Annual ResultsPresentation

FOR THE 52 WEEKS

ENDED DECEMBER 2018

Financial review

HANS VAN LIEROP

Financial summary

52-week basis

• 52-week like-on-like basis including material impact of IFRS 15 in both periods

• ^Restated

Sales

R90.9bnh 2.9%

2017: R88.4 billion*

Gross profit margin

19.45%

2017: 19.63%*

Trading profit before interest and tax

(excl restructure costs)

R2.1bni 16.8%

2017: R2.5 billion*^

Headline earnings(excl restructure costs)

R1.0bni 22.9%

2017: R1.3 billion*^

Sales

i3.0%i 4.7% COMPARABLE

Impact of reporting

changes

December 2018 •IFRS 9 & IFRS 15 (Shield)

•53rd week

•52-week like-on-like going forward

53-week basis

* 52-week like-on-like basis including material impact of IFRS 15 in both periods

SA Sales

91.3%h 2.9%

Ex-SA Sales

8.7%h 3.7% h 3.9%

Food & Liquor

56%h 3.2%

Durables

44%h 2.4%

Group Durables sales h 2.4%Group Food &

Liquor sales h 3.3%Total Group

ConstantCurrency

Durables

49%h 2.4%

Food & Liquor

51%Food h 4.9%

Sales* by geography and category

Softer November and December sales

• Margin pressure in Game

• Negative stock

adjustments in Massfresh

• Offset by increased retail

customer participation in

Massbuild

Gross profit margin

* 52-week like-on-like basis including material

impact of IFRS 15 in both periods

Dec 17

19.63%R17.3 billon

Dec 18

19.45%R17.7 billon

Depreciation

h3.2%i 1.1% COMPARABLE

• Re-assessment of useful

lives (IFRS)

• GK-POS implementation

• Lower capex spend

Employment costs

h2.7%n 0.0% COMPARABLE

• 48,500 FTEs (1% growth)

• Improved in-store and DC

staff scheduling

Occupancy costs

h10.1%h 6.3% COMPARABLE

• Net 2.2% trading space

increase

• Makro Riversands

annualisation

• Pressure from increased

rates and taxes

Other operating expenses

h5.8%h 4.6% COMPARABLE

• Continued focus on cost

containment

• Improved efficiencies and

lower support services

costs

Sustained cost discipline

Total expenses grew at 5.0%, comparable expense growth limited to 2.3%

• Cash interest increase

due to net working

capital increase

• Accounting interest

impacted by

capitalised DC lease

at the end of 2017

Like-on-like basis including material impact of IFRS 15 in both periods

^Restated

Net finance costs

RM DEC 2018 DEC 2017 MOVEMENT

Composition of net finance costs 623.7 566.8 56.9

Net cash interest 546.5 514.8 31.7

Accounting interest 77.2 52.0 25.2

R12

.2b

n

R11

.0b

n

20182017

• 2.2% net trading space increase

• Constrained December sales in

Game & Builders

• Strategic stock buy-ins,

specifically in Masscash

R18

.7b

n

R17

.4b

n

20182017

• Increase proportional with stock

• Year-end timing

R2.

6bn

R2.

2bn

20182017

Inventory days

61Creditor days

81Debtor days

10

• Growth in line with sales

• 31 December payment cut-off

Working capital

h5 daysh3 days

h1 day

• Material impact relates to the capitalising of

leased stores and equipment onto the balance

sheet with the corresponding lease liability

• Results in current operating lease costs being

replaced by amortisation of the right-of-use

asset and calculated lease finance costs on

the interest line

• Impacts EBITDA margin, earnings per share

and derived metrics

IFRS 16 ‘Leases’ Key areas of impact

Implementation effective 1 January 2019

Operational review

GUY HAYWARD

Our 2018

performance

disappointed

shareholders,

the investment

community and

ourselves

Disappointed, but resolute…

1st half of 2018:

Game and Masscash

restructure and relocation

SA economic recession

VAT increase

Product deflation

We remain

resolute

to deliver

Massmart's areas

of long-term

strategic focus

2nd half of 2018:

Continued distraction at Game

from restructure

Negative comp sales in

November & December ’18

Massfresh margin

Progress since 2014 …

Focus areas Since 2014 …

• Limit SA store growth

• Product assortment

• Replace legacy IT

• African store growth

• Omnichannel

• Joburg head office

• 0.9% CAGR SA space growth

• Food & Liquor participation was 17.9%, now 22.6%

• Implemented SAP POS in ’18 and will do ERP in ‘19

• 13.2% CAGR African space growth

• Game online since late ’17 with SAP Hybris

• From August ‘18

• New stores

• Retail Food

• Omnichannel

• 4.2% CAGR SA space growth

• Retail Food participation was <40% , now 54%

• Click ‘n Collect 33% of sales. SAP Hybris implemented.

Sales participation 3.5% of Gen Merch and 19% total

growth in FY18

Progress since 2014 …

Focus areas Since 2014 …

• New SA stores

• African store growth

• Omnichannel

• 3.4% CAGR SA space growth. Open new BW, BEX &

BSS stores. Selectively close Trade Depot stores

• 22% CAGR African space growth

• SAP Hybris. Sales participation >1% and >100%

sales growth in FY18

• Fewer SA stores

• Replace legacy IT

• Joburg head office

• -1.8% CAGR SA space growth

• Evaluating SAP

• From June ’18

• New SA stores

• Replace legacy IT

• 7.1% CAGR space growth

• SAP now in >50% of stores

Group

• VAS roll-out

• Supply Chain

optimisation

• Private Label

• Gross revenue was R90m in 2016, now R250m

• Massmart Logistics now with Game & Makro DCs &

Group capability

• Sales participation was 9.2%, now 9.0%

i

Constrained consumer environment

New vehicle sales

i7.4%in January

Data from FNB’s retail segment shows 56%

of middle-income consumers in South Africa

spend their entire

monthly salary in 5 days or less after receiving it.

Absa PMI falls

in January as

business

activity slips

Fuel

h5.7%

Unemployment

remains high

27.1%

Electricity Tariffs

h5.2%iTransUnion

Consumer Credit

Index (CCI)

deteriorated

sharply in Q4

Consumer inflation

4.6%

December wholesale

trade sales y/y

i4.6%

December retail

sales contracted

i1.4%

• Product deflation of 2.9%

• Durables’ volume growth of 3.7%

adjusting for deflation

• Good Black Friday sales, slowed

in December

• Ex-SA sales grew 0.9% in Rands

and 1.5% in constant currencies

• Product deflation of 0.2%

• Good sales growth in Liquor &

Durables. Food sales impacted

by deflation

• Good Black Friday sales,

slowed in December

• Riversands at 90% of budget,

despite poor national road

access

• Product inflation of 2.7%

• Softening trend in contractor sales

but higher retail sales participation

in H2

• Ex-SA growth 14.1% from new

stores, and 12.1% in constant

currencies

• Product inflation of 0.3%

• Retail sales growth 1.8% in very

competitive environment

• Wholesale benefitted from some

inflation. Sales growth 2.3%

• Ex-SA growth 6.3% and 4.2%

in constant currencies

Massdiscounters

R19.7bn2017: R20.0.bn*

Masswarehouse

R28.8bn2017: R27.3bn*

Massbuild

R13.8bn2017: R13.0bn*

Masscash

R28.7bn2017: R28.1bn*

* Like-on-like basis, including material impact of IFRS 15

Sales performance

Total sales h2.9%*. Comparable sales h1.2%*

i1.2% SALES h5.4% SALES h5.9% SALES h2.1% SALES

Good home improvement growth

h5.9%Increased retail

participation

Durables demand soft, strong market share

39%Market shares in

Large Domestic

Appliances*

Excellent online sales growth

h56%Sales growth

Superb expense control

h2.3%Comparable

expense increases

below inflation

Key performances

* Source: GFK SA

(December 2018)

• Sales – holding or growing

market shares. December

sales unexpectedly soft

• 1% lower trading margin.

Will recover

• Ex-SA profits lower (Nigeria)

• Great expense management

but above sales growth

• Good sales & margin

management given the

environment

• Expense growth higher than

sales growth

• 19% online sales growth

• Once-off inventory and cost of

sales adjustments in Massfresh

• Sales – gaining market share

• Margins well managed, and higher

from retail participation

• Exceptional online sales growth

• Ex-SA profit slightly higher (new

stores)

• Good expense management

• Wholesale benefitted from less

deflation

• Good 2nd half margin

performance

• Retail performance in-line with

market but with margin pressure

• Good expense management

Massdiscounters

R32.6m2017: R373.5 million

Masswarehouse

R1,100.8m2017: R1,256.7^ million

Massbuild

R749.1m2017: R735.5 million

Masscash

R188.6m2017: R127.1 million

The 'trading profit before interest and tax' above is the amount per the condensed consolidated income statement less the BEE transaction IFRS 2 charge and excludes restructure costs.

^Restated

Divisional performance

Trading profit before interest and taxation i16.8%

h16%Group sales increased over

three-day period

Winning on Black Friday

h 24%Increase Game’s sales of

+R600m over three-day period

h 10%Increase in Makro sales

h 33%Builders sales increase.

Appliances (aircons) did well

R50 off Uber rides to and from Makro over Black Friday –

a first in South Africa

Mobile POS in Makro busted over 7km of queues

Group Sales R1.8bn(Fri – Sun)

Black Friday customer research

Game and Makro

perceived to have the

best Black Friday deals

Survey of 1,248 customers at Massmart stores

in Durban, Johannesburg and Cape Town

Shoppers look for deals in these main categories

54%Of customers plan

for Black Friday

17%Budget for this

3-4 months prior

86%Of those customers

purchase in-store

39%Budget for this

1-2 months prior

44%Customers participate in

Black Friday

15%Groceries

15%Electronics

& Hi-tech

11%Appliances

8%Mobile phones

& computers

Online sales growth

h 56%Online sales now

represents 1.1% sales

participation

261Unique customer

collection points

h 26%in Makro GMV (which

includes market place

sales) growth

h

Builders online shopping

frequency higher than offline

h 74%Online traffic

growth

Click & Collect and

delivery available from all

Builders stores in major

metros

h 32%Commercial sales contribution

to Makro online sales

Launched Game Loyalty

App - GK-POS to provide

coupons, vouchers,

unique offers, and digital

receipts

VAS growth

A competitive range of

Financial Services are now

available across our business

h 61%growth in gross income

underpinned by RCS and bill

payments

h 64%RCS loans business

h 30%Improvement in

Lotto sales on back

of 69 new terminals

h 13%Increase in money

transfers

> 200Money Centres

trading

• Launching of new products

after buying trips

• Repositioned Trojan as the

anchor brand in home fitness -

sales grew 40.4%

• Lusso tap launch produced

230% sales growth -

contributes 22% to the tap

category

GEN MERCHFOOD HOME IMPROVEMENTPrivate Label

Improving Group Private Label

sourcing and brand to offer

customers good quality products

at low price points

73Brands in portfolio

5.6%Sales penetration

2017: 5.9%

36Brands in portfolio

19.7%Sales penetration

2017: 18.8%

27Brands in portfolio

13.9%Sales penetration

2017: 13.8%

Game Retail Proposition

Middle-income customers

Aspirational younger

family LSM 5-8

(make up 50% of spending)

Over-index on

mature families

Increase frequency

of customer visits

Offering an exciting assortment

Commoditise products

Strong market shares in

top-of-mind categories

Compelling private

label offering

At market-leading prices

Price leadership

Offering customers value

Price-beat policy

A Discounter

Best performing store

format globally

African consumers extremely

value-conscious

Lowering our cost base

and lean operations

New Game layout

Successfully rolled out new format stores in 12 locations (6 in SA and 6 ex-SA)

Store sales trading

density up 17% on

existing stores

8.5% improvement

in shelf-space sales

density

Easy to navigate displays

on product

Pricing kit changes to

highlight discounter look

Better lines-of-sight

Appealing to female

shoppers

Customer feedback on new format experience:

“Modern appearance”

“Improved atmosphere”

“Much easier to navigate the aisles in

the store and find products”

Builders

Game

Masscash

BotswanaNamibia

Zambia

Mozambique

Uganda

Nigeria

Tanzania

Malawi

Ghana

Lesotho

Kenya

NEW 229,269m2 of retail space

R7.9bnSales

47Stores

12Countries

14%of total space is ex-SA

Grow Africa

African retail space growth

(ex SA)

7.8% CAGR

Kenya+4 stores

15,064m2

Zambia+5 store

14,002m2

Forecast Actual

Improve Game’s profitability

Structurally lower Group operating costs

Group supply chain & logistics efficiency

Up to 2021 opening 43 new stores. Space growth of 2.5% CAGR. 31% of this ex-SA

Invest in omnichannel capabilities

Widen & improve VAS offering

Private label

Strategic Priorities

With our increased IT spend, likely muted SA

economic growth, and the possibility of negative

movements in key SA macro-economic

variables, we will selectively curtail new store

growth and focus on reducing working capital

levels to reduce our cash & capital requirements

• Sales for the seven weeks to 17 February ‘19 were R11.2bn, representing total sales

growth of 5.2% and comparable sales growth of 3.9%. Estimated product inflation of 1.3%

• Despite this slightly improved sales performance, we remain cautious about the outlook for

the South African consumer economy for the 1st half of the 2019 financial year

Any reference to future financial performance included in this document 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 issuer’s registered office.

Outlook

Additionalinformation

Condensed Consolidated Income Statement

Tax Rate Reconciliation

Cash Flow Statement

Capital Expansion

Capex Per Category

Store Portfolio

Forecast Stores: Jan 2019 – Dec 2021

Restatement

Like-on-like analysis

Restructure

Number of shares

* Certain comparative figures shown do not

correspond with the 2016 financial statements and

reflect statements made. Refer to note 5.

Condensed Consolidated

Income Statement

Extract from Reviewed

Consolidated Results for the

year ended 30 December 2018

RM

DEC 2018

(REVIEWED)

DEC 2017

(REVIEWED)

Standard tax rate 28.0 28.0

Non-taxable income and disallowable expenses (3.1) 0.8

Assessed loss not utilised 6.9 3.2

Other - including foreign tax adjustments (0.3) (2.1)

Group tax rate 31.5 29.9

Tax rate reconciliation

RM

DEC 2018

(REVIEWED)

RESTATED^

DEC 2017

(REVIEWED)

Operating cash before working capital movements 3,409.6 3,969.1

Working capital movements (545.8) 705.8

Cash generated in operations 2,863.8 4,674.9

Net interest and tax paid (805.8) (1,388.6)

Net investment to maintain operations (772.4) (678.5)

Free cash flow 1,285.6 2,607.8

Dividends paid (750.0) (689.9)

Dividends received 34.0 80.0

Investment to expand operations and other net investing activities (774.5) (1,128.2)

Cash outflow/(inflow) before financing activities (204.9) 869.7

^ Certain comparative figures shown do no correspond with the 2016 financial statements and reflect statements made. Refer to note 5.

Cash flow statement

0,0

500,0

1 000,0

1 500,0

2 000,0

2 500,0

0,0%

0,5%

1,0%

1,5%

2,0%

2,5%

3,0%

3,5%

4,0%

Property expansion

Businesses acquired

Investment to expand

operations

Investment to maintain

operations

Total capex as a % of sales

Total capex as a % of sales

excluding business and

property acquisitions

Ca

pe

x a

s a

% o

f sa

les

DEC 2013

DEC 2015

DEC 2014

DEC 2016

DEC 2017

DEC 2018

Capital expansion

RM

DEC 2018

(REVIEWED)

DEC 2017

(REVIEWED)

Land and buildings/leasehold improvements 191.6 533.8

Vehicles 15.7 5.2

Fixtures, fittings, plant and equipment 291.9 270.5

Computer hardware 72.9 28.8

Computer software 261.5 300.0

Investment to expand operations 833.6 1,138.3

Land and buildings/leasehold improvements 103.7 156.0

Vehicles 64.8 35.4

Fixtures, fittings, plant and equipment 295.7 328.9

Computer hardware 138.9 98.4

Computer software 169.3 59.8

Investment to maintain operations 772.4 678.5

23,0%

1,9%

35,0%

8,7%

31,4%

Land & buildings/leasehold improvements

Vehicles

Fixtures, fittings, plant & equipment

Computer hardware

Computer software

Expansionary investment

Capex per category

Total capex 1.8% of total sales (2017: 1.9%)

Store portfolio

Total Massdiscounters Masswarehouse Massbuild Masscash

436 171 21 114 130Up from 423

in Dec 2017

Up from 166

in Dec 2017

21 in Dec 2017 Up from 108

In Dec 2017

Up from 128

in Dec 2018

+13Net opened

+4

-1

Game

+2 in Ghana

+1 in Kenya

+2 in South Africa

-1 in South Africa

DionWired

+3 in South Africa

-2 in South Africa

+4

+4

-2

Builders Superstore

+4 in South Africa

-1 in South Africa

Builders Express

+3 in South Africa

+1 in Mozambique

Builders Trade Depot

-2 in South Africa

+2 Retail

+2 in South Africa

+1 Builders Warehouse

+1 Zambia

Forecast stores

Total Massdiscounters Masswarehouse Massbuild Masscash

+43 +14 +1 +11 +17Up from 436 to 479 Up from 171 to 185 Up from 21 to 22 Up from 114 to 125 Up from 130 to 147

+30South Africa

+13Ex-SA

+13

+1

Game

+6 in South Africa

+1 in Botswana

+3 in Kenya

+1 in Namibia

+1 in Swaziland

+1 in Zambia

DionWired

+1 in South Africa

+1 Makro

+1in South Africa

+3

+2

+6

Builders Warehouse

+1 in South Africa

+1 in Kenya

+1 in Zambia

Builders Express

+2 in South Africa

Builders Superstore

+6 in South Africa

+14

+3

Retail

+13 in South Africa

+1 in Lesotho

Wholesale

+3 in Zambia

+7.6%Up from 1,648,718m2

to 1,774,263m2

+7.0%Up from 560,828m2

to 600,225m2

+5.3%Up from 231,021m2

to 243,328m2

+8.0%Up from 468,155m2

to 505,466m2

+9.4%Up from 388,714m2

to 425,244m2

Jan 2019 – Dec 2021

This 7.6% increase includes a 31% increase in our ex-SA trading space

RESTATED

52 WEEKS

LIKE-ON-LIKE* LIKE-ON-LIKE

RESTATED

53 WEEKS

REPORTED REPORTED

Rm DECEMBER 2018 DECEMBER2017 GROWTH DECEMBER 2017 GROWTH

Sales 90,941.6 88,356.0 2.9% 93,735.2 -3.0%

Gross profit % 19.5% 19.6% 18.8%

Expenses as a % of sales 17.4% 17.1% 16.2%

Trading profit before interest and tax

(excl. restructure costs)2.3% 2.9% 2.9%

Working capital

Inventory days 61 56 5 54 7

Creditor days 81 78 3 74 7

Debtor days 10 9 1 9 1

* Restated to include IFRS 15 impact in prior year

Like-on-like analysis

Presentation prepared on like-on-like basis to reflect the material

IFRS 15 impact in both current and prior year i.e. excluding Shield’s sales (R4.4bn)

During the IFRS 16 implementation project, an

error in accounting was identified relating to a

long-term lease of land. This 99-year lease

arrangement that was entered into in 1994 for

the land on which Makro Woodmead store is

situated was incorrectly accounted for as an

operating lease and should have been

accounted for as a finance lease together with

an adjustment on the purchase price allocation

of the 2013 acquisition of the Makro store on

that land. As a consequence of this error, our

lease commitment disclosure relating to the

remaining non-cancellable lease payments has

been updated in our results to include an

additional R15.1 billion for both the 2018 and

2017 period, representing the lease

commitments for the remaining 74 years on the

lease. Between 2019 and 2033 R131.4 million

is payable on these leases whereas the

remaining 60 year post 2033 represents

R15,015.6 million. The present value of the

lease payments is R251.9 million. The error has

been corrected by restating the comparative

2017 and 2016 figures as follows:

Restatement

• Restructure and relocation of some of the

business functions within Massdiscounters

and Masscash announced in February 2018

• Approached under s189 of the Labour

Relations Act (LRA)

• Both concluded without any adverse legal

impacts to the business

• Once-off costs of R161.0 million

• Anticipate direct savings of R52.0 million

Restructure

Key impact

‘000

At Dec 2017 217,145.5

Shares issued 33.6

At Dec 2018 217,179.1

Weighted-average at Dec 2018 216,390.6

Diluted weighted-average at Dec 2018 221,078.7

Number of shares