| Wed 22 Feb 2012, 7:15 | | 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 25 December 2011
Massmart Holdings Limited
Company registration number: 1940/014066/06
JSE code: MSM
ISIN: ZAE000152617
("the Company" or "the Group")
REVIEWED CONSOLIDATED RESULTS FOR THE 26 WEEKS ENDED 25 DECEMBER 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
12 countries in sub-Saharan Africa comprising 330 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 +15.0% to R31,492 million
Operating profit before forex and Integration costs +4.8% to R1,326 million
Cash generated from operations +60.4% to R3,580 million
Headline earnings +21.1% to R895 million
Headline EPS +13.7% to 416 cents
OVERVIEW
During our first six months as a subsidiary of Walmart, Group sales increased by
15.0%, operating profit by 15.3% and headline earnings by 21.1%. The weaker Rand
during the period boosted foreign exchange translation gains and we began
incurring costs related to the integration of Massmart into Walmart. Excluding
these two items, operating profit would have increased by 4.8% and headline
earnings by 8.7%.
Group trading was resilient with comparable sales increasing by 9.2%,
indicating, when measured against national retail sales growth of approximately
8.7%, a gain in overall market share. With internal product inflation of only
1.1%, the Group`s volume growth remained high.
We experienced cost pressures, which increased by 14.4%, as a result of our
investments in: refurbished and new stores (space growth of 6.0%); supply chain
facilities and capability; and Food Retail; as well as above-inflation increases
in local taxes and service costs.
Management has been focused on maintaining operating momentum whilst aligning
our Governance and Reporting processes with Walmart.
We await the rulings in both South Africa and Namibia regarding the separate
legal challenges to the Walmart acquisition which followed the approvals issued
in June 2011 in both countries.
ENVIRONMENT
The trends in the health of the consumer appear to be improving, underpinned by
real wage increases and improving employment, but dampened by signs of over-
indebtedness within the middle-income consumer.
Whilst inflation, as measured by CPI, rose above the upper limit of the SARB
target of 6.0%, consumers have enjoyed a much lower inflation rate (only 1.1%)
in the products they bought through our stores. Driven partly by the weaker Rand
and by increased commodity prices, our Food inflation of 2.0% was the highest of
our main categories during the period. General Merchandise remained in deflation
and was 6.1% caused mostly by continued imported deflation and the benefits of
hedging our imports.
The increasing complexity of the regulatory environment has required an
investment in compliance. Given the high costs of compliance, these trends have
inadvertently made it more difficult for smaller retailers and suppliers to
compete.
The underlying cost pressures in services, electricity and transport require a
greater investment in productivity gains. This, at the same time as the proposed
onerous labour legislation, will put a strain on employment levels and labour
relations.
The political stability on the African continent remains variable with some of
the gains of the last ten years being lost as countries struggle with political
transitions.
DIVISIONAL OPERATIONAL REVIEW
26 weeks 26 weeks
December December Period
2011 % of 2010 % of %
Rm (Reviewed) sales (Reviewed) sales growth
Sales 31,492.2 27,375.8 15.0
Massdiscounters 7,819.2 6,993.9 11.8
Masswarehouse 7,799.9 6,593.3 18.3
Massbuild 4,240.1 3,782.4 12.1
Masscash 11,633.0 10,006.2 16.3
Trading profit before 1,335.7 4.2 1,284.7 4.7 4.0
interest and tax
Massdiscounters 498.3 6.4 473.6 6.8 5.2
Masswarehouse 446.2 5.7 397.1 6.0 12.4
Massbuild 215.8 5.1 189.5 5.0 13.9
Masscash 175.4 1.5 224.5 2.2 (21.9)
Trading profit before 1,424.7 4.5 1,355.6 5.0 5.1
tax
Massdiscounters 528.0 6.8 486.6 7.0 8.5
Masswarehouse 474.7 6.1 422.4 6.4 12.4
Massbuild 236.8 5.6 209.8 5.5 12.9
Masscash 185.2 1.6 236.8 2.4 (21.8)
52 weeks
Comparable Estimated June
% sales % sales 2011 % of
Rm growth inflation (Audited) sales
Sales 9.2 1.1 52,950.1
Massdiscounters 4.6 (5.0) 13,332.5
Masswarehouse 11.6 2.3 12,722.9
Massbuild 8.7 0.5 7,271.0
Masscash 10.9 5.2 19,623.7
Trading profit before 2,182.9 4.1
interest and tax
Massdiscounters 744.0 5.6
Masswarehouse 749.0 5.9
Massbuild 315.1 4.3
Masscash 374.8 1.9
Trading profit before 2,331.6 4.4
tax
Massdiscounters 782.0 5.9
Masswarehouse 803.2 6.3
Massbuild 354.7 4.9
Masscash 391.7 2.0
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 106-store General Merchandise retail discounter
Game, which trades in South Africa, Botswana, Ghana, Malawi, Mozambique,
Namibia, Nigeria, Tanzania, Uganda and Zambia; and the 16-store Hi-tech retailer
DionWired.
Comparable store sales increased by 4.6% with estimated deflation of 5.0%. Total
sales increased by 11.8% and trading profit before tax increased by 8.5%. Game
South Africa`s sales growth was lower than expected, indicative of pressure on
middle-income consumers but also continued product deflation and the anticipated
cannibalisation of some stores` sales to other Massmart brands. Our African
stores are trading well with comparable Rand sales up 18.1% (and 12.4% in
constant currency) and DionWired performed exceptionally.
Foodco continues to expand with 15 stores (nine refurbished and six new) now in
the format, including two in Africa, and is performing at or above expectations.
With seven Game stores and three DionWired stores opening, and one Game store
closing, trading space increased by 5.9%.
Masswarehouse - comprises the 16-store Makro warehouse club trading in Food,
General Merchandise and Liquor in South Africa.
Comparable store sales increased by 11.6% with estimated inflation of 2.3%,
while total sales increased by 18.3% and trading profit before tax increased by
12.4%. Trading profit includes store pre-opening costs which were R22 million
higher than in the prior period.
Makro had an excellent performance, particularly as three new stores were
opened, and one closed, with the associated management distraction and initial
cost inefficiencies. All new stores include the Fresh offering and one store was
converted, bringing to five the number of Makro stores trading with Fresh.
The acquisition of Fruitspot was effective 2 January 2012 and will assist Makro
with its procurement and distribution of fresh and processed fruit and
vegetables.
With three stores opened and one closing, trading space increased by 15.9%.
Massbuild - comprises 84 outlets, trading in DIY, Home Improvement and Builders
Hardware, under the Builders Warehouse, Builders Express and Builders Trade
Depot brands in South Africa and Botswana.
Comparable store sales increased by 8.7% with estimated inflation of 0.5%. Total
sales increased by 12.1% and trading profit before tax increased by 12.9%.
This was a strong performance in a weak market, suggesting further market share
gains in South Africa. The first non-South African Builders Warehouse store
opened in Gaborone, Botswana, and has received phenomenal local support,
indicating great potential for this format elsewhere in Africa.
With one Builders Warehouse store and two Builders Express stores opened,
trading space increased by 2.2%.
Masscash - comprises 80 Wholesale stores and 28 Retail stores, including
Cambridge Food, trading in South Africa, Botswana, Lesotho, Namibia and
Swaziland, and Shield, a voluntary buying association.
Divisional comparable store sales increased by 10.9% with estimated inflation of
5.2%. Total sales increased by 16.3% but, disappointingly, trading profit before
tax decreased by 21.8%.
Despite a good sales performance, trading profit declined as a result of our
investments in growth, price and capacity as we build the Cambridge and Saverite
brands and supply chains.
The acquisition of Rhino Cash & Carry, comprising 14 stores, will be effective 1
March 2012, and will increase our total annualised Retail Cash & Carry sales to
approximately R5 billion. It is a condition of the Competition Tribunal`s ruling
that Rhino needs to dispose of four stores by the end of June 2012, with the
possibility of a further three month extension.
With five new Retail stores opened and two closed, trading space increased by
3.2%.
FINANCIAL REVIEW
Statement of comprehensive income
Total Group sales growth for the period to December 2011 was 15.0% with
comparable sales growth of 9.2%. Sales in our African businesses represented
7.7% of total Group sales and total African sales grew by 21.3% in Rands and
12.8% in local currencies.
The Group`s product inflation was 1.1% for the period, and this is the first
time we have moved into product inflation since 2009. General Merchandise
remained strongly in deflation and was 6.1%, while Food and Liquor`s inflation
increased slightly to 2.3% and Home Improvement inflation was steady at 0.6%.
During the six-month period, four stores were closed and 21 opened resulting in
a total of 330 stores at December 2011. Net trading space increased by 5.0% to a
total of 1,321,233mSquared.
The Group`s gross margin of 17.70% is lower than that of the prior period
(18.06%). Margins were steady in Makro and Masscash but slightly lower in
Massbuild due to clearance activity and in Massdiscounters due to high sales
growth in the lower-margin Hi-tech and Appliances categories and as promotional
sales mix increased slightly.
Due to the Foodco roll-out, the three new Makro stores and the investment in
Cambridge`s supply chain and infrastructure, total expenses (excluding foreign
exchange gains and losses) increased by 14.4%. Comparable expenses increased by
9.4%. Amongst other areas, the impact of the Group`s continued investment in
growth can be seen in the 24.4% higher depreciation and amortisation charges and
excluding these charges, the Group`s expenses as a percentage of sales improved
from 12.9% to 12.8%.
Included in operating profit are net realised and unrealised foreign exchange
gains of R82.4 million (December 2010: R79.5 million loss), caused by the weaker
Rand. The translation of Massdiscounters` African balance sheets accounted for
R25.4 million of this (2010: R57.8 million loss) and there was a net gain from
other foreign monetary balances of R57.0 million (2010: R21.7 million loss).
Direct costs incurred by the Group in connection with the Walmart integration
totalled R41.7 million.
Net interest paid of R48.1 million increased as a result of the Group`s capital
expenditure programme. Working capital levels are optimal across the Divisions.
At R1.34 billion, the Group`s average net borrowings are 15.5% higher than the
prior period`s figure of R1.16 billion.
The Group`s effective tax rate of 31.2% (2010: 31.7%) includes the effect of STC
of 1.9% (2010: 2.6%).
The minority interests comprise store managers` holdings in Masscash stores and
minorities in acquired Masscash businesses. This period`s minority figure has
reduced due to the Group`s acquisition of several store managers` minority
interests in Masscash Wholesale and of the Kangela 49% minority interest.
Headline earnings increased by 21.1% and headline EPS increased by 13.7%.
Adjusting for the effect of foreign exchange translation in both periods
however, reduces these to 4.9% and -1.4% respectively. The lower earnings per
share growth is caused by the higher number of shares in issue, as a consequence
of the implementation of the Walmart transaction in June 2011.
Statement of financial position
As noted earlier, working capital levels have returned to optimal levels. Days
in inventory at December 2011 were 59.0 (2010: 59.7 days) for the Group, and
inventory days are higher only in Masscash.
The net book value of property, plant and equipment increased by 32.4% compared
to December 2010 as we invested for growth. No businesses were acquired during
the period.
Despite the higher average interest-bearing debt, the Group`s gearing ratio was
steady at 31.6% (2010: 31.4%).
The annual rolling return on equity was 33.1% at December 2011.
Statement of cash flows
Operating cash of R1.64 billion was 19.9% higher than the prior period. Cash
from operations of R3.58 billion was 60.4% higher, reflecting the Group`s
improved working capital position. Supplier funding levels are, however,
approximately R600 million higher than normal and adjusting for this results in
a more representative 33.5% increase in cash from operations. Total capital
expenditure of R752.2 million is 32.9% higher than the prior period, and
comprises R324.3 million on replacement and R427.9 million on expansionary
expenditure. This expenditure was incurred in three main areas, being from new
and Foodco-refurbished stores in Massdiscounters (R249.1 million), three new
Makro stores (R209.6 million), and new stores and supply chain capability in
Masscash Retail (R122.9 million).
Impact of New Tax Treatment on Dividends
The proposed amendments to the South African tax treatment of dividends becomes
effective on 1 April 2012 and so will affect Massmart`s final dividend payable
in September 2012 and thereafter. Following these amendments, Massmart`s
dividend policy will likely be adjusted in response to the effect of the new tax
on shareholders.
STRATEGIC AGENDA
Our strategic agenda included four areas. The first being to maintain the
momentum of improving the Group`s operating disciplines and implementing planned
improvements in Supply Chain, Private Label and Financial Services.
Our second priority has been to complete the Walmart transaction and we await
the conclusion of the next steps in the process being the rulings of the South
African Competition Appeal Court and the Namibian Minister of Trade and Industry
respectively. We are applying the appropriate resources to ensure that we comply
with the conditions in the Competition Tribunal merger approval.
Our third priority has been to commence the integration of Massmart into
Walmart. As one would expect in these endeavours, however, two things become
apparent: the impact of upfront costs and investments, and that accurately
measuring the resultant value can be difficult. Despite these challenges, we are
encouraged that these endeavours will ultimately benefit the Group, our staff
and our customers in the years ahead. We have made good progress on Governance,
Culture and Values.
Our final priority has been to continue to act as a good corporate citizen and
so we continue to invest in our three accountability themes: to enable
sustainable supply and consumerism; to minimise the Group`s environmental
footprint; and to champion social equality initiatives.
We have sought out opportunities to work with Government in areas where we can
leverage our Group capabilities to mutual benefit. This has resulted in a
multitude of partnerships. We are improving the quality of goods in partnership
with the Department of Trade and Industry through SABS. We are working with the
Department of Finance through SARS to assist with understanding and enabling
efficient procurement. We are working with the Department of Agriculture
exploring ways to support small emerging farmers with the end-objective of
integrating them into the Massmart supply chain. We are working with local
suppliers to assist them in taking advantage of opportunities to export locally
manufactured goods to Walmart`s global operations.
We are working with the Department of Safety and Security focusing on supporting
orphans of policemen and women killed in the line of duty, but also responding
to broader SAPS requests for assistance. We are working alongside the Department
of Basic Education helping them to meet infrastructural needs associated with
their school-feeding programme. We continue working with the Department of
Defense, providing Christmas food hampers to the families of soldiers on peace-
keeping operations in foreign countries.
PROSPECTS
For the 34 weeks to 19 February 2012, total sales increased by 15.1% and
comparable sales increased by 9.2%, continuing the trends experienced at the
close of the last financial period.
The current trends of investment in growth and capacity, including Integration
costs, will continue through to the end of the year, with sales performing well,
but with operating margin under pressure.
We are pleased with the trading performance and are confident that the current
period of investment will bear fruit in future years.
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. For the period to December 2011, the Board has resolved to
pay an interim dividend equal to that of the prior period, notwithstanding the
resultant lower dividend cover, due to the strong liquidity position of the
Group and its growth prospects.
Notice is hereby given that an interim cash dividend of 252 cents per share in
respect of the period ended 25 December 2011has been declared payable to the
holders of ordinary shares recorded in the share register of the Company on
Friday, 16 March 2012. The last day to trade cum-dividend will therefore be
Friday, 9 March 2012 and Massmart shares will trade ex-dividend from Monday, 12
March 2012. Payment of the cash dividend will be made on Monday, 19 March 2012.
Share certificates may not be dematerialised or rematerialised between Monday,
12 March 2012 and Friday, 16 March 2012, both days inclusive.
Massmart shareholders who hold Massmart ordinary shares in certificated form
("certificated shareholders") should note that dividends will be paid by cheque
and by means of an electronic funds transfer ("EFT") method. Where the dividend
payable to a particular certificated shareholder is less than R100, the dividend
will be paid by EFT only to such certificated shareholder. Certificated
shareholders who do not have access to any EFT facilities are advised to contact
the Company`s transfer secretaries, Computershare Investor Services at Ground
Floor 70 Marshall Street, Johannesburg 2001, PO Box 61051 Marshalltown 2107,
(011) 370 5000, 0861 100 9333, in order to make the necessary arrangements to
take delivery of the proceeds of their dividend.
Massmart shareholders who hold Massmart ordinary shares in dematerialised form
will have their accounts held at their CSDP or broker credited electronically
with the proceeds of their dividend.
A Thuthukani dividend equivalent to 100% of the Massmart ordinary dividend per
share (252 cents) will be paid to the Massmart Thuthukani Empowerment Trust on
Monday, 19 March 2012.
On behalf of the Board
Grant Pattison Guy Hayward
Chief Executive Officer Chief Financial Officer
21 February 2012
INCOME STATEMENT
26 weeks 26 weeks 52 weeks
December December June
2011 2010 2011
Rm (Reviewed) (Reviewed) % change (Audited)
Revenue 31,547.1 27,458.8 14.9 53,089.5
Sales 31,492.2 27,375.8 15.0 52,950.1
Cost of sales (25,917.3) (22,431.5) (15.5) (43,281.8)
Gross profit 5,574.9 4,944.3 12.8 9,668.3
Other income 54.9 83.0 (33.9) 139.4
Depreciation and (275.6) (221.5) (24.4) (476.3)
amortisation
Impairment of assets (note (0.3) - - (10.0)
3)
Employment costs (2,137.1) (1,836.5) (16.4) (3,766.3)
Occupancy costs (989.0) (827.1) (19.6) (1,664.7)
Foreign exchange 82.4 (79.5) - (72.3)
profit/(loss)
Other operating costs (902.2) (877.7) (2.8) (1,759.4)
Operating profit before 1,408.0 1,185.0 18.8 2,058.7
Transaction and Integration
costs
Transaction costs (note 5) - - - (408.8)
Integration costs (41.7) - - -
Loss on disposal of Makro - - - (38.6)
Zimbabwe
Operating profit 1,366.3 1,185.0 15.3 1,611.3
Finance costs (72.5) (58.3) (24.4) (140.4)
Finance income 24.4 17.6 38.6 33.2
Net finance costs (48.1) (40.7) (18.2) (107.2)
Profit before taxation 1,318.2 1,144.3 15.2 1,504.1
Taxation (410.9) (362.5) (13.4) (585.3)
Profit for the period 907.3 781.8 16.1 918.8
Profit attributable to:
Owners of the parent 893.0 738.5 20.9 838.7
Preference shareholders 2.5 16.9 38.4
(note 6)
Non-controlling interests 11.8 26.4 41.7
Profit for the period 907.3 781.8 16.1 918.8
Basic EPS (cents) 414.9 365.3 13.6 412.1
Diluted basic EPS (cents) 406.3 342.6 18.6 390.7
Dividend (cents):
- Interim 252.0 252.0 - 252.0
- Final 134.0
- Total 252.0 252.0 - 386.0
HEADLINE EARNINGS
Reconciliation of net
profit for the period to
headline earnings:
Net profit attributable to 893.0 738.5 838.7
equity holders of the
parent
Impairment of assets (note 0.3 - 10.0
3)
Loss/(Profit) on disposal 2.4 0.8 (2.9)
of fixed assets
Loss on disposal of - - 34.9
business
Release of negative - (0.2) -
goodwill
Loss on sale of assets - 0.7 -
classified as held for sale
Total tax effects of (0.5) (0.3) 1.2
adjustments
Headline earnings 895.2 739.5 21.1 881.9
Headline earnings before 835.9 796.7 4.9 933.9
foreign exchange
Headline EPS (cents) 416.0 365.8 13.7 433.3
Headline EPS before foreign 388.4 394.1 (1.4) 458.9
exchange (cents)
Diluted headline EPS 407.3 343.0 18.7 410.8
(cents)
Diluted headline EPS before 380.3 369.6 2.9 435.0
foreign exchange (cents)
STATEMENT OF COMPREHENSIVE INCOME
26 weeks 26 weeks 52 weeks
December December June
2011 2010 2011
Rm (Reviewed) (Reviewed) % change (Audited)
Profit for the period 907.3 781.8 918.8
Foreign currency 86.7 (5.9) 2.6
translation reserve
Cash flow hedges 16.2 (30.6) (2.2)
Revaluation of listed 0.1 0.1 0.1
shares
Income tax relating to (4.5) 8.6 0.6
components of other
comprehensive income
Other comprehensive income 98.5 (27.8) 1.1
for the period, net of tax
Total comprehensive income 1,005.8 754.0 33.4 919.9
for the period
Total comprehensive income
attributable to:
Owners of the parent 991.5 710.7 839.8
Preference shareholders 2.5 16.9 38.4
(note 6)
Non-controlling interests 11.8 26.4 41.7
Total comprehensive income 1,005.8 754.0 33.4 919.9
for the period
STATEMENT OF FINANCIAL POSITION
December December June
2011 2010 2011
Rm (Reviewed) (Reviewed) % change (Audited)
ASSETS
Non-current assets 6,291.6 5,536.0 5,846.7
Property, plant and 3,236.1 2,443.8 32.4 2,717.8
equipment
Goodwill and other 2,348.9 2,224.8 2,358.4
intangible assets
Investments and loans 458.1 616.6 505.5
Deferred taxation 248.5 250.8 265.0
Current assets 14,972.3 12,440.6 11,427.6
Inventories 8,385.2 7,336.1 14.3 6,199.7
Trade, other receivables 3,522.5 2,953.1 19.3 2,562.7
and prepayments
Taxation 54.4 33.8 22.5
Cash and bank balances 3,010.2 2,117.6 1,549.1
Restricted cash held on - - 1,093.6
behalf of Massmart Employee
Share Trusts` beneficiaries
(note 9)
Assets classified as held - 4.6 -
for sale
Total 21,263.9 17,981.2 17,274.3
EQUITY AND LIABILITIES
Total equity 4,864.6 4,009.7 4,181.7
Equity attributable to 4,658.1 3,857.5 20.8 3,965.9
equity holders of the
parent
Minority interest 206.5 152.2 215.8
Non-current liabilities 928.9 859.8 1,205.2
Non-current liabilities: 376.8 353.2 598.7
interest-bearing
Other non-current 527.7 487.4 584.3
liabilities and provisions
(note 7)
Deferred taxation 24.4 19.2 22.2
Current liabilities 15,470.4 13,111.7 11,887.4
Trade, other payables and 14,554.7 12,503.7 16.4 9,408.6
provisions
Massmart Employee Share - - 1,093.6
Trusts` beneficiaries
liability (note 9)
Taxation 235.7 267.7 170.6
Bank overdrafts and short- 680.0 340.3 1,214.6
term borrowings
Total 21,263.9 17,981.2 17,274.3
STATEMENT OF CASH FLOWS
26 weeks 26 weeks 52 weeks
December December June
2011 2010 2011
Rm (Reviewed) (Reviewed) (Audited)
Operating cash before 1,640.3 1,368.3 2,264.8
working capital movements
Working capital movements 1,939.4 863.7 (625.4)
Cash generated from 3,579.7 2,232.0 1,639.4
operations
Taxation paid (363.2) (316.9) (645.1)
Net interest paid (48.1) (40.7) (107.2)
Investment income 3.8 34.3 48.9
Dividends paid (291.1) (286.9) (822.5)
Cash inflow from operating 2,881.1 1,621.8 113.5
activities
Investment to maintain (324.3) (215.9) (305.2)
operations
Investment to expand (427.9) (350.1) (843.0)
operations
Businesses acquired - (87.0) (171.0)
Other investing activities 47.7 (24.0) 21.3
including minority
interests acquired
Cash outflow from investing (704.5) (677.0) (1,297.9)
activities
Cash (outflow)/inflow from (157.5) (249.9) 615.3
financing activities
Net increase/(decrease) in 2,019.1 694.9 (569.1)
cash and cash equivalents
Foreign exchange 86.7 (5.9) 2.6
profit/(loss) taken to
other comprehensive income
Opening cash and cash 744.4 1,310.9 1,310.9
equivalents
Closing cash and cash 2,850.2 1,999.9 744.4
equivalents
STATEMENT OF CHANGES IN EQUITY
Six months ended Ordinary
December 2011 share Share General Retained
(Reviewed) Rm capital premium reserves profit
Opening balance 2.0 743.9 444.4 2,775.6
Issue of share capital (net of 0.2 - - -
costs)
Dividends declared - - - (291.1)
Total comprehensive income - - 98.5 895.5
Changes in minority interests - - (3.0) -
and distribution to minorities
Share trust transactions and - - 41.3 (57.3)
IFRS 2 charge
Treasury shares - 6.2 1.9 -
(acquired)/realised
Total 2.2 750.1 583.1 3,322.7
Six months ended December 2010
(Reviewed) Rm
Opening balance 2.0 142.0 464.6 2,861.1
Issue of share capital (net of - - - -
costs)
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
Year ended June 2011
(Audited) Rm
Opening balance 2.0 142.0 464.6 2,861.1
Issue of share capital (net of - 481.6 - -
costs)
Dividends declared - - - (822.4)
Total comprehensive income - - 1.1 877.1
Changes in minority interests - - (40.5) -
and distribution to minorities
Minorities relating to - - (16.8) -
acquisitions
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
Six months ended to equity
December 2011 holders of Minority
(Reviewed) Rm the parent interest Total
Opening balance 3,965.9 215.8 4,181.7
Issue of share capital (net of 0.2 - 0.2
costs)
Dividends declared (291.1) (19.6) (310.7)
Total comprehensive income 994.0 11.8 1,005.8
Changes in minority interests (3.0) (1.5) (4.5)
and distribution to minorities
Share trust transactions and (16.0) - (16.0)
IFRS 2 charge
Treasury shares 8.1 - 8.1
(acquired)/realised
Total 4,658.1 206.5 4,864.6
Six months ended December 2010
(Reviewed) Rm
Opening balance 3,469.7 122.1 3,591.8
Issue of share capital (net of - - -
costs)
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
Year ended June 2011
(Audited) Rm
Opening balance 3,469.7 122.1 3,591.8
Issue of share capital (net of 481.6 - 481.6
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
Minorities relating to (16.8) 80.5 63.7
acquisitions
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
ADDITIONAL INFORMATION
26 weeks 26 weeks 52 weeks
December December June
2011 2010 2011
(Reviewed) (Reviewed) (Audited)
Net asset value per share (cents) 2,158.0 1,893.2 1,854.2
Ordinary shares (000`s):
- In issue 215,853 203,754 213,883
- Weighted average 215,209 202,185 203,516
- Diluted weighted average 219,778 215,581 214,683
Preference shares (000`s):
- Thuthukani Trust `A` shares 1,395 9,190 4,176
held by the participants (note 6)
- Black Scarce Skills Trust `B` 1,425 2,154 890
shares held by the participants
(note 6)
Capital expenditure (Rm):
- Authorised and committed 386.3 562.2 738.2
- Authorised not committed 529.9 209.0 593.1
Operating lease commitments (2012 11,812.7 9,736.8 10,334.0
- 2026) (Rm)
US dollar exchange rates - period 8.16 6.79 6.95
end (R/$)
US dollar exchange rates - 7.57 7.16 7.04
average (R/$)
RECONCILIATION BETWEEN TRADING AND OPERATING PROFIT
26 weeks 26 weeks 52 weeks
December December June
2011 2010 2011
Rm (Reviewed) (Reviewed) (Audited)
Profit before interest and
taxation
Trading profit before interest 1,335.7 1,284.7 2,182.9
and taxation
Asset impairments (0.3) - (10.0)
Transaction costs (note 5) - - (408.8)
Integration costs (41.7) - -
Loss on disposal of Makro - - (38.6)
Zimbabwe
BEE transaction IFRS 2 charge (9.8) (20.2) (41.9)
(note 4)
Foreign exchange profit/(loss) 82.4 (79.5) (72.3)
Operating profit before interest 1,366.3 1,185.0 1,611.3
and taxation
Profit before taxation
Trading profit before taxation 1,424.7 1,355.6 2,331.6
Corporate net interest (137.1) (111.6) (255.9)
Asset impairments (0.3) - (10.0)
Transaction costs (note 5) - - (408.8)
Integration costs (41.7) - -
Loss on disposal of Makro - - (38.6)
Zimbabwe
BEE transaction IFRS 2 charge (9.8) (20.2) (41.9)
(note 4)
Foreign exchange profit/(loss) 82.4 (79.5) (72.3)
Operating profit before taxation 1,318.2 1,144.3 1,504.1
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 AC 500 standards as
issued by the Accounting Practices Board or its successor and the
requirements of the Companies Act 71 of 2008, as amended. These condensed
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 Massmart shares acquired in the
market were by the Massmart Employee Share Trusts where 0.6 million shares
(0.3% of shares in issue) were bought at an average price of R154.99
totalling R86.3 million. In the prior period, the only shares bought in the
market were by the Massmart Employee Share Trusts where 1.4 million shares
(0.7% of shares in issue) were bought in the market at an average price of
R126.84 totalling R175.2 million.
3. The impairment of assets in the current period relates to the closure of
the Game Mauritius store. There was no impairment of assets in the prior
period. The impairment of assets in the prior year relates to the
impairment of certain acquired goodwill in Masscash.
4. The Massmart BEE transaction, which came into operation in October 2006,
gave rise to an IFRS 2 Share-based Payment charge of R9.8 million (2010:
R20.2 million). The `A` and `B` preference shares were issued to the
Thuthukani Trust and the Black Scarce Skills Trust respectively.
5. The 2011 year-end Walmart Transaction costs were made up as follows:
Rm
Advisors` fees 238.7
Accelerated share-based payment charge 70.1
Supplier fund 100.0
408.8
6. The preference shareholders` dividend amount of R2.5 million (2010: R16.9
million) represents the June 2011 final cash dividend of 134 cents paid to
all Thuthukani beneficiaries. The Thuthukani dividend was equivalent to
100% of the ordinary dividend for the current and prior periods.
7. Other non-current liabilities and provisions include the lease smoothing
liability of R354.5 million (2010: R418.6 million).
8. There were no businesses acquired during the period. The net asset value of
the businesses acquired in the prior period was R62.9 million on the date
of acquisition.
9. Included in the 2011 year-end current assets and current liabilities in the
Statement of Financial Position were 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.
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. Post-balance sheets events include the acquisition of 100% of Fruitspot
which became effective on 2 January 2012 and the acquisition of 100% of
Rhino Cash & Carry which will be effective from 1 March 2012.
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
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),
D Cheesewright*** (Alternate),
JA Davis**,
NN Gwagwa,
GRC Hayward* (Chief Financial Officer),
P Langeni,
CD McMillon**,
JP Suarez**
*Executive **USA ***UK
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
22 February 2012
Johannesburg
Sponsor
Deutsche Securities (SA) (Proprietary) Limited
Date: 22/02/2012 07:15:42 Produced by the JSE SENS Department.
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