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MSM: MASSMART HOLDINGS LIMITED - Sales Update And Trading Statement For The 52-week Period Ended 30 December 2018

Date: 2019/01/22

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

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