Directors’ report

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 2019 and the state of affairs of Massmart Holdings Limited and its subsidiaries at the end of the financial year. The external auditor is 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 this 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 can be found on the website. The Board comprises 10 Directors at the time of this report. Three of whom are Non-Independent Non-Executive, two are Executive and five are Independent Non-Executive Directors. 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 Interim Company Secretary is Nicole Morgan, whose business and postal addresses are the same as that of the Company. She was appointed on 1 January 2020.

Several Board and committee changes took place in 2019. In February 2019, Johannes (Hans) van Lierop indicated that he was not available to extend his tenure with Massmart for personal reasons after the formal conclusion of his South African work visa in February 2020. On 30 April 2019, shareholders were informed that Mohammed Abdool-Samad would succeed Hans as Chief Financial Officer and Executive Director, effective 1 August 2019.

On 6 May 2019, CEO Guy Hayward, informed the Board of his decision to step down before the end of 2019. On 23 May 2019, it was announced that Mitch Slape would assume the role of CEO and Executive Director; his appointment was effective 1 September 2019.

Lindiwe Mthimunye was appointed as an Independent Non-Executive Director and member of the Audit and Risk committees on 28 February 2019, and JP Suarez, a Walmart-appointed Non-Executive Director replaced Roger Burnley. Chris Seabrooke retired as Deputy Chairman and Lead Independent Non-Executive Director of the Board on 23 May 2020.

On 27 May 2019, Phumzile Langeni assumed the role of Lead Independent Non-Executive Director effective from 23 May 2019.

On 5 September 2019, Mohammed Abdool-Samad was appointed as a member of the Risk Committee effective 1 August 2019, and Mitch Slape a member of the Risk and Social and Ethics Committees effective 1 September 2019.

The Group’s General Counsel and Company Secretary, Joseph Ralebepa, resigned as of 31 December 2019 and the appointment of Nicole Morgan as the Interim Group Company Secretary came into effect as of 1 January 2020.

On 25 February 2020, Enrique Ostalé resigned from the Board, Remuneration and Nominations committees. JP Suarez was appointed to the Remuneration and Nominations committees on the same day. Charles Redfield was also nominated for appointment as a Non-Executive Director of the Board.

On 6 March 2020, Phumzile Langeni’s resignation as a member of the Audit and Risk committees, to focus on her other Massmart Board and Committee duties, was announced with effect from 21 May 2020.

Shares in issue

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

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

Interests of Directors in the Company’s shares

At December 2019, 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:

Subsidiaries

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

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 2019, borrowings were R3.7 billion (2018: R4.7 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 2020 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, Nicole Morgan, in my capacity as Interim Group 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

Nicole Morgan
Interim Company Secretary
02 April 2020