1. These reviewed interim condensed consolidated results (pages 9 to 13) 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 interim reviewed 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 except for the changes listed below in note 3.

  2. At the end of 2017 the Group reconsidered its accounting in respect to the valuation of inventory in line with IAS 2 Inventories relating to the valuation of inventory including the capitalisation of costs and recognition of some rebates on inventory. The effect of the reconsideration was disclosed for the full year in the results update for the 53 weeks ended 31 December 2017 as well as in note 43 of Massmart’s Annual Financial Statements for the year ended December 2017 (page 82). The effect of the reconsideration for the 26-week period ended 25 June 2017 (constituting the comparatives in this year’s half year results update) was disclosed in the same Annual Financial Statements for the year ended December 2017 (page 83).

  3. The Group has applied both IFRS 9 ‘Financial Instruments’ and IFRS 15 ‘Revenue from Contracts with Customers’ using the modified retrospective approach, by recognising the cumulative effect of initially applying IFRS 9 and IFRS 15 as an adjustment to the opening balance of equity at 1 January 2018. Therefore (with the exception of the like-on-like consolidated income statement on page 8 and the Divisional operational review on page 2) the comparative information has not been restated and continues to be reported under IAS 18 Revenue and IAS 39 ‘Financial Instruments’. IFRS 9 has had an insignificant impact for the Group due to the low-value short-term nature of debtors. IFRS 15 key areas of impact are the changes in the principal vs. agent recognition of sales in the Masscash Division whereby certain sales are now recognised on a net basis and the recognition of the right of return liability and related right of return asset now recognised on a gross basis. Revenue from contracts with customers can be further disaggregated for the current year between South Africa R38.1 billion (2017: R39.0 billion) and ex-SA R3.5 billion (2017: R3.5 billion). The quantitative impact of the changes is illustrated on pages 9 to 12.

  4. The Group anticipates a material impact as a result of the adoption of IFRS 16 ‘Leases’ using the modified retrospective approach. The material impact relates to the capitalising of the leased stores onto the statement of financial position with the corresponding lease liability. At 1 July 2018 extraction of leases included 561 real estate and 2,149 non-real estate leases.

  5. In late February 2018 the Group announced, internally, the decision to relocate major sections of Game head office from Durban to Johannesburg later this year and to embark on a formal organisational restructure under s189 of the Labour Relations Act (LRA) in both Massdiscounters and Masscash. This resulted in restructure costs of R110.3 million. The estimated costs for the 52-week period ending 30 December 2018 amount to R166.3 million. These restructures are expected to produce estimated annual savings of R52.0 million in a full financial year.

  6. The majority of Massmart’s realised and unrealised foreign exchange gain of R23.4 million (June 2017: R16.6 million (loss)) arose as a result of the strengthening of the average basket of ex-SA currencies.

  7. Massmart and its Divisions enter into certain transactions with related parties in the normal course of business. At June 2018, the Supplier Development Fund had a closing balance of R24.4 million (June 2017: R60.9million). The Group repaid its R600.0 million medium-term loan with Walmart in April 2018, on which it had an interest rate of 7.46% paid quarterly. As a 52.4% shareholder, Main Street 830 Proprietary Limited, a subsidiary of Walmart, will be receiving a dividend based on their number of shares held. A net amount of R2.7 million remains unpaid to Walmart, which has been accounted for in ‘trade, other payables and provisions’ and trade, other receivables and prepayments’.

  8. Massmart offers a diverse range of retail offerings to the market consisting of Food & Liquor, General Merchandise and Home Improvement. Due to the cyclical nature of this industry, higher revenues and operating profits are usually expected in the second half of the year rather than in the first six months. Higher sales during the period October to December are mainly attributed to the increased demand for our non-Food categories where we see an increase in discretionary spend leading up to the Christmas holiday period. This information is provided to allow for a better understanding of the results.

  9. The constant currency information included in these reviewed interim condensed consolidated results has been presented to illustrate the Group’s underlying ex-SA business performance, in terms of sales growth, excluding the effect of foreign currency fluctuations. In determining the application of constant currency, sales for the prior comparable financial reporting period have been adjusted to take into account the average monthly exchange rate for the current period. The table below depicts the percentage change in sales in both reported currency and constant currency for the given material currencies. The constant currency information incorporated in these reviewed interim condensed consolidated results has not been audited or reviewed or otherwise reported on by our external auditors. The constant currency information is the responsibility of the Directors of Massmart. It has been prepared for illustrative purposes only and due to its nature, may not fairly present Massmart’s financial position, changes in equity, results of operations or cash flows.

    Sales growth in:
      Reported Currency Constant Currency
    Zambian Kwacha 21.3% 32.8%
    Nigerian Naira (14.2%) (2.8%)
    Kenyan Shilling 51.0% 59.8%
    Total ex-SA 1.0% 5.7%
  10. Interest-bearing borrowings have decreased by R1.2 billion since June 2017. This movement is a result of the settlement of the R600.0 million medium-term loan with Walmart, as well as the R937.2 million settlement of our bank medium-term loans, offset by new finance leases.

  11. These reviewed interim condensed consolidated results (pages 9 to 13) 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 review was performed in accordance with ISRE 2410 ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’. 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 Group’s registered office. The preparation of the Group’s reviewed interim condensed consolidated results was supervised by the Chief Financial Officer, Johannes van Lierop, Bachelor of Business Economics, RA (Netherlands).