Wrap Text
Reviewed Interim Results for the 26 weeks ended 26 June 2022
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")
Reviewed Interim Results for the 26 weeks ended 26 June 2022 and trading update for the 33 weeks ended 14 August
2022, CEO Succession and notice of detailed cautionary announcement regarding a potential offer by Walmart Inc.
Date: 2022/08/29
Shareholders are referred to the SENS announcements issued on 2 August 2022, which provided a sales update and
trading statement for the 26 weeks ended 26 June 2022.
Reviewed Interim Results for the 26 weeks ended 26 June 2022
Massmart is an African retail group, with total Group sales of R41.3 billion for the 26 weeks ended 26 June 2022.
Through our widely recognised and differentiated retail and wholesale formats, represented in 403 Retail and Wholesale
stores in 13 sub-Saharan countries, we have leading market shares in the general merchandise, liquor, home
improvement and wholesale food markets. The Group’s key foundations of high volume, low cost, responsible business
and operational excellence enable our price leadership.
Performance summary – Total Group
Rm 26 weeks 26 weeks Period
June 2022 June 2021 %
(Reviewed) (Reviewed) change
Sales 41,316.8 41,323.6 -
Trading profit before
323.5 444.3 (27.2)
interest and taxation
Loss for the period
(1,101.9) (1,085.8) (1.5)
(Owners of the parent)
Basic EPS (cents) (509.0) (502.6) (1.3)
Headline loss (942.5) (645.4) (46.0)
Headline EPS (cents) (435.3) (298.8) (45.7)
Total dividend (cents) - - -
Performance summary – Continuing Operations
Rm 26 weeks 26 weeks Period
June 2022 June 2021 %
(Reviewed) (Reviewed ) change
Sales 38,141.0 37,445.0 1.9
Trading profit before
377.3 792.1 (52.4)
interest and taxation
Loss for the period
(919.7) (790.6) (16.3)
(Owners of the parent)
Basic EPS (cents) (424.8) (366.0) (16.1)
Headline loss (903.5) (358.5) (152.0)
Headline EPS (cents) (417.3) (166.0) (151.4)
Total dividend (cents) - - -
Operating environment
The operating environment was characterised by growing inflationary pressures and increased interest rates which
created pressure on discretionary spending by consumers. Eight stores are not trading at the end of this reporting
period as a consequence of the civil unrest in July 2021 and flooding during April 2022.
Total Group Performance
Total Group sales for the 26-weeks ended 26 June 2022 of R41.3 billion is flat compared to the same period in 2021,
while comparable store sales grew by 2.3% over the same period. Gross margin decreased by 100bps to 19.6% mainly
due to the lower General Merchandise sales mix compared to the prior year period and cost inflation outpacing sales
inflation. Our ongoing focus on cost management resulted in a 0.6% decrease in expenses. Other income increased
by 173.6% to R383.0 million and primarily related to insurance proceeds accrued for business interruption claims
relating to the civil unrest. This resulted in a trading profit of R323.5 million, a decrease of 27.2% from the prior year
period. The Group recognised R205.9 million of retrenchment and business transformation costs, R184.0 million of
which related to a once-off negotiated lease settlement cost in respect to the Riverhorse Distribution Centre that was
destroyed during the July 2021 civil unrest. The Group recognised an impairment expense of R146.5 million, the
majority of which related to goodwill in the Cambridge business. Fluctuations in African currencies resulted in foreign
exchange losses of R110.1 million and represented a 25.3% increase from June 2021. A higher opening net debt
compared to June 2021, together with increased interest rates, contributed to the 11.2% increase in net interest
expenses to R967.5 million. As a result of the above, the Group incurred a net loss of R1,029.2 million, which represents
an improvement of 4.0% from the prior year loss of R1,072.5 million for the same period. The headline loss amounted
to R942.5 million, and increased by 46.0% from the prior period headline loss of R645.4 million.
Discontinued operations
As previously announced the Board made the decision to divest of the Group’s Cambridge, Rhino and Massfresh
(comprising The Fruitspot and a meat processing facility) assets. The Cambridge, Rhino and Massfresh businesses
have therefore been classified and reported as discontinued operations in terms of IFRS 5 ‘Non-current Assets Held
for Sale and Discontinued Operations’.
Group overview from continuing operations
Total sales from continuing operations for the 26 weeks to 26 June 2022 of R38.1 billion represented an increase of
1.9%, and an increase of 4.3% on a comparable store sales basis, with estimated year-to-date internal sales inflation
of 4.5%. Sales from our South Africa stores increased by 1.9%, and by 4.6% on a comparable store sales basis. Total
sales from our Rest of Africa stores increased by 1.6% in Rands, and decreased by 2.6% in constant currencies. On a
comparable store sales basis, our Rest of Africa store sales increased by 1.3% in Rands and decreased by 2.9% in
constant currencies.
Sales from our eCommerce platforms grew by 50.0% compared to the prior year period, while orders increased by
109.0% and gross merchandise value increased by 108.0% over the same period.
Gross margin decreased by 95bps to 19.6% and was impacted by a combination of global General Merchandise supply
chain challenges; sales mix, with softer margin-accretive General Merchandise sales; and inflationary pressures with
cost inflation outpacing sales inflation.
The majority of other income related to a R270.0 million insurance proceeds total Group accrual for business
interruption claims as a consequence of the 2021 civil unrest.
Our ongoing commitment to cost-saving and Smart Spend initiatives resulted in expenses growing below inflation at
4.4%.
The above resulted in a trading profit of R377.3 million compared to a trading profit of R792.1 million in the prior year
period.
During the period, the Group incurred retrenchment and business transformation costs of R205.9 million, compared to
R73.4 million in the prior year period. This mainly related to a once-off R184.0 million negotiated lease settlement cost
relating to the Riverhorse Distribution Centre that was destroyed during the July 2021 civil unrest.
Fluctuations in African currencies continue to negatively impact the Group. This, together with the impact on the
revaluation of the USD-denominated Walmart loan resulted in a foreign exchange loss of R110.1 million being incurred,
compared to a loss of R87.9 million in the prior year period.
Net finance costs of R930.4 million increased by 12.6% compared to R826.2 million in the prior year period. Cash
interest to the Group's financiers, excluding those related to lease liabilities, increased by R58.5 million to R279.0
million, compared to the prior year period. This is due to several interest rate increases, coupled with the higher opening
net debt balance compared to the prior year period.
The effective tax rate for the reporting period was 3.4% (2021: 1.8%) which was impacted by the limitation of the
recognition of deferred tax assets relating to certain loss-making entities, the South African rate change and disallowed
expenditure.
A net loss of R847.0 million was reported for the period (2021: R774.1 million loss), with a headline loss of R903.5
million (2021: R358.5 million loss).
Trading update and outlook
Total Group sales for the 33-weeks to 14 August 2022 of R52.8 billion represents an increase of 2.9% and a comparable
store sales increase of 4.4% over the same period in 2021. Sales from continuing operations of R48.8 billion represents
an increase of 4.6% and a comparable store sales increase of 6.0% for the 33-week period to 14 August 2022, over
the same period in 2021.
The 7-week sales performance post our interim reporting period showed an improved performance relative to the prior
year. Total sales from continuing operations increased by 15.5%, and by 12.8% on a comparable store sales basis,
driven in part by the civil unrest-comparison period from the prior year.
We remain focused on our strategy to strengthen our core business, and are investing in e-commerce, Home
Improvement, General Merchandise, and Wholesale Food & Liquor growth.
The financial information on which this outlook statement is based has not been reviewed and reported on by the
Company’s external auditors.
Dividend
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. No interim dividend has been declared in June 2022 (June 2021: Nil).
CEO Succession
The board of Massmart is pleased to announce the appointment of Massmart Chief Operating Officer (COO), Jonathan
Molapo, to the position of Chief Executive Officer (CEO), with effect from 1 January 2023, when he will take over from
Mitch Slape. Jonathan has strong executive leadership and international experience having joined Massmart from
Astron Energy where he was Chief Executive Officer from June 2018 to December 2021 whilst having previously been
employed by Puma Energy and Total SA Group, where he held respective roles as Chief Operating Officer and
Executive Vice President for Central and East Africa. During his time with these organizations Jonathan was exposed
to all aspects of the value chain gaining experience in the full range of commercial and retail functions, including the
ongoing rollout of Total’s retail forecourt stores. He also had the opportunity to work across various geographies,
including France and Ghana. In his role as Massmart COO, Jonathan has been responsible for key business areas
including, Data & Analytics, Supply Chain and Central Operations. Jonathan has a BA Economics from Laurentain
University, Canada and has completed the International Executive Programme at the Insead Business School in
France.
The Board would also like to thank outgoing CEO Mitch Slape for his immense commitment and contribution to
Massmart under the most difficult of circumstances. The actions taken by the management team under his guidance
have resulted in the successful delivery of more than 30 turnaround projects. These included resetting the cost base
by removing R1.9 billion in non-payroll costs, leading the disposal of non-core assets, rationalising the group-wide
supply chain, revitalising the Game store proposition and initiating an intensified ecommerce investment programme.
Massmart is a better, more focused business as a direct result of the leadership provided by Mitch.
Mitch will remain in his role until 31 December 2022 and will have ultimate responsibility to deliver the FY2022 financial
plan whilst also facilitating the handover to Jonathan.
Notice of detailed cautionary announcement regarding a potential offer by Walmart to acquire all the
outstanding shares in Massmart
Holders of Massmart Holdings Limited ordinary shares ("Massmart Shareholders") are hereby advised that the Board
of Directors of Massmart Holdings Limited (“Massmart”) and the Board of Directors of Walmart Inc. (“Walmart”) have
reached in principle agreement regarding the terms and conditions of a potential offer by Walmart to acquire all of the
issued ordinary shares in Massmart Holdings Limited ("Ordinary Shares"), other than those Ordinary Shares already
indirectly held by Walmart through its wholly-owned subsidiary, Main Street 830 Proprietary Limited, or a treasury
shareholding subsidiary of Massmart, pursuant to a scheme of arrangement and standby general offer ("Potential
Offer"). If the Potential Offer is made and implemented, it would result in the delisting of all the Ordinary Shares from
the main board of the JSE. The Potential Offer Consideration is ZAR62 per share which represents a premium of 53%
to the closing share price and 62% premium to the 90-day volume weighted average price as at 26 August 2022, the
day prior to the detailed cautionary announcement. Massmart Shareholders are referred to the detailed cautionary
announcement which will be released on Monday, 29 August 2022, immediately following the release of this results
announcement for full details.
About this announcement
This short-form announcement is the responsibility of the Company’s Board of Directors (“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. This short-form announcement has not been reviewed but has been extracted from the reviewed
results. The Directors confirm that the information contained in this short-form announcement has been correctly
extracted. The full announcement has been released on the JSE Stock Exchange News Service and can be found at
(https://senspdf.jse.co.za/documents/2022/jse/isse/MSM/1H22Result.pdf), and is also available on the Company’s
website. Copies of the full announcement are also available at the offices of the sponsor or the Company’s registered
offices, at no charge, and may be requested by emailing investor.relations@Massmart.co.za 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.
Massmart will host a presentation covering these results, on Monday, 29 August 2022, at 10.30am. Details of the
presentation can be found on our results website, https://www.massmart.co.za/interimresults2022.
By order of the board
Mitchell Slape Mohammed Abdool-Samad
Chief Executive Officer Chief Financial Officer
29 August 2022
Sponsor: JP Morgan Equities South Africa (Pty) Ltd
Date: 29-08-2022 07:05:00
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