1. These reviewed provisional 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 Provisional 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 provisional 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 in the June 2020 interim press release.

  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. As part of the Group’s continued IFRS 9 ‘Financial Instruments’ compliance assessment it was noted that the Group has historically presented certain rebate receivable balances from vendors as part of the ‘Trade, other receivables and prepayments’ balance as opposed to offsetting these against the ‘Trade, other payables and provisions’ line as required by the accounting standard. This error has been corrected in the current year with rebate receivable balances of R1 709 million relating to the 2019 financial year and R1 809 million relating to the 2018 financial year being reclassified from the ‘Trade, other receivables and prepayments’ line to the ‘Trade, other payables and provisions’ line. This affects the Statement of financial position lines as follows:

                             
          December 2019       December 2018  
          Audited       Audited  
          52 weeks       52 weeks  
                             
        Previously   Effect of       Previously   Effect of    
    Rm   reported   change   Restated   reported   change   Restated
                             
    Statement of financial position                        
    Trade, other receivables and prepayments   5,020.8   (1,709.0)   3,311.8   5,693.2   (1,809.0)   3,884.2
    Total current assets   18,431.1   (1,709.0)   16,722.1   20,605.2   (1,809.0)   18,796.2
    Total assets   40,337.8   (1,709.0)   38,628.8   34,782.6   (1,809.0)   32,973.6
                             
    Trade, other payables and provisions   21,117.0   (1,709.0)   19,408.0   21,925.1   (1,809.0)   20,116.1
    Total current liabilities   24,415.8   (1,709.0)   22,706.8   24,559.5   (1,809.0)   22,750.5
    Total equity and liabilities   40,337.8   (1,709.0)   38,628.8   34,782.6   (1,809.0)   32,973.6
  4. 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 R102 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.

  5. The majority of Massmart’s realised and unrealised foreign exchange loss was primarily a result of currency weakness in Mozambique, Nigeria and Zambia as well as the foreign exchange movements arising from the foreign exchange contracts entered into relating to the Walmart loan.

  6. 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 one Wholesale Cash & Carry store, the Group received interest from various parties to acquire these stores. On 16 February 2021, the Competition Tribunal approved the transaction covering eight stores with a condition linked to employment security. The potential sale of the remaining three stores is still being contemplated. Subsequent to the announcement of the aforementioned 11 Masscash stores, a decision was taken to divest the Qwa Qwa Masscash store. A suitable buyer was found for the store and the transaction will close shortly.

  7. On 21 January 2021 the Group announced that it had concluded a managed services agreement covering the Group’s financial transaction processing activities with Genpact, a strategic partner of Walmart Enterprise Business Services (“Walmart EBS”). The managed services will affect Accounts Payable, Accounts Receivable, and defined activities in Financial Control, Tax, Treasury and FP&A transaction processing in the Massmart head office and our trading banner home offices. The agreement became effective in March 2021. In a separate agreement, Walmart, through Walmart EBS, will assist Massmart and Genpact with the managed services.

  8. On 19 February 2021 the Group announced via SENS that following a more comprehensive strategic review, the Group had taken the decision to divest its interest in an additional 14 Cash & Carry stores. This decision is aligned to the Group’s previously referenced turnaround objective to optimise the group store portfolio and is enabled by the good progress that the Group has made toward consolidating the Makro and Masscash wholesale store base within the Massmart Wholesale Business Unit.

  9. In an effort to optimise the Group’s store portfolio, in line with the revised strategy, and to take a focused approach to deliver sustainable, profitable growth and best serve our customers, the board made the decision subsequent to the financial year-end to appoint Barclays to facilitate the disposal of the Group’s Cambridge/ Rhino and Massfresh (comprising The Fruitspot and a meat processing facility) assets. These proposed transactions are still in the exploratory stages with an uncertain outcome and as a consequence it is difficult to estimate what the financial impact will be on the Group. As at the 27 December 2020 financial year-end the relative contribution of these businesses to the Group’s results were as follows:

             
        Net Asset Value (Excluding   Trading Loss (before
    Rm   Intercompany balances)   Interest and Tax)
             
    Cambridge and Rhino   988.4   (363.5)
    Massfresh   229.4   (136.0)
  10. On 24 April 2020 Walmart, through its UK subsidiary, advanced an amount of R4 billion to the Group. This loan was Rand denominated, bore interest at the South African prime rate and was repayable by 24 July 2020. On 24 July 2020 the R4 billion Rand denominated loan was repaid and a new loan agreement was entered into with Walmart for a R4 billion US dollar denominated loan. This loan bore interest at the United States prime lending rate and was repayable within a 3-month period. A forward exchange contract was entered into to mitigate the foreign exchange risk. On 20 October 2020 a further loan modification agreement was entered into on substantially the same terms except for the maturity date which was amended to 26 January 2021. As at 27 December 2020 the foreign exchange risk related to the US dollar denominated loan continued to be mitigated by the forward exchange contract entered into. The prevailing United States prime lending rate as at this date was 3.25%. On 26 January 2021 a further loan modification agreement was entered into on substantially the same terms except for the maturity date which was amended to 26 April 2021.

  11. 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 R3.6 billion remains payable to Walmart, largely due to the loan advanced during the financial year. 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.

  12. 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 non-Food categories as a result of 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.

  13. The constant currency information included in these reviewed provisional condensed consolidated results has been presented to illustrate the Group’s underlying ex-SA 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 provisional reviewed 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
    Currency
    Constant
    Currency
    Botswana Pula (10.4%) (15.9%)
    Mozambican Metical 8.0% 5.0%
    Nigerian Naira (1.7%) (6.8%)
    Zambian Kwacha (4.2%) 20.6%
    Kenyan Shilling 40.8% 29.2%
    Total ex-SA (3.7%) (4.3%)
  14. Total interest-bearing borrowings and debt facilities, including bank overdrafts and lease liabilities, increased by R2.8 billion since December 2019. The increase is largely attributable to the loan received from Walmart, an additional drawdown on the Group’s debt facilities as well as a R632.2 million increase in the Group’s lease liabilities. This was offset through cash generation largely as a result of stringent working capital management and various cash preservation initiatives being applied. On 26 February 2021 the Group concluded agreements for the roll-over of its medium term bank loans. The repayment date of the Group’s R600 million ZAR denominated fixed term loan was extended to February 2023 and the repayment date of the Group’s R1 400 million ZAR denominated fixed term loan was extended to February 2024. All other terms have remained substantially unchanged.

  15. The Group’s effective tax rate, of 6.5% (2019: -18.9%) is mainly as a result of limiting the recognition of certain deferred tax assets, disallowed expenses relating to goodwill impairments and the taxation charge on profit-making entities. Deferred tax assets (i.e. arising from unutilised tax losses in trading entities) are recognised as a result of the reassessment of the recoverable amount of the deferred tax asset. The assessment considers the probability of forecasted future taxable income, which may include future tax planning opportunities

  16. These reviewed provisional 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 provisional condensed consolidated results.