| Thu 28 Feb 2008, 7:05 | | MSM - Massmart Holdings Limited - Reviewed Consoli |
|
MSM
MSM
MSM - Massmart Holdings Limited - Reviewed Consolidated Results For The 26 Weeks
Ended 23 December 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" or "the Group")
MASSMART
DEDICATED TO VALUE
REVIEWED CONSOLIDATED RESULTS FOR THE 26 WEEKS ENDED 23 DECEMBER 2007
SALES INCREASE 11% TO R20 123 MILLION
TRADING PROFIT INCREASES 16% TO R1 201 MILLION
HEADLINE EARNINGS BEFORE THE BEE TRANSACTION INCREASE 16% TO R802 MILLION
HEADLINE EPS BEFORE THE BEE TRANSACTION INCREASES 17% TO 402 CENTS
OPERATING CASH BEFORE WORKING CAPITAL INCREASES 15% TO R1 283 MILLION
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 243 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.
OVERVIEW
In an environment of declining real retail sales growth, the Massmart portfolio
- diversified in its participation in the Food, Liquor, General Merchandise and
Home Improvement categories - continued to be resilient. This was assisted by
our balanced exposure to the low, middle and upper income consumers and our
sales being predominantly cash (98,8%).
Sales for the 26 weeks to 23 December 2007 grew 11,1% against the previous
period and comparable store sales growth was 9,4%. For the 27 weeks to 30
December 2007, which included the important trading day of 24 December,
comparable sales grew 9,8%.
Trading patterns were as expected in this environment with Food and Liquor sales
growth of 12,3% (with 9,8% inflation), Home Improvement, reflecting the
resilience in the housing market, growing sales at 16,2% (7,4% inflation) and
General Merchandise growing at 10,4% (1,6% inflation).
Gross margins were slightly higher while expense growth tracked sales growth.
Trading profit before interest and headline earnings before the non-comparable
BEE transaction charges grew by 16,2% and 16,4% respectively.
ENVIRONMENT
As the effect of higher interest rates and the National Credit Act (NCA)
impacted consumer spending patterns, the relative exposures of the different
competing retail formats have become more visible. In particular, we believe
that the NCA has ensured that households have a much clearer view of their
consolidated debt levels, in some instances perhaps for the first time, and may
be driving those customers towards cash-based spending.
It is the middle-income consumer who is the most indebted and so has materially
cut their debt-funded spending and is using a greater portion of disposable
income to service existing debt. Massdiscounters, for example, has seen a
material shift in tender type from credit card to cash.
Despite the credit-related pressures on consumers, their fundamental health is
evident in our Food and Liquor, General Merchandise and Home Improvement sales
that have, despite higher inflation, still grown in volumes. We believe however,
that the various formats in Massbuild are still gaining market share, which may
mask some of the slow-down in that sector.
The strong consumer response to our promotional activity is indicative of a
clear shift towards affordability and value.
DIVISIONAL OPERATING REVIEW
December December
2007 % of 2006 % of Period
Rm (Reviewed) sales (Reviewed) sales % growth
Sales 20 122,9 18 105,7 11,1
Massdiscounters 5 383,6 4 979,4 8,1
Masswarehouse 5 108,4 4 566,6 11,9
Massbuild 2 896,6 2 497,0 16,0
Masscash 6 734,3 6 062,7 11,1
Trading profit
before interest
and tax*
1 200,5 6,0 1 033,1 5,7 16,2
Massdiscounters 444,0 8,2 399,3 8,0 11,2
Masswarehouse 335,8 6,6 275,5 6,0 21,9
Massbuild 222,7 7,7 206,1 8,3 8,1
Masscash 198,0 2,9 152,2 2,5 30,1
Trading profit
before tax**
1 285,9 6,4 1 085,0 6,0 18,5
Massdiscounters 462,7 8,6 417,9 8,4 10,7
Masswarehouse 367,7 7,2 297,1 6,5 23,8
Massbuild 238,4 8,2 211,5 8,5 12,7
Masscash 217,1 3,2 158,5 2,6 37,0
Comparable Estimated June
% sales % sales 2007 % of
Rm growth inflation (Audited) sales
Sales 9,4 6,3 34 807,6
Massdiscounters 4,1 2,7 9 424,5
Masswarehouse 9,2 5,9 8 640,1
Massbuild 12,7 7,4 4 948,3
Masscash 12,1 10,5 11 794,7
Trading profit
before interest
and tax*
1 753,9 5,0
Massdiscounters 634,2 6,7
Masswarehouse 466,7 5,4
Massbuild 363,0 7,3
Masscash 290,0 2,5
Trading profit
before tax** 1 895,4 5,4
Massdiscounters 686,3 7,3
Masswarehouse 525,4 6,1
Massbuild 379,8 7,7
Masscash 303,9 2,6
*Trading profit before interest and tax is before asset impairments and the BEE
transaction IFRS 2 charge of R33,9 million (2006: R17,2 million).
**Trading profit before tax is after divisional net interest but before
corporate net interest of R113,3 million (2006: R61,0 million), asset
impairments and the BEE transaction IFRS 2 charge of R33,9 million (2006: R17,2
million).
Massdiscounters - comprises the 84-store General Merchandise retail discounter
Game, which trades in South Africa, Namibia, Botswana, Zambia, Uganda,
Mozambique, Mauritius, Malawi, Tanzania, Nigeria, and Ghana; Dion (4 stores),
which trades in the Gauteng province of South Africa; and the new Dion Wired
format (3 stores).
Divisional comparable store sales grew by 4,1% with estimated inflation of 2,7%.
Total sales grew by 8,1% and trading profit before tax grew 10,7%.
A lack of significant volume growth in this division, caused by the pressure on
middle-income consumers, combined with low product inflation, resulted in soft
comparable store sales growth in South Africa. Sales growth in the African
stores outperformed the South African stores. The Dion Wired brand continues to
make pleasing progress with a record opening at the Gateway store in November
2007. A national rollout of this brand is now planned.
As a direct result of the NCA introduced in June 2007, sales of certain
categories of insurance product ceased, reducing trading profit by R15 million.
Given this and the other consequences of the NCA, it has been decided to sell
Massdiscounters` consumer credit division to RCS which has been a business
partner for two years and is better suited to manage and grow this division.
This cash transaction which represents less than 2,3% of Massmart`s market
capitalisation is subject to certain conditions precedent and is expected to be
effective from May 2008 and will not materially affect earnings or net book
value.
During the period, 1 new Dion Wired store was opened, 2 Dion stores were
converted to Game stores and 1 Game store was relocated. Before June 2008 all
the remaining Dion stores will have been closed or converted to Game stores.
Masswarehouse - comprises the 13-store Makro warehouse club trading in Food,
General Merchandise and Liquor in South Africa (and two Zimbabwean stores, not
consolidated in the Group results).
Divisional comparable store sales grew by 9,2% with estimated inflation of 5,9%.
Total sales grew 11,9% and trading profit before tax grew 23,8%.
The new Silver Lakes store, east of Pretoria, had a record opening in October
2007 and made a net positive trading contribution to the division despite pre-
opening costs and the anticipated cannibalisation of the other two Makro stores
in Pretoria.
Massbuild - comprises 67 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 12,7% with estimated inflation of 7,4%.
Total sales grew 16,0% and trading profit before tax grew 12,7%.
New stores were opened in Nelspruit (Builders Warehouse), Robindale and Lambton
(both Builders Express) and a Builders Trade Depot was relocated in
Stellenbosch.
This division continues to mature and is establishing a solid foundation for
future growth. The investment in people, structure and systems that adversely
affected profitability in the second half of the 2007 financial year had a
lesser effect in this period. The consolidated national Builders brand has been
well received by customers and the investment in this exciting format is
beginning to bear fruit.
Masscash - comprises 65 CBW and 7 Jumbo wholesale cash and carry stores trading
in South Africa, Lesotho, Namibia and Botswana, and Shield, a voluntary buying
association.
Divisional comparable store sales grew by 12,1% with estimated inflation of
10,5%. Total sales grew by 11,1% and trading profit before tax grew 37,0%.
Apart from food inflation driving sales growth, cost savings and relatively good
performances from Jumbo and Shield contributed to growth in trading profit.
Progress in securing new sites for the hybrid format store has been slow but a
pipeline of potential stores is being developed.
FINANCIAL REVIEW
INCOME STATEMENT
Total and comparable sales growths for the 26-week period to Sunday, 23 December
2007, were 11,1% and 9,4% respectively. Net trading space increased by 2,9% to a
total of 1 023 294mSquared. During the period 4 stores were converted or
relocated, and 5 opened, resulting in a total of 243 stores at the end of
December 2007.
Gross profit of 18,4% was marginally higher than the prior period`s 18,3%, a
combination of the increased sales contribution from the higher margin Massbuild
division, slightly higher gross margins in Masscash and lower gross margins in
Massdiscounters.
Total expenses as a percentage of sales remained constant at 13,1%, partly
negatively affected by the new Makro store not yet trading to full capacity.
Included in operating profit are realised and unrealised foreign exchange losses
of R14,9 million (2006: R41,4 million loss).
Net interest paid has increased due to higher borrowings funding the total
capital expenditure of R350,0 million. In addition, cash was invested in share
buybacks of R271,8 million (2006: R106,1 million) over the period (see Note 3).
The non-cash IFRS 2 charge associated with the Group`s Staff Empowerment scheme,
Thuthukani, effective October 2006, has not yet annualised and increased from
R17,2 million to R33,9 million. Adjusting for all the non-deductible total IFRS
2 charges, the Group`s effective tax rate is 30,2% (2006: 31,4%), which includes
the effect of STC of 2,3% (2006: 1,4%). The new lower South African corporate
tax rate will be applied for the first time to the full year`s taxable income in
the June 2008 results.
The minority interests comprise mainly CBW store managers` holding in certain
Masscash stores.
Headline earnings before the BEE transaction grew by 16,4% while headline EPS
before the BEE transaction grew by 16,8%.
BALANCE SHEET
Group inventory levels at 23 December 2007 are higher than normal due to the
slightly softer Christmas sales in Massdiscounters and Massbuild as well as
continuing supply constraints requiring higher Food & Liquor inventory levels
particularly in Masscash.
Non-current interest-bearing debt of R346,2 million (2006: R462,8 million)
represents gearing of 13,6% (2006: 19,6%).
The annual rolling return on equity of 48,0% is higher than the 46,7% at
December 2006.
PROGRESS WITH VISION 2010
Vision 2010 deals with Leadership and Transformation, Comparable Store Growth,
Organic Growth, Supply Chain, Private Label, New Formats and Sustainability.
We are making progress towards our Employment Equity target and we have BEE
performance scorecards implemented in all parts of the business, which now forms
part of Executive incentives.
The latest review of our store opening opportunities indicates potential for new
unweighted space growth of 5,8% and 6,9% in 2009 and 2010 respectively, but
there always remains some risk in securing certain sites. Space growth in this
2008 financial year will be 3,4% which includes the 2,9% of new space already
opened. These figures exclude any potential minor acquisitions.
Progress continues with the Western Cape Regional Distribution Centre and it is
expected to be operational in August 2008 while SAP Forecasting and
Replenishment has been recently purchased for implementation into Masswarehouse
and Massbuild.
All the Group`s Private Label strategies are being re-developed and a small team
has been established under the leadership of Joe Owens to investigate the
viability of new formats.
We continue to adopt practical measures across the Group that are consistent
with sustainable development, in particular in the areas of BEE, social
development and environmental awareness.
ACKNOWLEDGING OUR PEOPLE
Every day, throughout the Group`s 243 stores, our employees are engaged in
improving the customers` shopping experience. Most of the Group`s 27 581 staff
members are directly employed in our stores and their working hours can seldom
coincide with others` leisure time. We acknowledge the contribution of all our
people to achieving these good trading results and thank them for their hard
work and dedication to ensuring the continuing success of Massmart.
PROSPECTS
A review of the challenges posed by the energy crisis concluded that Massmart`s
previous investments in electrical self-sufficiency over the past few years have
proven worthwhile and we are able to operate our stores and other crucial
support functions despite load-shedding. In the short-term, the opportunities
presented in selling solutions in energy management appear to balance the
increase in the cost of generating our own power, although the effect in the
medium- to long-term is difficult to forecast. The plans shared with us by Eskom
seem comprehensive and attainable, and we will work closely with them and all
the relevant authorities in responding to this crisis.
For the 35 weeks to 24 February 2008, total sales grew 12,4% and comparable
sales grew 10,2%.
The higher interest rates are in response to higher inflation, which has
historically assisted our comparable sales growths. We however, remain sensitive
to the pressures inflation places on consumers and will work with our suppliers
to keep the cost of basic goods as low as possible.
Although the economic environment remains uncertain, we anticipate headline
earnings growth in the second-half of this 2008 financial year to be higher than
that for the first-half. This is because of ongoing Food inflation in Masscash,
the new Makro store trading for the full period, and the relatively poor second-
half performance of Massbuild to June 2007.
Whilst we will continue to invest in organic and non-organic growth
opportunities, which provide superior returns in the medium- to long-term, we
will remain vigilant to a consumer slow-down and manage costs and stock
appropriately.
We continue to believe in the positive effect of the structural change to the
South African consumer market and whilst the upper-end of the growth prospects
may have been capped in the medium-term, we believe these more challenging times
will also bring opportunities to further consolidate our leadership position in
the markets in which we trade.
DISTRIBUTION AND DIVIDEND POLICY
Massmart`s dividend policy is to declare and pay an interim and final cash
dividend representing a 1,7 times dividend cover unless circumstances dictate
otherwise.
Notice is hereby given that an interim cash dividend of 223 cents per share in
respect of the period ended 23 December 2007 has been declared payable to the
holders of ordinary shares recorded in the books of the company on Thursday, 20
March 2008. The last day to trade cum-dividend will therefore be Thursday, 13
March 2008 and Massmart shares will trade ex-dividend from Friday, 14 March
2008. Payment of the cash dividend will be made on Tuesday, 25 March 2008. Share
certificates may not be dematerialised or rematerialised between Friday, 14
March 2008 and Thursday, 20 March 2008, both days inclusive.
A Thuthukani dividend equivalent to 50% of the Massmart ordinary dividend per
share (111,5 cents) will be paid to the Massmart Thuthukani Empowerment Trust on
Tuesday, 25 March 2008.
On behalf of the Board
Grant Pattison Guy Hayward
Chief Executive Officer Chief Financial Officer
27 February 2008
INCOME STATEMENT
Six months Six months Year
ended ended ended
December December % June 2007
2007 2006
Rm (Reviewed) (Reviewed) change (Audited)
Revenue 20 217,8 18 232,0 10,9 34 964,7
Sales 20 122,9 18 105,7 11,1 34 807,6
Cost of sales (16 411,0) (14 800,3) 10,9 (28 435,7)
Gross profit 3 711,9 3 305,4 12,3 6 371,9
Other income 91,8 81,2 13,1 157,1
Depreciation and (143,1) (115,1) 24,3 (240,9)
amortisation
Impairment of - - - (26,3)
assets (note 5)
Employment costs (1 350,4) (1 215,9) 11,1 (2 449,8)
Occupancy costs (468,5) (417,5) 12,2 (846,0)
Other operating (675,1) (622,2) 8,5 (1 292,7)
costs
Operating profit 1 166,6 1 015,9 14,8 1 673,3
Finance costs (49,8) (38,9) 28,0 (100,4)
Finance income 21,9 29,8 (26,5) 56,0
Net finance costs (27,9) (9,1) 206,6 (44,4)
Profit before 1 138,7 1 006,8 13,1 1 628,9
taxation
Taxation (359,3) (324,7) 10,7 (554,8)
Profit for the 779,4 682,1 14,3 1 074,1
period
Attributable to:
Equity holders of 762,9 673,2 13,3 1 049,9
the parent
Preference 5,0 - 8,9
shareholders
(note 7)
Minority interest 11,5 8,9 15,3
779,4 682,1 1 074,1
Basic EPS (cents) 382,5 336,4 13,7 523,7
Diluted basic EPS 370,3 329,0 12,6 514,6
(cents)
Dividend (cents):
- Interim 223,0 197,0 13,2 197,0
- Final - - 123,0
Total 320,0
Reconciliation of
net profit for the
period to headline
earnings
Net profit 762,9 673,2 1 049,9
attributable to
equity holders of
the parent
Impairment of - - 26,3
assets (note 5)
Loss/(profit) on 0,2 (2,1) 0,8
disposal of fixed
assets
Loss on disposal of - - 6,2
Furnex
Total tax effects (0,1) 0,5 0,1
of adjustments
Headline earnings 763,0 671,6 13,6 1 083,3
BEE transaction 38,9 17,2 63,2
(note 6 and 7)
Headline earnings 801,9 688,8 16,4 1 146,5
before the BEE
transaction
Headline EPS 382,6 335,6 14,0 540,4
(cents)
Headline EPS before
the BEE transaction
(cents)
(note 6 and 7) 402,1 344,2 16,8 571,9
Diluted headline 370,3 328,2 12,8 530,9
EPS (cents)
BALANCE SHEET
December December % June 2007
2007 2006
Rm (Reviewed) (Reviewed) change (Audited)
ASSETS
Non-current assets 3 670,6 3 359,3 3 448,2
Property, plant and 1 326,9 1 068,8 24,1 1 123,8
equipment
Goodwill and other 1 488,0 1 455,5 1 477,0
intangible assets
Investments and 437,8 399,3 414,6
loans
Deferred taxation 417,9 435,7 432,8
Current assets 9 415,7 8 961,1 7 401,4
Inventories 5 300,2 4 242,8 24,9 4 027,3
Accounts receivable 2 352,3 2 350,4 0,1 1 876,5
and prepayments
Taxation 13,5 15,4 251,9
Cash and bank 1 749,7 2 352,5 1 245,7
balances
Total 13 086,3 12 320,4 10 849,6
EQUITY AND
LIABILITIES
Total equity 2 563,0 2 372,6 2 264,8
Equity attributable 2 542,2 2 356,7 7,9 2 239,0
to equity holders
of the parent
Minority interest 20,8 15,9 25,8
Non-current 1 075,7 1 183,3 1 122,2
liabilities
Non-current 346,2 462,8 402,7
liabilities -
interest-bearing
Other non-current 601,4 606,6 604,0
liabilities and
provisions
Deferred taxation 128,1 113,9 115,5
Current liabilities 9 447,6 8 764,5 7 462,6
Accounts payable 8 952,0 8 127,5 10,1 6 759,6
and accruals
Taxation 309,4 426,3 534,4
Bank overdrafts and 186,2 210,7 168,6
short-term
borrowings
Total 13 086,3 12 320,4 10 849,6
ADDITIONAL INFORMATION
Six months Six months Year
ended
June 2007
ended ended
December December
2007 2006
(Reviewed) (Reviewed) (Audited)
Net asset value per share 1 264,0 1 171,7 1 113,2
(cents)
Ordinary shares (000`s):
- In issue 201 129 201 041 201 073
- Weighted-average 199 451 200 102 200 461
- Diluted weighted-average 206 048 204 609 204 037
Preference shares (000`s):
- Thuthukani "A" shares (note 17 912 17 952 17 968
6)
- Black Scarce Skills Trust 2 000 - 2 000
"B" shares (note 6)
Capital expenditure (Rm)
- Authorised and committed 149,6 32,5 101,0
- Authorised not committed 208,3 193,5 327,7
Operating lease commitments 6 327,1 4 704,0 6 082,5
(2008 - 2022) (Rm)
US dollar exchange rates - 7,08 7,10 7,20
period end
- average 6,96 7,26 7,22
Cash flow statement
Six months Six months Year
ended ended ended
December December June 2007
2007 2006
Rm (Reviewed) (Reviewed) (Audited)
Operating cash before working 1 283,3 1 114,5 1 926,4
capital movements
Working capital movements 509,3 642,3 (28,3)
Cash generated from 1 792,6 1 756,8 1 898,1
operations
Taxation paid (315,0) (181,2) (531,6)
Net interest paid (27,9) (9,1) (44,4)
Investment income 32,7 27,9 53,6
Dividends received 2,2 - 2,5
Dividends paid (249,5) (160,1) (565,1)
Cash inflow from operating 1 235,1 1 434,3 813,1
activities
Investment to maintain (153,1) (53,2) (142,3)
operations
Investment to expand (196,9) (223,0) (317,9)
operations
Businesses acquired - - (160,0)
Other investing activities (343,1) (172,7) (70,6)
Cash outflow from investing (693,1) (448,9) (690,8)
activities
Cash outflow from financing (48,3) (88,8) (288,4)
activities
Net increase/(decrease) in 493,7 896,6 (166,1)
cash and cash equivalents
Foreign exchange losses taken (8,4) (1,6) (1,5)
to statement of changes in
equity
Opening cash and cash 1 208,7 1 376,3 1 376,3
equivalents
Closing cash and cash 1 694,0 2 271,3 1 208,7
equivalents
Statement of changes in equity
Six months ended Ordinary General
December 2007 non-
(Reviewed) share Share distributable Retained
Rm capital premium reserve profit
Opening balance 2,0 254,7 205,4 1 776,9
Exchange differences - - (8,5) -
Dividends declared - - - (249,5)
Cash flow hedges taken
directly to equity
- - (8,0) -
Profit for the period - - - 767,9
Changes in minority
interests and
distribution to
minorities
- - - -
Release of deferred
taxation on
trademarks - - (2,9) 2,9
Net movement of - (215,5) - -
treasury shares
Share trust
transactions and
IFRS 2 charge - - 52,4 (35,6)
Total 2,0 39,2 238,4 2 262,6
Six months ended Ordinary General
December 2006 non-
(Reviewed) share Share distributable Retained
Rm capital premium reserve profit
Opening balance 2,0 262,6 143,4 1 493,8
Exchange differences - - (6,2) (0,9)
Dividends declared - - - (160,1)
Profit for the period - - - 673,2
Changes in minority
interests and
distribution to - - - -
minorities
Release of deferred
taxation on
trademarks - - (2,9) 2,9
Net movement of - (2,1) - -
treasury shares
BEE transaction costs - (4,6) - -
Share trust
transactions and
IFRS 2 charge - - 27,1 (71,5)
Total 2,0 255,9 161,4 1 937,4
General
Year ended June 2007 Ordinary non-
(Audited) share Share distributable Retained
Rm capital premium reserve profit
Opening balance 2,0 262,6 143,4 1 493,8
Exchange differences - - 0,6 -
Deconsolidation of
Makro Zimbabwe
(note 2) - - 5,9 -
FV adjustment of
investment in
Makro Zimbabwe - - (13,2) -
(note 2)
Dividends declared - - - (565,0)
Cash flow hedges taken
directly
to equity - - 1,2 -
Profit for the year - - - 1 058,8
Changes in minority
interests and
distribution to - - - -
minorities
Release of deferred
taxation on
trademarks - - (5,8) 5,8
Net movement of - (3,4) - -
treasury shares
BEE transaction costs - (4,5) - -
Share trust
transactions and
IFRS 2 charge - - 73,3 (216,5)
Total 2,0 254,7 205,4 1 776,9
STATEMENT OF CHANGES IN EQUITY
Equity
attributable
to equity
holders of
the parent
Six months ended
December 2007
(Reviewed) Minority
Rm interest Total
Opening balance 2 239,0 25,8 2 264,8
Exchange differences (8,5) - (8,5)
Dividends declared (249,5) - (249,5)
Cash flow hedges taken
directly to
equity (8,0) - (8,0)
Profit for the period 767,9 11,5 779,4
Changes in minority
interests and
distribution to - (16,5) (16,5)
minorities
Release of deferred
taxation on
trademarks - - -
Net movement of (215,5) - (215,5)
treasury shares
Share trust
transactions and
IFRS 2 charge 16,8 - 16,8
Total 2 542,2 20,8 2 563,0
Equity
attributable
to equity
holders of
the parent
Six months ended
December 2006
(Reviewed) Minority
Rm interest Total
Opening balance 1 901,8 50,6 1 952,4
Exchange differences (7,1) - (7,1)
Dividends declared (160,1) - (160,1)
Profit for the period 673,2 8,9 682,1
Changes in minority
interests and
distribution to - (43,6) (43,6)
minorities
Release of deferred
taxation on
trademarks - - -
Net movement of (2,1) - (2,1)
treasury shares
BEE transaction costs (4,6) - (4,6)
Share trust
transactions and
IFRS 2 charge (44,4) - (44,4)
Total 2 356,7 15,9 2 372,6
Equity
attributable
Year ended June 2007 to equity
(Audited) holders of Minority
Rm the parent interest Total
Opening balance 1 901,8 50,6 1 952,4
Exchange differences 0,6 - 0,6
Deconsolidation of
Makro Zimbabwe
(note 2) 5,9 - 5,9
FV adjustment of
investment in
Makro Zimbabwe (13,2) - (13,2)
(note 2)
Dividends declared (565,0) - (565,0)
Cash flow hedges taken
directly
to equity 1,2 - 1,2
Profit for the year 1 058,8 15,3 1 074,1
Changes in minority
interests and
distribution to - (40,1) (40,1)
minorities
Release of deferred
taxation on
trademarks - - -
Net movement of (3,4) - (3,4)
treasury shares
BEE transaction costs (4,5) - (4,5)
Share trust
transactions and
IFRS 2 charge (143,2) - (143,2)
Total 2 239,0 25,8 2 264,8
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 in the past. In the prior year, a decision was taken to
deconsolidate Makro Zimbabwe prospectively. This decision was made on the basis
that the Group no longer had 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".
3. The total share buyback (including shares bought in the market by the Share
Trust) for the period was 3,3 million shares (2006: 2,0 million) at an average
price of R83,10 (2006: R53,02) totalling R271,8 million (2006: R106,1 million).
4. The net realised and unrealised foreign exchange translation losses deducted
from trading profit amounted to R14,9 million (2006: loss of R41,4 million).
5. The impairment of assets in the prior year-end results relates to the write-
off of Dion inventory, consumables and plant and equipment and the impairment of
certain goodwill in an old Jumbo acquisition.
6. The Massmart BEE transaction, which came into operation in the prior year,
gave rise to an IFRS 2 Share-based Payment charge of R33,9 million (2006: R17,2
million). In terms of this transaction the "A" and "B" preference shares were
issued to the Thuthukani Trust and the Black Scarce Skills Trust respectively.
7. The preference shareholder amount of R5,0 million represents the final
dividend of 30,75 cents per share paid to all Thuthukani participants. In year
one (to June 2007), the Thuthukani dividend was equivalent to 25% of the
ordinary dividend, in year two (2008) it will be equivalent to 50%, in year
three (2009) it will be equivalent to 75%, in year four (2010) it will be
equivalent to 100%.
8. Related party transactions in the current year involve certain 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 minority
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 selected charter companies, two of which operate
aircraft indirectly beneficially owned by Mr MJ Lamberti, Chairman of Massmart.
9. Due to Christmas trading, Massmart`s earnings are weighted towards the six
months to December.
10. These results have been reviewed by independent external auditors Deloitte &
Touche and their unqualified review opinion is available for inspection at the
registered office.
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 and a copy of management`s presentation to the investment
community: www.massmart.co.za
Johannesburg
28 February 2008
Sponsor:
Deutsche Securities (SA) (Proprietary) Limited
Date: 28/02/2008 07:05:02 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
