| Thu 24 Feb 2011, 7:05 | | MSM - Massmart Holdings Limited - Reviewed consolidated results for the 26 weeks |
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MSM
MSM
MSM - Massmart Holdings Limited - Reviewed consolidated results for the 26 weeks
ended 26 December 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 26 WEEKS ENDED 26 DECEMBER 2010
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 308 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.
HIGHLIGHTS
Sales +13.3% to R27,376 million
Operating profit before foreign exchange movements +12.7% to R1,265 million
Cash generated from operations -13.7% to R2,232 million
Headline EPS +5.6% to 366 cents
Dividend per share 252 cents unchanged
OVERVIEW
Whilst the Massmart Group`s sales growth for most of the six months to December
2010 was strong, the softer sales growth over Christmas, and in the eight weeks
since then, suggest that the South African economy may not yet be in a
sustainable recovery. For the six months to December 2010, sales increased by
13.3% and Operating Profit excluding Foreign Exchange adjustments by 12.7% and
Headline Earnings by 6.5%.
The Rand strength against the US Dollar again depressed Rand earnings from our
African businesses and resulted in a foreign exchange translation loss of R79.5
million (2009: R13.9 million).
The Group`s product deflation has reached record levels, and so the comparable
sales growth of 7.3% represents 10.2% of volume growth after taking product
deflation of 2.9% into account. Deflation in Food meant that trading in this
category in Makro and Masscash was difficult.
The Group continues investing for growth and so trading space increased by 5.9%,
being 4.1% in new stores and 1.8% through acquisitions.
Three of the four Divisions performed strongly, growing trading profit at or
ahead of sales growth.
Since the first announcement on 27 September 2010, a significant amount of
Massmart time and resources have been committed to the Walmart transaction. The
approval by Massmart shareholders on 17 January 2011 and the recent positive
referral by the Competition Commission give us confidence that the transaction
is seen as positive for all stakeholders. The transaction remains subject to
approval by the Competition Tribunal which is hearing the matter on 22-24 March
2011. Separate announcements have been, and will be, made by Massmart regarding
this process.
ENVIRONMENT
With South African consumer inflation and interest rates at historical lows, it
was not surprising to see consumer spending accelerate during the 2010 calendar
year, boosted by the economic activity around the 2010 FIFA World Cup. Consumers
enjoyed record levels of product deflation, with Massmart statistics showing
Food deflation peaking at 4% and General Merchandise deflation peaking at 10%.
The low levels of food inflation allowed consumers to take advantage of the
improved economic conditions and increase their spend on semi-durable and
durable products.
Nationally, consumer indebtedness has declined but not to the extent that one
would expect given the recent benign economic environment.
DIVISIONAL OPERATIONAL REVIEW
26 weeks 26 weeks
December December
2010 % of 2009 % of Period
Rm (Reviewed) sales (Reviewed) sales % growth
Sales 27,375.8 24,153.5 13.3
Massdiscounters 6,993.9 6,114.4 14.4
Masswarehouse 6,593.3 5,955.7 10.7
Massbuild 3,782.4 3,189.9 18.6
Masscash 10,006.2 8,893.5 12.5
Trading profit before 1,284.7 4.7 1,161.3 4.8 10.6
interest and tax
Massdiscounters 473.6 6.8 396.2 6.5 19.5
Masswarehouse 397.1 6.0 360.5 6.1 10.2
Massbuild 189.5 5.0 139.9 4.4 35.5
Masscash 224.5 2.2 264.7 3.0 (15.2)
Trading profit before 1,355.6 5.0 1,229.1 5.1 10.3
tax
Massdiscounters 486.6 7.0 412.8 6.8 17.9
Masswarehouse 422.4 6.4 382.1 6.4 10.5
Massbuild 209.8 5.5 154.1 4.8 36.1
Masscash 236.8 2.4 280.1 3.1 (15.5)
Com- 52 weeks
parable Estimated June
% sales % sales 2010 % of
Rm growth inflation (Audited) sales
Sales 7.3 (2.9) 47,451.0
Massdiscounters 9.0 (8.2) 12,164.9
Masswarehouse 7.8 (1.2) 11,501.2
Massbuild 11.8 0.3 6,366.9
Masscash 4.2 (1.3) 17,418.0
Trading profit before 2,027.8 4.3
interest and tax
Massdiscounters 612.8 5.0
Masswarehouse 685.4 6.0
Massbuild 260.5 4.1
Masscash 469.1 2.7
Trading profitbefore 2,190.9 4.6
tax
Massdiscounters 660.4 5.4
Masswarehouse 743.2 6.5
Massbuild 291.7 4.6
Masscash 495.6 2.8
Trading profit excludes foreign exchange movements. A detailed reconciliation
between trading and operating profit can be found below the `Additional
information` table below.
Massdiscounters - comprises the 97-store General Merchandise retail discounter
Game, which trades in South Africa, Botswana, Ghana, Malawi, Mauritius,
Mozambique, Namibia, Nigeria, Tanzania, Uganda and Zambia; and the 12-store Hi-
tech retailer DionWired.
Divisional comparable store sales increased by 9.0% with estimated deflation of
8.2%. Total sales increased by 14.4% and trading profit before tax increased by
17.9%. Game SA and DionWired traded well with low double-digit comparable sales
growth while Game Africa`s comparable sales growth was negative in Rands but
positive in local currencies.
Two Game stores were converted into Game Foodco in the Western Cape and are
trading above expectations. A third Cape store will be converted shortly.
The Division completed December 2010 overstocked by some R300 million as a
result of lower than expected Christmas sales and the stock buffer implemented
during the commissioning of the Gauteng Regional Distribution Centre (RDC) in
July 2010. The new RDC increased this period`s rent by R18 million.
Six Game stores, including one in Lilongwe, Malawi, and one DionWired store were
opened, increasing trading space by 5.7%. In addition to our South African store
expansion, we anticipate opening four stores in Africa in the 2012 financial
year.
Masswarehouse - comprises the 14-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 7.8%, with estimated deflation of
1.2%. Trading profit before tax increased by 10.5%.
Total sales increased by 10.7% with the opening in October 2010 of the new Makro
Vaal store, which increased trading space by 9.0%. This new format store, which
is performing ahead of expectations, includes a full range Fresh offering and
new butchery layout more suited to the retail customer. New store pre-opening
costs of R13 million were incurred during the period.
In February 2011, the Division sold the two Makro Zimbabwe stores to OK
Zimbabwe. We remain on schedule to open Makro stores in Nelspruit, Polokwane and
Milnerton, Cape Town, in the first-half of the 2012 financial year.
Massbuild - comprises 80 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 increased by 11.8% with estimated inflation of
0.3%. Total sales increased by 18.6% and trading profit before tax increased by
36.1%.
The Division has performed well in a difficult market. Whilst the metrics of the
South African residential market have stabilised, there is little reason to
believe the market has grown. Our market share gains have come through a
superior customer offering in all respects.
Three Builders Warehouse stores and two Builders Express stores were opened or
acquired, and one Builders Trade Depot store was closed, resulting in net
trading space increasing by 3.3%. We expect to open our first African Builders
Warehouse store, in Gaborone, Botswana, in July 2011. After being unable to
reach agreement with the Namibian authorities, discussions concerning the
acquisition of the building materials business, Pupkewitz, have been terminated.
Masscash - comprises 79 Wholesale and 26 Retail Cash and Carry stores trading in
South Africa, Botswana, Lesotho, Mozambique, Namibia and Swaziland, and Shield,
a voluntary buying association.
Divisional comparable store sales increased by 4.2% with estimated deflation of
1.3%. Total sales increased by 12.5% and trading profit before tax decreased by
15.5%.
As we have seen in previous economic cycles, Food deflation made trading
challenging. Whilst volumes increased and trading margins were maintained,
growth in comparable sales was below cost increases with the resultant pressure
on profitability. With a 25% exposure to commodities, the Wholesale division was
particularly adversely impacted. This performance was buffered slightly by the
results from the Retail division and its new acquisitions. As the Retail
division continues its aggressive growth, we are investing in management
capacity, resulting in cost growth exceeding sales growth.
The Division now has annualised Retail sales of R3.5 billion, comprising 26
stores, 11 of which are already branded Cambridge.
Two new Wholesale Cash and Carry stores and six new Retail Cash and Carry stores
were opened or acquired. Net trading space increased by 8.7%.
FINANCIAL REVIEW
Statement of comprehensive income
Total sales growth for the six months to December 2010 was 13.3% with comparable
sales growth of 7.3%. Selling price inflation declined across most categories
and the Group recorded product deflation of 2.9% for the financial year-to-date.
There are signs of inflation returning to certain Food categories.
During the six-month period one store was closed, 16 opened, and five stores
acquired, resulting in a total of 308 stores at December 2010. Net trading space
increased by 8.7% from December 2009 to a total of 1,249,584m2.
The Group`s gross margin of 18.06% was slightly higher than the prior year`s
17.81%, as gross margins recovered, to different degrees, in all divisions.
Total expenses (excluding the foreign exchange loss) increased by 16.2% while
comparable expenses increased by only 7.8%. Total expense growth exceeded sales
growth due to the impact of the new stores not yet trading to full capacity, the
associated store pre-opening costs, the Massdiscounters` Gauteng RDC opening,
and the store refurbishment programmes in Masscash Food Retail. These results do
not include any material costs associated with the Walmart transaction.
Included in operating profit are net realised and unrealised foreign exchange
losses of R79.5 million (2009: R13.9 million loss). The translation of
Massdiscounters` African balance sheets accounted for R57.8 million of this
(2009: R7.0 million loss) and there was a net loss from other foreign monetary
balances of R21.7 million (2009: R6.9 million loss). Over the six-month period,
the average ZAR/US$ rate strengthened by 6% while the closing spot rate was 11%
stronger.
Despite lower commercial rates, net interest paid increased as the Group funded
new stores, Massmart shares acquired by the Employee Trust, and acquisitions,
including those in the second half of the 2010 financial year. Working capital
performance improved in three Divisions, whilst Massdiscounters was overstocked
by approximately R300 million at the period end.
The Group`s effective tax rate of 31.68% (2009: 31.89%) includes the effect of
STC of 2.6% (2009: 2.8%). The effective tax rate is anticipated to reduce
slightly as Group profitability improves, diluting the effect of non-deductible
expenditure.
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 increased by 6.5% while headline EPS increased by 5.6%.
Excluding the foreign exchange losses from both years however, headline earnings
increased by 13.1% while headline EPS increased by 12.1%.
Statement of financial position
Group inventory levels were 22.3% higher than December 2009. This includes the
Massdiscounters` overstocking and about R100 million inventory in the new Makro
store. Historical days in inventory at December 2010 are 59.7 (2009: 55.2 days).
Acquisitions continue to increase the amount of goodwill. During the period five
businesses, representing five stores, were acquired for a net cash consideration
of R87.0 million.
Average interest-bearing debt for the period was R1,162.9 million (2009: R588.9
million) representing average gearing of 31.4% (2009: 17.4%). The reasons for
the greater net debt levels are noted in the net interest paid paragraph above.
Despite the significant investment in the business and the acquisitions, the
improvement in the Group`s profitability slightly increased the annual rolling
return on equity to 30.8% at December 2010 (December 2009: 30.6%).
Statement of cash flows
Operating cash flow improved by 2.7% but after net working capital movements
declined by 13.7%. Total capital expenditure of R566.0 million (2009: R291.1
million) comprises R215.9 million on replacement or maintenance and R350.1
million on expansionary expenditure, respectively. A further amount of R87.0
million was spent on business acquisitions.
STRATEGIC VISION 2013
Whilst organic growth continues in all formats, the highlight of our growth
strategy is our expansion into Food retail through Cambridge, Game Foodco and
Makro.
We continue to invest in Supply Chain development, having opened the
Massdiscounters` Gauteng RDC and growing Makro Logistics services.
We are also very proud of increasing our BEE status to level three.
The offer by Walmart to acquire 51% of Massmart is a signal of confidence in our
Strategic Vision and our ability to implement it. We expect Walmart, subject to
approval by the Competition Tribunal, to greatly reduce the risk inherent in our
entry into Food retail, whilst assisting us with the implementation of all other
aspects of Vision 2013.
PROSPECTS
For the 34 weeks to 20 February 2011, total sales increased by 12.6% and
comparable sales increased by 6.4%.
Should the trends experienced in the Christmas period and the subsequent eight
weeks continue, we expect a difficult second-half. Management will be focused on
reducing stock levels, holding gross margins and containing costs, to continue
to grow annual operating profit (excluding foreign exchange losses or profits),
albeit perhaps at lower levels than achieved in the first-half of this financial
year.
In the event that the Walmart transaction is approved, shareholders are reminded
of the financial effects associated with the transaction that were communicated
in the circular to Massmart shareholders dated 9 December 2010, including
advisors` fees of R194 million.
The financial information on which this outlook statement is based has not been
reviewed or reported on by the Company`s external auditors.
DISTRIBUTION AND DIVIDEND POLICY
Massmart`s current dividend policy is to declare and pay an interim and final
cash dividend representing a 1.7 times dividend cover unless circumstances
dictate otherwise. Shareholders are reminded that while headline earnings
declined over the past two years the dividend level was maintained, effectively
reducing the dividend cover. Although headline earnings are higher than those
for the prior period, the Board has decided to maintain this year`s dividend at
the same level as last year`s dividend and will continue to do so until such
time as the dividend cover returns to the Group`s policy of 1.7 times.
Notice is hereby given that an interim cash dividend of 252 cents per share in
respect of the period ended 26 December 2010 has been declared payable to the
holders of ordinary shares recorded in the books of the company on Friday, 18
March 2011. The last day to trade cum-dividend will therefore be Friday, 11
March 2011 and Massmart shares will trade ex-dividend from Monday, 14 March
2011. Payment of the dividend will be made on Tuesday, 22 March 2011. Share
certificates may not be dematerialised or rematerialised between Monday, 14
March 2011 and Friday, 18 March 2011, both days inclusive.
A Thuthukani dividend equivalent to 100% of the Massmart ordinary dividend per
share of 252 cents will be paid to the Thuthukani participants on Tuesday, 22
March 2011.
On behalf of the Board
Grant Pattison Guy Hayward
Chief Executive Officer Chief Financial Officer
23 February 2011
INCOME STATEMENT
26 weeks 26 weeks 52 weeks
December December June
2010 2009 2010
Rm (Reviewed) (Reviewed) % change (Audited)
Revenue 27,458.8 24,214.2 13.4 47,550.6
Sales 27,375.8 24,153.5 13.3 47,451.0
Cost of sales (note 4) (22,431.5) (19,852.5) (13.0) (38,955.9)
Gross profit 4,944.3 4,301.0 15.0 8,495.1
Other income 83.0 60.7 36.7 99.6
Depreciation and (221.5) (187.0) (18.4) (382.8)
amortisation
Impairment of assets - - - (3.7)
(note 3)
Employment costs (1,836.5) (1,621.0) (13.3) (3,352.9)
Occupancy costs (note 4) (827.1) (689.3) (20.0) (1,415.1)
Foreign exchange loss (79.5) (13.9) (87.7)
(note 4)
Other operating costs (877.7) (742.2) (18.3) (1,485.8)
(note 4)
Operating profit 1,185.0 1,108.3 6.9 1,866.7
Finance costs (58.3) (48.6) (20.0) (92.6)
Finance income 17.6 22.1 (20.4) 45.9
Net finance costs (40.7) (26.5) (53.6) (46.7)
Profit before taxation 1,144.3 1,081.8 5.8 1,820.0
Taxation (362.5) (345.0) (5.1) (608.2)
Profit for the period 781.8 736.8 6.1 1,211.8
Profit attributable to:
Owners of the parent 738.5 693.7 1,129.9
Preference shareholders 16.9 13.5 46.5
(note 6)
Non-controlling 26.4 29.6 35.4
interests
Profit for the period 781.8 736.8 6.1 1,211.8
Basic EPS (cents) 365.3 346.2 5.5 562.8
Diluted basic EPS 342.6 335.9 2.0 538.5
(cents)
Dividend (cents):
- Interim 252.0 252.0 - 252.0
- Final 134.0
- Total 386.0
Headline earnings
Reconciliation of net
profit for the period to
headline earnings
Net profit attributable 738.5 693.7 1,129.9
to equity holders of the
parent
Impairment of assets - - 3.7
(note 3)
Loss on disposal of 0.8 0.9 0.6
fixed assets
Loss on disposal of - - 5.3
business
Release of negative (0.2) - -
goodwill
Loss on sale of assets 0.7 - -
classified as held for
sale (note 7)
Total tax effects of (0.3) (0.3) (0.9)
adjustments
Headline earnings 739.5 694.3 6.5 1,138.6
Headline earnings before 796.7 704.3 13.1 1,201.7
foreign exchange
Headline EPS (cents) 365.8 346.5 5.6 567.2
Headline EPS before 394.1 351.5 12.1 598.6
foreign exchange (cents)
Diluted headline EPS 343.0 336.1 2.1 542.7
(cents)
STATEMENT OF COMPREHENSIVE INCOME
26 weeks 26 weeks 52 weeks
December December June
2010 2009 2010
Rm (Reviewed) (Reviewed) % change (Audited)
Profit for the period 781.8 736.8 1,211.8
Foreign currency (5.9) (31.9) (30.9)
translation reserve
Cash flow hedges (30.6) 10.8 16.3
Revaluation of listed 0.1 - -
shares
Income tax relating to 8.6 (3.0) (4.5)
components of other
comprehensive income
Other comprehensive (27.8) (24.1) (19.1)
income for the period,
net of tax
Total comprehensive 754.0 712.7 5.8 1,192.7
income for the period
Total comprehensive
income attributable to:
Owners of the parent 710.7 669.6 1,110.8
Preference shareholders 16.9 13.5 46.5
(note 6)
Non-controlling 26.4 29.6 35.4
interests
Total comprehensive 754.0 712.7 5.8 1,192.7
income for the period
STATEMENT OF FINANCIAL POSITION
December December June
2010 2009 2010
Rm (Reviewed) (Reviewed) % change (Audited)
ASSETS
Non-current assets 5,536.0 4,739.3 4,974.9
Property, plant and 2,443.8 1,794.4 36.2 2,055.2
equipment
Goodwill and other 2,224.8 1,973.5 2,095.8
intangible assets
Investments and loans 616.6 559.6 585.6
Deferred taxation 250.8 411.8 238.3
Current assets 12,440.6 11,192.5 9,314.5
Inventories 7,336.1 5,997.3 22.3 5,601.5
Trade, other receivables 2,953.1 2,585.3 14.2 2,322.6
and prepayments
Taxation 33.8 31.3 22.1
Cash and bank balances 2,117.6 2,578.6 1,368.3
Assets classified as 4.6 - -
held for sale
Total 17,981.2 15,931.8 14,289.4
EQUITY AND LIABILITIES
Total equity 4,009.7 3,677.7 3,591.8
Equity attributable to 3,857.5 3,547.9 8.7 3,469.7
equity holders of the
parent
Minority interest 152.2 129.8 122.1
Non-current liabilities 859.8 821.2 895.3
Non-current liabilities 353.2 78.8 385.8
- interest-bearing
Other non-current 487.4 567.9 490.1
liabilities and
provisions
Deferred taxation 19.2 174.5 19.4
Current liabilities 13,111.7 11,432.9 9,802.3
Trade, other payables 12,503.7 10,779.6 16.0 9,220.1
and provisions
Taxation 267.7 228.3 201.9
Bank overdrafts and 340.3 425.0 380.3
short-term borrowings
Total 17,981.2 15,931.8 14,289.4
STATEMENT OF CASH FLOWS
26 weeks 26 weeks 52 weeks
December December June
2010 2009 2010
Rm (Reviewed) (Reviewed) (Audited)
Operating cash before working capital 1,368.3 1,331.8 2,346.8
movements
Working capital movements 863.7 1,253.2 292.6
Cash generated from operations 2,232.0 2,585.0 2,639.4
Taxation paid (316.9) (267.4) (552.8)
Net interest paid (40.7) (26.5) (46.7)
Investment income 34.3 26.7 36.1
Dividends paid (286.9) (281.9) (822.4)
Cash inflow from operating activities 1,621.8 2,035.9 1,253.6
Investment to maintain operations (215.9) (137.6) (277.8)
Investment to expand operations (350.1) (153.5) (346.1)
Disposal of subsidiary - - 26.9
Businesses acquired (87.0) (146.0) (369.9)
Other investing activities including (24.0) 14.5 (163.8)
minority interests acquired
Cash outflow from investing (677.0) (422.6) (1,130.7)
activities
Cash (outflow)/inflow from financing (249.9) (89.6) 193.8
activities
Net increase in cash and cash 694.9 1,523.7 316.7
equivalents
Foreign exchange loss taken to other (5.9) (31.9) (30.9)
comprehensive income
Opening cash and cash equivalents 1,310.9 1,025.1 1,025.1
Closing cash and cash equivalents 1,999.9 2,516.9 1,310.9
STATEMENT OF CHANGES IN EQUITY
Six months ended
December 2010 Ordinary
(Reviewed) share Share General Retained
Rm capital premium reserves profit
Opening balance 2.0 142.0 464.6 2,861.1
Dividends declared - - - (286.9)
Total comprehensive income - - (27.8) 755.4
Changes in minority interests - - - -
and distribution to minorities
Cost of acquiring minority - - (24.9) -
interests
Minorities relating to - - - -
acquisitions
Share trust transactions and - - 52.7 (98.8)
IFRS 2 charge
Treasury shares - 111.4 (93.3) -
(acquired)/realised
Total 2.0 253.4 371.3 3,230.8
Six months ended December 2009
(Reviewed)
Opening balance 2.0 149.4 298.7 2,604.6
Dividends declared - - - (281.8)
Total comprehensive income - - (24.1) 707.2
Changes in minority interests - - - -
and distribution to minorities
Cost of acquiring minority - - (30.8) -
interests
Minorities relating to - - - -
acquisitions
Share trust transactions and - - 78.7 (21.2)
IFRS 2 charge
Treasury shares - (50.7) 115.9 -
(acquired)/realised
Total 2.0 98.7 438.4 3,008.8
Year ended June 2010
(Audited)
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 - - (212.8) -
interests
Minorities relating to - - - -
acquisitions
Release of financial liability - - 120.0 -
raised on a business
acquisition
Share trust transactions and - - 149.4 (97.5)
IFRS 2 charge
Treasury shares - (7.4) 128.4 -
(acquired)/realised
Total 2.0 142.0 464.6 2,861.1
Equity
Six months ended attributable
December 2010 to equity
(Reviewed) holders of Minority
Rm the parent interest Total
Opening balance 3,469.7 122.1 3,591.8
Dividends declared (286.9) - (286.9)
Total comprehensive income 727.6 26.4 754.0
Changes in minority interests - (11.8) (11.8)
and distribution to minorities
Cost of acquiring minority (24.9) - (24.9)
interests
Minorities relating to - 15.5 15.5
acquisitions
Share trust transactions and (46.1) - (46.1)
IFRS 2 charge
Treasury shares 18.1 - 18.1
(acquired)/realised
Total 3,857.5 152.2 4,009.7
Six months ended December 2009
(Reviewed)
Opening balance 3,054.7 42.0 3,096.7
Dividends declared (281.8) - (281.8)
Total comprehensive income 683.1 29.6 712.7
Changes in minority interests - (20.3) (20.3)
and distribution to minorities
Cost of acquiring minority (30.8) - (30.8)
interests
Minorities relating to - 78.5 78.5
acquisitions
Share trust transactions and 57.5 - 57.5
IFRS 2 charge
Treasury shares 65.2 - 65.2
(acquired)/realised
Total 3,547.9 129.8 3,677.7
Year ended June 2010
(Audited)
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 - (42.4) (42.4)
and distribution to minorities
Cost of acquiring minority (212.8) - (212.8)
interests
Minorities relating to - 87.1 87.1
acquisitions
Release of financial liability 120.0 - 120.0
raised on a business
acquisition
Share trust transactions and 51.9 - 51.9
IFRS 2 charge
Treasury shares 121.0 - 121.0
(acquired)/realised
Total 3,469.7 122.1 3,591.8
ADDITIONAL INFORMATION
26 weeks 26 weeks 52 weeks
December December June
2010 2009 2010
(Reviewed) (Reviewed) (Audited)
Net asset value per share (cents) 1,893.2 1,761.9 1,722.0
Ordinary shares (000`s):
- In issue 203,754 201,370 201,496
- Weighted average 202,185 200,367 200,751
- Diluted weighted average 215,581 206,545 209,817
Preference shares (000`s):
- Thuthukani Trust `A` shares held 9,190 13,513 12,826
by the participants (note 5)
- Black Scarce Skills Trust `B` 2,154 2,314 2,203
shares held by the participants
(note 5)
Capital expenditure (Rm):
- Authorised and committed 562.2 231.9 226.9
- Authorised not committed 209.0 76.8 450.5
Operating lease commitments (2011 9,736.8 8,849.2 8,573.4
- 2025) (Rm)
US dollar exchange rates - year 6.79 7.55 7.67
end (R/$)
US dollar exchange rates - average 7.16 7.68 7.61
(R/$)
RECONCILIATION BETWEEN TRADING AND OPERATING PROFIT
26 weeks 26 weeks 52 weeks
December December June
2010 2009 2010
Rm (Reviewed) (Reviewed) (Audited)
Profit before interest and
taxation
Trading profit before interest and 1,284.7 1,161.3 2,027.8
taxation
Asset impairments - - (3.7)
BEE transaction IFRS 2 charge (20.2) (39.1) (69.7)
(note 5)
Foreign exchange loss (79.5) (13.9) (87.7)
Operating profit before interest 1,185.0 1,108.3 1,866.7
and taxation
Profit before taxation
Trading profit before taxation 1,355.6 1,229.1 2,190.9
Corporate net interest (111.6) (94.3) (209.8)
Asset impairments - - (3.7)
BEE transaction IFRS 2 charge (20.2) (39.1) (69.7)
(note 5)
Foreign exchange loss (79.5) (13.9) (87.7)
Operating profit before taxation 1,144.3 1,081.8 1,820.0
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 are in
accordance with IAS 34 Interim Financial Reporting, using accounting
policies that have been consistently applied to prior periods.
2. During the period under review, the only shares bought in the market were
by the Share Trust where 1.4 million shares (0.7% of average shares in
issue) were bought at an average price of R126.84 totalling R175.2 million.
No Massmart shares were bought in the market for the prior six month
period. During the prior year, the only shares bought in the market were by
the Share Trust where 1.2 million shares (0.6% of average shares in issue)
were bought at an average price of R114.44 totalling R137.2 million.
3. There was no impairment of assets in the current or prior six month period.
The impairment of assets in the prior 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.
4. Foreign exchange movements relating to the cost of stock have been
reallocated from `Foreign exchange loss` to `Cost of sales` in December
2009 (R54.8 million) and June 2010 (R76.6 million), in line with the
Group`s accounting policy. Water and electricity charges have been
reallocated from `Other operating costs` to `Occupancy costs` in December
2009 (R43.0 million) and June 2010 (R88.4 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 R20.2 million (2009:
R39.1 million). The `A` and `B` preference shares have been issued to the
Thuthukani Trust and the Black Scarce Skills Trust respectively.
6. The preference shareholders` dividend amount of R16.9 million (2009: R13.5
million) represents the final cash dividend of 134 cents (2009: 100.5
cents) paid to all Thuthukani participants. The Thuthukani dividend was
equivalent to 100% of the ordinary dividend for the current and prior
period.
7. The assets classified as held for sale in the current period relate to the
Saverite corporate owned stores in Masscash which are due to be sold/closed
during the remainder of the financial year and the start of the next
financial year.
8. Other non-current liabilities and provisions includes the lease smoothing
liability of R418.6 million (2009: R471.6 million).
9. The net asset value of the businesses acquired during the period was R62.9
million (2009: R36.2 million) on the date of acquisition.
10. 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.
11. Due to Christmas trading, Massmart`s earnings are weighted towards the six
months to December.
12. These results have been reviewed by independent external auditors, Deloitte
& Touche, and their unmodified review report 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
24 February 2011
Johannesburg
Sponsor
Deutsche Securities (SA) (Proprietary) Limited
Date: 24/02/2011 07:05:39 Produced by the JSE SENS Department.
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