| Thu 26 Aug 2010, 7:05 | | MSM - Massmart Holdings Limited - Reviewed consolidated results for the 52 |
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MSM
MSM
MSM - Massmart Holdings Limited - Reviewed consolidated results for the 52
weeks ended 27 June 2010
Massmart Holdings Limited
(Incorporated in the Republic of South Africa)
("Massmart" or "the Company" or "the Group")
JSE code: MSM
ISIN: ZAE000029534
Company registration number
1940/014066/06
REVIEWED CONSOLIDATED RESULTS FOR THE 52 WEEKS ENDED 27 JUNE 2010
HIGHLIGHTS
Sales
+10.0% to R47,451 million
Operating profit before foreign exchange movements
+0.1% to R2,031 million
Cash generated from operations
+7.2% to R2,639 million
Headline EPS
-6.2% to 567 cents
Dividend per share
386 cents unchanged
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 14 countries in sub-Saharan Africa comprising 288
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
The South African consumer economy appears to have emerged in early 2010 from
the recession that dominated 2009. This is confirmed by our second-half
results, being the six months to June 2010, where the Group increased sales by
14.4%, operating profit before foreign exchange losses by 9.7% and headline
earnings by 29.0%.
The Group`s full-year financial performance, however, bears the scars of the
challenging first half with sales increasing by 10.0%, operating profit before
foreign exchange losses increasing by 0.1% and headline earnings decreasing by
5.7%.
With Group comparable-store sales growth of 2.6% and product deflation
of 0.4%,we saw volume growth across all categories. With this level of
comparable sales growth however, it was critical that we closely managed
expenses and so comparable expenses increased by only 2.8% for the year.
The large difference between total sales growth of 10.0% and comparable sales
growth is indicative of the Group`s continued investment in growth with store
space increasing by 8.5%, of which 3.1% is in new stores and 5.4% through
acquisition.
In addition to the investment in growth, excellent control of expenses, margin
and stock protected the income statement, enabling us to grow operating profit
before foreign exchange losses by 0.1%.
After adjusting for foreign exchange losses operating profit reduced by 4.3%.
Independent data sources indicate the Group has been trading well relative to
our competitors in all major categories and has gained market share,
particularly in large ticket items such as Multimedia, Technology and
Appliances.
ENVIRONMENT
The South African economy has technically been out of recession for almost
four quarters but real retail sales growth lagged by six months and job
creation is still in decline.
The effect of the strengthening Rand dominated trading conditions and kept
inflation low in all our product categories with Food and Liquor inflation at
1.4%, General Merchandise deflation at 5.3% and Home Improvement inflation at
1.8%. Historically, Food and Liquor volumes do not respond significantly to
lower prices and did not do so over the past year. General Merchandise and
Home Improvement volumes however, usually do respond and this was
particularly evident in the latter part of the financial year.
The 2010 FIFA World Cup was an exciting, once in a lifetime experience for the
country and we could certainly see the increased spend in our stores over that
four-week period. We estimate this to have been R200 million - R300 million of
additional turnover, not significant in the year but welcome nevertheless.
Labour relations were strained in Massdiscounters as management sought more
labour flexibility from SACCAWU in order to extract productivity improvement
from our investment in supply chain. Unfortunately, we were unable to reach
resolution and had to resort to retrenchment, which was devastating for those
employees. We have provided and continue to provide those retrenched employees
with as much support as possible. As a result of these labour disputes,
there were some isolated labour-related disruptions to trading. More
significantly however, the Game Lakeside Mall store in Benoni was
deliberately destroyed by fire. We continue to co-operate with the
police as they progress their investigations and the store will re-open
in November 2010.
DIVISIONAL OPERATIONAL REVIEW
June June
2010 % of 2009 % of
Rm (Reviewed) sales (Audited) sales
Sales 47,451.0 43,128.7
Massdiscounters 12,164.9 11,206.0
Masswarehouse 11,501.2 11,102.4
Massbuild 6,366.9 5,604.6
Masscash 17,418.0 15,215.7
Trading profit before
interest and tax 2,104.4 4.4 2,097.5 4.9
Massdiscounters 642.7 5.3 680.0 6.1
Masswarehouse 700.8 6.1 713.0 6.4
Massbuild 277.3 4.4 222.6 4.0
Masscash 483.6 2.8 481.9 3.2
Trading profit before tax 2,267.5 4.8 2,348.9 5.4
Massdiscounters 690.3 5.7 746.6 6.7
Masswarehouse 758.6 6.6 802.6 7.2
Massbuild 308.5 4.8 270.1 4.8
Masscash 510.1 2.9 529.6 3.5
Comparable Estimated
Year % sales % sales
Rm % growth growth inflation
Sales 10.0 2.6 (0.4)
Massdiscounters 8.6 3.2 (4.2)
Masswarehouse 3.6 3.6 2.8
Massbuild 13.6 3.4 1.8
Masscash 14.5 1.1 (0.6)
Trading profit before
interest and tax 0.3
Massdiscounters (5.5)
Masswarehouse (1.7)
Massbuild 24.6
Masscash 0.4
Trading profit before tax (3.5)
Massdiscounters (7.5)
Masswarehouse (5.5)
Massbuild 14.2
Masscash (3.7)
Trading profit excludes foreign exchange movements. A detailed reconciliation
between trading and operating profit can be found below the `Additional
information` table over the page.
Massdiscounters - comprises the 91-store General Merchandise retail discounter
Game, which trades in South Africa, Botswana, Ghana, Malawi, Mauritius,
Mozambique, Namibia, Nigeria, Tanzania, Uganda and Zambia; and the 11-store
Hi-tech retailer DionWired which trades in South Africa.
Divisional comparable store sales increased by 3.2% with estimated deflation
of 4.2%. Total sales increased by 8.6% and trading profit before
interest and tax decreased by 5.5%. Game SA performed well with
comparable sales growth of 10.9% and it increased profits ahead of sales
growth. Trading profit from Game Africa is down 29% as we suffered from
African currency weakness and struggling domestic economies, but still
maintained good levels of profitability.DionWired`s rapid store
expansion and solid trading saw sales increase by 52.8%.
With seven Game stores and five DionWired stores opening and three Game stores
closed, space increased by 4.0%. The new Gauteng Regional Distribution Centre
(RDC) opened and several small warehouses closed.
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 store sales increased by 3.6% with estimated inflation of 2.8% and
trading profit before interest and tax decreased by 1.7%. Declining food
inflation and intense retail competition adversely affected Makro`s
sales and margins. Liquor sales were good throughout the year while
General Merchandise sales began recovering late in the year.
No new stores were opened, although construction began on a new Makro store in
Vanderbijlpark, to open in October 2010, and good progress is being made in
securing several other sites. The re-engineering of the supply chain continues
to gain momentum.
Massbuild - comprises 76 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 increased by 3.4% with estimated inflation
of 1.8%. Boosted by new stores and acquisitions, total sales increased
by 13.6% and trading profit before interest and tax increased by 24.6%.
In the current negative residential building market, this is a very good
trading performance that reflects the intensive management focus over the past
few years. Homeowners` efforts to maintain and improve their homes managed to
compensate for the decline in new homes built. We completed the integration of
all the formats under one management team and made several strategic and
opportunistic acquisitions. The largest of these is Pupkewitz in Namibia,
which we expected to have completed by June 2010 but remains yet to be
fully approved by the Namibian authorities.
With two Builders Warehouse stores, four Builders Express stores and two
Builders Trade Depot stores opened or acquired, and three closed, net trading
space increased by 7.6%.
Masscash - comprises 77 Wholesale and 20 Retail Cash and Carry stores trading
in South Africa, Botswana, Lesotho, Mozambique and Namibia, and Shield, a
voluntary buying association.
Divisional comparable store sales increased by 1.1% with estimated deflation
of 0.6%. Through acquisitions, total sales increased by 14.5% and
trading profit before interest and tax increased by 0.4%.
Food deflation dominated trading, putting pressure on sales and gross margins.
Despite the difficult environment, management maintained its focus on
transforming the Division to position itself to compete nationally in
both the wholesale and retail markets. Cambridge Food has been chosen as
the national corporate-owned retail brand and Saverite the franchise
brand.
Retail sales totalled R1.8 billion for the financial year.
Eight new wholesale cash and carry stores and ten new retail cash and carry
stores were opened or acquired. Net trading space increased by 18.8%.
FINANCIAL REVIEW
Statement of comprehensive income
Total sales growth for the year to June 2010 was 10.0% with comparable sales
growth of 2.6%. Excluding sales from our African businesses, total Group sales
grew by 11.4% and comparable sales by 4.5%.
Selling price inflation declined significantly in all categories and the Group
recorded deflation of 0.4% for the financial year.
During the year, six stores were closed or sold, 18 opened, and 20 stores
acquired, resulting in a total of 288 stores at the end of June 2010. Net
trading space increased by 8.5% to a total of 1,179,466m2.
The Group`s gross margin of 18.1% was slightly higher than the prior year,
despite gross margins declining in all divisions apart from Massbuild.
Declining inflation and, eventually, deflation in Food adversely affected
gross margins in Makro and Masscash. Gross margin was lower in
Massdiscounters due mainly to lower reported Rand profits from Game
Africa.
Due to acquisitions, total expenses (excluding the foreign exchange loss)
increased by 13.5%. Comparable expenses however, increased by only 2.8%.
Included in operating profit are net realised and unrealised foreign exchange
losses of R164.3 million (2009: R78.4 million loss). The translation of
Massdiscounters` African balance sheets accounted for R64.2 million of this
(2009: R106.6 million loss), there was a net loss from other foreign monetary
balances of R51.1 million (2009: R24.0 million gain) and the balance came
mostly from unrealised losses on landed forward foreign exchange contracts of
R49.0 million (2009: R4.2 million gain).
Net interest paid decreased slightly as commercial interest rates softened,
although at R584 million the Group`s average net borrowings were higher than
the prior year. Despite better working capital performances, interest received
in the Divisions declined due to the lower interest rates.
The non-cash IFRS Share-based Payments charge associated with the Group`s
Staff Empowerment scheme and the Black Scarce Skills Trust was R69.7
million (2009: R66.9 million). Including the preference dividend paid to
participants however, the total cost of the scheme was R116.2 million
(2009: R104.9 million) and has increased because 100% of the ordinary
dividend now accrues to scheme participants (see note 6).
The Group`s effective tax rate is 33.4% (2009: 32.6%) and this is higher
because of the effect of STC of 4.6% (2009: 3.8%).
The minority interests comprise those from certain acquisitions and store
managers` holdings in certain Masscash stores. The Cambridge Food 49% minority
interest was acquired with effect from April 2010.
Headline earnings declined by 5.7% while headline EPS declined by 6.2%.
Excluding the foreign exchange losses from both years however, headline
earnings declined by 0.5% while headline EPS declined by 1.1%.
Statement of financial position
Group inventory levels were well controlled and, including acquisitions and
new stores, were 14.5% higher than June 2009. Historical days in stock
at June 2010 are 52.6 (2009: 50.5 days) and are higher only in
Massdiscounters and Builders Warehouse as those businesses invested in
inventory to meet accelerating sales growth.
Acquisitions continue to increase the amount of goodwill. During the period 13
businesses representing 20 stores and properties were acquired for a net cash
consideration of R369.9 million.
Average interest-bearing debt for the period, using net interest paid as a
proxy, was R584 million (2009: R360 million) representing gearing of 17.9%
(2009: 12.4%).
Due to the decline in Group profitability and the ongoing investment in the
business and acquisitions, the annual rolling return on equity of 34.9% at
June 2010 is lower than the equivalent 2009 figure of 41.7%.
Statement of cash flows
Cash flow from operations grew 7.2% due to the improvement in net working
capital levels. Total capital expenditure of R623.9 million (2009: R685.6
million) comprises R277.8 million on replacement and R346.1 million on
expansionary expenditure. A further net amount of R369.9 million was spent on
business acquisitions, some of which included properties.
STRATEGIC VISION 2013
Our Strategic Agenda has been reviewed and updated, focusing on Leadership and
Transformation, Growth of the Core Business through investment in Supply
Chain, Private Label and Financial Services, Organic Growth, New Formats
and Categories, and Sustainability.
We continue to focus on format renewal across the Group. All stores opened
this year took significant steps forward in their look and feel,
and this Will continue for several years.
One new Strategic Agenda item has been added under the heading of Customer 2.0
which represents our desire to ensure all our trading formats are positioned
to respond to continually changing customer demands and the trading
opportunities created by the adoption of internet-based technologies.
In terms of delivery against the Strategic Agenda, we are proud to have
recruited an additional 39 graduates, hosted more than 231 senior leaders
through our Corporate University, complied with all aspects of the Employment
Equity Act and BEE Acts, achieved Level 4 BBBEE status, achieved fourth place
in the external rating of our 2009 annual report, opened our 70,000mSquared
Gauteng RDC, and generally made significant progress on our Strategic Agenda.
DIRECTORATE
With effect from 1 May 2010, following his appointment as chairman of a major
supplier, Mr ZL "KK" Combi resigned from the board after seven years of
service. We thank him for his contribution to the Group and wish him
well.
PROSPECTS
For the eight weeks to 22 August 2010, total sales increased by 15.0% and
comparable sales increased by 9.2%, continuing the trends experienced for most
of the second half of the 2010 financial year, specifically with strong
General Merchandise and Home Improvement trading performances.
In the short-term, we expect the Food and African businesses to underperform
due to food deflation and the strong Rand respectively, but expect gradual
improvement in both of these throughout the coming financial year.
Acknowledging the concerns and uncertainty permeating the global economy,
if current South African economic and trading trends continue for the
financial year, Massmart should achieve profit growth, before any foreign
exchange translation adjustments, ahead of sales growth for the full year.
The financial information on which this outlook statement is based has not
been reviewed or reported on by the Company`s external auditors.
CONCLUSION
The environment has been very difficult for the past 24 months, but we have a
growing sense of confidence that the worst is behind us. Whilst net margins
declined, we are satisfied that the Group has demonstrated a relative level of
resilience despite the cyclical characteristics of some of our businesses.
Our decision to continue to invest through the economic cycle should bear
fruit in the years ahead.
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 the
past two years.
Notice is hereby given that a final cash dividend of 134 cents per share
In respect of the period ended 27 June 2010 has been declared payable to
The holders of ordinary shares recorded in the share register of the Company
on Friday, 17 September 2010. The last day to trade cum-dividend will
therefore be Friday, 10 September 2010 and Massmart shares will trade
ex-dividend from Monday, 13 September 2010. Payment of the cash dividend will
be made on Monday, 20 September 2010. Share certificates may not be
dematerialised Or rematerialised between Monday, 13 September 2010 and
Friday, 17 September 2010, both days inclusive.
A Thuthukani dividend equivalent to 100% of the Massmart ordinary dividend per
share (134 cents) will be paid to the Massmart Thuthukani Empowerment Trust on
Monday, 20 September 2010.
On behalf of the Board
Grant Pattison Guy Hayward
Chief Executive Officer Chief Financial Officer
25 August 2010
INCOME STATEMENT
June 2010 June 2009
Rm (Reviewed) (Audited) % change
Revenue 47,550.6 43,231.8 10.0
Sales 47,451.0 43,128.7 10.0
Cost of sales (38,879.3) (35,351.0) (10.0)
Gross profit 8,571.7 7,777.7 10.2
Other income 99.6 103.1 (3.4)
Depreciation and amortisation (382.8) (343.1) (11.6)
Impairment of assets (note 3) (3.7) (1.6) (131.3)
Employment costs (3,352.9) (2,965.8) (13.1)
Occupancy costs (note 4) (1,326.7) (1,170.4) (13.4)
Foreign exchange loss (164.3) (78.4)
Other operating costs (1,574.2) (1,370.9) (14.8)
Operating profit 1,866.7 1,950.6 (4.3)
Finance costs (92.6) (112.8) 17.9
Finance income 45.9 64.2 (28.5)
Net finance costs (46.7) (48.6) 3.9
Profit before taxation 1,820.0 1,902.0 (4.3)
Taxation (608.2) (620.4) 2.0
Profit for the year 1,211.8 1,281.6 (5.4)
Profit attributable to:
Owners of the parent 1,129.9 1,210.9
Preference shareholders (note 6) 46.5 38.0
Non-controlling interests 35.4 32.7
Profit for the year 1,211.8 1,281.6 (5.4)
Basic EPS (cents) 562.8 606.9 (7.3)
Diluted basic EPS (cents) 538.5 593.4 (9.3)
Dividend (cents):
- Interim 252.0 252.0
- Final 134.0 134.0
- Total 386.0 386.0 -
HEADLINE EARNINGS
Reconciliation of net profit for the
year to headline earnings
Net profit attributable to equity
holders of the parent 1,129.9 1,210.9
Impairment of assets (note 3) 3.7 1.6
Loss on disposal of fixed assets 0.6 1.7
Loss on disposal of business 5.3 -
Profit on sale of assets classified
as held for sale (note 7) - (7.0)
Total tax effects of adjustments (0.9) (0.1)
Headline earnings 1,138.6 1,207.1 (5.7)
Headline earnings before foreign
exchange 1,256.9 1,263.5 (0.5)
Headline EPS (cents) 567.2 605.0 (6.2)
Headline EPS before foreign exchange
(cents) 626.1 633.3 (1.1)
Diluted headline EPS (cents) 542.7 591.6 (8.3)
STATEMENT OF COMPREHENSIVE INCOME
June 2010 June 2009
Rm (Reviewed) (Audited) % change
Profit for the year 1,211.8 1,281.6
Foreign currency translation reserve (30.9) (27.3)
Cash flow hedges 11.8 (11.7)
Other comprehensive income for the
year, net of tax (19.1) (39.0)
Total comprehensive income for the year 1,192.7 1,242.6 (4.0)
Total comprehensive income
attributable to:
Owners of the parent 1,110.8 1,171.9
Preference shareholders (note 6) 46.5 38.0
Non-controlling interests 35.4 32.7
Total comprehensive income for the year 1,192.7 1,242.6 (4.0)
STATEMENT OF FINANCIAL POSITION
June 2010 June 2009
Rm (Reviewed) (Audited) % change
ASSETS
Non-current assets 4,974.9 4,397.5
Property, plant and equipment 2,055.2 1,696.6 21.1
Goodwill and other intangible assets 2,095.8 1,747.4
Investments and loans 585.6 534.3
Deferred taxation 238.3 419.2
Current assets 9,314.5 8,129.4
Inventories 5,601.5 4,893.2 14.5
Trade, other receivables and prepayments 2,322.6 1,851.1 25.5
Taxation 22.1 329.3
Cash and bank balances 1,368.3 1,055.8
Total 14,289.4 12,526.9
EQUITY AND LIABILITIES
Total equity 3,591.8 3,096.7
Equity attributable to equity holders
of the parent 3,469.7 3,054.7 13.6
Minority interest 122.1 42.0
Non-current liabilities 895.3 858.3
Non-current liabilities -
interest-bearing 385.8 149.7
Other non-current liabilities and
provisions 490.1 560.1
Deferred taxation 19.4 148.5
Current liabilities 9,802.3 8,571.9
Trade, other payables and provisions 9,220.1 7,692.5 19.9
Taxation 201.9 490.4
Bank overdrafts and short-term borrowings 380.3 389.0
Total 14,289.4 12,526.9
STATEMENT OF CASH FLOWS
June 2010 June 2009
Rm (Reviewed) (Audited)
Operating cash before working capital movements 2,346.8 2,398.2
Working capital movements 292.6 63.8
Cash generated from operations 2,639.4 2,462.0
Taxation paid (552.8) (700.3)
Net interest paid (46.7) (48.6)
Investment income 36.1 42.9
Dividends paid (822.4) (867.4)
Cash inflow from operating activities 1,253.6 888.6
Investment to maintain operations (277.8) (345.5)
Investment to expand operations (346.1) (340.1)
Disposal of assets classified as held for sale (note 7) - 174.3
Disposal of subsidiary (note 9) 26.9 4.3
Businesses acquired (note 10) (369.9) (198.5)
Other investing activities including minority
interests acquired (163.8) 8.1
Cash outflow from investing activities (1,130.7) (697.4)
Cash inflow/(outflow) from financing activities 193.8 (160.7)
Net increase in cash and cash equivalents 316.7 30.5
Foreign exchange loss taken to other comprehensive
income (30.9) (27.3)
Opening cash and cash equivalents 1,025.1 1,021.9
Closing cash and cash equivalents 1,310.9 1,025.1
STATEMENT OF CHANGES IN EQUITY
Year ended June 2010 Ordinary
(Reviewed) share Share General Retained
Rm capital premium reserves profit
Opening balance 2.0 149.4 298.7 2,604.6
Dividends declared - - - (822.4)
Total comprehensive income - - (19.1) 1,176.4
Changes in minority
interests and distribution
to minorities - - - -
Cost of acquiring minority
interests - - (212.8) -
Minorities relating to
acquisitions - - - -
Release of financial
liability raised on a
business acquisition - - 120.0 -
Share trust transactions
and IFRS 2 charge - - 149.4 (97.5)
Treasury shares
(acquired)/realised - (7.4) 128.4 -
Total 2.0 142.0 464.6 2,861.1
Year ended June 2009
(Audited)
Opening balance 2.0 151.7 269.0 2,313.1
Dividends declared - - - (867.4)
Total comprehensive income - - (39.6) 1,249.5
Changes in minority interests
and distribution to minorities - - - -
Financial liability raised on
a business acquisition - - (120.0) -
Share trust transactions
and IFRS 2 charge - - 133.5 (90.6)
Treasury shares
(acquired)/realised - (2.3) 55.8 -
Total 2.0 149.4 298.7 2,604.6
Equity
attributable
Year ended June 2010 to equity
(Reviewed) holders of Minority
Rm the parent interest Total
Opening balance 3,054.7 42.0 3,096.7
Dividends declared (822.4) - (822.4)
Total comprehensive income 1,157.3 35.4 1,192.7
Changes in minority interests and
distribution to minorities - (42.4) (42.4)
Cost of acquiring minority interests (212.8) - (212.8)
Minorities relating to acquisitions - 87.1 87.1
Release of financial liability raised
on a business acquisition 120.0 - 120.0
Share trust transactions
and IFRS 2 charge 51.9 - 51.9
Treasury shares
(acquired)/realised 121.0 - 121.0
Total 3,469.7 122.1 3,591.8
Year ended June 2009
(Audited)
Opening balance 2,735.8 30.7 2,766.5
Dividends declared (867.4) - (867.4)
Total comprehensive income 1,209.9 32.7 1,242.6
Changes in minority interests and
distribution to minorities - (21.4) (21.4)
Financial liability raised on
a business acquisition (120.0) - (120.0)
Share trust transactions and IFRS 2 charge 42.9 - 42.9
Treasury shares
(acquired)/realised 53.5 - 53.5
Total 3,054.7 42.0 3,096.7
ADDITIONAL INFORMATION
June 2010 June 2009
(Reviewed) (Audited)
Net asset value per share (cents) 1,722.0 1,517.5
Ordinary shares (000`s):
- In issue 201,496 201,303
- Weighted average 200,751 199,533
- Diluted weighted average 209,817 204,054
Preference shares (000`s):
- Thuthukani Trust `A` shares held by the participants
(note 6) 12,826 13,694
- Black Scarce Skills Trust `B` shares held by the
participants (note 6) 2,203 2,345
Capital expenditure (Rm):
- Authorised and committed 226.9 286.9
- Authorised not committed 450.5 320.0
Operating lease commitments (2011 - 2025) (Rm)
(note 11) 8,573.4 8,515.4
US dollar exchange rates - year end (R/$) 7.67 7.94
- average (R/$) 7.61 9.05
RECONCILIATION BETWEEN TRADING AND OPERATING PROFIT
June 2010 June 2009
Rm (Reviewed) (Audited)
Profit before interest and taxation
Trading profit before interest and taxation 2,104.4 2,097.5
Asset impairments (3.7) (1.6)
BEE transaction IFRS 2 charge (note 5) (69.7) (66.9)
Foreign exchange loss (164.3) (78.4)
Operating profit before interest and taxation 1,866.7 1,950.6
Profit before taxation
Trading profit before taxation 2,267.5 2,348.9
Corporate net interest (209.8) (300.0)
Asset impairments (3.7) (1.6)
BEE transaction IFRS 2 charge (note 5) (69.7) (66.9)
Foreign exchange loss (164.3) (78.4)
Operating profit before taxation 1,820.0 1,902.0
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),
Schedule 4 of the Companies Act and the AC 500 standards as issued by
the Accounting Practices Board or its successor. The financial
statements contain the information required by IAS 34 Interim Financial
Reporting, using accounting policies that have been consistently applied
to prior periods, except for IFRS 3 Business Combinations, IFRS 8
Operating Segments, IAS 1 Presentation of Financial Statements, IAS 23
Borrowing Costs and IAS 27 Consolidated and Separate Financial
Statements which were implemented during the year in accordance with the
transitional provisions. The implementation of these standards required
no prior year restatement.
2. During the year under review, the only shares bought in the market were by
the Share Trust where 1.2 million shares were bought at an average price of
R114.44 totalling R137.2 million. During the prior year, the total share
buyback (including shares bought in the market by the Share Trust) was 1.6
million shares at an average price of R78.76 totalling R126.0 million.
3. The impairment of assets in the current year relates to the impairment of
computer software in Builders Warehouse due to an IT upgrade and the
impairment of fixed assets in Game due to a fire in the Benoni store.
The impairment of assets in the prior year relates to the impairment of
computer software in Shield due to an IT upgrade.
4. Security costs relating to properties in Masscash have been reallocated
from `Other operating costs` to `Occupancy costs` in June 2009 (R34.9
million), in line with the Group`s accounting policy.
5. The Massmart BEE transaction, which came into operation in October 2006,
gave rise to an IFRS 2 Share-based Payment charge of R69.7 million (2009:
R66.9 million). The `A` and `B` preference shares have been issued to the
Thuthukani Trust and the Black Scarce Skills Trust respectively.
6. The `A` preference shareholders dividend amount of R46.5 million (2009:
R38.0 million) represents the 2009 final cash dividend of 100.5 cents and the
2010 interim cash dividend of 252.0 cents paid to all Thuthukani participants.
In the prior year, the Thuthukani dividend was equivalent to 75% of the
ordinary dividend, and for the current year it is equivalent to 100%.
7. The profit on assets classified as held for sale in the prior year relates
to the cash sale of the Massdiscounters` retail debtors` book effective from
30 June 2008, immediately after closing the 2008 financial year.
8. Other non-current liabilities and provisions include the lease-smoothing
liability of R422.8 million (2009: R463.6 million).
9. The disposal of subsidiary in the current year relates to the sale of the
cell phone contract business in CellShack (Masscash). The disposal in the
prior year relates to the sale of the Jabulani Cash and Carry store
(Masscash).
10. The net asset value of the businesses acquired during the year was R188.9
million (2009: R34.8 million) on the date of acquisition.
11. In the prior year the June 2009 operating lease commitments figure was
incorrectly disclosed as R9,959.6 million.
12. Related party transactions include private aircraft, used from time to
time, in the normal course of business by Massmart and its divisions and hired
from competitively selected charter companies, two of which operate aircraft
indirectly beneficially owned by Mr MJ Lamberti.
13. Due to Christmas trading, Massmart`s earnings are weighted towards the six
months to December.
14. 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 the JSE Listings Requirements and 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, 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 (Proprietary)
Limited
Registered auditors
Deloitte & Touche
For more information
www.massmart.co.za
26 August 2010
Johannesburg
Sponsor
Deutsche Securities (SA) (Proprietary) Limited
Date: 26/08/2010 07:05:13 Produced by the JSE SENS Department.
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