) 135.6 707.7 345.9 Net increase/(decrease) in cash and cash equivalents 942.0 2,019.1 (1,216.3) 755.1 (139.2) Foreign exchange profit 25.1 86.7 6.0 95.2 67.6 Opening cash and cash equivalents 672.8 744.4 2,850.2 1,999.9 744.4 Closing cash and cash equivalents 1,639.9 2,850.2 1,639.9 2,850.2 672.8 Reconciliation between trading and operating profit 26 weeks 26 weeks 52 weeks 52 weeks 52 weeks December December December December June 2012 2011 2012 2011 2012 Rm (Reviewed) (Reviewed) (Reviewed) (Reviewed) (Audited) Profit before interest and taxation Trading profit before interest and taxation 1,427.1 1,335.7 2,356.7 2,233.9 2,265.3 Asset impairments (note 3) (5.4) (0.3) (21.6) (10.3) (16.5) Walmart transaction, integration and related costs (note 5) (205.2) (41.7) (348.9) (450.5) (185.4) Loss on disposal of business (4.4) (16.5) (38.6) (12.1) Fair value adjustment on assets classified as held for sale (0.4) (8.3) (7.9) BEE transaction IFRS 2 charge (note 4) (9.9) (9.8) (21.8) (31.5) (21.7) Foreign exchange loss (76.7) 82.4 (231.6) 89.6 (72.5) Operating profit before interest and taxation 1,125.1 1,366.3 1,708.0 1,792.6 1,949.2 Profit before taxation Trading profit before taxation 1,498.5 1,424.7 2,530.6 2,400.7 2,456.8 Corporate net interest (131.8) (137.1) (301.3) (281.4) (306.6) Asset impairments (note 3) (5.4) (0.3) (21.6) (10.3) (16.5) Walmart transaction, integration and related costs (note 5) (205.2) (41.7) (348.9) (450.5) (185.4) Loss on disposal of business (4.4) (16.5) (38.6) (12.1) Fair value adjustment on assets classified as held for sale (0.4) (8.3) (7.9) BEE transaction IFRS 2 charge (note 4) (9.9) (9.8) (21.8) (31.5) (21.7) Foreign exchange loss (76.7) 82.4 (231.6) 89.6 (72.5) Operating profit before taxation 1,064.7 1,318.2 1,580.6 1,678.0 1,834.1
Condensed statement of changes in equity Equity attributable Ordinary to equity Nonshare Share General Retained holders of the controlling Rm capital premium reserves profit parent interests Total Six months ended December 2012 (Reviewed) Opening balance 2.2 750.6 614.7 2,989.4 4,356.9 207.9 4,564.8 Issue of share capital (net of costs) Dividends declared (317.0) (317.0) (39.6) (356.6) Total comprehensive income 22.5 693.2 715.7 29.2 744.9 Changes in non-controlling interests and distribution to minorities (13.6) (13.6) (21.9) (35.5) Share trust transactions and IFRS 2 charge (224.1) 220.0 (4.1) (4.1) Treasury shares realised 1.5 0.3 1.8 1.8 Total 2.2 752.1 399.8 3,585.6 4,739.7 175.6 4,915.3 Six months ended December 2011 (Reviewed) Opening balance 2.0 743.9 444.4 2,775.6 3,965.9 215.8 4,181.7 Issue of share capital (net of costs) 0.2 0.2 0.2 Dividends declared (291.1) (291.1) (19.6) (310.7) Total comprehensive income 98.5 895.5 994.0 11.8 1,005.8 Changes in non-controlling interests and distribution to minorities (3.0) (3.0) (1.5) (4.5) Share trust transactions and IFRS 2 charge 41.3 (57.3) (16.0) (16.0) Treasury shares realised 6.2 1.9 8.1 8.1 Total 2.2 750.1 583.1 3,322.7 4,658.1 206.5 4,864.6 Year ended December 2012 (Reviewed) Opening balance 2.2 750.1 583.1 3,322.7 4,658.1 206.5 4,864.6 Issue of share capital (net of costs) Dividends declared (864.7) (864.7) (58.9) (923.6) Total comprehensive income (0.1) 977.3 977.2 53.7 1,030.9 Changes in non-controlling interests and distribution to minorities (10.6) (10.6) (25.7) (36.3) Non-controlling interests relating to acquisitions (20.5) (20.5) (20.5) Share trust transactions and IFRS 2 charge (151.6) 150.3 (1.3) (1.3) Treasury shares realised/(acquired) 2.0 (0.5) 1.5 1.5 Total 2.2 752.1 399.8 3,585.6 4,739.7 175.6 4,915.3 Year ended December 2011 (Reviewed) Opening balance 2.0 253.4 371.3 3,230.8 3,857.5 152.2 4,009.7 Issue of share capital (net of costs) 0.2 481.6 481.8 481.8 Dividends declared (826.6) (826.6) (24.1) (850.7) Total comprehensive income 127.4 1,017.2 1,144.6 27.1 1,171.7 Changes in non-controlling interests and distribution to minorities (35.4) (35.4) (13.7) (49.1) Non-controlling interests relating to acquisitions 65.0 65.0 Share trust transactions and IFRS 2 charge 169.4 (98.7) 70.7 70.7 Treasury shares realised/(acquired) 15.1 (49.6) (34.5) (34.5) Total 2.2 750.1 583.1 3,322.7 4,658.1 206.5 4,864.6 Year ended June 2012 (Audited) Opening balance 2.0 743.9 444.4 2,775.6 3,965.9 215.8 4,181.7 Issue of share capital (net of costs) 0.2 0.2 0.2 Dividends declared (838.8) (838.8) (38.9) (877.7) Total comprehensive income 75.9 1,179.6 1,255.5 36.3 1,291.8 Changes in non-controlling interests and distribution to minorities (5.3) (5.3) Non-controlling interests relating to acquisitions (20.5) (20.5) (20.5) Share trust transactions and IFRS 2 charge 113.8 (127.0) (13.2) (13.2) Treasury shares realised 6.7 1.1 7.8 7.8 Total 2.2 750.6 614.7 2,989.4 4,356.9 207.9 4,564.8
REVIEWED CONSOLIDATED RESULTS FOR THE 26 WEEKS ENDED 23 DECEMBER 2012 Additional information 26 weeks 26 weeks 52 weeks 52 weeks 52 weeks December December December December June 2012 2011 2012 2011 June 2012 (Reviewed) (Reviewed) (Reviewed) (Reviewed) (Audited) Net asset value per share (cents) 2,185.1 2,158.0 2,185.1 2,158.0 2,015.9 Ordinary shares (000 s): In issue 216,910 215,853 216,910 215,853 216,124 Weighted average 216,414 215,209 216,142 210,028 215,539 Diluted weighted average 219,313 219,778 219,393 217,690 220,284 Preference shares (000 s): Thuthukani Trust A shares held by the participants (notes 4 and 6) 1,395 1,395 1,053 Black Scarce Skills Trust B shares held by the participants (note 4) 1,755 1,425 1,755 1,425 1,740 Capital expenditure (Rm): Authorised and committed 954.7 386.3 954.7 386.3 472.1 Authorised not committed 715.6 529.9 715.6 529.9 598.3 Gross operating lease commitments (2013 2027) (Rm) 13,383.4 11,812.7 13,383.4 11,812.7 12,271.0 US dollar exchange rates: period-end (R/$) 8.59 8.16 8.59 8.16 8.40 average (R/$) 8.47 7.57 8.20 7.23 7.75 NOTES 1. These condensed financial statements have been prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the information as required by IAS 34 Interim Financial Reporting, the JSE Listings Requirements and the requirements of the Companies Act of South Africa. The accounting policies applied are consistent with that of the previous financial year, except for the IAS 1: Presentation of Financial Statements with regard to the presentation of items within the Statement of Comprehensive Income. The adoption of the amendment to IAS 1 has no impact on these Condensed Financial Statements. 2. During the current period the only Massmart shares acquired in the market were by the Massmart Employee Share Trusts where 0.7 million shares (0.3% of average shares in issue) were bought at an average price of R174.38 totalling R124.5 million. During the comparative six month period, the Massmart Employee Share Trusts acquired 0.6 million shares (0.3% of average shares in issue) at an average price of R154.99 totalling R86.3 million. 3. The impairment of assets in the current period relates to the impairment of leasehold improvements in Masscash. The impairment of assets in the comparative six month period relates to the closure of the Game Mauritius store. 4. The Massmart BEE transaction, which came into operation in October 2006, gave rise to an IFRS 2 Share-based Payment charge of R9.9 million (2011: R9.8 million). The A and B preference shares were issued to the Thuthukani Trust and the Black Scarce Skills Trust respectively. 5. Walmart transaction, integration and related costs comprise professional fees, integration costs, expatriate employment costs, share-based payments, travel, consulting costs and other direct expenses relating to the Walmart transaction, of which certain amounts remain unpaid at the reporting date, as well as the additional R140 million being the increase in the Supplier Development Fund required by the judgement of the Competition Appeal Court. 6. The preference shareholders dividend amount of R1.4 million (2011: R2.5 million) represents the June 2012 final cash dividend of 146 cents (2011: 134 cents) paid to all Thuthukani beneficiaries. The Thuthukani dividend was equivalent to 100% of the ordinary dividend for the current and prior year. 7. Other non-current liabilities and provisions include the net lease smoothing liability of R302.7 million (2011: R354.5 million). 8. The net asset value of the businesses acquired during the year was R22.8 million on the date of acquisition. There were no businesses acquired in the comparative six month period. 9. With effect from the end of January 2013, Massmart acquired control of seven Makro stores that had previously been lease-held. The cash consideration paid for control amounted to R575 million. We expect that the income statement effect of this transaction will be neutral in 2013 but then positive, with significant annual cash flow benefits. 10. Massmart and its divisions enter into certain transactions with related parties in the normal course of business. Details of these are, and will be, disclosed in Massmart s Integrated Annual Report. Transactions between the Company and Walmart (its Holding Company), are accounted for in Walmart transaction, integration and related costs in the Condensed income statement. Further detail relating to these costs is disclosed in note 5 above. As a 51% shareholder, Walmart will also be receiving a dividend based on their number of shares held. 11. Due to Christmas trading, Massmart s earnings are weighted towards the six months to December. 12. The results of the 26 weeks and 52 weeks ended December 2012, 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. The results of the 26 weeks and 52 weeks ended December 2011 as well as the 52 weeks ended June 2012, were reviewed/audited by independent external auditors, Deloitte & Touche, 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 preparation of the Group s condensed consolidated reviewed results was supervised by the Financial Director, Ilan Zwarenstein, BCom, BAcc, CA(SA).
MASSDISCOUNTERS GENERAL MERCHANDISE DISCOUNTER AND FOOD RETAILER UP BY 7.7% DOWN BY 14.8% R8,442.1 m SALES R449.6 m TRADING PROFIT BEFORE TAX SOUTH AFRICA, BOTSWANA, GHANA, LESOTHO, MALAWI, MOZAMBIQUE, NAMIBIA, NIGERIA, TANZANIA, UGANDA, ZAMBIA 114 SOUTH AFRICA 19 MASSWAREHOUSE WAREHOUSE CLUB UP BY 23.5% UP BY 12.7% R9,630.2 m R535.1 m SALES TRADING PROFIT BEFORE TAX SOUTH AFRICA 18 MASSBUILD UP BY 10.0% UP BY 23.6% HOME IMPROVEMENT RETAILER AND BUILDING MATERIALS SUPPLIER R4,663.1 m SALES R292.6 m TRADING PROFIT BEFORE TAX SOUTH AFRICA, BOTSWANA 28 SOUTH AFRICA 28 SOUTH AFRICA 29 MASSCASH UP BY 15.3% UP BY 19.4% MASSCASH WHOLESALE: MASSCASH RETAIL: BUYING ASSOCIATION: FOOD WHOLESALER, RETAILER AND BUYING ASSOCIATION R13,407.2 m R221.2 m SALES TRADING PROFIT BEFORE TAX SOUTH AFRICA, BOTSWANA, LESOTHO, NAMIBIA, SWAZILAND 79 SOUTH AFRICA 44 SOUTH AFRICA, BOTSWANA, SWAZILAND SHARE DATA: 25 FEBRUARY 2013 SHARE PRICE R187.95 R196.17 52 WEEK HIGH MARKET CAP REUTERS MSMJ.J R158.64 52 WEEK LOW R40.8 BILLION BLOOMBERG MSM SJ Directorate MJ Lamberti (Chairman), CS Seabrooke (Deputy Chairman), GM Pattison* (Chief Executive Officer), D Cheesewright***, JA Davis**, NN Gwagwa, GRC Hayward* (Chief Operating Officer), P Langeni, JP Suarez**, I Zwarenstein* (Financial Director) * Executive ** USA *** UK 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 Transfer secretaries Computershare Investor Services (Proprietary) Limited Registered auditors Ernst & Young Inc.* Previous registered auditors Deloitte & Touche* * Scope defined in note 12 For more information T: (+27 11) 517 4444 www.massmart.co.za BRUNSWICK R Pinker T: (+27 11) 502 7300