Performance summary

R41.6 billion
2017: R40.8 billion*
Trading profit
before interest and tax
R664.2 million
2017: R825.2 million
Headline earnings before restructure costs (taxed)
R290.3 million
2017: R364.7 million
Interim dividend
per share
68.0 cents
2017: 76.0 cents




Massmart, Africa’s second largest retail group, , with annualised sales of R90.6 billion, comprises four Divisions operating in 425 stores, across 13 sub-Saharan countries.

Through our widely-recognised, differentiated retail and wholesale formats, we have leading shares in the General Merchandise, Liquor, Home Improvement and wholesale Food markets. Our key foundations of high volume, low cost and operational excellence enable our price leadership.

Group sales performance on a like-on-like basis

This year’s accounting for the adoption of IFRS 9 and IFRS 15, which in particular excludes Shield’s sales from the current year, complicates performance comparisons between the results for the current and prior periods. To provide a more meaningful assessment of the current period’s performance, and unless otherwise stated, the commentary below has been provided on a like-on-like basis, i.e. reflecting the impact of of IFRS 9 and IFRS 15 in both the current and prior periods. This like-on-like financial information must be read in conjunction with note 3.

On a like-on-like basis, Massmart’s total sales for the 26-week period of R41.6 billion represented an increase of 1.9%, with comparable store sales increasing by 0.2%. Product deflation was 0.7%. Total sales from our South African stores for the period grew by 2.0% and comparable sales by 0.5%. Total sales from our ex-SA stores for the period grew by 5.7% and comparable stores by 0.6% (both in constant currencies). Given South Africa’s currency weakness, the total ex-SA Rand sales increase was 1.0%.

The Group’s like-on-like sales declined 1.5% in Food, but grew 9.2% in Liquor, 0.9% in Durable Goods and 7.6% in Home Improvement. As noted earlier this year, the Group’s Food growth, especially in wholesale, was adversely impacted by commodities’ deflation, estimated to be 9.5%. Similarly, we are seeing deflation in Durable Goods but these lower prices are not attracting more customer spending because of the adverse financial pressures experienced by lower- and middle-income consumers who prioritise their spending on food, clothing and transport. We continue to gain market share across a number of our Durable Goods categories, including: small domestic appliances, large domestic appliances, electronics and most DIY and hardware categories.


Overview and environment

The consumer environment in South Africa for the six months to June 2018 was difficult and deteriorated during the period. The economic conditions in the 12 other African countries where we have a total of 43 stores were also difficult. In South Africa, which generates 91.6% of Group sales, with the economic backdrop of a reported 2.2% contraction in the first quarter’s GDP growth, consumers were adversely impacted by the April VAT increase and petrol price increases (11.1% from January to 1 July 2018).


Group overview

On a like-on-like basis, gross margins declined slightly from 19.7% to 19.6% which was caused primarily by margin pressure from deflation in Food.

Expense management remained effective with total expense growth, excluding restructuring costs, of only 3.9% while comparable expense increases were limited to 2.1%.

In late February this year we announced internally the restructuring of some of the business functions within Massdiscounters and Masscash respectively and the relocation of both head offices from the Durban area to Johannesburg. We approached both of these as formal organisational restructures under s189 of the Labour Relations Act (LRA). The once-off direct costs of both of these exercises in this reporting period is R110.3 million, with a further R56.0 million expected to be incurred in the second half of 2018. The annualised direct savings of these restructures and relocations are estimated to be R52.0 million. In addition, the relocation, which will see all the Divisional buying functions now based in Johannesburg, will improve our ability to take advantage of greater co-ordination of procurement activities across the Group.

In the period under review, efficiencies from a focus on transport, logistics and supply chain achieved a reduction in distribution centre (DC) costs. We continue to generate transport benefits resulting from better leverage of Group scale through network planning. Furthermore, we see an opportunity to increase product velocity through the Massmart logistics network, resulting in improved DC cost recoveries.

The pressure from the current period’s low sales growth caused Group trading profit before interest and taxation, excluding restructure costs, to decline by 19.5% to R664.2 million. Headline earnings decreased by 42.2% to R210.9 million, while headline earnings excluding restructure costs decreased by 20.4% to R290.3 million.

We continued pursuing new revenue streams and in the six-month period saw significant growth in our ValueAdded Services (VAS) business. This was achieved through double-digit growth across the VAS product portfolio in the areas of money transfers, lotto sales, RCS credit product sales, and extended warranties.

Our omnichannel focus, which improves our customers’ choice and experience, was rewarded with the Group’s aggregate Online sales growing by 69%. This was achieved through our four ecommerce points of presence (being Makro, Game, DionWired and Builders Warehouse), all of which are currently utilising or migrating to the SAP Hybris platform. Combined Makro, Game, DionWired and Builders Warehouse achieved a 23% increase in average online basket size and a 159% growth in online traffic.

During the period, five stores were opened and three were closed, resulting in a net trading space increase of 0.8% to 1,626,261m². We will open another 17 stores over the remainder of 2018. Our African growth plans remain on track and we added 5,000m2 of ex-SA trading space in the period.


Our people

The contribution of our 43,000 colleagues across sub-Saharan Africa is always appreciated, especially in the current environment where many of them and their own families feel the adverse consequences of the weak economy. We acknowledge and thank our colleagues in all our stores, offices, DCs, and call centres for their contributions, service and support.



The Board is pleased to advise that Mr Chris Seabrooke has agreed to continue as Lead Independent Director and Deputy Chairman but will cease to be a member of the Board Committees as previously advised on 25 May 2018.


Strategic priorities

Despite the challenges of the current consumer economies in most of the 13 African countries where we operate, we are executing towards clear long-term strategic goals including:

  • Driving structurally lower operating costs;
  • Adding 49 new stores between 2018 and December 2020 representing 10.7% total new space. 29.9% of this space will be in Africa, concentrated specifically in Nigeria, Kenya and Ghana;
  • Investing significant capital in, and driving, online sales which now represent 1.6% sales participation of those categories that are online and are growing at 69%;
  • Driving our valued-add-services customer offerings across the Group and which are growing in aggregate by 71%;
  • Implementing a Group DC service and network function with the aim of reducing the cost-to-serve by at least 1%; and
  • Reviewing the composition of the Group’s current store portfolio and considering, inter alia, the conversion of some Rhino stores to Cambridge and evaluating potential new metropolitan sites for Makro.


For the 33 weeks to 19 August 2018, total sales amounted to R53.2 billion, representing a like-on-like increase of 2.3% over the prior period. Comparable store sales increased by 0.4%. Product deflation is estimated at 0.5%. On an IFRS 15 reported basis, total sales of R53.2 billion represent a decrease of 2.5% and 4.3% on a comparable sales basis.

The current weakness of the domestic economy and the volatile and uncertain international geopolitical situation which impacts the oil price and the Rand, amongst other factors, make near-term forecasting difficult. Compounding this is that Massmart’s profitability is skewed towards the second-half of the financial year and particularly the fourth quarter which includes Black Friday and the festive season.

Assuming no further deterioration in the South African consumer economy for the remainder of 2018, Massmart is cautiously optimistic about the full-year’s earnings.

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


Guy Hayward
Chief Executive Officer
Johannes van Lierop
Chief Financial Officer

22 August 2018


* To provide a more meaningful assessment of the current period’s performance, the performance results have been prepared on a like-on-like basis which includes the material impact of IFRS 15 in the first half of the current and prior financial year. Refer to note 3 for detail on the impact of the new accounting standards using the modified retrospective approach.