| Thu 27 Aug 2009, 7:05 | | MSM - Massmart - Reviewed consolidated results for the 52 weeks ended 28 June |
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MSM
MSM
MSM - Massmart - Reviewed consolidated results for the 52 weeks ended 28 June
2009
Massmart Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration Number: 1940/014066/06)
Share code: MSM
ISIN: ZAE000029534
("Massmart" or "the Company" or "the Group")
MASSMART
DEDICATED TO VALUE
Reviewed consolidated results for the 52 weeks ended 28 June 2009
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 256 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.
*Total sales +10,7% to R43 129 million
*Operating profit before foreign exchange movements +5,1% to R2 029 million
*Headline earnings -4,3% to R1 207 million
*Headline EPS -4,6% to 605 cents
Cash generated from operations +6,0% to R2 462 million
*52 week percentage change
Overview
The trends in national economic data confirm that South Africa has now
transitioned from a traditional interest-rate tightening cycle into its first
recession in 17 years, led by the global economy. It is therefore not
surprising that real retail sales growth declined throughout this financial
year, ending at -6.7% for the month of June 2009 and at -2,6% for the year to
June 2009, despite the steady relaxation of interest rates from December 2008.
In the same period, a number of factors have complicated the interpretation of
Massmart`s current underlying operating performance. The first is the
inclusion of an extra week of trading in our 2008 financial results which
should be excluded for meaningful comparison to the 2009 results. The second
has been the recent weakness of African currencies against the Rand, which
caused a large unrealised foreign exchange loss in Massdiscounters.
Excluding the effect of the currency volatility and the 53rd week in the prior
year, sales increased by 10,7% (8,2% comparable), trading profit increased by
5,5%, and headline earnings increased by 3,8%.
Including the effect of the currency volatility but excluding the 53rd week in
the prior year, sales increased by 10,7%, operating profit declined by 2,1%,
and headline earnings declined by 4,3%.
Without these adjustments, sales increased by 8,4%, operating profit declined
by 6,5%, and headline earnings declined by 8,5%.
Importantly, despite comparable sales growth declining from 11,9% in the first
half to 4,5% in the second half, the business managed to achieve operating
profit growth in both halves. This disciplined income statement management was
supported by equally disciplined management of the balance sheet, particularly
inventories, which ended the year only 2,8% higher than last year.
The business produced strong cash flows with cash generated from operations up
by 6,0%.
Trading space increased by 3,8%, from opening seven new stores, acquiring 12
new stores, and closing or selling five stores.
Environment
Towards the end of the financial year, with the South African economy in a
clear recession, management`s focus shifted to protecting market share,
profitability and cash flows. Investment in viable long-term projects
continued however, with the opportunities that presented themselves in
property and business acquisitions taking priority.
Food and Liquor inflation increased from 12,5% last year to 15,0% this year.
Home Improvement inflation remained largely unchanged at 8,1%, while General
Merchandise inflation increased from 1,1% last year to 6,4% this year.
The steady 500 basis point reduction in interest rates, beginning in December
2008, has been most welcome and consumers are responsibly reducing their debt.
While we monitor our comparable sales for signs of the positive effect of such
reductions on consumer expenditure, we do not anticipate this before late
2009.
The greatest management challenges, other than economic, have been in crime
prevention and labour relations. The recession has emboldened criminals and we
are seeing upturns in fraud, store robberies and shrinkage. In terms of labour
relations, we have been fortunate so far, through careful management of other
costs, to avoid resorting to cost-saving retrenchments. Within the current
South African political and economic environment, it is understandable that
the incidence of industrial action has increased as the differing
stakeholders` demands exert their pressures. We continue to do our best to
adjust our employees` benefits in line with inflation and productivity gains.
The Competition Commission investigation into the large Food Retailers and
Wholesalers, announced in June 2009, has recently commenced. We welcome the
investigation and look forward to any practical suggestions the Competition
Commission has to increase the sustainable competitiveness of the retail and
wholesale industry in the interests of the consumers. Notwithstanding the
potential outcome of the investigations, we know that the retail and wholesale
food industry is among the least concentrated and one of the more competitive
industries in South Africa.
Divisional Operational Review
52 weeks 53 weeks
to June to June 53rd week
2009 % of 2008 pro forma
Rm (Reviewed) sales (Audited) adjustment
Sales 43 128,7 39 783,6 (825,3)
Massdiscounters 11 206,0 10 406,5 (276,7)
Masswarehouse 11 102,4 10 103,8 (191,8)
Massbuild 5 604,6 5 662,9 (99,9)
Masscash 15 215,7 13 610,4 (256,9)
Trading profit before
interest and taxation 2 097,5 4,9 2 094,4 (92,0)
Massdiscounters 680,0 6,1 661,8 (33,9)
Masswarehouse 713,0 6,4 640,3 (24,3)
Massbuild 222,6 4,0 390,2 (22,2)
Masscash 481,9 3,2 402,1 (11,6)
Trading profit before
taxation 2 348,9 5,4 2 323,9 (97,0)
Massdiscounters 746,6 6,7 720,4 (35,0)
Masswarehouse 802,6 7,2 730,9 (26,8)
Massbuild 270,1 4,8 433,1 (23,0)
Masscash 529,6 3,5 439,5 (12,2)
52 weeks 52 week
to June 52 week comparable Estimated
2008 % of total % % sales % sales
Rm (Pro forma) sales growth growth inflation
Sales 38 958,3 10,7 8,2 11,4
Massdiscounters 10 129,8 10,6 8,9 6,6
Masswarehouse 9 912,0 12,0 10,0 13,4
Massbuild 5 563,0 0,7 (3,7) 11,4
Masscash 13 353,5 13,9 11,6 14,0
Trading profit
before interest and
taxation 2 002,4 5,1 4,7
Massdiscounters 627,9 6,2 8,3
Masswarehouse 616,0 6,2 15,7
Massbuild 368,0 6,6 (39,5)
Masscash 390,5 2,9 23,4
Trading profit
before taxation 2 226,9 5,7 5,5
Massdiscounters 685,4 6,8 8,9
Masswarehouse 704,1 7,1 14,0
Massbuild 410,1 7,4 (34,1)
Masscash 427,3 3,2 23,9
Trading profit excludes foreign exchange movements for the first time. A
detailed reconciliation between trading and operating profit can be found
below the statement of changes in equity.
The December 2008 Divisional trading results have been restated to exclude
foreign exchange movements and can be found in note 8.
To make comparisons with the prior financial year meaningful, all current year
income statement figures in this announcement are compared to the equivalent
figure for the prior year`s 52-week period. To further assist, the income
statement shows both the 52-week and 53-week results to June 2008.
Massdiscounters - comprises the 87-store General Merchandise retail discounter
Game, which trades in South Africa, Namibia, Botswana, Zambia, Uganda,
Mozambique, Mauritius, Malawi, Tanzania, Nigeria, and Ghana; and the six-store
Hi-tech retailer Dion Wired.
Divisional comparable store sales increased by 8,9% with estimated inflation
of 6,6%. Total sales increased by 10,6% and trading profit increased by 8,9%.
Game South Africa, with its exposure to the middle-income consumer, remained
under pressure throughout the year increasing comparable sales by 1,8%. Game
Africa`s sales increased 26,9% in local currency and 37,0% in Rands. The
recent volatility in the African currencies was unprecedented. Dion Wired
continued to perform well and is now positioned to expand nationally.
Investments in efficiency and competitiveness continued, and the new Cape Town
Regional Distribution Centre (RDC) which opened in August 2008 is operating
successfully.
In October 2008, a new look and feel Game store in Boksburg was unveiled and
experienced record-breaking opening sales.
Three Game stores and one Dion Wired store were opened and one Game store was
closed, increasing trading space by 1,0% to 341 687m2.
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 increased by 10,0% with estimated inflation
of 13,4%. Total sales increased by 12,0% and trading profit by 14,0%.
Makro traded well throughout the year and, as a result of good margin control
and effective cost management, increased its trading profit margin.
No new stores were opened, although solid progress was made in securing future
sites in South Africa.
Massbuild - comprises 71 stores, 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 decreased by 3,7% with estimated inflation
of 11,4%. Total sales increased by 0,7% and trading profit decreased by 34,1%.
Sales were under pressure throughout the year, driven by the slump in the
residential property market. Those categories associated with home maintenance
however, experienced good growth, protecting the Division from the marked
decline in residential building activity.
Under new leadership, the Division is well positioned to benefit from the
expected recovery in the market.
One Builders Warehouse store, one Builders Express store, four Builders Trade
Depot stores were opened or acquired, and two Builders Express stores and one
Builders Trade Depot store were closed. Net trading space increased by 3,8% to
357 589m2 (Massbuild`s 2008 year end trading space was adjusted upwards to 344
388mSquared following accurate re-measurement).
Masscash - comprises 79 Wholesale and Retail Cash and Carry stores trading in
South Africa, Lesotho, Namibia and Botswana, and Shield, a voluntary buying
association.
Divisional comparable store sales increased by 11,6% with estimated inflation
of 14,0%. Adjusting for the change in the BATSA cigarette distribution model
in the current year, comparable sales increased to 16,6%. Total sales
increased by 13,9% and trading profit increased by 23,9%.
Food inflation peaked in November 2008 and sales growths slowed in sympathy
with declining inflation in the latter part of the financial year. The
Division completed a number of acquisitions, including 51% of Cambridge Food,
and is currently in discussions on several more. At year end the annualised
contribution of Retail Cash and Carry reached R2 billion.
No Wholesale Cash and Carry stores were opened, nine Retail Cash and Carry
stores were acquired, and one store was sold. Net trading space increased by
9,4%.
Financial Review
Income statement
Total sales growth for the year to June 2009 was 10,7% and comparable sales
growth was 8,2%. Group sales inflation for the year was 11,4%. During the
year sales inflation increased due to high food inflation, now declining, and
we saw inflation returning to the general merchandise category caused by
imported Chinese product inflation and, for a period, the weaker South African
currency.
During the year five stores were closed or sold, seven opened and 12 stores
acquired, resulting in a total of 256 stores at the end of June 2009. Net
trading space increased by 3,8% to 1 087 459mSquared (the Group`s opening
trading space figure was adjusted upwards to 1 047 539mSquared following
accurate re-measurement in one Division).
Gross profit of 18,0% was lower than the prior year`s 18,4%, a combination of
steady gross margins in Makro and Masscash and lower gross margins in
Massdiscounters and Massbuild.
Effective expense management resulted in total expenses increasing by only
8,2% and improving as a percentage of sales over the prior year.
Included in operating profit are net realised and unrealised foreign exchange
losses of R78,4 million (2008: R62,5 million gain). The year end translation
of Massdiscounters` African balance sheets accounted for a loss of R106,6
million (2008: R63,0 million gain) and there was a net gain from other non-
African monetary balances of R28,2 million (2008: R0,5 million loss). In the
fourth quarter of the year, the basket of African currencies to which
Massdiscounters is exposed weakened by more than 20%.
Net interest paid decreased as commercial interest rates softened and better
working capital levels were achieved in the second half of the year.
The non-cash IFRS 2 Share-based Payments charge associated with the Group`s
Staff Empowerment scheme and the Black Scarce Skills Trust was R66,9 million
(2008: R67,1 million). Including the preference dividend paid to participants
however, the total cost of the scheme was R104,9 million (2008: R89,6 million)
and has increased because of the greater proportion of the ordinary dividend
now accruing to scheme participants (see note 5).
The Group`s effective tax rate is high at 32,6% (2008: 32,7%) because of the
non-tax-deductible IFRS 2 charges of R133,5 million (2008: R109,1 million).
Excluding these charges results in an adjusted tax rate of 30,5% (2008:
31,1%), which includes the effect of STC of 3,8% (2008: 3,4%). STC is higher
due to the prior year`s final dividend having been bolstered by the 53rd
week`s earnings.
The minority interests comprise mainly CBW store managers` holdings in certain
Masscash stores and Cambridge Food, 51% of which was acquired with effect from
1 December 2008.
Headline earnings declined by 4,3% (53-weeks: 8,5% decline) while headline EPS
declined by 4,6% (53-weeks: 8,7% decline). Excluding the net realised and
unrealised foreign exchange movements from both years however, headline
earnings grew by 3,8% (53-weeks: 0,9% decline) while headline EPS grew by 3,6%
(53-weeks: 1,1% decline).
Balance sheet
Group inventory levels were well controlled in response to the trading
environment and at June 2009 are only slightly higher than 2008.
At year end, the non-current interest-bearing debt of R149,6 million (2008:
R267,7 million) represents gearing of 4,9% (2008: 9,8%). A more representative
figure however, being average interest-bearing debt for the year, was R360,1
million (2008: R501,7 million) which suggests gearing of 12,4% (2008: 20,4%).
The annual return on equity of 41,7% at June 2009 is lower than the 2008
figure of 50,7%.
Cash flow
Cash flow from operations grew a pleasing 6,0% as working capital management
improved. Total capital expenditure of R685,6 million (2008: R572,7 million)
comprises R345,5 million on replacement and R340,1 million on expansionary
expenditure. Expenditure on acquisitions of R198,5 million includes Cambridge
Food with six stores, three Buildrite stores, and two Retail Cash and Carry
businesses with three stores.
Progress with Vision 2012
The annual Strategic review resulting in Vision 2012 produced no significant
changes. Supply Chain, Private Label and Financial Service investments
continue and are making excellent progress. Our commitment to Leadership
Development, Transformation and Sustainability remain unchanged. Our space
expansion plans, in South Africa and Africa remain on track with space growth
planned for the three years averaging 5% per annum, including the Retail Cash
and Carry acquisitions. We continue to explore other acquisition opportunities
in strategically aligned markets and formats.
Prospects
For the 8 weeks to 23 August 2009, total sales increased by 5,5% and
comparable sales increased by 1,3%.
As is evident from this sales update, the South African consumer remains under
pressure. Until there are clear signs of recovery in consumer expenditure,
management remains focused on protecting the income statement and balance
sheet, whilst continuing to invest for growth where returns are clear.
The first-half of the 2010 financial year will undoubtedly be very difficult
as we trade over a reasonably resilient first-half last year, and we may see
profit decline compared to that period. Profit growth for the full financial
year will depend on the timing of any economic recovery - there may be no
profit growth if this recovery is delayed past December 2009.
The financial information on which this outlook statement is based has not
been reviewed or reported on by the Company`s auditors.
Conclusion
Massmart has so far weathered the economic storm and its strategic,
operational and long-term growth prospects are intact. We are responding to
the short-term environmental challenges, but remain confident in the
underlying strengths of the Group and are positive about our medium to long-
term growth potential in our markets in both South Africa and the rest of
Africa.
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. Despite the slightly lower headline earnings and this policy, the
Board has decided to maintain this year`s dividend at the same level as last
year.
Notice is hereby given that a final cash dividend of 134 cents per share in
respect of the period ended 28 June 2009 has been declared payable to the
holders of ordinary shares recorded in the books of the company on Friday, 18
September 2009. The last day to trade cum-dividend will therefore be Friday,
11 September 2009 and Massmart shares will trade ex-dividend from Monday, 14
September 2009. Payment of the cash dividend will be made on Monday, 21
September 2009. Share certificates may not be dematerialised or rematerialised
between Monday, 14 September 2009 and Friday, 18 September 2009, both days
inclusive.
A Thuthukani dividend equivalent to 75% of the Massmart ordinary dividend per
share (100,5 cents) will be paid to the Massmart Thuthukani Empowerment Trust
on Monday, 21 September 2009.
On behalf of the Board
Grant Pattison Guy Hayward
Chief Executive Officer Chief Financial Officer
26 August 2009
Income statement
52 weeks 53 weeks 53rd week 52 weeks 52
week
June 2009 June 2008 pro forma June 2008 total
%
Rm (Reviewed) (Audited) adjustment (Pro forma) Change
Revenue 43 231,8 39 944,8 (827,3) 39 117,5 10,5
Sales 43 128,7 39 783,6 (825,3) 38 958,3 10,7
Cost of sales (35 351,0) (32 481,4) 699,7 (31 781,7) (11,2)
Gross profit 7 777,7 7 302,2 (125,6) 7 176,6 8,4
Other income 103,1 161,2 (2,0) 159,2 (35,2)
Depreciation and
amortisation (343,1) (297,8) - (297,8) (15,2)
Impairment of
assets (note 3) (1,6) (4,7) - (4,7) 66,0
Employment costs (2 965,8) (2 736,2) 13,1 (2 723,1) (8,9)
Occupancy costs (1 135,5) (962,7) 10,4 (952,3) (19,2)
Foreign exchange
(loss)/gain (78,4) 62,5 - 62,5 -
Other operating
costs (1 405,8) (1 439,4) 12,1 (1 427,3) 1,5
Operating profit 1 950,6 2 085,1 (92,0) 1 993,1 (2,1)
Finance costs (112,8) (110,6) 1,2 (109,4) (3,1)
Finance income 64,2 46,5 3,2 49,7 29,2
Net finance
costs (48,6) (64,1) 4,4 (59,7) 18,6
Profit before
taxation 1 902,0 2 021,0 (87,6) 1 933,4 (1,6)
Taxation (620,4) (662,9) 30,1 (632,8) 2,0
Profit for the
year 1 281,6 1 358,1 (57,5) 1 300,6 (1,5)
Attributable to:
Equity holders
of the parent 1 210,9 1 314,1 (57,5) 1 256,6 (3,6)
Preference
shareholders
(note 5) 38,0 22,5 - 22,5
Minority
interest 32,7 21,5 - 21,5
1 281,6 1 358,1 (57,5) 1 300,6
Basic EPS
(cents) 606,9 660,3 (28,8) 631,5 (3,9)
Diluted basic
EPS (cents) 593,4 644,6 (28,2) 616,4 (3,7)
Dividend
(cents):
- Interim 252,0 223,0 - 223,0 13,0
- Final 134,0 163,0 - 163,0 (17,8)
- Total 386,0 386,0 - 386,0 -
Reconciliation
of net profit
for the year to
headline
earnings
Net profit
attributable to
equity holders
of the parent 1 210,9 1 314,1 (57,5) 1 256,6
Impairment of
assets (note 3) 1,6 4,7 - 4,7
Loss on disposal
of fixed assets 1,7 3,8 - 3,8
Profit on sale
of assets
classified
as held for sale (7,0) - - -
Total tax
effects of
adjustments (0,1) (3,2) - (3,2)
Headline
earnings 1 207,1 1 319,4 (57,5) 1 261,9 (4,3)
Headline
earnings before
foreign
exchange 1 263,5 1 274,4 (57,5) 1 216,9 3,8
Headline EPS
(cents) 605,0 663,0 (28,9) 634,1 (4,6)
Headline EPS
before foreign
exchange (cents) 633,3 640,4 (28,9) 611,5 3,6
Diluted headline
EPS (cents) 591,6 647,2 (28,2) 619,0 (4,4)
Balance sheet
June 2009 June 2008
Rm (Reviewed) (Audited) % change
ASSETS
Non-current assets 4 397,5 3 840,6
Property, plant and equipment 1 696,6 1 393,0 21,8
Goodwill and other intangible
assets 1 747,4 1 494,4
Investments and loans 534,3 538,0
Deferred taxation 419,2 415,2
Current assets 8 129,4 7 892,7
Inventories 4 893,2 4 758,6 2,8
Accounts receivable and
prepayments 1 851,1 1 764,1 4,9
Taxation 329,3 310,4
Cash and bank balances 1 055,8 1 059,6
Assets classified as held for
sale (note 6) - 167,6
Total 12 526,9 11 900,9
EQUITY AND LIABILITIES
Total equity 3 096,7 2 766,5
Equity attributable to equity
holders of the parent 3 054,7 2 735,8 11,7
Minority interest 42,0 30,7
Non-current liabilities 858,3 1 015,9
Non-current liabilities -
interest-bearing 149,6 267,7
Other non-current liabilities and
provisions (note 7) 560,2 606,3
Deferred taxation 148,5 141,9
Current liabilities 8 571,9 8 118,5
Accounts payable and accruals 7 692,5 7 391,5 4,1
Taxation 490,4 543,1
Bank overdrafts and short-term
borrowings 389,0 183,9
Total 12 526,9 11 900,9
Additional information
Year ended Year ended
June 2009 June 2008
(Reviewed) (Audited)
Net asset value per share (cents) 1 517,5 1 359,8
Ordinary shares (000`s):
- In issue 201 303 201 195
- Weighted average 199 533 198 996
- Diluted weighted average 204 054 203 867
Preference shares (000`s):
- Thuthukani `A` shares held by the
participants (note 5) 13 694 15 311
- Black Scarce Skills Trust `B` shares (note
5) 1 979 1 979
Capital expenditure (Rm)
- Authorised and committed 286,9 278,0
- Authorised not committed 320,0 287,2
Operating lease commitments (2009 - 2025) (Rm) 9 959,6 6 270,7
US dollar exchange rates - year end 7,94 7,96
- average 9,05 7,31
Cash flow statement
52 weeks 53 weeks
June 2009 June 2008
Rm (Reviewed) (Audited)
Operating cash before working capital movements 2 398,2 2 394,9
Working capital movements 63,8 (73,2)
Cash generated from operations 2 462,0 2 321,7
Taxation paid (700,3) (668,1)
Net interest paid (48,6) (64,1)
Investment income 29,5 47,7
Dividends received 13,4 2,2
Dividends paid (867,4) (709,9)
Cash inflow from operating activities 888,6 929,5
Investment to maintain operations (345,5) (263,1)
Investment to expand operations (340,1) (309,6)
Disposal of assets classified as held for sale 174,3 -
Disposal of subsidiary 4,3 -
Businesses acquired (198,5) -
Other investing activities 8,1 (325,5)
Cash outflow from investing activities (697,4) (898,2)
Cash outflow from financing activities (160,7) (222,7)
Net increase/(decrease) in cash and cash
equivalents 30,5 (191,4)
Foreign exchange (loss)/gain taken to statement
of changes in equity (27,3) 4,6
Opening cash and cash equivalents 1 021,9 1 208,7
Closing cash and cash equivalents 1 025,1 1 021,9
Statement of changes in equity
Year ended June 2009 Ordinary
(Reviewed) share Share General Retained
Rm capital premium reserves profit
Opening balance 2,0 151,7 269,0 2 313,1
Exchange differences - - (27,3) -
Dividends declared - - - (867,4)
Cash flow hedges taken
directly to equity - - (11,7) -
Profit for the year - - - 1 248,9
Changes in minority interests
and distribution to minorities - - - -
Release of deferred taxation
on trademarks - - (0,6) 0,6
Financial liability raised on
a business acquisition - - (120,0) -
Net movement of treasury
shares - (2,3) 55,8 -
Share trust transactions and
IFRS 2 charge - - 133,5 (90,6)
Total 2,0 149,4 298,7 2 604,6
Year ended June 2008 Ordinary
(Audited) share Share General Retained
Rm capital premium reserves profit
Opening balance 2,0 254,7 205,4 1 776,9
Exchange differences - - 4,6 -
Dividends declared - - - (709,9)
Cash flow hedges taken
directly to equity - - (1,9) -
Profit for the year - - - 1 336,6
Changes in minority interests
and distribution to minorities - - - -
Release of deferred taxation
on trademarks - - (5,8) 5,8
Net movement of treasury
shares - (103,0) (42,4) -
Share trust transactions and
IFRS 2 charge - - 109,1 (96,3)
Total 2,0 151,7 269,0 2 313,1
Equity
attributable
Year ended June 2009 to equity
(Reviewed) holders of Minority
Rm the parent interest Total
Opening balance 2 735,8 30,7 2 766,5
Exchange differences (27,3) - (27,3)
Dividends declared (867,4) - (867,4)
Cash flow hedges taken directly
to equity (11,7) - (11,7)
Profit for the year 1 248,9 32,7 1 281,6
Changes in minority interests
and distribution to minorities - (21,4) (21,4)
Release of deferred taxation on
trademarks - - -
Financial liability raised on a
business acquisition (120,0) - (120,0)
Net movement of treasury shares 53,5 - 53,5
Share trust transactions and
IFRS 2 charge 42,9 - 42,9
Total 3 054,7 42,0 3 096,7
Equity
attributable
Year ended June 2008 to equity
(Audited) holders of Minority
Rm the parent interest Total
Opening balance 2 239,0 25,8 2 264,8
Exchange differences 4,6 - 4,6
Dividends declared (709,9) - (709,9)
Cash flow hedges taken directly
to equity (1,9) - (1,9)
Profit for the year 1 336,6 21,5 1 358,1
Changes in minority interests
and distribution to minorities - (16,6) (16,6)
Release of deferred taxation on
trademarks - - -
Net movement of treasury shares (145,4) - (145,4)
Share trust transactions and
IFRS 2 charge 12,8 - 12,8
Total 2 735,8 30,7 2 766,5
Reconciliation between Trading and Operating profit
52 weeks to 53 weeks to 53rd week 52 weeks to
June 2009 June 2008 pro forma June 2008
Rm (Reviewed) (Audited) adjustment (Pro forma)
Profit before
interest and taxation
Trading profit before
interest and taxation 2 097,5 2 094,4 (92,0) 2 002,4
Asset impairments (1,6) (4,7) - (4,7)
BEE transaction IFRS
2 charge (66,9) (67,1) - (67,1)
Foreign exchange
(loss)/gain (78,4) 62,5 - 62,5
Operating profit
before interest and
taxation 1 950,6 2 085,1 (92,0) 1 993,1
Profit before
taxation
Trading profit before
taxation 2 348,9 2 323,9 (97,0) 2 226,9
Corporate net
interest (300,0) (293,6) 9,4 (284,2)
Asset impairments (1,6) (4,7) - (4,7)
BEE transaction IFRS
2 charge (66,9) (67,1) - (67,1)
Foreign exchange
(loss)/gain (78,4) 62,5 - 62,5
Operating profit
before taxation 1 902,0 2 021,0 (87,6) 1 933,4
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. The total share buyback (including shares bought in the market by the Share
Trust) for the year was 1,6 million shares (2008: 3,3 million) at an average
price of R78,76 (2008: R83,10) totalling R126,0 million (2008: R271,8
million).
3. The impairment of assets in the current year relates to computer software
in Shield. The impairment of assets in the prior year related to computer
software and trademarks in Shield and Corporate.
4. The Massmart staff BEE transaction, which came into operation in October
2006, gave rise to an IFRS 2 Share-based Payment charge of R66,9 million
(2008: R67,1 million). The `A` and `B` preference shares have been issued to
the Thuthukani Trust and the Black Scarce Skills Trust, respectively.
5. The preference shareholders dividend amount of R38,0 million represents the
final cash dividend of 81,5 cents and an interim cash dividend of 189,0 cents
paid to all Thuthukani participants. In year three (2009), the Thuthukani
dividend is equivalent to 75% of the ordinary dividend, and in year four
(2010) it will be equivalent to 100%.
6. The assets classified as held for sale in the prior year relate to the cash
sale of the Massdiscounters` retail debtors` book effective from 30 June 2008,
immediately after closing the 2008 financial year.
7. Other non-current liabilities and provisions include the lease smoothing
liability of R463,6 million (2008: R467,4 million).
8. Trading results for December 2008 have been restated to exclude foreign
exchange movements:
Trading Trading
Rm PBIT PBT
Massdiscounters 479,7 507,9
Masswarehouse 399,6 439,1
Massbuild 139,3 161,9
Masscash 262,5 283,1
1 281,1 1 392,0
9. The net asset value of the businesses acquired during the year was R34,8
million.
10. Related party transactions include certain properties used by Masscash
that 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.
11. The pro forma financial effects, for which the directors of Massmart are
responsible, are provided for illustrative purposes only. These show the
effect of the additional week of trading in the prior year on the financial
information of Massmart. This allows a like-on-like comparison of the 52-week
periods.
Because of its nature, the pro forma financial effects may not fairly present
the Group`s financial position, changes in equity, results of operations or
cash flows.
The pro forma financial effects have been prepared using accounting policies
that comply with International Financial Reporting Standards. The accounting
policies are consistent with those applied in the previous financial year.
The pro forma financial effects have been compiled from the financial
information for the 53 weeks ended June 2008.
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 unmodified review opinion is available for
inspection at the registered office. The review was performed in accordance
with ISRE 2410 Review of Interim Financial Information Performed by the
Independent Auditor of the Entity.
Directorate
MJ Lamberti (Chairman), CS Seabrooke (Deputy Chairman), GM Pattison* (Chief
Executive Officer), MD Brand, ZL Combi, KD Dlamini, NN Gwagwa, GRC Hayward*
(Chief Financial Officer), 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 Investor Services (Pty) Ltd
Registered auditors
Deloitte & Touche
For more information
www.massmart.co.za
27 August 2009
Johannesburg
Sponsor
Deutsche Securities (SA) (Proprietary) Limited
Date: 27/08/2009 07:05:04 Produced by the JSE SENS Department.
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