| Thu 25 Aug 2011, 7:07 | | MSM - Massmart Holdings Limited - Reviewed consolidated results for the 52 weeks |
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MSM
MSM
MSM - Massmart Holdings Limited - Reviewed consolidated results for the 52 weeks
ended 26 June 2011
Massmart Holdings Limited
Registration number 1940/014066/06
JSE code MSM
ISIN ZAE000152617
("the Company" or "the Group")
REVIEWED CONSOLIDATED RESULTS FOR THE 52 WEEKS ENDED 26 JUNE 2011
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
13 countries in sub-Saharan Africa comprising 313 stores.
The Group is the second 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
+11.6%
TO R52,950 MILLION
OPERATING PROFIT BEFORE
TRANSACTION COSTS
+10.3%
TO R2,059 MILLION
CASH GENERATED FROM OPERATIONS*
-28.8 %
TO R1,878 MILLION
* excluding cash-effect of Transaction Costs
HEADLINE EPS BEFORE TRANSACTION COSTS
+8.5%
TO 616 CENTS
DIVIDEND PER SHARE
386 CENTS
UNCHANGED
Overview
We are pleased to report that the Group increased sales by 11.6% and operating
profits, excluding Walmart Transaction costs, by 10.3% and headline earnings
before Transaction costs by 10.0%.
Including the costs associated with the Walmart Transaction, operating profit
decreased by 13.7% and headline earnings decreased by 22.5%.
Total Group sales of almost R53 billion, up by 11.6%, reflect the continued
investment for growth which saw trading space increasing by 6.0% for the year.
Comparable store sales growth of 5.2% with product deflation of 1.3% indicates
strong volume growth.
Effective cost control saw the Group`s comparable expenses increase by only
5.4%.
The Group`s high stock levels reported at our half-year have been addressed with
inventories closing 10.7% above last year, below the level of sales growth.
Internal and independent data sources indicate the Group has been trading well
relative to its competitors and has gained market share in all our major
categories.
Walmart Transaction
The Board received a non-binding offer from Walmart on 20 September 2010, which
was followed up with a binding offer on 24 October 2010 and accepted by the
Massmart Board on 26 November 2010. This was followed by approval from all the
necessary authorities and Massmart shareholders. The acquisition became
effective on 20 June 2011, after receiving Competition Tribunal approval with
four voluntary conditions.
Subsequently, three Departments of the South African Government and the Unions
have filed a Review and an Appeal respectively, that is set down to be heard by
the Competitions Appeal Court on 20 and 21 October 2011. Separately, the
Competition Commission of Namibia also appealed the unconditional approval
granted by that country`s High Court and that matter has been set down to be
heard on 17 October 2011. Our legal teams are preparing responses to the
interveners` submissions and are confident about our strong legal position. We
will keep stakeholders informed of material developments.
Following implementation, the Board of Massmart has been reconstituted with the
resignation of Messrs Dods Brand, Kuseni Dlamini, Jim Hodkinson, Nigel Matthews,
Peter Maw and Michael Rubin, and Ms Dawn Mokhobo. We thank them for their many
years of service, leadership and counsel. Messrs Doug McMillon, Jeff Davis and
JP Suarez are the Walmart-appointees to the Board. Grant Pattison and Guy
Hayward remain on as CEO and CFO, respectively. The Board now comprises nine
directors of whom seven are non-executive and the majority of whom are
independent. In addition, each Board committee is chaired by an independent
director. The amended composition of the Board`s sub-committees will be included
in the 2011 annual report.
At the operational level, the integration process has begun. A team of 12
Walmart expatriates and their families have moved to South Africa and joined the
Massmart team. Work has begun on the Governance, Culture and Value dimensions of
the formal Integration Plan.
Environment
The state of the South African consumer and economy have been difficult to read
for the past few months. The different Easter trading periods in 2010 and 2011
and the base-effect of the 2010 FIFA World Cup have made interpretation of
internal and external data difficult.
Notwithstanding this, it appears that the current economic environment is a
mixed bag. On the positive side, there is low inflation, low interest rates and
high real wage increases, but on the negative side, we see high inflation in
Government-provided services, a disconcerting political environment and high
levels of strikes and unemployment.
We believe we will only be able to form a firm view following the first three
months` trading of this new 2012 financial year. Early indications are however,
that the consumer environment is perhaps slightly better than we may have
thought.
We have settled almost all our collective wage agreements for the 2012 financial
year.
Divisional operational review
June 2011 % of June 2010 % of
Rm (Reviewed) sales (Audited) sales
Sales 52,950.1 47,451.0
Massdiscounters 13,332.5 12,164.9
Masswarehouse 12,722.9 11,501.2
Massbuild 7,271.0 6,366.9
Masscash 19,623.7 17,418.0
Trading profit before interest 2,182.9 4.1 2,027.8 4.3
and tax
Massdiscounters 744.0 5.6 612.8 5.0
Masswarehouse 749.0 5.9 685.4 6.0
Massbuild 315.1 4.3 260.5 4.1
Masscash 374.8 1.9 469.1 2.7
Trading profit before tax 2,331.6 4.4 2,190.9 4.6
Massdiscounters 782.0 5.9 660.4 5.4
Masswarehouse 803.2 6.3 743.2 6.5
Massbuild 354.7 4.9 291.7 4.6
Masscash 391.7 2.0 495.6 2.8
Comparable Estimated
Year % sales % sales
Rm % growth growth inflation
Sales 11.6 5.2 (1.3)
Massdiscounters 9.6 3.7 (7.3)
Masswarehouse 10.6 6.9 (0.4)
Massbuild 14.2 7.2 0.8
Masscash 12.7 4.1 2.1
Trading profit before interest 7.6
and tax
Massdiscounters 21.4
Masswarehouse 9.3
Massbuild 21.0
Masscash (20.1)
Trading profit before tax 6.4
Massdiscounters 18.4
Masswarehouse 8.1
Massbuild 21.6
Masscash (21.0)
Trading profit excludes several items. A detailed reconciliation between trading
and operating profit can be found below the `Additional information` table
below.
Massdiscounters - comprises the 100-store General Merchandise retail discounter
Game, which trades in South Africa, Namibia, Botswana, Zambia, Uganda,
Mozambique, Mauritius, Malawi, Tanzania, Nigeria and Ghana; and the 13-store Hi-
tech retailer DionWired.
Divisional comparable store sales increased by 3.7% with estimated deflation of
7.3%. Total sales increased by 9.6% and trading profit before tax increased by
18.4%. Game SA performed well, with aggressive trading and good cost control.
The post-Christmas over-stocked position has been cleared but interest received
was adversely affected as a consequence. Game Africa`s sales continued to lag in
Rands but are performing better in local currency as the African economies
appear to be recovering. DionWired had another spectacular year.
Nine Game stores and two DionWired stores opened, increasing space by 9.1%. The
new Gauteng Regional Distribution Centre opened in July 2010 and several small
warehouses closed. The Foodco concept was rolled out into four stores during the
financial year and in July 2011, it had a successful opening in Game Maputo,
Mozambique.
Masswarehouse - comprises the 14-store Makro warehouse club trading in Food,
General Merchandise and Liquor in South Africa.
Divisional comparable store sales increased by 6.9% with estimated deflation of
0.4%. Total sales increased by 10.6% and trading profit before tax increased by
8.1%. Despite the costs of a new Makro store, including pre-opening costs of
R14.0 million, the Division controlled costs and margin well, delivering a solid
result in a low Food inflation environment.
A new Makro store with a full Fresh offering was opened in Vanderbijlpark, and
good progress has been made in securing several other sites, with three new
stores scheduled to open during the period to December 2011.
Massbuild - comprises 81 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 7.2% with estimated inflation of
0.8%. Total sales increased by 14.2% and trading profit before tax increased by
21.6%.
Builders Warehouse and Builders Express reported very good trading performances,
despite residential housing market statistics indicating a declining market.
This performance suggests our sales growth is underpinned by market share gains.
Builders Trade Depot sales growth was positive but muted as that sector of the
building market showed no signs of recovery.
Three Builders Warehouse stores and three Builders Express stores were opened or
acquired, and one Builders Trade Depot store was closed, resulting in a net
trading space increase of 3.4%.
Masscash - comprises 105 Wholesale and Retail stores, which include the
Cambridge brand, trading in South Africa, Lesotho, Namibia, Botswana and
Mozambique, and Shield, a voluntary buying association.
Divisional comparable store sales increased by 4.1% with estimated inflation of
2.1%. Total sales increased by 12.7% but trading profit before tax decreased by
21.0%.
The Division suffered from, first, deflation and then low Food inflation.
Profits were impacted by low margins, high conversion and investment costs in
Retail, and some one-off costs related to the completion of the new IT system
implementation in Wholesale. The underlying Wholesale business remains solid
with high growth potential. We will be deliberate and patient as we build the
new Retail Division.
One new Wholesale Cash and Carry store and seven new Retail Cash and Carry
stores were opened or acquired. Net trading space increased by 4.8%.
Financial review
Statement of comprehensive income
Total Group sales growth for the year to June 2011 was 11.6% with comparable
sales growth of 5.2%. Sales in our African businesses represented 7% of total
Group sales and total African sales grew by 8.3% in Rands and 11.4% in local
currencies.
The Group`s product inflation remained in deflation overall and was -1.3% for
the year. General Merchandise remained strongly in deflation (7.8%) while Food &
Liquor moved into inflation (1.6%) and Home Improvement was steady at 0.7%
inflation.
During the year one store was closed, 20 opened, and four stores acquired,
resulting in a total of 313 stores at June 2011. Net trading space increased by
6.0% to a total of 1 280 936mSquared.
The Group`s gross margin of 18.26% improved on that of the prior year (17.90%)
as margins improved in Massdiscounters, Makro and Massbuild. Deflation in Food
and a highly competitive environment adversely affected gross margins in
Masscash.
Due to acquisitions, new stores and the investment in Cambridge`s
infrastructure, total expenses (excluding the foreign exchange losses) increased
by 15.6%. Comparable expenses however increased by 5.4%.
Included in operating profit are net realised and unrealised foreign exchange
losses of R72.3 million (2010: R87.7 million loss). The translation of
Massdiscounters` African balance sheets accounted for R58.7 million of this
(2010: R64.2 million loss) and there was a net loss from other foreign monetary
balances of R13.6 million (2010: R23.5 million loss).
Costs incurred by the Group in connection with the Walmart Transaction totalled
R408.8 million. Included here are total advisors` fees and expenses of R238.7
million, the R100.0 million Supplier Development Fund and R70.1 million in
accelerated IFRS 2 charges. The latter two amounts are non-cash and a portion of
the total amount may not be tax-deductible. The other effects of the Walmart
Transaction on the Group`s results are noted below.
The agreement to sell Makro Zimbabwe was signed in November 2010 and was
finalised in late February 2011. The loss on sale of R38.6 million represents
costs relating to the disposal of the Makro Zimbabwe stores.
Net interest paid of R107.2 million increased significantly as a result of the
Group`s highest ever capital expenditure programme and funding the post-December
2010 over-stocking in Massdiscounters as well as higher stock levels in Makro
and Masscash. At R1,484.8 million the Group`s average net borrowings were higher
than the prior year`s equivalent figure of R583.8 million.
The Group`s tax rate is 38.9% (2010: 33.4%) but this is artificially higher
because of the non-deductible amounts included in Transaction costs and also the
effect of STC of 5.6% (2010: 4.6%). Adjusting for the Transaction costs results
in a more representative tax rate of 32.6%.
The minority interests comprise those from acquisitions and store managers`
holdings in certain Masscash stores.
Headline earnings declined by 22.5% and headline EPS declined by 23.6%.
Excluding the after-tax effect of the Transaction costs however, headline
earnings increased by 10.0% and headline EPS increased by 8.5%.
Statement of financial position
For most of the second-half of the 2011 financial year, Group inventory levels
were high but by June 2011 had been restored to historical levels. Historical
days in inventory at June 2011 were 49.8 (2010: 52.6 days) for the Group, and
inventory days are higher only in Masscash. The level of supplier funding
returned to normal Group levels. The prior year was bolstered by the additional
inventory purchases for the 2010 FIFA World Cup.
Acquisitions and IT capital expenditure increased the amount of goodwill and
intangible assets. During the financial year, seven businesses representing six
stores and properties were acquired for a net cash consideration of R171.0
million. A net amount of R108.4 million was invested in IT this year.
Excluding the effect of Transaction costs, the annual rolling return on equity
was 33.7% at June 2011.
Statement of cash flows
Operating cash of R2,26 billion was 3.5% below the prior year but this includes
the cash effect of the Transaction costs. Adjusting for these costs results in a
more representative figure of R2,50 billion which is 6.7% above the prior year.
Cash from operations was 37,9% lower due to the Transaction costs and the
retention of cash in net working capital level. This figure adjusted for the
cash effect of the Transaction costs is R1,88 billion which is 28,8% below the
prior year. Total capital expenditure of R1,148.2 million is 84% higher than the
prior year, and comprises R305.2 million on replacement and R843,0 million on
expansionary expenditure. Larger items included in expansionary expenditure are
the costs of the new Makro store in Milnerton, Cape Town and Cambridge stores.
Effect of Walmart Transaction
There were two main financial consequences of the Walmart Transaction, being the
Transaction costs of R408.8 million described above and the effects of the
vesting and purchase by Walmart of the Massmart options held by share trust
beneficiaries. With regard to the latter, in June 2011 share premium increased
by a net cash amount of R481.6 million as 51% of all vested and unvested
Massmart options held by trust beneficiaries (including Thuthukani) were
converted into ordinary shares and then acquired by Walmart. Issued shares
therefore increased by 12.4 million or 6.1% to 213.9 million shares. These
additional shares had a limited impact on the weighted-average number of shares
due to the transaction occurring in late June 2011.
In addition, cash proceeds were received from Walmart on 20 June 2011 but, at 26
June 2011, the actual year-end date, had not yet been paid to share trust
beneficiaries. As the share trusts are consolidated with the Group, the net cash
proceeds of R1,093.6 million are shown as Restricted cash held on behalf of
scheme beneficiaries, with an equal amount shown as a Scheme beneficiaries`
liability.
Strategic Vision 2014
Our Strategic Agenda has remained consistent and we have maintained its
implementation momentum throughout this period.
The focus remains on increasing comparable store sales growth through aggressive
trading, supply chain development and the addition of Financial Services. This
year we opened and commissioned a new Massdiscounters Gauteng Regional
Distribution Centre, and soft-launched the Builders Warehouse credit card in
partnership with third party credit provider, RCS. We also implemented several
new systems improving our replenishment and space planning capabilities.
Private Label products continue to out-perform total sales, contributing 5.7% to
our total sales.
In terms of growth, we continued to add space through opening profitable new
stores and acquiring businesses. We are currently awaiting Competition
Authorities` approval for the acquisitions of Rhino and Fruitspot.
In Leadership and Transformation, we have successfully appointed two director-
level Black executives, and have continued to improve our EE and BEE scores,
although aspects of the latter will be adversely affected by the change in
Massmart shareholding. The Massmart Corporate University provided development
opportunities to 41 colleagues this year.
Over the next few months, the Strategic Agenda will be augmented with outcomes
of the Walmart integration process.
Prospects
For the 8 weeks to 21 August 2011, total sales increased by 13.5% and comparable
sales increased by 7.1%, indicating perhaps either another market share gain, or
a healthier than expected consumer.
Whilst we expect that our Walmart relationship will be positive for the Group`s
future financial performance, we anticipate that this will only be seen in the
2013 financial year and beyond.
Despite the difficult and uncertain socio/political and economic environments,
both locally and globally, we believe we have the plans in place to deliver
another solid performance in the year to June 2012.
The financial information on which this outlook statement is based has not been
reviewed or reported on by the Company`s external auditors.
Conclusion
We have concluded an historic year in Massmart, delivering solid results in a
difficult environment. The process of integration with Walmart has just begun,
but there is certainly plenty of medium- and long-term opportunity to save
people money so they can live better on the African continent.
We would like to thank all our Massmart colleagues, our external advisors, our
suppliers and, most importantly, our loyal customers for their unwavering
dedication and service this year.
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. For the 2011 financial year, the Board has resolved to pay a
final dividend such that dividends for the year are maintained relative to the
prior year, notwithstanding the lower cover, due to the strong cash position of
the Group and growth prospects for the coming year.
Notice is hereby given that a final cash dividend of 134 cents per share in
respect of the period ended 26 June 2011 has been declared payable to the
holders of ordinary shares recorded in the share register of the company on
Friday, 16 September 2011. The last day to trade cum-dividend will therefore be
Friday, 9 September 2011 and Massmart shares will trade ex-dividend from Monday,
12 September 2011. Payment of the cash dividend will be made on Monday, 19
September 2011. Share certificates may not be dematerialised or rematerialised
between Monday, 12 September 2011 and Friday, 16 September 2011, 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, 19 September 2011.
On behalf of the Board
Grant Pattison Guy Hayward
Chief Executive Officer Chief Financial Officer
24 August 2011
Income statement
June 2011 June 2010
Rm (Reviewed) (Audited) % change
Revenue 53,089.5 47,550.6 11.6
Sales 52,950.1 47,451.0 11.6
Cost of sales (note 4) (43,281.8) (38,955.9) (11.1)
Gross profit 9,668.3 8,495.1 13.8
Other income 139.4 99.6 40.0
Depreciation and amortisation (476.3) (382.8) (24.4)
Impairment of assets (note 3) (10.0) (3.7) (170.3)
Employment costs (3,766.3) (3,352.9) (12.3)
Occupancy costs (note 4) (1,664.7) (1,415.1) (17.6)
Foreign exchange loss (note 4) (72.3) (87.7) -
Other operating costs (note 4) (1,759.4) (1,485.8) (18.4)
Operating profit before Transaction 2,058.7 1,866.7 10.3
costs
Transaction costs (note 6) (408.8) - -
Loss on disposal of Makro Zimbabwe (38.6) - -
Operating profit 1,611.3 1,866.7 (13.7)
Finance costs (140.4) (92.6) (51.6)
Finance income 33.2 45.9 (27.7)
Net finance costs (107.2) (46.7) (129.6)
Profit before taxation 1,504.1 1,820.0 (17.4)
Taxation (585.3) (608.2) 3.8
Profit for the year 918.8 1,211.8 (24.2)
Profit attributable to:
Owners of the parent 838.7 1,129.9
Preference shareholders (note 7) 38.4 46.5
Non-controlling interests 41.7 35.4
Profit for the year 918.8 1,211.8 (24.2)
Basic EPS (cents) 412.1 562.8 (26.8)
Diluted basic EPS (cents) 387.5 538.5 (28.0)
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 838.7 1,129.9
holders of the parent
Impairment of assets (note 3) 10.0 3.7
(Profit)/loss on disposal of fixed (2.9) 0.6
assets
Loss on disposal of business 34.9 5.3
Total tax effects of adjustments 1.2 (0.9)
Headline earnings 881.9 1,138.6 (22.5)
Headline earnings before Transaction 1,252.7 1,138.6 10.0
costs
Headline EPS (cents) 433.3 567.2 (23.6)
Headline EPS before Transaction 615.5 567.2 8.5
costs (taxed) (cents)
Diluted headline EPS (cents) 407.5 542.7 (24.9)
Diluted headline EPS before 578.8 542.7 6.7
Transaction costs (taxed) (cents)
Statement of comprehensive income
June 2011 June 2010
Rm (Reviewed) (Audited) % change
Profit for the year 918.8 1,211.8
Foreign currency translation reserve 2.6 (30.9)
Cash flow hedges (2.2) 16.3
Revaluation of listed shares 0.1 -
Income tax relating to components of 0.6 (4.5)
other comprehensive income
Other comprehensive income for the 1.1 (19.1)
year, net of tax
Total comprehensive income for the 919.9 1,192.7 (22.9)
year
Total comprehensive income
attributable to:
Owners of the parent 839.8 1,110.8
Preference shareholders (note 7) 38.4 46.5
Non-controlling interests 41.7 35.4
Total comprehensive income for the 919.9 1,192.7 (22.9)
year
Statement of financial position
June 2011 June 2010
Rm (Reviewed) (Audited) % change
ASSETS
Non-current assets 5,846.7 4,974.9
Property, plant and equipment 2,717.8 2,055.2 32.2
Goodwill and other intangible assets 2,358.4 2,095.8
Investments and loans 505.5 585.6
Deferred taxation 265.0 238.3
Current assets 11,427.6 9,314.5
Inventories 6,199.7 5,601.5 10.7
Trade, other receivables and 2,562.7 2,322.6 10.3
prepayments
Taxation 22.5 22.1
Cash and bank balances 1,549.1 1,368.3
Restricted cash held on behalf of 1,093.6 -
Massmart Employee Share Trusts`
beneficiaries (note 10)
Total 17,274.3 14,289.4
EQUITY AND LIABILITIES
Total equity 4,181.7 3,591.8
Equity attributable to equity 3,965.9 3,469.7 14.3
holders of the parent
Minority interest 215.8 122.1
Non-current liabilities 1,205.2 895.3
Non-current liabilities: interest- 598.7 385.8
bearing
Other non-current liabilities and 584.3 490.1
provisions
Deferred taxation 22.2 19.4
Current liabilities 11,887.4 9,802.3
Trade, other payables and provisions 9,416.7 9,220.1 2.1
Massmart Employee Share Trusts` 1,093.6 -
beneficiaries liability (note 10)
Taxation 170.6 201.9
Bank overdrafts and short-term 1,206.5 380.3
borrowings
Total 17,274.3 14,289.4
Statement of cash flows
June 2011 June 2010
Rm (Reviewed) (Audited)
Operating cash including cash-effect of 2,264.8 2,346.8
Transaction costs
Working capital movements (625.4) 292.6
Cash generated from operations 1,639.4 2,639.4
Taxation paid (645.1) (552.8)
Net interest paid (107.2) (46.7)
Investment income 48.9 36.1
Dividends paid (822.5) (822.4)
Cash inflow from operating activities 113.5 1,253.6
Investment to maintain operations (305.2) (277.8)
Investment to expand operations (843.0) (346.1)
Disposal of subsidiary - 26.9
Businesses acquired (171.0) (369.9)
Other investing activities including minority 21.3 (163.8)
interests acquired
Cash outflow from investing activities (1,297.9) (1,130.7)
Cash inflow from financing activities (note 615.3 193.8
10)
Net (decrease)/increase in cash and cash (569.1) 316.7
equivalents
Foreign exchange profit/(loss) taken to other 2.6 (30.9)
comprehensive income
Opening cash and cash equivalents 1,310.9 1,025.1
Closing cash and cash equivalents 744.4 1,310.9
Statement of changes in equity
Year ended June 2011 Ordinary
(Reviewed) share Share General Retained
Rm capital premium reserves profit
Opening balance 2.0 142.0 464.6 2,861.1
Issue of share capital (net - 481.6 - -
of costs)
Dividends declared - - - (822.4)
Total comprehensive income - - 1.1 877.1
Changes in minority interests - - (40.5) -
and distribution to
minorities
Cost of acquiring minority - - - -
interests
Minorities relating to - - (16.8) -
acquisitions
Release of financial - - - -
liability raised on a
business acquisition
Share trust transactions and - - 180.8 (140.2)
IFRS 2 charge
Treasury shares - 120.3 (144.8) -
(acquired)/realised
Total 2.0 743.9 444.4 2,775.6
Equity
attributable
Year ended June 2011 to equity
(Reviewed) holders of Minority
Rm the parent interest Total
Opening balance 3,469.7 122.1 3,591.8
Issue of share capital (net 481.6 - 481.6
of costs)
Dividends declared (822.4) (27.5) (849.9)
Total comprehensive income 878.2 41.7 919.9
Changes in minority interests (40.5) (1.0) (41.5)
and distribution to
minorities
Cost of acquiring minority - - -
interests
Minorities relating to (16.8) 80.5 63.7
acquisitions
Release of financial - - -
liability raised on a
business acquisition
Share trust transactions and 40.6 - 40.6
IFRS 2 charge
Treasury shares (24.5) - (24.5)
(acquired)/realised
Total 3,965.9 215.8 4,181.7
Year ended June 2010 Ordinary
(Audited) share Share General Retained
Rm capital premium reserves profit
Opening balance 2.0 149.4 298.7 2,604.6
Issue of share capital (net - - - -
of costs)
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 - - 120.0 -
liability 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
attributable
Year ended June 2010 to equity
(Audited) holders of Minority
Rm the parent interest Total
Opening balance 3,054.7 42.0 3,096.7
Issue of share capital (net - - -
of costs)
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 120.0 - 120.0
liability 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
June 2011 June 2010
(Reviewed) (Audited)
Net asset value per share (cents) 1,854.2 1,722.0
Ordinary shares (000`s):
- In issue 213,883 201,496
- Weighted average 203,516 200,751
- Diluted weighted average 216,425 209,817
Preference shares (000`s):
- Thuthukani Trust `A` shares held by the 8,547 12,826
participants (note 7)
- Black Scarce Skills Trust `B` shares held by 890 2,203
the participants (note 7)
Capital expenditure (Rm):
- Authorised and committed 738.2 226.9
- Authorised not committed 593.1 450.5
Operating lease commitments (2012 - 2026) (Rm) 10,334.0 8,573.4
US dollar exchange rates: - year end (R/$) 6.95 7.67
US dollar exchange rates: - average (R/$) 7.04 7.61
Reconciliation between trading and operating profit
June 2011 June 2010
Rm (Reviewed) (Audited)
Profit before interest and taxation
Trading profit before interest and taxation 2,182.9 2,027.8
Asset impairments (10.0) (3.7)
Transaction costs (408.8) -
Loss on disposal of Makro Zimbabwe (38.6) -
BEE transaction IFRS 2 charge (note 5) (41.9) (69.7)
Foreign exchange loss (72.3) (87.7)
Operating profit before interest and taxation 1,611.3 1,866.7
Profit before taxation
Trading profit before taxation 2,331.6 2,190.9
Corporate net interest (255.9) (209.8)
Asset impairments (10.0) (3.7)
Transaction costs (408.8) -
Loss on disposal of Makro Zimbabwe (38.6) -
BEE transaction IFRS 2 charge (note 5) (41.9) (69.7)
Foreign exchange loss (72.3) (87.7)
Operating profit before taxation 1,504.1 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), the requirements of the
Companies Act 71 of 2008 and the AC 500 standards as issued by the Accounting
Practices Board or its successor. These condensed financial statements contain
the information as per IAS 34 Interim Financial Reporting, using accounting
policies that have been consistently applied to prior years.
2. During the current year, the only Massmart shares acquired in the market were
by the Massmart Employee Share Trusts where 2.1 million shares (1.0% of average
shares in issue) were bought at an average price of R131.60 totalling R273.9
million. During the prior year, the Massmart Employee Share Trusts acquired 1.2
million shares (0.6% of average shares in issue) at an average price of R114.44
totalling R137.2 million.
3. The impairment of assets in the current year relates to the impairment of
certain acquired goodwill in Masscash. 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 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 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 R64.7 million (2010: R69.7
million). The acceleration IFRS 2 Share-based Payment charge as a result of the
Walmart Transaction totalled R22.8 million, (included in the R70.1 million in
note 6 below). The `A` and `B` preference shares were issued to the Thuthukani
Trust and the Black Scarce Skills Trust respectively.
6. The Walmart Transaction costs are made up as follows:
Rm
Advisors` fees 238.7
Accelerated share-based payment charge 70.1
Supplier fund 100.0
408.8
7. The preference shareholders` dividend amount of R38.4 million (2010: R46.5
million) represents the 2010 final cash dividend of 134 cents and the 2011
interim cash dividend of 252 cents paid to all Thuthukani beneficiaries. The
Thuthukani dividend was equivalent to 100% of the ordinary dividend for the
current and prior year.
8. Other non-current liabilities and provisions include the lease smoothing
liability of R414.3 million (2010: R422.8 million).
9. The net asset value of the businesses acquired during the year was R46.0
million (2010: R188.9 million) on the date of acquisition.
10. Included in current assets and current liabilities in the Statement of
Financial Position are two amounts of R1,093.6 million each. These amounts
represent the net cash proceeds held in the three Massmart Employee Share
Trusts, and the corresponding liability to the beneficiaries, as a result of the
Walmart Transaction. The cash was distributed to beneficiaries shortly after 26
June 2011. The Massmart Employee Share Trusts are consolidated with the Group
results. In the Statement of Cash Flows, the two amounts have been contra`d in
the Cash inflow from Financing Activities.
11. The increase in share premium is a result of Walmart acquiring Massmart
shares arising from the conversion of 51% of the vested and unvested share
options held by beneficiaries of the Massmart Employee Share Trusts. This
resulted in 9,751,231 new ordinary shares being issued and net cash of R481.6
million being received.
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. There are no material post balance sheet events. Two conditional
acquisitions, Fruitspot and Rhino Cash & Carry, have been filed with the
Competition Commission whose findings are expected to be issued in September or
October 2011.
14. 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 JSE Limited
Listings Requirements and ISRE 2410 Review of Interim Financial Information
Performed by the Independent Auditor of the Entity. The preparation of the
Group`s condensed consolidated reviewed results was supervised by the Chief
Financial Officer, Guy Hayward, BCom, CTA, CA(SA).
Directorate
MJ Lamberti (Chairman),
CS Seabrooke (Deputy Chairman),
GM Pattison* (Chief Executive Officer),
JA Davis**, NN Gwagwa,
GRC Hayward* (Chief Financial Officer),
P Langeni, CD McMillon**, JP Suarez**
*Executive **USA
Registered office
Massmart House, 16 Peltier Drive
Sunninghill Ext 6, 2191
Company secretary
I Zwarenstein
Transfer secretariesComputershare Investor Services
(Proprietary) Limited
Registered auditors
Deloitte & Touche
For more informationwww.massmart.co.za
Sunninghill
25 August 2011
Sponsor
Deutsche Securities (SA) (Proprietary) Limited
Date: 25/08/2011 07:07:28 Produced by the JSE SENS Department.
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