| Thu 22 Feb 2007, 7:30 | | MSM - Massmart - Reviewed consolidated results for |
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MSM
MSM
MSM - Massmart - Reviewed consolidated results for the 26 weeks
ended December 2006 and dividend declaration
Massmart Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration Number: 1940/014066/05)
Share code: MSM
ISIN: ZAE000029534
("Massmart" or "the company")
Reviewed consolidated results for the 26 weeks ended December 2006
Massmart - Dedicated to Value
Massmart is a managed portfolio of nine wholesale and retail chains, each
focused on high volume, low margin, low cost distribution of mainly branded
consumer goods for cash, in 13 countries in sub-Saharan Africa through four
divisions comprising 235 stores, and one buying association serving 480
independent retailers and wholesalers. 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.
- Sales from continuing operations increase 16%
to R18 014 million
- Trading profit from continuing operations increases
35% to R1 033 million
- Headline earnings increase
31% to R672 million
- Headline earnings before the BEE transaction increase
35% to R689 million
- Headline EPS increases
31% to 335,6 cents
- Cash flow from operations increases
8% to R1 757 million
- Dividend increases 52%
to 197 cents per share
Overview
As we predicted this time last year, the South African consumer economy remained
buoyant throughout 2006.
This environment enhanced the effect of aggressive trading strategies on
Massmart`s low price, high volume, low expense business model, culminating in
pleasing comparable store sales growths and excellent first half profit
performances from each of Massmart`s divisions, despite major integration
projects in Massbuild and Masscash, and numerous store openings and conversions
in Massdiscounters.
This is Massmart`s 36th consecutive half-year of real sales growth over 8% and
our 17th consecutive half-year of headline earnings per share growth. We are
delighted that this performance has been recognised internationally by our
ranking in the annual Deloitte retail survey as the 140th of the largest 250
retailers in the world, and the 15th fastest growing over the past five years.
The highlights of the half-year were:
- Record sales of R18,0 billion, of which 98,7% were cash sales and 5,0% from
foreign stores.
- Comparable store sales growth of 11,9%.
- Profit before tax grew 34,4% to R1,01 billion. For the first time half-year
profits exceeded R1 billion, equal to those for the full year to June 2005.
- Pre- and post-interest operating profit margins increased to 5,6% and 5,6%
respectively.
- Cash flow from operations rose 8,4% to R1,8 billion, only R50 million less
than the full year to June 2006.
- Rolling twelve-month return on equity increased from 43,5% to 46,7%.
- The store network was increased to 235 (1 026 320 square meters) with the
opening of 11 new stores with estimated annual sales of over R1 billion.
Strategic Overview and Progress
The management of Massmart remains fixated on the art and science of strategy.
This fascination has caused us to continually review and refine the core tenets
of the Group`s existence and progress for almost 19 years: aggressive organic
and acquisitive growth; value-adding collaboration between focussed trading
entities; and incentivisation for alignment.
Medium term performance is guided by our "Vision for Growth," a rolling three-
year internal financial target resulting from implementation of the above
strategies, given effect through specific plans and objectives for the growth of
sales, cash flows, profits and profitability. Since mid 2005, these activities
have been underpinned by the imperative to reduce operating expenses, leverage
management capabilities and facilitate shareholder understanding, by simplifying
the structures and processes of the Group.
Acquisitions have made no contribution to these results, emphasising our
assertion that having achieved the requisite critical mass, Massmart`s exciting
future sales and profit plans are no longer dependent on acquisitions.
For most South African retailers, good comparable store sales growth in recent
times was enhanced by aggressive new store expansion and credit extension. We
approach the first with caution and we avoid the second. Excess capacity raises
fixed cost ratios and prejudices returns in less favourable times and, given our
low gross margins, the expense and complexity of providing credit would
undermine our low price proposition to customers.
"Vision for Growth 2009" announced last August contained plans for the
unrelenting pursuit of strategic advantage and operating efficiencies, and the
opening of 58 stores which will generate additional estimated sales of R6,5
billion by June 2009. 11 of the 17 stores planned to open in the current
financial year were opened in the first half and a further 6 are confirmed for
the second half. Together these new stores will generate estimated annualised
sales of R1,5 billion.
Finally, over the next three to five years, shareholders can look forward to a
new source of value being unlocked as we pursue world class supply chain
standards in all our divisions.
Retail Economy
Contrary to the views of most market commentators who attribute the extent and
duration of consumer expenditure solely to cyclical macro economic factors, we
have held the view (first espoused in 2002) that retail sales are being
underpinned in no small part by a structural change in the South African
consumer economy. Aided by Black Economic Empowerment and employment equity, the
transformation of our society is bringing new, confident, discerning customers
into our stores. Industry wide, this phenomenon is sustaining relatively high
levels of monthly retail sales growth, which averaged 10% over the reporting
period compared to 6,9 % in the previous year.
While gradually rising interest rates and more cautious granting of credit muted
slightly the sales growth of some credit retailers towards the year end, all
retail sectors reported a record Christmas season with strong comparable sales
growths.
Operational Review
General merchandise sales grew 12,2%, home improvement sales 29,4% and food and
liquor sales 16,3%. Massmart`s 3,7% estimated average inflation on selling
prices was the weighted average of 0,6% deflation in general merchandise, 4,7%
in home improvement and 6,8% inflation in food and liquor.
Trading profit was depressed by store pre-opening costs of R30,5 million (2005:
R18,8 million) and foreign exchange movements of R41,4 million (2005: R16,8
million).
Massdiscounters - comprises retail general merchandise discounters Game (79
stores), which trades in South Africa, Namibia, Botswana, Zambia, Uganda,
Mozambique, Mauritius, Malawi, Tanzania, and Nigeria, and Dion (8 stores), which
trades in the Gauteng province of South Africa. Divisional comparable store
sales grew 7,0% with estimated inflation of 0,5%.
New store development comprised four large Game outlets and three smaller format
Game stores. Three Game stores were refurbished and three Dion stores converted
to Game. A new experimental format Dion Wired was opened in November.
Sound management of expenses and working capital resulted in a 19,8% growth in
profit before tax, which was reduced by store pre-opening expenses of R24
million (2005: R15 million) and a R34,6 million (2005: R13,8 million) foreign
exchange loss.
Notwithstanding eight new stores, the division ended the first half with higher
inventory in order to obviate the unsatisfactory out of stock situation that
depressed sales in the first quarter of 2006.
Despite the fact that seasonality has enhanced the first half trading profit
before tax return on sales of 8,5%, the division has exceeded its medium- term
target of 7%, which is accordingly being revised upwards to 8% compared to its
international benchmark of 7,4%.
Masswarehouse - comprises the 14-store Makro warehouse club trading in food,
general merchandise and liquor in South Africa and Zimbabwe. Divisional
comparable store sales grew 13,7% with estimated inflation of 3,5%.
Innovative merchandising, new cardholder recruitment and the use of Makro`s
considerable Customer Relationship Management capability to pursue high quality
sales, was underpinned by excellent inventory and expense management. The result
was an excellent growth on the previous years` trading profit.
While acknowledging the seasonal effect, the Masswarehouse half-year trading
profit before tax return on sales of 6,5% has so substantially exceeded its
medium-term target of 4% that it is being revised upwards to 5% compared to its
international benchmark of 5%.
Massbuild - comprises 64 outlets, trading in DIY, home improvement and builders
hardware, under the Builders Warehouse, De La Rey (currently being re-branded as
Builders Warehouse), Builders Express and Federated Timbers (currently being re-
branded as Builders Trade Depot) brands in the major metropolitan areas of South
Africa. Divisional comparable store sales grew 11,6% with estimated inflation of
4,7%.
Aggressive trading created a platform for the division to register significant
progress with the implementation of its strategic initiatives: the divisional
leadership structure was strengthened; merchandise skills were augmented; the
marketing platform was clarified; systems were upgraded; stores re-branded; one
De La Rey and one Builders Express store were opened and three Federated Timbers
stores closed. The division produced the Group`s highest levels of sales, with
significantly higher profit growth resulting in an improved profit margin.
Our insight into the business and our rate of progress with the integration of
the acquisitions has caused us to raise Massbuild`s medium-term trading profit
before tax return on sales target to 9%, compared to the 8.5% achieved in this
first half and its international benchmark of 10%.
Masscash - comprises 63 CBW and seven Jumbo wholesale cash and carry outlets
trading in South Africa, Lesotho, Namibia, and Botswana, and voluntary buying
organisation Shield (serving 480 independently owned food outlets). Divisional
comparable store sales grew by 14,4% with estimated inflation of 7,2%.
Sales growth was enhanced by food inflation, particularly in commodities, while
tight control of expenses and working capital enabled CBW to produce an
excellent result with profit growth over twice its double digit sales growth and
profitability in excess of the divisional return on sales target. Jumbo
(particularly the refurbished Crown Mines store) enjoyed a good first half as
did Shield with both producing pleasing profit growth.
Masscash`s half-year trading profit return on sales of 2,6% compares to its
medium-term target and its international benchmark of 3%.
Sustainability
Board Appointments
On the 1st November 2006, we were pleased to welcome to the Board, Dr Nolulamo
Nobambiswano (Lulu) Gwagwa - Chief Operating Officer of Lereko Investments and
Mr Kuseni D Dlamini - Executive Chairman of the Richards Bay Coal Terminal.
On the 1st December 2006 Mr Fanus Nothnagel resigned from the Board. We thank
him for his contribution to the Board over almost two years.
Governance Structure
The governance structure of Massmart is analogous to the European model, which
consists of a Supervisory Board chaired by a non-executive chairperson and
comprising mostly non-executive directors and a Management Board chaired by the
Group CEO and comprising executives. In Massmart`s case the latter has been
called the Executive Committee.
From 1st July 2007, when Messrs. Mark Lamberti and Grant Pattison are appointed
Non Executive Chairperson and Chief Executive respectively, the Massmart
Holdings Limited Board will comprise the non-executive Chairperson, independent
non-executive lead director and Deputy Chairperson Mr Chris Seabrooke, the Chief
Executive, the Chief Financial Officer and 10 independent non-executive
directors. Of the five Black independent non-executive directors, three are
women.
Currently, six of the 35 Executive Directors who serve on the Executive
Committee and the four Divisional Boards are from previously disadvantaged
groups and two are women.
Employment Equity
Massmart`s unqualified commitment to transformation is evidenced in the fact
that of the 1 321 new employees who were recruited in the reporting period,
39,3% were female and 81,9% were from previously disadvantaged groups. Of the
latter 39,0% were female.
At a Top Management level only one appointment was made which was white and
male, but at the Senior Management, Professional and Skilled levels, 40%, 36,8%
and 62% respectively were from previously disadvantaged groups.
It would be insulting to the previously disadvantaged members of Massmart at any
level to suggest that they hold their positions for any reason other than
competence. Our progress with employment equity will be driven by this principle
acknowledging the qualities required for successful business leadership and the
desperate skills and leadership shortage in our country.
Thuthukani Empowerment Transaction
On the 19th March this year 14 829 members of Massmart`s permanent general staff
represented by the Thuthukani Empowerment Trust will receive their first
dividend of 49 cents per share in terms of the R1 billion, company funded
empowerment transaction that was approved by shareholders on the 14th July 2006.
This initial 25% share of the dividend will rise to full participation over the
next three years and together with their voting rights through the trust, will
afford these staff members, 83% of whom are previously disadvantaged, the same
rights as all ordinary shareholders.
The cost of the scheme has reduced first half earnings per share by 8,6 cents.
Ownership by Previously Disadvantaged Directors
After Massmart`s empowerment schemes were announced in May 2006, the Group
temporarily withdrew its proposals for a share trust for previously
disadvantaged non-executive directors.
After consultation with major shareholders, the Board resolved at its November
22nd Board meeting to propose to shareholders that the these directors be
offered the opportunity to acquire shares in Massmart at a discount to the five-
day weighted average price before that Board meeting. Ownership of the shares
will be subject to normal vesting conditions.
As soon as the Corporate Laws Amendment Bill has been promulgated, a circular
will be dispatched with all necessary information, for shareholder approval.
Crime
Crime continues to increase costs and risks for Massmart, while imposing fear,
trauma, injury, bereavement, grief and material loss on our employees and their
families. Armed robberies and burglaries in the six months resulted in the loss
of R12,7 million of merchandise and cash.
The impact of crime on our society is insidious and it threatens many of the
rights and freedoms of our young democracy. We are wholly supportive of all
efforts by Government to eliminate this scourge, inter alia by using the
creative ideas, unconventional insights and organisational and leadership skills
that organised business can mobilise, without abdicating its prime
responsibility for the safety and security of its citizens. Insofar as business
is invited to play a role, the magnitude and complexity of the challenge demands
a thoughtful, measured response, sustained through appropriate structures.
HIV/AIDS
We are experiencing increased utilisation by staff of the services of IMPILO,
our health and wellness programme, which provides free medical attention and
anti-retroviral treatment to staff members.
Massmart`s People
For retailers, the six months to December is a very demanding period. The
functional expertise in the business is directed at preparation for that
extraordinary last quarter of the year when the rigours of the holiday season
devolve mainly on the women and men who work in our 235 stores in 12 countries
in sub-Saharan Africa.
We are deeply grateful for the efforts and energies that each of our 23 500
Massmart colleagues devoted to delivering this outstanding result.
Prospects
The excellent monetary and fiscal management of the South African economy
continues to provide an environment conducive to confident investment, extensive
infrastructural development, the growth of the private sector and the steady
creation of sustainable jobs at all levels. These factors should sustain healthy
growth for the retail sector although in the short-term it is likely that higher
interest rate levels and the introduction of the National Credit Bill will
result in a contraction of consumer credit.
All of the above augers well for Massmart. As a cash business we are less
susceptible to pressures on credit, our business model is structured to deliver
exceptional value and our unique portfolio of businesses comprises product
categories that will be stimulated by the economic scenario described above.
Notwithstanding this positive outlook, we continue to invest more time and
resource in developing flexibility than we do in attempting to predict the
future. Over many years we have proven that our strategic initiatives and
trading tactics have reduced the correlation of our performance with tightening
economic cycles.
For these reasons we retain the view that Massmart will enjoy an exceptional
year to June 2007, with earnings growth well ahead of sales growth, although our
second half profit growth may be lower than that reported here.
For the 34 weeks to the 18th February, total sales grew 16,1%, comparable store
sales grew 12,1%, with profit growth significantly ahead of sales growth and
last year.
Distribution and Changed Dividend Policy
In view of the continued strong cash generation by the Group and its liquid
balance sheet, the Board has revised Massmart`s dividend policy to declare and
pay an interim and final dividend representing a 1,7 times dividend cover unless
circumstances dictate otherwise.
Notice is hereby given that an interim dividend of 197 cents per share in
respect of the period ended 24 December 2006 has been declared payable to the
holders of ordinary shares recorded in the books of the company on Friday, 16
March 2007. The last day to trade cum dividend will therefore be Friday, 9 March
2007 and Massmart shares will trade ex dividend from Monday, 12 March 2007.
Payment of the dividend will be made on Monday, 19 March 2007. Share
certificates may not be dematerialised or rematerialised between Monday, 12
March 2007 and Friday, 16 March 2007, both days inclusive.
A Thuthukani dividend equivalent to 25% of the Massmart ordinary dividend per
share will be paid to the Thuthukani participants on Monday, 19 March 2007.
On behalf of the Board
Mark J Lamberti Guy Hayward
Deputy Chairman and Chief Financial Officer
Chief Executive Officer
21 February 2007
Operational review - Continuing operations
Restated
6 months 6 months Year ended
ended ended
December 2006 December 2005 June 2006
Rm (Reviewed) (Reviewed) % (Reviewed)
change
Sales 18 013,8 15 520,7 16,1 29 963,6
Massdiscounters 4 917,0 4 196,1 17,2 8 095,7
Masswarehouse 4 572,5 4 057,2 12,7 7 661,1
Massbuild 2 497,0 1 934,7 29,1 3 892,8
Masscash 6 027,3 5 332,7 13,0 10 314,0
Trading profit
before interest
and tax* 1 033,1 766,8 34,7 1 333,5
As a % of sales 5,7 4,9 4,5
Massdiscounters 399,3 347,8 14,8 546,4
Masswarehouse 275,5 167,6 64,4 288,3
Massbuild 206,1 146,2 41,0 290,4
Masscash 152,2 105,2 44,7 208,4
Trading profit
before tax** 1 085,0 791,0 37,2 1 412,7
As a % of sales 6,0 5,1 4,7
Massdiscounters 417,9 356,0 17,4 576,4
Masswarehouse 297,1 178,4 66,5 317,9
Massbuild 211,5 147,5 43,4 296,8
Masscash 158,5 109,1 45,3 221,6
The above results exclude Furnex from both prior periods (note 11).
*Trading profit before interest and tax is before asset impairments and the IFRS
2 charge of R17,2 million (2005: R0 million) relating to the BEE transaction.
** Trading profit before tax is after interest income but before corporate
interest paid of R61,0 million (2005: R42,1 million), asset impairments and the
IFRS 2 charge of R17,2 million (2005: R0 million) relating to the BEE
transaction.
Condensed balance sheet
Restated
December December June 2006
2006 2005
Rm (Reviewed) (Reviewed) % change (Audited)
Assets
Non-current assets 3 359,3 2 903,3 3 034,1
Property, plant and
equipment 1 068,8 875,1 22,1 944,3
Goodwill and other
intangible assets 1 455,5 1 267,3 1 298,7
Investments and other
financial assets 399,3 316,9 381,6
Deferred taxation 435,7 444,0 409,5
Current assets 8 961,1 7 863,7 6 584,3
Inventories 4 242,8 3 573,2 18,7 3 221,0
Trade receivables and
prepayments 2 350,4 2 284,9 1 770,0
Taxation 15,4 11,7 151,7
Cash and bank balances 2 352,5 1 993,9 1 441,6
Total 12 320,4 10 767,0 9 618,4
Equity and liabilities
Total equity 2 372,6 1 894,0 1 952,4
Equity attributable to
equity holders of the
parent 2 356,7 1 846,5 27,6 1 901,8
Minority interest 15,9 47,5 50,6
Non-current
liabilities 1 183,3 1 158,4 1 133,8
Non-current
liabilities - interest-
bearing 462,8 548,0 519,7
Other non-current
liabilities and
provisions 606,6 507,0 516,9
Deferred taxation 113,9 103,4 97,2
Current liabilities 8 764,5 7 714,6 6 532,2
Trade payables and
accruals 8 127,5 7 133,8 13,9 5 881,0
Taxation 426,3 319,0 410,9
Bank overdraft and
short-term borrowings 210,7 261,8 240,3
Total 12 320,4 10 767,0 9 618,4
Income statement
Restated
6 months 6 months Year ended
ended ended
December December % June 2006
2006 2005
Rm (Reviewed) (Reviewed) change (Audited)
Continuing operations
Revenue 18 232,0 15 648,8 16,5 30 129,4
Sales 18 013,8 15 520,7 16,1 29 963,6
Cost of sales (14 800,3) (12 831,5) 15,3 (24 650,0)
Gross profit 3 213,5 2 689,2 19,5 5 313,6
Depreciation and (115,1) (101,0) 14,0 (202,9)
amortisation
Impairment of assets - - - (5,4)
(note 9)
Employment costs (1 215,9) (1 027,5) 18,3 (2 079,0)
Occupancy costs (417,5) (350,7) 19,0 (740,5)
Net operating costs (449,1) (443,2) 1,3 (957,7)
Operating profit 1 015,9 766,8 32,5 1 328,1
Finance costs (38,9) (44,9) 13,4 (95,9)
Finance income 29,8 27,0 10,4 63,7
Net interest paid (9,1) (17,9) 49,2 (32,2)
Profit before taxation 1 006,8 748,9 34,4 1 295,9
Taxation (324,7) (230,0) 41,2 (444,6)
Profit for the period 682,1 518,9 31,5 851,3
from continuing
operations
Discontinued
operations:
Profit for the - 3,4 3,7
period (note 11)
Loss on disposal - - (1,8)
(note 11)
Profit for the period 682,1 522,3 30,6 853,2
Attributable to:
Equity holders of the 673,2 512,2 31,4 828,5
parent
Minority interest 8,9 10,1 24,7
682,1 522,3 853,2
Basic EPS (cents) 336,4 257,0 30,9 415,3
Basic EPS from 336,4 255,3 414,3
continuing operations
(cents)
Basic EPS from - 1,7 1,0
discontinued operations
(cents)
Diluted basic EPS 329,0 248,6 32,3 404,4
(cents)
Diluted basic EPS 329,0 247,0 403,4
from continuing
operations (cents)
Diluted basic EPS - 1,6 1,0
from discontinued
operations (cents)
Dividend (cents):
- Interim 197,0 130,0 51,5 130,0
- Final - - 80,0
Reconciliation of net
profit for the period
to headline earnings
Net profit attributable 673,2 512,2 828,5
to equity holders of
the parent
Impairment of assets - - 3,8
(note 9)
Write-off costs - - 3,3
incurred on acquisition
(note 10)
Loss on disposal of - - 1,8
discontinued operation
(note 11)
Profit on disposal (1,6) (0,6) (0,8)
of fixed assets
Headline earnings 671,6 511,6 31,3 836,6
IFRS 2 BEE transaction 17,2 - -
charge (note 12)
Headline earnings 688,8 511,6 34,6 836,6
before the BEE
transaction
Headline EPS (cents) 335,6 256,7 30,7 419,3
Headline EPS before the 344,2 256,7 34,1 419,3
BEE transaction (cents)
Diluted headline EPS 328,2 248,3 32,2 408,3
(cents)
Condensed cash flow statement
Restated
6 months 6 months Year ended
ended ended
December December June 2006
2006 2005
Rm (Reviewed) (Reviewed) (Audited)
Cash inflow from trading 1 114,5 881,7 1 543,6
Working capital movements 642,3 739,5 260,4
Cash generated from operations 1 756,8 1 621,2 1 804,0
Taxation paid (181,2) (213,4) (487,4)
Net interest paid (9,1) (18,2) (32,7)
Investment income 27,9 45,5 34,6
Dividends received - - 3,2
Dividends paid (160,1) (143,8) (402,8)
Net cash inflow from operating 1 434,3 1 291,3 918,9
activities
Investment to maintain operations (53,2) (72,4) (170,2)
Investment to expand operations (223,0) (113,5) (184,1)
Disposal of subsidiary - - 25,7
Other investing activities (172,7) (95,8) (130,9)
Net cash outflow from investing (448,9) (281,7) (459,5)
activities
Net cash (outflow)/inflow from (88,8) 465,3 506,0
financing activities
Net increase in cash and cash 896,6 1 474,9 965,4
equivalents
Foreign exchange losses taken to (1,6) (5,3) 6,1
statement of changes in equity
Cash and cash equivalents at the 1 376,3 404,8 404,8
beginning of the period
Cash and cash equivalents at the 2 271,3 1 874,4 1 376,3
end of the period
Condensed statement of changes in equity
6 months ended
December 2006
(Reviewed)
Ordinary General non-
share Share distributable
Rm capital premium reserve
Opening balance 2,0 262,6 143,4
Exchange differences
and
hyperinflation - - (6,2)
movements
Dividends declared - - -
Profit for the period - - -
Changes in minority
interests and
distribution to - - -
minorities
Release of deferred - - (2,9)
taxation on trademarks
Net movement of - (2,1) -
treasury shares
BEE transaction costs - (4,6) -
Share trust - - 27,1
transactions and IFRS
2 charge
Total 2,0 255,9 161,4
Condensed statement of changes in equity (continued)
6 months ended Equity
December 2006
(Reviewed)
attributable
Retained to equity Minority
holders of
Rm profit the parent interest Total
Opening balance 1 493,8 1 901,8 50,6 1 952,4
Exchange differences
and
hyperinflation (0,9) (7,1) - (7,1)
movements
Dividends declared (160,1) (160,1) - (160,1)
Profit for the period 673,2 673,2 8,9 682,1
Changes in minority
interests and
distribution to - - (43,6) (43,6)
minorities
Release of deferred 2,9 - - -
taxation on trademarks
Net movement of - (2,1) - (2,1)
treasury shares
BEE transaction costs - (4,6) - (4,6)
Share trust (71,5) (44,4) - (44,4)
transactions and IFRS
2 charge
Total 1 937,4 2 356,7 15,9 2 372,6
Restated 6 months ended December 2005 (Reviewed)
Ordinary General non-
share Share distributable
Rm capital premium reserve
Opening balance 2,0 209,4 122,1
Exchange differences
and hyperinflation
movements - - (4,8)
Dividends declared - - -
Profit for the - - -
period
Changes in minority
interests and
distribution to - - -
minorities
Release of deferred - - (2,9)
taxation on
trademarks
Shares issued (net - 1,1 -
of costs)
Share trust - - 11,2
transactions and
IFRS 2 charge
Total 2,0 210,5 125,6
Restated 6 months ended December 2005 (Reviewed)(continued)
Equity
attributable
Retained to equity Minority
holders of
Rm profit the parent interest Total
Opening balance 1 187,8 1 521,3 37,7 1 559,0
Exchange differences
and hyperinflation
movements 0,3 (4,5) - (4,5)
Dividends declared (143,8) (143,8) - (143,8)
Profit for the 512,2 512,2 - 512,2
period
Changes in minority
interests and
distribution to - - 9,8 9,8
minorities
Release of deferred 2,9 - - -
taxation on
trademarks
Shares issued (net - 1,1 - 1,1
of costs)
Share trust (51,0) (39,8) - (39,8)
transactions and
IFRS 2 charge
Total 1 508,4 1 846,5 47,5 1 894,0
Year ended June 2006 Ordinary General non-
(Audited)
share Share distributable
Rm capital premium reserve
Opening balance 2,0 209,4 122,1
Exchange differences
and hyperinflation
movements - - 9,7
Dividends declared - - -
Profit for the - - -
period
Changes in minority
interests and
distribution to - - -
minorities
Release of deferred - - (5,8)
taxation on
trademarks
Reduction of - - -
deferred tax asset
Shares issued (net - 71,5 -
of costs)
Net movement of - (18,3) -
treasury shares
Share trust - - 17,4
transactions and
IFRS 2 charge
Total 2,0 262,6 143,4
Year ended June 2006 Equity
(Audited)(continued)
attributable
Retained to equity Minority
holders of
Rm profit the parent interest Total
Opening balance 1 187,8 1 521,3 37,7 1 559,0
Exchange differences
and hyperinflation
movements 0,1 9,8 - 9,8
Dividends declared (402,8) (402,8) - (402,8)
Profit for the 828,5 828,5 24,7 853,2
period
Changes in minority
interests and
distribution to - - (11,8) (11,8)
minorities
Release of deferred 5,8 - - -
taxation on
trademarks
Reduction of (33,7) (33,7) - (33,7)
deferred tax asset
Shares issued (net - 71,5 - 71,5
of costs)
Net movement of - (18,3) - (18,3)
treasury shares
Share trust (91,9) (74,5) - (74,5)
transactions and
IFRS 2 charge
Total 1 493,8 1 901,8 50,6 1 952,4
Additional information
Restated
6 months 6 months Year ended
ended ended
December 2006 December 2005 June 2006
(Reviewed) (Reviewed) (Audited)
Net asset value per share 1 172,2 924,4 946,0
(cents)
Ordinary shares (000s):
- In issue 201 041 199 741 201 041
- Weighted average 200 102 199 293 199 507
- Diluted weighted average 204 609 206 006 204 886
- Thuthukani `A` 17 952 - -
preference shares (note
12)
Capital expenditure (Rms)
- Authorised and committed 32,5 21,9 183,0
- Authorised not committed 193,5 225,1 143,0
Operating lease 4 704,0 4 472,9 5 977,2
commitments (2007 - 2022)
(Rms)
US dollar exchange rates 7,10 6,37 7,48
- period end
- average 7,26 6,55 6,42
Notes
1. These condensed financial statements have been prepared in accordance with
IAS 34 Interim Financial Reporting, using accounting policies that are in line
with IFRS and consistently applied to prior periods.
2. Makro Zimbabwe operates in a hyperinflationary environment, and thus the
principles of IAS 29 Financial Reporting in Hyperinflationary Economies have
been applied. The financial impact on net profit attributable to equity holders
of the parent for December 2006 is a profit of R2,1 million (R0,4 million in
2005).
3. In the prior year the Group amended its accounting policy for the treatment
of extended warranty protection provided on the sale of goods and products. This
was done with guidance from Financial Accounting Standards Board (FASB)
technical bulletin FTB 90-1 Accounting for Separately Priced Extended Warranty
and Product Maintenance Contracts which clarified that revenue from separately
priced extended warranty contracts should be deferred and recognised in income
on a straight-line basis over the contract period. The prior half year results
have been restated.
4. In terms of IAS 39 Financial Instruments: Recognition and Measurement,
certain financial assets have been present valued using the effective interest
rate method. The prior half year results have been restated.
5. The prior half year results have been restated following Circular 9/2006
Transactions giving rise to Adjustments to Revenue/Purchases, issued by SAICA in
May 2006. This circular provided clarity on the accounting treatment for cash
discounts, settlement discounts, rebates and extended payment terms which are in
line with the accounting treatment required by IAS 18 Revenue and IAS 2
Inventories.
6. The total share buyback for the period was 2,0 million shares (2005: 1,9
million) at an average price of R53,02 (2005: R52,00) totalling R106,1 million
(2005: R99,3 million).
7. The net realised and unrealised foreign exchange translation losses deducted
from trading profit amounted to R41,4 million (2005: R16,8 million).
8 The operating lease smoothing adjustment expensed in the period as a result of
circular 7/2005 was a charge of R14,6 million after tax (2005: R10,2 million).
9. The impairment of assets in the prior year relates to the write-off of IT
software at CBW.
10. Capital costs written off in the prior year were due to The Competition
Tribunal prohibiting the acquisition of Moresport.
11. Furnex (a division of Masscash) was disposed of effective 1 March 2006. The
sale was accounted for in accordance with IFRS 5 Non-Current Assets Held for
Sale and Discontinued Operations. Results from the discontinued operation were
as follows:
Trading
Discontinued operation Sales profit PBT Taxation PAT
December 2005 395,1 6,2 5,8 (2,4) 3,4
June 2006 484,4 7,0 6,5 (2,8) 3,7
12. The Massmart BEE transaction, which came into operation in the current
period, gave rise to an IFRS 2 Share-based Payment charge of R17,2 million. The
`A` preference shares have been issued to the Thuthukani staff trust.
13. Related party transactions in the current period involve properties used by
Builders Express, CBW and De La Rey, which are owned, partially or wholly,
directly or indirectly, by parties that are directors of those companies. The
relevant directors of Builders Express and De La Rey are no longer directors of
these companies. From time to time, in the normal course of business, Massmart
and its divisions make use of private aircraft hired from competitively selected
charter companies, two of which operate aircraft indirectly beneficially owned
by Mr MJ Lamberti.
14. Due to Christmas trading, Massmart`s earnings are weighted towards the six
months to December.
15. These results have been reviewed by independent external auditors Deloitte
& Touche and their unqualified review opinion is available for inspection at the
registered office.
Directorate: CS Seabrooke (Chairman), MJ Lamberti* (Deputy Chairman and Chief
Executive Officer), MD Brand, ZL Combi, KD Dlamini, NN Gwagwa
GRC Hayward*, JC Hodkinson**, P Langeni, IN Matthews, P Maw, DNM Mokhobo, GM
Pattison*, MJ Rubin * Executive ** United Kingdom
Massmart Holdings Limited JSE code - MSM, ISIN - ZAE000029534, Company
registration number: 1940/014066/06
Registered office: Massmart House, 16 Peltier Drive, Sunninghill Extension 6,
2191, Company secretary: I Zwarenstein, Registered auditors: Deloitte & Touche
For more information: www.massmart.co.za
Date: 22/02/2007 07:30:02 Produced by the JSE SENS Department.
