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 2015 and the state of affairs of Massmart Holdings Limited and its subsidiaries at the end of the financial year. 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 Board’s Audit Committee reviews the financial information presented and ensures that there has been adherence to International Financial Reporting Standards and the South African Companies Act. 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.

Shares in issue

Please find the movement in ordinary and preference shares for the financial year under review below:

 Ordinary shares    
Balance at December 2013   217,109,044
Converted preference shares¹   9,028
Balance at December 2014    217,118,072
Converted preference shares¹   18,262
Ordinary shares in issue at December 2015   217,136,334

 

Preference shares¹    
Balance at December 2013   2,867,773     
Converted to ordinary shares   (9,028)
Balance at December 2014   2,858,745
Converted to ordinary shares   (18,262)
Preference shares in issue at December 2015   2,840,483

 

1The preference shares relate to Massmart’s Black Scarce Skills Trust

 

Directorate and Company Secretary

The Board comprises ten Directors at the time of this Report of whom eight are non-Executive and five 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, and he was appointed on 7 May 2012.

Following the August 2014 announcement of the intended resignation of Ilan Zwarenstein from his role as Group Finance Director, the Massmart Board announced the appointment of Johannes van Lierop as CFO of Massmart with effect from 12 March 2015, at which date Ilan accordingly resigned.

Shelley Broader left Walmart in October 2015 and as such, resigned from the Massmart Board and relevant sub-committees on 9 November 2015.

Moses Kgosana was appointed as an independent non-Executive Director with effect from 1 September 2015. Moses is the former Chief Executive and Senior Partner of KPMG South Africa and Chairman of KPMG Africa.

Enrique Ostalé was appointed to the Board of Directors of Massmart with effect from 24 February 2016. Enrique is the President and Chief Executive Officer of Walmart Latin America, India and Africa regions, as well as chairman of the board of directors of Walmart Mexico and Central America.

 At least one-third of the non-Executive Directors are required to retire every year and the Executive Directors have elected to also retire on this basis. As a result, all Directors retire by rotation at least every three years and are then eligible for re-election. In addition, shareholders must ratify the initial appointment of each Director at the first Annual General Meeting following that Director’s appointment. As a result of these requirements, at the 26 May 2016 Annual General Meeting, Chris Seabrooke retires by rotation; while Moses Kgosana and Enrique Ostalé will retire due to having been appointed during the applicable year. Being eligible, they all offer themselves for re-election.

 

 

Interests of Directors in the Company’s shares

At December 2015, the following 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:

                 
    Dec-15   Dec-14
Non-executive Directors   Shares   Options/
Share Awards
  Shares   Options/
Share Awards
                 
K Dlamini    9,800      9,800  
NN Gwagwa    9,800      9,800  
                 
Executive Directors                
GM Pattison1        643,473    196,877
GRC Hayward    222,894    384,376    222,894    342,619
J van Lierop2      107,678    
I Zwarenstein3          201,029
                 
At the date of this report, the Directors’ beneficial holdings were as follows:
                 
    Apr 16   Apr 15
Non-executive Directors   Shares   Options/
Share Awards
  Shares   Options/
Share Awards
                 
K Dlamini    9,800      9,800  
NN Gwagwa    9,800      9,800  
                 
Executive Directors                
GRC Hayward    222,894    422,095    222,894    342,619
J van Lierop2      144,877      95,327

 

There were no non-beneficial interests in either of these periods.

¹    Resigned with effect from 31 December 2014.
²    Appointed with effect from 12 March 2015.
³    Resigned with effect from 12 March 2015.

 

Subsidiaries

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

Massbuild Proprietary Limited 2004/035206/07
Masscash Proprietary Limited 1997/014716/07
Massmart International Holdings Limited (incorporated in Mauritius) 47902 C1/GBL
Massmart Management and Finance Company Proprietary Limited 1992/004084/07
Masstores Proprietary Limited 1991/006805/07
Wild Developments Proprietary Limited 1973/000178/07

Details of the Company’s interests in material subsidiaries are set out in note 37


Borrowing powers

In terms of the Memorandum of Incorporation, the Group has unlimited borrowing powers. At December 2015, borrowings were R3.5 billion (2014: R3.6 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 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 its customer, product or geographic markets; and
  • budgets to December 2016 reflect a continuation of the above positive factors

Direct and ultimate holding companies

The Company’s direct holding company is Main Street 830 Proprietary Limited, incorporated in South Africa, and the Company’s ultimate holding company is Wal-Mart Stores, Inc., incorporated in the United States.

Subsequent events

The Group concluded a Term Loan Facility Agreement with Standard Bank as lender in February 2016. In terms of the agreement Standard Bank has advanced R2.0 billion to the Group on 26 February 2016. The agreement includes a R600 million facility that will mature in three years and a R1.4 billion facility that will mature in five years.

A fire was reported at the Jumbo Cash & Carry store in Crown Mines, Johannesburg, on 25 February 2016. All night shift employees were safely evacuated, fully accounted for and no one was injured. In situations such as this the cause of the fire is investigated after the site has been declared to be safe. The investigation is typically conducted by teams from the Fire Department, South African Police Services and the insurers. The value of stock that was carried in the store is estimated, at this early stage, to be approximately R100 million. The store, assets and stock are fully insured and we have Business Interruption Cover.

With the exception of the above, there were no significant subsequent events after the year end.

On behalf of the Board

 

Philip-Sigsworth

Philip Sigsworth
Company Secretary
1 April 2016

Massmart address

The Company’s registered office and postal address are as follows:

Registered office: Postal address:

Massmart House
16 Peltier Drive
Sunninghill Ext 6
Sandton, 2146
South Africa

Private Bag X
4 Sunninghill
2157
South Africa

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.