1. These reviewed interim condensed 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 reviewed interim condensed consolidated results are in terms of IFRS and are consistent in all material respects with those applied in the most recent Annual Financial Statements, except for the IFRS 16 practical expedient on lease concessions as well as the SAICA Circular 1/2019 on headline earnings which were applied for the first time.

  2. During the reporting period, as part of the turnaround plan, the Group operating model was restructured from its previous four Divisions into two Business Units. The four Divisions comprised of Massdiscounters (incorporating the Game and DionWired brands); Masswarehouse (incorporating the Makro and Fruitspot brands); Massbuild (incorporating the Builders Warehouse; Builders Express; Builders Trade Depot and Builders Superstore brands); and Masscash (incorporating the Jumbo; Cambridge Food; Rhino; Trident; Jumbo Shield and Saverite brands). The two new Business Units comprise of Massmart Retail (incorporating Game, Builders, Cambridge and Rhino); and Massmart Wholesale (incorporating Makro, Fruitspot, Wholesale Cash & Carry). In terms of the requirements of IFRS 8 the composition of the Group’s reportable segments were restated due to this structure change. The Group’s reportable segments comprise Game (incorporating the Game and DionWired brands), Builders (incorporating the Builders Warehouse; Builders Express; Builders Trade Depot and Builders Superstore brands), Cambridge and Rhino (incorporating the Cambridge Food and Rhino brands) and Massmart Wholesale (incorporating the Makro, Fruitspot, Jumbo, Trident; Jumbo Shield and Saverite brands).

  3. 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 R97 million rental relief in the occupancy costs line of the condensed consolidated income statement relating to rent concessions meeting the conditions specified and occurring as a direct consequence of the Covid-19 pandemic.

  4. The majority of Massmart’s realised and unrealised foreign exchange loss was primarily a result of currency weakness in Mozambique, Nigeria and Zambia.

  5. Following the announcement of the Group entering into a consultation process in terms of section 189 and section 189A of the Labour Relations Act 66 of 1995, as amended (the LRA) relating to 10 Cambridge and Rhino stores and 1 Wholesale Cash & Carry store, the Group received interest from various parties to acquire these stores. The Group remains in negotiations with one interested party regarding the sale of these stores. Further to this, in August 2020, we also announced the initiation of a section 189 and section 189A of the LRA process, to reorganise the Group’s Centres of Excellence into a low cost, customer-first operating structure. This may potentially affect 165 associates at our regional and home offices.

  6. On 7 July 2020 the Group announced via SENS that it had completed an assessment of opportunities to improve South African Game store efficiencies and consequent to this project a consultation process in terms of section 189 and section 189A of the LRA mentioned above, with organised labour and other relevant stakeholders commenced.

  7. On 24 July 2020 the R4 billion Rand denominated loan owing to Walmart as at 28 June 2020 was repaid and a new loan agreement has been concluded with Walmart for a R4 billion US dollar denominated loan. This loan bears interest at the United States prime lending rate which is currently 3.25%. A forward exchange contract was entered into to mitigate the foreign exchange risk related to this loan.

  8. 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. A net amount of R4.1 billion remains payable to Walmart, largely due to the loan advanced during the interim reporting period. Non-loan related amounts due to and from Walmart are accounted for in ‘trade, other payables and provisions’ and ‘trade, other receivables and prepayments’ respectively.

  9. Massmart offers a diverse range of retail offerings to the market consisting of Food & Liquor, General Merchandise and Home Improvement. 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.

  10. The constant currency information included in these reviewed interim condensed 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 reviewed interim condensed 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.

    Sales growth in: Reported
    Botswana Pula (7.8%) (13.9%)
    Mozambican Metical 14.9% 3.2%
    Nigerian Naira (3.9%) (10.2%)
    Zambian Kwacha 0.1% 17.9%
    Kenyan Shilling 34.7% 18.9%
    Rest of Africa (0.5%) (5.1%)
  11. Total interest-bearing borrowings and debt facilities, including bank overdrafts and lease liabilities, increased by only R309.8 million since June 2019. This minimal movement is largely due to stringent working capital management and various cash preservation initiatives being applied. The approximate R5 billion increase since December 2019 is largely due to the R4 billion loan received from Walmart and an additional drawdown on the Group’s debt facilities.

  12. The Group’s effective tax rate, of 16.6% (2019: -4.8%) is mainly as a result of limiting the recognition of certain deferred tax assets and the taxation charge on profit-making entities.

  13. These reviewed interim condensed 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 reviewed interim condensed consolidated results.