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Joe RalebepaCompany Secretary

Directors’ report

for the year ended December 2018

Directors’ responsibilities

The Directors acknowledge responsibility for the preparation of the audited consolidated Group Annual Financial Statements, which, in their opinion, fairly present the results and cash flows for the year ended December 2018 and the state of affairs of Massmart Holdings Limited and its subsidiaries at the end of the financial year. The external auditors are responsible for reporting on the fair presentation of these financial statements.

The Company and its subsidiaries have maintained satisfactory accounting records and an effective system of internal controls to ensure the integrity of the underlying information. Appropriate accounting policies, supported by sound and prudent managerial judgements and estimates, have been consistently applied.

The Board’s Audit Committee reviews the financial information presented and ensures that there has been adherence to International Financial Reporting Standards and the Companies Act of South Africa. Internal and external auditors of Group companies have unrestricted access to the Committee.

Group financial results

The financial results of the Group are set out in the Income Statement, Statement of Comprehensive Income, the Statement of Cash Flows and the Statement of Changes in Equity. The financial position of the Group is set out in the Statement of Financial Position and accompanying notes.

Directorate and secretary

The current Directorate of the Company is shown here. The Board comprises 11 Directors at the time of this report, of whom three are non-Independent non-Executive, two are Executive and six are Independent non-Executive. In addition, each Board Committee is chaired by an Independent non-Executive Director.

The Company Secretary provides a central source of guidance and advice to the Board, and within the Company, on matters of ethics and good governance. The Company Secretary is Joe Ralebepa, whose business and postal addresses are the same as that of the Company, and he was appointed in November 2016.

A number of non-Executive Director changes took place in 2018. On 25 May 2018, we announced the appointment of Olufunke (Funke) Ighodaro as an Independent non-Executive Director and a member of the Massmart Risk and Audit Committees. On 23 August 2018, shareholders were informed that Chris Seabrooke had agreed to continue as Lead Independent non-Executive Director and Deputy Chairman but would cease to be a member of the Board Committees and step down as Chairman of the Remuneration, Audit and Risk Committees. Funke succeeded Chris as the Chairman of the Audit and Risk Committees and Phumzile Langeni assumed the role of Chairman of the Remuneration Committee.

On 28 February 2019 we announced the appointment of Lindiwe Mthimunye to the Board as an Independent non-Executive Director. Lindiwe was further nominated to serve on the Audit and Risk Committees. We announced the appointment of JP Suarez as a Walmart-appointed non-Executive Director in place of Roger Burnley. On the same day we informed shareholders that Chris Seabrooke’s retirement will become effective on 23 May 2019, from which date Chris will step down as the Deputy Chairman and Lead Independent non-Executive Director of the Board.

At least one-third of the non-Executive Directors are required to retire every year and Massmart Executive Directors have elected to also retire on this basis. Accordingly, all Directors retire by rotation at least every three years and, if eligible and available, their names are submitted for re-election by the shareholders at the ensuing AGM. In addition, shareholders must ratify the initial appointment of each Director at the first AGM following that Director’s appointment. As a result of these requirements, at the 23 May 2019 AGM, Olufunke Ighodaro, Lindiwe Mthimunye and JP Suarez are nominated for election having been appointed during the reporting period and Enrique Ostalé, Susan Muigai and Kuseni Dlamini retire by rotation. Being eligible, they all offer themselves for election or re-election, as applicable.

Shares in issue

Please find the movement in ordinary and preference shares for the financial year under review below:

Ordinary shares
Balance at December 2016 217,136,334
Converted preference shares* 9,155
Balance at December 2017 217,145,489
Converted preference shares* 33,653
Ordinary shares in issue at December 2018 217,179,142
Preference shares
Balance at December 2016 2,840,483
Converted ordinary shares (9,155)
Balance at December 2017 2,831,328
Converted ordinary shares (33,653)
Preference shares in issue at December 2018 2,797,675

* These preference shares above relate to Massmart’s Black Scarce Skills Trust.

 

Interests of Directors in the Company’s shares

At December 2018, Directors owned, directly or indirectly, ordinary shares or options over ordinary shares in the Company. These holdings were all beneficial and are aggregated in the table below:

                 
    December 2018   December 2017
Non-executive Directors   Shares   Options/
Share Awards
  Shares   Options/
Share Awards
                 
K Dlamini   9,800     9,800  
NN Gwagwa   9,800     9,800  
                 
Executive Directors                
GRC Hayward   208,183   545,435   235,771   569,853
JJM van Lierop   2,511   150,706     200,924
                 
At the date of this report , the Directors’ beneficial holdings were as follows:
                 
    March 2019   March 2018
Non-executive Directors   Shares   Options/
Share Awards
  Shares   Options/
Share Awards
                 
K Dlamini   9,800     9,800  
NN Gwagwa   9,800     9,800  
                 
Executive Directors                
GRC Hayward   208,183   545,435   245,754   568,879
JJM van Lierop   2,511   150,706     120,411

 

 

 

Subsidiaries

As at the date hereof, the following companies are material subsidiaries of the Company:

Massbuild Proprietary Limited 2004/035206/07
Masscash Holdings Proprietary Limited 1997/014716/07
Massmart International Holdings Limited (incorporated in Mauritius) 47902 C1/GBL
Massmart Management and Finance Company Proprietary Limited 1992/004084/07
Masstores Proprietary Limited 1991/006805/07
Wild Developments Proprietary Limited 1973/000178/07

The principal subsidiaries above are determined based on the Group’s cross-surety arrangement. These subsidiaries represent the Group for which lender covenants shall be maintained. Details of the Company’s interests in material subsidiaries are set out in note 35 of the audited consolidated Group Annual Financial Statements.

Borrowing powers

In terms of the Memorandum of Incorporation, the Group has unlimited borrowing powers. At December 2018, borrowings were R4.7 billion (2017: R4.1 billion).

Going concern

The Directors are of the opinion that the business will be a going concern in the year ahead. In reaching this opinion, the Directors considered the following factors:

  • Strong positive cash flows from trading;
  • No recurring operating losses at Divisional and Group level;
  • Well-controlled working capital and good quality inventory;
  • Approved short- and long-term financing, with sufficient additional short-term borrowing capacity if required;
  • Key Executive management in place;
  • There have been no material changes that may affect the Group in any of its customer, product or geographic markets; and
  • Budgets to December 2019 reflect a continuation of the above positive factors.

Direct and ultimate holding companies

The Company’s direct holding company is Main Street 830 Proprietary Limited, incorporated in South Africa, and the Company’s ultimate holding company is Wal-Mart Stores, Inc., incorporated in the United States.

Company Secretary certificate

In terms of section 88(e) of the Companies Act No. 71 of 2008, as amended (‘Companies Act’), I, Joe Ralebepa, in my capacity as Company Secretary of Massmart Holdings Limited, confirm that, to the best of my knowledge and belief, in respect of the year under review, Massmart Holdings Limited has filed with the Companies and Intellectual Property Commission all such returns and notices as are required of a public company in terms of the Companies Act and that all such returns and notices appear to be true, correct and up to date.

On behalf of the Board

Joe Ralebepa
Company Secretary
4 April 2019

 

 

Massmart address

The Company’s registered office and postal address are as follows:

Registered office: Postal address:
Massmart House
16 Peltier Drive
Sunninghill Ext 6
Sandton, 2157
South Africa
Private Bag X4
Sunninghill
2157
South Africa