Reviewed consolidated results - Massmart · movements, grew by 6.7% while operating profit, excluding foreign exchange movements and interest, grew by 4.3%. Higher net interest paid

Reviewed consolidated results for 52 weeks ended

28 December 2014

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 392 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.

2 Massmart reviewed consolidated results

For the 52 weeks ended 28 December 2014 Massmart’s total sales of R78.2 billion increased by 10.4% over the prior comparable year. Comparable stores’ sales growth was 7.5% with product inflation of 4.8%. Group EBITDA* of R2.9 billion, before foreign exchange movements, grew by 6.7% while operating profit, excluding foreign exchange movements and interest, grew by 4.3%.

Higher net interest paid from funding several significant property acquisitions in 2013-14 and an adverse movement in foreign exchange translations resulted in headline earnings decreasing by 10.2% while, excluding foreign exchange movements, headline earnings declined by 3.5%.

The South African consumer environment improved towards the latter part of 2014, evidenced by the slightly higher nominal sales growth reported by StatsSA and the Group’s own sales performance. The fourth quarter was particularly strong. In contrast, several African economies weakened or were affected by currency devaluations, causing some profit pressure in our non-South African businesses which represent 8.1% of Group sales.

EnvironmentThe South African consumer, who has been responsible

for approximately 60% of GDP growth since 2000, is currently impacted by negative forces including inadequate job creation and naggingly persistent inflation. Positive forces include a resilient upper-income consumer; a low interest rate environment; and, possibly, improving consumer indebtedness. The lower petrol price has been a welcome, but likely temporary, boon to the country’s inflation rate and level of consumer spending.

The direction and rate of the future interest rate cycle will likely have a material impact on middle-income customers. Declining Food inflation suggests some relief for lower- and middle-income customers, although the likely anticipated sugar price increase will have a secondary price effect in food and beverages.

Ongoing power outages will have an adverse impact on the South African economy as manufacturing processes and plants are compromised; large and small electrical motors burn-out from frequent stop-starts and need to be replaced; labour scheduling becomes uncertain and expensive; and product wastage, from interrupted manufacturing and storage processes, escalates. Business and private consumers will pay directly and indirectly for this.

Sales

R78,173.2 m UP BY 10.4%

2013: R70,790.7 m

Operating profit before forex and interest

R2,015.9 m UP BY 4.3%

2013: R1,933.7 m

EBITDA* before forex

R2,887.1 m UP BY 6.7%

2013: R2,706.4 m

Headline earnings before forex

R1,141.4 m DOWN BY 3.5%

2013: R1,182.7 m

Headline earnings after forex

R1,105.5 m DOWN BY 10.2%

2013: R1,231.5 m

Dividend per share

421 centsUNCHANGED

2013: 421 cents

Our financial highlights:

* Earnings before interest, tax, depreciation, amortisation and impairments

The 2013 financial year was a 53-week period but, for the sake of meaningful comparison, all 2013 financial information included here is shown for the pro-forma 52-week period unless indicated otherwise.

3For the year ended 28 December 2014

Divisional operational review

Massdiscounterscomprises the 130-store General Merchandise discounter

and Food retailer Game, which trades in South Africa, Botswana, Ghana, Lesotho, Malawi, Mozambique, Namibia, Nigeria, Tanzania, Uganda and Zambia; and the 23-store Hi-tech retailer DionWired.

Total sales for the year increased by 10.2%. Comparable sales grew by 4.8% with product inflation of 3.1%. Game South Africa had a better second-half and an especially strong fourth quarter where comparable sales grew by 8.1%. The weak performance for much of the 2014 financial year however, caused pressure on overall profitability resulting in Massdiscounters’ trading profit before interest and tax decreasing by 44.7%. For the second-half of 2014, Game SA’s trading profit before interest and tax grew ahead of sales. The roll-out of Fresh continues with 66 Game stores now offering this category. Food and Liquor sales comprise 19.4% of Game total sales and Food and Liquor’s growth in these comparable stores remains strong at 19.4%.

DionWired’s total sales growth was 13.2% and this brand remains the destination store within its category. The DionWired online offering now comprises 2.3% of total DionWired sales (December 2013: 1.8%).

Game Africa’s total Rand sales and sales in local currencies increased by 18.2% and 16.6% respectively. Profit growth was below sales growth due to operational challenges, currency devaluation and the impact of our new stores opened in Nigeria in 2013 and 2014. The latter two issues impacted profit by R40 million.

For the past two years we have defended several legal actions filed or threatened by three of the dominant Food retailers in South Africa.

These actions are based on lease exclusivity clauses that

seek to restrict competition for the benefit of the dominant retailers. There have been no new legal actions since July 2014. We have defended these actions as we believe the blanket enforcement of these clauses to be anti-competitive. In October 2014, Massmart lodged a formal complaint with the Competition Commission against each retailer who has filed legal action against us.

Eleven Game stores (two in Africa) were opened and two closed; and two DionWired stores were opened and one closed, increasing trading space by 30,857m² (6.5%).

Masswarehousecomprises the 19-store Makro warehouse-club trading in

Food, General Merchandise and Liquor in South Africa; and The Fruitspot.

Makro’s total sales for the year increased by 11.8%. Comparable sales increased by 10.7% with product inflation of 5.5%. Makro’s trading profit before interest and tax increased by 11.2% as the business traded superbly in a challenging Wholesale Food environment, outperformed in Liquor and General Merchandise, and extracted value from the new stores opened in 2011-12. Our Food business continues to benefit from increased sales to retail customers and we have gained additional share in the Retail and Wholesale Liquor markets. The General Merchandise and Liquor online offerings, launched in March and October 2014 respectively, are trading above expectations but are not without their logistical challenges.

The Fruitspot grew sales and profit, and compared to December 2013 has doubled its intra-Group sales.

There was no movement in stores in the 2014 financial year.

Rm

52 weeks December 2014

(Reviewed)% of

sales


(Pro forma)% of sales

52 week % growth

52 week Comparable

% sales growth

Estimated % sales

inflation


(Audited)% of sales

Sales 78,173.2 70,790.7 10.4 7.5 4.8 72,263.4

Massdiscounters 17,955.2 16,294.2 10.2 4.8 3.1 16,740.6

Masswarehouse 21,554.8 19,271.7 11.8 10.7 5.5 19,675.1

Massbuild 10,822.8 9,441.3 14.6 9.1 5.9 9,583.6

Masscash 27,840.4 25,783.5 8.0 6.3 4.8 26,264.1

Trading profit before interest and tax 2,061.7 2.6 1,994.4 2.8 3.4 2,145.4 3.0

Massdiscounters 180.7 1.0 326.9 2.0 (44.7) 366.6 2.2

Masswarehouse 1,044.3 4.8 939.5 4.9 11.2 990.2 5.0

Massbuild 537.6 5.0 467.6 5.0 15.0 507.6 5.3

Masscash 299.1 1.1 260.4 1.0 14.9 281.0 1.1

Trading profit excludes certain items. A detailed reconciliation between trading and operating profit can be found on page 6.

Divisional Operational Review


Massbuildcomprises 100 stores, trading in DIY, Home Improvement

and Building Materials, under the Builders Warehouse, Builders Express, Builders Trade Depot and Builders Superstore brands in South Africa, Botswana and Mozambique.

Massbuild grew total sales for the year by 14.6%. Comparable sales increased by 9.1% with product inflation of 5.9%. Builders Warehouse and Builders Express performed exceptionally, and are clearly market leaders in their categories, while Builders Trade Depot struggled, possibly as a result of the success of the other two. Massbuild’s trading profit before interest and tax increased by 15.0%.

The new Superstore format continues to exceed expectations and we will soon expand stores beyond the Gauteng region. We are very encouraged by the success of our five stores in Botswana and Mozambique. The new store in Maputo, opened in July 2014, is trading particularly strongly and so we are actively exploring sites in other southern African countries.

Three Builders Warehouse stores were opened and two closed; four Builders Express stores were opened and two closed; one Builders Trade Depot store was opened; and four Builders Superstores were opened, resulting in net trading space increasing by 25,992 m² (6.3%).

Masscashcomprises 73 Wholesale Cash and Carry and 47 Retail stores

trading in South Africa, Botswana, Lesotho, Mozambique, Namibia and Swaziland; and Shield, a voluntary buying association.

In the extremely competitive South African Wholesale and Retail Food environments, total sales increased by 8.0%. This was impacted by slowing inflation in our categories. Comparable sales increased by 6.3% with product inflation of 4.8%. Sales growth of 2.7% in our South African Wholesale business was affected by severe challenges at our two largest stores; adjusting for these saw acceptable sales growth of 5.3%. Sales growth in our non-South African Wholesale businesses was 8.0% and we remain excited at the potential of Wholesale and Hybrid formats in southern Africa. Masscash Retail performed very well, reporting comparable sales of 9.7%, improving profitability and strong customer price-perception.

Masscash’s trading profit before interest and tax increased by 14.9%.

Two Wholesale stores were closed; three Retail stores were opened and three were closed, resulting in net trading space increasing by 1,138m² (0.3%).

Financial review

Statement of comprehensive incomeTotal Group sales growth increased by 10.4% over the

prior year, with comparable sales growth of 7.5%. Product inflation was 4.8%, suggesting real comparable volume growth of 2.7%.

General Merchandise’s inflation increased to 3.6%, Food and Liquor’s inflation increased to 5.1% and Home Improvement inflation increased to 5.9%. Sales in our African businesses represented 8.1% of total sales and increased by 16.2% in Rands.

During the year, 28 stores were opened and 12 were closed, resulting in a total of 392 stores at December 2014. Net trading space increased by 3.9% to 1,539,295m².

The Group’s gross margin of 18.6% is higher than that of the prior year of 18.4%. This is driven by an increased Africa contribution at a higher gross margin and improved gross margins in Makro, Massbuild and Masscash Retail. These were marginally offset by a soft gross margin performance in Masscash Wholesale due to some commodity deflation; difficult trading conditions in Game South Africa; and a greater Food contribution at lower margins across the Group.

Total operating expenses (excluding foreign exchange movements) increased by 11.7% over the prior year. Comparable operating expenses were well controlled and increased by 7.1%. Employment costs, the Group’s most significant cost, increased by 14.0%, largely due to the opening of the new stores (detailed above) which led to an 8.3% increase in full time equivalents; and the incremental cost of the new share scheme implemented towards the end of 2013. Occupancy costs increased by 5.3%. Included in this figure are the costs of services such as electricity, rates and taxes, which increased by approximately 15%. The lower occupancy cost is a result of the Group’s acquisitions of some of its key properties during the last two years. The 15.8% increase in depreciation results from the acquisition of these properties and the opening of new stores and distribution centres.

Included in operating profit is a net realised and unrealised foreign exchange translation loss of R49.8 million (December 2013: R67.8 million gain).

Excluding foreign exchange movements, EBITDA of R2.9 billion increased over the prior year by 6.7%.

Net interest paid of R345.3 million increased mainly as a result of the Group’s capital expansion programme and higher interest rates. At R2.9 billion, the Group’s average borrowings are higher than the prior year’s figure (December 2013: R2.0 billion). The net additional medium-term funding in the 2014 financial year amounted to R1.2 billion.

The Group’s effective tax rate of 29.8% (December 2013: 29.3%) is in line with expectations.

The non-controlling interests comprise store managers’ holdings in Masscash stores and non- controlling interests in acquired Masscash businesses.

Headline earnings and Headline EPS each decreased by 10.2% over the prior year. Adjusting for the effect of the foreign exchange movements in both years results in a decrease in headline earnings and a decrease in headline EPS of 3.5%.

Statement of financial positionWorking capital was managed effectively in all Divisions

other than in Massdiscounters where, due to the soft sales, we only made some progress. Inventory days for the Group at December 2014 were in line with the prior year at 64 days.

The net book value of property, plant and equipment


increased by 20.9% compared to December 2013, as a result of acquiring some of our key properties and the investment in new stores. The Group’s gearing ratio (debt:equity) increased to 44.5% (December 2013: 29.7%). The annual rolling return on equity was 21.0% at December 2014 (December 2013: 24.8%). Excluding foreign exchange movements, this figure was 21.7% (December 2013: 23.9%).

Statement of cash flowsOperating cash generated amounted to R2.7 billion. The

53rd week in the prior year resulted in a calendar shift which accounts for a significant swing in the movement of working capital. This, coupled with the increase in debtors (mainly timing related), gave rise to the slightly softer working capital performance. Total capital expenditure of R2.2 billion comprises: R0.9 billion on replacement expenditure; R0.9 billion on property acquisitions; and R0.4 billion on expansionary expenditure, and is in line with expectation. The ‘Investment to expand operations’ includes, amongst others, the acquisition of 12 Masscash Wholesale properties; the Makro Strubens Valley and Builders Warehouse Northriding stores; and the Massmart Head Office complex.

DirectorateShareholders were advised on 27 August 2014 that Ilan

Zwarenstein had submitted his resignation effective 28 February 2015 and intended to leave the Group to pursue other interests. The search process to engage a new Chief Financial Officer is at an advanced stage and Massmart anticipates making an announcement in this regard shortly. In the meantime, we are pleased to advise that Ilan Zwarenstein has agreed to continue in his current role for an extended period and to assist with the transition. His resignation will accordingly not take effect on the original date of 28 February. Further announcements will be made in due course.

Strategic prioritiesOur areas of strategic focus remain unchanged:• To drive the growth and profitability of the core South

African business over the medium-term is a priority and we are making good progress in this regard;

• To expand further into Food Retail and Fresh in our existing formats and Masscash Retail;

• Sub-Saharan African expansion remains a priority and in the next two years we anticipate opening 13 new stores representing African space growth of about 50%; and

• We continue to expand and improve our ecommerce offerings.

ProspectsFor the 8 weeks to 22 February 2015, total sales increased

by 10.0% and comparable sales increased by 7.9%. This level of sales growth is similar to that seen in the latter part of 2014 and so may be indicative of future sales levels for the short-term. We remain concerned by the relatively fragile South African consumer economy and we are cautious about the impact of lower oil prices on those larger African countries with some dependency on oil revenues. The financial information

on which this outlook statement is based has not been reviewed or reported on by the Company’s external auditors.

Dividend Massmart has maintained the dividend at the same level

as the prior comparable year. Notice is hereby given that a gross final cash dividend of 275.00 cents per share, in respect of the year ended 28 December 2014, has been declared. There were no STC credits available for use as part of this declaration. The number of shares in issue at the date of this declaration is 217,118,072. The dividend has been declared out of income reserves and will be subject to the Dividend Tax rate of 15% which will result in a net dividend of 233.75 cents per share to those shareholders who are not exempt from paying Dividend Tax. Massmart’s tax reference number is 9900/196/71/9.

The salient dates relating to the payment of the dividend are as follows:Last day to trade cum dividend on the JSE:Friday, 13 March 2015First trading day ex dividend on the JSE:Monday, 16 March 2015Record date:Friday, 20 March 2015Payment date:Monday, 23 March 2015

Share certificates may not be dematerialised or rematerialised between Monday, 16 March 2015 and Friday, 20 March 2015, 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; on +27 (0)11 370 5000; or on 086 110 09818 (fax), 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.

On behalf of the Board

Guy Hayward Ilan ZwarensteinChief Executive Officer Group Finance Director25 February 2015


Reconciliation between Trading profit and Operating profit before foreign exchange movements, interest and taxation

Rm


(Reviewed)


(Pro forma)


(Audited)

Profit before interest and taxation

Trading profit before interest and taxation 2,061.7 1,994.4 2,145.4

Impairment of assets (note 3) (24.6) (41.6) (41.6)

Loss on disposal of business - (1.8) (1.8)

BEE transaction IFRS 2 charge (note 4) (21.2) (17.3) (17.3)

Operating profit before foreign exchange movements and interest 2,015.9 1,933.7 2,084.7

Condensed consolidated income statement

Rm

52 weeks December

2014 (Reviewed)

52 weeks December

2013 (Pro forma)

52 week % change

53 weeks December

2013 (Audited)

Revenue 78,319.0 71,035.3 10.3 72,512.9 Sales 78,173.2 70,790.7 10.4 72,263.4 Cost of sales (63,610.8) (57,733.8) (10.2) (58,926.4)Gross profit 14,562.4 13,056.9 11.5 13,337.0 Other income 145.8 244.6 (40.4) 249.5 Depreciation and amortisation (846.6) (731.1) (15.8) (731.1)Impairment of assets (note 3) (24.6) (41.6) 40.9 (41.6)Employment costs (6,109.0) (5,357.5) (14.0) (5,423.5)Occupancy costs (2,678.8) (2,544.5) (5.3) (2,555.3)Other operating costs (3,033.3) (2,693.1) (12.6) (2,750.3)Operating profit before foreign exchange movements and interest 2,015.9 1,933.7 4.3 2,084.7 Foreign exchange (loss)/gain (49.8) 67.8 67.8 Operating profit before interest 1,966.1 2,001.5 (1.8) 2,152.5 - Finance costs (386.8) (278.4) (38.9) (283.8) - Finance income 41.5 28.6 45.1 28.7

Net finance costs (345.3) (249.8) (38.2) (255.1)Profit before taxation 1,620.8 1,751.7 (7.5) 1,897.4 Taxation (483.4) (512.6) 5.7 (555.3)Profit for the year 1,137.4 1,239.1 (8.2) 1,342.1

Profit attributable to: - Owners of the parent 1,079.8 1,180.0 (8.5) 1,283.0 - Non-controlling interests 57.6 59.1 (2.5) 59.1

Profit for the year 1,137.4 1,239.1 (8.2) 1,342.1

Basic earnings per share (EPS) (cents) 497.8 543.9 (8.5) 591.4 Diluted basic EPS (cents) 492.9 538.1 (8.4) 585.1 Dividend (cents): - Interim 146.0 146.0 - 146.0 - Final 275.0 275.0 - 275.0 - Total 421.0 421.0 - 421.0


Headline earnings

Rm

52 weeks December

2014 (Reviewed)

52 weeks December

2013 (Pro forma)

52 week % change

53 weeks December

2013 (Audited)

Reconciliation of profit for the year to headline earningsProfit for the year attributable to owners of the parent 1,079.8 1,180.0 (8.5) 1,283.0 - Impairment of assets (note 3) 24.6 41.6 41.6 - Loss on disposal of tangible and intangible assets 1.4 11.9 11.9 - Loss on disposal of business - 1.8 1.8 - Total tax effects of adjustments (0.3) (3.8) (3.8)

Headline earnings 1,105.5 1,231.5 (10.2) 1,334.5 Headline earnings before foreign exchange (taxed) 1,141.4 1,182.7 (3.5) 1,285.7

Headline EPS (cents) 509.7 567.7 (10.2) 615.2 Headline EPS before foreign exchange (taxed) (cents) 526.2 545.2 (3.5) 592.7 Diluted headline EPS (cents) 504.7 561.6 (10.1) 608.6 Diluted headline EPS before foreign exchange (taxed) (cents) 521.1 539.4 (3.4) 586.4

Condensed consolidated statement of comprehensive income52 weeks

December 2014

(Reviewed)

52 weeks December

2013 (Pro forma) % change

53 weeksDecember

2013(Audited)Rm

Profit for the year 1,137.4 1,239.1 (8.2) 1,342.1

Items that will not subsequently be re-classified to the income statement: (8.9) 5.7 5.7 Post retirement medical aid actuarial (loss)/gain (8.9) 5.7 5.7

Items that will subsequently be re-classified to the income statement: (55.6) 55.8 55.8 Foreign currency translation reserve (53.7) 47.2 47.2 Cash flow hedges 1.4 7.0 7.0 Revaluation of listed shares (3.7) 4.7 4.7 Income tax relating to components of other comprehensive income 0.4 (3.1) (3.1)

Total other comprehensive (loss) / income for the year, net of tax (64.5) 61.5 61.5

Total comprehensive income for the year 1,072.9 1,300.6 (17.5) 1,403.6

Total comprehensive income attributable to: - Owners of the parent 1,015.3 1,241.5 1,344.5 - Non-controlling interests 57.6 59.1 59.1

Total comprehensive income for the year 1,072.9 1,300.6 (17.5) 1,403.6


Condensed consolidated statement of financial position

RmDecember 2014

(Reviewed)December 2013

(Audited) % change

AssetsNon-current assets 11,018.3 10,111.8 Property, plant and equipment (note 6) 7,239.2 5,988.1 20.9

Goodwill and other intangible assets 2,958.7 2,928.8 Investments and other financial assets (note 7) 158.2 522.8 Deferred taxation 662.2 672.1 Current assets 17,870.1 16,036.1 Other current financial assets (note 7) 229.3 - Inventories 11,228.8 10,115.5 11.0

Trade, other receivables and prepayments 4,288.3 3,712.5 15.5

Taxation 56.3 12.0 Cash and bank balances 2,067.4 2,196.1 Non-current assets classified as held for sale 18.0 -

Total 28,906.4 26,147.9

Equity and liabilitiesTotal equity 5,527.2 5,369.6 Equity attributable to owners of the parent 5,334.4 5,173.0 3.1

Non-controlling interests 192.8 196.6 Non-current liabilities 3,236.8 2,206.4 Interest-bearing borrowings 2,133.9 1,178.7 Deferred taxation 61.3 86.6 Other non-current liabilities and provisions (note 5) 1,041.6 941.1 Current liabilities 20,142.4 18,571.9 Trade, other payables and provisions 18,518.9 17,101.2 8.3

Taxation 208.3 331.3 Bank overdrafts 584.0 607.8 Interest-bearing borrowings 831.2 531.6

Total 28,906.4 26,147.9


Condensed consolidated statement of changes in equity

Ordinaryshare

capitalShare

premium

Othergeneral

reservesRetained

profit

Equity attributable

to ownersof the

parent

Non-controlling

interests TotalRm

Balance as at December 2012 (Audited) 2.2 752.1 323.3 3,662.1 4,739.7 175.6 4,915.3 Dividends declared - - - (913.4) (913.4) - (913.4)Total comprehensive income - - 61.5 1,283.0 1,344.5 59.1 1,403.6 Changes in non-controlling interests - - 3.8 - 3.8 (7.2) (3.4)Distribution to non-controlling interests - - - - - (30.9) (30.9)IFRS 2 charge and Share Trust transactions - - 129.0 (121.8) 7.2 - 7.2 Treasury shares acquired - (8.8) - - (8.8) - (8.8)Balance as at December 2013 (Audited) 2.2 743.3 517.6 3,909.9 5,173.0 196.6 5,369.6 Dividends declared - - - (914.0) (914.0) - (914.0)Total comprehensive income - - (64.5) 1,079.8 1,015.3 57.6 1,072.9 Changes in non-controlling interests - - (27.6) - (27.6) (11.0) (38.6)Distribution to non-controlling interests - - - - - (50.4) (50.4)IFRS 2 charge and Share Trust transactions - - 125.1 (27.4) 97.7 - 97.7 Treasury shares acquired - (9.9) (0.1) - (10.0) - (10.0)

52 weeks ended December 2014 (Reviewed) 2.2 733.4 550.5 4,048.3 5,334.4 192.8 5,527.2

Condensed consolidated statement of cash flows

Rm


(Reviewed)

53 weeksDecember 2013

(Audited)

Operating cash before working capital movements 2,983.4 2,984.0 Working capital movements (295.1) 752.6 Cash generated from operations 2,688.3 3,736.6 Taxation paid (683.4) (732.8)Net interest paid (345.3) (255.1)Investment income - 79.2 Dividends paid (914.0) (913.4)Cash inflow from operating activities 745.6 1,914.5

Investment to maintain operations (857.4) (780.2)Investment to expand operations (note 6) (1,322.1) (1,306.8)Investment in subsidiaries (note 6) (14.4) - Proceeds on disposal of property, plant and equipment 32.5 25.6 Proceeds on disposal of assets classified as held for sale - 2.5 Other net investing activities 14.9 (247.4)Cash outflow from investing activities (2,146.5) (2,306.3)

Cash inflow from financing activities 1,349.7 293.0

Net decrease in cash and cash equivalents (51.2) (98.8)Foreign exchange movements (53.7) 47.2 Opening cash and cash equivalents 1,588.3 1,639.9 Closing cash and cash equivalents 1,483.4 1,588.3


Additional information 52 weeks

December 2014 (Reviewed)


(Audited)

Net asset value per share (cents) 2,456.9 2,382.7 Ordinary shares (000’s): - In issue 217,118.1 217,109.0 - Weighted average (net of treasury shares) 216,907.6 216,934.9 - Diluted weighted average 219,055.0 219,268.2

Preference shares (000’s): - Black Scarce Skills Trust ‘B’ shares in issue (note 4) 2,858.7 2,867.8

Capital expenditure (Rm): - Authorised and committed 864.1 1,249.3 - Authorised not committed 1,155.1 783.4

Gross operating lease commitments (2015 - 2029) (Rm) 15,482.1 14,445.7 US dollar exchange rates: - year end (R/$) 11.60 10.52 - average (R/$) 10.83 9.61

Fair value hierarchyFor financial instruments traded in an active market (level 1), fair value is determined using stock exchange quoted prices. For other financial instruments (level 2), appropriate valuation techniques, including recent market transaction and other valuation models, have been applied and significant inputs include market yield curves and exchange rates. For non-current assets classified as held for sale (level 3) fair value has been determined based on the sale agreement. The table below reflects ‘Financial instruments’ and ‘Non-current assets classified as held for sale’ carried at fair value, and those ‘Financial instruments’ and ‘Non-current assets classified as held for sale’ that have carrying amounts that differ from their fair values, in the statement of financial position.

RmDec 2014

(Reviewed) Level 1 Level 2 Level 3

December 2013

(Audited) Level 1 Level 2 Level 3

Financial assets at fair value through profit or loss 155.1 - 155.1 - 235.4 - 235.4 - - Investments in cell captives and other 125.2 - 125.2 - 217.7 - 217.7 - - FEC asset 29.9 - 29.9 - 17.7 - 17.7 -

Designated cash flow hedge 13.7 - 13.7 - 8.8 - 8.8 - - FEC asset 13.7 - 13.7 - 8.8 - 8.8 -

Loans and receivables 30.3 - 30.3 - 34.9 - 34.9 - - Employee share trust loans 30.3 - 30.3 - 34.9 - 34.9 -

Available-for-sale financial assets 8.4 8.4 - - 12.1 12.1 - - - Other listed investments 8.4 8.4 - - 12.1 12.1 - -

Non-current assets classified as held for sale 22.0 - - 22.0 - - - - 229.5 8.4 199.1 22.0 291.2 12.1 279.1 -

Financial liabilities at amortised cost 2,653.0 - 2,653.0 - 1,724.8 - 1,724.8 - - Medium-term loan, bank loans and capitalised

finance leases 2,653.0 - 2,653.0 - 1,724.8 - 1,724.8 -

Financial liabilities at fair value through profit or loss 4.5 - 4.5 - 1.9 - 1.9 - - FEC liability 4.5 - 4.5 - 1.9 - 1.9 -

Designated cash flow hedge 2.2 - 2.2 - 0.8 - 0.8 - - FEC liability 2.2 - 2.2 - 0.8 - 0.8 -

2,659.7 - 2,659.7 - 1,727.5 - 1,727.5 -

There were no transfers of financial instruments between Level 1 and Level 2 fair value measurements during the year ended December 2014, and no transfers into, or out of, Level 3.

Share Data

30 Dec 2013 - 24 Dec 2014

Closing price, 24 Dec 2014 R143.93

Share price (52 week high) R149.80

Share price (52 week low)R110.00

Market CapR31.2 billion

ReutersMSMJ.J

BloombergMSM SJ


Massmart Holdings Limited (“the Company” or “the Group”)

JSE code MSM

ISIN ZAE000152617

Company registration number 1940/014066/06

Registered office Massmart House, 16 Peltier Drive, Sunninghill Ext 6, 2191

Company secretary P Sigsworth

Sponsor Deutsche Securities (SA) Proprietary Limited, 3 Exchange Square, 87 Maude Street, Sandton, Johannesburg, 2196, South Africa

Transfer secretaries Computershare Investor Services (Proprietary) Limited, 70 Marshall Street, Johannesburg, 2001 South Africa

Registered auditors Ernst & Young Inc. 102 Rivonia Road, Sandton, Johannesburg, South Africa

Directorate K Dlamini (Chairman), CS Seabrooke (Deputy Chairman), GRC Hayward* (Chief Executive Officer), S Broader***, A Clarke**, NN Gwagwa, P Langeni, JP Suarez***, I Zwarenstein* (Group Finance Director)* Executive ** UK *** USA

At December 2014, the Supplier Development Fund, a separate entity created in line with the judgement of the Competition Appeal Court at the time of the Walmart transaction, had a closing balance of R157.2 million (December 2013: R202.5 million). A net amount of R206.2 million remains unpaid to Walmart (December 2013: R126.0 million), which has been accounted for in ‘trade, other receivables and prepayments’ and ‘trade, other payables and provisions’. During the prior year the Group secured a medium-term loan with Walmart repayable after five years. Interest of 7.46% is paid quarterly. The loan of R600.0 million is accounted for under interest-bearing non-current liabilities. As a 52.4% shareholder, Wal-Mart Stores, Inc. will also be receiving the ordinary dividend based on their number of shares held.

9. The pro forma financial effects, for which the Directors of Massmart are responsible, are provided for illustrative purposes only to show the effect of the additional week of trading in the prior year on the financial information of Massmart allowing for a comparison of the 52-week periods. These pro forma adjustments are not expected to have a continuing effect as they will only occur in every 53-week year. The pro forma financial effects have been prepared using accounting policies that comply with IFRS. The accounting policies are consistent with those applied in the previous financial year. The pro forma financial effects have been compiled from the financial information for the 53 weeks ended December 2013, and in deriving our 52-week comparative, we have excluded the 53rd week.

10. Due to Christmas trading, Massmart’s earnings are weighted towards the six months to December.

11. These condensed consolidated year end results have been reviewed by independent external auditors, Ernst & Young Inc. and their unmodified review report is available for inspection at the Company’s registered office. The reviews were performed in accordance with ISRE 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity for the year ended 28 December 2014 and ISAE 3420 Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus for the year ended 29 December 2013. Any reference to future financial performance included in this announcement has not been reviewed or reported on by the Group’s external auditors. The auditor’s report does not necessarily report on all of the information contained in this announcement/financial results. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor’s engagement they should obtain a copy of the auditor’s report together with the accompanying financial information from the issuer’s registered office. The preparation of the Group’s condensed consolidated financial statements was supervised by the Group Finance Director, Ilan Zwarenstein, BCom, BAcc, CA(SA).

For more information call +27 (0)11 517 0000 or visit massmart.co.za

Notes 1. These condensed consolidated year end results have been

prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS), its interpretations issued by the IFRS Interpretations Committee, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council, presentation and disclosure as required by International Accounting Standard (IAS) 34 Interim Financial Reporting, the JSE Limited Listings Requirements and the requirements of the Companies Act 71 of 2008 of South Africa. The accounting policies and methods of computation used in the preparation of the condensed consolidated results are in terms of IFRS and are consistent in all material respects with those applied in the most recent annual financial statements, as none of the amendments coming into effect in the current financial year have had an impact on the financial reporting of the Group.

2. During the current year, 0.6 million Massmart shares (0.3% of average shares in issue) were acquired in the market by the Massmart Employee Share Trust at an average price of R128.22 totalling R73.7 million. During the prior year, the Massmart Employee Share Trust acquired 1.2 million shares (0.6% of average shares in issue) at an average price of R186.76 totalling R223.0 million.

3. The impairment of assets in the current year relates to the impairment of tangible assets in Masscash as a result of store closures. The impairment also includes the write-down on reclassification to ‘Non-current Assets Held for Sale’ of a Masscash store which was closed in the 2012 financial period, but had remained owned by the Group. The impairment of assets in the prior period relates to the impairment of acquired goodwill in Masscash and tangible assets in Masscash and Makro as a result of store closures.

4. The Massmart BEE transaction, which came into operation in October 2006, gave rise to an IFRS 2 Share-based Payment charge of R21.2 million (December 2013: R17.3 million). The ‘B’ preference shares were issued to the Black Scarce Skills Trust.

5. Other non-current liabilities and provisions include the lease smoothing liability of R912.5 million (December 2013: R822.2 million).

6. Property acquisitions during the current year amounted to R876.6 million. The property acquisitions include, amongst others, the acquisition of 12 Masscash Wholesale properties; the Makro Strubens Valley and Builders Warehouse Northriding stores; and the Massmart Head Office complex. Massmart acquired Capensis Investments 241 (Pty) Ltd in the prior period, resulting in control of seven Makro properties that were previously lease held.

7. In the prior year, Massmart entered into an agreement to acquire the Makro Amanzimtoti store. A property loan of R214.2 million was provided to the seller in terms of the agreement and was reflected in ‘Non-current assets’. However, as the legal transfer was approved in February 2015, the loan has been reflected in ‘Current assets’ at year end.

8. Massmart and its divisions enter into certain transactions with related parties in the normal course of business. Details of these are, and will be, disclosed in Massmart’s Integrated Annual Report.

MASSDISCOUNTERS MASSWAREHOUSE MASSBUILD MASSCASH

Food wholesaler, retailer and buying association

Sales

R27,840.4 m UP BY 8.0%

Trading profit before interest and tax

R299.1 m UP BY 14.9%

Net new stores

-2 FROM 122 TO 120

Increase in trading space

0.3%TO 400,775 SQM

73 WHOLESALE STORESSouth Africa, Botswana, Lesotho, Mozambique, Namibia, Swaziland

47 RETAIL STORESSouth Africa

BUYING ASSOCIATIONSSouth Africa, Botswana, Namibia, Swaziland

Home improvement retailer and building materials supplier

Sales

R10,822.8 m UP BY 14.6%


R537.6 m UP BY 15.0%

Net new stores

8 FROM 92 TO 100


6.3%TO 436,538 SQM

35 STORES South Africa, Botswana, Mozambique

41 STORESSouth Africa

16 STORES South Africa


Warehouse club

Sales

R21,554.8 m UP BY 11.8%


R1,044.3 m UP BY 11.2%

Net new stores

019 (UNCHANGED)


NO CHANGE195,794 SQM


General merchandise discounter and food retailer

Sales

R17,955.2 m UP BY 10.2%


R180.7 m DOWN BY 44.7%

Net new stores

10 FROM 143 TO 153


6.5%TO 506,188 SQM

130 STORESSouth Africa, Botswana, Ghana, Lesotho, Malawi, Mozambique, Namibia, Nigeria, Tanzania, Uganda, Zambia


23.0%

8.8%

27.6%

50.6%

13.8%

26.1%

35.6%

14.5%

Documents

Reviewed consolidated results - Massmart · movements, grew by 6.7% while operating profit, excluding foreign exchange movements and interest, grew by 4.3%. Higher net interest paid