Reviewed Interim Results for the Period ended 28 June 2020

Massmart Holdings Limited
(Incorporated in the Republic of South Africa)
Company registration No. 1940/014066/06
JSE Code: MSM
ISIN: ZAE 000152617
("Massmart", "Company" or the "Group")



   MSM: MASSMART HOLDINGS LIMITED – Reviewed Interim Results for the Period ended 28 June 2020

   Date: 2020/08/27

   Shareholders are referred to the SENS announcement issued on 20 August 2020, which provided a sales update and
   trading statement for the 26-week period ended 28 June 2020.

   Interim Results

   Massmart, with total half-year sales of R39.6 billion, comprises two Business Units operating 420 retail and wholesale
   stores, in 13 sub-Saharan countries. Through our widely recognised, differentiated retail and wholesale formats, we
   have leading market shares in the General Merchandise, Liquor, Home Improvement and Wholesale Food markets.
   Our key foundations of high volume, low cost and operational excellence enable our price leadership.

   Performance summary

Rm                                                                                                              52 weeks
                                                26 weeks June          26 weeks June         Period %
                                                                                                               December
                                               2020 (Reviewed)        2019 (Reviewed)         change
                                                                                                           2019 (Audited)

Sales                                                   39,599.2               43,832.4           (9.7)           93,660.0

Trading (loss)/profit before interest and
                                                          (266.6)                 318.9         (183.6)            1,111.2
taxation

EBITDA, before non-trading items                          1,253.5               1,867.3          (32.9)            4,178.3

Loss for the period                                     (1,166.8)               (832.4)          (40.2)           (1,296.4)

Basic EPS (cents)                                         (534.2)               (382.8)          (39.6)             (600.6)

Headline loss                                           (1,090.3)              (800.7)*          (36.2)          (1,151.5)*

Headline EPS (cents)                                      (501.6)              (366.6)*          (36.8)            (529.0)*

   *Restated June and December 2019 to apply the SAICA Circular 1/2019 on headline earnings, which resulted in a prior
   year amount of R5.7 million relating to the pre-tax loss arising from the partial or full termination of leases, no longer
   being a headline earnings adjustment.

   Group overview
   Massmart’s total sales for the 26 weeks ended 28 June 2020 of R39.6 billion represents a decline of 9.7% compared
   to the same period in 2019, with a similar decline in comparable store sales. Sales were significantly impacted by
   various restrictions put in place by respective Governments in response to the Covid-19 pandemic in the jurisdictions
   in which we operate.

   An increased focus on optimising our product and promotional mix, combined with shifting towards the everyday low
   price (EDLP) proposition resulted in the gross margin increasing by 90bps to 20.1% from June 2019.

   With sales pressure and the significant impact of the Covid-19 pandemic on cash flows, we remain focused on
   improving expense management, with further savings being realised through cost saving initiatives implemented as
   part of our cost reset strategy. This resulted in operating expenses increasing by only 1.9% over the prior year period.
   A trading loss of R266.6 million was reported for the period.
As part of the turnaround plan, and as previously announced, the Group successfully closed 23 DionWired stores during
the period. Restructure costs associated mainly with the above store closures and the potential closure of 11 Cambridge
and Wholesale Cash & Carry stores, as previously announced, resulted in additional costs of R47.4 million. We have
also impaired certain Game, Cambridge and Wholesale Cash & Carry stores resulting in impairment expenses of
R55.5 million during the period.

Fluctuations in African currencies continue to negatively impact the Group, particularly the effect of US dollar
denominated leases in other African countries, resulting in a total foreign exchange loss of R112.3 million. Despite
pressure associated with lower cash flows from restrictions relating to the Covid-19 pandemic, the combination of
ongoing focus on working capital management and reduced interest rates resulted in net finance costs increasing by
only 0.8% to R916.6 million during the period.

The Group’s effective tax rate of 16.6% (2019: -4.8%) is mainly due to limiting the recognition of certain deferred tax
assets and the taxation charge on profitmaking entities.

The Group reported a net loss of R1.2 billion for the period, compared to a loss of R0.8 billion during the same period
in 2019, while reporting a headline loss of R1.1 billion for the period compared to a headline loss of R0.8 billion during
the same period last year.

Turnaround plan update
During the period, we have progressed our turnaround plan and have achieved the following thus far:

1. Group operating model: Reorganised the Group operating structure into two Business Units, initiated Centres of
Excellence and outsourced applications support to Walmart India Development Centre, confirming 80-140bps
opportunity.

2. Portfolio optimisation: Closed 23 DionWired stores and as previously communicated are finalising sale of 8 Masscash
Stores, while working through the details of the remaining 3 stores.

3. Game reset: Completed the SAP S/4 HANA ERP implementation and expediting everyday low cost execution,
leading to a 220bps GP margin uplift.

4. Wholesale integration: Constituted a single Executive Committee, being presented as a single business to suppliers
strengthening price competitiveness and piloted the integration of Makro and Builders onto the Shield B2B platform,
contributing to a GP margin uplift of 50bps.

5. Supply chain optimisation: Increased vendor on-boarding into network, delivered phase 1 of temperature controlled
network and reduced Game aged and obsolete stock by 10%. This achieved 50bps of the 1% COGS reduction
opportunity.

6. Cost reset: Validated R1.9bn selling, general and administrative (SG&A) savings opportunity and aggressively
executing against it, unlocking 54bps (as % of sales).

While we will continue to reach key milestones across the work streams according to our clear plan, we remain
operationally focused on improving our professional retail effectiveness; our obsession with everyday low costing; and
improving our margins through EDLP.

For a detailed update on our turnaround plan refer to the interim results presentation on our website:
www.massmart.co.za

Outlook

Total sales for the 33 weeks to 16 August 2020 of R50.0 billion represents sales decline of 10.5%, with the same
movement in comparable sales growth. Product inflation is estimated to be 3.7%.

We expect the uncertain operating environment and negatively impacted economy related to the Covid-19 pandemic
to persist. While trade in all our categories is currently permitted, future Covid-19 related trading restrictions remain
uncertain. We are however, confident that we will be able to navigate through this, as we successfully did during the
first half of this year. We will continue to accelerate the implementation of our turnaround plan and we expect SG&A
and GP margin performance achieved during this reporting period to continue into the second half of the year.
The financial information on which this outlook statement is based has not been reviewed and reported on by the
Company’s external auditors.

Dividend

Massmart’s 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 and the need to preserve
cash, as a result of the uncertain economic outlook, no interim dividend has been declared. No interim dividend was
declared in June 2019.

About this announcement

This short-form announcement is the responsibility of the Company’s Board of Directors and is a summary of the
information in the full results announcement and as such does not contain full or complete details of the full results
announcement.        The       full  announcement      can     be    found     on      the    JSE      website      at
https://senspdf.jse.co.za/documents/2020/jse/isse/MSM/MSMJun2020.pdf and is also available on the Company’s
website: https://www.massmart.co.za/interimresults2020. Copies of the full announcement are available for inspection
and may be requested at the Company’s registered office, at no charge, during office hours. Any investment decisions
by investors and/or shareholders, in relation to the Company’s shares, should be based on a consideration of the full
announcement.


By order of the board



Mitchell Slape                                                       Mohammed Abdool-Samad

Chief Executive Officer                                              Chief Financial Officer

26 August 2020

Sponsor: J.P. Morgan Equities South Africa (Pty) Ltd

Date: 27-08-2020 07:05:00
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