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MSM
MSM
MSM - Massmart - Reviewed consolidated results for the 52 weeks ended june 2007
Massmart Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration Number: 1940/014066/05)
Share code: MSM
ISIN: ZAE000029534
("Massmart" or "the company")
Reviewed consolidated results for the 52 weeks ended June 2007
Dedicated to Value
Massmart is a managed portfolio of nine wholesale and retail chains, each
focused on high-volume, low-margin, low-cost distribution of mainly branded
consumer goods for cash, in 14 countries in sub-Saharan Africa through four
divisions comprising 238 stores. The Group is the third 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.
Sales from continuing operations increase 16% to R34 808 million
Trading profit from continuing operations increases 32% to R1 754 million
Headline earnings before the BEE transaction increase 37% to R1 147 million
Headline earnings increase 31% to R1 092 million
Headline EPS increases 29% to 540 cents
Dividend increases 52% to 320 cents
Cash generated from operations increases 5% to R1 892 million
Overview
Despite higher interest rates, the combination of low cash prices and rising
product inflation, particularly in Food, resulted in strong sales growth.
Underpinned by sound operating disciplines, headline earnings growth before the
first-time Thuthukani IFRS 2 charge was 37,0%, the highest growth since our
listing in 2000.
The Group`s sales growth was strong in all categories with Food and Liquor at
17,0%, General Merchandise at 11,8% and Building at 27,3%. The increased
inflation in the Food category (8,6%) translated into increased sales growth,
and whilst inflation remained low in General Merchandise (0,5%), volume growth
was steady. Building material inflation remained relatively constant (6,5%),
with sales being supported by the strong growth in the home improvement market
and solid activity in residential construction.
The highlights of the year were:
Record sales achieved of R34,8 billion, of which 98,7% were cash sales and 6,0%
from foreign stores. Comparable store sales growth of 12,5%.
Profit before tax grew 25,7% to R1,6 billion.
Pre- and post-interest operating profit margins increased to 4,8% and 4,7%
respectively.
Headline earnings grew by 30,6%, exceeding R1 billion for the first time.
Return on equity increased from 46,4% to 51,8%.
The store network was increased to 994 277mSquared, a net increase of 3,7% over
the prior year.
Environmental and Competitive Overview
The sound macro-economic management of the economy has created and sustained a
structural change to the South African consumer markets. Improved levels of
employment, real wage increases, increased supply of housing and increased
wealth levels are the underlying drivers. The effect of the tightening interest
rates has so far been limited by the structural strength of the economy.
In this environment most retailers have benefited substantially, which has
encouraged the aggressive space expansion of existing formats as well as new
formats and categories. Only a less favourable economic environment will test
the quality of these investments.
The impact of an under-investment in capacity and infrastructure by the
Government and the Private sector is coming to the fore, but the resultant
commitment to infrastructural spend will provide significant stimulus to the
economy in general. This trend has however, exacerbated the shortage of
experienced leaders, executives and specialist skills, professional or
otherwise.
Divisional Operating Overview
Massdiscounters - comprises the 82-store General Merchandise retail discounter
Game, which trades in South Africa, Namibia, Botswana, Zambia, Uganda,
Mozambique, Mauritius, Malawi, Tanzania, Nigeria, and Ghana and Dion (8 stores),
which trades in the Gauteng province of South Africa.
Divisional comparable store sales grew 6,8% with estimated inflation of 1,3%.
New stores comprised eight large Game outlets and three smaller format Game
stores. In addition, seven Game stores were refurbished, three Dion stores were
converted to Game, and one Dion store was closed. The first Dion Wired store was
opened in November 2006 and a second in April 2007.
This was a year of intense operational focus which included removing the
Clothing category, improving the quality of the store portfolio as outlined
above, and upgrading IT systems. Aided by a strong contribution from
Massdiscounters` African stores, the division`s return on sales improved to 7,3%
resulting in a 19,1% increase in trading profit before tax. This was achieved
notwithstanding an adverse movement of R35,7 million in currency translation
charges.
We have decided to discontinue the original Dion format and will have closed or
converted all Dion stores to Game by June 2008. An after-tax impairment charge
of R11,9 million arising from this decision has been added back to headline
earnings.
Masswarehouse - comprises the 12-store Makro warehouse club trading in Food,
General Merchandise and Liquor in South Africa (and two Zimbabwean stores, no
longer consolidated in the current year Group results).
Divisional total and comparable store sales grew 14,4% with estimated inflation
of 4,7%.
Tight operational control kept cost growth substantially below the sales growth
and good margin control through the merchandise mix and innovative trading,
translated into a growth of 65,3% in trading profit before tax and a 6,1% return
on sales.
Good progress was made on identifying sites for new stores in Pretoria,
Johannesburg and Cape Town, the first of which will open in October 2007.
Massbuild - comprises 64 outlets, trading in DIY, Home Improvement and Builders
Hardware, under the Builders Warehouse, Builders Express and Builders Trade
Depot brands in South Africa.
Divisional comparable store sales grew 13,6% with estimated inflation of 6,5%.
A good trading and operating performance saw trading profit before tax growing
by 28,0% and the achievement of a 7,7% return on sales. The second half saw a
slight decline in profitability as the business was temporarily distracted by
converting De La Rey to Builders Warehouse, Servistar to Builders Express and
Federated Timbers to Builders Trade Depot (25 store conversions in total),
whilst simultaneously implementing new IT systems and bringing the Servistar and
De La Rey head offices to Johannesburg.
With the significant challenge of restructuring the business now complete, the
business is free to focus on securing new sites, improving operating and
merchandise controls, refining customer offerings and aggressively responding to
the changing competitive environment.
Masscash - comprises 65 CBW and seven Jumbo wholesale cash and carry outlets
trading in South Africa, Lesotho, Namibia, and Botswana, and Shield, a voluntary
buying organisation.
Divisional comparable store sales grew by 15,3% with estimated inflation of
8,7%.
Sales growth was enhanced by higher Food inflation, particularly in commodities,
while tight control of expenses and working capital resulted in trading profit
before tax growing by 37,1% and a 2,6% return on sales.
The Jumbo and Shield management teams have been integrated into CBW, resulting
in a strengthened Masscash management team with responsibility for all three
businesses. This team recently completed a strategic review and will continue to
operate the Wholesale businesses for cash and returns, whilst growing the new
hybrid format in the lower LSM retail market.
Operational review - Continuing operations
June 2007 June 2006
Rm (Reviewed) (Audited) % change
Sales 34 807,6 29 963,6 16,2
Massdiscounters 9 424,5 8 095,7 16,4
Masswarehouse 8 640,1 7 661,1 12,8
Massbuild 4 948,3 3 892,8 27,1
Masscash 11 794,7 10 314,0 14,4
Trading profit before interest 1 753,9 1 333,5 31,5
and tax*
As a % of sales 5,0 4,5
Massdiscounters 634,2 546,4 16,1
Masswarehouse 466,7 288,3 61,9
Massbuild 363,0 290,4 25,0
Masscash 290,0 208,4 39,2
Trading profit before tax** 1 895,4 1 412,7 34,2
As a % of sales 5,4 4,7
Massdiscounters 686,3 576,4 19,1
Masswarehouse 525,4 317,9 65,3
Massbuild 379,8 296,8 28,0
Masscash 303,9 221,6 37,1
The above results exclude Furnex from the prior year (note 8).
*Trading profit before interest and tax is before asset impairments of R26,3
million (2006: R5,4 million) and the IFRS 2 charge of R54,3 million (2006: R0
million) relating to the BEE transaction.
**Trading profit before tax is after divisional net interest but before
corporate net interest of R185,9 million (2006: R111,4 million), asset
impairments of R26,3 million (2006: R5,4 million) and the IFRS 2 charge of R54,3
million (2006: R0 million) relating to the BEE transaction.
Financial Overview
Income Statement
Total ongoing sales growth for the 52-week period was 16,2% and comparable
stores sales growth was 12,5%. Net space increase of
35 021mSquared represents space growth of 3,7% and brings the Group`s total
trading space to 994 277mSquared. During the financial year, eight stores were
closed, 15 new stores opened and five acquired, bringing the Group total to 238
stores at financial year-end.
Inflation in the Group for the year is estimated to be 4,9%, comprising 0,5% in
General Merchandise, 8,1% in Food & Liquor and 6,5% in Home Improvement.
There are two significant items included in operating profit: store opening
costs of R48,4 million (2006: R38,0 million) and realised and unrealised foreign
exchange losses of R41,4 million (2006: gain of R33,3 million).
Included in net interest paid is a once-off interest payment of R18,1 million
relating to a settlement reached recently between a major financial institution
and the South African Revenue Services (SARS). In terms of the financial
institution`s settlement with SARS, the terms of which are confidential, this
payment is not tax-deductible.
This year there is a new IFRS 2 Share-based Payment charge of R54,3 million
associated with the Group`s Staff Empowerment scheme, Thuthukani, which became
effective in October 2006. This is a non-cash charge that is also not tax-
deductible. The total IFRS 2 cost of R372,8 million associated with Thuthukani
will be amortised over six years and the charge for June 2008 will be
approximately R76,2 million. The IFRS 2 charge associated with the existing
Group Share Scheme was R19,0 million (prior year: R17,4 million).
Adjusting for the R18,1 million interest payment and the total IFRS 2 charge of
R73,3 million, the effective Group tax rate was 32,3% (prior year: 32,8%
excluding the once-off R20 million deferred tax impairment associated with the
Game Mauritius store). The Group tax rate includes 3,6% relating to STC paid on
ordinary dividends and Thuthukani preference dividends.
Minority interests primarily comprise CBW store managers` holdings in certain
CBW stores.
Headline earnings of R1 092,2 million reflects growth of 30,6% over the prior
year. Adjusting for the first-time Thuthukani IFRS 2 charge of R54,3 million
increases this growth to 37,0%.
Due to the lowering of the Group`s dividend cover from 2,0 to
1,7 times in February 2007, the growth in total dividends declared and paid of
52,4% exceeds the growth in headline earnings per share of 28,9%.
Balance Sheet
Working capital management remained effective across the Group. Due primarily to
planned higher inventory levels in Massdiscounters, Group inventory days
increased from 46 to 51 days, while Debtors days improved from 13 to 12 days and
Accounts Payable days increased from 58 to 60 days.
Goodwill increased by R150,4 million, due mainly to the July 2006 acquisition
of the 49% minority interest in De La Rey.
With medium-term interest-bearing debt of R403 million and shareholders
equity of R2 239 million, the Group`s gearing at year-end was 18,0%. Most
of the medium-term debt was incurred to fund the June 2005 acquisitions of
the Massbuild businesses.
Cash Flow Statement
Operating cash before working capital movements of R1 920,4 million is 24,4%
above prior year. The 26,0% increase in profit before interest and tax
demonstrates the Group`s effective cash generation ability.
For the reasons noted above, net working capital movements resulted in a R28,3
million cash outflow.
Total capital expenditure comprises R142,3 million spent on replacing assets and
R317,9 million invested in expanding and improving capacity. Total capital
expenditure in the 2008 financial year is expected to be almost R600 million.
Share buybacks during the year executed by a Massmart subsidiary and by the
Massmart Share Scheme Trust totalled R313,2 million (prior year: R148,3
million). Further details of the share buybacks are shown in Note 3 to the
Financial Statements.
Sustainability
Succession Process
The CEO succession was completed effective 1 July 2007 with the appointment of
Grant Pattison as CEO, Mark Lamberti as Non-Executive Chairman and Chris
Seabrooke as Deputy Chairman and Lead Independent Director.
Transformation
With the national BEE framework now finalised we have begun the process to re-
score the Group against the new BEE scorecard. Executives are now partly
incentivised against scorecard improvement.
In February 2007 the first Thuthukani dividend was paid, representing an average
of R593 per participant. The Group`s proposed previously disadvantaged Non-
Executive Directors equity participation scheme still awaits the promulgation of
the Corporate Law Amendment Bill, specifically the proposed changes
to s38.
Crime
In addition to the very high internal investment in protecting our business,
employees and customers against crime, we continue to participate in and support
major industry and government initiatives to curb crime.
Environment
As the increasing social awareness of the potential impact of climate change
grows, we are embarking on a practical and realistic program of addressing those
issues in our supply chain that are contributing to this change, such as energy
consumption, packaging, food sourcing and water consumption.
Strategy and Vision 2010
Every year we review the Group and Divisional strategies, producing a three-year
Vision for Growth, communicated as Vision 2010. The process this year had three
major outcomes.
The first was that the strategies were fundamentally sound and required only
refining and updating. The second was that the completion of the strategic and
structural "simplification" process, begun in 2006, has positioned the Group to
once again look externally for growth. The third was that the strategic focus
over the next three years would be on Leadership Development and Transformation;
Growth (whether comparable, organic, green-fields or acquisitive), Supply Chain,
Private Brands, Financial Services and Sustainability.
In terms of new space growth we plan over the next three years to add an
additional 50 stores, representing 197 500mSquared ( a growth of 19,8%), which
should translate into additional annualised sales of R5,4 billion.
Prospects
The excellent monetary and fiscal management of the South African economy
continues to provide an environment conducive to confident local investment. The
extensive infrastructural development, the private sector growth and the steady
creation of sustainable jobs at all levels should, regardless of the short-term
cycles, provide opportunities for retail growth into the future.
As we monitor the effects of the higher interest rates on consumers, we will
also need to correct for the consequences of the June 2007 implementation of the
National Credit Act. Whilst the direct impact on our business, due to its cash
focus, is minimal, the effect on the general consumer and their buying patterns
needs to be carefully monitored.
Although the current adverse economic environment may result in lower sales
growth in the short-term, the growth prospects remain sound and we continue to
invest and manage the Group for the long-term.
For the eight weeks to 19 August 2007, total sales grew 13,4%, with comparable
store sales at 11,2%.
Distribution and Dividend Policy
Massmart`s dividend policy is to declare and pay an interim and final dividend
representing a 1,7 times dividend cover unless circumstances dictate otherwise.
Notice is hereby given that the Board is proposing a final dividend of 123 cents
per share in respect of the period ended
24 June 2007 which declaration will take place on 2 October 2007. The last day
to trade cum-dividend will therefore be Friday,
19 October 2007 and Massmart shares will trade ex-dividend from Monday, 22
October 2007. The record date will be Friday,
26 October 2007. Payment of the dividend will be made on Monday, 29 October
2007. Share certificates may not be dematerialised
or rematerialised between Monday, 22 October 2007 and Friday,
26 October 2007, both days inclusive.
A Thuthukani dividend equivalent to 25% of the Massmart ordinary dividend per
share (30,75 cents) will be paid to the Massmart Thuthukani Empowerment Trust on
Monday, 29 October 2007.
Balance sheet
June 2007 June 2006
Rm (Reviewed) (Audited) % change
ASSETS
Non-current assets 3 448,2 3 034,1
Property, plant and equipment 1 123,8 944,3 19,0
Goodwill and other intangible 1 477,0 1 298,7
assets
Investments and loans 414,6 381,6
Deferred taxation 432,8 409,5
Current assets 7 401,4 6 584,3
Inventories 4 027,3 3 221,0 25,0
Accounts receivable and 1 876,5 1 770,0 6,0
prepayments
Taxation 251,9 151,7
Cash and bank balances 1 245,7 1 441,6
Total 10 849,6 9 618,4
EQUITY AND LIABILITIES
Total equity 2 264,8 1 952,4
Equity attributable to equity 2 239,0 1 901,8 17,7
holders of the parent
Minority interest 25,8 50,6
Non-current liabilities 1 122,2 1 133,8
Non-current liabilities - 402,7 519,7
interest-bearing
Other non-current liabilities 604,0 516,9
and provisions
Deferred taxation 115,5 97,2
Current liabilities 7 462,6 6 532,2
Accounts payable and accruals 6 759,6 5 881,0 14,9
Taxation 534,4 410,9
Bank overdrafts and short-term 168,6 240,3
borrowings
Total 10 849,6 9 618,4
Income statement
Year ended Year ended
June 2007 June 2006
Rm (Reviewed) (Audited) % change
Continuing operations
Revenue 34 961,1 30 080,6 16,2
Sales 34 807,6 29 963,6 16,2
Cost of sales (28 435,7) (24 650,0) 15,4
Gross profit 6 371,9 5 313,6 19,9
Other income 153,5 117,0 31,1
Depreciation and (240,9) (202,9) 18,7
amortisation
Impairment of assets (note (26,3) (5,4) 387,0
6)
Employment costs (2 449,8) (2 079,0) 17,8
Occupancy costs (846,0) (740,5) 14,2
Other operating costs (1 289,1) (1 074,7) 19,9
Operating profit 1 673,3 1 328,1 26,0
Finance costs (100,4) (95,9) 4,7
Finance income 56,0 63,7 (12,1)
Net finance costs (44,4) (32,2) 37,9
Profit before taxation 1 628,9 1 295,9 25,7
Taxation (554,8) (444,6) 24,8
Profit for the year from 1 074,1 851,3 26,2
continuing operations
Discontinued operations:
Net profit/(loss) for the - 3,7
year (note 8)
Loss on disposal (note 8) - (1,8)
Profit for the year 1 074,1 853,2 25,9
Attributable to:
Equity holders of the parent 1 058,8 828,5 27,8
Minority interest 15,3 24,7
1 074,1 853,2
Basic EPS before the 528,2 415,3 27,2
Thuthukani dividend (cents)
Thuthukani dividend (note (4,4) -
10)
Basic EPS (cents) 523,8 415,3 26,1
Basic EPS from continuing 523,8 414,3
operations (cents)
Basic EPS from discontinued - 1,0
operations (cents)
Diluted basic EPS before the 518,9 404,4 28,3
Thuthukani dividend (cents)
Thuthukani dividend (note (4,4) -
10)
Diluted basic EPS (cents) 514,5 404,4 27,2
Diluted basic EPS from 514,5 403,4
continuing operations
(cents)
Diluted basic EPS from - 1,0
discontinued operations
(cents)
Dividend (cents):
Interim 197,0 130,0 51,5
Final 123,0 80,0 53,8
Total 320,0 210,0 52,4
Reconciliation of net profit
for the year to headline
earnings
Net profit attributable to 1 058,8 828,5
equity holders of the parent
Impairment of assets (note 24,1 3,8
6)
Write-off costs incurred on - 3,3
acquisition (note 7)
Loss on disposal of - 1,8
discontinued operation (note
8)
Loss/(profit) on disposal of 0,7 (0,8)
fixed assets
Loss on disposal of Furnex 6,2 -
CGT on sale of treasury 2,4 -
shares
Headline earnings 1 092,2 836,6 30,6
IFRS 2 BEE transaction 54,3 -
charge (note 9)
Headline earnings before the 1 146,5 836,6 37,0
BEE transaction
Headline EPS (cents) (note 540,4 419,3 28,9
10)
Headline EPS before the BEE 571,9 419,3 36,4
transaction (cents) (note 9)
Diluted headline EPS (cents) 530,9 408,3 30,0
Cash flow statement
Year ended Year ended
June 2007 June 2006
Rm (Reviewed) (Audited)
Operating cash before 1 920,4 1 543,6
working capital movements
Working capital movements (28,3) 260,4
Cash generated from 1 892,1 1 804,0
operations
Taxation paid (531,6) (487,4)
Net interest paid (44,4) (32,7)
Investment income 53,6 34,6
Dividends received 2,5 3,2
Dividends paid (565,1) (402,8)
Cash inflow from operating 807,1 918,9
activities
Investment to maintain (142,3) (170,2)
operations
Investment to expand (317,9) (184,1)
operations
Businesses acquired (160,0) -
Disposal of subsidiary - 25,7
Other investing activities (70,6) (130,9)
Cash outflow from investing (690,8) (459,5)
activities
Cash (outflow)/inflow from (282,4) 506,0
financing activities
Net (decrease)/increase in (166,1) 965,4
cash and cash equivalents
Foreign exchange losses (1,4) 6,1
taken to statement of
changes in equity
Opening cash and cash 1 376,3 404,8
equivalents
Closing cash and cash 1 208,8 1 376,3
equivalents
Statement of changes in equity
Year ended June 2007 General
Ordinary non-dis-
share Share tributable
(Reviewed) capital premium reserve
Rm
Opening balance 2,0 262,6 143,4
Exchange differences and - - 0,6
hyperinflation movements
Deconsolidation of Makro - - 5,9
Zimbabwe (note 2)
FV adjustment of investment in - - (13,2)
Makro Zimbabwe (note 2)
Dividends declared - - -
Cash flow hedges taken directly - - 1,2
to equity
Profit for the year - - -
Changes in minority interests
and distribution
to minorities - - -
Release of deferred taxation on - - (5,8)
trademarks
Net movement of treasury shares - (3,4) -
BEE transaction costs - (4,5) -
Share trust transactions and - - 73,3
IFRS 2 charge
Total 2,0 254,7 205,4
Year ended June 2006 General
Ordinary non-dis-
share Share tributable
(Audited) capital premium reserve
Rm
Opening balance 2,0 209,4 122,1
Exchange differences and - - 9,7
hyperinflation movements
Dividends declared - - -
Profit for the year - - -
Changes in minority interests - - -
and distribution to minorities
Release of deferred taxation on - - (5,8)
trademarks
Reduction of deferred tax asset - - -
Shares issued (net of costs) - 71,5 -
Net movement of treasury shares - (18,3) -
Share trust transactions and - - 17,4
IFRS 2 charge
Total 2,0 262,6 143,4
Statement of changes in equity (continued)
Year ended June 2007
Equity
attributable
to equity
holders
(Reviewed) Retained of the Minority
Rm profit parent interest Total
Opening balance 1 493,8 1 901,8 50,6 1 952,4
Exchange differences
and hyperinflation
movements - 0,6 - 0,6
Deconsolidation of - 5,9 - 5,9
Makro Zimbabwe
(note 2)
FV adjustment of
investment in Makro
Zimbabwe (note 2) - (13,2) - (13,2)
Dividends declared (565,0) (565,0) - (565,0)
Cash flow hedges - 1,2 - 1,2
taken directly to
equity
Profit for the year 1 058,8 1 058,8 15,3 1 074,1
Changes in minority
interests and
distribution
to minorities - - (40,1) (40,1)
Release of deferred 5,8 - - -
taxation on
trademarks
Net movement of - (3,4) - (3,4)
treasury shares
BEE transaction - (4,5) - (4,5)
costs
Share trust (216,5) (143,2) - (143,2)
transactions and
IFRS 2 charge
Total 1 776,9 2 239,0 25,8 2 264,8
Year ended June 2006 Equity
attributable
to equity
holders
(Audited) Retained of the Minority
Rm profit parent interest Total
Opening balance 1 187,8 1 521,3 37,7 1 559,0
Exchange differences
and hyperinflation
movements 0,1 9,8 - 9,8
Dividends declared (402,8) (402,8) - (402,8)
Profit for the year 828,5 828,5 24,7 853,2
Changes in minority
interests and
distribution
to minorities - - (11,8) (11,8)
Release of deferred 5,8 - - -
taxation on
trademarks
Reduction of (33,7) (33,7) - (33,7)
deferred tax asset
Shares issued (net - 71,5 - 71,5
of costs)
Net movement of - (18,3) - (18,3)
treasury shares
Share trust (91,9) (74,5) - (74,5)
transactions and
IFRS 2 charge
Total 1 493,8 1 901,8 50,6 1 952,4
Additional information
Year ended Year ended
June 2007 June 2006
(Reviewed) (Audited)
Net asset value per share (cents) 1 113,5 946,0
Ordinary shares (000`s):
- In issue 201 073 201 041
- Weighted-average 200 461 199 507
- Diluted weighted-average 204 037 204 886
Preference shares (000`s):
- Thuthukani `A` shares (note 9) 17 968 -
- Black Scarce Skills Trust `B` shares 2 000 -
(note 9)
Capital expenditure (Rm)
- Authorised and committed 101,0 183,0
- Authorised not committed 327,7 143,0
Operating lease commitments (2007 - 2022) 6 082,5 5 977,2
(Rm)
US dollar exchange rates - year-end 7,20 7,48
- average 7,22 6,42
Notes
1 These condensed financial statements have been prepared in accordance with
IAS 34 Interim Financial Reporting, using accounting policies that are in
line with IFRS and consistently applied to prior periods.
2 Makro Zimbabwe operates in a hyperinflationary environment, and thus the
principles of IAS 29 Financial Reporting in Hyperinflationary Economies
have been applied to the prior year. In the current year, a decision was
taken to deconsolidate Makro Zimbabwe prospectively. This decision was made
on the basis that the Group no longer has day-to-day control of the entity.
Control is defined as "the power to govern the financial and operating
policies of the entity so as to obtain benefits from its activities". The
financial impact on net profit attributable to equity holders of the parent
for the prior year was a loss of R1,1 million.
3 The total share buyback (including shares bought in the market by the Share
Trust) for the year was 4,4 million shares (2006: 2,7 million) at an
average price of R71,85 (2006: R54,71) totalling R313,2 million (2006:
R148,3 million).
4 The net realised and unrealised foreign exchange translation losses
deducted from trading profit amounted to R41,4 million
(2006: gain of R33,3 million).
5 The operating lease smoothing adjustment expensed in the year as a result
of IAS 17 Leases, was a charge of R24,5 million after tax (2006: R35,7
million).
6 The impairment of assets in the current year relates to the write-off of
Dion inventory, consumables and plant and equipment, and the impairment of
certain goodwill in an old Jumbo acquisition. The impairment of assets in
the prior year relates to the write-off of IT software at CBW.
7 Capital costs written off in the prior year were due to The Competition
Tribunal prohibiting the acquisition of Moresport.
8 Furnex (a division of Masscash) was disposed of effective
1 March 2006. The sale was accounted for in the prior year in accordance
with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.
Results from the discontinued operation for the prior year were as follows:
Discontinued Sales Trading profit PBT Taxation PAT
operation
June 2006 (8 months) 480,0 7,0 6,5 (2,8) 3,7
9 The Massmart BEE transaction, which came into operation in the current
year, gave rise to an IFRS 2 Share-based Payment charge of R54,3 million.
The `A` and `B` preference shares have been issued to the Thuthukani Trust
and the Black Scarce Skills Trust respectively.
10 An interim dividend of 50 cents per share was distributed to all Thuthukani
participants. This equates to an effect on earnings per share of 4,4 cents
resulting in a revised basic earnings per share of 523,8 cents per share.
In year one, the Thuthukani dividend is equivalent to 25% of the ordinary
dividend. Next year, the Thuthukani dividend is equivalent to 50% of the
ordinary dividend. Headline earnings per share has been calculated using
headline earnings adjusted by 4,4 cents, being the weighted-average effect
of the Thuthukani dividend.
11 Related party transactions in the current year involve properties leased by
Builders Express (formally Servistar) that were owned by John Keil, a
former director and owner of Servistar. Certain properties used by CBW are
leased from CCW Property Holdings in which Robin Wright has a shareholding.
Robin Wright is a director and former owner of CBW. From time to time, in
the normal course of business, Massmart and its divisions make use of
private aircraft hired from competitively selected charter companies, two
of which operate aircraft indirectly beneficially owned by Mr MJ Lamberti.
12 Due to Christmas trading, Massmart`s earnings are weighted towards the six
months to December.
13 These results have been reviewed by independent external auditors Deloitte
& Touche and their unqualified review opinion is available for inspection
at the registered office.
On behalf of the Board
Grant Pattison Guy Hayward
Chief Executive Officer Chief Financial Officer
22 August 2007
Directorate: MJ Lamberti (Chairman),
CS Seabrooke (Deputy Chairman),
GM Pattison* (Chief Executive Officer),
MD Brand, ZL Combi, KD Dlamini, NN Gwagwa,
GRC Hayward*, JC Hodkinson**, P Langeni,
IN Matthews, P Maw, DNM Mokhobo, MJ Rubin
* Executive ** United Kingdom
Registered office: Massmart House, 16 Peltier Drive,
Sunninghill Ext 6, 2191,
Company secretary: I Zwarenstein
Transfer secretaries: Computershare Limited,
Investor Services Division,
Registered auditors: Deloitte & Touche
For more information: www.massmart.co.za
Johannesburg
23 August 2007
Sponsor:
Deutsche Securities (SA) (Proprietary) Ltd
Date: 23/08/2007 07:00:14 Produced by the JSE SENS Department.
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