MSM: MASSMART HOLDINGS LIMITED - Sales Update And Trading Statement For The 52-week Period Ended 30 December 2018
MSM: MASSMART HOLDINGS LIMITED - Sales update and trading statement for the 52-week period ended 30 December 2018 Sales update and trading statement for the 52-week period ended 30 December 2018 Massmart Holdings Limited (Incorporated in the Republic of South Africa) Company registration No. 1940/014066/06 JSE Code: MSM ISIN: ZAE 000152617 ("Massmart", "Company" or the "Group") Sales update and trading statement for the 52-week period ended 30 December 2018 1. Sales update for the 52-week period ended 30 December 2018 Massmart´s total sales for the 52-week period of R90.9 billion increased by 2.9%, with comparable store sales increasing by 1.2%, and with product deflation estimated at 0.2%. These figures are compared to the 2017 52-week period excluding Shield (see the IFRS 15 explanation below). Despite a satisfactory sales performance over the Black Friday period, sales growth slowed in all Divisions apart from Massdiscounters in both November and December 2018. The slowdown resulted in total and comparable sales growths in that two-month period being 0.1% and -0.9% respectively. As noted in recent announcements, for statutory reporting purposes Massmart has adopted IFRS 15 using the `modified retrospective approach´, which requires that the comparative period not be restated. This non-restatement complicates comparison with the prior period, particularly as Shield´s sales are included in revenue on a gross basis during 2017. In addition, the 2017 financial year was a 53-week period. Using the abovementioned modified retrospective method per IFRS 15, relative to the 2017 53-week period, total sales for the 2018 52-week period of R90.9 billion represent a decline of 3.0%, with comparable store sales declining by 4.7%. Total and comparable sales growths for the first three weeks of 2019 are 4.6% and 3.1% respectively. 2. Trading statement for the 52-week period ended 30 December 2018 In accordance with the Listings Requirements of the JSE Limited, a company is required to publish a trading statement as soon as it is satisfied that a reasonable degree of certainty exists that the financial results for the next period to be reported on are likely to vary by at least 20% from the previous corresponding period. The softer than expected sales, particularly over the crucial November and December 2018 period, slightly lower gross margins in response and growth in expenses, adversely impacted profitability as outlined in the tables below. Gross margins of 19.46% were 18bps below those for the 2017 52-week period. Total expenses grew at a creditable 5.0% (comparable expense growth well below that) but which was higher than sales growth and therefore caused further operating profit compression. In addition, there are the previously-disclosed one-off costs of R161 million associated with moving the Masscash and Massdiscounters head offices from Durban to Johannesburg. Shareholders are advised that Massmart expects, with reasonable certainty, the following financial results: 52 weeks compared to 2017 52-weeks: Estimated Reported* Expected Dec 2018 Dec 2017 % change (52 weeks) Including the Restructure Costs HEPS (cents) 389.2 - 450.4 612.8 -36.5% to -26.5% Basic EPS (cents) 381.2 - 443.0 619.0 -38.4% to -28.4% Excluding the Restructure costs Normalised HEPS (cents) 440.4 - 501.6 612.8 -28.1% to -18.1% Normalised Basic EPS (cents) 432.4 - 494.3 619.0 -30.1% to -20.1% 52 weeks compared to 2017 53-weeks: Estimated Reported * Expected Dec 2018 Dec 2017 % change Including the Restructure Costs HEPS (cents) 385.4 - 454.2 688.1 -44.0% to -34.0% Basic EPS (cents) 377.4 - 446.8 694.3 -45.6% to -35.6% * Includes impact of restatement of an accounting adjustment totalling R13m for lease accounting Massmart´s financial results for the 52 weeks to December 2018 will be released on the Stock Exchange News Service of the JSE Limited on 28 February 2019. The information above has not been audited or reviewed or otherwise reported on by the Company´s external auditors. Johannesburg 22 January 2019 Sponsor: JP Morgan Equities South Africa (Pty) Ltd Date: 22/01/2019 02:41:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.