Massmart Holdings Reviewed Interim Results for the 26 weeks ended 29 June 2014 PRESENTED IN AUGUST 2014
Review CEO
Performance Overview The weak South African consumer environment requires us to: > Focus on bringing value to the customer > Be innovative > Aggressively control costs > Address areas of underperformance > Not losing sight of the longer-term growth imperative > Being clear in our strategic intent We achieved much of this, across most Divisions 3 Interim Results to June 2014
Performance Divisional
Massdiscounters June Total Comparable 2014 growth growth Inflation Sales R8,226m 8.0% 4.0% 3.1% Game SA: > Tough SA consumer environment. Declining SA Durables‘ sales growth > Total & comparable sales growth low: 5.4% and 0.4% respectively > Stock clearance impacted margin Game Africa: > Strong performance (total sales +20%, own currency +13%) > 19% sales participation > Profit growth below sales growth. Expense drag from new stores DionWired: > Very good performance (total sales +13%) > Profit growth exceeded sales growth 5 Interim Results to June 2014
Massdiscounters continued June 2014 Change Sales R8,226m 8.0% PBIT R27.4m -78.8% PBIT margin 0.3% Game SA: > Fresh now in 55 stores, incl. seven in Africa. 12 planned for H2 > 20% Food sales growth in comparable Fresh stores. Higher Gen Merch sales too > Now 40 new-look stores. Great customer response > Comparable expense growth 6.7% Game Africa: > Currency weakness in Ghana & Malawi > Now three stores in Nigeria DionWired: > Online now 2.1% of total sales (LY: 1.4%) 6 Interim Results to June 2014
Game: A Difficult Consumer Environment from 2013 Retail Sales per Type of Dealer at Current Prices: Y-on-Y % Q1 ‘13 Q2 ‘13 Q3 ‘13 Q4 ‘13 Q1 ‘14 Q2 ‘14 General Dealers 8.1 6.4 5.4 6.3 7.0 8.2 Food, Beverages & Tobacco 4.8 6.1 6.7 5.4 4.7 8.1 Pharma, Medical & Cosmetics 3.2 4.4 2.9 5.3 6.0 5.0 Textiles, Clothing & Footwear 10.6 10.9 11.1 10.9 13.5 7.5 Furniture, Appliances & Equipment -3.1 -2.0 -4.7 -8.9 0.1 -0.8 Hardware, Paint & Glass 8.6 10.8 10.1 12.9 9.2 7.0 All Other 7.5 10.3 5.2 2.6 3.9 5.5 Total 7.3 7.5 6.3 6.4 7.5 7.0 Source: Econometrix / Stats SA June 2014 National Retail Sales 7 Interim Results to June 2014
Masswarehouse June Total Comparable 2014 growth growth Inflation Sales R9,659m 12.2% 9.4% 5.5% > Very good trading performance in tough environment. Strong comparable sales growth in all categories > Accelerating sales in stores opened in 2012-13. Sales growth +19% > Gaining market share in Liquor wholesale & retail > The Fruitspot sales up 23% > General Merchandise launched online March ’14. Good learnings. Liquor next > First R100 promotion: sales of R200m, saved customers R40m 8 Interim Results to June 2014
Masswarehouse continued June 2014 Change Sales R9,664m 12.3% PBIT R406.5m 7.8% PBIT margin 4.2% > Good profit performance given the environment > Comparable expense growth 6.8% > Food Retail / Fresh offering now in 16 stores. Great customer response > Innovating around Commercial customer > Profit growth lagged sales growth due to new & relocated stores in 2013 > Electricity consumption growth -2% despite 10% new space > No new stores in FY14 9 Interim Results to June 2014
Massbuild June Total Comparable 2014 growth growth Inflation Sales R4,848m 14.2% 8.8% 5.3% > Great performances in Builders Warehouse & Builders Express: comp sales growth 12% & 18% respectively > Non-SA stores performing strongly > Trade Depot struggled following SAP implementation & store closures in Q4 2013 > New format Superstore doing well: satisfactory sales & margin. Testing merchandise categories > New Builders Warehouse Rivonia store: best DIY store in the world! Innovation! > RDC opened in Q1 2013 doing well. Costs annualised > Comparable expense growth 5.4% 10 Interim Results to June 2014
Massbuild continued June 2014 Change Sales R4,848m 14.2% PBIT R186.2m 16.4% PBIT margin 3.8% South Africa: > Market share & new stores > Focus on contractor / commercial customers > Roof Truss plants across SA Africa: > Closed Kangela stores & ops > Builders Warehouse performing well in Botswana (two) and Mozambique (two) > Matola store opened July 2014. Great trading to date … 11 Interim Results to June 2014
Masscash June Total Comparable 2014 growth growth Inflation Sales R12,927m 8.7% 6.8% 5.0% Very tough trading environment: intense competition, struggling lower-income consumers, mining sector unrest & other recent strike action Wholesale: > Comparable sales growth 6.7% > Total sales growth in SA Wholesale 1.4% & Africa 12% > Non-SA sales 16% participation > Tobacco category sales down 11% due to illicit cigarettes > After modest inflation, commodities now in deflation > Comparable expense growth 6% 12 Interim Results to June 2014
Masscash continued June 2014 Change Sales R12,927m 8.7% PBIT R109.8m 48.4% PBIT margin 0.8% Retail: > Comparable sales growth 9.6% > Gaining market share > Strong customer price-perception > Closed three stores. Two great openings in H1 > Rhino integration underway > 14 new stores in 2015 13 Interim Results to June 2014
Performance Financial
Overview for the 26 weeks ended 29 June 2014 > Three divisions performed well – Game SA disappointed > Total sales growth increased to 10.2% (June 2013: 8.9%) > Comparable sales growth increased to 7.1% (June 2013: 5.5%) > Gross margin decreased to 18.64% (June 2013: 18.73%) > Comparable expense growth of 7.7% greater than comparable sales growth of 7.1% > Foreign exchange loss of R7.9 million (June 2013: R133.8 million gain) > Operating profit before foreign exchange movements and interest decreased by 3.8% 15 Massmart Reviewed Consolidated Results June 2014
Sales June June Total Comparable 2014 2013 Growth Growth Inflation Rm Rm % % % Massdiscounters 8,225.8 7,618.1 8.0 4.0 3.1 Masswarehouse 9,659.4 8,608.9 12.2 9.4 5.5 Massbuild 4,847.9 4,246.9 14.2 8.8 5.3 Masscash 12,926.7 11,895.5 8.7 6.8 5.0 Total 35,659.8 32,369.4 10.2 7.1 4.8 8% > Real comparable volume growth S.A. Sales > Rest of Africa businesses’ sales growth: – Sales in ZAR grew by 16.7% Rest of Africa Sales 92% 16 Massmart Reviewed Consolidated Results June 2014
Sales Inflation June 2014 June 2013 YTD Sales Inflation to June 2014 % % General Merchandise 4.7 0.2 Home Improvement 5.3 3.1 Food and Liquor 4.5 4.4 Total 4.8 2.9 > Higher inflation in General Merchandise and Home Improvement > Indicators of food deflation, specifically food commodities 17 Massmart Reviewed Consolidated Results June 2014
Gross Profit June June 2014 2013 Gross Profit (Rm) 6,649.6 6,063.0 Gross Profit as a % of sales 18.64 18.73 > Gross Profit performance is a combination of: – Increased margins in Massbuild and Cambridge due to better trading; Offset by – Food margins under pressure; – Greater Food contribution across the Group at a lower gross margin; and – A poor margin performance in Massdiscounters despite the increased Africa contribution 18 Massmart Reviewed Consolidated Results June 2014
Operating Costs (excluding forex) June June 2014 2013 Operating Costs (Rm) 6,043.4 5,429.3 Operating Costs as a % of sales 16.9 16.8 > Operating Costs (excl. forex) increased by 11.3%: – Employment Costs increased by 12.9%; and – Depreciation and Occupancy Costs increased by 14.5% and 7.9%, respectively > Comparable expenses increased by 7.7% 19 Massmart Reviewed Consolidated Results June 2014
Employment Costs June June 2014 2013 Employment Costs (Rm) 2,885.1 2,555.8 Employment Costs as a % of operating 47.7 47.1 costs Employment Costs as a % of sales 8.1 7.9 > Total increase of 12.9% > Comparable increase of 10.9% > Increase in staff (Full-Time Equivalents) of 5.1% 20 Massmart Reviewed Consolidated Results June 2014
Occupancy Costs June June 2014 2013 Occupancy Costs (Rm) 1,311.0 1,215.2 Occupancy Costs as a % of operating 21.7 22.4 costs Occupancy Costs as a % of sales 3.7 3.8 > Total increase of 7.9% > Comparable increase of 8.3% > 1.3% net new trading space to a total of 1,499,928m² > High inflation - rates, services and electricity > Good performance – costs reducing as a % of sales 21 Massmart Reviewed Consolidated Results June 2014
Depreciation and Amortisation June June 2014 2013 Depreciation and amortisation (Rm) 409.2 357.4 Depreciation and amortisation as a % of operating 6.8 6.6 costs Depreciation and amortisation as a % of sales 1.15 1.10 > Depreciation growth of 14.5% greater than sales growth of 10.2% > Opening of new stores, DC’s and the acquisition of key properties - increased depreciation charge Rm 1.20% 7 000 6 000 1.00% Property, Plant and Equipment (Rm) 5 000 Depreciation and amortisation as a % 0.80% 4 000 of sales 3 000 0.60% 2 000 0.40% 1 000 0.20% - June 2010 June 2011 June 2012 June 2013 June 2014 22 Massmart Reviewed Consolidated Results June 2014
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