Total sales up by                                                   _
(R78,173 million)                                               _
EBIDTA before forex up by                                   _
(R2,887 million)
Operating profit before forex and interest up
(R2,015 million)








The 2014 South African consumer economy was marked by two distinct halves to the year – the first was compromised by the five-month labour strike in the Mining sector which rippled, directly and indirectly, into associated service industries and communities. This period was probably also subdued from the after-shocks of the collapse of unsecured credit lending. The second half was noticeably stronger, as seen in the national sales data and reports from South African retailers. This was likely as a result of the absence of a negative, rather than the presence of a new or positive, impetus. Low economic growth, inadequate job creation and persistent inflation remain a pressure point for many South African consumers. Upper-income consumers remained resilient however, reflected in robust sales in Makro and Builders Warehouse.
The 2014 African economy, similarly, experienced two halves to the year – the first was positive but the second affected by US Dollar strength and the decline in prices of oil and other key commodities. This caused several African economies to weaken and some were affected by currency devaluations, causing some profit pressure on our non-South African businesses that represent 8.1% of Group sales.

Financial performance

The Group’s financial performance is covered in useful detail in the Chief Financial Officer’s review but is summarised briefly here. For the year to December 2014 (52 weeks) Massmart reported total sales of R78.2 billion, an increase of 10.4% compared to the previous year, with comparable stores’ sales growth of 7.5% and product inflation of 4.8%.
Good management of gross margins and an increased participation of higher-margin sales in Massbuild saw slightly higher Group gross margins in 2014 at 18.6% (Dec 2013: 18.4%).
As a result of the significant investment in new stores and capacity in the last three years, total expenses grew by 11.7% which was ahead of sales growth. Within the core business, expenses were well controlled and comparable expenses grew by only 7.1%. EBITDA of R2.9 billion, before foreign exchange movements, grew by 6.7%, while Operating profit, excluding foreign exchange movements and interest, increased 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%. Excluding foreign exchange movements, headline earnings declined by 3.5%.

Operational highlights

  • Excellent performances from Makro, Builders Warehouse and Builders Express. Achieved through leveraging skills, scale, SAP and supply chain. Profit growth accelerated in the second half
  • Game South Africa – good second half, growing profit however Game Africa declined from weaker economies, new stores and currency devaluations
  • Game Food Retail growth continues: now R3.2 billion; positive impact on General Merchandise sales
  • Margin recovery in Masscash Wholesale through focus on direct distribution and larger stores
  • Great performance by new Builders Warehouse stores in southern Africa
  • High consumer brand affiliation for Cambridge Food; strong trading performance
  • Successful launch of Makro ecommerce site offering General Merchandise and Liquor


Net trading space increased by 30,857m² (6.5%)
130 stores
(11 opened – 2 in Africa, 2 closed)
General Merchandise discounter and Food retailer
Trades in South Africa, Botswana, Ghana, Lesotho, Malawi, Mozambique, Namibia, Nigeria, Tanzania, Uganda and Zambia
23 stores
(2 opened, 1 closed)
Hi-tech retailer
Trades in South Africa



Trades in South Africa
19 stores
(no store changes)
Warehouse-club trading in Food, General Merchandise and Liquor
Established wholesaler and distributor of fresh and cut fruit and vegetables.


Net trading space increased by 25,992m² (6.3%)
DIY, Home Improvement and Building Materials
Builders Warehouse
35 stores
(3 opened, 2 closed – effectively 2 relocations)
Trades in South Africa, Botswana and Mozambique
Builders Express
41 stores
(7 opened – including
3 converted from BTD,
2 closed)
Trades in South Africa
Builders Trade Depot
16 stores
(1 opened, 5 closed and converted to BEX & BSS)
Trades in South Africa
Builders Superstore
8 stores
(6 opened – including
2 converted from BTD)
Trades in South Africa


Net trading space increased by 1,138m² (0.3%).
73 stores
(2 closed)
Trades in South Africa, Botswana, Lesotho, Mozambique, Namibia and Swaziland
47 stores
(3 opened, 3 closed)
Trades in South Africa
Shield buying association
Trades in South Africa, Botswana, Namibia and Swaziland


Divisional operational review

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%.
Game SA’s trading profit before interest and tax grew ahead of sales in the second-half of 2014. The roll-out of the Fresh offer continues with 66 Game stores in South Africa and Africa 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%.
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 2013-2014. The latter two issues impacted profit by R40 million; most of this in the second-half of 2014.
DionWired’s total sales growth was 13.2%. The brand remains the destination store within its category. The DionWired online offering now comprises 2.3% of total DionWired sales (December 2013: 1.8%).

Anti-competitive challenges

For the past two years we have defended several legal actions filed against our Massdiscounters/Game division by three of the major food retailers in South Africa and a prominent property fund also located in South Africa. These interdictory actions for injunctive relief are based on contractual and delictual theories of law relating to exclusivity and restrictive usage clauses in separate lease agreements between the relevant landlord and Game on the one hand, and one or more of the major food retailers on the other. These disputes arise when one or more of these retailers are co-located in a particular shopping centre with a Game store that seeks to offer a limited fresh food offering. Along with other legal defences, we have asserted that the blanket enforcement of these clauses by the major food retailers contravenes South African competition law. In October 2014, Massmart lodged a formal complaint with the South African Competition Commission and requested the Commission to initiate a formal investigation into this behaviour. In December 2014, the Commission notified us that they would proceed with a formal investigation of our claims, together with similar complaints raised by other stakeholders. The various proceedings, including the Commission’s investigation, are on-going. If the conclusion of these proceedings is not in our favour–in whole or in part–then a key Group strategy in certain localities in South Africa could be delayed or curtailed.


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. It outperformed in Liquor and General Merchandise. Further it extracted value from the new stores opened in 2011-2012. Our Food business continues to benefit from increased sales to retail customers. Importantly, 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, especially over the Christmas rush.
The Fruitspot grew sales and profit, and compared to December 2013 has doubled its intra-Group sales.


Massbuild grew total sales for the year by 14.6%. Comparable sales increased by 9.1% with product inflation of 5.9%. Massbuild’s trading profit before interest and tax increased by 15.0%.
Builders Warehouse and Builders Express performed exceptionally, and are clearly market leaders in their categories. We are particularly encouraged by the success of our five stores in Botswana and Mozambique. The new store in Maputo, Mozambique opened in July 2014. It is enjoying strong trading and as a result we are actively exploring sites in other southern African countries.
Builders Trade Depot struggled, likely due to some of the success and dominance of Builders Warehouse and Builders Express. The new Superstore format continues to exceed expectations. We are now committed to expanding this store format beyond the Gauteng province, South Africa.


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%. Masscash’s trading profit before interest and tax increased by 14.9%.
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%. 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. Both the Cambridge and Rhino brands receive strong customer support and loyalty.

Strategic priorities

Our areas of strategic focus remain unchanged. We will continue to improve on Group profitability through a continued focus on sales, operating margin and expenses.
We will always be prepared to invest profit into price, to drive sales and the productivity loop. We aim to achieve this through:

  • Driving the growth and profitability of the core South African business over the medium-term. This is a priority and we are making good progress
  • Expanding further into Food Retail and Fresh in our existing formats and Masscash Retail
  • Expansion in sub-Saharan Africa. This remains a priority and in the next two years we anticipate opening 13 new stores representing African space growth of about 50%
  • We will continue to expand and improve our ecommerce offerings


It is almost five years since we first met Walmart and almost four since its 52% ownership of Massmart formally began in June 2011.
Becoming part of a multinational spanning the globe was initially challenging, particularly as Massmart was already an African multinational organisation. Since then, all functional and operational relationships between Walmart and Massmart have found the appropriate business owners and are useful and constructive.
There are now multiple points of contact between the businesses – these are not limited to executive level and stretch from: speaking to ASDA about the intricacies of the Fresh supply chain, attending ecommerce discussion with, attending meetings to lower store construction costs, or our Divisional management attending a two-week deep-dive with the Walmart Canada supply chain team. Much of the value-transfer from Walmart to Massmart is in the form of intellectual property and retail skills.
A strategic benefit however, is the significantly lower costs of international IT licences including SAP. This, for example, has enabled Massmart to plan SAP implementations across Cambridge and Game that will transform the retail execution in those businesses over the longer-term.


For a business to be sustainable over the long-term it must be instinctively responsive to the nature, needs and direction of the society within which it operates. We believe that diversity makes a business stronger, more resilient and more responsive. As a major South African Group, our focus remains steadfast on the Transformation of our employee body, especially at senior- and executive-management levels. Similarly, through our involvement with the Supplier Development Fund, we are making progress in the Transformation of the South African FMCG supply chain. Our progress in both these areas is described in greater detail in Human Capital and the Supplier Development Fund respectively.

The Board

My Board colleagues are a source of great counsel and support, with the occasional challenge too. Each Board member contributes to me in my role as CEO and, formally and informally, I have ready access to skills and experience across diverse areas including international retail, multinationals, corporate governance and risk, South African politics and transformation. This counsel, of course, extends beyond me to my Executive Committee colleagues and senior management.
After assisting with the transition of the new CFO, Ilan Zwarenstein resigned from Board on 12 March 2015. Ilan has been with Massmart for nine years and was Group Finance Director from 2012. His contribution to Massmart has been significant at many levels and beyond Finance too, and the Board and I acknowledge and thank him for this.
I welcome Johannes van Lierop, Ilan’s successor, to Massmart and the Board, and look forward to his contribution. Johannes has extensive multinational experience in Africa where he has lived in three different countries and covered over 20 countries at various times over the last 18 years. In particular, he was with Diageo from 2000 to 2011 where he worked in various roles including Finance, Supply Chain and Planning, finishing as CFO of the Diageo-subsidiary Guinness Nigeria in 2011. He joins Massmart from Bharti Airtel Africa in Kenya where he was CFO from 2011 to 2014.
I echo the remarks made by Kuseni Dlamini concerning our new non-Executive Directors.

Our people

Our Group’s success and sustainability depends on the five Divisional CEOs, and the over 47,000 colleagues employed across all our businesses, in stores, distribution centres, offices, processing plants and across 12 countries. Many have a significant length of service with Massmart while others have recently joined. I thank all of them for their hard work, dedication, customer service and loyalty.


For the 13 weeks to 29 March 2015, total sales increased by 9.5% and comparable sales increased by 7.4%. Recent sales trends were adversely affected by the 21 March public holiday falling on a Saturday this year, rather than the Friday as was the case in the prior year. Allowing for this, the 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 however, 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. Regardless, we remain focused on our strategic priorities to improve sustainably Group profitability and to grow in our core businesses and markets.
The financial information on which this outlook statement is based has not been reviewed or reported on by the Company’s external auditors.


Our appreciation and gratitude is due to all our stakeholders for their contribution and commitment to Massmart during this period.


Guy Hayward            
Chief Executive Officer
2 April 2015