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MSM: MASSMART HOLDINGS LIMITED - Interim Results For The Period Ended 1 July 2018

Date: 2018/08/23

MSM: MASSMART HOLDINGS LIMITED - Interim Results for the period ended 1 July 2018
Interim Results for the period ended 1 July 2018

Massmart Holdings Limited 
("the Company" or "the Group") 
JSE code MSM 
ISIN ZAE000152617 
Company registration number  1940/014066/06 

Interim Results for the period ended 1 July 2018 

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 Value-Added 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.
 
Financial review 

Financial performance 
The prescribed method of accounting for the adoption of IFRS 9 and IFRS 15 has the unfortunate consequence in this financial year of complicating the ability to make useful comparisons, between the results for the 26-week periods ended 25 June 2017 and 1 July 2018, from a statutory reporting perspective. 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 to reflect the material impact of IFRS 9 and IFRS 15 as though it was in effect for the period 26 December 2016 to 25 June 2017. The like-on-like financial information must be read in conjunction with note 3. 

Rm                                  June 2018    June 2017    % change total   % change comparable 
Sales per IFRS 15 (reviewed)          R41.6bn      R42.5bn             (2.2%)                (3.9%) 
Like-on-like sales (unreviewed)       R41.6bn      R40.8bn              1.9%                  0.2% 


Sales performance per IFRS 15 
For the 26 weeks to 1 July 2018, Massmart's total sales decreased to R41.6 billion representing a decline of 2.2% and comparable store sales decline of 3.9% (compared to the prior period). 

Like-on-like sales performance 
Massmart's total sales for the 26 weeks ended June 2018 increased by 1.9% and comparable store sales increased by 0.2%. Year-to-date product inflation reduced from 2.0% at December 2017 to deflation of 0.7% in June 2018. Inflation in Food & Liquor and Home Improvement reduced slightly to 0.4% and 0.3% respectively, while Durables went further into deflation of 1.4%. Our ex-SA businesses represent 8.4% (2017: 8.5%) of total sales and increased by 1.0% in Rands (5.7% increase in constant currencies). 
The Group's 26-week like-on-like gross margin of 19.6% is marginally lower than that of the prior period (2017: 19.7%), despite margin pressure from the deflation in Durable Goods and commodities. While customers timed their purchases around promotions and sought competitive pricing, the Group remained committed to protecting margin. 
Expenses were tightly controlled, increasing by only 3.9% (excluding restructure costs), while comparable expense increases were limited to 2.1%. Employment costs, the Group's biggest cost category, were limited to an increase of 5.8% (with a comparable increase of 4.6%), due to a combination of improved staff scheduling in stores and Distribution Centres (DCs), and a selective replacement of vacancies which resulted in full-time equivalent employees remaining stable at just over 43,000, against the prior period. Favourable lease renewals and improved management of municipal and energy costs resulted in occupancy cost increases being limited to 5.1%. Depreciation and amortisation increased by 0.5%. Other operating expenses remained flat. The non- capital costs of upgrading our IT infrastructure, as well as pre-opening store expenses of R18.6 million (2017: R10.7 million), are included in this expense category. 
Trading profit before interest and taxation (excluding restructure costs) declined by 19.5% to R664.2 million. 
Included in the 26-week period are the direct costs of R110.3 million pertaining to the formal organisational restructure under s189 of the LRA in both Massdiscounters and Masscash (see note 5). 
Operating profit after restructure costs and before interest and taxation declined by 34.2% to R547.5 million. 
Included in operating profit are net realised and unrealised foreign exchange gains of R23.4 million (2017: loss of R16.6 million), the majority of which arose as a result of the strengthening of the average basket of ex-SA currencies. 
Although net bank interest decreased by R13.5 million, net finance costs grew by R8.0 million (2.8%) to R290.1 million (2017: R282.1 million), largely due to the impact of a finance lease capitalised at the end of 2017. The Group's effective tax rate of 29.9% is in line with expectations (2017: 30.0%). 
Headline earnings before restructure costs decreased by 20.4% to R290.3 million, while Headline earnings including restructure costs decreased by 42.2% to R210.9 million. 


Financial position 

Unless otherwise stated, the commentary on our financial position has been provided taking into account the adoption of IFRS 9 and IFRS 15. 
During the period, investment spend was focused on new IT infrastructure, store openings and the refurbishment of existing stores. As a result, the net book value of property, plant and equipment increased by 7.1% over the prior period. Total capital expenditure was R632.9 million. The expansionary expenditure of R358.9 million included investments in IT systems and new store openings. Replacement expenditure was R274.0 million and included store refurbishments. 
Operating cash before working capital movements amounted to R1.3 billion, 18.7% lower than the corresponding prior period, caused by lower cash from operations. The cash outflow from working capital movements increased from R4.2 billion in 2017 to R5.1 billion in the current period, largely due to higher inventory levels. 
The inventory balance increased by 9.2% to R11.0 billion, mainly due to month-end timing. On a like-on-like basis, inventory days increased by four days compared to June 2017. Trade receivables decreased by 3.2% which resulted in debtors' days remaining flat. Creditors' days increased by six days to 60 days. 
The annual rolling return on equity was 23.7% (2017:24.4%).

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. 

Directorate
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 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. 


Outlook 
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. 


Dividend 
Massmart's current dividend policy is to declare and pay an interim and final cash dividend representing a 2.0 times dividend cover unless circumstances dictate otherwise. This interim dividend has been calculated on headline earnings before restructure costs. Notice is hereby given that a gross interim cash dividend of 68.0 cents per share, in respect of the period ended 1 July 2018 has been declared. The number of shares in issue at the date of this declaration is 217,179,142. 
The dividend has been declared out of income reserves as defined in the Income Tax Act, 1962, and will be subject to the South African dividend withholding tax rate of 20% which will result in a net dividend of 54.4 cents per share to those shareholders who are not exempt from paying dividend tax. Massmart's tax reference number is 9900/196/71/9. 
 
The salient dates relating to the payment of the dividend are as follows: 
Last day to trade cum dividend on the JSE: 
Tuesday, 11 September 2018 
First trading day ex dividend on the JSE: 
Wednesday, 12 September 2018 
Record date: 
Friday, 14 September 2018 
Payment date: 
Monday, 17 September 2018 

Share certificates may not be dematerialised or rematerialised between Wednesday, 12 September 2018 and Friday, 14 September 2018, both days inclusive. 
Massmart shareholders who hold Massmart ordinary shares in certificated form ("certificated shareholders") should note that dividends will be paid by cheque and by means of an electronic funds transfer ("EFT") method. Where the dividend payable to a particular certificated shareholder is less than R100, the dividend will be paid by EFT only to such certificated shareholder. 
Certificated shareholders who do not have access to any EFT facilities are advised to contact the company's transfer secretaries, Computershare Investor Services at Rosebank Towers, 15 Biermann Avenue, Rosebank, Johannesburg, 2196; on 011 370 5000; or on 0861 100 9818 (fax), in order to make the necessary arrangements to take delivery of the proceeds of their dividend. 
Massmart shareholders who hold Massmart ordinary shares in dematerialised form will have their accounts held at their CSDP or broker credited electronically with the proceeds of their dividend. 

On behalf of the Board 

Guy Hayward 
Chief Executive Officer
22 August 2018

Johannes van Lierop 
Chief Financial Officer 


Performance summary 

Sales
Up by 1.9% 
R41.6 billion 
2017: R40.8 billion* 

Trading profit before interest and tax 
Down by 19.5% 
R664.2 million 
2017: R825.2 million 

Headline earnings before restructure costs (taxed) 
Down by 20.4% 
R290.3 million 
2017: R364.7 million 

Interim dividend per share 
Down by 10.5% 
68.0 cents 
2017: 76.0 cents

* 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. 



Like-on-like Divisional trading review 
                                                                                                                                                                                                                                          
                                                                                                                             53 weeks        
                     26 weeks                    26 weeks                                   Comparable*    Estimated         December
                    June 2018        % of       June 2017         % of    Like-on-like*        % sales       % sales             2017         % of  
Rm                  (Reviewed)      sales   (Like-on-like)*      sales        % growth          growth     inflation    (Like-on-like)*      sales
                                                                                                                           
Sales                41,558.4                    40,784.5                          1.9             0.2          (0.7)+       89,869.7 
Massdiscounters       9,143.9                     9,520.6                         (4.0)           (4.7)         (4.6)        20,330.6 
Masswarehouse        12,880.8                    12,222.4                          5.4             3.5          (0.7)        27,748.9 
Massbuild             6,412.5                     5,961.6                          7.6             5.7           2.3         13,191.9 
Masscash             13,121.2                    13,079.9                          0.3            (2.0)         (0.3)        28,598.3 
Trading profit**        665.6         1.6           829.2          2.0           (19.7)                                       2,743.9          2.9 
Massdiscounters         (95.3)       (1.0)           79.8          0.8          (100.0)                                         454.3          2.2 
Masswarehouse           484.5         3.8           485.9          4.0            (0.3)                                       1,313.1          4.7 
Massbuild               280.5         4.4           250.4          4.2            12.0                                          797.5          6.0 
Masscash                 (4.1)       (0.0)           13.1          0.1          (100.0)                                         179.0          0.6 

** The 'trading profit before interest and tax' above is the amount per the condensed consolidated income statement less the BEE transaction IFRS 2 charge and excludes restructure costs. 
+ Group sales inflation is a weighted inflation. 



Our Divisions on a 26-week basis 

Massdiscounters

Sales 
Down by 4.0% 
R9,143.9 million 
2017: R9,520.6 million* 

Massdiscounters comprises the 142-store General Merchandise and Food discounter Game, which trades in South Africa and 11 other African countries; and the 22-store Hi-tech retailer DionWired in South Africa. 
Total sales of R9.1 billion decreased by 4.0% and comparable sales were down 4.7%. Year-to-date product deflation was 4.6%. In Game's South African stores, total sales declined by 2.3% and comparable sales by 2.9% which masks an improved sales performance in the second quarter. General Merchandise sales were the same as for the prior period and we gained market share in the domestic large appliances and Hi-tech categories. Game Africa's total sales in constant currencies increased by 1.0%, but declined by 5.7% in Rands due to currency weakness, particularly in Mozambique and Nigeria. Given the difficult consumer environment for Hi-tech and appliances, DionWired sales were below those of the prior period. 
As noted elsewhere, we began to relocate sections of the Game head office from Durban to Johannesburg and embarked upon an organisational restructure. The direct cost of this is about R116 million, of which R90.5 million is included in this reporting period. Annualised savings are estimated to be R30.0 million and will be realised from the second half of this financial year. 
The Division continued to manage expenses well and, in total these were only 1.9% higher than the prior period, with a comparable expense decrease of 2.8%. We reduced inventory values to 
below that of June 2017. Both of these position the business to benefit from any positive sales momentum. The sales pressure was such that for the period Massdiscounters' trading loss before 
interest and tax was R95.3 million (excluding restructure costs). 
The new GK-POS point-of-sale roll-out was completed successfully across all but three Game and DionWired stores, improving speed at checkout and introducing additional value-added 
products and services for customers. In late 2017, Game launched its online shopping platform using SAP Hybris and DionWired moved from its legacy online system to SAP Hybris in March 
2018. The more significant SAP ERP system implementation remains on schedule for early 2019. 
During the year, two DionWired stores were closed decreasing Massdiscounters' trading space by 0.6% to 545,460m2 from December 2017. We are on schedule to open six new stores over the 
remainder of the 2018 financial year. 


Masswarehouse

Sales 
Up by 5.4%
R12,880.8 million 
2017: R12,222.4 million* 

Masswarehouse comprises the 21-store Makro warehouse-club trading in Food, General Merchandise and Liquor in South Africa; and Massfresh the Group's fresh produce, fresh meat and 
bakery operations including The Fruitspot. 
Total sales of R12.9 billion increased by 5.4% and comparable sales grew by 3.5%. Year-to-date product deflation was 0.7%, caused by deflation in General Merchandise and Food commodities. 
Total sales growth in Food & Liquor was 5.2%, a good performance given the consumer environment. General Merchandise sales growth was a very pleasing 5.7%, despite deflation and pressure on discretionary spending. 
Resulting from our 21st Makro store opening in late 2017 and the ongoing investments in IT and online, expense growth of 10.4% (a comparable expense increase of 7.5%) was higher than sales growth. Trading profit before interest and tax decreased by 0.3% to R484.5 million. 
Online sales grew by 27%. Our online platform now includes a successful marketplace offering (the sales or Gross Merchandise Value which are excluded here). Later this year we will replace the legacy online platform with SAP Hybris. 
No new stores in the period and trading space remained at 231,021m2. 


Massbuild

Sales 
Up by 7.6%
R6,412.5 million 
2017: R5,961.6 million* 
   
Massbuild comprises 110 stores, trading in DIY, Home Improvement and Building Materials, under the Builders Warehouse, Builders Express, Builders Trade Depot and Builders Superstore 
brands in South Africa; and six Builders Warehouse stores in Botswana, Mozambique and Zambia. 
With a very strong performance, Massbuild grew total sales for the year by 7.6% to R6.4 billion, with comparable sales increasing by 5.7% and year-to-date product inflation of 2.3%. It is noteworthy that for the period contractors' sales growth was higher than that for retail customers. Total sales growth in our ex-SA stores was 11.2% in constant currencies and 8.1% in Rands. 
Good expense management saw an expense growth of only 5.8% (a comparable expense increase of 2.9%) and trading profit before interest and tax of R280.5 million grew by 12.0%. 
The product range on the Builders Warehouse online platform, launched in early 2017, has been expanded to 26,000 items and sales growth remains very high with incredible customer support. 
Two Builders Express stores were opened and one Builders Trade Depot store was closed in South Africa, and one Builders Express store was opened in Maputo, Mozambique, resulting in a net trading space increase of 1.2% to 461,710m2 from December 2017. Over the remainder of the 2018 financial year, we will open a further six stores, including one in Lusaka, Zambia. 



Masscash

Sales 
Up by 0.3%
R13,121.2 million 
2017: R13,079.9 million* 
  
Masscash comprises 55 Wholesale Cash & Carry stores, and 62 Retail stores trading in South Africa; 13 Cash & Carry stores in Botswana, Lesotho, Mozambique, Namibia, Swaziland and Zambia; and Shield, a voluntary buying association. 
As noted earlier, the adoption of IFRS 15 has the effect of excluding Shield's sales from the current period, consequently the figures below are on a like-for-like basis. 
Total sales of R13.1 billion increased by 0.3%, while comparable sales decreased by 2.0%. Year-to-date product deflation fell to 0.3% in June 2018, with commodities like maize, wheat, oil, sugar and rice remaining in price deflation. Commodities represent 18% of our Wholesale sales and, excluding this category, the remaining Wholesale business grew sales by 4.5%. Cambridge and Rhino performed well in this difficult consumer environment, growing total sales at 4.3%. 
As noted elsewhere, we announced the relocation of the Masscash regional office from the Durban area to Johannesburg and an organisational restructure. The direct costs of these are estimated at R50.0 million, of which R19.8 million is included in this reporting period. This restructure will produce estimated annualised savings of R22.0 million which will be felt from the second half of this financial year. 
Expenses were well managed and were only 0.4% higher (a comparable expense decrease of 2.0%). The soft sales performance caused a trading loss before interest and tax of R4.1 million (excluding restructure costs). 
One Retail store and one Wholesale store was opened in South Africa resulting in a net trading space increase of 2.9% to 388,070m2 from December 2017. We should open five new stores over the remainder of the 2018 financial year. 

* Like-on-like basis, including material impact of IFRS 15 in both years. 


Like-on-like condensed consolidated income statement 
                                                                                                                                                              
                                                                                                                                            
                                                                                               26 weeks                 26 weeks                                               53 weeks
                                                                                              June 2018                June 2017            Like-on-like*                 December 2017
Rm                                                                                            (Reviewed)           (Like-on-like)*              % change                  (Like-on-like)* 

Revenue                                                                                        41,688.4                 40,905.6                     1.9                       90,163.6 
Sales                                                                                          41,558.4                 40,784.5                     1.9                       89,869.7 
Cost of sales                                                                                 (33,416.3)               (32,753.5)                   (2.0)                     (72,219.1) 
Gross profit                                                                                    8,142.1                  8,031.0                     1.4                       17,650.6 
Other income                                                                                      127.9                    114.3                    11.9                          235.1 
Depreciation and amortisation                                                                    (544.6)                  (542.0)                   (0.5)                      (1,095.4) 
Employment costs                                                                               (3,653.8)                (3,453.6)                   (5.8)                      (7,402.9) 
Occupancy costs                                                                                (1,708.9)                (1,626.6)                   (5.1)                      (3,187.0) 
Other operating costs                                                                          (1,698.5)                (1,697.9)                   (0.0)                      (3,463.3) 
Trading profit before interest and taxation                                                       664.2                    825.2                   (19.5)                       2,737.1 
Restructuring cost (note 5)                                                                      (110.3)                       -                       -                              - 
Impairment of assets                                                                               (8.5)                    (0.2)                      -                          (18.9) 
Insurance proceeds on items in PP&E                                                                 2.1                      6.8                   (69.1)                          58.8 
Operating profit before foreign exchange movements and interest                                   547.5                    831.8                   (34.2)                       2,777.0 
Foreign exchange gain/(loss) (note 6)                                                              23.4                    (16.6)                  100.0                          (47.2) 
Operating profit before interest                                                                  570.9                    815.2                   (30.0)                       2,729.8 
- Finance costs                                                                                  (300.9)                  (294.6)                   (2.1)                        (585.4) 
- Finance income                                                                                   10.8                     12.5                   (13.6)                          26.4 
Net finance costs                                                                                (290.1)                  (282.1)                   (2.8)                        (559.0) 
Profit before taxation                                                                            280.8                    533.1                   (47.3)                       2,170.8 
Taxation                                                                                          (84.0)                  (159.9)                   47.5                         (649.1) 
Profit for the period                                                                             196.8                    373.2                   (47.3)                       1,521.7 

Profit attributable to: 
- Owners of the parent                                                                            202.5                    369.3                   (45.2)                       1,507.7 
- Non-controlling interests                                                                        (5.7)                     3.9                       -                           14.0 
Profit for the period                                                                             196.8                    373.2                   (47.3)                       1,521.7 

Basic EPS (cents)                                                                                  94.0                    170.6                   (44.9)                         700.3 
Diluted basic EPS (cents)                                                                          92.1                    167.7                   (45.1)                         687.3 
Dividend (cents):
- Interim                                                                                          68.0                     76.0                   (10.5)                          76.0 
- Final                                                                                               -                        -                       -                          271.0 
- Total                                                                                            68.0                     76.0                   (10.5)                         347.0 

* To provide a more meaningful assessment of the current period's performance, the performance summary has 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. 

The like-on-like financial effects on sales, for which the Directors of Massmart are responsible, are provided for illustrative purposes only to show the effect that IFRS 15: Revenue from contracts with customers would have had on the 25 June 2017 sales amount, allowing for a like-on-like comparison to June 2018. The Group's external auditor has issued a reporting accountants' report on the June 2017 sales amount. A copy of their procedures report is available at the Group's registered office. 


Condensed consolidated income statement 
                                                                                                                                                                    
                                                                                                                                                 
                                                                             26 weeks                          26 weeks       26 weeks                                      53 weeks     
                                                                            June 2018       IFRS 9 & 15       June 2018      June 2017         Period     Adjusted*    December 2017 
Rm                                                                          (Reviewed)       adjustment*      (Adjusted)*    (Reviewed)      % change     % change          (Audited) 

Revenue                                                                      41,688.4          1,768.4         43,456.8       42,627.4           (2.2)         1.9          94,029.1 
Sales                                                                        41,558.4          1,768.9         43,327.3       42,506.3           (2.2)         1.9          93,735.2 
Cost of sales                                                               (33,416.3)        (1,776.8)       (35,193.1)     (34,475.3)           3.1         (2.1)        (76,084.6) 
Gross profit                                                                  8,142.1             (7.9)         8,134.2        8,031.0            1.4          1.3          17,650.6 
Other income                                                                    127.9             (0.5)           127.4          114.3           11.9         11.5             235.1 
Depreciation and amortisation                                                  (544.6)               -           (544.6)        (542.0)          (0.5)        (0.5)         (1,095.4) 
Employment costs                                                             (3,653.8)               -         (3,653.8)      (3,453.6)          (5.8)        (5.8)         (7,402.9) 
Occupancy costs                                                              (1,708.9)               -         (1,708.9)      (1,626.6)          (5.1)        (5.1)         (3,187.0) 
Other operating costs                                                        (1,698.5)             2.8         (1,695.7)      (1,697.9)          (0.0)        0.1           (3,463.3) 
Trading profit before interest and taxation                                     664.2             (5.6)           658.6          825.2          (19.5)       (20.2)          2,737.1 
Restructuring cost (note 5)                                                    (110.3)               -           (110.3)             -              -            -                 - 
Impairment of assets                                                             (8.5)               -             (8.5)          (0.2).            -            -             (18.9) 
Insurance proceeds on items in PP&E                                               2.1                -              2.1            6.8          (69.1)       (69.1)             58.8 
Operating profit before foreign exchange movements and interest                 547.5             (5.6)           541.9          831.8          (34.2)       (34.9)          2,777.0 
Foreign exchange gain/(loss) (note 6)                                            23.4                -             23.4          (16.6)         100.0        100.0             (47.2) 
Operating profit before interest                                                570.9             (5.6)           565.3          815.2          (30.0)       (30.7)          2,729.8 
- Finance costs                                                                (300.9)               -           (300.9)        (294.6)          (2.1)        (2.1)           (585.4) 
- Finance income                                                                 10.8                -             10.8           12.5          (13.6)       (13.6)             26.4 
Net finance costs                                                              (290.1)               -           (290.1)        (282.1)          (2.8)        (2.8)           (559.0) 
Profit before taxation                                                          280.8             (5.6)           275.2          533.1          (47.3)       (48.4)          2,170.8 
Taxation                                                                        (84.0)             1.7            (82.3)        (159.9)          47.5         48.5            (649.1) 
Profit for the period                                                           196.8             (3.9)           192.9          373.2          (47.3)       (48.3)          1,521.7 

Profit attributable to: 
- Owners of the parent                                                          202.5             (3.9)           198.6          369.3          (45.2)       (46.2)          1,507.7 
- Non-controlling interests                                                      (5.7)               -             (5.7)           3.9              -            -             14.0 
Profit for the period                                                           196.8             (3.9)           192.9          373.2          (47.3)       (48.3)          1,521.7 
                                                                                                                                                                   
Basic EPS (cents)                                                                94.0             (1.8)            92.2          170.6          (44.9)       (46.0)            700.3 
Diluted basic EPS (cents)                                                        92.1             (1.8)            90.3          167.7          (45.1)       (46.2)            687.3 
Dividend (cents): 
- Interim                                                                        68.0                -             68.0           76.0          (10.5)       (10.5)             76.0 
- Final                                                                             -                -                -              -              -            -             271.0 
- Total                                                                          68.0                -             68.0           76.0          (10.5)       (10.5)            347.0 

* Refer to note 3. 


Headline earnings 
                                                                                                                                                           
                                                                                                                                              
                                                                           26 weeks                          26 weeks        26 weeks                                       53 weeks
                                                                          June 2018       IFRS 9 & 15       June 2018       June 2017         Period     Adjusted*     December 2017            
Rm                                                                        (Reviewed)       adjustment*      (Adjusted)*     (Reviewed)      % change     % change           (Audited) 
Reconciliation of profit for the period to headline earnings 
Profit for the period attributable to owners of the parent                    202.5             (3.9)           198.6           369.3          (45.2)       (46.2)           1,507.7 
Impairment of assets                                                            8.5                -              8.5             0.2          100.0        100.0               18.9 
Net loss on disposal of tangible and intangible assets                          4.6                -              4.6             2.7           70.4         70.4               23.3 
Profit on sale of non-current assets classified as held for sale                  -                -                -            (2.3)             -            -               (2.3) 
Insurance proceeds for fixed assets impaired                                   (2.1)               -             (2.1)           (6.8)          69.1         69.1              (58.8) 
Available for sale reserve re-classified to the income statement                  -                -                -               -              -           -                 1.1 
Total tax effects of adjustments                                               (2.6)               -             (2.6)            1.6              -           -                 4.4 
Headline earnings                                                             210.9             (3.9)           207.0           364.7          (42.2)       (43.2)           1,494.3 
Restructure costs after taxation                                               79.4                -             79.4               -              -           -                   - 
Headline earnings before restructure costs (taxed)                            290.3             (3.9)           286.4           364.7          (20.4)       (21.5)           1,494.3 
Headline EPS (cents)                                                           97.9             (1.8)            96.1           168.5          (41.9)       (43.0)             694.1 
Headline EPS before restructure costs (taxed) (cents)                         134.8             (1.8)           133.0           168.5          (20.0)       (21.1)             694.1 
Diluted headline EPS (cents)                                                   95.9             (1.8)            94.1           165.7          (42.1)       (43.2)             681.2 
Diluted headline EPS before restructure costs (taxed) (cents)                 132.1             (1.8)           130.3           165.7          (20.3)       (21.4)             681.2 
 


Condensed consolidated statement of comprehensive income 

Profit for the period                                                                196.8   (3.9)   192.9   373.2    (47.3)    (48.3)    1,521.7 
Items that will not subsequently be re-classified to the Income Statement:             3.1      -      3.1       -        -         -        15.1 
Net post retirement medical aid actuarial profit                                       3.2      -      3.2       -        -         -        15.1 
Fair value movement on OCI financial assets                                           (0.1)     -     (0.1)      -        -         -           - 

Items that will subsequently be re-classified to the Income Statement:               124.1      -    124.1   (46.3)   100.0     100.0       (99.8) 
Foreign currency translation reserve                                                 127.3      -    127.3   (25.8)   100.0     100.0      (109.7) 
Cash flow hedges - effective portion of changes in fair value                         20.8      -     20.8    (2.9)   100.0     100.0       (14.2) 
Fair value movement on available-for-sale financial assets                               -      -        -       -        -         -         0.4 
Income tax relating to components of other comprehensive income                      (24.0)     -    (24.0)  (17.6)   (36.4)    (36.4)       23.7 

Total other comprehensive income/(loss) for the period, net of tax                   127.2      -    127.2   (46.3)   100.0     100.0       (84.7) 
Total comprehensive income for the period                                            324.0   (3.9)   320.1   326.9     (0.9)     (2.1)    1,437.0 
Total comprehensive income attributable to: 
- Owners of the parent                                                               329.7   (3.9)   325.8   323.0      2.1       0.9     1,423.0 
- Non-controlling interests                                                           (5.7)     -     (5.7)    3.9        -         -        14.0 
Total comprehensive income for the period                                            324.0   (3.9)   320.1   326.9     (0.9)     (2.1)    1,437.0 

* Refer to note 3. 



Condensed consolidated statement of financial position 
 
                                                                                                                                              December 
                                                  June 2018    IFRS 9 & 15          June 2018      June 2017     Period      Adjusted*            2017
Rm                                                (Reviewed)    adjustment*         (Adjusted)*    (Reviewed)  % change      % change         (Audited)
                                                                                                                                                                                                     
ASSETS 
Non-current assets                                 13,641.0             -            13,641.0       12,665.7        7.7           7.7         13,402.4 
Property, plant and equipment                       9,269.6             -             9,269.6        8,655.0        7.1           7.1          9,214.7 
Goodwill and other intangible assets                3,484.2             -             3,484.2        3,183.8        9.4           9.4          3,378.9 
Investments and other financial assets                139.1             -               139.1          164.4      (15.4)        (15.4)           156.2 
Deferred taxation                                     748.1             -               748.1          662.5       12.9          12.9            652.6 
Current assets                                     17,474.1         (66.0)           17,408.1       15,848.6       10.3           9.8         18,893.8 
Inventories                                        11,023.6         (68.4)           10,955.2       10,093.4        9.2           8.5         10,984.6 
Trade, other receivables and prepayments            4,782.7           4.0             4,786.7        4,142.4       15.5          15.6          5,119.1 
Taxation                                              506.4          (1.6)              504.8          366.1       38.3          37.9            396.5 
Cash on hand and bank balances                      1,161.4             -             1,161.4        1,246.7       (6.8)         (6.8)         2,393.6 
Non-current assets classified as held for sale         36.0             -                36.0           19.9       80.9          80.9             19.9 

Total assets                                       31,151.1        (66.0)            31,085.1       28,534.2        9.2           8.9         32,316.1 
                                                                                                                             
EQUITY AND LIABILITIES 
Total equity                                        6,078.3        (39.6)             6,038.7        5,421.3       12.1          11.4          6,391.4 
Equity attributable to owners of the parent         6,048.6        (39.6)             6,009.0        5,386.6       12.3          11.6          6,348.2 
Non-controlling interests                              29.7           -                  29.7           34.7      (14.5)        (14.5)            43.2 
Non-current liabilities                             3,244.2        (19.2)             3,225.0        3,938.1      (17.6)        (18.1)         3,934.6 
Interest-bearing borrowings (note 10)               1,746.7            -              1,746.7        2,467.2      (29.2)        (29.2)         2,553.0 
Deferred taxation                                      84.8        (19.2)                65.6           78.3        8.3         (16.2)            66.3 
Other non-current liabilities and provisions        1,412.7            -              1,412.7        1,392.6        1.4           1.4          1,315.3 
Current liabilities                                21,828.6         (7.2)            21,821.4       19,174.8       13.8          13.8         21,990.1 
Trade, other payables and provisions               14,907.0         (7.2)            14,899.8       13,984.6        6.6           6.5         20,581.5 
Taxation                                               75.5           -                  75.5           73.4        2.8           2.8             59.1 
Bank overdrafts                                     5,836.4           -               5,836.4        3,600.2       62.1          62.1             87.5 
Interest-bearing borrowings (note 10)               1,009.7           -               1,009.7        1,516.6      (33.4)        (33.4)         1,262.0 

Total equity and liabilities                       31,151.1       (66.0)             31,085.1       28,534.2        9.2           8.9         32,316.1 

* Refer to note 3. 



Condensed consolidated statement of cash flows 

                                                                     June 2018      IFRS 9 & 15           June 2018      June 2017    December 2017 
Rm                                                                   (Reviewed)      adjustment*          (Adjusted)*    (Reviewed)        (Audited) 

Operating cash before working capital movements                        1,253.9            (5.6)             1,248.3        1,542.8          3,964.8 
Working capital movements                                             (5,147.7)            5.6             (5,142.1)      (4,205.3)           705.7 
Cash (utilised) / generated from operations                           (3,893.8)              -             (3,893.8)      (2,662.5)         4,670.5 
Taxation paid                                                           (293.3)              -               (293.3)        (321.4)          (795.0) 
Net interest paid                                                       (239.5)              -               (239.5)        (183.7)          (593.6) 
Investment income                                                         14.0               -                 14.0           30.0             80.0 
Dividends paid                                                          (603.0)              -               (603.0)        (504.1)          (689.9) 
Cash (outflow)/inflow from operating activities                       (5,015.6)              -             (5,015.6)      (3,641.7)         2,672.0 
Investment to maintain operations                                       (274.0)              -               (274.0)        (353.3)          (678.5) 
Investment to expand operations                                         (358.9)              -               (358.9)        (395.7)        (1,138.3) 
Investment in subsidiaries                                                   -               -                    -           (2.5)            (6.5) 
Proceeds on disposal of property, plant and equipment                      9.6               -                  9.6            9.5             12.9 
Proceeds on disposal of assets classified as held for sale                   -               -                    -            9.4              9.4 
Other net investing activities                                             2.1               -                  2.1            0.8             (5.7) 
Cash outflow from investing activities                                  (621.2)              -               (621.2)        (731.8)        (1,806.7) 
Decrease in non-current liabilities.                                    (848.5)              -               (848.5)        (843.3)          (403.3) 
(Decrease)/increase in current liabilities                              (332.4)              -               (332.4)         472.5           (433.2) 
Non-controlling interests acquired                                           -               -                    -         (110.0)          (112.6) 
Net acquisition of treasury shares                                      (164.3)              -               (164.3)        (151.5)          (193.1) 
Cash outflow from financing activities                                (1,345.2)              -             (1,345.2)        (632.3)        (1,142.2) 
Net decrease in cash and cash equivalents                             (6,982.0)              -             (6,982.0)      (5,005.8)          (276.9) 
Foreign exchange movements on cash and cash equivalents                    0.9               -                  0.9           30.6            (38.7) 
Opening cash and cash equivalents                                      2,306.1               -              2,306.1        2,621.7          2,621.7 
Closing cash and cash equivalents                                     (4,675.0)              -             (4,675.0)      (2,353.5)         2,306.1 

* Refer to note 3. 



Condensed consolidated statement of changes in equity 
                                                                                                                  Equity               
                                                                                                            attributable              Non-
                                                              Share     Share        Other    Retained      to owners of       controlling      
Rm                                                          capital   premium     reserves      profit        the parent         interests           Total
                                                                                                                        
Balance as at December 2016 (Audited)                           2.2     569.0        437.7     4,672.4           5,681.3              74.5         5,755.8 
Dividends declared                                                -         -            -      (653.2)           (653.2)            (35.4)         (688.6) 
Total comprehensive income                                        -         -        (84.7)    1,507.7           1,423.0              14.0         1,437.0 
Changes in non-controlling interests                              -         -       (103.2)          -            (103.2)             (9.9)         (113.1) 
IFRS 2 charge and Share Trust transactions                        -    (193.1)       203.7       (35.5)            (24.9)                -           (24.9) 
Treasury shares acquired                                          -      25.3         (0.1)          -              25.2                 -            25.2 

Balance as at December 2017 (Audited)                           2.2     401.2        453.4     5,491.4           6,348.2              43.2         6,391.4 
Effect of adoption of new accounting standards (note 3)           -         -         (0.7)       36.4              35.7                 -            35.7 
Balance as at December 2017 (Audited) Restated                  2.2     401.2        452.7     5,527.8           6,383.9              43.2         6,427.1 

Dividends declared                                                -         -            -      (588.5)           (588.5)             (8.4)         (596.9) 
Total comprehensive income                                        -         -        127.2       202.5             329.7              (5.7)          324.0 
Changes in non-controlling interests                              -         -            -           -                 -               0.6             0.6 
IFRS 2 charge and Share Trust transactions                        -         -         90.8        10.7             101.5                 -           101.5 
Treasury shares acquired                                          -    (178.0)           -           -            (178.0)                -          (178.0) 
                                                                     
Period ended June 2018 (Reviewed)                               2.2     223.2        670.7     5,152.5           6,048.6              29.7         6,078.3 
                                                                    
Balance as at December 2016 (Audited) as previously stated      2.2     569.0        437.7     4,672.4           5,681.3              74.5         5,755.8 
Dividends declared                                                -         -            -      (488.1)           (488.1)            (34.2)         (522.3) 
Total comprehensive income                                        -         -        (46.3)      369.3             323.0               3.9           326.9 
Changes in non-controlling interests                              -         -       (100.5)          -            (100.5)             (9.5)         (110.0) 
IFRS 2 charge and Share Trust transactions                        -    (151.5)       102.0       (32.0)            (81.5)                -           (81.5) 
Treasury shares acquired                                          -      53.6         (0.2)       (1.0)             52.4                 -            52.4 
   
Balance as at June 2017 (Reviewed)                              2.2     471.1        392.7     4,520.6           5,386.6              34.7         5,421.3 

* Refer to note 3. 


Fair value hierarchy 

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments identified below. The table below reflects 'Financial instruments' and 'Non-current 
assets classified as held for sale' carried at fair value, and those 'Financial instruments' and 'Non-current assets classified as held for sale' that have carrying amounts that differ from their fair 
values, in the Statement of Financial Position. 
                                                                                                                                                                   
                                                                         June                                            June                                       December  
                                                                         2018     Level        Level       Level         2017        Level       Level     Level        2017       Level      Level   Level  
                                                                    (Reviewed)        1            2           3    (Reviewed)           1           2         3    (Audited)          1          2       3
Rm                                                                                                                                                 
Financial assets at fair value through profit or loss                   185.6         -        185.6           -        146.7            -       146.7         -       134.9           -      134.9       - 
Financial asset designated as a cash flow hedging instrument                -         -            -           -          0.6            -         0.6         -         1.1           -        1.1       - 
Loans and receivables                                                    12.5         -         12.5           -         12.7            -        12.7         -        13.1           -       13.1       - 
Available-for-sale financial assets                                       1.0       1.0            -           -          0.8          0.8           -         -         1.1         1.1          -       - 
Non-current assets classified as held for sale                           36.0         -            -        36.0         19.9            -           -      19.9        19.9           -          -     19.9 
                                                                        235.1       1.0        198.1        36.0        180.7          0.8       160.0      19.9       170.1         1.1      149.1     19.9 
                                                                                    
Financial liabilities at amortised cost                               2,013.7         -      2,013.7           -      3,521.8            -     3,521.8         -     3,259.5           -    3,259.5        - 
Financial liabilities at fair value through profit or loss               46.2         -         46.2           -          7.8            -         7.8         -        28.7           -       28.7        - 
Financial liability designated as a cash flow hedging instrument            -         -            -           -          5.8            -         5.8         -        23.8           -       23.8        - 
                                                                      2,059.9         -      2,059.9           -      3,535.4            -     3,535.4         -     3,312.0           -    3,312.0        - 

There were no transfers of financial instruments between Level 1, Level 2 and Level 3 fair value measurements during the period ended June 2018. The financial assets and financial liabilities 
have been presented based on an analysis of their respective natures, characteristics and risks. 


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