Integrated Annual Report 2021
Integrated Annual Report 2021
Chief Financial Officer's review
Mohammed Abdool-Samad,
Chief Financial Officer
While we remain uncertain of the future in terms of potential Covid-19 trading restrictions and global and local supply chain challenges on our business, we are confdent in our ability to successfully navigate through these challenges and serve our customers.

Total Group performance

Massmart’s total Group sales for the 52-weeks ended 26 December 2021 of R84.9 billion represented a 1.9% decrease compared to the same period in 2020, while comparable store sales grew by 1.7% over the same period. Gross margin decreased by 191bps to 18.5%. Excluding inventory write-downs as a result of the civil unrest, gross margin decreased by 45bps to 19.9%. Through our sustainable cost-saving initiatives, expenses decreased by 1.2%. Other income increased by 280.9% to R1.1 billion and primarily related to insurance proceeds received from material damage and business interruption claims related to the civil unrest. This resulted in a trading profit of R195.4 million, a decrease of 83.3% from the prior year. The Group recognised an impairment expense of R1,066.3 million, the majority of which related to assets impacted by the civil unrest of R230.7 million, and Game’s corporate assets of R507.2 million, the most significant of which is the SAP S/4 HANA ERP system software asset. Weaknesses in African currencies, together with hedging costs associated with the USD denominated Walmart loan, resulted in foreign exchange losses of R178.5 million which represents a 53.2% decrease from 2020. Net interest expenses increased by 2.3% to R1,778.4 million. As a result of the above, the Group incurred a net loss of R2,203.9 million, which represents an increase of 25.7% from the prior year loss of R1,753.4 million. The headline loss amounted to R1,524.8 million, and increased by 65.0% from the prior year headline loss of R924.3 million.

Operating environment

2021 was a year of significant challenges in the external environment – not only for South Africa, but globally. In spite of the headwinds, Massmart has again proven to be a resilient business, and has effectively navigated through significant challenges while executing significant components of the Group’s Turnaround strategy. We have been able to innovate and adapt to address challenges, and this has made us a fundamentally stronger business and better prepared for the future.

During the year, we were impacted by the ongoing effects of the global Covid-19 pandemic, while the South African market also experienced the civil unrest during July 2021. Global supply chain challenges, which were exacerbated in South Africa by the civil unrest, resulted in insufficient in-stock service levels of certain home electronics and appliances categories. We were further impacted by load shedding and growing inflationary pressures on raw materials and product costing. In addition to the above, labour disputes resulted in a Group-wide strike during November and December this year.


We continue to experience the impact of the Covid-19 pandemic, its successive waves and infection rates, and related trading restrictions. In our efforts to combat Covid-19, we assisted pensioners in rural areas to successfully register for and receive their vaccines at our stores when they collected their SASSA grant payments. We also encouraged our associates to get their vaccines through educational and enablement programmes, rolled out mobile clinics at stores located in high density urban areas and provided paid leave for associates to get vaccinated. We continue to practise and enhance our Covid-19 safety protocols implemented since the onset of the pandemic.

Under Government regulations, liquor sales were prohibited for approximately 110 days of our trading year. The ban and restrictions on Liquor trading impacted the Total Group by an estimated R1.8 billion* in lost Liquor sales, which translated into an estimated R193.0 million* in lost sales margin during 2021. Liquor sales contributed 15% of total sales during the year (2020: 13%).

Additional Covid-19-related costs associated with ensuring a safe shopping and workplace environment for customers and associates amounted to R77.7 million (2020: R132.4 million). Government supported Temporary Employment Relief Scheme (TERS) benefits and negotiated rental relief of R62.2 million (2020: R288.0 million) were received by the Group during the year.

* The Covid-19 lost sales impact was estimated at a store specific level. To estimate the impact, we applied the expected sales trend of that store, in comparison to underlying performance in periods where trading was permitted and to store level plans. Where it was noted that there was a pent-up demand impact, this was also taken into account, effectively reducing the loss in sales estimate. Lost trading profit was calculated by applying the achieved margin for the period immediately preceding the restriction to the estimated lost sales value.

This information is provided only to allow for a more meaningful comparison of performance based on Management’s best estimate. This information on which our assumptions are based has not been reviewed and reported on by the Company’s external auditors. The estimated information is the responsibility of the Directors of Massmart.




Civil unrest

During July 2021, the KZN and Gauteng provinces of South Africa experienced civil unrest, which directly impacted 43 of our stores and two distribution centres (DCs). Of these, only nine stores and both DCs still remain closed due to significant damage. Damages incurred from the civil unrest from inventory written-off and assets impaired amounted to R1,469.6 million. Including directly related costs this amounted to R1,534.7 million for the Total Group. Insurance proceeds recouped for damaged inventory and assets was R1 billion of which R171.2 million relates to third party liabilities. Of this, R434.8 million was received and R565.2 million was accrued during 2021. The accrued amount was received in January 2022, post our financial year-end. In addition to this, an interim amount of R100 million was received in relation to our business interruptions claims. This resulted in a Total Group net accounting loss of R605.9 million. The majority of business interruption claims are still in the processing phase and will be received during 2022. As previously announced, the Group is comfortable that it is adequately covered for the full extent of the business interruption losses through a non-SASRIA policy.

Lost sales directly related to store closures as a result of the civil unrest is estimated to be R2.7 billion*, with lost sales margin estimated to be R473.1 million* for the Total Group.

* The civil unrest lost sales impact was estimated at a store specific level. To estimate the impact, the year-to-date sales trends, prior to the civil unrest, of these stores were assessed; including the expected sales trend of that store, in comparison to underlying performance in 2020 and store level plans. Where it was noted that there were specific deflection of sales to neighbouring stores, the impact of deflected sales was also taken into account, effectively reducing the loss in sales estimate. Lost trading profit was calculated by applying the year-to-date average achieved margin for each store, up to the point of the civil unrest, to the estimated lost sales.

This information is provided only to allow for a more meaningful comparison of performance based on Management’s best estimate. This information on which our assumptions are based has not been reviewed and reported on by the Company’s external auditors. The estimated information is the responsibility of the Directors of Massmart.


Discontinued operations

As previously announced, the Board made the decision to dispose of the Group’s Cambridge, Rhino and Massfresh (comprising The Fruitspot and a meat processing facility) assets. Following this, the Cambridge, Rhino and Massfresh businesses have been classified as one disposal group and reported as discontinued operations in terms of IFRS 5. As such, the following results and commentary relate to continuing operations only, unless stated otherwise. Refer to note 3.

Continuing operations performance

Financial review

Massmart’s total sales from continuing operations for the 52 weeks to 26 December 2021 of R77.6 billion represents an increase of 0.1%, and an increase of 3.0% on a comparable store sales basis, with year to-date internal sales inflation of 4.7%. Sales from our South African stores increased by 0.9% and by 4.3% on a comparable store sales basis. Total sales from our rest of African stores decreased by 7.5% in Rands, and increased by 0.3% in constant currencies. On a comparable store sales basis, our rest of African store sales decreased by 7.7% in Rands and by 0.4% in constant currencies. Sales performance in the rest of Africa, in Rands, have been impacted by significant currency fluctuations.

Food and Liquor sales of R39.9 billion decreased by 1.0% (2020: R40.3 billion), Home Improvement sales of R14.9 billion increased by 7.1% (2020: R13.9 billion) and General Merchandise sales of R22.8 billion decreased by 2.2% (2020: R23.4 billion).

Gross margin decreased by 187bps to 18.7% and was impacted by promotional and sales mix and inventory write-offs as a result of the civil unrest. Excluding inventory write-offs as a result of the civil unrest, gross margin decreased by 62bps to 19.9%.

Included in other income relating to civil unrest are insurance proceeds received from SASRIA for inventory write-offs and an interim business interruption claim, both for damages incurred during the civil unrest.

Our continued focus on sustainable cost-saving and Smart Spend initiatives resulted in only a 0.1% increase in costs, and an increase of 1.4% on a comparable store basis.

Employment costs, the Group’s biggest cost category, increased by 0.6% (with a comparable decrease of 1.6%), and was impacted by the differential in receipt of the South African Government TERS and skills development levy relief in the current year compared to the prior year.

Occupancy costs decreased by 0.4% (with a comparable increase of 4.1%). Included in the 2020 comparative is the once-off rental relief received from landlords in light of the Covid-19 pandemic. Offsetting this year-on-year increase were rental re-negotiations and reduced utility costs achieved through our sustainability initiatives.

Depreciation and amortisation decreased by 5.5% (and by 7.2% on a comparable store basis) due to a reduced footprint and a lower asset base as a consequence of previous asset impairments recognised. A net of 15 stores were either closed or sold during the year.

Contributing to the 3.5% increase in other operating costs are software maintenance costs, repairs and maintenance, an increase in credit card costs and costs associated with our financial transaction processing function, Genpact.

The above resulted in a trading profit of R830.6 million compared to a trading profit of R1,613.0 million in 2020.

During the year, the Group incurred retrenchment and business transformation costs of R80.7 million, compared to R107.8 million in the prior year. This mainly related to the turnaround initiative which involved moving certain corporate support functions into centralised Centres of Excellence, as previously announced, as well as professional fees incurred as part of the Group’s disposal programmes.

Impairment losses of R960.3 million were recognised during the year and primarily related to the impact of the civil unrest of R210.7 million, Game’s corporate assets of R507.2 million, the most significant of which is the SAP S/4 HANA ERP system software asset, as well as the property, plant and equipment and lease assets of certain underperforming Game stores in South Africa and Kenya. Insurance proceeds received in relation to asset impairments resulting from the civil unrest amounted to R118.4 million.

We have benefitted from the strengthening of certain currencies against the South African Rand.

This, together with hedging costs associated with the USD denominated Walmart loan resulted in a foreign exchange loss of R178.5 million, compared to a loss of R381.1 million in the prior year.

Net finance costs of R1,695.4 million represents an increase of only 2.8% compared to R1,649.4 million in the prior year. Total net interest expenses in relation to the Group’s financiers, excluding those related to lease liabilities, decreased by R38.0 million compared to the prior year. This was partially offset by an increase in finance costs related to lease liabilities.

The Group’s effective tax rate of 19.6% (2020: -47.4%) was impacted by the limitation of the recognition of deferred tax assets relating to certain loss-making entities and disallowed expenditure.

A net loss of R1,577.7 million was reported for this year (2020: R1,027.9 million), with a headline loss of R980.2 million (2020: R831.0 million).



Financial position

During the course of 2020 capital expenditure on projects was deferred, where possible, to preserve cash in an attempt to mitigate the impacts of Covid-19 on the business. As economic activity increased in 2021, there was a commensurate increase in capital expenditure. The Group continues to invest cash responsibly with expenditure being re-prioritised to re-open stores impacted by the civil unrest.

Total capital expenditure for the year amounted to R1,378.0 million, and increased by 33.2% compared to 2020. Expansionary capital expenditure amounted to R902.5 million, of which leasehold improvements and fixtures, fittings plant and equipment amounted to R733.0 million, and was mostly associated with the refurbishment of selected existing stores.

Capital expenditure relating to maintenance amounted to R247.5 million. An investment related to the acquisition of OneCart amounted to R228.0 million. Overall property, plant and equipment decreased by 4.3% which was driven primarily by the impairments recognised as well as the classification of the balances related to the discontinued operations as held-for-sale.

Working capital continues to be a focus area. The Group’s inventory balance increased by 0.4%, while inventory days remained at 70 days. Trade receivable days remained static since 2020 at nine days. Trade creditor days decreased by seven days to 70 days, while the trade creditors balance decreased by 7.7% since 2020. This is largely due to the renegotiated terms with our suppliers in 2020, which assisted in mitigating the impacts of Covid-19 trading restrictions on the business, coming to an end in 2021.

Operating cash inflows before working capital movements of R1,822.0 million decreased by 60.0% over 2020 and were negatively impacted by the second and third waves of Covid-19 infections that resulted in subdued trading, liquor trading restrictions during the year, as well as the period of civil unrest in July. Consequently, gross debt increased by 13.3% to R6.7 billion, while average net debt increased by 15.8% to R8.7 billion. The Group has sufficient headroom to meet all its obligations.


* Total Group estimated growth
** Refer to above for Management assumptions used



We are thankful to all our associates who continue to contribute to our Group’s performance and put our customers first, especially during the challenging times we have experienced during this year. We are grateful to our customers for their ongoing support and loyalty. We also thank our Board and Management teams for their continued guidance and leadership.


Our 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. Due to the headline loss reported, the need to preserve cash and the ongoing impact of the civil unrest and Covid-19 pandemic on our operating environment, no final dividend has been declared during this financial year (2020: nil).


Mohammed Abdool-Samad  
Group Chief Financial Officer
8 April 2022
















  1. These summary consolidated results have been prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS), its interpretations issued by the IFRS Interpretations Committee, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council, presentation and disclosure as required by International Accounting Standard (IAS) 34 ‘Interim financial reporting’, the JSE Limited Listings Requirements and the requirements of the Companies Act 71 of 2008 of South Africa. The accounting policies and methods of computation used in the preparation of the summary consolidated results are in terms of IFRS and are consistent in all material respects with those applied in the most recent audited consolidated Group Annual Financial Statements.
  2. The Group operating model comprises Massmart Retail (incorporating Game, Builders, Cambridge and Rhino) and Massmart Wholesale (incorporating Makro, The Fruitspot and Wholesale Cash & Carry); and is supported by our Group e-commerce function which also comprises OneCart and WumDrop. The Group’s reportable segments comprise Game; Builders (incorporating the Builders Warehouse, Builders Express, Builders Trade Depot and Builders Superstore brands); Massmart Wholesale (incorporating the Makro, Jumbo, Trident, Jumbo Shield and Saverite brands); and the Sale Businesses (incorporating the Cambridge Food and Rhino brands, as well as The Fruitspot). Given its relative size, Group e-commerce is not disclosed as a separate operating segment and is included with the corporate operations.
  3. As previously reported, a sale of business agreement has been concluded with K2019389785 (South Africa) Proprietary Limited, a subsidiary of Shoprite Checkers Proprietary Limited, in terms of which the Group sells, as a going concern, the businesses of Cambridge, Rhino and Massfresh as well as 12 Cash & Carry stores for a maximum consideration of R1,360.0 million. Consequently these businesses and stores are now classified as held-for-sale with the income statement results of the Group’s Cambridge, Rhino and Massfresh businesses being presented as discontinued operations in terms of IFRS 5 ‘Non-current Assets Held for Sale and Discontinued Operations’. The conditions precedent to this agreement are in the process of being fulfilled, including the Competition Commission review, which are all anticipated to be completed during the first half of 2022.
  4. The Group also previously announced that it had identified 14 Game stores in East and West Africa and 15 Game stores in South Africa it intends to dispose of. This decision represents an intensification of the Group’s initiative to optimise the Game store portfolio as we move beyond our turnaround imperative, to prioritise investment in core and high returning trading assets. Service providers have been appointed to assist the Group with these disposals and a further update will be provided in due course.
  5. The Group announced, on 06 October 2021, that it had entered into an agreement to acquire a controlling interest in OneCart Proprietary Limited. OneCart is a fast moving consumer goods market place and logistics platform that partners with leading retailers in South Africa to enable fast, flexible and efficient online sales and home delivery to consumers across the country. The platform provides access to products across the dry grocery, frozen and fresh foods, liquor, baby, health and beauty, household and pet supplies categories; all made available to consumers via a single shopping interface. After the fulfilment of all suspensive conditions, the transaction became effective on 29 October 2021 with Massmart acquiring an effective shareholding of 87.5%. The breakdown of the assets and liabilities acquired, as well as the purchase consideration are:
    Property, plant and equipment   0.2
    Other intangible assets   58.8
    Goodwill   258.5
    Trade, other receivables and prepayments   4.4
    Trade and other payables   (41.0)
    Deferred taxation   (11.8)
    Non-controlling interests   (41.1)
    Assets and liabilities acquired   228.0
    Cash acquired   4.8
    Net assets and liabilities acquired   232.8
    Cash acquired   4.8
    Consideration paid   (232.8)
    Net purchase consideration   (228.0)

    From the acquisition date until the financial year-end, OneCart has contributed R23.2 million to sales and generated a loss of R11.8 million. Had OneCart been acquired on 28 December 2020 the Group’s sales for the 52-weeks ended 26 December 2021 relating to continuing operations would have been R73.2 million higher at R77,694.8 million, and the loss for the year from continuing operations would have been R9.2 million higher at R1,586.9 million.

  6. In May 2020, the International Accounting Standards Board issued an amendment to IFRS 16 ‘Leases’, dealing specifically with Covid-19 related rent concessions. In line with the practical expedient provided in the amendment, the Group recognised approximately R1 million (2020: R102 million) rental relief in the occupancy costs line of the summary consolidated income statement relating to rent concessions meeting the conditions specified and occurring as a direct consequence of the Covid-19 pandemic.
  7. The majority of Massmart’s realised and unrealised foreign exchange loss was primarily a result of currency weakness in Malawi, Kenya and Uganda, as well as the impact of hedging costs associated with the USD denominated Walmart loan.
  8. As previously announced, during March 2021 the managed services agreement involving Genpact (a strategic partner of Walmart Enterprise Services) managing Massmart’s financial transaction processing activities became effective (MSA). The MSA covers a period of eight years and will incur a total of USD16.2 million in transformational costs, of this USD13.4 million is payable within the first two years of the contract. Walmart, through its wholly owned Irish subsidiary, Newgrange Platinum Services, LTD. (“NGPS”), entered into a contract to assist Massmart to manage the resultant cash outflow by entering into an agreement with Genpact to pay the upfront transformational costs and charging these to Massmart in eight equal instalments, interest-free. Consequently, Massmart entered into back-to-back agreement with NGPS reflecting these terms. The net effect of this agreement will provide cash flow relief to Massmart of USD11.3 million over the first two years of the MSA. As at December 2021, an amount of R22.4 million was paid to NGPS in terms of this agreement.
  9. Massmart and its business units enter into certain transactions with related parties in the normal course of business. As a 52.8% shareholder, Main Street 830 Proprietary Limited, a subsidiary of Walmart, is entitled to a dividend based on their number of shares held. The balances outstanding by/(to) Walmart and its subsidiaries as at December 2021 as disclosed on the balance sheet are:
    Trade, other receivables and prepayments   9.8
    Perpetual bond (classified as equity)   (2,009.5)
    Trade, other payables and provisions   (4.2)
    Interest-bearing borrowings   (1,826.2)
  10. Excluding the impact of the civil unrest, impairment losses of R749.6 million were recognised during the year and related primarily to Game’s corporate assets (R507.2 million), the most significant of which is the SAP S/4 HANA ERP system software asset. The corporate assets impairment was assessed on a consistent basis to the fair-value-less-cost-to-dispose methodology as articulated in the 2020 audited consolidated Group Annual Financial Statements available on the Group’s website. The most significant driver of the impairment was Game’s revenue growth, which was much lower than Management’s forecast as at December 2020, and the resultant impact this had on trading profit. The remaining key inputs, being the average margin (between 27% and 29%) and expense growth (between 1% and 5%) over the 5-year forecast period as well as the discount rate (16.4%), were within Management’s sensitivity ranges. Included in the corporate assets impairment is goodwill amounting to R9.0 million. Further impairment losses amounting to R182.8 million were also recognised and related to a number of underperforming Game stores, primarily in South Africa and Kenya.
  11. Massmart offers a diverse range of retail offerings to the market consisting of Food and Liquor, General Merchandise and Home Improvement (DIY). Due to the cyclical nature of this industry, higher revenues and operating profits are usually expected in the second half of the year rather than in the first six months. Higher sales during the period October to December are mainly attributed to the increased demand for our non-Food categories where we see an increase in discretionary spend leading up to the Black Friday and Christmas holiday periods. This information is provided to allow for a better understanding of the results.
  12. The constant currency information included in these summary consolidated results has been presented to illustrate the Group’s underlying rest of Africa business performance excluding the effect of foreign currency fluctuations. In determining the application of constant currency, sales for the prior comparable financial reporting period have been adjusted to take into account the average monthly exchange rate for the current period. The table below depicts the percentage change in sales in both reported currency and constant currency for the given material currencies. The constant currency information incorporated in these summary consolidated results has not been audited or reviewed or otherwise reported on by our external auditors. The constant currency information is the responsibility of the Directors of Massmart. It has been prepared for illustrative purposes only and due to its nature, may not present Massmart’s financial position, changes in equity, results of operations or cash flows.
        Reported   Constant
    Sales growth in:   currency   currency
    Botswana Pula   (6.2%)   0.9%
    Nigerian Naira   (11.0%)   5.6%
    Tanzanian Shilling   (29.1%)   (21.3%)
    Zambian Kwacha   (4.5%)   17.3%
    Kenyan Shilling   (12.8%)   (0.3%)
    Rest of Africa   (7.4%)   (4.3%)
  13. As per the announcement on 21 December 2021, Walmart continued to demonstrate strong levels of support for Massmart, by agreeing to optimise the Group’s balance sheet in the short to medium term, by extending the term of a portion of the previously advanced R4 billion USD-denominated loan. This involved replacing R2 billion (approximately US$125 million) of this loan by subscribing for a perpetual fixed rate unsecured bond. This bond was issued by Massmart Holdings Limited, has a perpetual tenure and is treated as equity in terms of IFRS. The bond bears interest at 7.25% initially, and includes an interest step up of 225bps on 31 December 2023. The remaining Walmart loan has a 6-month tenure, which can be extended at the end of each tenure period. All other terms remain materially unchanged.
  14. Total interest-bearing borrowings and debt facilities, including bank overdrafts and lease liabilities, increased by R354.4 million compared to December 2020. Average net debt increased by R1.2 billion compared to the prior year.
  15. The Group’s effective tax rate of 19.6% (2020: -47.4%) was impacted by the limitation of the recognition of deferred tax assets relating to certain loss-making entities and disallowed expenditure.
  16. During the current year, the Group acquired the remaining 49.8% non-controlling interest in Sunshine Powersave Proprietary Limited that the Group did not own from the minority shareholders. All conditions precedent were met and the purchase became effective on 2 July 2021, for a purchase consideration of R200.0 million. Furthermore, in three separate transactions, the Group also acquired the remaining 25% shareholding in Cambridge Food Gauteng Proprietary Limited, the 38.5% shareholding in HB Unlimited Overs Cricket Proprietary Limited trading as WumDrop and the 40% shareholding in Croge Investments Proprietary Limited it did not already own for a combined purchase consideration of R110.3 million.
  17. These summary consolidated results have been reviewed by independent external auditors, Ernst & Young Inc. and their unmodified review report is available for inspection at the Company’s registered office. The review was performed in accordance with ISRE 2410 ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’. Any reference to future financial performance included in this announcement has not been reviewed or reported on by the Group’s external auditors. The auditor’s report does not necessarily report on all of the information contained in this announcement/ financial results. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor’s engagement, they should obtain a copy of the auditor’s report together with the accompanying financial information from the Group’s registered office. The Chief Financial Officer, Mohammed Abdool-Samad CA (SA), supervised the preparation of the Group’s summary consolidated results.