Presentation for 26 weeks ended 28 June 2015 The Environment Its - PowerPoint PPT Presentation

Results Presentation for 26 weeks ended 28 June 2015

The Environment It’s tough gh out ther ere! South Africa: • Consumer confidence at 14-year low • CPI range-bound but Food inflation soon to increase • Manufacturing sector in technical recession. Load-shedding. Job losses • And entering a 12 – 18 month interest up-cycle (+50bps?) • Increasing legislative & regulatory demands Africa: • Many countries affected by double- dip of lower Commodities’ prices and USD strength • Weak & volatile currencies • USD is de facto currency • But long-term potential remains intact Interim results Presentation August 2015 In 2

Retail Environment Dive vergent rgent behavi viour ur. . Place ce your bet ets! s! • Upper-income consumers stable but confidence falling. Lower asset prices now to compound this? • Middle-income affected by job losses. Direction of the credit cycle unclear? • Lower- income sustained by Commodities’ deflation, buffeted by job losses • National sales data seems ok – are majors holding share at expense of weaker businesses? • Time for caution in South Africa – too much space, too little volume growth? • Intense competition in Retail Food Commodities in deflation, likely to reverse soon • • Weak demand and cost-inflation causing pressure along entire retail value chain • Some retailers benefitting from weaker / failed formal competitors • Retailers seeking new growth avenues: ex-SA, ex-Africa, new formats, new categories Interim results Presentation August 2015 In 3

Massmart Response Trust our model. el. Supe perb b executio ution. . Be patient ent and d measur asured ed. • Grow market share in our major categories • Very deliberate about our South African new space growth (only 0.8% space growth in H1) • Invest in skills & capability – people, IT & Supply Chain – for the longer-term • Customer traffic & loyalty through omni-channel • African growth – Game, Builders Warehouse, and Cash & Carry – measured and steady pace • Reduce operating costs as % of sales (12-mth rolling Opex as % of sales is 16.3%) Maintain positive price-gap • • Acquire strategically significant prime real estate – avoids future cost inflation & permanently secures retail site • Supplier collaboration • Private label Interim results Presentation August 2015 In 4

Financial Performance Great sales growth, good margin management and decent cost control in tough environment. 26 weeks 26 weeks Estimated June 2015 % of June 2014 % of Period Comparable % % sales (Reviewed) sales (Reviewed) sales % growth sales growth inflation Sales 38,917.4 35,659.8 9.1 6.9 3.7 Massdiscounters 8,973.6 8,225.8 9.1 4.1 2.1 Masswarehouse 10,759.2 9,659.4 11.4 11.4 4.3 Massbuild 5,637.1 4,847.9 16.3 10.6 5.1 Masscash 13,547.5 12,926.7 4.8 3.9 3.6 Trading profit before interest and tax 806.7 729.9 10.5 2.1 2.0 29.6 27.4 8.0 Massdiscounters 0.3 0.3 461.3 406.5 13.5 Masswarehouse 4.3 4.2 243.9 186.2 31.0 Massbuild 4.3 3.8 71.9 109.8 (34.5) Masscash 0.5 0.8 Interim results Presentation August 2015 In 5

Perspective on Game Short-term erm trading ding recover very. . Longer er-term m busines ness s renewal al. Short-term: • Improving SA performance • Food roll- out: 19 new / converted Fresh stores since June ‘14 . Sales participation now 19% • Weak African environment. Negative Rand comparable sales growth • Merchandise renewal – rationalise categories & merchandise ranges • Improving in- stock service levels, and SA inventory below June ‘ 14 Positive price-gap in GM and Food • Longer-term: • Category renewal – Gen Merch & Food – younger, female, family • Optimise supply chain utilisation • SAP GK point-of-sales implementation in 2016, and SAP ERP likely for 2017 Interim results Presentation August 2015 In 6

Perspective on Masscash Wholesale Fluid d mark rket t – consolida dati tion n opportu tuni nity ty. Transformi rming ng the e business ness. Short-term: • Commodities (25% participation) in deflation – caused margin pressure. Vibrant market • Gained market share, despite soft market • ARCH Enterprise IT system enabling regional buying & pricing • Africa tough trading Longer-term: • We are a relationship business – very close to our customers • Largest participant in SA formal Wholesale, and wholesale market remains 20%-25% of total South African FMCG • Drive lower operating costs from fewer & larger stores, Shield B2B, logistics & DCs • Be suppliers’ preferred distribution partner – an efficient & effective route to market Interim results Presentation August 2015 In 7

Financial performance

Strong performance Positive gearing of 3.6% from Sales to Operating Profit. +3.6% +1.8% +1.8% 12,7% 10,9% 9,1% Growth in Sales Growth in Gross profit Growth in Operating profit before foreign exchange movements and interest In Interim results Presentation August 2015 9

Sales Real comparable volume growth of 3.2% (June 2014: 2.3%). 26 weeks 26 weeks June 2015 June 2014 % Comparable Estimated Real comparable Rm (Reviewed) (Reviewed) growth % sales growth % sales inflation volume growth Total 3.2 38,917.4 35,659.8 9.1 6.9 3.7 2.0 Massdiscounters 8,973.6 8,225.8 9.1 4.1 2.1 7.1 Masswarehouse 10,759.2 9,659.4 11.4 11.4 4.3 5.5 Massbuild 5,637.1 4,847.9 16.3 10.6 5.1 0.3 Masscash 13,547.5 12,926.7 4.8 3.9 3.6 • Rest of Africa businesses’ sales growth: Sales in ZAR grew by 14.6% and in constant local 8,2% currencies grew by 16.9% • General Merchandise inflation remained steady at 3.6%, Food & Liquor and Home Improvement inflation decreased to 3.3% and 5.2% respectively 91.8% Rest of Africa sales SA sales Interim results Presentation August 2015 In 10 10

Operating profit before forex and interest 0,2 0,4 0,6 0,8 1,0 1,2 1,4 • June 2014: Operating profit before forex of R702.9m Jun-14 Sales-related gross margin • Total Group sales for the period increased by 9.1% • Gross profit for the period increased by 10.9% • A strong trading performance in Makro and Massbuild Price-and-mix- related gross margin • Total increase of 12.2% / Comparable increase of 8.5% Employment costs • Increase in staff (Full-Time Equivalents) of 3.2% to +/- 44,000 FTE’s • Total increase of 8.0% / Comparable increase of 2.6% • 3.4% increase of net new trading space since June 2014 to a total of Occupancy costs 1,551,613m² • Electricity, rates and taxes increased by approximately 9.5% Depreciation, Amortisation and • Depreciation growth of 12.8% / Comparable increase of 8.2% Impairment of Assets Other operating • Total increase of 7.2% / Comparable increase of 8.7% costs June 2015: Operating profit before forex of R791.9 million • Jun-15 Increase of 12.7% • Interim results Presentation August 2015 In 11 11

Good Operating profit growth impacted by forex and interest June 2015 June 2014 Rm (Reviewed) (Reviewed) % change Operating profit before foreign exchange movements 791.9 702.9 12.7 and interest Foreign exchange loss (106.7) (7.9) Net finance costs (234.8) (154.9) Taxation (143.7) (164.1) Profit for the period 306.7 376.0 (18.4) Profit attributable to non-controlling interests (25.1) (26.0) Profit and loss on disposals (12.3) 14.1 Headline earnings 269.3 364.1 (26.0) Interim results Presentation August 2015 In 12 12

Foreign Exchange Movements 110 6% 105 12% 100 95 82% 90 85 Group loans and other monetary balances Hedges 80 Other Average African currency rate • Majority of the forex loss is as a result of the weakening of the average basket of African currencies against the Rand • The strength of the US Dollar against the Rand exacerbated this loss Interim results Presentation August 2015 In 13 13

Interest June 2015 June 2014 Rm (Reviewed) (Reviewed) % change Finance costs (252.5) (176.6) Finance income 17.7 21.7 Net finance costs (234.8) (154.9) (51.6) Increase in finance costs attributable to: 35% 46% 19% Property acquistions Increased cost of funds Expansions and working capital Interim results Presentation August 2015 In 14 14

Working Capital June 2015 June 2014 (Reviewed) (Reviewed) Inventories (Rm) 10,530.8 9,774.7 Inventory Days 61 61 Trade Debtors (Rm) 2,295.7 1,907.0 Debtors’ Days 10 9 Trade Creditors (Rm) 11,388.5 10,849.2 Creditors’ Days 58 60 • Good inventory management. Growth of 7.7% is below sales growth • Supply chain efficiency efforts starting to yield • Significant focus on and efforts to clear older stock in Massdiscounters continues • Trade Creditors increased by 5.0% while Creditors’ days decreased Interim results Presentation August 2015 In 15 15

Capital Expansion 4,0% 2 500,0 3,5% 2 000,0 3,0% Capex as a % of sales 2,5% 1 500,0 Rm 2,0% 1 000,0 1,5% 1,0% 500,0 0,5% 0,0% 0,0 June 2011 June 2012 June 2013 June 2014 June 2015 Property acquisitions Businesses acquired Investment to expand operations Investment to maintain operations Total capex as a % of sales Total capex as a % of sales excl. business and property acqs • Total Capex as a % of sales: 2.7% (June 2014: 2.3%) • Total Capex excl. business & property acquisitions as a % of sales: 1.7% (June 2014: 1.5%) Interim results Presentation August 2015 In 16 16