Directors’ responsibilities

The Directors acknowledge responsibility for the preparation of the Annual Financial Statements, which, in their opinion, fairly present the results and cash flows for the year ended December 2013 and the state of affairs of Massmart Holdings Limited and its subsidiaries at the end of the period. The External Auditors are responsible for reporting on the fair presentation of these financial statements.

The Company and its subsidiaries have maintained satisfactory accounting records and an effective system of internal controls to ensure the integrity of the underlying information. Appropriate accounting policies, supported by sound and prudent managerial judgments and estimates, have been consistently applied.

The Audit Committee of the Board reviews the financial information presented and ensures that there has been adherence to International Financial Reporting Standards. Internal and External Auditors of Group companies have unrestricted access to the Committee.

Group financial results

The financial results of the Group are set out in the income statement, statement of comprehensive income, the statement of cash flows and the statement of changes in equity. The financial position of the Group is set out in the statement of financial position and accompanying notes.

Dividend

The Company’s dividend policy is to declare and pay an interim and final cash dividend representing a 1.55 times dividend cover unless circumstances dictate otherwise. For the year ended December 2013, the Board has resolved to maintain the absolute value of the final cash dividend at the level that it was in the prior financial year, due to the strong liquidity position of the Group and its growth prospects.
With regard to the final distribution to shareholders, the Directors resolved to distribute to shareholders registered in the books of the Company on 20 March 2014, a final cash dividend of 275 cents (December 2012: 275 cents).

Shares in issue

The movement in ordinary and preference shares for the period under review can be found below:

Ordinary Shares
Balance at June 2012 216,124,461
Converted preference shares1 785,734
Balance at December 2012 216,910,195
Converted preference shares2 198,849
Ordinary shares in issue at December 2013 217,109,044
Preference Shares
Balance at June 2012 13,247,409
Converted to ordinary shares1 (785,734)
Balance at December 2012 12,461,675
Converted to ordinary shares2 (198,849)
Residual shares automatically redeemed (9,395,053)
Preference shares in issue at December 2013 2,867,773
1The preference shares in the prior year relate to Massmart’s Thuthukani Empowerment Trust and Black Scarce Skills Trust’** The preference shares in the current year relate to Massmart’s Black Scarce Skills Trust
2The preference shares in the current year relate to Massmart’s Black Scarce Skills Trust

 

Directorate and secretary

The current directorate of the Company is shown here.

The Board comprises ten Directors of whom seven are non-executive and four are independent. In addition, each Board committee is chaired by an independent Director.

The Company Secretary provides a central source of guidance and advice to the Board, and within the Company, on matters of ethics and good governance. The Company Secretary is Philip Sigsworth, CA (SA), whose business and postal addresses are the same as that of the Company. Philip was appointed on 7 May 2012.

In accordance with the provisions of the Company’s Memorandum of Incorporation, Messrs CS Seabrooke, D Cheesewright and GRC Hayward, and Dr NN Gwagwa will retire, and Mr D Dlamini will resign, at the Annual General Meeting. Being eligible, they all offer themselves for re-election.

Interests of Directors in the Company’s shares

At December 2013, Directors owned, directly or indirectly, ordinary shares or options over ordinary shares in the Company. These holdings were all beneficial and are aggregated in the table below:

At December 2013, Directors owned, directly or indirectly, ordinary shares or options over ordinary shares in the Company. These holdings were all beneficial and and are aggregated in the table below:
Dec-13 Dec-12
Shares Options/
Share Awards
Shares Options/
Share Awards
Non-executive Directors
MJ Lamberti1 - - - -
CS Seabrooke - - - -
D Cheesewright - - - -
JA Davis - - - -
NN Gwagwa 9,800 - 9,800 -
P Langeni 9,800 - 9,800 -
JP Suarez - - - -
Executive Directors
GM Pattison 596,473 205,603 696,473 205,603
GRC Hayward 222,894 270,529 222,894 270,529
Ilan Zwarenstein - 167,331 - 182,659
At the date of this report, the Directors’ beneficial holdings were as follows:
Apr 14 Apr 13
Shares Options/
Share Awards
Shares Options/
Share Awards
Non-executive Directors
MJ Lamberti1 - - - -
CS Seabrooke - - - -
D Cheesewright - - - -
JA Davis - - - -
NN Gwagwa 9,800 - 9,800 -
P Langeni 8,800 - 9,800 -
JP Suarez - - - -
Executive Directors
GM Pattison 596,473 205,603 596,473 205,603
GRC Hayward 222,894 270,529 222,894 270,529
Ilan Zwarenstein - 167,331 - 182,659
There were no non-beneficial interests in either of these periods.
1 Resigned with effect from 10 April 2014.

 

Subsidiaries

As at the date hereof, the following companies are principal subsidiaries of the Company:

Capensis Investments 241 (Pty) Limited
2000/007070/07
Massbuild (Proprietary) Limited (previously Builders Trade Depot)
2004/035206/07
Masscash Holdings (Proprietary) Limited
1997/014716/07
Massmart International Holdings Limited (incorporated in Mauritius)
47902 C1/GBL
Massmart Management & Finance Company (Proprietary) Limited
1992/004084/07
Masstores (Proprietary) Limited
1991/006805/07
Mystic Blue Trading 62 (Proprietary) Limited
2005/018657/07

 

Details of the Company’s interests in material subsidiaries are set out in note 36. Total net profit after tax for all subsidiaries for the year ended December 2013 amounted to R1.3 billion (Dec 2012: R240.4 million/Jun 2012: R458.6 million).

Borrowing powers

In terms of the Memorandum of Incorporation, the Group has unlimited borrowing powers. At December 2013, borrowings were R2.3 billion (December 2012: R1.7 billion).

Going concern

The Directors are of the opinion that the business will be a going concern in the year ahead. In reaching this opinion, the Directors considered the following factors:

  • strong positive cash flows from trading;
  • no recurring material operating losses at Divisional and Group level;
  • well-controlled working capital and good quality inventory;
  • approved short- and long-term financing, with sufficient additional short-term borrowing capacity if required;
  • key executive management in place;
  • there have been no material changes that may affect the Group in any of our customer, product or geographic markets; and
  • budgets to December 2014 reflect a continuation of the above positive issues.

Litigation

There are no current, pending or threatened legal or arbitration proceedings that may have, or have had in the previous 12 months,
a material effect on the Group’s financial position.

As part of the litigation relating to the Massmart-Walmart acquisition, Massmart has either satisfied or is in the process of satisfying the conditions ordered by the 2012 Competition Appeal Court order. Two conditions remain active.

Firstly, Massmart has established a Supplier Development Fund that has commenced distributing funds to qualifying beneficiaries.

Secondly, in cooperation with the Competition Commission, Massmart has initiated its remedial plan to re-instate the approximately 230 employees who were either not located or did not accept their original re-instatement offer from the pool of 503 retrenched employees.

The objective of the remedial plan is to ensure that Massmart has fully complied with the court order to re-instate all employees. The first annual report of the Fund was submitted to the Competition Commission in December 2013.

Change in year-end

In order to align the Group better with Wal-Mart Stores, Inc. (Massmart’s ultimate holding Company), in 2012 Massmart’s year-end was changed from June to December. The change in year-end meant that Massmart reported audited results for the six months to December 2012 in April 2013, and audited results for the twelve months to December 2013 in April 2014.

Direct and ultimate holding companies

The Company’s direct holding company is Main Street 830 (Proprietary) Limited and the ultimate holding company is
Wal-Mart Stores, Inc.

Subsequent events

The Group’s non-Executive Chairman, Mark Lamberti, has been appointed CEO of the Imperial Group, from 1 March 2014. As a consequence, he has chosen to relinquish his directorships of other public companies and has resigned as Chairman of Massmart. Kuseni Dlamini has been appointed the new Chairman of Massmart, with effect from 10 April 2014. His details can be found here.

Grant Pattison has resigned as Chief Executive Officer of the Group with effect from 1 June 2014. Guy Hayward has been appointed to succeed Grant. The careers of both Grant and Guy, including their combined 30 years of service to the Group are set out in more detail here.

There were no other significant subsequent events after the year-end.

On behalf of the Board

_0007_Philip signature.tif
Philip Sigsworth
Company Secretary

10 April 201

 

Company Secretary certificate
In terms of section 88(e) of the Companies Act No. 71 of 2008, as amended (“Companies Act”), I, Philip Sigsworth, in my capacity as Company Secretary of Massmart Holdings Limited, confirm that, to the best of my knowledge and belief, in respect of the year under review, Massmart Holdings Limited has filed with the Companies and Intellectual Property Commission all such returns and notices as are required of a public company in terms of the Companies Act and that all such returns and notices appear to be true, correct and up to date.